N-30D/A 1 2017_slic_va_a.htm AMENDED FILING

Rationale for Amended Filing
 
Sentry Variable Account II (the "Variable Account") is filing this Amendment No. 1 (this "Amended Filing") to the Variable Account's Annual Report on Form N-30D for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission (the "SEC") on February 23, 2018 (the "Original Filing"), solely to revise the form of the Report of the Independent Registered Public Accounting Firm (the "Report") regarding KPMG LLP's opinions on the financial statements of the sub-accounts that comprise the Variable Account, which were included in the Original Filing.  The form of the Report was revised to include an Appendix that lists the financial statements of the sub-accounts that comprise the Variable Account.  The change to the filed copy of the KPMG LLP Report does not affect KPMG LLP's unqualified opinions on the financial statements of the sub-accounts that comprise the Variable Account included in the Original Filing and this Amended Filing.
For ease of reference, this Amended Filing amends and restates the Original Filing in its entirety, making only the amendment described above.  No other amendments have been made to the Original Filing and the Variable Account is not amending the financial statements of the sub-accounts that comprise the Variable Account or any other part of, or otherwise updating any disclosures made in, the Original Filing.  This Amended Filing speaks as of the original filing date of the Original Filing and does not reflect any events that may have occurred subsequent to the original filing date.  Accordingly, this Amended Filing should be read in conjunction with our other filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings.
 
 
 
   KPMG LLP
   Suite 1050
   833 East Michigan Street
   Milwaukee, WI 53202-5337

Report of Independent Registered Public Accounting Firm

The Board of Directors of Sentry Life Insurance Company and the
Contract Owners of Sentry Variable Life Account II:

Opinion on the Financial Statements
 
We have audited the accompanying statement of assets and liabilities of the sub-accounts listed in the Appendix that comprise the Sentry Variable Account II (the Separate Account) as of December 31, 2017, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the related notes including the financial highlights in Note 7 (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of each sub-account as of December 31, 2017, the results of its operations for the year then ended, changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion
These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Separate Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Such procedures also included confirmation of securities owned as of December 31, 2017, by correspondence with the transfer agent of the underlying mutual funds. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
                                                                                  

We have served as the Accounts' auditor since 2007.
 
Milwaukee, Wisconsin
February 20, 2018


KPMG LLP is a Delaware limited liability partnership and the U.S. member
firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative ("KPMG International"), a Swiss entity.
Appendix
 
 
Janus Henderson Series - Institutional Shares - Research Portfolio(1)
Janus Henderson Series - Institutional Shares - Enterprise Portfolio(1)
Janus Henderson Series - Institutional Shares - Forty Portfolio(1)
Janus Henderson Series - Institutional Shares - Global Research Portfolio(1)
Janus Henderson Series - Institutional Shares - Balanced Portfolio(1)
T. Rowe Price Fixed Income Series, Inc. - Government Money Portfolio(1)
T. Rowe Price Fixed Income Series, Inc. - Limited Term Bond Portfolio
T. Rowe Price Equity Series, Inc. - Equity Income Portfolio
T. Rowe Price Equity Series, Inc. - Personal Strategy Balanced Portfolio
T. Rowe Price Equity Series, Inc. - Mid-Cap Growth Portfolio
T. Rowe Price International Series, Inc. - International Stock Portfolio
Vanguard Variable Insurance Fund - Balanced Portfolio
Vanguard Variable Insurance Fund - Equity Index Portfolio
Vanguard Variable Insurance Fund - High Yield Bond Portfolio
Vanguard Variable Insurance Fund - Small Company Growth Portfolio
Vanguard Variable Insurance Fund - Mid-Cap Index Portfolio
Vanguard Variable Insurance Fund - REIT Index Portfolio

(1) See the statement of assets and liabilities for the former name of the sub-account.
 


SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2017
Assets:
 
Investments at fair value:
 
   * 
Janus Henderson Series - Institutional Shares:
      
     **  Research Portfolio, 22,129 shares (cost $594,055)  
$
807,925
  
     Enterprise Portfolio, 193,529 shares (cost $7,892,871)    
13,672,858
  
      Forty Portfolio, 30,650 shares (cost $1,096,363)    
1,218,650
  
    
 Global Research Portfolio, 7,141 shares (cost $213,235) 
    
365,612
  
    
 
  Balanced Portfolio, 32,339 shares (cost $915,020)    
1,140,583
  
               
     
T. Rowe Price Fixed Income Series, Inc.:
        
  ***  Government Money Portfolio, 732,833 shares (cost $732,833)    
732,833
  
       Limited Term Bond Portfolio, 197,629 shares (cost $985,852)    
952,574
  
               
     
T. Rowe Price Equity Series, Inc.:
        
       Equity Income Portfolio, 50,080 shares (cost $1,117,305)    
1,465,852
  
       Personal Strategy Balanced Portfolio, 230,152 shares (cost $4,295,326)    
4,853,899
  
       Mid-Cap Growth Portfolio, 25,111 shares (cost $632,071)    
709,377
  
               
     
T. Rowe Price International Series, Inc.:
        
       International Stock Portfolio, 12,542 shares (cost $174,446)    
217,605
  
               
     
Vanguard Variable Insurance Fund:
        
     
Balanced Portfolio, 35,634 shares (cost $726,138)
    
883,719
  
       Equity Index Portfolio, 8,914 shares (cost $261,587)    
367,005
  
       High Yield Bond Portfolio, 19,089 shares (cost $152,016)    
155,191
  
       Small Company Growth Portfolio, 20,165 shares (cost $441,468)    
496,474
  
       Mid-Cap Index Portfolio, 21,368 shares (cost $399,955)    
506,851
  
       REIT Index Portfolio, 33,494 shares (cost $445,525)    
440,107
  
               
Total Assets
    
28,987,115
  
Total Liabilities
    
-
  
               
Net Assets
  
$
28,987,115
  
 
See accompanying notes to financial statements
                   
*
Formerly Janus Aspen Series
            
**
Formerly Janus Aspen Janus Portfolio
          
***
Formerly T. Rowe Price Prime Reserve Portfolio
        


SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF OPERATIONS
December 31, 2017
 
   
For the Year Ended December 31, 2017
  
                     
Janus Henderson
          
   
Janus Henderson
    
Janus Henderson
    
Janus Henderson
    
Global
    
Janus Henderson
  
   
Research**
    
Enterprise
    
Forty
    
Research
    
Balanced
  
   
2017
    
2017
    
2017
    
2017
    
2017
  
Investment income:
                              
  Dividends
  
$
2,968
    
$
32,178
    
$
-
    
$
2,985
    
$
17,134
  
                                         
Expenses:
                                        
  Mortality and expense risk charges
    
9,150
      
151,804
      
14,543
      
4,259
      
12,806
  
                                         
Net investment income (loss)
    
(6,182
)
    
(119,626
)
    
(14,543
)
    
(1,274
)
    
4,328
  
                                         
Realized gains (loss) on investments:
                                  
  Realized net investment gain (loss)
    
22,416
      
698,210
      
38,670
      
14,690
      
28,031
  
                                         
  Capital gain distributions received
    
7,159
      
795,991
      
65,375
      
-
      
2,137
  
                                         
Realized gain (loss) on investments and
                                  
    capital gain distributions, net
    
29,575
      
1,494,201
      
104,045
      
14,690
      
30,168
  
                                         
Unrealized appreciation (depreciation), net
    
153,794
      
1,524,811
      
212,162
      
67,111
      
134,354
  
                                         
Net increase (decrease) in net assets
                                  
  from operations
  
$
177,187
    
$
2,899,386
    
$
301,664
    
$
80,527
    
$
168,850
  
 
See accompanying notes to financial statements  
**   Formerly Janus Aspen Janus Portfolio
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF OPERATIONS
December 31, 2017
 
   
For the Year Ended December 31, 2017
  
         
T. Rowe Price
          
T. Rowe Price
    
T. Rowe Price
    
T. Rowe Price
  
   
T. Rowe Price
    
Limited Term
    
T. Rowe Price
    
Personal Strategy
    
Mid-Cap
    
International
  
   
Government Money***
    
Bond
    
Equity Income
    
Balanced
    
Growth
    
Stock
  
   
2017
    
2017
    
2017
    
2017
    
2017
    
2017
  
Investment income:
                                    
  Dividends
  
$
2,524
    
$
14,062
    
$
24,475
    
$
72,105
    
$
-
    
$
2,267
  
                                                 
Expenses:
                                                
  Mortality and expense risk charges
    
9,020
      
11,501
      
16,749
      
56,838
      
8,208
      
2,459
  
                                                 
Net investment income (loss)
    
(6,496
)
    
2,561
      
7,726
      
15,267
      
(8,208
)
    
(192
)
                                                 
Realized gains (loss) on investments:
                                                
  Realized net investment gain (loss)
    
-
      
(414
)
    
24,533
      
60,034
      
23,744
      
5,777
  
                                                 
  Capital gain distributions received
    
-
      
-
      
137,787
      
235,929
      
84,148
      
8,352
  
                                                 
  Realized gain (loss) on investments and
                                                
    capital gain distributions, net
    
-
      
(414
)
    
162,320
      
295,963
      
107,892
      
14,129
  
                                                 
Unrealized appreciation (depreciation), net
    
-
      
(3,562
)
    
23,814
      
390,034
      
42,426
      
33,126
  
                                                 
Net increase (decrease) in net assets
                                                
  from operations
  
$
(6,496
)
  
$
(1,415
)
  
$
193,860
    
$
701,264
    
$
142,110
    
$
47,063
  
 
See accompanying notes to financial statements  
***  Formerly T. Rowe Price Prime Reserve Portfolio
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF OPERATIONS
December 31, 2017
 
   
For the Year Ended December 31, 2017
               
Vanguard
    
Vanguard
    
Vanguard
        
   
Vanguard
    
Vanguard
    
High Yield
    
Small Company
    
Mid-Cap
    
Vanguard
  
   
Balanced
    
Equity Index
    
Bond
    
Growth
    
Index
    
REIT Index
  
   
2017
    
2017
    
2017
    
2017
    
2017
    
2017
  
Investment income:
                                    
  Dividends
  
$
19,143
    
$
6,321
    
$
7,636
    
$
2,305
    
$
6,141
    
$
12,944
  
                                                 
Expenses:
                                                
  Mortality and expense risk charges
    
9,923
      
4,141
      
1,869
      
5,864
      
6,176
      
5,935
  
                                                 
Net investment income (loss)
    
9,220
      
2,180
      
5,767
      
(3,559
)
    
(35
)
    
7,009
  
                                                 
Realized gains (loss) on investments:
                                                
  Realized net investment gain (loss)
    
15,950
      
13,169
      
(181
)
    
13,869
      
41,497
      
8,006
  
                                                 
  Capital gain distributions received
    
30,153
      
10,795
      
-
      
31,771
      
22,446
      
23,083
  
                                                 
  Realized gain (loss) on investments and
                                                
    capital gain distributions, net
    
46,103
      
23,964
      
(181
)
    
45,640
      
63,943
      
31,089
  
                                                 
Unrealized appreciation (depreciation), net
    
49,104
      
37,627
      
3,158
      
55,469
      
19,813
      
(20,192
)
                                                 
Net increase (decrease) in net assets
                                                
  from operations
  
$
104,427
    
$
63,771
    
$
8,744
    
$
97,550
    
$
83,721
    
$
17,906
  
 
See accompanying notes to financial statements  
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF CHANGES IN NET ASSETS
December 31, 2017
 
For the Years Ended December 31                                
                                       
Janus Henderson
              
   
Janus Henderson
    
Janus Henderson
    
Janus Henderson
    
Global
    
Janus Henderson
  
   
Research** 
    
Enterprise
    
Forty
    
Research
    
Balanced
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
  
                                                             
Increase (decrease) in net assets from operations:
                                                            
  Net investment income (loss)
  
$
(6,182
)
  
$
(4,999
)
  
$
(119,626
)
  
$
(118,228
)
  
$
(14,543
)
  
$
(13,318
)
  
$
(1,274
)
  
$
(400
)
  
$
4,328
    
$
10,251
  
                                                                                 
  Realized gains (losses) on investments
    
29,575
      
71,691
      
1,494,201
      
1,578,213
      
104,045
      
130,776
      
14,690
      
4,386
      
30,168
      
36,396
  
                                                                                 
  Unrealized appreciation (depreciation), net
    
153,794
      
(72,371
)
    
1,524,811
      
(281,001
)
    
212,162
      
(102,838
)
    
67,111
      
(1,314
)
    
134,354
      
(13,351
)
                                                                                 
Net increase  (decrease) in net assets from operations
    
177,187
      
(5,679
)
    
2,899,386
      
1,178,984
      
301,664
      
14,620
      
80,527
      
2,672
      
168,850
      
33,296
  
                                                                                 
Contract transactions:
                                                                                
  Purchase payments
    
10,010
      
11,037
      
66,150
      
38,032
      
9,378
      
58,308
      
4,919
      
5,298
      
10,100
      
8,211
  
                                                                                 
  Transfers between subaccounts, net
    
(263
)
    
567
      
(257
)
    
(79,337
)
    
4,403
      
147
      
255
      
3,263
      
12,939
      
427
  
                                                                                 
  Withdrawals
    
(74,679
)
    
(87,264
)
    
(760,102
)
    
(736,757
)
    
(199,443
)
    
(68,269
)
    
(51,369
)
    
(42,286
)
    
(91,347
)
    
(91,373
)
                                                                                 
  Contract maintenance fees
    
(1,204
)
    
(1,296
)
    
(11,505
)
    
(12,308
)
    
(1,411
)
    
(1,334
)
    
(464
)
    
(465
)
    
(1,530
)
    
(1,632
)
                                                                                 
Net increase (decrease) in net assets
                                                                                
  derived from contract transactions
    
(66,136
)
    
(76,956
)
    
(705,714
)
    
(790,370
)
    
(187,073
)
    
(11,148
)
    
(46,659
)
    
(34,190
)
    
(69,838
)
    
(84,367
)
                                                                                 
Total increase (decrease) in net assets
    
111,051
      
(82,635
)
    
2,193,672
      
388,614
      
114,591
      
3,472
      
33,868
      
(31,518
)
    
99,012
      
(51,071
)
                                                                                 
Net assets at beginning of year
    
696,874
      
779,509
      
11,479,186
      
11,090,572
      
1,104,059
      
1,100,587
      
331,744
      
363,262
      
1,041,571
      
1,092,642
  
                                                                                 
Net assets at end of year
  
$
807,925
    
$
696,874
    
$
13,672,858
    
$
11,479,186
    
$
1,218,650
    
$
1,104,059
    
$
365,612
    
$
331,744
    
$
1,140,583
    
$
1,041,571
  
 
See accompanying notes to financial statements  
 
**   Formerly Janus Aspen Janus Portfolio
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF CHANGES IN NET ASSETS
December 31, 2017
 
   
For the Years Ended December 31
  
               
T. Rowe Price
                
T. Rowe Price
    
T. Rowe Price
    
T. Rowe Price
  
   
T. Rowe Price
    
Limited Term
    
T. Rowe Price
    
Personal Strategy
    
Mid-Cap
    
International
  
   
Government Money***
    
Bond
    
Equity Income
    
Balanced
    
Growth
    
Stock
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
  
                                                                         
Increase (decrease) in net assets from operations:
                                                                        
  Net investment income (loss)
  
$
(6,496
)
  
$
(9,316
)
  
$
2,561
    
$
1,545
    
$
7,726
    
$
14,141
    
$
15,267
    
$
20,501
    
$
(8,208
)
  
$
(7,956
)
  
$
(192
)
  
$
(263
)
                                                                                                 
  Realized gains (losses) on investments
    
-
      
-
      
(414
)
    
454
      
162,320
      
154,869
      
295,963
      
112,663
      
107,892
      
97,009
      
14,129
      
9,228
  
                                                                                                 
  Unrealized appreciation (depreciation), net
    
-
      
-
      
(3,562
)
    
(198
)
    
23,814
      
42,963
      
390,034
      
93,427
      
42,426
      
(55,872
)
    
33,126
      
(7,209
)
                                                                                                 
Net increase  (decrease) in net assets from operations
    
(6,496
)
    
(9,316
)
    
(1,415
)
    
1,801
      
193,860
      
211,973
      
701,264
      
226,591
      
142,110
      
33,181
      
47,063
      
1,756
  
                                                                                                 
Contract transactions:
                                                                                                
  Purchase payments
    
2,350
      
3,275
      
20,527
      
16,163
      
9,429
      
12,181
      
16,337
      
14,209
      
8,146
      
7,086
      
3,746
      
3,416
  
                                                                                                 
  Transfers between subaccounts, net
    
(4,948
)
    
10,336
      
(2,964
)
    
13,245
      
(2,117
)
    
1,984
      
26,079
      
(974
)
    
(161
)
    
(96,981
)
    
606
      
1,489
  
                                                                                                 
  Withdrawals
    
(20,860
)
    
(41,775
)
    
(29,785
)
    
(133,032
)
    
(73,579
)
    
(182,232
)
    
(399,102
)
    
(513,941
)
    
(70,059
)
    
(28,319
)
    
(29,650
)
    
(10,236
)
                                                                                                 
  Contract maintenance fees
    
(782
)
    
(784
)
    
(1,238
)
    
(1,429
)
    
(1,651
)
    
(1,687
)
    
(3,884
)
    
(4,300
)
    
(616
)
    
(704
)
    
(276
)
    
(316
)
                                                                                                 
Net increase (decrease) in net assets
                                                                                                
  derived from contract transactions
    
(24,240
)
    
(28,948
)
    
(13,460
)
    
(105,053
)
    
(67,918
)
    
(169,754
)
    
(360,570
)
    
(505,006
)
    
(62,690
)
    
(118,918
)
    
(25,574
)
    
(5,647
)
                                                                                                 
Total increase (decrease) in net assets
    
(30,736
)
    
(38,264
)
    
(14,875
)
    
(103,252
)
    
125,942
      
42,219
      
340,694
      
(278,415
)
    
79,420
      
(85,737
)
    
21,489
      
(3,891
)
                                                                                                 
Net assets at beginning of year
    
763,569
      
801,833
      
967,449
      
1,070,701
      
1,339,910
      
1,297,691
      
4,513,205
      
4,791,620
      
629,957
      
715,694
      
196,116
      
200,007
  
                                                                                                 
Net assets at end of year
  
$
732,833
    
$
763,569
    
$
952,574
    
$
967,449
    
$
1,465,852
    
$
1,339,910
    
$
4,853,899
    
$
4,513,205
    
$
709,377
    
$
629,957
    
$
217,605
    
$
196,116
  
 
See accompanying notes to financial statements  
*** Formerly T. Rowe Price Prime Reserve Portfolio
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
STATEMENT OF CHANGES IN NET ASSETS
December 31, 2017
 
   
For the Years Ended December 31
  
                           
Vanguard
    
Vanguard
    
Vanguard
              
   
Vanguard
    
Vanguard
    
High Yield
    
Small Company
    
Mid-Cap
    
Vanguard
  
   
Balanced
    
Equity Index
    
Bond
    
Growth
    
Index
    
REIT Index
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
    
2017
    
2016
  
                                                                         
Increase (decrease) in net assets from operations:
                                                                        
  Net investment income (loss)
  
$
9,220
    
$
10,016
    
$
2,180
    
$
3,455
    
$
5,767
    
$
6,317
    
$
(3,559
)
  
$
(3,604
)
  
$
(35
)
  
$
584
    
$
7,009
    
$
5,810
  
                                                                                                 
  Realized gains (losses) on investments
    
46,103
      
55,078
      
23,964
      
17,177
      
(181
)
    
(843
)
    
45,640
      
41,200
      
63,943
      
45,777
      
31,089
      
47,680
  
                                                                                                 
  Unrealized appreciation (depreciation), net
    
49,104
      
4,734
      
37,627
      
11,071
      
3,158
      
9,141
      
55,469
      
16,924
      
19,813
      
(3,459
)
    
(20,192
)
    
(28,655
)
                                                                                                 
Net increase  (decrease) in net assets from operations
    
104,427
      
69,828
      
63,771
      
31,703
      
8,744
      
14,615
      
97,550
      
54,520
      
83,721
      
42,902
      
17,906
      
24,835
  
                                                                                                 
Contract transactions:
                                                                                                
  Purchase payments
    
16,110
      
11,155
      
1,320
      
1,320
      
514
      
972
      
4,625
      
3,134
      
12,398
      
9,495
      
9,588
      
11,397
  
                                                                                                 
  Transfers between subaccounts, net
    
(632
)
    
25,497
      
(1,246
)
    
(450
)
    
561
      
2,798
      
(4,022
)
    
12,481
      
(1,823
)
    
29,270
      
(25,938
)
    
76,190
  
                                                                                                 
  Withdrawals
    
(26,009
)
    
(61,300
)
    
(25,047
)
    
(23,184
)
    
(11,210
)
    
(13,412
)
    
(63,540
)
    
(32,327
)
    
(73,886
)
    
(16,910
)
    
(83,442
)
    
(23,072
)
                                                                                                 
  Contract maintenance fees
    
(627
)
    
(608
)
    
(324
)
    
(346
)
    
(230
)
    
(242
)
    
(516
)
    
(457
)
    
(449
)
    
(415
)
    
(423
)
    
(395
)
                                                                                                 
Net increase (decrease) in net assets
                                                                                                
  derived from contract transactions
    
(11,158
)
    
(25,256
)
    
(25,297
)
    
(22,660
)
    
(10,365
)
    
(9,884
)
    
(63,453
)
    
(17,169
)
    
(63,760
)
    
21,440
      
(100,215
)
    
64,120
  
                                                                                                 
Total increase (decrease) in net assets
    
93,269
      
44,572
      
38,474
      
9,043
      
(1,621
)
    
4,731
      
34,097
      
37,351
      
19,961
      
64,342
      
(82,309
)
    
88,955
  
                                                                                                 
Net assets at beginning of year
    
790,450
      
745,878
      
328,531
      
319,488
      
156,812
      
152,081
      
462,377
      
425,026
      
486,890
      
422,548
      
522,416
      
433,461
  
                                                                                                 
Net assets at end of year
  
$
883,719
    
$
790,450
    
$
367,005
    
$
328,531
    
$
155,191
    
$
156,812
    
$
496,474
    
$
462,377
    
$
506,851
    
$
486,890
    
$
440,107
    
$
522,416
  
 
See accompanying notes to financial statements  
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
 

1.
Organization
The Sentry Variable Account II (the Variable Account) is a segregated investment account of the Sentry Life Insurance Company (the Company) and is registered with the Securities and Exchange Commission (SEC) as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940. The Variable Account is an accounting entity wherein all segregated account transactions are reflected.
 
The Variable Account was established by the Company on August 2, 1983 in support of variable annuity contracts, and commenced operations on May 3, 1984. The Company discontinued new sales of variable annuity contracts on December 1, 2004. Management of the Company has determined that there is no justification for substantial doubt regarding the entity's ability to continue as a going concern.
 
The assets of each subaccount of the Variable Account are invested in shares of corresponding portfolios of Janus Henderson Series - Institutional Shares, T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Equity Series, Inc., T. Rowe Price International Series, Inc., and Vanguard Variable Insurance Fund (collectively, the Funds) at each portfolio's net asset value in accordance with the selection made by contract owners.
 
The Funds are diversified open-end investment management companies registered under the Investment Company Act of 1940. A copy of the Funds' annual reports is included in the Variable Account's Annual Report.
 
The Variable Account meets the definition of an investment company under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 and is following the accounting and reporting guidance under that Topic.
 
2.
Significant Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Valuation of Investments
Investments in shares of each of the Funds are valued on the closing net asset value per share at December 31, 2017. The Funds value their investment securities at fair value.
Securities Transactions and Investment Income
Transactions in shares of the Funds are recorded on the trade date if received by 3:00 p.m. central standard time (the date the order to buy and sell is executed). Dividend income is recorded on the ex- dividend date.  The cost of Fund shares sold and the corresponding investment gains and losses are determined on a specific identification basis.
Federal Income Taxes
The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code. The operations of the Variable Life Account are part of the total operations of the Company and are not taxed as a separate entity.
Subsequent Events
In connection with the preparation of the financial statements, the Company evaluated subsequent events after the financial statement date of December 31, 2017 through February 20, 2018, the date the financial statements were issued. No significant subsequent events were identified.
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
3.
Purchases and Sales of Securities

In 2017, purchases and proceeds on sales of the Funds' shares were as follows:
             
Proceeds
  
         
Purchases
    
on Sales
  
   
**
Janus Henderson Research Portfolio
  
$
20,325
    
$
85,485
  
     
Janus Henderson Enterprise Portfolio
    
972,600
      
1,001,949
  
     
Janus Henderson Forty Portfolio
    
79,631
      
215,872
  
     
Janus Henderson Global Research Portfolio
    
8,214
      
56,146
  
     
Janus Henderson Balanced Portfolio
    
43,510
      
106,883
  
   
***
T. Rowe Price Government Money Portfolio
    
6,300
      
37,037
  
     
T. Rowe Price Limited Term Bond Portfolio
    
38,022
      
48,921
  
     
T. Rowe Price Equity Income Portfolio
    
171,767
      
94,172
  
     
T. Rowe Price Personal Strategy Balanced Portfolio
    
416,521
      
525,895
  
     
T. Rowe Price Mid-Cap Growth Portfolio
    
92,508
      
79,259
  
     
T. Rowe Price International Stock Portfolio
    
15,204
      
32,617
  
     
Vanguard Balanced Portfolio
    
66,251
      
38,036
  
     
Vanguard Equity Index Portfolio
    
18,436
      
30,758
  
     
Vanguard High Yield Bond Portfolio
    
8,711
      
13,309
  
     
Vanguard Small Company Growth Portfolio
    
38,782
      
74,023
  
     
Vanguard Mid-Cap Index Portfolio
    
41,255
      
82,606
  
     
Vanguard REIT Index Portfolio
    
48,913
      
119,035
  
     
    Total
  
$
2,086,950
    
$
2,642,003
  
 
In 2016, purchases and proceeds on sales of the Funds' shares were as follows:
             
Proceeds
  
        
Purchases
    
on Sales
  
   
Janus Aspen Janus Portfolio
  
$
64,549
    
$
100,959
  
   
Janus Aspen Enterprise Portfolio
    
937,744
      
966,102
  
   
Janus Aspen Forty Portfolio
    
214,649
      
89,045
  
   
Janus Aspen Global Research Portfolio
    
12,263
      
46,854
  
   
Janus Aspen Balanced Portfolio
    
47,678
      
106,963
  
   
***
T. Rowe Price Government Money Portfolio
    
14,365
      
52,628
  
     
T. Rowe Price Limited Term Bond Portfolio
    
45,040
      
148,549
  
     
T. Rowe Price Equity Income Portfolio
    
168,071
      
199,792
  
     
T. Rowe Price Personal Strategy Balanced Portfolio
    
194,854
      
578,393
  
     
T. Rowe Price Mid-Cap Growth Portfolio
    
49,303
      
135,364
  
     
T. Rowe Price International Stock Portfolio
    
14,204
      
12,910
  
     
Vanguard Balanced Portfolio
    
92,331
      
74,284
  
     
Vanguard Equity Index Portfolio
    
15,026
      
28,310
  
     
Vanguard High Yield Bond Portfolio
    
12,196
      
15,763
  
     
Vanguard Small Company Growth Portfolio
    
54,657
      
38,290
  
     
Vanguard Mid-Cap Index Portfolio
    
78,633
      
26,946
  
     
Vanguard REIT Index Portfolio
    
167,875
      
66,911
  
     
    Total
  
$
2,183,438
    
$
2,688,063
  
**   Formerly Janus Aspen Janus Portfolio
*** Formerly T. Rowe Price Prime Reserve Portfolio
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
4.
Expenses and Related Party Transactions
          
                     
 
A mortality and expense risk premium is deducted by the Company from the Variable Account on a daily basis which is equal, on an annual basis, to 1.20% (0.80% mortality and 0.40% expense risk) of the daily net asset value of the Variable Account.  This mortality and expense risk premium compensates the Company for assuming these risks under the variable annuity contract.
                     
 
The Company deducts, on the contract anniversary date, an annual contract maintenance charge of $30, per contract holder, from the contract value by canceling accumulation units.  If the contract is surrendered for its full surrender value, on other than the contract anniversary, the contract maintenance charge will be deducted at the time of such surrender.  This charge reimburses the Company for administrative expenses relating to maintenance of the contract.
                     
 
Any premium tax payable to a governmental entity as a result of the existence of the contracts or the Variable Account will be charged against the contract value.  Premium taxes up to 3.0% are currently imposed by certain states.  Some states assess their premium taxes at the time purchase payments are made; others assess their premium taxes at the time of annuitization.  In the event contracts would be issued in states assessing  their  premium taxes  at the  time purchase payments are made,  the Company currently intends to advance such premium taxes and deduct the premium taxes from a contract owner's contract value at the time of annuitization or surrender.
                     
 
Sentry Equity Services, Inc., a related party, acts as the underwriter for the contract.
      
                     
5.
Fair Value Measurement
                
                     
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
                     
 
The Variable Account categorized its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique.  The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.
                     
 
The Company categorizes financial assets recorded at fair value as follows:
        
                     
 
Level 1 - Unadjusted quoted prices accessible in active markets for identical assets at the measurement date.  The assets utilizing Level 1 valuations represent investments in publicly-traded registered mutual funds with quoted market prices.
                     
 
Level 2 - Unadjusted quoted prices for similar assets in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means.  The assets utilizing Level 2 valuations represent investments in privately-traded registered mutual funds only offered through insurance products.  These funds have no unfunded commitments or restrictions and the Variable Account always has the ability to redeem its interest in the funds with the investee at NAV daily.
                     
 
Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
                     
 
The following table summarizes assets measured at fair value on a recurring basis as of December 31, 2017:
    
   
Level 1
    
Level 2
    
Level 3
    
Total
  
                         
Variable Account Investments
    
-
    
$
28,987,115
      
-
    
$
28,987,115
 
 
The Variable Life Account only invests in funds with fair value measurements in Level 2 and did not have any assets or liabilities reported at fair value on a nonrecurring basis.
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
6.      Changes in Units Outstanding
 
   The changes in units outstanding for the year ended December 31, 2017 were as follows:
           
Units
  
Units
  
Net Increase
           
Issued
  
Redeemed
  
(Decrease)
**
Janus Henderson Research Portfolio
    
           774
  
         5,877
  
          (5,103)
 
Janus Henderson Enterprise Portfolio
    
         1,168
  
         6,756
  
          (5,588)
 
Janus Henderson Forty Portfolio
      
           708
  
         9,868
  
          (9,160)
 
Janus Henderson Global Research Portfolio
    
           543
  
         5,243
  
          (4,700)
 
Janus Henderson Balanced Portfolio
      
         1,055
  
         4,208
  
          (3,153)
***
T. Rowe Price Government Money Portfolio
    
           188
  
         1,403
  
          (1,215)
 
T. Rowe Price Limited Term Bond Portfolio
    
           652
  
         1,019
  
             (367)
 
T. Rowe Price Equity Income Portfolio
    
           353
  
         2,766
  
          (2,413)
 
T. Rowe Price Personal Strategy Balanced Portfolio
  
         1,576
  
         6,607
  
          (5,031)
 
T. Rowe Price Mid-Cap Growth Portfolio
    
           219
  
         1,775
  
          (1,556)
 
T. Rowe Price International Stock Portfolio
    
           360
  
         2,523
  
          (2,163)
 
Vanguard Balanced Portfolio
      
           659
  
         1,098
  
             (439)
 
Vanguard Equity Index Portfolio
      
             52
  
         1,064
  
          (1,012)
 
Vanguard High Yield Bond Portfolio
      
             49
  
           524
  
             (475)
 
Vanguard Small Company Growth Portfolio
    
           155
  
         2,139
  
          (1,984)
 
Vanguard Mid-Cap Index Portfolio
      
           410
  
         2,342
  
          (1,932)
 
Vanguard REIT Index Portfolio
      
           365
  
         3,191
  
          (2,826)
 
   The changes in units outstanding for the year ended December 31, 2016 were as follows:
           
Units
  
Units
  
Net Increase
           
Issued
  
Redeemed
  
(Decrease)
 
Janus Aspen Janus Portfolio
      
         1,369
  
         8,216
  
          (6,847)
 
Janus Aspen Enterprise Portfolio
      
           398
  
         7,919
  
          (7,521)
 
Janus Aspen Forty Portfolio
      
         4,092
  
         4,518
  
             (426)
 
Janus Aspen Global Research Portfolio
    
         1,012
  
         5,032
  
          (4,020)
 
Janus Aspen Balanced Portfolio
      
           495
  
         4,627
  
          (4,132)
***
T. Rowe Price Government Money Portfolio
    
           712
  
         2,140
  
          (1,428)
 
T. Rowe Price Limited Term Bond Portfolio
    
           854
  
         3,716
  
          (2,862)
 
T. Rowe Price Equity Income Portfolio
    
           652
  
         8,058
  
          (7,406)
 
T. Rowe Price Personal Strategy Balanced Portfolio
  
           294
  
         8,341
  
          (8,047)
 
T. Rowe Price Mid-Cap Growth Portfolio
    
           257
  
         3,719
  
          (3,462)
 
T. Rowe Price International Stock Portfolio
    
           457
  
           974
  
             (517)
 
Vanguard Balanced Portfolio
      
         1,711
  
         2,830
  
          (1,119)
 
Vanguard Equity Index Portfolio
      
             89
  
         1,152
  
          (1,063)
 
Vanguard High Yield Bond Portfolio
      
           196
  
           694
  
             (498)
 
Vanguard Small Company Growth Portfolio
    
           613
  
         1,342
  
             (729)
 
Vanguard Mid-Cap Index Portfolio
      
         1,550
  
           761
  
              789
 
Vanguard REIT Index Portfolio
      
         3,435
  
         1,742
  
           1,693
 
    **Formerly Janus Aspen Janus Portfolio
  ***Formerly T. Rowe Price Prime Reserve Portfolio
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
7.   Financial Highlights
 
 A summary of unit values, units outstanding and certain financial performance information for each subaccount for variable life contracts and the expense ratios, excluding expenses of the underlying funds, for the year ended December 31, 2017 is as follows:
                         
Expenses as a % of Average Net Assets #
    
Income as a % of Average Net Assets
        
                                     
             
Net Assets
                
             
Unit
                  
Total
  
        
Units
    
Value
    
(000's)
            
Return
  
   
**
Janus Henderson Research Portfolio
    
56,687
    
$
14.25
    
$
808
      
1.20
%
    
0.39
      
26.37
%
     
Janus Henderson Enterprise Portfolio
    
97,780
      
139.83
      
13,673
      
1.20
      
0.25
      
25.92
  
     
Janus Henderson Forty Portfolio
    
54,952
      
22.18
      
1,219
      
1.20
      
-
      
28.78
  
     
Janus Henderson Global Research Portfolio
    
33,813
      
10.81
      
366
      
1.20
      
0.84
      
25.53
  
     
Janus Henderson Balanced Portfolio
    
45,883
      
24.86
      
1,141
      
1.20
      
1.59
      
17.03
  
   
***
T. Rowe Price Government Money Portfolio
    
36,778
      
19.93
      
733
      
1.20
      
0.34
      
(0.86
)
     
T. Rowe Price Limited Term Bond Portfolio
    
26,004
      
36.63
      
953
      
1.20
      
1.46
      
(0.15
)
     
T. Rowe Price Equity Income Portfolio
    
50,290
      
29.15
      
1,466
      
1.20
      
1.74
      
14.65
  
     
T. Rowe Price Personal Strategy Balanced Portfolio
    
63,873
      
75.99
      
4,854
      
1.20
      
1.52
      
16.02
  
     
T. Rowe Price Mid-Cap Growth Portfolio
    
16,390
      
43.28
      
709
      
1.20
      
-
      
23.30
  
     
T. Rowe Price International Stock Portfolio
    
15,563
      
13.98
      
218
      
1.20
      
1.10
      
26.37
  
     
Vanguard Balanced Portfolio
    
31,451
      
28.10
      
884
      
1.20
      
2.30
      
13.36
  
     
Vanguard Equity Index Portfolio
    
13,277
      
27.64
      
367
      
1.20
      
1.82
      
20.22
  
     
Vanguard High Yield Bond Portfolio
    
6,947
      
22.34
      
155
      
1.20
      
4.89
      
5.74
  
     
Vanguard Small Company Growth Portfolio
    
14,556
      
34.11
      
496
      
1.20
      
0.47
      
22.01
  
     
Vanguard Mid-Cap Index Portfolio
    
14,818
      
34.21
      
507
      
1.20
      
1.19
      
17.67
  
     
Vanguard REIT Index Portfolio
    
12,341
      
35.66
      
440
      
1.20
      
2.64
      
3.53
  
 
 
A summary of unit values, units outstanding and certain financial performance information for each subaccount for variable life contracts and the expense ratios, excluding expenses of the underlying funds, for the year ended December 31, 2016 is as follows:
                         
Expenses as a % of Average Net Assets #
    
Income as a % of Average Net Assets
        
                                     
             
Net Assets
                
             
Unit
                  
Total
  
        
Units
    
Value
    
(000's)
            
Return
  
   
Janus Aspen Janus Portfolio
    
61,790
    
$
11.28
    
$
697
      
1.20
%
    
0.53
%
    
(0.69
)%
   
Janus Aspen Enterprise Portfolio
    
103,368
      
111.05
      
11,479
      
1.20
      
0.14
      
11.03
  
   
Janus Aspen Forty Portfolio
    
64,112
      
17.22
      
1,104
      
1.20
      
-
      
0.98
  
   
Janus Aspen Global Research Portfolio
    
38,513
      
8.61
      
332
      
1.20
      
1.09
      
0.85
  
   
Janus Aspen Balanced Portfolio
    
49,036
      
21.24
      
1,042
      
1.20
      
2.19
      
3.36
  
   
***
T. Rowe Price Government Money Portfolio
    
37,993
      
20.10
      
764
      
1.20
      
-
      
(1.19
)
     
T. Rowe Price Limited Term Bond Portfolio
    
26,371
      
36.69
      
967
      
1.20
      
1.36
      
0.16
  
     
T. Rowe Price Equity Income Portfolio
    
52,703
      
25.42
      
1,340
      
1.20
      
2.29
      
17.76
  
     
T. Rowe Price Personal Strategy Balanced Portfolio
    
68,904
      
65.50
      
4,513
      
1.20
      
1.65
      
5.19
  
     
T. Rowe Price Mid-Cap Growth Portfolio
    
17,946
      
35.10
      
630
      
1.20
      
-
      
5.00
  
     
T. Rowe Price International Stock Portfolio
    
17,726
      
11.06
      
196
      
1.20
      
1.06
      
0.91
  
     
Vanguard Balanced Portfolio
    
31,890
      
24.79
      
790
      
1.20
      
2.53
      
9.70
  
     
Vanguard Equity Index Portfolio
    
14,289
      
22.99
      
329
      
1.20
      
2.28
      
10.49
  
     
Vanguard High Yield Bond Portfolio
    
7,422
      
21.13
      
157
      
1.20
      
5.30
      
10.03
  
     
Vanguard Small Company Growth Portfolio
    
16,540
      
27.95
      
462
      
1.20
      
0.35
      
13.58
  
     
Vanguard Mid-Cap Index Portfolio
    
16,750
      
29.07
      
487
      
1.20
      
1.32
      
9.80
  
     
Vanguard REIT Index Portfolio
    
15,167
      
34.45
      
522
      
1.20
      
2.36
      
7.07
  
 
# Excluding the effect of the expenses of the underlying fund portfolios and administrative fees charged directly to contract holder accounts.
 
  **Formerly Janus Aspen Janus Portfolio
***Formerly T. Rowe Price Prime Reserve Portfolio
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
 
A summary of unit values, units outstanding and certain financial performance information for each subaccount for variable life contracts and the expense ratios, excluding expenses of the underlying funds, for the year ended December 31, 2015 is as follows:
                     
Expenses as a % of Average Net Assets #
    
Income as a % of Average Net Assets
        
                                 
         
Net Assets
                
         
Unit
                  
Total
  
   
Units
    
Value
    
(000's)
            
Return
  
Janus Aspen Janus Portfolio
    
68,637
    
$
11.36
    
$
780
      
1.20
%
    
0.63
%
    
4.09
%
Janus Aspen Enterprise Portfolio
    
110,889
      
100.02
      
11,091
      
1.20
      
0.65
      
2.79
  
Janus Aspen Forty Portfolio
    
64,538
      
17.05
      
1,101
      
1.20
      
-
      
10.88
  
Janus Aspen Global Research Portfolio
    
42,533
      
8.54
      
363
      
1.20
      
0.63
      
(3.46
)
Janus Aspen Balanced Portfolio
    
53,168
      
20.55
      
1,093
      
1.20
      
1.57
      
(0.58
)
T. Rowe Price Prime Reserve Portfolio
    
39,421
      
20.34
      
802
      
1.20
      
-
      
(1.20
)
T. Rowe Price Limited Term Bond Portfolio
    
29,233
      
36.63
      
1,071
      
1.20
      
1.15
      
(0.89
)
T. Rowe Price Equity Income Portfolio
    
60,109
      
21.59
      
1,298
      
1.20
      
1.82
      
(7.97
)
T. Rowe Price Personal Strategy Balanced Portfolio
    
76,951
      
62.27
      
4,792
      
1.20
      
1.71
      
(1.24
)
T. Rowe Price Mid-Cap Growth Portfolio
    
21,408
      
33.43
      
716
      
1.20
      
-
      
5.29
  
T. Rowe Price International Stock Portfolio
    
18,243
      
10.96
      
200
      
1.20
      
0.90
      
(2.09
)
Vanguard Balanced Portfolio
    
33,009
      
22.60
      
746
      
1.20
      
2.45
      
(1.11
)
Vanguard Equity Index Portfolio
    
15,352
      
20.81
      
319
      
1.20
      
2.00
      
0.05
  
Vanguard High Yield Bond Portfolio
    
7,920
      
19.20
      
152
      
1.20
      
6.69
      
(2.75
)
Vanguard Small Company Growth Portfolio
    
17,269
      
24.61
      
425
      
1.20
      
0.42
      
(3.92
)
Vanguard Mid-Cap Index Portfolio
    
15,961
      
26.47
      
423
      
1.20
      
1.28
      
(2.62
)
Vanguard REIT Index Portfolio
    
13,474
      
32.17
      
433
      
1.20
      
1.82
      
1.00
  
 
A summary of unit values, units outstanding and certain financial performance information for each subaccount for variable life contracts and the expense ratios, excluding expenses of the underlying funds, for the year ended December 31, 2014 is as follows:
                     
Expenses as a % of Average Net Assets #
    
Income as a % of Average Net Assets
        
                                 
         
Net Assets
                
         
Unit
                  
Total
  
   
Units
    
Value
    
(000's)
            
Return
  
Janus Aspen Janus Portfolio
    
72,338
    
$
10.91
    
$
789
      
1.20
%
    
0.36
%
    
11.66
%
Janus Aspen Enterprise Portfolio
    
130,682
      
97.30
      
12,716
      
1.20
      
0.16
      
11.19
  
Janus Aspen Forty Portfolio
    
72,323
      
15.38
      
1,112
      
1.20
      
0.16
      
7.44
  
Janus Aspen Global Research Portfolio
    
50,489
      
8.85
      
447
      
1.20
      
1.09
      
6.17
  
Janus Aspen Balanced Portfolio
    
62,943
      
20.67
      
1,301
      
1.20
      
1.75
      
7.22
  
T. Rowe Price Prime Reserve Portfolio
    
51,820
      
20.58
      
1,067
      
1.20
      
-
      
(1.19
)
T. Rowe Price Limited Term Bond Portfolio
    
42,200
      
36.95
      
1,559
      
1.20
      
1.27
      
(0.56
)
T. Rowe Price Equity Income Portfolio
    
64,919
      
23.46
      
1,523
      
1.20
      
1.74
      
6.10
  
T. Rowe Price Personal Strategy Balanced Portfolio
    
96,318
      
63.05
      
6,073
      
1.20
      
1.63
      
3.95
  
T. Rowe Price Mid-Cap Growth Portfolio
    
23,368
      
31.75
      
742
      
1.20
      
-
      
11.77
  
T. Rowe Price International Stock Portfolio
    
20,177
      
11.20
      
226
      
1.20
      
1.05
      
(2.41
)
Vanguard Balanced Portfolio
    
35,971
      
22.85
      
822
      
1.20
      
2.39
      
8.54
  
Vanguard Equity Index Portfolio
    
24,131
      
20.80
      
502
      
1.20
      
1.88
      
12.16
  
Vanguard High Yield Bond Portfolio
    
17,032
      
19.75
      
336
      
1.20
      
3.34
      
3.16
  
Vanguard Small Company Growth Portfolio
    
22,818
      
25.62
      
585
      
1.20
      
0.31
      
2.15
  
Vanguard Mid-Cap Index Portfolio
    
18,334
      
27.19
      
498
      
1.20
      
0.92
      
12.25
  
Vanguard REIT Index Portfolio
    
13,658
      
31.85
      
435
      
1.20
      
3.31
      
28.57
  
        
        # Excluding the effect of the expenses of the underlying fund portfolios and administrative fees charged directly to contract holder accounts.
 
SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account II
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
 
A summary of unit values, units outstanding and certain financial performance information for each subaccount for variable life contracts and the expense ratios, excluding expenses of the underlying funds, for the year ended December 31, 2013 is as follows:
                     
Expenses as a % of Average Net Assets #
    
Income as a % of Average Net Assets
        
                              
         
Net Assets
                
         
Unit
                  
Total
  
   
Units
    
Value
    
(000's)
            
Return
  
Janus Aspen Janus Portfolio
    
76,175
    
$
9.77
    
$
744
      
1.20
%
    
0.77
%
    
28.79
%
Janus Aspen Enterprise Portfolio
    
152,103
      
87.51
      
13,311
      
1.20
      
0.50
      
30.81
  
Janus Aspen Forty Portfolio
    
75,281
      
14.31
      
1,078
      
1.20
      
0.72
      
29.67
  
Janus Aspen Global Research Portfolio
    
54,452
      
8.33
      
454
      
1.20
      
1.22
      
26.90
  
Janus Aspen Balanced Portfolio
    
71,502
      
19.28
      
1,379
      
1.20
      
1.51
      
18.73
  
T. Rowe Price Prime Reserve Portfolio
    
54,229
      
20.83
      
1,130
      
1.20
      
-
      
(1.19
)
T. Rowe Price Limited Term Bond Portfolio
    
50,762
      
37.16
      
1,886
      
1.20
      
1.55
      
(1.07
)
T. Rowe Price Equity Income Portfolio
    
66,929
      
22.11
      
1,480
      
1.20
      
1.52
      
28.18
  
T. Rowe Price Personal Strategy Balanced Portfolio
    
108,680
      
60.66
      
6,592
      
1.20
      
1.48
      
16.53
  
T. Rowe Price Mid-Cap Growth Portfolio
    
24,133
      
28.41
      
686
      
1.20
      
-
      
35.08
  
T. Rowe Price International Stock Portfolio
    
21,744
      
11.47
      
249
      
1.20
      
0.87
      
12.69
  
Vanguard Balanced Portfolio
    
42,027
      
21.05
      
885
      
1.20
      
2.46
      
18.46
  
Vanguard Equity Index Portfolio
    
29,473
      
18.54
      
547
      
1.20
      
1.73
      
30.61
  
Vanguard High Yield Bond Portfolio
    
9,826
      
19.14
      
188
      
1.20
      
4.59
      
3.10
  
Vanguard Small Company Growth Portfolio
    
26,231
      
25.08
      
658
      
1.20
      
0.72
      
44.82
  
Vanguard Mid-Cap Index Portfolio
    
19,790
      
24.22
      
479
      
1.20
      
1.12
      
33.33
  
Vanguard REIT Index Portfolio
    
15,534
      
24.77
      
385
      
1.20
      
2.51
      
1.10
  
 
        # Excluding the effect of the expenses of the underlying fund portfolios and administrative fees charged directly to contract holder accounts.
 
8.  Diversification Requirements

Under the provisions of Section 817(h) of the Internal Revenue Code of 1986 (the Code), as amended, a variable contract, other than a contract issued in connection with certain types of employee benefit plans, will not be treated as a variable contract for federal tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified. Each subaccount is required to satisfy the requirements of Section 817(h). The Code provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either the statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury.

The Secretary of the Treasury has issued regulations under Section 817(h) of the Code. The Variable Life Account intends that each of the subaccounts shall comply with the diversification requirements and, in the event of any failure to comply, will take immediate action to assure compliance.