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1997 ANNUAL REPORT
T. ROWE PRICE VARIABLE ANNUITY
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T. ROWE PRICE
VARIABLE ANNUITY ACCOUNT
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
CONTENTS
Report of Independent Auditors.............................................. 2
Audited Financial Statements
Balance Sheet............................................................. 3
Statement of Operations and Changes in Net Assets......................... 4
Notes to Financial Statements............................................. 5
NOTICE OF CONTRACT OWNERS' MEETING
The annual meeting of contract owners will be held on Tuesday, June 2, 1998, at
Security Benefit Life Insurance Company, 700 SW Harrison St., Topeka, Kansas, at
2:00 p.m. Each contract owner is entitled to vote, either in person or by proxy,
on all matters coming before the meeting. Proxies are available from the
corporate secretary and must be returned at least 30 days prior to the annual
meeting.
This report is submitted for the information of T. Rowe Price No-Load Variable
Annuity contract owners. The T. Rowe Price No-Load Variable Annuity (V6021) is
issued by Security Benefit Life Insurance Company.
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REPORT OF INDEPENDENT AUDITORS
The Contract Owners of T. Rowe Price Variable Annuity Account and
The Board of Directors of Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of T. Rowe Price Variable Annuity
Account (the Account) as of December 31, 1997, and the related statements of
operations and changes in net assets for the year then ended. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1997, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of T. Rowe Price Variable Annuity
Account at December 31, 1997, and the results of its operations and changes in
its net assets for the year then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
February 6, 1998
2
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BALANCE SHEET
T. Rowe Price Variable Annuity Account
December 31, 1997 (DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
T. Rowe Price Portfolios:
New America Growth Portfolio - 1,833,800 shares at net
asset value of $21.35 per share (cost, $32,618) ............... $ 39,153
International Stock Portfolio - 1,606,981 shares at net
asset value of $12.74 per share (cost, $20,455) ............... 20,472
Equity Income Portfolio - 3,500,961 shares at net asset
value of $18.59 per share (cost, $56,024) ..................... 65,084
Personal Strategy Balanced Portfolio - 1,032,694 shares at
net asset value of $15.13 per share (cost, $14,309) ........... 15,625
Limited-Term Bond Portfolio - 1,469,237 shares at net
asset value of $4.96 per share (cost, $7,241) ................. 7,287
Mid-Cap Growth Portfolio - 1,095,013 shares at net asset
value of $11.88 per share (cost $11,586) ...................... 13,009
Prime Reserve Portfolio - 8,068,379 shares at net asset
value of $1.00 per share (cost $8,068) ........................ 8,068
-------
Total Assets ........................................................ $168,698
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NET ASSETS
Net assets are represented by (Note 3):
NUMBER UNIT
OF UNITS VALUE AMOUNT
----------------------------
New America Growth Subaccount:
Accumulation units ................. 2,030,514 $19.28 $39,141
Annuity reserves ................... 684 19.28 12 $ 39,153
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International Stock Subaccount:
Accumulation units ................. 1,562,428 13.09 20,450
Annuity reserves ................... 1,778 13.09 22 20,472
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Equity Income Subaccount:
Accumulation units ................. 3,450,047 18.84 64,989
Annuity reserves ................... 5,044 18.84 95 65,084
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Personal Strategy Balanced Subaccount:
Accumulation units ................. 983,602 15.86 15,603
Annuity reserves ................... 1,391 15.86 22 15,625
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Limited-Term Bond Subaccount:
Accumulation units ................. 626,694 11.60 7,271
Annuity reserves ................... 1,337 11.60 16 7,287
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Mid-Cap Growth Subaccount:
Accumulation units ................. 1,100,979 11.82 13,009
Prime Reserve Subaccount:
Accumulation units ................. 769,829 10.48 8,064
Annuity reserves ................... 413 10.48 4 8,068
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Total net assets ..................... $168,698
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SEE ACCOMPANYING NOTES. 3
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STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
T. Rowe Price Variable Annuity Account
Year ended December 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
PERSONAL
NEW AMERICA INTERNATIONAL EQUITY STRATEGY LIMITED- MID-CAP PRIME
GROWTH STOCK INCOME BALANCED TERM BOND GROWTH RESERVE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions ..................... $ --- $ 188 $ 1,156 $ 396 $ 311 $ --- $ 283
Expenses (NOTE 2):
Mortality and expense risk fee ........... (174) (108) (258) (65) (29) (43) (30)
-------- -------- -------- -------- -------- -------- ---------
Net investment income (loss) ............... (174) 80 898 331 282 (43) 253
Capital gain distributions ................. 91 267 1,942 235 --- --- ---
Realized gain on investments ............... 1,427 727 1,816 382 20 175 ---
Unrealized appreciation (depreciation) on
investments .............................. 4,680 (791) 6,797 916 21 1,423 ---
-------- -------- -------- -------- -------- -------- ---------
Net realized and unrealized gain on
investments .............................. 6,198 203 10,555 1,533 41 1,598 ---
-------- -------- -------- -------- -------- -------- ---------
Net increase in net assets resulting from
operations ............................... 6,024 283 11,453 1,864 323 1,555 253
Net assets at beginning of year ............ 25,570 14,362 27,983 8,121 4,865 --- ---
Variable annuity deposits (NOTES 2 AND 3) .. 15,321 11,401 32,625 8,325 5,200 14,695 19,412
Terminations and withdrawals (NOTES 2 AND 3) (7,753) (5,574) (6,977) (2,684) (3,101) (3,241) (11,597)
Annuity payments (NOTES 2 AND 3) ........... (9) --- --- (1) --- --- ---
-------- -------- -------- -------- -------- -------- ---------
Net assets at end of year .................. $39,153 $20,472 $65,084 $15,625 $ 7,287 $13,009 $ 8,068
======== ======== ======== ======== ======== ======== =========
</TABLE>
4 SEE ACCOMPANYING NOTES.
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NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Variable Annuity Account
December 31, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
T. Rowe Price Variable Annuity Account (the Account) is a separate account of
Security Benefit Life Insurance Company (SBL). The Account is registered as a
unit investment trust under the Investment Company Act of 1940, as amended. The
Account currently is divided into seven subaccounts. Each subaccount invests
exclusively in shares of a single corresponding mutual fund or series thereof.
Purchase payments received by the Account are invested in one of the Portfolios
of either T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc. or T. Rowe Price International Series, Inc., mutual funds not otherwise
available to the public. As directed by the owners, purchase payments are
invested in shares of New America Growth Portfolio -- emphasis on long-term
capital growth through investments in common stocks of domestic companies,
International Stock Portfolio -- emphasis on long-term capital growth through
investments in common stocks of established foreign companies, Equity Income
Portfolio -- emphasis on substantial dividend income and capital appreciation by
investing primarily in dividend-paying common stocks, Personal Strategy Balanced
Portfolio -- emphasis on both capital appreciation and income, Limited-Term Bond
Portfolio -- emphasis on income with moderate price fluctuation by investing in
short- and intermediate-term investment grade debt securities, Mid-Cap Growth
Portfolio -- emphasis on long-term capital appreciation through investments in
companies with proven products or services and Prime Reserve Portfolio --
emphasis on preservation of capital and liquidity while generating the
5
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NOTES TO FINANCIAL STATEMENTS (cont.)
highest possible current income by investing primarily in high-quality money
market securities.
T. Rowe Price Associates, Inc. (T. Rowe Price) serves as the investment advisor
to each Portfolio except the International Stock Portfolio which is managed by
Rowe Price-Fleming International, Inc., an affiliate of T. Rowe Price. The
investment advisors are responsible for managing the Portfolios' assets in
accordance with the terms of the investment advisory contracts.
INVESTMENT VALUATION
Investments in mutual fund shares are carried in the balance sheet at market
value (net asset value of the underlying mutual fund). The first-in, first-out
cost method is used to determine gains and losses. Security transactions are
accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold were as
follows:
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ----------
(IN THOUSANDS)
New America Growth Portfolio .......... $15,921 $ 8,445
International Stock Portfolio ......... 12,122 5,948
Equity Income Portfolio ............... 36,441 7,953
Personal Strategy Balanced Portfolio... 9,170 2,964
Limited-Term Bond Portfolio ........... 5,875 3,494
Mid-Cap Growth Portfolio .............. 14,965 3,554
Prime Reserve Portfolio ............... 21,041 12,973
ANNUITY RESERVES
Annuity reserves relate to contracts which have matured and are in the payout
stage. Such reserves are computed on the basis of published mortality tables
using assumed interest rates that will provide reserves as prescribed by law. In
cases where the payout option selected is life contingent, SBL periodically
recalculates the required annuity reserves, and any resulting adjustment is
either charged or credited to SBL and not to the Account.
REINVESTMENT OF DIVIDENDS
Dividend and capital gains distributions paid by the mutual fund to the Account
are reinvested in additional shares of each respective Portfolio. Dividend
income and capital gains distributions are recorded as income on the ex-dividend
date.
FEDERAL INCOME TAXES
Under current law, no federal income taxes are payable with respect to the
Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
Mortality and expense risks assumed by SBL are compensated for by a fee
equivalent to an annual rate of .55% of the average daily net assets of each
account.
When applicable, an amount for state premium taxes is deducted as provided by
pertinent state law either from the purchase payments or from the amount applied
to effect an annuity at the time annuity payments commence.
6
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3. SUMMARY OF UNIT TRANSACTIONS
(IN THOUSANDS)
New America Growth Subaccount:
Variable annuity deposits ............................ 897
Terminations, withdrawals and annuity payments ....... 464
International Stock Subaccount:
Variable annuity deposits ............................ 862
Terminations, withdrawals and annuity payments ....... 423
Equity Income Subaccount:
Variable annuity deposits ............................ 1,970
Terminations, withdrawals and annuity payments ....... 419
Personal Strategy Balanced Subaccount:
Variable annuity deposits ............................ 568
Terminations, withdrawals and annuity payments ....... 184
Limited-Term Bond Subaccount:
Variable annuity deposits ............................ 462
Terminations, withdrawals and annuity payments ....... 279
Mid-Cap Growth Subaccount:
Variable annuity deposits ............................ 1,406
Terminations, withdrawals and annuity payments ....... 305
Prime Reserve Subaccount:
Variable annuity deposits ............................ 1,929
Terminations, withdrawals and annuity payments ....... 1,159
