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1998 ANNUAL REPORT
T. ROWE PRICE VARIABLE ANNUITY
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T. ROWE PRICE
VARIABLE ANNUITY ACCOUNT
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
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 MEETING OF MEMBERS
The annual meeting of members of Security Benefit Mutual Holding Company (the
"Mutual Holding Company") will be held on Tuesday, June 1, 1999, at 700 SW
Harrison St., Topeka, Kansas, at 1:00 p.m. Each owner of an insurance policy
issued by Security Benefit Life Insurance Company is a member of the Mutual
Holding Company and 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 no later than May 31, 1999.
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) (comprised of the individual series as indicated therein)
as of December 31, 1998, and the related statement 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, 1998, by correspondence
with the transfer agent. 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 the individual series of the
T. Rowe Price Variable Annuity Account at December 31, 1998 and the results of
their operations and changes in their net assets for the year then ended in
conformity with generally accepted accounting principles.
Ernst & Young LLP
February 5, 1999
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BALANCE SHEET
T. Rowe Price Variable Annuity Account
December 31, 1998 (DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
T. Rowe Price Portfolios:
New America Growth Portfolio - 2,085,300 shares at net
asset value of $24.74 per share (cost, $42,194)................ $ 51,590
International Stock Portfolio - 1,616,711 shares at net
asset value of $14.52 per share (cost, $21,488)................ 23,475
Equity Income Portfolio - 3,650,555 shares at net asset
value of $19.24 per share (cost, $65,245) ..................... 70,237
Personal Strategy Balanced Portfolio - 1,405,575 shares
at net asset value of $16.16 per share (cost, $21,192)......... 22,714
Limited-Term Bond Portfolio - 2,287,803 shares at net
asset value of $5.02 per share (cost, $11,442)................. 11,485
Mid-Cap Growth Portfolio - 1,516,695 shares at net
asset value of $14.27 per share (cost, $19,091) ............... 21,643
Prime Reserve Portfolio - 15,023,712 shares at net
asset value of $1.00 per share (cost, $15,024) ................ 15,024
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Total assets......................................................... $216,168
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LIABILITIES AND NET ASSETS
Mortality guarantee payable.......................................... $ 3
NET ASSETS
Net assets are represented by (NOTE 3):
NUMBER UNIT
OF UNITS VALUE AMOUNT
-----------------------------
New America Growth Subaccount:
Accumulation units.................. 2,269,650 $22.72 $51,559
Annuity reserves.................... 1,371 22.72 31 51,590
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International Stock Subaccount:
Accumulation units.................. 1,554,164 15.08 23,438
Annuity reserves.................... 2,466 15.08 37 23,475
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Equity Income Subaccount:
Accumulation units.................. 3,428,903 20.42 70,021
Annuity reserves.................... 10,454 20.42 213 70,234
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Personal Strategy Balanced Subaccount:
Accumulation units.................. 1,257,891 18.04 22,686
Annuity reserves.................... 1,544 18.04 28 22,714
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Limited-Term Bond Subaccount:
Accumulation units.................. 926,046 12.38 11,464
Annuity reserves.................... 1,661 12.38 21 11,485
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Mid-Cap Growth Subaccount:
Accumulation units.................. 1,508,570 14.34 21,640
Annuity reserves.................... 238 14.34 3 21,643
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Prime Reserve Subaccount:
Accumulation units.................. 1,367,278 10.97 14,997
Annuity reserves.................... 2,421 10.97 27 15,024
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Total net assets...................... 216,165
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Total liabilities and net assets...... $216,168
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SEE ACCOMPANYING NOTES.
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STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
T. Rowe Price Variable Annuity Account
Year Ended December 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
NEW PERSONAL
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............... $ --- $ 271 $ 1,403 $ 603 $ 500 $ --- $ 651
Expenses (NOTE 2):
Mortality and expense risk fee..... (251) (123) (378) (106) (49) (93) (70)
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Net investment income (loss)......... (251) 148 1,025 497 451 (93) 581
Capital gain distributions........... 1,019 94 2,162 810 22 311 ---
Realized gain on investments......... 3,409 798 6,302 920 92 1,748 ---
Unrealized appreciation
(depreciation) on investments...... 2,861 1,970 (4,068) 206 (3) 1,129 ---
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Net realized and unrealized
gain on investments................ 7,289 2,862 4,396 1,936 111 3,188 ---
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Net increase in net assets
resulting from operations.......... 7,038 3,010 5,421 2,433 562 3,095 581
Net assets at beginning of year...... 39,153 20,472 65,084 15,625 7,287 13,009 8,068
Variable annuity deposits
(NOTES 2 AND 3).................... 17,228 5,717 22,321 8,764 8,087 13,294 26,964
Terminations and withdrawals
(NOTES 2 AND 3).................... (11,826) (5,720) (22,547) (4,105) (4,449) (7,755) (20,586)
Annuity payments (NOTES 2 AND 3)..... (2) (4) (42) (3) (2) --- (3)
Net mortality guarantee transfer..... (1) --- (3) --- --- --- ---
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Net assets at end of year............ $ 51,590 $23,475 $ 70,234 $22,714 $11,485 $21,643 $ 15,024
============================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
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NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Variable Annuity Account
December 31, 1998
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
common stocks of medium-sized growth companies, and Prime Reserve Portfolio -
emphasis on preservation of capital and liquidity while generating current
income by investing primarily in high-quality money market securities.
T. Rowe Price Associates, Inc. (T. Rowe Price) serves as the investment adviser
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 advisers 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........ $18,940 $12,773
International Stock Portfolio....... 6,348 6,113
Equity Income Portfolio............. 26,941 24,022
Personal Strategy Balanced Portfolio 10,669 4,706
Limited-Term Bond Portfolio......... 8,752 4,643
Mid-Cap Growth Portfolio............ 14,083 8,326
Prime Reserve Portfolio............. 28,398 21,442
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 gain 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
The operations of the Account are a part of the operations of SBL. Under current
law, no federal income taxes are allocated by SBL to the operations of 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 0.55% 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.
3. SUMMARY OF UNIT TRANSACTIONS
(IN THOUSANDS)
New America Growth Subaccount:
Variable annuity deposits............................. 827
Terminations, withdrawals and annuity payments........ 587
International Stock Subaccount:
Variable annuity deposits............................. 397
Terminations, withdrawals and annuity payments........ 404
Equity Income Subaccount:
Variable annuity deposits............................. 1,132
Terminations, withdrawals and annuity payments........ 1,148
Personal Strategy Balanced Subaccount:
Variable annuity deposits............................. 520
Terminations, withdrawals and annuity payments........ 245
Limited-Term Bond Subaccount:
Variable annuity deposits............................. 667
Terminations, withdrawals and annuity payments........ 367
Mid-Cap Growth Subaccount:
Variable annuity deposits............................. 1,029
Terminations, withdrawals and annuity payments........ 621
Prime Reserve Subaccount:
Variable annuity deposits............................. 2,510
Terminations, withdrawals and annuity payments........ 1,910
