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USAA LIFE
INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE
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Semiannual Report
June 30, 2000
[USAA LOGO APPEARS HERE]
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TABLE OF CONTENTS
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PRESIDENT'S MESSAGE...................................................... iii
USAA LIFE VARIABLE UNIVERSAL LIFE INSURANCE
SEPARATE ACCOUNT
Overview of the Variable Universal Life Fund Accounts.................... A-2
USAA LIFE INVESTMENT TRUST
USAA Life Fund Overviews................................................. B-3
Portfolios of Investments................................................ B-24
Notes to Portfolios of Investments....................................... B-43
Statements of Assets and Liabilities..................................... B-44
Statements of Operations................................................. B-45
Statements of Changes in Net Assets...................................... B-46
Notes to Financial Statements............................................ B-48
SCUDDER VARIABLE LIFE INVESTMENT FUND (VLIF)
CAPITAL GROWTH PORTFOLIO
Letter from the Fund's President......................................... C-2
Portfolio Management Discussion.......................................... C-3
Performance Update....................................................... C-4
Portfolio Summary........................................................ C-5
Investment Portfolio..................................................... C-6
Financial Statements..................................................... C-9
Financial Highlights..................................................... C-12
Notes to Financial Statements............................................ C-13
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
Schedule of Investments.................................................. D-4
Financial Highlights..................................................... D-6
Statement of Assets and Liabilities...................................... D-7
Statement of Operations.................................................. D-8
Statement of Changes in Net Assets....................................... D-9
Notes to Financial Statements............................................ D-10
This report is for the information of USAA Life Variable Universal Life policy
owners. The USAA Life Variable Universal Life policy is distributed by USAA
Investment Management Company, a registered broker dealer.
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TABLE OF CONTENTS, continued
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DEUTSCHE VIT EQUITY 500 INDEX
Letter to Shareholders................................................... E-2
Schedule of Investments.................................................. E-5
Statement of Assets and Liabilities...................................... E-11
Statement of Operations.................................................. E-12
Statements of Changes in Net Assets...................................... E-13
Financial Highlights..................................................... E-14
Notes to Financial Statements............................................ E-15
DEUTSCHE VIT SMALL CAP INDEX
Letter to Shareholders................................................... E-18
Schedule of Investments.................................................. E-21
Statement of Assets and Liabilities...................................... E-43
Statement of Operations.................................................. E-44
Statements of Changes in Net Assets...................................... E-45
Financial Highlights..................................................... E-46
Notes to Financial Statements............................................ E-47
DEUTSCHE VIT EAFE (R) Equity Index
Letter to Shareholders................................................... E-50
Schedule of Investments.................................................. E-54
Statement of Assets and Liabilities...................................... E-63
Statement of Operations.................................................. E-64
Statements of Changes in Net Assets...................................... E-65
Financial Highlights..................................................... E-66
Notes to Financial Statements............................................ E-67
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust
Company, DB Alex Brown LLC, Deutsche Asset Management, Inc. and Deutsche Asset
Management Investment Services Limited.
Deutsche VIT Funds are not insured by the FDIC and are not deposits, obligations
of or guaranteed by Deutsche Bank.
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USAA LIFE INSURANCE COMPANY VARIABLE UNIVERSAL LIFE SEMIANNUAL REPORT
PRESIDENT'S MESSAGE
FROM THE DESK OF JIM MIDDLETON
Your Variable Universal Life* policy provides you with valuable life insurance
protection. As an added bonus, your policy offers the potential for future
financial growth.
I am pleased to provide you with this mid-year overview of our Variable
Universal Life's policy performance and accumulation unit values, as well as
USAA Life Investment Trust reports. Please take a moment to review your policy
and selected investment asset mix to ensure it matches your personal investment
and payment strategy.
Variable Universal Life is purchased because a long-term need for life insurance
has been identified. Sometimes its advantages - tax-deferred accumulation and
tax-free access to your cash value - are forgotten. Are you making the most of
this valuable policy to assist you in later years? Have you maximized its
potential?
When it comes to Variable Universal Life, here are some things to consider:
. Make use of your policy's flexibility by increasing the amount of money you
are investing. This could prevent your policy from lapsing when you need it
most.
. By adding money to your policy, you'll make optimum use of its valuable
tax-deferral feature.
. The more you invest in your policy now, the more you will have prepared for
your retirement and estate planning goals.
Remember: One of the best ways to plan for retirement is to diversify your
portfolio. See page A-2 of this report for accumulation unit values and an
overview of the historical performance of your funds. If you would like to
discuss your personal financial goals, or learn more about payment strategies,
please call us at 1-800-531-4265 (456-9061 in San Antonio).
You may also access information about the value of your contract and the
performance of your investment options 24 hours a day, seven days a week by
simply calling the toll-free USAA Touchline(R) at 1-800-531-5433.
Sincerely,
/s/ James M. Middleton
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James M. Middleton, Col., USAF, (Ret.)
President & CEO
USAA Life Insurance Company
*Known in some states as Flexible Premium Variable Life.
.USAA Life's Variable Universal Life is distributed by USAA Investment
Management Company, a registered broker dealer. . The Variable Universal Life
insurance policy is subject to surrender charges and possible tax consequences.
. This material should be preceded by a USAA Life Variable Universal Life
prospectus. . The Variable Universal Life insurance product is subject to
market risk, including potential fluctuations in investment return and the
potential loss of principal. . A 10% federal penalty tax may apply to
withdrawals made before age 59 1/2.
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iii
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USAA LIFE VARIABLE UNIVERSAL LIFE
INSURANCE SEPARATE ACCOUNT
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SEMIANNUAL REPORT
June 30, 2000
LOGO OF USAA
APPEARS HERE]
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VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE
COMPANY
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AN OVERVIEW
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June 30, 2000
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<TABLE>
<CAPTION>
AUV AVERAGE
ACCUMULATION ANNUAL TOTAL RETURN
UNIT VALUE SINCE
FUND ACCOUNT OBJECTIVE (AUV) ONE YEAR INCEPTION
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<S> <C> <C> <C> <C>
USAA LIFE Seeks the highest level of current income consistent $1.26 3.47% 2.97%
MONEY MARKET with preservation of capital and maintenance of liquidity (7-day yield
is 5.13%)
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USAA LIFE INCOME Seeks maximum current income without undue risk to principal $13.89 1.10% -0.98%
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USAA LIFE GROWTH Seeks capital growth and current income $23.66 -1.52% 18.54%
AND INCOME
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USAA LIFE Seeks long-term capital appreciation $23.82 20.04% 27.22%
WORLD GROWTH
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USAA LIFE Seeks long-term capital growth, consistent with preservation $19.64 -1.89% 10.36%
DIVERSIFIED ASSETS of capital and balanced by current income
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USAA LIFE Seeks appreciation of capital $28.33 59.69% 80.25%
AGGRESSIVE GROWTH
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USAA LIFE Seeks capital appreciation with current income as a secondary $13.24 18.98% 19.78%
INTERNATIONAL objective
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SCUDDER VLIF CAPITAL Seeks to maximize long-term capital growth $33.80 23.91% 36.88%
GROWTH PORTFOLIO
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ALGER AMERICAN Seeks long-term capital appreciation $36.69 17.50% 39.55%
GROWTH PORTFOLIO
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DEUTSCHE VIT Seeks to match as closely as possible the performance of the $13.04 5.28% 24.33%
EQUITY 500 INDEX S&P 500 Index, before the deduction of Fund expenses
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DEUTSCHE VIT Seeks to match as closely as possible the performance of the $10.73 12.08% 24.26%
SMALL CAP INDEX Russell 2000 Small Stock Index before the deduction of Fund
expenses
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DEUTSCHE VIT Seeks to match as closely as possible the performance of the $12.36 13.62% 18.00%
EAFE(R) EQUITY INDEX Morgan Stanley Capital International Europe Australia Far
East (EAFE(R)) Index before the deduction of Fund expenses
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</TABLE>
THE PERFORMANCE OF THE USAA LIFE AGGRESSIVE GROWTH FUND ACCOUNT AND THE DEUTSCHE
VIT SMALL CAP INDEX FUND ACCOUNT WILL REFLECT THE VOLATILITY OF INVESTMENTS IN
SMALL CAP STOCKS AND INITIAL PUBLIC OFFERINGS.
The 7-day yield more closely reflects the current earnings of the fund account
than the total return. An investment in the USAA Life Money Market Fund Account
is not insured or guaranteed by the F.D.I.C. or any other government agency.
Although the fund seeks to preserve a stable value at $1 per share, it is
possible to lose money by investing in the fund account. The 7-day yield
reflects the 7-day period ended June 30, 2000.
Foreign investing is subject to additional risks, such as currency fluctuations,
market illiquidity, and political instability.
The performance data quoted represent past performance and do not represent the
actual experience of amounts invested by a particular owner. Past performance is
not a guarantee of future results. The variable insurance products are subject
to market risk, including potential fluctuations in investment return and the
potential loss of principal. . Inception date for all variable fund accounts
for Variable Universal Life is 8/31/98 when sale of USAA Life's Variable
Universal Life insurance policy began. Since inception performance numbers
reflect experience since USAA Life began selling the product. All data reflects
the actual performance of the underlying funds in which the Life Insurance
Separate Account invests, adjusted to reflect a deduction of the M&E risk charge
and $5 monthly maintenance charge. M&E charges total 0.75% on an annual basis.
THE PERFORMANCE FIGURES ABOVE DO NOT REFLECT THE COST OF INSURANCE PROTECTION
AND OTHER INSURANCE POLICY FEES AND, IF THEY DID, THE PERFORMANCE QUOTED ABOVE
WOULD BE SIGNIFICANTLY LOWER. INVESTORS SHOULD ASK FOR A PERSONAL ILLUSTRATION
THAT SHOWS THE EFFECT ON PERFORMANCE OF THE COST OF INSURANCE, OTHER CHARGES,
AND OTHER VARIABLES. . Because accumulation units are part of an insurance
policy, actual performance should always be considered in conjunction with the
policy's fees, cash value, and death benefit. . This product is not yet
available in all states. This product is known in some states as Flexible
Premium Variable Life.
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