<PAGE>
USAA LIFE INSURANCE COMPANY
VARIABLE ANNUITY
========================================================================
------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1995
[LOGO OF USAA APPEARS HERE]
USAA /(R)/
<PAGE>
this page left blank intentionally
<PAGE>
TABLE of CONTENTS
================================================================================
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PRESIDENT'S LETTER.................................................................5
SEPARATE ACCOUNT OF
USAA LIFE INSURANCE CO...................................................A-9--A-13
Statements of Assets and Liabilities............................................A-10
Statements of Operations........................................................A-11
Statements of Changes in Net Assets.............................................A-11
Notes to Financial Statements...................................................A-12
USAA LIFE INVESTMENT TRUST................................................B-15--B-49
Statements of Assets and Liabilities............................................B-17
USAA Life VA Money Market Fund
An Overview.................................................................B-18
Portfolio of Investments in Securities......................................B-19
USAA Life VA Income Fund
An Overview.................................................................B-22
Portfolio of Investments in Securities......................................B-23
USAA Life VA Growth and Income Fund
An Overview.................................................................B-25
Portfolio of Investments in Securities......................................B-27
USAA Life VA World Growth Fund
An Overview.................................................................B-30
Portfolio of Investments in Securities......................................B-32
USAA Life VA Diversified Assets Fund
An Overview.................................................................B-38
Portfolio of Investments in Securities......................................B-40
Notes to Portfolios of Investments in Securities................................B-43
Statements of Operations........................................................B-44
Statements of Changes in Net Assets.............................................B-45
Notes to Financial Statements...................................................B-46
SCUDDER VARIABLE LIFE INVESTMENT FUND
CAPITAL GROWTH PORTFOLIO................................................C-51--C-67
Letter from the Fund's President................................................C-52
Capital Growth Portfolio Management Discussion..................................C-53
Capital Growth Portfolio Summary................................................C-54
Investment Portfolio, Financial Statements and Financial Highlights.............C-55
Notes to Financial Statements...................................................C-64
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO.........................................D-69--D-79
Portfolio Manager's Letter to Shareholders......................................D-70
Schedule of Investments.........................................................D-71
Financial Highlights............................................................D-73
Statement of Assets and Liabilities.............................................D-74
Statement of Operations.........................................................D-75
Statement of Cash Flows.........................................................D-76
Statements of Changes in Net Assets.............................................D-77
Notes to Financial Statements...................................................D-78
</TABLE>
This report is for the information of USAA Life Variable Annuity contract owners
and others who have received a copy of the currently effective Variable Annuity
prospectus. It may be used as sales literature only when preceded or accompanied
by a current prospectus which includes complete information. The USAA Life
Variable Annuity is distributed by USAA Investment Management Company, a
registered broker dealer.
<PAGE>
this page left blank intentionally
<PAGE>
USAA LIFE VARIABLE ANNUITY SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE] from the desk of Ed Rosane
---------------------------------------------------------
It is exciting to produce our first Variable Annuity
Semiannual Report. This report provides in-depth
information to help you better understand your annuity
contract and its performance. In addition to pertinent
financial information, fund narratives provide a
discussion of relevant market conditions, investment
strategies and techniques pursued by the fund's
investment advisers; and charts and graphs are added to
provide further insight into some of the more important
factors that drive a fund's performance. Because
performance is important to you and your financial
future, I'd like to dedicate my first semiannual report
message to a discussion of performance.
--------------------------
1995 SEMIANNUAL REPORT 5
<PAGE>
USAA LIFE VARIABLE ANNUITY SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
TOTAL RETURNS
So far, 1995 has proven to be a good time to introduce a new retirement product.
The bull market has been most pleasant. We at USAA Life are pleased with the
performance of each fund available through our Variable Annuity and the impact
this has had on the value of your contract.
The table below provides the accumulation unit value (AUV) total returns for
each variable annuity fund account as of June 30, 1995--the close of our first
financial reporting period. The AUV total return is important to you in
monitoring the growth of your annuity.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AUV TOTAL RETURNS
- --------------------------------------------------------------------------------
For the Period 2/6/95 through 6/30/95
<S> <C>
VA Money Market
Fund Account/1/ 1.83%
- --------------------------------------------------------------------------------
VA Income Fund Account 7.92%
- --------------------------------------------------------------------------------
VA Growth and Income
Fund Account 11.84%
- --------------------------------------------------------------------------------
VA World Growth
Fund Account/2/ 12.12%
- --------------------------------------------------------------------------------
VA Diversified Assets
Fund Account 10.17%
- --------------------------------------------------------------------------------
Scudder VLIF
Capital Growth Portfolio 14.22%
- --------------------------------------------------------------------------------
Alger American
Fund Growth Portfolio 20.89%
- --------------------------------------------------------------------------------
</TABLE>
The performance data quoted represents past performance. Past performance is not
a guarantee of future returns. The principal value contributed to the seven
Variable Annuity fund accounts listed above will fluctuate. When variable
annuity units are redeemed, they may be worth more or less than their original
cost.
1 An investment in the Variable Annuity Money Market Fund is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the Fund
will be able to maintain a stable net asset value of $1 per share.
2 Foreign investing is subject to certain risks which are discussed in the
Variable Annuity prospectus.
To calculate a variable annuity fund account's AUV total return, we first begin
with each underlying fund's net asset value (NAV). The NAV total return
calculated at the underlying fund's level includes the reinvestment of income
dividends and the deduction of fund expenses which can vary from fund to fund.
(More specific information regarding fund expenses can be found on page 9A of
your August 1, 1995 prospectus.)
NAV -- Measure of how the underlying funds performed.
- EXPENSES -- Variable Annuity contract expenses, includes M&E and
---------- administration.
AUV -- Best measure for monitoring the value of your contract.
From the NAV, Variable Annuity contract costs are deducted to provide the AUV
calculation. For the USAA Life Variable Annuity, these contract costs include:
(1) the mortality and expense (M&E) risk charge, which is 1.05% of the average
net asset value of each variable annuity fund account, and (2) the
administration expense charge, which is 0.10% of the average net asset value of
each variable annuity fund account.
MAKING COMPARISONS
When performance figures are announced, it is human nature to make comparisons.
However, comparisons made at a quick glance may cause you to reach the wrong
conclusion. Because there is so much to contemplate when making comparisons, I'd
like to share a few guidelines you may want to consider.
EACH INDIVIDUAL HAS DIFFERENT NEEDS
Your personal investment strategy, risk tolerance and retirement horizon are
unique to your financial situation, your objectives and the investment options
you select. These decisions should not be changed precipitously simply because a
given fund is currently providing superior returns. Taking the time to regularly
review these factors with a registered representative will ensure that your
objectives are up-to-date and that your needs are still being met.
A LONG-TERM RETIREMENT PLAN
It is important to view your variable annuity as a long-term retirement plan,
rather than just another investment vehicle. Special tax-deferred status on the
earnings of variable annuities is granted by the Internal Revenue Code to
encourage individuals to save for retirement. Through the years, the compounding
of tax-deferred earnings may have a powerful impact on the value of your
annuity.
COMPARING PRODUCT FEATURES
Due to the unique design of variable annuities, contract features provide
inherent value to the product which is difficult to measure. Therefore, when
comparing variable annuity products to other investment vehicles, you may want
to consider the following:
. Since a variable annuity is a contract between you and a life insurance
company, the guaranteed death benefit gives you added protection. With USAA
Life's Variable Annuity, you have the comfort of knowing that should you die
prematurely while your contract is in the accumulation phase, your
beneficiary(ies) will receive the total value of your annuity contract or at
least the total contributions you made less any withdrawals, whichever is
greater.
- --------------------------
6 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE VARIABLE ANNUITY SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
. Unlike some investment vehicles, with most variable annuities there are no
tax consequences when assets are transferred among the contract's investment
options.
. Because investment strategies do vary for each individual's personal
situation, there may be instances when you may wish to allocate a portion of
your money to the USAA Life Variable Annuity fixed fund account. Such a
transfer can be accomplished without surrender charges or tax consequences.
. Sales loads or commissions may be charged on the products to which you may
compare your Variable Annuity. These costs can have a major impact on the
total value that you are able to accumulate over time. As you are aware, our
Variable Annuity has no sales loads or commissions.
. One of the advantages of a variable annuity is the flexibility of choosing
an income stream upon retirement that can last the rest of your life. The
payout options offered, as well as the fixed annuity payout rate, vary from
company to company. Even if you are years away from needing to select a payout
option, you may want to review this feature.
COMPARING PERFORMANCE
Once you actually begin comparing performance you may also want to consider the
following:
. Compare like periods of time. A lot can happen in a short period of time
which can dramatically affect the performance of a fund. And because different
companies and products have different fiscal years, comparing performance
figures found in financial reports may not result in a comparison of like
periods of time.
. Consider a fund's investment objective. Generally funds with lower risk have
a lower rate of return. You wouldn't want to compare an income fund (low
risk/return) to an aggressive growth fund (high risk/return) seeking capital
appreciation. The performance of the Variable Annuity fund accounts was about
what you would expect considering the investment objective of each. Those fund
accounts with less risk provided lower returns while those with greater risk
potential provided higher returns.
. Compare variable annuity fund account AUV total returns. So often
individuals look only at NAV total returns. Comparing NAV total returns may be
appropriate for some investment products but not for variable annuities. AUV
total returns are more accurate measures of performance since they take into
account all of the fees and expenses that are deducted before you can truly
determine the accumulated value of your contract.
. If you do compare the NAV total returns of another investment product to a
variable annuity fund account's AUV total return, keep in mind that products
which are not variable annuities may not provide the benefit of tax-deferred
earnings or the inherent value of a guaranteed death benefit.
LOOKING FORWARD
The future holds great promise as we continue to evaluate, update and add
increasing value to our Variable Annuity. USAA Life is positioned for growth,
and we feel our future is filled with considerable opportunities. The extent of
our progress will be tempered only by factors beyond our control -- the market,
interest rates and economic conditions.
We believe in providing superior value to customers through an innovative
product which offers options, flexibility and diversification at a fair price
from a company where quality service, honest and open communication, and
customer satisfaction are a way of life. We will continue to evaluate our
Variable Annuity contract over time to ensure that strong cost-effective
controls are maintained over day-to-day operations.
We feel this innovative package offers the right mix of investment options and
features which individuals demand for their retirement plans. We invite you to
call an Account Representative, toll free, at 1-800-531-2923 (456-9035 in San
Antonio) to explore this report with us in greater detail.
Sincerely,
/s/ Edwin L. Rosane
Edwin L. Rosane, CLU, FLMI
President
USAA Life Insurance Company
--------------------------
1995 SEMIANNUAL REPORT 7
<PAGE>
this page left blank intentionally
<PAGE>
SEPARATE ACCOUNT OF
USAA LIFE INSURANCE CO.
============================================================================
- ----------------------------------------------------------------------------
SEMIANNUAL REPORT
June 30, 1995
[LOGO OF USAA APPEARS HERE]
USAA /(R)/
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
VARIABLE ANNUITY FUND ACCOUNTS June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life Scudder VLIF Alger
VA Money USAA Life VA Growth VA World VA Diversified Capital American
Market VA Income and Income Growth Assets Growth Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at value:
USAA Life Investment Trust -
USAA Life VA Money Market
Fund Account - 4,158,883
shares at net asset value
of $1.00 per share
(identified cost $1,999,613) $1,999,613
USAA Life Investment Trust -
USAA Life VA Income Fund
Account 2,027,610 shares at
net asset value of $11.22 per
share (identified cost $299,828) $309,785
USAA Life Investment Trust -
USAA Life VA Growth and Income
Fund Account - 2,024,756
shares at net asset value of
$11.65 per share (identified
cost $418,351) $432,419
USAA Life Investment Trust -
USAA Life VA World Growth Fund
Account - 1,956,054 shares at
net asset value of $11.15 per
share (identified cost $521,274) $561,714
USAA Life Investment Trust -
USAA Life VA Diversified Assets
Fund Account - 2,028,016 shares
at net asset value of $11.30 per
share (identified cost $308,212) $316,578
Scudder Variable Life Investment
Fund (VLIF) -
Capital Growth Portfolio
13,504 shares at net asset
value of $13.72 per share
(identified cost $176,692) $186,279
Alger American Fund -
American Growth Portfolio
41,639 shares at net asset
value of $28.60 per share
(identified cost $1,108,846) $1,215,709
Receivable from USAA Life
Insurance Company 56 - - - - 2 165
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS $1,999,669 $309,785 $432,419 $561,714 $316,578 $186,281 $1,215,874
========== ========== ========== ========== ========== ========== ==========
LIABILITIES
Payable to USAA Life
Insurance Company - 76 44 24 13 6 37
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets applicable to
accumulation units outstanding $1,999,669 $309,709 $432,375 $561,690 $316,565 $186,275 $1,215,837
========== ========== ========== ========== ========== ========== ==========
ACCUMULATION UNITS OUTSTANDING 1,963,755 28,699 38,662 50,099 28,733 16,308 100,576
========== ========== ========== ========== ========== ========== ==========
ACCUMULATION UNIT VALUE AND
REDEMPTION PRICE PER UNIT $1.018288 $10.791552 $11.183526 $11.211692 $11.017540 $11.422330 $12.088714
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements on page A-12.
- -----------------------------
A-10 SEMIANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
VARIABLE ANNUITY FUND ACCOUNTS Period Ending June 30, 1995* (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life Scudder VLIF Alger
VA Money USAA Life VA Growth VA World VA Diversified Capital American
Market VA Income and Income Growth Assets Growth Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income dividends and capital
gains distributions $31,946 - - - - $133 $7,086
EXPENSES
Mortality and expense risk 6,353 608 603 1,247 538 319 1,758
---------- ---------- ---------- ---------- ---------- ---------- ---------
NET INVESTMENT
INCOME (LOSS) 25,594 (608) (603) (1,247) (538) (186) 5,328
---------- ---------- ---------- ---------- ---------- ---------- ---------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investment transactions - 511 1,418 772 1,418 2,884 2,073
Change in net unrealized
appreciation on investments - 9,957 14,068 40,440 8,366 9,587 106,863
---------- ---------- ---------- ---------- ---------- ---------- ---------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS - 10,468 15,486 41,212 9,784 12,471 108,936
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $25,594 $9,860 $14,883 $39,965 $9,246 $12,285 $114,265
========== ========== ========== ========== ========== ========== =========
</TABLE>
*Separate Account commenced operation on February 6, 1995.
See accompanying notes to financial statements on page A-12.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
VARIABLE ANNUITY FUND ACCOUNTS Period Ending June 30, 1995* (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life Scudder VLIF Alger
VA Money USAA Life VA Growth VA World VA Diversified Capital American
Market VA Income and Income Growth Assets Growth Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $25,594 ($ 608) ($ 603) ($ 1,247) ($ 538) ($ 186) $5,328
Net realized gain on
investment transactions - 511 1,418 772 1,418 2,884 2,073
Change in net unrealized
appreciation - 9,957 14,068 40,440 8,366 9,587 106,863
---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets
resulting from operations $25,594 $9,860 $14,883 $39,965 $9,246 $12,285 $114,265
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ACCUMULATION
UNIT TRANSACTIONS 1,974,075 299,849 417,492 521,725 307,319 173,990 1,101,572
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 1,999,669 309,709 432,375 561,690 316,565 186,275 1,215,837
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT BEGINNING OF PERIOD - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $1,999,669 $309,709 $432,375 $561,690 $316,565 $186,275 $1,215,837
========== ========== ========== ========== ========== ========== ==========
</TABLE>
*Separate Account commenced operation on February 6, 1995.
See accompanying notes to financial statements on page A-12.
-----------------------------
A-11 SEMIANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
1) ORGANIZATION
The Separate Account of USAA Life Insurance Company (the Separate Account) is
registered under the Investment Company Act of 1940, as amended, as a segregated
unit investment account of USAA Life Insurance Company (USAA Life), a wholly-
owned subsidiary of the United Services Automobile Association (USAA).
The Separate Account is divided into seven variable annuity fund accounts, each
of which invests in a corresponding fund.
The funds that are available within the Separate Account include: five funds of
USAA Life Investment Trust (the Trust), namely the USAA Life Variable Annuity
Money Market Fund Account (USAA Life VA Money Market Fund), USAA Life Variable
Annuity Income Fund Account (USAA Life VA Income Fund), USAA Life Variable
Annuity Growth and Income Fund Account (USAA Life VA Growth and Income Fund),
USAA Life Variable Annuity World Growth Fund Account (USAA Life VA World Growth
Fund), and USAA Life Variable Annuity Diversified Assets Fund Account (USAA Life
VA Diversified Assets Fund); the Capital Growth Portfolio of the Scudder
Variable Life Investment Fund (Scudder Capital Growth Portfolio); and the
American Growth Portfolio of The Alger American Fund (Alger American Growth
Portfolio).
The assets of the Separate Account are the property of USAA Life and are not
chargeable with liabilities arising out of any other business of USAA Life.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Investments in mutual fund securities are carried in the Statements of Assets
and Liabilities at net asset value as reported by the Fund. Gains or losses on
securities transactions are determined on the basis of the first-in first-out
(FIFO) cost method. Security transactions are recorded on the trade date.
DISTRIBUTIONS
The net investment income (loss) and realized capital gains of the Separate
Account are not distributed, but instead are retained and reinvested for the
benefit of accumulation unit owners.
FEDERAL INCOME TAX
Operations of the Separate Account are included in the federal income tax return
of USAA Life, which is taxed as a "life insurance company" under the Internal
Revenue Code. Under current federal income tax law, no income taxes are payable
with respect to operations of the Separate Account.
UNIT VALUE CALCULATION
For financial reporting purposes, amounts have been rounded to the nearest
dollar, except for per unit amounts, which may result in minor rounding
differences. Per unit amounts are calculated based on precise amounts.
3) EXPENSES
A mortality and expense risk charge is deducted by USAA Life from the Separate
Account on a daily basis which is equal, on an annual basis, to 1.05% of the
daily net asset value of each Variable Annuity Fund Account. The mortality risks
assumed by USAA Life arise from its contractual obligation to make annuity
payments after the annuity date for the life of the annuitant in accordance with
annuity rates guaranteed in the contracts under distribution options that
involve life contingencies. USAA Life will also assume a mortality risk by its
contractual obligation to pay a death benefit upon the death of an Annuitant or
Contract Owner prior to the Distribution Phase. The expense risk assumed by USAA
Life is that the costs of administering the contracts and the Separate Account
may exceed the amount recovered from the contract maintenance and administration
expense charge. The mortality and expense risk charge is guaranteed by USAA Life
and cannot be increased.
The following expenses are charged to reimburse USAA Life for the expenses it
incurs in the establishment and maintenance of the Contracts and each Variable
Annuity Fund Account. USAA Life assesses each Variable Annuity Fund Account a
daily charge at an annualized rate of 0.10% of the average daily net assets of
each Variable Annuity Fund Account. Beginning on the first anniversary of the
effective date, and each anniversary thereafter, a maintenance charge of $30 is
deducted by USAA Life from the accumulated value of each contract. This charge
will apply only while the contract is in the accumulation phase.
Any premium tax levied by a state or government entity with respect to the
Separate Account will be charged against the contract.
- -----------------------------
A-12 SEMIANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
4) ACCUMULATION UNITS DATA*
VARIABLE ANNUITY FUND ACCOUNTS
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life Scudder VLIF Alger
VA Money USAA Life VA Growth VA World VA Diversified Capital American
Market VA Income and Income Growth Assets Growth Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITS
Sales 4,967,538 29,396 39,887 51,228 30,213 29,264 103,920
Redemptions (3,003,783) (697) (1,225) (1,129) (1,480) (12,956) (3,344)
---------- --------- --------- --------- --------- --------- ----------
Net change 1,963,755 28,699 38,662 50,099 28,733 16,308 100,576
========== ========= ========= ========= ========= ========= ==========
AMOUNTS
Sales $5,009,995 $306,580 $430,624 $533,783 $323,138 $309,391 $1,136,416
Redemptions (3,035,920) (6,731) (13,132) (12,058) (15,819) (135,401) (34,844)
---------- --------- --------- --------- --------- --------- ----------
Net change $1,974,075 $299,849 $417,492 $521,725 $307,319 $173,990 $1,101,572
========== ========= ========= ========= ========= ========= ==========
</TABLE>
5) ACCUMULATION UNIT VALUE DATA*
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life Scudder VLIF Alger
VA Money USAA Life VA Growth VA World VA Diversified Capital American
Market VA Income and Income Growth Assets Growth Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Portfolio Portfolio
------------ ------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
February 6, 1995 $1.000000 $10.000000 $10.000000 $10.000000 $10.000000 $10.000000 $10.000000
June 30, 1995 $1.018288 $10.791552 $11.183526 $11.211692 $11.017540 $11.422330 $12.088714
</TABLE>
*Separate Account commenced operation on February 6, 1995.
-----------------------------
A-13 SEMIANNUAL REPORT 1995
<PAGE>
this page left blank intentionally
<PAGE>
USAA LIFE
INVESTMENT TRUST
=========================================================================
- -------------------------------------------------------------------------
SEMIANNUAL REPORT
June 30, 1995
[LOGO OF USAA APPEARS HERE]
USAA /(R)/
<PAGE>
The total return calculations found in this section are calculated at each
fund's investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends and the deductions of fund expenses which can
vary from fund to fund. More specific information regarding the fund expenses
can be found on page 9A of your August 1, 1995 prospectus.
These NAV total return performance figures quoted represent past performance for
the period beginning January 5, 1995 and ending June 30, 1995. Past performance
is not a guarantee of future returns. The principal value contributed to the
seven Variable Annuity Fund Accounts will fluctuate. When variable annuity units
are redeemed, they may be worth more or less than their original cost.
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified
Market VA Income and Income Growth Assets
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value
(identified cost of $4,152, $20,883, $20,570,
$20,322, and $20,938, respectively) $ 4,152 $ 22,571 $ 23,327 $ 21,801 $ 22,932
Cash 23 19 1 2 7
Cash denominated in foreign currencies
(identified cost of $13) - - - 14 -
Receivables:
Capital shares sold 15 - - 12 -
Dividends and interest 13 198 80 61 197
Securities sold - - 255 262 1,002
Foreign currency contracts held, at value - - - 10 -
--------- ---------- ---------- ---------- ----------
Total assets 4,203 22,788 23,663 22,162 24,138
--------- ---------- ---------- ---------- ----------
LIABILITIES
Securities purchased - - 37 273 1,180
Foreign currency contracts held, at value - - - 10 -
Capital shares redeemed 39 - - 1 -
USAA Life Insurance Company 5 36 35 59 36
--------- ---------- ---------- ---------- ----------
Total liabilities 44 36 72 343 1,216
--------- ---------- ---------- ---------- ----------
Net assets applicable to capital
shares outstanding $ 4,159 $ 22,752 $ 23,591 $ 21,819 $ 22,922
========= ========== ========== ========== ==========
REPRESENTED BY:
Paid-in capital $ 4,159 $ 20,299 $ 20,417 $ 19,420 $ 20,307
Accumulated net investment income - 762 320 209 532
Accumulated net realized gain on investments - 3 97 710 89
Net unrealized appreciation of investments - 1,688 2,757 1,479 1,994
Net unrealized appreciation on foreign
currency translations - - - 1 -
--------- ---------- ---------- ---------- ----------
Net assets applicable to capital
shares outstanding $ 4,159 $ 22,752 $ 23,591 $ 21,819 $ 22,922
========= ========== ========== ========== ==========
Capital shares outstanding, unlimited number of shares
authorized, no par value 4,159 2,028 2,025 1,956 2,028
========= ========== ========== ========== ==========
Net asset value, redemption price,
and offering price per share $ 1.00 $ 11.22 $ 11.65 $ 11.15 $ 11.30
========= ========== ========== ========== ==========
</TABLE>
See accompanying "Notes to Financial Statements" on page B-46.
-----------------------------
1995 SEMIANNUAL REPORT B-17
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
AN OVERVIEW June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OBJECTIVE:
To obtain the highest level of current income consistent with preservation of
capital and maintenance of liquidity.
INVESTMENT PROGRAM:
This Fund invests in a diversified portfolio of high-quality U.S. dollar-
denominated debt instruments that present minimal credit risk with remaining
maturities of 397 days or less.
<TABLE>
<CAPTION>
As of June 30, 1995
<S> <C>
NET ASSETS: $4.2 million
NET ASSETS VALUE
(NAV) PER SHARE: $1.00
SIMPLE 7-DAY YIELD: 5.80%
TOTAL RETURN:
Since Inception
January 5, 1995: 2.82%
</TABLE>
GENERAL DISCUSSION
by Portfolio Manager J. Eric Thorderson
FUND BACKGROUND
The Securities and Exchange Commission (SEC) places strict parameters on the
quality and maturity of taxable money market funds. Nearly all money market
funds have high-quality portfolios because the SEC mandates that at least 95% of
the assets of the fund be invested in securities of the highest grade. One way
that the VA Money Market Fund differs from other money market funds is that it
invests 100% of the portfolio in the highest category of credit quality.
In addition, like all money market funds, the VA Money Market Fund limits the
average maturity of its portfolio to 90 days and the maturity of any one
security to 397 days. This reduces the likelihood of any short-term fluctuations
in the stated net asset value of $1 per share*.
PORTFOLIO POSITION
Due to the Variable Annuity's design and the necessity of the free-look period,
the VA Money Market Fund invests in securities with relatively short maturity
dates. Currently, the Fund's average maturity is managed in a range of 7 to 16
days.
The portfolio contains four types of securities: Demand Notes, Certificates of
Deposit (CDs), Commercial Paper and U.S. Agency Discount Notes. Discount Notes
are extremely liquid and provide the flexibility this Fund needs while the
higher percentage of Demand Notes held by the Fund adds stability. Currently,
Demand Notes have higher yields than the other three types of securities.
The Fund's position is constantly reviewed in relation to the current market,
and potential securities are evaluated for appropriateness and eligibility based
on established standards. We also consider the liquidity needs of the Fund and
purchase those securities that "make sense" on a credit quality, yield, and
maturity basis.
OUTLOOK
It appears the economy has slowed down enough that the Fed funds rate (the rate
member banks of the Federal Reserve charge each other) will begin to decline.
We continue to search for opportunities that are developing in the marketplace
and take advantage of those that will add value (for example, demand notes that
are enhanced by banks). We attempt to do this by monitoring market conditions
and economic indicators.
PORTFOLIO MIX
as of June 30, 1995
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Demand Notes 46.4%
CDs 4.4%
U.S. Agency Discount 22.6%
Commercial Paper 26.4%
</TABLE>
*An investment in this Fund is neither insured nor guaranteed by the U.S.
Government and there is no assurance that the Fund can maintain a stable net
asset value of $1 per share.
- -----------------------------
B-18 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE RATE DEMAND NOTES (42.8%)
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
------ ---------- -------- ---------- -------
<C> <S> <C> <C> <C>
AUTO PARTS
$ 100 Alabama IDA RB (Rehau Project), (CRE) 6.25% 10/01/19 $100
140 Bardstown, KY, Taxable Notes, Series 1994, (CRE) 6.15 6/01/24 140
------
240
------
BUILDING MATERIALS GROUP
100 Sarasota County, FL, IDA RB, Series 1994, (CRE) 6.15 9/01/14 100
------
BUILDINGS
100 MMR Funding I, DEB, Series A, (CRE) 6.07 9/01/10 100
------
FINANCE - RECEIVABLES
150 Capital One Funding Corp., Notes, Series 1993A, (CRE) 6.07 6/02/08 150
100 Capital One Funding Corp., Notes, Series 1994D, (CRE) 6.07 10/01/24 100
92 Midwest Funding Corp., Notes, Series 1992A, (CRE) 6.07 5/01/07 92
------
342
------
HEALTHCARE - DIVERSIFIED
100 GMS Associates Partnership Project Health Care RB, (CRE) 6.15 5/15/24 100
------
HEALTHCARE - MISCELLANEOUS
100 Mason City Clinic, P.C., IA, Demand Bonds, Series 1992, (CRE) 6.15 9/01/22 100
------
HOSPITALS
100 Armstrong County Hospital Auth., PA, RB, Series 1993B, (CRE) 6.15 9/01/17 100
------
HOTEL/MOTEL
100 Howard County, MD, Taxable RB, Series 1994, (CRE) 6.15 10/01/09 100
100 Ramada Hotel Downtown, San Diego, CA, DEB, (CRE) 6.60 2/01/96 100
------
200
------
HOUSING - MULTI/FAMILY
100 Palm Desert Redevelopment Agency, CA, RB, (CRE) 6.38 8/01/22 100
------
MACHINERY - DIVERSIFIED
100 DSL Funding Corp., Notes, (CRE) 6.23 12/01/09 100
------
NURSING CARE
150 Massachusetts Nursing Homes RB, Series 1993, (CRE) 6.15 11/15/13 150
------
SPECIAL ASSESSMENT/TAX/FEE
150 Community Redevelopment Agency,
City of Visalia, CA, DEB, (CRE) 6.26 9/01/20 150
------
Total variable rate demand notes (cost: $1,782) 1,782
------
<CAPTION>
PUT BONDS (3.6%)
<C> <S> <C> <C> <C>
HEALTHCARE - DIVERSIFIED
150 Wenatchee Valley Clinic, P. S., TaxableBonds,
Series 1995, (CRE) (cost: $150) 6.25 1/15/15 150
------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-19
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED RATE INSTRUMENTS (53.4%)
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- ---------- --------- -------- ---------- -------
<C> <S> <C> <C> <C>
BANKS
$185 First Deposit National Bank, CD 6.25% 8/03/95 $ 185
-------
CHEMICALS
100 Du Pont (E.I.) De Nemours and Co., CP 5.95 7/07/95 100
-------
ELECTRIC POWER
100 Midwest Power Systems Inc., CP 5.98 7/21/95 99
100 Northern States Power Minnesota, CP 5.95 7/05/95 100
-------
199
-------
FINANCE - BUSINESS/COMMERCIAL
100 Sanwa Business Credit Corp., CP 6.05 7/14/95 99
100 Sears Roebuck Acceptance Corp., CP 5.95 7/13/95 100
-------
199
-------
FINANCE - CONSUMER
100 Aristar Inc., CP 6.02 7/06/95 100
100 Aristar Inc., CP 6.03 8/04/95 99
100 Ford Motor Credit Co., CP 6.55 7/05/95 100
100 Heller Financial Inc., CP 5.89 8/01/95 100
-------
399
-------
RETAIL STORES - DEPARTMENT STORES
100 J. C. Penney Funding Corp., CP 5.94 7/07/95 100
-------
RETAIL STORES - GENERAL MERCHANDISING
100 Wal-Mart Stores Inc., CP 5.92 7/19/95 100
-------
U.S. GOVERNMENT
175 Federal Home Loan Mortgage Discount Notes 5.88 7/20/95 175
150 FNMA Discount Notes 5.88 7/06/95 150
200 FNMA Discount Notes 5.77 7/10/95 200
165 FNMA Discount Notes 5.78 7/17/95 164
250 FNMA Discount Notes 5.91 7/25/95 249
-------
938
-------
Total fixed rate instruments (cost: $2,220) 2,220
-------
Total investments (cost: $4,152) $4,152
=======
</TABLE>
- -----------------------------
B-20 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<S> <C>
U.S. Government 22.5%
- --------------------------------------------------------------------------------
Finance - Consumer 9.6
- --------------------------------------------------------------------------------
Finance - Receivables 8.2
- --------------------------------------------------------------------------------
Healthcare - Diversified 6.0
- --------------------------------------------------------------------------------
Auto Parts 5.8
- --------------------------------------------------------------------------------
Hotel/Motel 4.8
- --------------------------------------------------------------------------------
Electric Power 4.8
- --------------------------------------------------------------------------------
Finance - Business/Commercial 4.8
- --------------------------------------------------------------------------------
Banks 4.5
- --------------------------------------------------------------------------------
Nursing Care 3.6
- --------------------------------------------------------------------------------
Special Assessment/Tax/Fee 3.6
- --------------------------------------------------------------------------------
Building Materials Group 2.4
- --------------------------------------------------------------------------------
Buildings 2.4
- --------------------------------------------------------------------------------
Chemicals 2.4
- --------------------------------------------------------------------------------
Healthcare - Miscellaneous 2.4
- --------------------------------------------------------------------------------
Hospitals 2.4
- --------------------------------------------------------------------------------
Housing - Multi/Family 2.4
- --------------------------------------------------------------------------------
Machinery - Diversified 2.4
- --------------------------------------------------------------------------------
Retail Stores - Department Stores 2.4
- --------------------------------------------------------------------------------
Retail Stores - General Merchandising 2.4
------
- --------------------------------------------------------------------------------
99.8%
======
</TABLE>
See accompanying "Notes to Portfolio of Investments in Securities" on page B-43.
-----------------------------
1995 SEMIANNUAL REPORT B-21
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OBJECTIVE:
To obtain maximum current income without undue risk to principal.
INVESTMENT PROGRAM:
This Fund invests in a diversified portfolio of U.S. dollar-denominated debt and
income-producing equity securities selected for their high yields relative to
the risk involved.
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
NET ASSETS: $22.8 million
NET ASSET VALUE
(NAV) PER SHARE: $11.22
TOTAL RETURN:
Since Inception
January 5, 1995 12.20%
</TABLE>
GENERAL DISCUSSION
by Portfolio Manager J.W. Saunders, Jr.
January 1995 was a good time to start the VA Income Fund. We have been in a
strong bull market for bonds in this first reporting period and the net asset
value per share of the Fund has increased 12.20% in value.
Our investment strategy involves using a combination of high-yield common
stocks, government agency mortgage pass-through securities, and corporate or
government bonds. In fact, mortgage pass-through securities are the foundation
of the Fund's portfolio. These securities are issued by U.S. government
agencies - FNMA (Fannie Mae) and GNMA (Ginnie Mae) - and although not rated, are
considered to be comparable to Moody's and Standard & Poor's highest categories
(Aaa and AAA, respectively) for rating bond quality.
Mortgage pass-through securities are pools of mortgages which receive monthly
principal and interest payments. While yields on these securities are generally
comparable to yields on long-term bonds, they are priced like 10-year bonds to
reflect the 8-to 10-year average maturity which results from monthly principal
paydowns and refinancing of mortgages in the pools. The result is high current
yield with less price volatility, which fits well with the Fund's investment
objective.
A portion of the Fund is invested in high-yield common stocks which have
dividend yields almost as high as bonds and, over time, offer the potential for
increasing dividends. These common stocks react quickly to changes in interest
rates and generally experience the highest price volatility in the portfolio.
The Fund also holds long-term U.S. Treasury bonds which capture the benefits of
increasing prices as long-term interest rates decline.
Currently, the VA Income Fund portfolio mix (as percentages of net assets) is
14.5% in high-yield common stocks, 0.6% preferred stock, 71.1% in agency
mortgage pass-through securities, and 12.5% in U.S. Treasury bonds, with the
remaining 0.5% in cash and cash equivalents.
OUTLOOK
The rapid decline in long-term interest rates this year has surprised market
forecasters. This decline is a result of a perception that the economy is
slowing and that the Federal Reserve will not foster further increases in short-
term interest rates. Although a change in this perception could cause a
temporary bond market reversal, we believe that the trend toward lower long-term
interest rates can continue.
TOP 10 SECURITIES
as of June 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Coupon % of
Rate Net Assets
<S> <C> <C>
1) U.S. Treasury
Bond 7.875% 12%
- --------------------------------------------------------------------------------
2) GNMA 6.5% 8%
- --------------------------------------------------------------------------------
3) GNMA 8.5% 7%
- --------------------------------------------------------------------------------
4) FNMA 8.5% 7%
- --------------------------------------------------------------------------------
5) FNMA 8.0% 7%
- --------------------------------------------------------------------------------
6) GNMA 8.0% 7%
- --------------------------------------------------------------------------------
7) FNMA 7.0% 6%
- --------------------------------------------------------------------------------
8) GNMA 7.5% 6%
- --------------------------------------------------------------------------------
9) FNMA 7.5% 6%
- --------------------------------------------------------------------------------
10) FNMA 6.5% 6%
- --------------------------------------------------------------------------------
</TABLE>
- -----------------------------
B-22 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
COMMON STOCKS (14.5%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- --------- --------
<S> <C> <C>
14,000 Allegheny Power System, Inc. $ 329
9,000 American Electric Power Co., Inc. 316
13,000 CINergy Corp. 341
11,000 CIPSCO, Inc. 329
4,500 Entergy Corp. 109
11,000 General Public Utilities Corp. 327
3,300 Health Care Property Investors, Inc. 106
8,500 Houston Industries, Inc. 358
13,500 Northeast Utilities 304
4,000 NYNEX Corp. 161
6,000 PNC Bank Corp. 158
11,500 Public Service Enterprise Group, Inc. 319
5,000 Sun Co., Inc. 137
------
Total common stocks (cost: $3,081) 3,294
------
PREFERRED STOCKS (0.6%)
6,000 United Dominion Realty Trust, Inc. "A",
9.25%, Preferred Series A (cost: $150) 152
------
U.S. GOVERNMENT & AGENCY ISSUES (83.6%)
<CAPTION>
Principal
Amount
(000)
----------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (34.7%)
$ 1,511 6.50%, 4/01/24 1,454
1,485 7.00%, 6/01/24 1,462
1,454 7.50%, 1/01/25 1,460
1,461 8.00%, 1/01/25 1,490
1,465 8.50%, 12/01/24 1,512
498 9.00%, 1/01/25 520
------
7,898
------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (36.4%)
1,959 6.50%, 1/15/24 - 4/15/24 1,883
1,436 7.00%, 8/15/23 1,414
1,452 7.50%, 8/15/23 1,461
1,441 8.00%, 5/15/24 1,476
1,465 8.50%, 12/15/24 1,522
488 9.00%, 1/15/25 513
------
8,269
------
U.S. TREASURY BOND (12.5%)
100 7.625%, 2/15/25 113
2,400 7.875%, 2/15/21 2,734
------
2,847
------
Total U.S. Government & agency issues (cost: $17,541) 19,014
------
SHORT-TERM (0.5%)
<CAPTION>
Coupon
Rate Maturity
------ --------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
$111 Ford Motor Credit Co. (cost: $111) 5.93% 7/03/95 111
-------
Total investments (cost: $20,883) $ 22,571
=======
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-23
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<S> <C>
U.S. Government 83.6%
- --------------------------------------------------------------------------------
Electric Power 12.0
- --------------------------------------------------------------------------------
Real Estate Investment Trusts 1.1
- --------------------------------------------------------------------------------
Telephone 0.7
- --------------------------------------------------------------------------------
Bank Holding Companies - Major Regional 0.7
- --------------------------------------------------------------------------------
Oil - Domestic 0.6
- --------------------------------------------------------------------------------
Automobiles 0.5
------
- --------------------------------------------------------------------------------
99.2%
======
</TABLE>
See accompanying "Notes to Portfolio of Investments in Securities" on page B-43.
- -----------------------------
B-24 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
GENERAL DISCUSSION
by Portfolio Manager R. David Ullom
INVESTMENT PHILOSOPHY
Since this is our first report to Variable Annuity contractowners, it is
appropriate to explain this Fund's investment philosophy - value orientation.
This philosophy emphasizes the valuation of securities based on earnings, cash
flow, dividends, asset values and our judgment of a company's management. We do
not base investment selections on economic forecasts or market outlooks. We
place importance on being a patient investor and viewing the entire investment
process over an extended period of time. It is important to adhere to our
strategy which may not seem in line with market activity from time to time.
FUND PERFORMANCE
The above-average performance of the VA Growth and Income Fund since its
inception on January 5 resulted from investment in several areas which all
reflect our value-oriented investment philosophy. In particular, investments in
the areas of capital goods (Aerospace/Defense) and consumer staples
(Healthcare, Foods and Tobacco) had the most significant influence on the Fund's
performance since all of these areas boasted above-average appreciation. More
specifically, the Fund's investment weighting in Aerospace (Boeing, Rockwell and
B.F. Goodrich) and Healthcare (Baxter International, Merck and American Home
Products) provided solid returns. Also aiding the performance were our
investments in various technology-oriented companies such as National
Semiconductor, Computer Associates and Novell.
Detracting from the Fund's performance in the first half of the fiscal year were
our investments in various companies providing intermediate goods and services
(chemicals, machinery, energy, and paper & forest products). Also impeding
performance were investments in consumer cyclicals, primarily automobile and
retail stores.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT DIVERSIFICATION
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Intermediate Goods & Services 27.0%
Credit Sensitive 24.9%
Consumer Staples 18.3%
Capital Goods 15.1%
Consumer Cyclicals 12.7%
Cash Equivalent 0.9%
</TABLE>
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Boeing Co. 3.2%
Xerox Corp. 2.5%
Baxter International 2.5%
Dow Chemical Co. 2.1%
Occidental Petroleum Corp. 2.1%
Ford Motor Co. 2.1%
Ball Corp. 2.1%
BankAmerica Corp. 2.0%
American Home Products Corp. 2.0%
Universal Corp. 2.0%
</TABLE>
OBJECTIVE:
Seeks capital growth and current income.
INVESTMENT PROGRAM:
Not less than 65% of its assets are invested in a diversified portfolio of
dividend-paying common stocks, convertible securities, nonconvertible preferred
stock and nonconvertible debt securities of companies that offer the prospect
for growth of earnings.
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
NET ASSETS: $23.6 million
NET ASSET VALUE
(NAV) PER SHARE: $11.65
TOTAL RETURN:
Since Inception
January 5, 1995 16.50%
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OUTLOOK
As discussed, our investment philosophy is value-oriented and is not predicated
on a forecast for the U.S. economy or stock markets. Therefore, we will continue
to invest in securities that meet our value criteria. More specifically, we will
continue to invest in select cyclical industries such as chemicals, paper &
forest products, and railroads.
<TABLE>
<CAPTION>
TOP SECTORS
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Energy* 7.9%
- --------------------------------------------------------------------------------
Telephones 7.7%
- --------------------------------------------------------------------------------
Aerospace/Defense 6.0%
- --------------------------------------------------------------------------------
Chemicals* 6.0%
- --------------------------------------------------------------------------------
Tobacco 5.1%
- --------------------------------------------------------------------------------
Insurance* 4.8%
- --------------------------------------------------------------------------------
Computer Software & Service 4.6%
- --------------------------------------------------------------------------------
Paper & Forest Products 4.6%
- --------------------------------------------------------------------------------
Medical Products & Supplies 4.0%
- --------------------------------------------------------------------------------
Automobiles 3.1%
- --------------------------------------------------------------------------------
Natural Gas Distribution--
Pipelines 2.9%
- --------------------------------------------------------------------------------
</TABLE>
* Sectors broken down by industries:
Energy: Oil - Domestic (3.4%), Oil - Exploration & Production (1.5%),
Oil - International (1.4%), Oil Well Equipment & Service (1.6%)
Chemicals: Chemicals (4.7%), Chemicals - Specialty (1.3%)
Insurance: Insurance- Property/Casualty (2.9%), Insurance - Multi/Line (1.9%)
- -----------------------------
B-26 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS (96.1%)
Market
Number Value
of Shares Security (000)
--------- --------- --------
<S> <C> <C>
AEROSPACE/DEFENSE (6.0%)
4,000 B.F. Goodrich Co. $ 215
12,000 Boeing Co. 752
10,000 Rockwell International Corp. 458
------
1,425
------
ALUMINUM (1.6%)
7,400 Aluminum Co. of America 371
------
AUTOMOBILES (3.1%)
5,000 Chrysler Corp. 239
16,500 Ford Motor Co. 491
------
730
------
BANK HOLDING COMPANIES - MONEY CENTER (1.6%)
6,000 Bankers Trust New York Corp. 372
------
BANK HOLDING COMPANIES - OTHER MAJOR (2.0%)
9,000 BankAmerica Corp. 474
------
BROKERAGE FIRMS (1.4%)
7,000 Dean Witter, Discover & Co. 329
------
CHEMICALS (4.7%)
7,000 Dow Chemical Co. 503
6,000 Olin Corp. 309
9,000 Union Carbide Corp. 301
------
1,113
------
CHEMICALS - SPECIALTY (1.3%)
10,500 Morton International, Inc. 307
------
COMPUTER SOFTWARE & SERVICE (4.6%)
5,500 Computer Associates International, Inc. 373
5,000 First Financial Management Corp. 427
15,000 Novell, Inc.* 299
------
1,099
------
CONTAINERS - METALS & GLASS (2.1%)
14,000 Ball Corp. 488
------
DRUGS (1.3%)
6,500 Merck & Co., Inc. 319
------
ELECTRIC POWER (1.9%)
6,000 CINergy Corp. 157
7,000 Houston Industries, Inc. 295
------
452
------
ENGINEERING & CONSTRUCTION (0.3%)
11,000 Morrison Knudsen Corp. 74
------
ENTERTAINMENT (1.4%)
8,000 Time Warner, Inc. 329
------
FOODS (2.8%)
6,000 CPC International, Inc. 371
10,500 Dean Foods Co. 294
------
665
------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-27
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- --------- --------
<S> <C> <C>
HEALTHCARE - DIVERSIFIED (2.0%)
6,000 American Home Products Corp. $ 464
------
HOMEBUILDING (1.8%)
15,000 Centex Corp. 424
------
HOUSEHOLD PRODUCTS (1.7%)
5,500 Procter & Gamble Co. 395
------
INSURANCE - MULTI/LINE COMPANIES (1.9%)
7,000 Aetna Life & Casualty Co. 440
------
INSURANCE - PROPERTY/CASUALTY (2.9%)
3,300 American International Group, Inc. 376
11,800 PartnerRe Holdings Ltd. 308
------
684
------
MACHINERY - DIVERSIFIED (1.6%)
20,000 BW/IP, Inc. 370
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.4%)
11,000 Hillenbrand Industries, Inc. 342
------
MEDICAL PRODUCTS & SUPPLIES (4.0%)
16,000 Baxter International, Inc. 582
12,000 C.R. Bard, Inc. 360
------
942
------
NATURAL GAS DISTRIBUTION - PIPELINES (2.9%)
12,000 NICOR, Inc. 323
12,000 Sonat, Inc. 366
------
689
------
OFFICE EQUIPMENT & SUPPLIES (2.5%)
5,000 Xerox Corp. 586
------
OIL - DOMESTIC (3.4%)
21,500 Occidental Petroleum Corp. 492
11,000 Unocal Corp. 304
------
796
------
OIL - EXPLORATION & PRODUCTION (1.5%)
13,000 Apache Corp. 356
------
OIL - INTERNATIONAL (1.4%)
5,000 Texaco, Inc. 328
------
OIL WELL EQUIPMENT & SERVICE (1.6%)
6,000 Schlumberger Ltd. 373
------
PAPER & FOREST PRODUCTS (4.6%)
27,000 Fort Howard Corp.* 381
24,000 Jefferson Smurfit Corp.* 315
8,500 Weyerhaeuser Co. 401
------
1,097
------
POLLUTION CONTROL (1.7%)
14,000 WMX Technologies, Inc. 397
------
RAILROADS (1.6%)
5,500 Norfolk Southern Corp. 371
------
</TABLE>
- -----------------------------
B-28 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- --------- --------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (2.7%)
10,600 Developers Diversified Realty Corp. $ 305
20,000 Storage Equities, Inc. 327
-------
632
-------
RETAIL STORES - DEPARTMENT STORES (1.7%)
10,000 May Department Stores Co. 416
-------
RETAIL STORES - GENERAL MERCHANDISING (1.6%)
6,500 Sears, Roebuck & Co. 389
-------
RETAIL STORES - SPECIALTY (2.7%)
11,000 OfficeMax, Inc.* 307
21,000 Phillips-Van Heusen Corp. 325
-------
632
-------
TELEPHONES (7.7%)
7,000 American Telephone & Telegraph Co. 372
17,000 COMSAT Corp. 334
10,000 GTE Corp. 341
9,000 NYNEX Corp. 362
12,000 Sprint Corp. 403
-------
1,812
-------
TOBACCO (5.1%)
5,000 Philip Morris Companies, Inc. 372
13,000 RJR Nabisco Holdings Corp. 362
22,000 Universal Corp. 462
-------
1,196
-------
Total common stocks (cost: $20,044) 22,678
-------
PREFERRED STOCKS (1.9%)
4,500 National Semiconductor Corp. depositary shares, $3.25
convertible (cost: $321) 444
-------
SHORT-TERM (0.9%)
<CAPTION>
Principal
Amount Coupon
(000) Rate Maturity
----------- ------- --------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT ISSUES
$ 205 FNMA Discount Notes
(cost: $205) 5.90% 7/07/95 205
Total investments (cost: $20,570) $ 23,327
=======
</TABLE>
*Non-income producing
See accompanying "Notes to Portfolio of Investments in Securities" on page B-43.
-----------------------------
1995 SEMIANNUAL REPORT B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
AN OVERVIEW June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks long-term capital appreciation.
INVESTMENT PROGRAM:
Not less than 65% of the Fund's assets are invested in a diversified portfolio
of common stocks and other equity securities of both foreign and domestic
issuers representing at least three countries, one of which may include the
United States. The remainder of the Fund's assets may be invested in marketable
debt securities having remaining maturities of less than one year which are
issued or guaranteed as to both principal and interest by the U.S. government or
by its agencies.
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
NET ASSETS: $21.8 million
NET ASSET VALUE
(NAV) PER SHARE: $11.15
TOTAL RETURN:
Since Inception
January 5, 1995 11.50%
</TABLE>
GENERAL DISCUSSION
by Portfolio Managers David Peebles (Foreign Stocks) and R. David Ullom
(Domestic Stocks)
EUROPE
Over the last six months, Europe provided attractive stock market returns aided
by stronger European currencies. Investments were selected on the merits of a
company's prospects rather than by country. This approach helped to reduce
exposure to the possibility of poor profit growth within certain countries and
industries.
JAPAN
Japan was underweighted for a number of reasons: a lack of economic recovery,
Japan's bad debt within its banking system, a lack of competitiveness within
certain Japanese industries and trade disputes arising from closed markets. When
signs of the long-awaited recovery are evident, this market will be viewed more
positively.
EMERGING MARKETS
Concerns over the Mexican peso devaluation affected all emerging markets, both
inside and outside Latin America. While these markets have shown some recovery
in the last few months, the mature markets still provided better returns.
However, we will continue to maintain an overweighted position in emerging
markets as we feel these economies will continue to grow at a rapid rate.
UNITED STATES
We anticipate that the U.S. economy will continue to experience reasonable
economic growth and therefore will emphasize investments in areas such as
intermediate goods and services (commodity chemicals and metals), consumer
cyclicals (retailing and autos) and the capital goods area (aerospace/defense
and electronics).
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of June 30, 1995
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
USA 43.0
Japan 9.3
U.K. 6.1
France 3.9
Netherlands 3.9
Germany 3.2
Hong Kong 2.8
Sweden 2.7
Mexico 2.0
Australia 2.0
Other* 21.0
</TABLE>
*Investment in all other countries was less than 2% of the portfolio's net
assets.
- -----------------------------
B-30 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OUTLOOK
We think economic growth will continue to be modest in many markets; however,
low inflation and low interest rates coupled with continued gains in corporate
profits could provide attractive returns.
<TABLE>
TOP 10 EQUITY HOLDINGS
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Tarkett AG (Germany) 1.8%
- --------------------------------------------------------------------------------
Cadbury Schweppes
plc (United Kingdom) 1.5%
- --------------------------------------------------------------------------------
Verenigd Bezit
VNU (Netherlands) 1.5%
- --------------------------------------------------------------------------------
Veba AG (Germany) 1.4%
- --------------------------------------------------------------------------------
Northern Ireland Electricity
plc (United Kingdom) 1.3%
- --------------------------------------------------------------------------------
Tomkins plc (United Kingdom) 1.3%
- --------------------------------------------------------------------------------
Autoliv AB (Sweden) 1.3%
- --------------------------------------------------------------------------------
Essilor International (France) 1.3%
- --------------------------------------------------------------------------------
Microsoft Corp. (United States) 1.2%
- --------------------------------------------------------------------------------
STET Savings SHS (Italy) 1.2%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP 10 INDUSTRIES
OF EQUITY HOLDINGS
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Telephones 6.0%
- --------------------------------------------------------------------------------
Automobiles 3.6%
- --------------------------------------------------------------------------------
Conglomerate 3.5%
- --------------------------------------------------------------------------------
Electronics (semi-conductors) 3.4%
- --------------------------------------------------------------------------------
Retail- Specialty 3.3%
- --------------------------------------------------------------------------------
Computer Software & Service 3.0%
- --------------------------------------------------------------------------------
Drugs 2.9%
- --------------------------------------------------------------------------------
Building Materials 2.8%
- --------------------------------------------------------------------------------
Electric Power 2.8%
- --------------------------------------------------------------------------------
Paper & Forest Products 2.7%
- --------------------------------------------------------------------------------
</TABLE>
Foreign investing is subject to certain risks which are discussed in the USAA
Life Variable Annuity prospectus.
-----------------------------
1995 SEMIANNUAL REPORT B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
FOREIGN SECURITIES (56.9%)
FOREIGN COMMON STOCKS (55.9%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
ARGENTINA (0.8%)
12,400 Compania Interamericana de Automobiles S.A.* $ 60
6,000 YPF Sociedad Anonima S.A. ADS "D" 113
------
173
------
AUSTRALIA (0.9%)
90,000 CSL Ltd. 192
5,100 Rothmans Holdings Ltd. 17
------
209
------
AUSTRIA (0.7%)
1,200 VA Technologie AG 150
------
BRAZIL (0.8%)
15,100 Usinas Siderurgicas de Minas Gerais S.A.-USIMINAS ADS 170(a)
------
CANADA (1.0%)
7,000 Alliance Forest Products, Inc.* 128
3,200 Canadian Occidental Petroleum Ltd. 99
------
227
------
CHILE (1.1%)
100 Compania de Telefonos de Chile S.A. 8
7,900 Madeco S.A. ADS 227
------
235
------
DENMARK (1.8%)
2,200 Novo Nordisk A/S "B" 235
5,800 Tele Danmark A/S ADS 162
------
397
------
FINLAND (1.1%)
4,000 Nokia Corp. ADS 239
------
FRANCE (3.9%)
6,000 Coflexip ADS 152
5,000 Elf Aquitaine ADS 186
3,300 Eramet Group* 236
1,500 Essilor International 273
------
847
------
GERMANY (3.2%)
15,000 Tarkett AG 389
800 Veba AG 315
------
704
------
HONG KONG (2.8%)
84,400 Hong Kong Telecommunications Ltd. 167
50,000 Hutchison Whampoa Ltd. 242
120,000 Varitronix International Ltd. 210
------
619
------
INDIA (1.0%)
11,000 Larsen & Toubro Ltd. GDR* 215
------
</TABLE>
- -----------------------------
B-32 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
INDONESIA (0.9%)
110,000 PT Astra International, Inc. $ 195
------
ITALY (1.2%)
116,800 STET 259
------
JAPAN (9.3%)
10,000 77 Bank Ltd. 112
9,000 Canon, Inc. 147
13,000 Higo Bank 127
4,000 Hoya Corp. 118
3,000 Ito-Yokado Co., Ltd. 158
3,000 Kissei Pharmaceutical Co., Ltd. 95
7,000 Laox Co., Ltd. 136
2,000 Mabuchi Motor Co. 138
26,000 Minebea Co., Ltd. 167
19,000 Mitsubishi Heavy Industries, Ltd. 129
6,000 Nomura Securities Co., Ltd. 105
5,000 Sanwa Bank Ltd. 94
3,000 Shimamura Co., Ltd. 106
4,000 Tostem Corp. 123
7,000 Toyo Communication 157
4,000 Toyo Seikan Kaisha, Ltd. 117
------
2,029
------
MALAYSIA (1.6%)
35,000 Aokam Perdana BHD 87
25,000 Malaysian Assurance Alliance BHD 90
19,000 Tanjong plc 65
40,000 Technology Resources Industries BHD* 115
------
357
------
MEXICO (2.0%)
6,000 Bufete Industrial, S.A. de C.V. ADS 97
7,500 Desc, Soceidad de Fomento Industrial, S.A. de C.V. ADS* 97
8,000 Grupo Simec, S.A. de C.V. ADS* 79
8,000 Grupo Televisa, S.A. de C.V. ADS 163
------
436
------
NETHERLANDS (3.9%)
2,000 EVC International N.V.* 93
1,250 Heineken N.V. 189
4,400 Royal PTT Nederland N.V. 158
3,000 Vendex International N.V.* 80
2,700 Verenigd Bezit VNU 323
------
843
------
PHILIPPINES (1.3%)
500,000 Filinvest Land, Inc.* 145
212,500 Petron Corp. GDS 139
------
284
------
PORTUGAL (0.8%)
8,500 Portucel Industrial, S. A. 61
928 Portugal Telecom* 18
5,300 Portugal Telecom, S.A. ADS* 100
------
179
------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
SINGAPORE (1.6%)
16,000 City Developments Ltd. $ 98
27,000 DBS Land Ltd. 85
19,500 Keppel Corp. Ltd. 159
------
342
------
SOUTH AFRICA (1.1%)
8,400 Murray and Roberts Holdings Ltd. 49
14,800 Nedcor Ltd. GDR * 179
3,700 Nedcor Ltd. Warrants * 6
------
234
------
SPAIN (1.1%)
6,200 Telefonica de Espana, S.A. ADR 240
------
SWEDEN (2.7%)
13,000 Arjo AB 114
5,300 Autoliv AB 284
10,000 Volvo AB 190
------
588
------
SWITZERLAND (0.9%)
200 Ciba Geigy AG 147
65 Sulzer AG P.C. 44
------
191
------
THAILAND (1.9%)
25,600 Finance One Public Co. 189
30,000 Krung Thai Bank Ltd. 122
15,000 TPI Polene Public Co., Ltd. 101
------
412
------
UNITED KINGDOM (6.1%)
6,000 British Sky Broadcasting plc ADR * 157
45,000 Cadbury Schweppes plc 328
50,500 Northern Ireland Electricity plc 291
20,000 Refuge Group plc 108
81,500 Tomkins plc 291
80,000 WPP Group plc 155
------
1,330
------
OTHER HOLDINGS (0.4%)
153,000 Central European Growth Fund plc 94
30,000 Central European Growth Fund plc Warrants * 3
------
97
------
Total foreign common stocks (cost: $11,796) 12,201
------
FOREIGN PREFERRED STOCKS (1.0%)
AUSTRALIA (1.0%)
100,000 Village Roadshow Ltd. (cost: $203) 217
------
Total foreign securities (cost: $11,999) 12,418
------
</TABLE>
- -----------------------------
B-34 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
DOMESTIC STOCKS (35.3%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
AEROSPACE/DEFENSE (2.6%)
1,500 B.F. Goodrich Co. $ 80
4,000 Boeing Co. 251
5,000 Rockwell International Corp. 229
------
560
------
ALUMINUM (0.6%)
2,400 Aluminum Co. of America 120
------
AUTOMOBILES (1.6%)
3,500 Chrysler Corp. 168
6,000 Ford Motor Co. 178
------
346
------
BANK HOLDING COMPANIES - MONEY CENTER (1.1%)
1,900 Bankers Trust New York Corp. 118
2,200 Citicorp 127
------
245
------
BIOTECHNOLOGY (0.7%)
2,000 Amgen, Inc. * 161
------
BROKERAGE FIRMS (0.4%)
2,000 Dean Witter, Discover & Co. 94
------
CHEMICALS (0.9%)
2,700 Dow Chemical Co. 194
------
CHEMICALS - SPECIALTY (0.5%)
4,000 Morton International, Inc. 117
------
COMPUTER SOFTWARE & SERVICE (3.0%)
1,800 First Financial Management Corp. 154
3,000 Microsoft Corp. * 271
5,500 Novell, Inc. * 110
3,250 Oracle Systems Corp. * 125
------
660
------
CONTAINERS - METALS & GLASS (0.6%)
4,000 Ball Corp. 140
------
DRUGS (0.5%)
2,100 Merck & Co., Inc. 103
------
ELECTRONICS - SEMI-CONDUCTORS (2.4%)
3,000 Intel Corp. 190
3,000 Motorola, Inc. 201
5,000 National Semiconductor Corp. * 139
------
530
------
ENTERTAINMENT (1.0%)
5,500 Time Warner, Inc. 226
------
FOODS (0.6%)
4,300 Dean Foods Co. 120
------
HEALTHCARE - DIVERSIFIED (1.0%)
3,200 Bristol-Myers Squibb Co. 218
------
HEALTHCARE - HMO (0.8%)
4,000 United HealthCare Corp. 166
------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
HEALTHCARE - MISCELLANEOUS (0.7%)
2,500 Cerner Corp. * $153
------
HOUSEHOLD PRODUCTS (0.5%)
1,500 Procter & Gamble Co. 108
------
INSURANCE - PROPERTY/CASUALTY (1.0%)
2,000 American International Group, Inc. 228
------
MACHINERY - DIVERSIFIED (1.7%)
6,000 BW/IP, Inc. 111
2,900 Deere & Co. 248
------
359
------
MEDICAL PRODUCTS & SUPPLIES (1.3%)
4,100 C.R. Bard, Inc. 123
3,000 St. Jude Medical, Inc. 150
------
273
------
OFFICE EQUIPMENT & SUPPLIES (0.7%)
1,300 Xerox Corp. 153
------
OIL - DOMESTIC (0.4%)
3,000 Unocal Corp. 83
------
OIL - EXPLORATION & PRODUCTION (0.5%)
4,100 Apache Corp. 112
------
OIL & GAS DRILLING (0.7%)
5,500 Sonat Offshore Drilling, Inc. 158
------
OIL WELL EQUIPMENT & SERVICE (0.6%)
3,400 Halliburton Co. 122
------
PAPER & FOREST PRODUCTS (1.4%)
8,600 Fort Howard Corp. * 121
4,000 Weyerhaeuser Co. 189
------
310
------
POLLUTION CONTROL (0.6%)
4,800 WMX Technologies, Inc. 136
------
REAL ESTATE INVESTMENT TRUSTS (0.7%)
5,000 Developers Diversified Realty Corp. 144
------
RESTAURANTS (0.4%)
5,000 Brinker International, Inc. * 86
------
RETAIL STORES - GENERAL MERCHANDISING (1.1%)
7,500 Dollar General Corp. 237
------
RETAIL STORES - SPECIALTY (1.5%)
7,600 Borders, Inc. * 109
4,000 OfficeMax, Inc. * 111
7,000 Phillips-Van Heusen Corp. 109
------
329
------
TELEPHONES (1.1%)
5,600 COMSAT Corp. 110
4,000 Sprint Corp. 135
------
245
------
</TABLE>
- -----------------------------
B-36 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
TOBACCO (1.6%)
3,000 Philip Morris Companies, Inc. $ 223
4,200 RJR Nabisco Holdings Corp. 117
------
340
------
TRANSPORTATION - MISCELLANEOUS (0.5%)
5,000 American President Companies, Ltd. 119
------
Total domestic stocks (cost: $6,635) 7,695
------
<CAPTION>
U.S. GOVERNMENT & AGENCY ISSUES (7.7%)
Principal
Amount Coupon
(000) Rate Maturity
--------- ------ --------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY ISSUES (7.7%)
$ 1,690 FNMA Discount Notes (Cost $1,688) 5.90% 7/07/95 1,688
Total investments (cost: $20,322) $ 21,801
========
</TABLE>
*Non-income producing.
See accompanying "Notes to Portfolio of Investments in Securities" on page B-43.
-----------------------------
1995 SEMIANNUAL REPORT B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
AN OVERVIEW June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
OBJECTIVE
Seeks long-term capital growth, consistent with preservation of capital and
balanced by current income.
INVESTMENT PROGRAM:
Approximately 60% of the Fund's assets are invested in equity securities
selected for total return potential and approximately 40% are invested in debt
securities of varying maturities. On June 30, 1995, the portfolio mix was 59.4%
common stocks and 40.6% fixed-income securities.
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
NET ASSETS: $22.9 million
NET ASSET VALUE
(NAV) PER SHARE: $11.30
TOTAL RETURN:
Since Inception
January 5, 1995 13.00%
</TABLE>
GENERAL DISCUSSION
by Portfolio Managers Harry Miller (Common Stock) and Paul Lundmark (Debt
Securities)
THE MARKET
COMMON STOCK. We are pleased at how well common stocks have performed. The rise
has been broad -- not centering on just one or two industry sectors. Corporate
earnings have steadily increased; however, few companies have increased the
payout of their dividends. Instead, they are reinvesting dividends and
restructuring in order to lower costs. We expect these trends to continue.
DEBT SECURITIES. From the inception of the Fund to June 30, 1995, interest rates
on debt securities from six months to 30 years to maturity have fallen
dramatically. The increases in overnight rates instituted by the Federal Reserve
in 1994 caused the economy to slow significantly. In response, in early July
1995, the Federal Reserve eased overnight rates by a quarter of a percent. We
believe that with the slowing economy, inflation will be contained and
therefore, debt securities could provide excellent returns.
PORTFOLIO STRATEGIES
COMMON STOCK. The equity portfolio segment is diversified in high-quality common
stocks which we consider to be undervalued with regard to assets and earnings.
These "basic value" stocks have one or more of the following characteristics
when purchased: P/E ratio lower than the S&P 500 P/E ratio, dividend yield
higher than the S&P 500 yield, share price below book value, or assets with
perceived market value higher than book value.
Since the equity component of the Fund consists primarily of "value-oriented"
stocks, this is not considered an aggressive fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BASIC VALUE STOCKS
TOP 10 HOLDINGS
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Total Net Assets
<S> <C>
Boeing Co. 2.7%
Ford Motor Co. 2.5%
Monsanto Co. 2.4%
Sears, Roebuck & Co. 2.1%
James River Corp. 2.1%
Occidental Petroleum Corp. 2.0%
Rockwell International Corp. 2.0%
Philip Morris Companies, Inc. 2.0%
Aetna Life & Casualty Co. 1.9%
Atlantic Richfield Co. 1.9%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 5 BONDS
as of June 30, 1995
- --------------------------------------------------------------------------------
Coupon % of Total
Rate Net Assets
<S> <C> <C>
U.S. Treasury
Bonds 6.25% 8.7%
Westinghouse
Electric Notes 8.875% 4.7%
Nationwide
Healthcare
Properties 8.61% 4.6%
Time Warner
Inc., Notes 7.95% 4.5%
K-Mart Corp. 8.125% 4.5%
- --------------------------------------------------------------------------------
</TABLE>
- -----------------------------
B-38 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
Compared to like sectors in the S&P 500, the Fund was overweighted in Drugs,
Healthcare, and Aerospace/Defense. More importantly, each of these sectors
outperformed the market. Outstanding individual stocks included: Aetna, American
Home Products, Deere, Upjohn, Philip Morris, Sears, Bristol-Myers Squibb,
Boeing, EG & G, Monsanto, Rockwell and Xerox. One disappointment was Morrison
Knudsen which has been sold.
DEBT SECURITIES. The Fund has continued to lengthen the maturity of the debt
segment. As of June 30, 1995, the weighted average maturity for this segment
stood at 12.2 years. This has been done in order to take advantage of falling
interest rates. At first, the Fund was heavily weighted in cash instruments but
has subsequently reduced this cash position and funnelled the proceeds into
intermediate and long-term, fixed-rate securities.
OUTLOOK
COMMON STOCK. On the equities side, the market has produced satisfactory results
so far this year. Much of this can be attributed to lower interest rates and
higher corporate earnings under a scenario of low inflation. We do not see these
factors changing much in the near future.
DEBT SECURITIES. It is important to note that it is impossible to predict the
course interest rates will take. However, the general feeling is that the
Federal Reserve Board has slowed the economy sufficiently to contain inflation.
With a continued slowdown in the economy, the result should be a further
decrease in interest rates. The Fund's debt segment is positioned to provide
high current income and potential high returns in this environment.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 10 PORTFOLIO INDUSTRIES
as of June 30, 1995
- --------------------------------------------------------------------------------
% of Total Net Assets
<S> <C>
Real Estate Investment Trusts 8.9%
U.S. Government 8.7%
Retail Stores -
General Merchandising 7.9%
Aerospace/Defense 6.6%
Oil - Domestic 5.4%
Tobacco 4.9%
Oil - International 4.8%
Electrical Equipment 4.7%
Entertainment 4.5%
Banks 4.4%
Chemicals 4.2%
- --------------------------------------------------------------------------------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-39
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC VALUE STOCKS (59.4%)
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
AEROSPACE/DEFENSE (6.6%)
10,000 Boeing Co. $ 626
25,000 EG & G, Inc. 419
10,000 Rockwell International Corp. 457
------
1,502
------
AUTO PARTS (1.4%)
14,000 Arvin Industries, Inc. 313
------
AUTOMOBILES (2.5%)
19,000 Ford Motor Co. 565
------
BANK HOLDING COMPANIES - MONEY CENTER (1.4%)
5,000 Bankers Trust New York Corp. 310
------
CHEMICALS (4.2%)
6,000 Dow Chemical Co. 431
6,000 Monsanto Co. 541
------
972
------
DISTRIBUTION & PIPELINES (1.6%)
14,000 NICOR, Inc. 376
------
DRUGS (1.6%)
10,000 Upjohn Co. 379
------
ELECTRIC POWER (3.2%)
9,000 Houston Industries, Inc. 379
10,000 Texas Utilities Co. 344
------
723
------
HEALTHCARE - DIVERSIFIED (3.5%)
5,000 American Home Products Corp. 387
6,000 Bristol-Myers Squibb Co. 409
------
796
------
INSURANCE - MULTI/LINE COMPANIES (1.9%)
7,000 Aetna Life & Casualty Co. 440
------
INSURANCE - PROPERTY/CASUALTY (1.5%)
8,000 Hartford Steam Boiler Inspection & Insurance Co. 355
------
MACHINERY - DIVERSIFIED (1.7%)
4,600 Deere & Co. 394
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.5%)
6,000 Minnesota Mining & Manufacturing Co. 343
------
OFFICE EQUIPMENT & SUPPLIES (1.5%)
3,000 Xerox Corp. 352
------
OIL - DOMESTIC (5.4%)
7,000 Amerada Hess Corp. 342
4,000 Atlantic Richfield Co. 439
20,000 Occidental Petroleum Corp. 458
------
1,239
------
</TABLE>
- -----------------------------
B-40 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
OIL - INTERNATIONAL (4.8%)
7,000 Chevron Corp. $ 326
4,000 Mobil Corp. 384
6,000 Texaco, Inc. 394
------
1,104
------
PAPER & FOREST PRODUCTS (2.0%)
17,000 James River Corp. 470
------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
20,000 Kmart Corp. 292
8,000 Sears, Roebuck & Co. 479
------
771
------
TELEPHONES (3.2%)
10,000 GTE Corp. 341
10,000 NYNEX Corp. 403
------
744
------
TOBACCO (4.9%)
9,000 American Brands, Inc. 358
6,000 Philip Morris Companies, Inc. 446
15,000 Universal Corp. 315
------
1,119
------
TRANSPORTATION - MISCELLANEOUS (1.6%)
15,000 American President Companies, Ltd. 356
------
Total basic value stocks (cost: $11,926) 13,623
------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE AND MUNICIPAL OBLIGATIONS (31.1%)
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
--------- -------- ------ -------- ------
<C> <S> <C> <C> <C>
BANKS (4.4%)
$ 1,000 Manufacturers + Traders Trust Company, Subordinated Notes 7.00% 7/01/05 $ 1,000
--------
ELECTRICAL EQUIPMENT (4.7%)
1,000 Westinghouse Electric Corp., Global Notes 8.88 6/01/01 1,074
--------
ENTERTAINMENT (4.5%)
1,000 Time Warner, Inc., Notes 7.95 2/01/00 1,030
--------
HEALTHCARE - MISCELLANEOUS (4.1%)
1,000 Caremark International, Inc., Notes 6.88 8/15/03 949
--------
REAL ESTATE INVESTMENT TRUSTS (8.9%)
1,000 Merry Land + Investment Co., Notes 7.25 6/15/05 988
1,000 Nationwide Health Properties, Inc., MTN 8.61 3/01/02 1,063
--------
2,051
--------
RETAIL STORES - GENERAL MERCHANDISING (4.5%)
1,000 K Mart Corporation, Notes 8.13 12/01/06 1,029
--------
Total corporate and municipal obligations (cost: $6,957) 7,133
--------
</TABLE>
-----------------------------
1995 SEMIANNUAL REPORT B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government & Agency Issues (8.7%)
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
--------- -------- ------ -------- ------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT (8.7%)
2,110 U.S. Treasury Bonds (cost: $1,875) 6.25% 8/15/23 1,996
--------
SHORT-TERM (0.8%)
COMMERCIAL PAPER (0.8%)
180 Columbus Southern Power Co. (cost: $180) 6.15 7/06/95 180
--------
Total investments (cost: $20,938) $ 22,932
========
</TABLE>
See accompanying "Notes to Portfolio of Investments in Securities" on page B-43.
- -----------------------------
B-42 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
GENERAL NOTES
Market values of securities are determined by procedures and practices discussed
in note 1 to the Trust's financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CP Commercial Paper
CRE Credit Enhanced
DEB Debentures
FNMA Federal National
Mortgage Association
IDA Industrial Development
Authority/Agency
MTN Medium-Term Note
RB Revenue Bond
SPECIFIC NOTES
(a) Securities which are exempt from registration by Rule 144A under the
Securities Act of 1933 and when purchased were determined to be liquid. Any
resale of these securities will occur in an exempt transaction in the United
States to a qualified institutional buyer.
CATEGORIES
& DEFINITIONS
The securities in USAA Life VA Money Market Fund are divided into three
categories - variable rate demand notes, put bonds, and fixed rate instruments.
We hope this presentation enhances your understanding of the securities held in
the fund.
VARIABLE RATE DEMAND NOTES (VRDN) - provide the right, on any business day, to
demand, or put, the security for redemption at face value on either that day or
in seven days. The interest rate is adjusted at the stipulated daily, weekly, or
monthly interval to a rate that reflects current market conditions. In money
market funds, the VRDN's effective maturity is the longer of the next put date
or the interest reset date rather than the final maturity. Most VRDNs possess a
credit enhancement.
PUT BONDS - provide the right to tender, or put, the bond for redemption at face
value at specific tender dates prior to final maturity. The put feature shortens
the effective maturity to the next tender date. Between tender dates, the price
of a put bond generally varies inversely to the movement of interest rates.
FIXED RATE INSTRUMENTS - consist of municipal bonds, notes, and commercial
paper. The coupon rate is constant to maturity. Prior to maturity, the price of
a fixed rate instrument generally varies inversely to the movement of interest
rates. At maturity, the security pays face value.
CREDIT ENHANCEMENT - adds the financial strength of the provider to support the
underlying obligor's debt service obligations and/or the put option. The
enhancement may be provided by either a high-quality bank, insurance company or
other corporation, or a collateral trust. Typically, the rating agencies
evaluate the security based upon the credit standing of the credit enhancement.
-----------------------------
1995 SEMIANNUAL REPORT B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
(In Thousands) Period Ending June 30, 1995* (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified
Market VA Income and Income Growth Assets
Fund Fund Fund Fund Fund
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income (net of foreign taxes withheld of $0,
$0, $0, $19, and $0, respectively):
Dividends $ - $ 107 $ 295 $ 186 $ 246
Interest 97 691 60 82 322
-------------- -------------- -------------- -------------- --------------
Total income 97 798 355 268 568
-------------- -------------- -------------- -------------- --------------
Expenses:
Management fees 3 21 20 19 21
Administrative fees 19 19 19 19 19
Custodian's fees 18 22 25 38 21
Trustees' fees 1 1 1 1 1
Audit fees 3 3 3 3 3
Legal fees 5 5 5 5 5
Miscellaneous 2 1 2 1 1
-------------- -------------- -------------- -------------- --------------
Total expenses before reimbursement 51 72 75 86 71
Expenses reimbursed (45) (36) (40) (27) (35)
-------------- -------------- -------------- -------------- --------------
Total expenses after reimbursement 6 36 35 59 36
-------------- -------------- -------------- -------------- --------------
Net investment income 91 762 320 209 532
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on investments - 3 97 710 89
Change in net unrealized appreciation on:
Investments - 1,688 2,757 1,479 1,994
Translation of assets and liabilities in
foreign currencies - - - 1 -
-------------- -------------- -------------- -------------- --------------
Net realized and unrealized gain - 1,691 2,854 2,190 2,083
-------------- -------------- -------------- -------------- --------------
Increase in net assets resulting from operations $ 91 $ 2,453 $ 3,174 $ 2,399 $ 2,615
============== ============== ============== ============== ==============
</TABLE>
*Funds commenced operations on January 5, 1995.
See accompanying "Notes to Financial Statements" on page B-46.
- ---------------------------
B-44 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(In Thousands) Period Ending June 30, 1995* (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified
Market VA Income and Income Growth Assets
Fund Fund Fund Fund Fund
--------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income $ 91 $ 762 $ 320 $ 209 $ 532
Net realized gain on investments - 3 97 710 89
Change in net unrealized appreciation on:
Investments - 1,688 2,757 1,479 1,994
Foreign currency translations - - - 1 -
--------- ----------- ---------- --------- --------------
Increase in net assets resulting from operations 91 2,453 3,174 2,399 2,615
--------- ----------- ---------- --------- --------------
Distributions to shareholders from:
Net investment income (91) - - - -
--------- ----------- ---------- --------- --------------
From capital share transactions:
Shares sold 7,110 20,306 20,431 19,434 20,323
Shares issued for dividends reinvested 91 - - - -
Shares redeemed (3,042) (7) (14) (14) (16)
--------- ----------- ---------- --------- --------------
Increase in net assets from capital share transactions 4,159 20,299 20,417 19,420 20,307
--------- ----------- ---------- --------- --------------
Net Increase in net assets 4,159 22,752 23,591 21,819 22,922
Net assets:
Beginning of period - - - - -
--------- ----------- ---------- --------- --------------
End of period $ 4,159 $ 22,752 $ 23,591 $ 21,819 $ 22,922
========= =========== ========== ========= ==============
Undistributed net investment income included in net assets:
Beginning of period $ - $ - $ - $ - $ -
========= =========== ========== ========= ==============
End of period $ - $ 762 $ 320 $ 209 $ 532
========= =========== ========== ========= ==============
Change in shares outstanding:
Shares sold 7,110 2,028 2,026 1,957 2,030
Shares issued for dividends reinvested 91 - - - -
Shares redeemed (3,042) - (1) (1) (2)
--------- ----------- ---------- --------- --------------
Increase in shares outstanding 4,159 2,028 2,025 1,956 2,028
========= =========== ========== ========= ==============
</TABLE>
*Funds commenced operations on January 5, 1995.
See accompanying "Notes to Financial Statements" on page B-46.
----------------------------
1995 SEMIANNUAL REPORT B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In Thousands) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA LIFE INVESTMENT TRUST (the Trust), registered under the Investment Company
Act of 1940, is a diversified, open-end management investment company organized
as a Delaware business trust consisting of five separate Funds. Shares of the
Trust currently are offered only to the Separate Account of USAA Life Insurance
Company (the Separate Account) to serve as the funding medium for certain
variable annuity contracts offered by USAA Life Insurance Company (USAA Life).
A. SECURITY VALUATION
The value of each security is determined (as of the close of trading on the New
York Stock Exchange on each business day the Exchange is open) as set forth
below:
[1] Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange. Portfolio securities traded primarily on foreign securities
exchanges are generally valued at the closing values of such securities on
the exchange where primarily traded. If no sale is reported, the latest bid
price is generally used depending upon local custom or regulation.
[2] Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
[3] Securities purchased with maturities of 60 days or less and, pursuant to
Rule 2a-7 of the Securities and Exchange Commission, all securities in the
USAA Life VA Money Market Fund are stated at amortized cost which
approximates market value.
[4] Other debt and government securities are valued each business day by a
pricing service (the Service) approved by the Funds' Board of Trustees. The
Service uses the mean between quoted bid and asked prices or the last sale
price to price securities when, in the Service's judgement, these prices are
readily available and are representative of the securities' market values.
For many securities, such prices are not readily available. The Service
generally prices these securities based on methods which include
consideration of yields or prices of securities of comparable quality,
coupon, maturity and type, indications as to values from dealers in
securities, and general market conditions.
[5] Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods
determined by the Manager under the general supervision of the Board of
Trustees.
B. FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of their income to their shareholders. Therefore, no federal
income or excise tax provision is required.
C. INVESTMENTS IN SECURITIES
As is common in the industry, security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income, less foreign taxes, if any, are recorded on the ex-dividend date. If the
ex-dividend date has passed, certain dividends from foreign securities are
recorded upon notification. Interest income is recorded on the accrual basis.
Discounts and premiums on short-term securities are amortized over the life of
the respective securities. Amortization of market discounts on long-term
securities is recognized as interest income upon disposition of security to the
extent there is a gain on disposition.
D. FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
The assets of the USAA Life VA World Growth Fund may be invested in the
securities of foreign issuers. Since the accounting records of the Fund are
maintained in U.S. dollars, foreign currency amounts are translated into U.S.
dollars on the following basis:
[1] Market value of securities, other assets, and liabilities at the mean
between the bid and asked translation rates of such currencies against U.S.
dollars.
[2] Purchases and sales of securities, income, and expenses at the rate of
exchange obtained from an independent pricing service on the respective
dates of such transactions.
Net realized and unrealized foreign currency gains/losses occurring during the
holding period of investments are a component of realized gain/loss on
investments and unrealized appreciation/depreciation on investments,
respectively.
Net realized foreign currency gains/losses arise from sales of foreign currency,
currency gains/losses realized between the trade and settlement dates on
security transactions, and the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accu-
- ---------------------------
B-46 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In Thousands (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
mulated net realized gain/loss to accumulated undistributed net investment
income on the statement of assets and liabilities as such amounts are treated as
ordinary income for tax purposes. Net unrealized foreign currency exchange
gains/losses arise from changes in the value of assets and liabilities other
than investments in securities resulting from changes in the exchange rate.
2) DISTRIBUTIONS
Distributions of realized gains from security transactions not offset by capital
losses are made in the succeeding fiscal year to the Separate Account.
USAA LIFE VA MONEY MARKET FUND:
Net investment income is accrued daily as dividends and distributed to the
Separate Account monthly. All net investment income available for distribution
had been distributed at June 30, 1995.
USAA LIFE VA INCOME,
USAA LIFE VA GROWTH AND INCOME,
USAA LIFE VA WORLD GROWTH, AND
USAA LIFE VA DIVERSIFIED ASSETS FUND:
Distributions of net investment income are made to the Separate Account annually
in the succeeding year.
3) INVESTMENT TRANSACTIONS
Purchases and sales/maturities of securities, excluding short-term securities,
for the six-month period ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Income Fund Growth and Income Fund
--------------- -------------------------
<S> <C> <C>
Purchases $ 20,963 $ 21,355
Sales $208 $ 1,050
<CAPTION>
USAA Life VA USAA Life VA
World Growth Fund Diversified Assets Fund
-------------------- --------------------------
<S> <C> <C>
Purchases $ 24,949 $ 25,465
Sales $ 7,026 $ 4,795
</TABLE>
Purchases and sales/maturities of securities for the six-month period ended
June 30, 1995, for the USAA Life VA Money Market Fund were $15,180 and $11,070,
respectively.
Gross unrealized appreciation and depreciation of investments as of June 30,
1995, were as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Income Fund Growth and Income Fund
--------------- -------------------------
<S> <C> <C>
UNREALIZED:
Appreciation $ 1,704 $ 2,940
Depreciation $ 16 $ 183
<CAPTION>
USAA Life VA USAA Life VA
World Growth Fund Diversified Assets Fund
-------------------- --------------------------
<S> <C> <C>
UNREALIZED:
Appreciation $ 1,968 $ 2,041
Depreciation $ 489 $ 47
</TABLE>
4) FOREIGN CURRENCY CONTRACTS
A forward currency contract (currency contract) is a commitment to purchase or
sell a foreign currency at a specified date, at a negotiated price. The USAA
Life VA World Growth Fund currently enters into currency contracts only in
connection with the purchase or sale of a security denominated in a foreign
currency. These contracts allow the fund to "lock in" the U.S. dollar price of
the security. Currency contracts are valued on a daily basis using foreign
currency exchange rates obtained from an independent pricing service. Risks of
entering into currency contracts include the potential inability of the
counterparty to meet the terms of the contract and the fund foregoing the
opportunity for potential profit.
At June 30, 1995, the terms of open foreign currency contracts in the USAA Life
VA World Growth Fund were as follows:
<TABLE>
<CAPTION>
U.S.Dollar U.S.Dollar
Value Value
Exchange Currency to be as of Currency to be as of
Date Delivered 6/30/95 Received 6/30/95
---- --------- ------- -------- -------
<S> <C> <C> <C> <C>
07-03-95 3 U.S. Dollar $ 3 8 Malaysian Ringgit $ 3
07-07-95 7 U.S. Dollar 7 17 Malaysian Ringgit 7
-------- --------
$ 10 $ 10
======== ========
</TABLE>
---------------------------
1995 SEMIANNUAL REPORT B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In Thousands (continued) June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
5) TRANSACTIONS WITH AFFILIATES
A. MANAGEMENT FEES
The investment policy of the Funds and the management of the Funds' portfolios
are carried out by USAA Investment Management Company (USAA IMCO). The Funds'
management fees are computed at .20% on an annual basis of the monthly average
net assets of each Fund of the Trust for each calendar month. USAA Life, out of
its general account, has agreed to reimburse USAA IMCO for the expenses it
incurs in rendering services to the Trust, but only to the extent these expenses
exceed the amount of the above advisory fees.
B. ADMINISTRATIVE FEES
As outlined in the Underwriting and Administrative Services Agreement by and
between USAA Life, USAA Life Investment Trust and USAA IMCO, USAA Life provides
certain management, administrative, legal, clerical, accounting and record-
keeping services necessary or appropriate to conduct the Trust's business and
operations.
C. EXPENSES REIMBURSED
USAA Life, out of its general account, has agreed to pay directly or reimburse
the Trust for Trust expenses to the extent that such expenses exceed .65% of the
monthly average net assets of the USAA Life VA World Growth Fund and .35% of the
monthly average net assets of each other Fund.
D. UNDERWRITING AND DISTRIBUTION AGREEMENT
The Trust has an agreement with USAA IMCO for exclusive underwriting and
distribution of the Funds' shares on a continuing best efforts basis. This
agreement provides that USAA IMCO will receive no fee or other remuneration for
such services.
E. BROKERAGE SERVICES
USAA Brokerage Services, a discount brokerage service of USAA IMCO, may execute
portfolio transactions for the Funds. The amount of brokerage commissions paid
to USAA Brokerage Services during the six-month period ended June 30, 1995, was
$5, $4, $1, and $4 for the USAA Life VA Income, USAA Life VA Growth and Income,
USAA Life VA World Growth, and USAA Life VA Diversified Assets Funds,
respectively.
F. SHARE OWNERSHIP
At June 30, 1995, USAA Life, for the Separate Account, owned 2,159 shares
(51.9%) of the USAA Life VA Money Market Fund, 2,000 shares (98.6%) of the USAA
Life VA Income Fund, 1,988 shares (98.2%) of the USAA Life VA Growth and Income
Fund, 1,906 shares (97.4%) of the USAA Life VA World Growth Fund, and 2,000
shares (98.6%) of the USAA Life VA Diversified Assets Fund.
- -----------------------------
B-48 SEMIANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued) June 30, 1995* (Unaudited)
- --------------------------------------------------------------------------------
6) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout the period is
as follows:
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified
Market VA Income and Income Growth Assets
Fund Fund Fund Fund Fund
--------- --------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Net investment income 0.03 (a) 0.38 (a) 0.18 (a) 0.12 (a) 0.26 (a)
Net realized and unrealized gain - 0.84 1.47 1.03 1.04
Distributions from net investment income (0.03) - - - -
------- -------- -------- -------- --------
Net asset value at end of period $ 1.00 $ 11.22 $ 11.65 $ 11.15 $ 11.30
======= ======== ======== ======== ========
Total return 2.82% (b) 12.20% (b) 16.50% (b) 11.50% (b) 13.00% (b)
Net assets at end of period ($000) $ 4,159 $ 22,752 $ 23,591 $ 21,819 $ 22,922
Ratio of expenses to average net assets 0.35% (c,d) 0.35% (c,d) 0.35% (c,d) 0.65% (c,d) 0.35% (c,d)
Ratio of net investment income to average net assets 5.77% (c,d) 7.33% (c,d) 3.21% (c,d) 2.27% (c,d) 5.12% (c,d)
Portfolio turnover - 1.12% 5.90% 46.03% 29.15%
</TABLE>
(a) Calculated using weighted average shares.
(b) Total returns do not reflect expenses that apply at the separate account
level. These expenses would reduce the total return for the period shown.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) The information contained in this table is based on actual expenses for
the period, after giving effect to reimbursements of expenses by USAA Life.
Absent such reimbursements, the Funds' ratios would have been:
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified
Market VA Income and Income Growth Assets
Fund Fund Fund Fund Fund
----------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets 3.20% (c) 0.70% (c) 0.75% (c) 0.94% (c) 0.69% (c)
Ratio of net investment income to average net assets 2.92% (c) 6.98% (c) 2.81% (c) 1.98% (c) 4.78% (c)
</TABLE>
*Funds commenced operations on January 5, 1995.
1995 SEMIANNUAL REPORT B-49
<PAGE>
this page left blank intentionally
<PAGE>
- --------------------------------------------------------------------------------
USAA LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
To discuss your investment strategy,
the Variable Annuity's features or performance,
call an Account Representative toll free
Monday - Friday 7:15 a.m. to 8:00 p.m.
1-800-531-2923
(456-9035 in San Antonio)
-----------------------------------
If you wish to discuss your particular contract,
transfer money from one fund account to another or select a payout option,
call a Service Representative, toll free,
Monday - Friday 8 a.m. to 5 p.m.
1-800-531-4265
-----------------------------------
For variable annuity unit values,
call our recorded QUOTELINE,
24-hours a day, 7 days a week
1-800-531-8233
(498-6860 in San Antonio)
================================================================================
[LOGO OF USAA APPEARS HERE]
USAA Life Insurance Company
9800 Fredericksburg Road
San Antonio, Texas 78288
(C)Copyright, 1995, USAA. All rights reserved.
