<PAGE>
USAA Life Insurance Company
Variable Annuity
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Annual Report
December 31, 1995
[LOGO OF USSA APPEARS HERE]
USSA /(R)/
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
PRESIDENT'S MESSAGE................................................. A-3
USAA LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT.............................................A-7--A-12
Statements of Assets and Liabilities.................................A-8
Statements of Operations.............................................A-9
Statements of Changes in Net Assets..................................A-9
Notes to Financial Statements.......................................A-10
Independent Auditors' Report........................................A-12
USAA LIFE INVESTMENT TRUST....................................B-13--B-56
Shareholder Voting Results..........................................B-14
USAA Life VA Money Market Fund
An Overview.......................................................B-15
USAA Life VA Income Fund
An Overview.......................................................B-17
USAA Life VA Growth and Income Fund
An Overview.......................................................B-19
USAA Life VA World Growth Fund
An Overview.......................................................B-21
USAA Life VA Diversified Assets Fund
An Overview.......................................................B-24
Independent Auditors' Report........................................B-27
USAA Life VA Money Market Fund Portfolio of Investments in
Securities........................................................B-28
USAA Life VA Income Fund Portfolio of Investments in Securities.....B-31
USAA Life VA Growth and Income Fund Portfolio of Investments in
Securities........................................................B-33
USAA Life VA World Growth Fund Portfolio of Investments in
Securities........................................................B-36
USAA Life VA Diversified Assets Fund Portfolio of Investments in
Securities........................................................B-44
Notes to Portfolios of Investments in Securities....................B-47
Statements of Assets and Liabilities................................B-48
Statements of Operations............................................B-49
Statements of Changes in Net Assets.................................B-50
Notes to Financial Statements.......................................B-51
SCUDDER VARIABLE LIFE INVESTMENT FUND(VLIF)
CAPITAL GROWTH PORTFOLIO....................................C-57--C-75
Letter from the Fund's President....................................C-59
Capital Growth Portfolio Management Discussion......................C-60
Capital Growth Portfolio Summary....................................C-61
Investment Portfolio, Financial Statements and Financial Highlights
Capital Growth Portfolio..........................................C-62
Notes to Financial Statements.......................................C-70
Report of Independent Accounts......................................C-73
Tax Information.....................................................C-74
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO.............................D-77--D-92
Letter to Shareholders..............................................D-79
Schedule of Investments.............................................D-82
Financial Highlights................................................D-84
Statement of Assets and Liabilities.................................D-85
Statement of Operations.............................................D-86
Statement of Cash Flows.............................................D-87
Statement of Changes in Net Assets..................................D-88
Notes to Financial Statements.......................................D-90
</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.
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USAA LIFE VARIABLE ANNUITY ANNUAL REPORT
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PRESIDENT'S MESSAGE
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[PHOTO APPEARS HERE] from the desk of Ed Rosane
---------------------------------------------------------
THE YEAR IN REVIEW
How the Market Fared
1995 was a year of low inflation, relatively slow growth,
good productivity and good profits. For the stock market
that meant exceptional performance.
Domestic equity funds outperformed international equity
funds and interest rates on long-term, 30-year Treasury
bonds provided a solid foundation for the stock market's
rally by falling 150 basis points to their lowest levels
since January 1994.
Even the speculation as to when the market would turn
couldn't affect the surge as industry indexes continued
to set new records throughout the year. One of the most
watched indicators, the Dow Jones Industrial Average,
gained 1,282.68 points in 1995 closing the year at
5117.12 - a 33.45 percent increase over the previous
year.
-------------------------
1995 ANNUAL REPORT 3
<PAGE>
USAA LIFE VARIABLE ANNUITY ANNUAL REPORT
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PRESIDENT'S MESSAGE
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HOW THE MARKET AFFECTED USAA LIFE'S VARIABLE ANNUITY
Independent financial rating agency Morningstar summed up USAA Life's
Variable Annuity well in an August analysis when they said our product was
"basically conservative" while at the same time "pushing the envelope by
providing some high-growth choices from which other contracts shy away."
The following table provides the accumulation unit value (AUV) total returns
for each variable annuity fund account as of December 31, 1995. As you review
our performance information, it is important to keep in mind that performance
does not give you a sense of a fund account's volatility which you need to
assess regardless of that fund account's investment objective. And it is
equally important to know the relationship between risk and reward in the
investment options you choose so you can better determine if they are in line
with your long-term goals.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AUV Total Returns
- --------------------------------------------------------------------------------
For the Period 2/6/95 through 12/31/95
<S> <C>
USAA Life VA Money
Market Fund Account 4.07%
- --------------------------------------------------------------------------------
USAA Life VA
Income Fund Account 18.49%
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USAA Life VA Growth and
Income Fund Account 25.80%
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USAA Life VA World
Growth Fund Account/1/ 19.47%
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USAA Life VA Diversified
Assets Fund Account 22.44%
- --------------------------------------------------------------------------------
Scudder VLIF
Capital Growth Portfolio 25.43%
- --------------------------------------------------------------------------------
Alger American
Fund Growth Portfolio 30.96%
- --------------------------------------------------------------------------------
</TABLE>
1 Foreign investing is subject to additional risks which are discussed in
the Variable Annuity prospectus.
The performance data quoted represent past performance. Past performance is
not a guarantee of future returns. An investment in the USAA Life VA 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. The principal value contributed to the other six variable
annuity fund accounts will fluctuate. When variable annuity units are redeemed,
they may be worth more or less than their original cost.
STRATEGIES FOR PLANNING AHEAD
Speculation about when the market would turn had both analysts and investors
guessing the entire year. Some individuals held money in cash positions
waiting for the inevitable downturn which never transpired. How do you plan
for and react to such speculation? The solution varies for each individual
based on personal goals and risk tolerance. But for some, the answer is simple
- --diversification and dollar cost averaging--two strategies which are
discussed in more detail.
Regardless of how the market performs or what sort of immediate return you
realize on your money, it is important to keep in mind that your Variable
Annuity is a long-term retirement plan rather than just another investment
vehicle.
Diversification
Many financial planners say that a diversified portfolio is the basis for a
sound and balanced strategy. If you correctly diversify your portfolio, you
have the ability to minimize risk while at the same time optimize your
potential to increase your returns. A diversified strategy enables you to
allocate money within risk categories, across levels of risk and even through
domestic and international investments. How does this work?
To begin with, the seven variable annuity fund accounts by their very nature
are diversified. Each fund account invests in an underlying fund whose
portfolio includes a variety of securities. Depending on the fund's investment
objective, the assets may be invested in securities such as stocks and/or bonds
which can be either domestic, international or a combination. Therefore, a
participant is not at as great a risk when individual securities or market
sectors fluctuate.
Upon closer inspection of each underlying fund's portfolio of holdings
(which can be found later in this Report), you can determine how assets are
invested. This review enables you to determine whether a fund is investing in
such a way that makes you comfortable (for example, you may choose to avoid a
fund because it has invested a high concentration of assets in a particular
market sector).
You can further diversify your money within our Variable Annuity by
allocating dollars to fund accounts with completely different investment
objectives or strategies. Then, if the performance of one fund account begins
to decline because that fund account has invested in one or two market sectors
which falter, your risk may be minimized.
With USAA Life's Variable Annuity, contractowners can select from five
growth fund accounts with varying degrees of risk and return, an income fund
account, and two fund accounts which provide stability.
- -------------------------
4 ANNUAL REPORT 1995
<PAGE>
USAA LIFE VARIABLE ANNUITY ANNUAL REPORT
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PRESIDENT'S MESSAGE
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- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INVESTMENT PYRAMID
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[ARTWORK GOES HERE]
GROWTH
Alger American Growth Portfolio
Scudder VLIF Capital Growth Portfolio
USAA Life VA World Growth Fund Account
USA Life VA Growth and Income Fund Account
USAA Life VA Diversified Assets Fund Account
INCOME
USAA Life VA Income Fund Account
STABILITY
USAA Life VA Money Market Fund Account
Fixed Fund Account
DOLLAR COST AVERAGING
It's tempting to try to "time" the market--that is, to buy when you think a
fund account or the overall market is at a low point and sell when you think
it's high. But that's not easy for most of us to do. Often we guess wrong.
Instead of playing a guessing game, many have decided it makes more sense to
contribute regularly through a pre-established strategy called Dollar Cost
Averaging.
For some, Dollar Cost Averaging is an excellent way to both build a
long-term financial plan and buy units at the "right" price. If you're
contributing a fixed amount every month, then you'll be buying more units when
prices are low and fewer units when prices are high. Through the years, this
strategy could produce a better return than any attempt to selectively time the
market with occasional purchases.
USAA Life's Dollar Cost Averaging program enables you to systematically
allocate a fixed dollar amount or a specified percentage from any of your seven
variable annuity fund accounts to one or more of the other variable annuity
fund accounts.
For example, assume that you purchase $500 of variable annuity units each
month for six months. Taking market price fluctuations into consideration, you
are able to acquire a total of 120 units over a 6-month period as illustrated
in the hypothetical example in the next cloumn.
The average market price of a unit was $28.33. Using the Dollar Cost
Averaging program, you would have paid an average of $25 for each unit--a
difference of $3.33 each or a total of $399.60 for the 120 units.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market Dollar Cost
Price Averaging
Period Per Unit Cost # of Units
<S> <C> <C> <C>
1 $ 40 $ 500 12.5
2 40 500 12.5
3 30 500 16.7
4 25 500 20.0
5 20 500 25.0
6 15 500 33.3
Total $170 $3,000 120
- --------------------------------------------------------------------------------
</TABLE>
Average Market Price per Unit: $28.33
($170 divided by 6)
Average Cost per Unit: $25
($3,000 divided by 120)
Even though it has proven to be an effective tactic over time, keep in mind that
there is no guarantee that Dollar Cost Averaging will result in a profit or
protect against a loss. Systematic investing involves continuous investment in
securities regardless of the fluctuating price levels of these securities, and
you should consider your ability to continue through periods of both low and
high price levels.
LOOKING FORWARD
Some experts are already predicting that the stock market could go higher in
'96 with different sectors falling in and out of favor. Others are saying that
because of the all time highs we have experienced over the last few months, a
market correction seems inevitable. In any event, it will be an interesting and
exciting environment for the industry.
1996 also promises to be an exciting year for us here at USAA Life. Our
Variable Annuity team has been evaluating the benefits of adding to our current
line-up of investment options. The objectives, performance history and fund
expenses of several funds are being reviewed in an effort to determine which,
if any, would add the most value to our contract--both now and in the future.
We feel that having the foresight to offer options that build upon the
long-term nature of variable annuities is of paramount importance.
We remain committed to servicing our contractowners by providing quick and
accurate responses to your questions. As always we encourage you to call our
salaried Account Representatives at:
1-800-531-2923
(456-9035 in San Antonio)
to discuss this Report or your own personal financial situation.
Sincerely,
/s/ Edwin L. Rosane
Edwin L. Rosane, CLU, FLMI
President
USAA Life Insurance Company
-------------------------
1995 ANNUAL REPORT 5
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USAA LIFE
VARIABLE ANNUITY
SEPARATE ACCOUNT
=======================================================================
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ANNUAL REPORT
December 31, 1995
[LOGO OF USAA APPEARS HERE]
USAA /(R)/
<PAGE>
Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
Variable Annuity Fund Accounts (In Thousands) December 31, 1995
- --------------------------------------------------------------------------------
<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 - 5,702 shares
at net asset value
of $1.00 per share
(identified cost $ 5,702 ) $5,702
USAA Life Investment Trust -
USAA Life VA Income Fund Account -
93 shares at net asset
value of $11.32 per share
(identified cost $1,086) $1,051
USAA Life Investment Trust -
USAA Life VA Growth and Income
Fund Account - 204 shares
at net asset value of $12.60 per share
(identified cost $2,561) $2,574
USAA Life Investment Trust -
USAA Life VA World Growth Fund Account -
173 shares at net asset
value of $11.10 per share
(identified cost $1,964) $1,924
USAA Life Investment Trust -
USAA Life VA Diversified Assets Fund Account -
88 shares at net asset
value of $11.96 per share
(identified cost $1,046) $1,047
Scudder Variable Life Investment Fund (VLIF) -
Capital Growth Portfolio -
77 shares at net asset
value of $15.08 per share
(identified cost $1,133) $1,165
Alger American Fund -
American Growth Portfolio -
265 shares at net asset
value of $31.16 per share
(identified cost $8,159) $8,245
------------ ------------ ------------ ------------ ------------ ---------- -----------
Net Assets applicable to
accumulation units outstanding $ 5,702 $ 1,051 $ 2,574 $ 1,924 $ 1,047 $ 1,165 $ 8,245
============ ============ ============ ============ ============ ========== ==========
Accumulation units outstanding 5,478 89 205 161 86 93 630
============ ============ ============ ============ ============ ========== ==========
Accumulation unit value and
redemption price per unit $ 1.040729 $ 11.848795 $ 12.579981 $ 11.947438 $ 12.243941 $12.543192 $13.095503
============ ============ ============ ============ ============ ========== ==========
</TABLE>
See accompanying "Notes To Financial Statements" on page A-10.
- ----------------------------
A-8 ANNUAL REPORT 1995
<PAGE>
Separate Account of USAA Life Insurance Company
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- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
Variable Annuity Fund Accounts (In Thousands) Period Ending December 31, 1995*
- --------------------------------------------------------------------------------
<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 $ 128 $ 91 $ 111 $ 138 $ 56 $ 2 $ 7
EXPENSES
Mortality and expense risk 26 4 8 8 4 4 24
------------ ------------ ------------ ------------ ------------ --------- ---------
NET INVESTMENT
INCOME (LOSS) 102 87 103 130 52 (2) (17)
------------ ------------ ------------ ------------ ------------ --------- ---------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investment transactions - 16 57 20 28 20 107
Change in net unrealized
appreciation (depreciation)
on investments - (35) 13 (40) 1 32 86
------------ ------------ ------------ ------------ ------------ --------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS - (19) 70 (20) 29 52 193
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 102 $ 68 $ 173 $ 110 $ 81 $ 50 $ 176
============ ============ ============ ============ ============ ========= =========
</TABLE>
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Statements of Changes in Net Assets
Variable Annuity Fund Accounts (In Thousands) Period Ending December 31, 1995*
- --------------------------------------------------------------------------------
<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) $ 102 $ 87 $ 103 $ 130 $ 52 $ (2) $ (17)
Net realized gain on
investment transactions - 16 57 20 28 20 107
Change in net unrealized
appreciation (depreciation) - (35) 13 (40) 1 32 86
------------ ------------ ------------ ------------ ------------ --------- ---------
Increase in net assets
resulting from operations $ 102 $ 68 $ 173 $ 110 $ 81 $ 50 $ 176
------------ ------------ ------------ ------------ ------------ --------- ---------
NET ACCUMULATION
UNIT TRANSACTIONS 5,600 983 2,401 1,814 966 1,115 8,069
------------ ------------ ------------ ------------ ------------ --------- ---------
TOTAL CHANGE IN NET ASSETS 5,702 1,051 2,574 1,924 1,047 1,165 8,245
------------ ------------ ------------ ------------ ------------ --------- ---------
NET ASSETS AT BEGINNING OF PERIOD - - - - - - -
------------ ------------ ------------ ------------ ------------ --------- ---------
NET ASSETS AT END OF PERIOD $ 5,702 $ 1,051 $ 2,574 $ 1,924 $ 1,047 $ 1,165 $ 8,245
============ ============ ============ ============ ============ ========= =========
</TABLE>
*Separate Account commenced operation on February 6, 1995.
See accompanying "Notes To Financial Statements" on page A-10.
--------------------------
A-9 ANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
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Notes to Financial Statements
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December 31, 1995
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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 commenced operation February 6, 1995.
The Separate Account is divided into seven variable annuity fund accounts, each
of which invests in a corresponding fund. The funds' objectives can be found
later in this Report.
The fund accounts that are available within the Separate Account include:
the USAA Life Variable Annuity Money Market Fund Account (USAA Life VA Money
Market Fund Account), USAA Life Variable Annuity Income Fund Account (USAA Life
VA Income Fund Account), USAA Life Variable Annuity Growth and Income Fund
Account (USAA Life VA Growth and Income Fund Account), USAA Life Variable
Annuity World Growth Fund Account (USAA Life VA World Growth Fund Account), and
USAA Life Variable Annuity Diversified Assets Fund Account (USAA Life VA
Diversified Assets Fund Account); 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.
Dividend income, if any, is recorded on ex-dividend 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 operation of the Separate Account.
UNIT VALUE
For financial reporting purposes, amounts have been rounded to the nearest
thousand dollars, 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 on 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-10 ANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO.
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(continued) December 31, 1995*
- --------------------------------------------------------------------------------
4) ACCUMULATION UNITS DATA (In Thousands)
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 20,265 98 228 173 100 115 675
Redemptions (14,787) (9) (23) (12) (14) (22) (45)
---------- --------- --------- --------- --------- --------- ----------
Net change 5,478 89 205 161 86 93 630
========== ========= ========= ========= ========= ========= ==========
AMOUNTS
Sales $ 20,651 $ 1,077 $ 2,675 $ 1,952 $ 1,130 $ 1,360 $ 8,641
Redemptions (15,051) (94) (274) (138) (164) (245) (572)
---------- --------- --------- --------- --------- --------- ----------
Net change $ 5,600 $ 983 $ 2,401 $ 1,814 $ 966 $ 1,115 $ 8,069
========== ========= ========= ========= ========= ========= ==========
</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
March 31, 1995 1.006692 10.156945 10.320270 10.245504 10.315780 10.186257 10.347650
June 30, 1995 1.018288 10.791552 11.183526 11.211692 11.017540 11.422330 12.088714
September 30, 1995 1.029471 11.173075 11.993908 11.801272 11.637422 12.394905 13.794896
December 31,1995 1.040729 11.848795 12.579981 11.947438 12.243941 12.543192 13.095503
</TABLE>
6) RECONCILIATION TO SHARES OF THE USAA LIFE INVESTMENT TRUST (In Thousands)
<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 Account Fund Account Fund Account Fund Account Fund Account
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SHARES ATTRIBUTABLE TO:
USAA VA Contractowners 5,702 93 204 173 88
USAA Life Insurance Company 2,100 2,189 2,078 2,053 2,112
------------ ------------ ------------ ------------ ------------
TOTAL SHARES IN FUNDS 7,802 2,282 2,282 2,226 2,200
============ ============ ============ ============ ============
</TABLE>
*Separate Account commenced operation on February 6, 1995.
-----------------------------
A-11 ANNUAL REPORT 1995
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
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- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND CONTRACTOWNERS OF
THE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY:
We have audited the accompanying statements of assets and liabilities of the
USAA Life Variable Annuity (VA) Money Market Fund Account, USAA Life VA Income
Fund Account, USAA Life VA Growth and Income Fund Account, USAA Life VA World
Growth Fund Account, USAA Life VA Diversified Assets Fund Account, the Scudder
Variable Life Investment Fund Capital Growth Portfolio and the Alger American
Fund Alger American Growth Portfolio of the Separate Account of USAA Life
Insurance Company as of December 31, 1995 and the related statements of
operations and changes in net assets for the period February 6, 1995
(commencement of operations) through December 31, 1995. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investments owned at December 31, 1995 were verified by examination of the
underlying portfolios of the USAA Life Investment Trust or through
confirmation for the Scudder and Alger Funds' portfolios. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the aforementioned fund
accounts of the Separate Account of USAA Life Insurance Company as of December
31, 1995 and the results of their operations and changes in their net assets
for the period February 6, 1995 through December 31, 1995 in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
San Antonio, Texas
February 9, 1996
- ----------------------------
A-12 ANNAUL REPORT 1995
<PAGE>
USAA LIFE
INVESTMENT TRUST
=========================================================================
- -------------------------------------------------------------------------
ANNUAL REPORT
December 31, 1995
[LOGO OF USAA APPEARS HERE]
USAA /(R)/
<PAGE>
USAA Life Investment Trust
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS
On February 1, 1995, USAA Life Insurance Company, on behalf of the Separate
Account and prior to the offering of variable annuity contracts, approved by
consent, in lieu of an initial meeting of Trust shareholders, resolutions:
electing as trustees of the Trust, Edwin L. Rosane, Michael J.C. Roth, June R.
Reedy, Neil H. Stone, and Gary W. West; selecting KPMG Peat Marwick, LLP as
auditors for the Trust for the fiscal year ending December 31, 1995; and
approving an investment advisory agreement between the Trust and USAA Investment
Management Company.
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 December 31, 1995. Past
performance is not a guarantee of future returns. The principal value
contributed to the variable annuity fund accounts will fluctuate. When variable
annuity units are redeemed, they may be worth more or less than their original
cost.
- ----------------------------
B-14 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
AN OVERVIEW December 31, 1995
- --------------------------------------------------------------------------------
COMPARISON OF FUND TO BENCHMARK
[GRAPH GOES HERE]
The graph above tracks the USAA Life VA Money Market Fund's yield compared
to a benchmark--IBC/Donoghue's Money Fund AveragesTM/First Tier, an average
of all major money market fund yields.
Information for the benchmark is based on a full calendar year whereas the
VA Money Market Fund yields are based on a starting date of January 5, 1995--
the inception date of this Fund. This comparison is for illustrative purposes
only.
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 endeavors to invest 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.
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
maturities. Currently, the Fund's average maturity is managed in a range of 12
to 25 days.
PORTFOLIO POSITION
We started out 1995 with a high degree of uncertainty regarding the
direction of interest rates. Early in the year, the Fed funds rate (the rate
member banks of the Federal Reserve charge each other) increased once by 0.5%.
Then later in the year, the rate was lowered twice--0.25% each time.
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.
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 December 31, 1995
<S> <C>
Net Assets: $7.8 million
Net Asset Value
(NAV) Per Share: $1.00
Simple 7-Day Yield: 5.53%
Total Return:
Since Inception
January 5, 1995: 5.69%
</TABLE>
----------------------------
1995 ANNUAL REPORT B-15
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
Despite fluctuations in interest rates, the strategy of the Fund remains the
same. This is consistent with our belief that it is virtually impossible to
forecast interest rates. Our basic goal is to maintain a portfolio of
high-quality securities which provide a competitive yield. We review all
securities in the Fund in relation to the current market and focus on important
factors such as liquidity, credit quality, yield and maturity. We use the same
stringent criteria to scrutinize potential new purchases. Most of our analysis
is done prior to purchasing a security because we prefer to hold securities
until they mature--selling only if it is absolutely necessary.
OUTLOOK
The economy continues to be sluggish and pressure from recent inflation is
minimal. If this scenario persists, we would anticipate lower interest rates.
However, the federal budget impasse could have an adverse effect on interest
rates if the budget isn't resolved in a timely fashion.
We continue to search for opportunities that are developing in the marketplace
and take advantage of those that will add value. We attempt to do this by
monitoring market conditions and economic indicators. In summary, we do
everything we can to meet the objective of the Fund--namely, the highest income
consistent with the preservation of capital and maintenance of liquidity.
PORTFOLIO MIX
AS A PERCENTAGE OF NET ASSETS
as of December 31, 1995
Put Bonds 2.5%
U.S. Agency Discount Notes 12.1%
Variable Rate Demand Notes 34.9%
Commercial Paper 49.7%
Other Assets & Liabilities .8%
[ARTWORK GOES HERE]
- ----------------------------
B-16 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW December 31, 1995
- --------------------------------------------------------------------------------
Comparison of Fund to Benchmarks
[ARTWORK GOES HERE]
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life VA Income Fund to an industry index and an independent rating
agency's average which most closely resemble the holdings of this Fund.
The Lehman Brothers Aggregate Bond Index is an unmanaged index made up of the
government/corporate index, the mortgage-backed securities index, and the asset-
backed securities index.
The calculations for the Lehman Brothers Bond Index are based on information for
a full calendar year whereas the VA Income Fund calculations are based on a
starting date of January 5, 1995--the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Manager J.W. Saunders, Jr.
We stated in our June 30, 1995 Semiannual Report that January 1995 was a
good time to start the VA Income Fund. In fact, 1995 has been one of the best
bond markets ever. Except for a brief retreat in July and August, the bond
market has been rising in price as long-term interest rates have declined
throughout this past year.
We viewed the bond market as an exceptional opportunity in the final stages
of that brief decline in August, and we restructured the portfolio to take
advantage of the anticipated resumption of rising bond prices (decline in
interest rates). We reduced our mortgage pass-through position by one-third,
tripled our long-term Treasury bond position, and maintained our exposure to
high-yield common stocks. This strategy has paid off handsomely as evidenced
in the Fund's total return of 23.88% from inception on January 5, 1995 to the
end of 1995.
Currently, the VA Income Fund portfolio mix (as percentages of net assets) is
32.6% in U. S. Treasury bonds, 44.9% in agency mortgage pass-through securities,
12.7% in high yield common stocks, 0.6% in preferred stock, and 7.8% in cash
equivalents.
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>
As of December 31, 1995
<S> <C>
NET ASSETS: $25.8 million
NET ASSET VALUE
(NAV) PER SHARE: $11.32
TOTAL RETURN:
Since Inception
January 5, 1995 23.88%
</TABLE>
----------------------------
1995 ANNUAL REPORT B-17
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
OUTLOOK
Inflation, the scourge of interest rates, has averaged less than 3% for the
past five years. Real interest rates (net of inflation) are still high and can
continue to move lower in an economic environment which is beginning to show
signs of slowing. We will continue to maintain our current portfolio structure
in this environment.
TOP 10 SECURITIES
as of December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Coupon % of
Rate Net Assets
<S> <C> <C>
1) U.S. Treasury
Bonds 7.875% 32.6%
2) GNMA 8.5% 5.9%
3) FNMA 8.0% 5.8%
4) FNMA 7.5% 5.7%
5) FNMA 7.0% 5.7%
6) GNMA 8.0% 5.6%
7) GNMA 7.5% 5.5%
8) GNMA 7.0% 5.5%
9) FNMA 8.5% 5.2%
10) Houston Industries N/A 1.6%
</TABLE>
- ----------------------------
B-18 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW December 31, 1995
- --------------------------------------------------------------------------------
COMPARISON OF FUND TO BENCHMARK
[GRAPH GOES HERE]
The graph above compares the performance of a $10,000 hypothetical
investment in the USAA Life VA Growth and Income Fund to the S&P 500 Index. The
S&P 500 Index is an unmanaged index representing the average performance of a
group of 500 widely held, publicly traded stocks. It is not possible to invest
directly in the S&P 500 Index.
The calculations for the S&P 500 Index are based on a full calendar year
whereas the calculations for the VA Growth and Income Fund are based on a
starting date of January 5, 1995--the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Manager R. David Ullom
FUND PERFORMANCE
The Variable Annuity Growth and Income Fund appreciated 31.72% since its
inception January 5, 1995. We continue to adhere to an investment philosophy
and strategy which places emphasis on value. Therefore, our strategy uses
investment criteria such as price to earnings ratios, price to cash flow
ratios, price to book-value ratios and yield to select investments.
Investments are not based on forecasts for the economy or equity markets. We
place importance on being a patient investor and in reviewing the investment
process over an extended period of time.
PORTFOLIO INVESTMENT DIVERSIFICATION
AS A PERCENTAGE OF NET ASSETS
as of December 31, 1995
Consumer Cyclicals 15.4%
Other Assets & Liabilities 2.1%
Intermediate Goods & Services 28.9%
Capital Goods 11.3%
Consumer Staples 18.4%
Credit Sensitive 23.9%
[ART GOES HERE]
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 and convertible securities of companies that offer
the prospect for growth of earnings.
<TABLE>
<CAPTION>
As of December 31, 1995
<S> <C>
NET ASSETS: $28.8 million
NET ASSET VALUE
(NAV) PER SHARE: $12.60
TOTAL RETURN:
Since Inception
January 5, 1995 31.72%
</TABLE>
----------------------------
1995 ANNUAL REPORT B-19
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
WHAT HELPED
Our investments in credit-sensitive industries such as banking, insurance,
utilities and telephones had a positive and significant impact on the Fund's
performance during 1995. Investments in aerospace, office equipment and
homebuilding also had a positive impact. Within these industries, the stocks
with the greatest, positive contribution included: Boeing, B.F. Goodrich and
Rockwell International (aerospace/defense); Aetna Life & Casualty and Allstate
(insurance); Baxter International and American Home Products (healthcare); and
GTE Corp., NYNEX Corp. and Sprint Corp. (telephones).
WHAT HINDERED
Our investment performance was hindered the most by our equity holdings
in several commodity-oriented industries such as containers, paper & forest
products, machinery and metals. In addition, selected investments in various
consumer cyclical industries such as autos, entertainment and retailing hurt
Fund performance.
OUTLOOK
Given our value-oriented philosophy, we are not altering our investment strategy
or our equity selections based on an economic or market forecast. We will
continue to invest in stocks that meet our value criteria. Areas that continue
to provide value include various commodity-oriented industries such as
chemicals, metals and selected segments of retailing.
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Boeing Co. 3.3%
- --------------------------------------------------------------------------------
Xerox Corp. 2.4%
- --------------------------------------------------------------------------------
B. F. Goodrich Co. 2.4%
- --------------------------------------------------------------------------------
Fort Howard Corp. 2.1%
- --------------------------------------------------------------------------------
BankAmerica Corp. 2.0%
- --------------------------------------------------------------------------------
American Home Products Corp. 2.0%
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 2.0%
- --------------------------------------------------------------------------------
Universal Corp. 1.9%
- --------------------------------------------------------------------------------
Rockwell International Corp. 1.8%
- --------------------------------------------------------------------------------
Centex Corp. 1.8%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP 10 SECTORS
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Oil 7.9%
- --------------------------------------------------------------------------------
Aerospace/Defense 7.5%
- --------------------------------------------------------------------------------
Retail 6.6%
- --------------------------------------------------------------------------------
Telephones 6.5%
- --------------------------------------------------------------------------------
Healthcare 6.2%
- --------------------------------------------------------------------------------
Chemicals 6.0%
- --------------------------------------------------------------------------------
Tobacco 4.9%
- --------------------------------------------------------------------------------
Paper & Forest Products 4.5%
- --------------------------------------------------------------------------------
Insurance - Property/Casualty 4.4%
- --------------------------------------------------------------------------------
Banks 3.4%
- --------------------------------------------------------------------------------
</TABLE>
- ----------------------------
B-20 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
AN OVERVIEW December 31, 1995
- --------------------------------------------------------------------------------
COMPARISON OF FUND TO BENCHMARK
[GRAPH GOES HERE]
The graph above compares the performance of a $10,000 hypothetical
investment in the USAA Life VA World Growth Fund to its benchmark, the Morgan
Stanley Capital Index (MSCI) World, an unmanaged index which reflects the
movement of world stock markets by representing a broad selection of
domestically listed companies within each market.
Calculations for the Morgan Stanley Index are based on a full calendar year
whereas the VA World Growth Fund calculations are based on a starting date of
January 5, 1995--the inception date of this Fund. This comparison is for
illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Managers David Peebles (Foreign Securities) and
R. David Ullom (Domestic Securities)
INTERNATIONAL
Market Conditions--Political, economic and other problems in places as disparate
as Japan, Italy, Mexico and China gave international markets a rough ride in
1995. Much of Europe performed well, but most of the emerging markets performed
poorly. Japan's gains since the last report have been offset by the weakness of
the yen versus the dollar. While the U.S. market has outperformed nearly all
international markets during this period, we are confident that over a longer
investment horizon, international markets will provide competitive returns and
diversification benefits.
Europe--Europe continued to provide the most attractive returns during this
six-month financial reporting period. We have emphasized the countries of
northern Europe with the United Kingdom followed by the Netherlands having the
largest country weightings. We overweighted telecommunications, consumer
non-durables, and interest-rate sensitive stocks and underweighted consumer and
industrial cyclicals.
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>
As of December 31, 1995
<S> <C>
NET ASSETS: $24.7 million
NET ASSET VALUE
(NAV) PER SHARE: $11.10
TOTAL RETURN:
Since Inception
January 5, 1995 19.55%
</TABLE>
----------------------------
1995 ANNUAL REPORT B-21
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
Japan--While we have marginally raised our position in Japan, we continue
to remain underweighted. Our concern revolves around a lack of commitment to
corporate restructuring, problems within the banking system, and lack of strong
political leadership. We are seeing early signs of recognition as to what is
needed to resolve these problems.
Emerging Markets--Our overweighted position in emerging markets hurt us
over the last six months. Economic and political problems in major Latin
American markets (excluding Brazil), the political turmoil surrounding China,
plus concerns about financing Asia's ongoing economic growth were major
concerns. While we recognize these concerns, the potential for economic growth
will cause us to maintain a full to overweighted position in these markets.
UNITED STATES
During the last six months, we reduced our weighting in U.S. stocks from
35.3% of the Fund's assets to approximately 31.9%. This reduction in weighting
reflects a slightly more cautious attitude toward the U.S. equity markets and a
more positive feeling about international markets.
Within our allocation to the U.S. markets, we have continued to focus more
on companies and industries that are generating above-average revenue and
earnings growth. We believe that these qualities characterize selected
companies in such industries as healthcare and healthcare services,
aerospace/defense, technology, and specialty retailing.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of December 31, 1995
- --------------------------------------------------------------------------------
[ARTWORK GOES HERE]
Other* 21.2%
Denmark 2.0%
Switzerland 2.1%
Germany 2.7%
Hong Kong 2.8%
Canada 3.0%
France 3.2%
Australia 3.4%
Sweden 3.6%
Netherlands 4.0%
USA 35.1%
Japan 11.7%
United Kingdom 5.5%
*Investment in all other countries was less than 2% of the portfolio's net
assets.
- ----------------------------
B-22 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
OUTLOOK
Moderate yet stable economic growth should result in favorable corporate
profit gains. This positive corporate outlook, coupled with continued low
inflation and low interest rates, could provide a favorable investment climate.
<TABLE>
<CAPTION>
TOP 10 EQUITY HOLDINGS
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Verenigd Bezit VNU (Netherlands) 1.5%
- --------------------------------------------------------------------------------
Boeing Co. (USA) 1.3%
- --------------------------------------------------------------------------------
Veba AG (Germany) 1.2%
- --------------------------------------------------------------------------------
Telefonica de Espana, S.A. ADR (Spain) 1.2%
- --------------------------------------------------------------------------------
Essilor International (France) 1.1%
- --------------------------------------------------------------------------------
Autoliv AB (Sweden) 1.1%
- --------------------------------------------------------------------------------
CSL Ltd. (Australia) 1.1%
- --------------------------------------------------------------------------------
Rockwell International Corp. (USA) 1.1%
- --------------------------------------------------------------------------------
Ciba Geigy AG (Switzerland) 1.1%
- --------------------------------------------------------------------------------
Welsh Water plc (United Kingdom) 1.0%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP 10 INDUSTRIES
OF EQUITY HOLDINGS
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Healthcare 9.8%
- --------------------------------------------------------------------------------
Retail 6.5%
- --------------------------------------------------------------------------------
Telecommunications 5.9%
- --------------------------------------------------------------------------------
Oil 5.6%
- --------------------------------------------------------------------------------
Banks 5.6%
- --------------------------------------------------------------------------------
Electronics 4.3%
- --------------------------------------------------------------------------------
Chemicals 3.7%
- --------------------------------------------------------------------------------
Aerospace/Defense 3.2%
- --------------------------------------------------------------------------------
Automobiles 3.1%
- --------------------------------------------------------------------------------
Publishing 3.0%
- --------------------------------------------------------------------------------
</TABLE>
Foreign investing is subject to additional risks which are discussed in the
USAA Life Variable Annuity prospectus.
----------------------------
1995 ANNUAL REPORT B-23
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
AN OVERVIEW December 31, 1995
- --------------------------------------------------------------------------------
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 December 31, 1995, the portfolio mix was
61.8% common stocks and 38.2% fixed-income securities.
<TABLE>
<CAPTION>
As of December 31, 1995
<S> <C>
NET ASSETS: $26.3 million
NET ASSET VALUE
(NAV) PER SHARE: $11.96
TOTAL RETURN:
Since Inception
January 5, 1995 26.33%
</TABLE>
COMPARISON OF FUND TO BENCHMARKS
[ARTWORK GOES HERE]
The graph above compares the performance of a $10,000 hypothetical
investment in the USAA Life VA Diversified Assets Fund to two industry indexes
and an independent rating agency's average which most closely resemble the
holdings of this Fund.
The S&P 500 Index is an unmanaged index representing the average performance
of a group of 500 widely held, publicly traded stocks. It is not possible to
invest directly in the S&P 500 Index. The Lehman Brothers Aggregate Bond Index
is an unmanaged index made up of the government/corporate index, the
mortgage-backed securities index, and the asset-backed securities index. The
Lipper Balanced Fund Average is the average performance level of all variable
annuity balanced funds as reported by Lipper Analytical Services, an
independent organization that monitors the performance of variable annuity
funds and mutual funds.
The calculations for all indexes and averages are based on a full calendar
year whereas the VA Diversified Assets Fund calculations are based on a
starting date of January 5, 1995--the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Managers Harry Miller (Common Stock) and Paul Lundmark (Debt
Securities)
THE MARKET
Common Stock--In 1995, the stock market performed surprisingly well and
this portfolio has acted accordingly. Overall, since our last Report of June
30, 1995, companies have reported excellent increases in earnings. And, we
were blessed with low interest rates and a low inflation rate of less than 3%--
all factors that generally produce a higher stock market.
Debt Securities--Since the last Report on June 30, 1995, interest rates
have continued to fall with interest rates on long-term maturity bonds falling
even more than overnight rates. This meant that the difference between
overnight and long-term rates narrowed to what is commonly called a flatter
yield curve. Investors believe that the economy is still slowing down and that
inflation is in check. Substantiating this viewpoint, the Federal Reserve Board
eased overnight rates by a quarter of a percent on December 19th to 5.5%. Given
these slow growth and low inflation scenarios, we believe that debt securities
will continue to provide excellent returns.
- ----------------------------
B-24 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
PORTFOLIO STRATEGIES
Common Stock--We seek high-quality common stocks which are considered to be
undervalued with regard to assets and earnings. The portfolio is well-
diversified in 18 industries and 36 companies. The largest industries are oil,
aerospace/defense, healthcare and tobacco. The best performing sectors have been
health, financial services and technology. The best performing stocks since our
last report were: Pharmacia + UpJohn, Bristol-Myers Squibb, NYNEX, GTE Corp.,
Boeing, EG&G, Monsanto and Allstate--all of which we still hold. Kmart was a
disappointment and the common stock has been sold. Other disappointments include
Arvin Industries (partially sold), James River and Occidental Petroleum.
Debt Securities--The Fund has continued to lengthen the maturity of the
debt segment by investing in intermediate and long-term, fixed-rate securities.
As of December 31, 1995, the weighted average maturity for this segment stood
at 13.22 years. This was done to take advantage of falling interest rates.
This strategy has worked well, therefore our holdings have appreciated in
price since the last Report. The one exception is our holdings in Kmart which
comprises only 2.9% of the portfolio. Concerning Kmart, we believe that the
market has overreacted and that the value of the bonds will rebound as Kmart
management addresses their financial situation. Furthermore, we believe that it
is not in our best interest for us to sell the Kmart bonds we hold at this time.
<TABLE>
<CAPTION>
BASIC VALUE STOCKS
TOP 10 HOLDINGS
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Boeing Co. 3.0%
- --------------------------------------------------------------------------------
Allstate Corp. 2.7%
- --------------------------------------------------------------------------------
Monsanto Co. 2.3%
- --------------------------------------------------------------------------------
E G & G, Inc. 2.3%
- --------------------------------------------------------------------------------
Pharmacia + Upjohn, Inc. 2.1%
- --------------------------------------------------------------------------------
Philip Morris Companies, Inc. 2.1%
- --------------------------------------------------------------------------------
NYNEX Corp. 2.1%
- --------------------------------------------------------------------------------
Rockwell International Corp. 2.0%
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 2.0%
- --------------------------------------------------------------------------------
Chrysler Corp. 1.9%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP 5 BONDS
as of December 31, 1995
- --------------------------------------------------------------------------------
Coupon % of
Rate Net Assets
<S> <C> <C>
U.S. Treasury Bonds 6.25% 9.8%
- --------------------------------------------------------------------------------
Nationwide Health Properties, Inc., MTN 8.61% 4.1%
- --------------------------------------------------------------------------------
Tektronix Inc. 7.50% 4.0%
- --------------------------------------------------------------------------------
Giddings & Lewis Inc. 7.50% 4.0%
- --------------------------------------------------------------------------------
Merry Land + Investment Co., Notes 7.25% 3.9%
- --------------------------------------------------------------------------------
</TABLE>
----------------------------
1995 ANNUAL REPORT B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSEST FUND
- --------------------------------------------------------------------------------
AN OVERVIEW (Continued) December 31, 1995
- --------------------------------------------------------------------------------
OUTLOOK
Common Stock--The same factors of low interest rates, low inflation and
forecasts of increasing profits (at a lower acceleration) are evident.
Therefore, we believe the stock market will continue to produce positive
results in 1996 until these factors change, but not to the extent of 1995. The
restructuring of U.S. companies continues to produce positive earnings as we
slowly move forward in the economy.
Debt Securities--I want to reiterate from the June 30, 1995 report that it
is impossible to predict the course interest rates will take. However, the
general feeling is that the economy has sufficiently slowed to contain
inflation. While we do not believe that rates will fall as much as they did in
1995, there is still enough room for further decreases. Given the slow growth
rate and low inflation scenarios, we believe that debt securities will continue
to provide excellent returns.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO INDUSTRIES
as of December 31, 1995
- --------------------------------------------------------------------------------
% of Net Assets
<S> <C>
Healthcare 9.7%
- --------------------------------------------------------------------------------
Oil 9.6%
- --------------------------------------------------------------------------------
Aerospace/Defense 8.9%
- --------------------------------------------------------------------------------
Real Estate InvestmentTrusts 8.0%
- --------------------------------------------------------------------------------
Chemicals 5.8%
- --------------------------------------------------------------------------------
Banks 5.2%
- --------------------------------------------------------------------------------
Tobacco 5.0%
- --------------------------------------------------------------------------------
Insurance--Property/Casualty 4.2%
- --------------------------------------------------------------------------------
Retail Stores--General Merchandising 4.1%
- --------------------------------------------------------------------------------
Electronics - Instrumentation 4.0%
- --------------------------------------------------------------------------------
</TABLE>
- ----------------------------
B-26 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
We have audited the accompanying statements of assets and liabilities and
portfolios of investments in securities of the USAA Life Variable Annuity (VA)
Money Market Fund, USAA Life VA Income Fund, USAA Life VA Growth and Income
Fund, USAA Life VA World Growth Fund, and USAA Life VA Diversified Assets Fund
of USAA Life Investment Trust as of December 31, 1995, the related statements of
operations, changes in net assets and financial highlights information for the
period January 5, 1995 (commencement of operations) through December 31, 1995.
These financial statements and financial highlights information are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights information based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights information are free of material misstatement. An audited includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and brokers.
An audited also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights information
referred to above present fairly, in all material respects, the financial
position of the aforementioned funds of the USAA Life Investment Trust as of
December 31, 1995, the results of their operations, the changes in their net
assets, and financial highlights information for the period January 5, 1995
through December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
San Antonio, Texas
February 9, 1996
----------------------------
1995 ANNUAL REPORT B-27
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED RATE INSTRUMENTS (61.8%)
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
------ ---------- -------- ---------- -------
<C> <S> <C> <C> <C>
BANK HOLDING COMPANIES - MAJOR REGIONAL
$ 150 Barnett Banks, Inc., CP 5.75% 1/19/96 $ 149
------
CHEMICALS
300 Du Pont (E.I.) De Nemours and Co., CP 5.77 1/26/96 299
------
CONGLOMERATE
125 Cargill, Inc., CP 5.85 1/08/96 125
------
ELECTRIC POWER
275 New England Power Co., CP 5.75 1/23/96 274
120 Northern States Power Minnesota, CP 5.75 1/17/96 120
------
394
------
ELECTRONICS - SEMI-CONDUCTORS
325 Motorola, Inc., CP 5.75 1/25/96 324
------
FINANCE - BUSINESS/COMMERCIAL
235 General Electric Capital Corp., CP 5.65 1/05/96 235
200 Heller Financial, Inc., CP 5.85 1/08/96 199
100 Heller Financial, Inc., CP 5.95 1/10/96 100
------
534
------
FINANCE - CONSUMER
350 American General Finance Corp., CP 5.76 1/09/96 349
165 Aristar, Inc., CP 5.73 2/06/96 164
300 Ford Motor Credit Co., CP 5.76 1/04/96 300
125 General Motors Acceptance Corp., CP 5.85 1/03/96 125
165 Toyota Motor Credit Corp., CP 5.67 1/12/96 165
------
1,103
------
FOODS
200 Heinz (H.J.) Co., CP 5.70 1/12/96 199
130 Heinz (H.J.) Co., CP 5.75 1/30/96 129
------
328
------
INSURANCE - MULTI-LINE COMPANIES
180 Prudential Funding Corp., CP 5.65 1/16/96 179
------
LEASING
120 PHH Corp., CP 5.75 1/26/96 119
------
RETAIL - GENERAL MERCHANDISING
190 Sears Roebuck Acceptance Corp., CP 5.82 1/11/96 190
------
TOBACCO
125 Philip Morris Cos. Inc., CP 5.70 1/19/96 125
------
U.S. GOVERNMENT
100 Federal Home Loan Mortgage Discount Notes 5.61 1/02/96 100
850 Federal Home Loan Mortgage Discount Notes 5.51 1/22/96 847
------
947
------
Total fixed rate instruments (cost: $4,816) 4,816
------
</TABLE>
- ----------------------------
B-28 ANNUAL REPORT 1995
<PAGE>
USAA Life Investment Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA Life Variable Annuity Money Market Fund
- --------------------------------------------------------------------------------
Portfolio of Investments in Securities (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUT BONDS (2.5%)
Principal
Amount Value
(000) Security Rate Maturity (000)
- --------- -------- ---- -------- -------
<C> <S> <C> <C> <C>
EDUCATION
$ 200 Dome Corp. Demand Bonds, Series 1991(CRE) (cost: $200) 5.98% 8/31/16 $ 200
-------
VARIABLE RATE DEMAND NOTES (34.9%)
AUTO PARTS
200 Alabama IDA RB (Rehau Project) (CRE) 5.98 10/01/19 200
140 Bardstown, KY, RB, Series 1994 (CRE) 5.85 6/01/24 140
-------
340
-------
BUILDING MATERIALS GROUP
100 Sarasota County, FL, IDA RB, Series 1994 (CRE) 5.90 9/01/14 100
-------
BUILDINGS
100 MMR Funding I, DEB, Series A (CRE) 6.00 9/01/10 100
-------
FINANCE - RECEIVABLES
150 Capital One Funding Corp., Notes, Series 1993A (CRE) 5.83 6/02/08 150
98 Capital One Funding Corp., Notes, Series 1994D (CRE) 5.83 10/01/24 98
100 Capital One Funding Corp., Notes, Series 1995C (CRE) 5.83 10/01/15 100
88 Midwest Funding Corp., Notes, Series 1992A (CRE) 5.83 5/01/07 88
-------
436
-------
HEALTHCARE - DIVERSIFIED
100 GMS Associates II Project Health Care RB, Series 1995 (CRE) 5.95 8/15/25 100
100 GMS Associates Project Health Care RB, Series 1994 (CRE) 5.95 5/15/24 100
150 Wenatchee Valley Clinic, P. S., WA, Taxable Bonds, Series 1995 (CRE) 6.23 1/15/15 150
-------
350
-------
HEALTHCARE - MISCELLANEOUS
100 Mason City Clinic, P.C., IA, Demand Bonds, Series 1992 (CRE) 5.95 9/01/22 100
-------
HOSPITALS
100 Armstrong County Hospital Auth., PA, RB, Series 1993B (CRE) 5.95 9/01/17 100
-------
HOTEL/MOTEL
100 Howard County, MD, Taxable RB, Series 1994 (CRE) 5.90 10/01/09 100
200 Ramada Hotel Downtown, San Diego, CA, DEB (CRE) 6.40 2/01/96 200
-------
300
-------
MULTI-FAMILY HOUSING
100 Palm Desert Redevelopment Agency, CA, RB (CRE) 6.05 8/01/22 100
-------
MACHINERY - DIVERSIFIED
200 DSL Funding Corp., Notes (CRE) 5.98 12/01/09 200
-------
NURSING CARE
200 Lincolnwood Funding Corp. RB, Series 1995A (CRE) 5.98 8/01/15 200
150 Massachusetts Nursing Homes RB, Series1993 (CRE) 5.95 11/15/13 150
-------
350
-------
REAL ESTATE
100 H/M Partners, LLC, Bonds (CRE) 6.15 10/01/20 100
-------
SPECIAL ASSESSMENT/TAX/FEE
150 Community Redevelopment Agency, City of Visalia, CA, DEB (CRE) 5.93 9/01/20 150
-------
Total variable rate demand notes (cost: $2,726) 2,726
-------
Total investments (cost: $7,742) $ 7,742
=======
</TABLE>
-------------------------
1995 ANNUAL REPORT B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<CAPTION>
<S> <C>
Finance - Consumer 14.1%
- --------------------------------------------------------------------------------
U.S. Government 12.1
- --------------------------------------------------------------------------------
Healthcare 11.6
- --------------------------------------------------------------------------------
Finance - Business/Commercial 6.9
- --------------------------------------------------------------------------------
Finance - Receivables 5.6
- --------------------------------------------------------------------------------
Electric Power 5.0
- --------------------------------------------------------------------------------
Auto Parts 4.4
- --------------------------------------------------------------------------------
Foods 4.2
- --------------------------------------------------------------------------------
Electronics 4.1
- --------------------------------------------------------------------------------
Hotel/Motel 3.8
- --------------------------------------------------------------------------------
Chemicals 3.8
- --------------------------------------------------------------------------------
Education 2.6
- --------------------------------------------------------------------------------
Machinery - Diversified 2.6
- --------------------------------------------------------------------------------
Retail 2.4
- --------------------------------------------------------------------------------
Insurance - Multi-Line Companies 2.3
- --------------------------------------------------------------------------------
Special Assessment/Tax/Fee 1.9
- --------------------------------------------------------------------------------
Banks 1.9
- --------------------------------------------------------------------------------
Conglomerates 1.6
- --------------------------------------------------------------------------------
Tobacco 1.6
- --------------------------------------------------------------------------------
Leasing 1.5
- --------------------------------------------------------------------------------
Building Materials Group 1.3
- --------------------------------------------------------------------------------
Buildings 1.3
- --------------------------------------------------------------------------------
Multi-Family Housing 1.3
- --------------------------------------------------------------------------------
Real Estate 1.3
- --------------------------------------------------------------------------------
99.2%
- --------------------------------------------------------------------------------
</TABLE>
See accompanying "Notes to Portfolio of Investments in Securities" on page B-47.
- -------------------------
B-30 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS (12.7%)
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
14,000 Allegheny Power System, Inc. $ 401
9,000 American Electric Power Co., Inc. 364
13,000 CINergy Corp. 398
4,500 Entergy Corp. 132
11,000 General Public Utilities Corp. 374
3,300 Health Care Property Investors, Inc. 116
17,000 Houston Industries, Inc. 412
13,500 Northeast Utilities 329
4,000 NYNEX Corp. 216
6,000 PNC Bank Corp. 194
11,500 Public Service Enterprise Group, Inc. 352
------
Total common stocks (cost: $2,631) 3,288
------
PREFERRED STOCKS (0.6%)
6,000 United Dominion Realty Trust, Inc. "A",
9.25%, Preferred Series A (cost: $150) 155
------
U.S. GOVERNMENT & AGENCY ISSUES (77.5%)
<CAPTION>
Principal
Amount
(000)
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (22.4%)
$ 1,445 7.00%, 6/01/24 1,459
1,426 7.50%, 1/01/25 1,463
1,451 8.00%, 1/01/25 1,506
1,285 8.50%, 12/01/24 1,343
------
5,771
------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (22.5%)
1,388 7.00%, 8/15/23 1,409
1,384 7.50%, 8/15/23 1,426
1,382 8.00%, 5/15/24 1,442
1,458 8.50%, 12/15/24 1,532
------
5,809
------
U.S. TREASURY BONDS (32.6%)
6,847 7.875%, 2/15/21 8,430
------
Total U.S. Government & agency issues (cost: $18,056) 20,010
------
SHORT-TERM (7.8%)
<CAPTION>
Rate Maturity
---- --------
COMMERICAL PAPER
800 General Electric Capital Corp., CP 5.40% 1/02/96 800
1,000 General Motors Acceptance Corp., CP 5.40 1/02/96 999
222 Prudential Funding Corp. 5.92 1/02/96 222
-------
Total short-term (cost: $2,021) 2,021
-------
Total investments (cost: $22,858) $25,474
=======
</TABLE>
-------------------------
1995 ANNUAL REPORT B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<S> <C>
U.S. Government Agency Issues 44.9%
U.S. Treasury 32.6
Electric Power 10.7
Commercial Paper 7.8
Real Estate Investment Trusts 1.1
Telephones 0.8
Bank Holding Companies - Major Regional 0.7
----
98.6%
====
</TABLE>
See accompanying "Notes to Portfolio of Investments in Securities" on page B-47.
- -------------------------
B-32 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS (97.9%)
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
AEROSPACE/DEFENSE (7.5%)
10,000 B.F. Goodrich Co. $ 681
12,000 Boeing Co. 940
10,000 Rockwell International Corp. 529
-------
2,150
-------
ALUMINUM (1.5%)
8,000 Aluminum Co. of America 423
-------
AUTOMOBILES (2.6%)
5,000 Chrysler Corp. 277
16,500 Ford Motor Co. 478
-------
755
-------
BANK HOLDING COMPANIES - MONEY CENTER (1.4%)
6,000 Bankers Trust New York Corp. 399
-------
BANK HOLDING COMPANIES - OTHER MAJOR (2.0%)
9,000 BankAmerica Corp. 583
-------
BROKERAGE FIRMS (1.3%)
8,000 Dean Witter, Discover & Co. 376
-------
CHEMICALS (6.0%)
9,000 Avery Dennison Corp. 451
7,000 Dow Chemical Co. 493
6,000 Olin Corp. 445
9,000 Union Carbide Corp. 338
-------
1,727
-------
CHEMICALS - SPECIALTY (1.4%)
11,500 Morton International, Inc. 413
-------
COMPUTER SOFTWARE & SERVICE (0.4%)
8,000 Novell, Inc.* 114
-------
CONTAINERS - METALS & GLASS (1.7%)
17,500 Ball Corp. 481
-------
ELECTRIC POWER (1.2%)
14,000 Houston Industries, Inc. 340
-------
ELECTRONICS - SEMI-CONDUCTORS (1.1%)
14,000 National Semiconductor Corp.* 312
-------
ENTERTAINMENT (1.3%)
10,000 Time Warner, Inc. 379
-------
FOODS (2.8%)
6,000 CPC International, Inc. 411
14,500 Dean Foods Co. 399
-------
810
-------
HEALTHCARE - DIVERSIFIED (2.0%)
6,000 American Home Products Corp. 582
-------
HEALTHCARE - HMO (1.6%)
16,800 Humana, Inc.* 460
-------
</TABLE>
-------------------------
1995 ANNUAL REPORT B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
HOMEBUILDING (1.8%)
15,000 Centex Corp. $ 521
------
HOUSEHOLD PRODUCTS (3.0%)
5,500 Procter & Gamble Co. 456
26,000 Sunbeam Corp. 397
------
853
------
INSURANCE - MULTI-LINE COMPANIES (1.7%)
7,000 Aetna Life & Casualty Co. 485
------
INSURANCE - PROPERTY/CASUALTY (4.4%)
8,000 Allstate Corp. 329
4,950 American International Group, Inc. 458
20,000 Prudential Reinsurance Holdings, Inc. 467
------
1,254
------
LEISURE TIME (1.6%)
19,000 Brunswick Corp. 456
------
MACHINERY - DIVERSIFIED (2.9%)
22,000 BW/IP, Inc. 363
13,500 Deere & Co. 476
------
839
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.4%)
12,000 Hillenbrand Industries, Inc. 407
------
MEDICAL PRODUCTS & SUPPLIES (2.6%)
8,000 Baxter International, Inc. 335
13,000 C.R. Bard, Inc. 419
------
754
------
NATURAL GAS DISTRIBUTION - PIPELINES (2.7%)
13,000 NICOR, Inc. 358
12,000 Sonat, Inc. 427
------
785
------
OFFICE EQUIPMENT & SUPPLIES (2.4%)
5,000 Xerox Corp. 685
------
OIL - DOMESTIC (3.4%)
27,000 Occidental Petroleum Corp. 577
13,500 Unocal Corp. 393
------
970
------
OIL - EXPLORATION & PRODUCTION (1.5%)
15,000 Apache Corp. 442
------
OIL - INTERNATIONAL (1.6%)
5,800 Texaco, Inc. 455
------
OIL WELL EQUIPMENT & SERVICE (1.4%)
6,000 Schlumberger Ltd. 416
------
PAPER & FOREST PRODUCTS (4.5%)
27,000 Fort Howard Corp.* 607
29,000 Jefferson Smurfit Corp.* 276
9,500 Weyerhaeuser Co. 411
------
1,294
------
</TABLE>
- -------------------------
B-34 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- --------- --------
<S> <C> <C>
POLLUTION CONTROL (1.4%)
14,000 WMX Technologies, Inc. $ 418
-------
PUBLISHING (1.5%)
6,500 Dun & Bradstreet Corp. 421
-------
RAILROADS (1.5%)
5,500 Norfolk Southern Corp. 437
-------
REAL ESTATE INVESTMENT TRUSTS (2.8%)
13,000 Developers Diversified Realty Corp. 390
22,000 Public Storage, Inc. 418
-------
808
-------
RETAIL - DEPARTMENT STORES (1.5%)
10,000 May Department Stores Co. 422
-------
RETAIL - GENERAL MERCHANDISING (3.0%)
9,000 J.C. Penney Company, Inc. 429
11,000 Sears, Roebuck & Co. 429
-------
858
-------
RETAIL - SPECIALTY (2.1%)
8,000 Borders Group, Inc.* 148
11,000 OfficeMax, Inc.* 246
21,000 Phillips-Van Heusen Corp. 207
-------
601
-------
TELEPHONES (6.5%)
7,000 American Telephone & Telegraph Co. 453
10,000 GTE Corp. 440
9,000 NYNEX Corp. 486
12,000 Sprint Corp. 479
-------
1,858
-------
TOBACCO (4.9%)
5,000 Philip Morris Companies, Inc. 453
13,000 RJR Nabisco Holdings Corp. 401
22,900 Universal Corp. 558
-------
1,412
-------
Total common stocks (cost: $23,035) 28,155
-------
Short-Term (2.6%)
<CAPTION>
Principal
Amount
(000) Rate Maturity
----------- ------- --------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY ISSUES
$ 760 Federal Home Loan Bank Consolidated
Discount Note (cost: $23,795) 5.70% 1/02/96 760
-------
Total investments (cost: $23,795) $28,915
=======
</TABLE>
*Non-income producing
See accompanying "Notes to Portfolios of Investments in Securities" on
page B-47.
----------------------------
1995 ANNUAL REPORT B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES December 31, 1995
- --------------------------------------------------------------------------------
FOREIGN SECURITIES (65.2%)
FOREIGN COMMON STOCKS (62.0%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
ARGENTINA (0.3%)
16,533 Compania Interamericana de Automobiles S.A.* $ 86
------
AUSTRALIA (2.6%)
90,000 CSL Ltd. 267
135,000 David Jones Ltd. 207
21,300 Rothmans Holdings Ltd. 87
28,000 Seven Network Ltd. 79
------
640
------
Austria (0.9%)
1,750 VA Technologie AG 222
------
BELGIUM (0.9%)
825 Colruyt S.A. 227
------
BRAZIL (0.3%)
7,000 Rhodia-Ster S.A. GDS 63
------
CANADA (2.5%)
5,000 Alliance Forest Products, Inc. * 88
40,000 Beau Canada Exploration Ltd. * 48
3,800 Canadian National Railway Co. * 57
4,500 Canadian Occidental Petroleum Ltd. 147
2,200 Loewen Group, Inc. 56
1,000 Potash Corp. Saskatchewan, Inc. 71
4,700 Suncor, Inc. 147
------
614
------
CHILE (0.9%)
2,000 Madeco S.A. ADS 54
5,300 Maderas y Sinteticos S.A. ADS 103
1,500 Sociedad Quimica y Minera de Chile S.A. ADS 71
------
228
------
COLOMBIA (0.4%)
18,000 Banco de Colombia GDS 94
------
DENMARK (2.0%)
1,500 Novo Nordisk A/S "B" 205
7,000 Tele Danmark A/S ADS 194
2,000 Unidanmark A/S 99
------
498
------
FINLAND (0.3%)
2,000 Nokia Corp. ADS 78
------
FRANCE (3.2%)
6,000 Coflexip ADS 113
5,000 Elf Aquitaine ADS 184
3,300 Eramet Group 215
1,475 Essilor International 282
------
794
------
</TABLE>
- ----------------------------
B-36 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
GERMANY (2.7%)
3,000 ADIDAS AG* $ 159
350 Siemens AG 191
7,200 Veba AG 306
------
656
------
HONG KONG (2.8%)
91,500 Amoy Properties Ltd. 91
7,300 China Yuchai International Ltd. 59
110,000 Florens Group Ltd. 72
18,000 Henderson Land Development Co. 109
24,000 Hutchison Whampoa Ltd. 146
120,000 Varitronix International Ltd. 223
------
700
------
HUNGARY (0.4%)
12,000 Mol Magyar Olay Es Gazipari GDS * 98
------
INDIA (1.1%)
4,000 Hindalco Industries Ltd. GDR 136
7,000 Larsen & Toubro Ltd. GDR 127
------
263
------
INDONESIA (1.4%)
95,000 PT Asahimas Flat Glass Co. Ltd. * 93
1,500 PT Bank Dagang Nasional Indonesia 1
5,000 PT HM Sampoerna 52
50,000 PT Jaya Real Property 136
40,000 PT Matahari Putra Prima 70
------
352
------
ISRAEL (0.3%)
4,100 Koor Industries Ltd. ADS * 83
------
ITALY (1.9%)
13,000 Arnoldo Mondadori Editore 113
1,000 De Rigo S.p.A. 23
112,500 Olivetti and C., S.p.A. 90
116,800 STET 238
------
464
------
JAPAN (11.0%)
10,000 77 Bank Ltd. 92
11,000 Canon, Inc. 199
13,000 Higo Bank 104
15,000 Hitachi Ltd. 151
9,000 Honda Motor Co. Ltd. 186
4,000 Hoya Corp. 138
3,000 Ito-Yokado Co. Ltd. 185
3,000 Kissei Pharmaceutical Co., Ltd. 91
2,000 Kyocera Corp. 149
7,000 Laox Co. Ltd. 141
</TABLE>
----------------------------
1995 ANNUAL REPORT B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
2,000 Mabuchi Motor Co. $ 124
26,000 Minebea Co. Ltd. 218
22,000 Mitsubishi Heavy Industries Ltd. 175
62,000 NKK Corp. 167
11,000 Nomura Securities Co. Ltd. 240
3,000 Shimamura Co. Ltd. 116
6,000 Shiseido Co. Ltd. 71
5,000 Tostem Corp. 166
------
2,713
------
KOREA (1.3%)
2,500 Korea Electric Power Corp. ADS 111
2,270 LG Chemical Ltd. * 44
1,470 Pohang Iron & Steel Co., Ltd. 108
250 Samsung Electronics Co., Ltd. * 46
------
309
------
MALAYSIA (1.1%)
28,125 Malaysian Assurance Alliance BHD 127
6,000 Tanjong plc 18
40,000 Technology Resources Industries BHD * 118
------
263
------
MEXICO (1.1%)
3,700 Bufete Industrial, S.A. de C.V. ADS 56
5,700 Desc, Soceidad de Fomento Industrial, S.A. de C.V. ADS * 81
8,000 Grupo Simec, S.A. de C.V. ADS * 50
4,000 Grupo Televisa, S.A. de C.V. ADS 90
------
277
------
NETHERLANDS (4.0%)
700 DSM N.V. 57
3,000 EVC International N.V. 78
1,250 Heineken N.V. 222
2,200 Internationale Nederlanden Groep N.V. 147
3,500 Vendex International N.V. 104
2,700 Verenigd Bezit VNU 371
------
979
------
NORWAY (0.9%)
100,000 Christiania Bank og Kreditkasse 234
------
PHILIPPINES (1.1%)
425,500 Filinvest Land, Inc. * 136
121,200 Petron Corp. GDS 63
7,800 Philippine Commercial International Bank 72
------
271
------
PORTUGAL (0.6%)
928 Portugal Telecom, S.A. * 18
6,800 Portugal Telecom, S.A. ADS * 129
------
147
------
SINGAPORE (0.8%)
11,000 Keppel Corp. Ltd. 98
13,000 Overseas Union Bank Ltd. 90
------
188
------
</TABLE>
- ----------------------------
B-38 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
SOUTH AFRICA (0.6%)
1,431 Murray and Roberts Holdings Ltd. $ 10
7,000 Nedcor Ltd. GDR* 121
2,800 Nedcor Ltd. Warrants* 17
------
148
------
SPAIN (1.2%)
7,200 Telefonica de Espana, S.A. ADR 301
------
SWEDEN (3.6%)
1,500 Asea AB 146
4,600 Autoliv AB 269
4,333 Getinge Industrier AB "B" 197
4,500 Nordbanken AB * 77
10,000 Volvo AB 205
------
894
------
SWITZERLAND (2.1%)
300 Ciba Geigy AG 264
40 SGS Group 79
300 Sulzer AG P.C. 172
------
515
------
TAIWAN (0.4%)
7,500 Acer, Inc. * 96
------
THAILAND (1.1%)
11,300 Finance One Public Co. 71
29,600 Sahaviriya Steel Industries Public Co., Ltd. * 40
60,400 Sahaviriya Steel Industries Public Co., Ltd. * 80
15,000 TPI Polene Public Co., Ltd. 88
750 TPI Polene Rights -
------
279
------
TURKEY (0.3%)
170,000 Erciyas Biracilik ve Malt Sanayi A.S. 79
------
UNITED KINGDOM (5.5%)
19,000 Amstrad plc 58
2,500 British Gas plc 98
23,000 Cadbury Schweppes plc 190
30,500 Northern Ireland Electricity plc 204
18,900 Refuge Group plc 133
51,500 Tomkins plc 225
20,833 Welsh Water plc 250
80,000 WPP Group plc 204
------
1,362
------
OTHER HOLDINGS (0.4%)
153,000 Central European Growth Fund plc 92
30,000 Central European Growth Fund plc Warrants * 2
------
94
------
Total foreign common stocks (cost: $14,352) 15,309
------
</TABLE>
----------------------------
1995 ANNUAL REPORT B-39
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS (2.5%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
AUSTRALIA (0.8%)
65,000 Village Roadshow Ltd. $ 203
------
BRAZIL (1.2%)
3,500,000 Companhia Energetica de Minas Gerais (Cemig) 77
2,000,000 Telebras PN 96
151,000,000 Usinas Siderurgicas de Minas Gerais S.A. 123
------
296
------
CANADA (0.5%)
6,600 Loewen Group, Inc., 6.00%, Convertible First Preferred Shares,
Series C Receipts 121
------
Total foreign preferred stocks (cost: $613) 620
------
FOREIGN BONDS (0.7%)
Principal
Amount
(000)
---------
JAPAN
$ 160 MBL International Finance (Bermuda) Trust, Convertible Notes,
3.00%, 11/30/02 (cost: $167) 185
------
Total foreign securities (cost: $15,132) 16,114
------
DOMESTIC STOCKS (31.9%)
Number
of Shares
---------
AEROSPACE/DEFENSE (3.2%)
3,200 B.F. Goodrich Co. 218
4,000 Boeing Co. 314
5,000 Rockwell International Corp. 264
------
796
------
ALUMINUM (0.5%)
2,400 Aluminum Co. of America 127
------
AUTOMOBILES (1.1%)
1,900 Chrysler Corp. 105
6,000 Ford Motor Co. 174
------
279
------
BANK HOLDING COMPANIES - MONEY CENTER (0.8%)
1,900 Bankers Trust New York Corp. 127
1,000 Citicorp 67
------
194
------
BEVERAGES - SOFT DRINK (0.5%)
2,300 PepsiCo, Inc. 129
------
BIOTECHNOLOGY (0.7%)
3,000 Amgen, Inc. * 178
------
</TABLE>
- ----------------------------
B-40 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
CHEMICALS (1.4%)
3,200 Avery Dennison Corp. $ 160
2,700 Dow Chemical Co. 190
------
350
------
CHEMICALS - SPECIALTY (1.1%)
4,000 Morton International, Inc. 144
7,000 Zoltek Companies, Inc. * 117
------
261
------
COMPUTER SOFTWARE & SERVICE (1.1%)
2,100 Microsoft Corp. * 184
5,500 Novell, Inc. * 79
------
263
------
CONTAINERS - METALS & GLASS (0.4%)
4,000 Ball Corp. 110
------
ELECTRONICS - SEMI-CONDUCTORS (1.6%)
2,000 Intel Corp. 114
3,000 Motorola, Inc. 171
5,000 National Semiconductor Corp.* 111
------
396
------
ENTERTAINMENT (0.6%)
4,000 Time Warner, Inc. 151
------
FOODS (0.5%)
4,300 Dean Foods Co. 118
------
HEALTHCARE - DIVERSIFIED (0.8%)
2,200 Bristol-Myers Squibb Co. 189
------
HEALTHCARE - HMO (0.7%)
2,500 United HealthCare Corp. 164
------
HEALTHCARE - MISCELLANEOUS (1.3%)
6,500 Caremark International, Inc. 118
5,000 Cerner Corp. * 103
3,200 Total Renal Care Holdings, Inc. 94
------
315
------
HOUSEHOLD PRODUCTS (0.6%)
1,700 Procter & Gamble Co. 141
------
INSURANCE - PROPERTY/CASUALTY (0.7%)
2,000 American International Group, Inc. 185
------
MACHINERY - DIVERSIFIED (1.2%)
6,000 BW/IP, Inc. 99
5,700 Deere & Co. 201
------
300
------
MEDICAL PRODUCTS & SUPPLIES (1.1%)
4,100 C.R. Bard, Inc. 132
3,000 St. Jude Medical, Inc. 129
------
261
------
</TABLE>
----------------------------
1995 ANNUAL REPORT B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<S> <C> <C>
OFFICE EQUIPMENT & SUPPLIES (0.7%)
1,300 Xerox Corp. $ 178
------
OIL - DOMESTIC (0.3%)
3,000 Unocal Corp. 87
------
OIL - EXPLORATION & PRODUCTION (0.6%)
4,700 Apache Corp. 139
------
OIL & GAS DRILLING (0.8%)
4,300 Sonat Offshore Drilling, Inc. 192
------
OIL WELL EQUIPMENT & SERVICE (0.7%)
3,400 Halliburton Co. 172
------
PAPER & FOREST PRODUCTS (1.5%)
8,600 Fort Howard Corp. * 193
4,000 Weyerhaeuser Co. 173
------
366
------
POLLUTION CONTROL (0.8%)
2,000 Browning-Ferris Industries, Inc. 59
4,800 WMX Technologies, Inc. 143
------
202
------
PUBLISHING (1.0%)
4,600 American Greetings Corp. 127
1,900 Dun & Bradstreet Corp. 123
------
250
------
RESTAURANTS (0.4%)
7,000 Brinker International, Inc. * 106
------
RETAIL - GENERAL MERCHANDISING (0.5%)
6,000 Dollar General Corp. 125
------
RETAIL - SPECIALTY (1.7%)
4,700 Best Buy Co., Inc. * 76
8,300 Borders Group, Inc. * 154
6,000 OfficeMax, Inc. * 134
7,000 Phillips-Van Heusen Corp. 69
------
433
------
TELEPHONES (1.2%)
2,000 American Telephone & Telegraph Co. 130
900 COMSAT Corp. 17
4,000 Sprint Corp. 159
------
306
------
TOBACCO (1.3%)
2,000 Philip Morris Companies, Inc. 181
4,200 RJR Nabisco Holdings Corp. 130
------
311
------
TRANSPORTATION - MISCELLANEOUS (0.5%)
5,000 American President Companies, Ltd. 115
------
Total domestic stocks (cost: $6,639) 7,889
------
</TABLE>
- ----------------------------
B-42 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT & AGENCY ISSUES (3.2%)
Principal Market
Amount Value
(000) Security Rate Maturity (000)
--------- -------- ------ -------- -------
<C> <S> <C> <C> <C>
DISCOUNT NOTES
$ 775 Federal Home Loan Bank Consolidated
Discount Note (cost $775) 5.70% 1/02/96 775
-------
Total Investments (cost: $22,546) $24,778
=======
</TABLE>
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<CAPTION>
<S> <C>
Healthcare 9.8%
- --------------------------------------------------------------------------------
Retail 6.5
- --------------------------------------------------------------------------------
Telecommunications 5.9
- --------------------------------------------------------------------------------
Oil 5.6
- --------------------------------------------------------------------------------
Banks 5.6
- --------------------------------------------------------------------------------
Electronics 4.3
- --------------------------------------------------------------------------------
Chemicals 3.7
- --------------------------------------------------------------------------------
Aerospace/Defense 3.2
- --------------------------------------------------------------------------------
U.S. Government 3.1
- --------------------------------------------------------------------------------
Automobiles 3.1
- --------------------------------------------------------------------------------
Publishing 3.0
- --------------------------------------------------------------------------------
Electric Power 2.8
- --------------------------------------------------------------------------------
Steel 2.3
- --------------------------------------------------------------------------------
Electrical Equipment 2.2
- --------------------------------------------------------------------------------
Machinery - Diversified 2.1
- --------------------------------------------------------------------------------
Conglomerates 2.1
- --------------------------------------------------------------------------------
Real Estate 1.9
- --------------------------------------------------------------------------------
Paper & Forest Products 1.8
- --------------------------------------------------------------------------------
Building Materials Group 1.8
- --------------------------------------------------------------------------------
Engineering & Construction 1.7
- --------------------------------------------------------------------------------
Auto Parts 1.7
- --------------------------------------------------------------------------------
Office Equipment & Supplies 1.5
- --------------------------------------------------------------------------------
Tobacco 1.5
- --------------------------------------------------------------------------------
Entertainment 1.4
- --------------------------------------------------------------------------------
Manufacturing - Diversified Industries 1.4
- --------------------------------------------------------------------------------
Beverages - Soft Drink 1.3
- --------------------------------------------------------------------------------
Insurance - Property/Casualty 1.3
- --------------------------------------------------------------------------------
Brokerage Firms 1.3
- --------------------------------------------------------------------------------
Bererages - Alcoholic 1.2
- --------------------------------------------------------------------------------
Metals - Miscellaneous 1.2
- --------------------------------------------------------------------------------
Transportation - Miscellaneous 1.2
- --------------------------------------------------------------------------------
Aluminum 1.1
- --------------------------------------------------------------------------------
Computer Software & Service 1.1
- --------------------------------------------------------------------------------
Water Utilties 1.0
- --------------------------------------------------------------------------------
Other 9.8
- --------------------------------------------------------------------------------
100.3%
================================================================================
</TABLE>
*Non-income producing
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-47.
----------------------------
1995 ANNUAL REPORT B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
AEROSPACE/DEFENSE (8.8%)
6,000 B.F. Goodrich Co. $ 409
10,000 Boeing Co. 783
25,000 EG & G, Inc. 606
10,000 Rockwell International Corp. 529
------
2,327
------
AUTO PARTS (0.5%)
8,400 Arvin Industries, Inc. 139
------
AUTOMOBILES (1.9%)
9,000 Chrysler Corp. 498
------
BANK HOLDING COMPANIES - MONEY CENTER (1.3%)
5,000 Bankers Trust New York Corp. 333
------
CHEMICALS (5.8%)
6,000 Dow Chemical Co. 422
5,000 Monsanto Co. 612
13,000 Union Carbide Corp. 488
------
1,522
------
DISTRIBUTION & PIPELINES (1.5%)
14,000 NICOR, Inc. 385
------
DRUGS (2.1%)
14,500 Pharmacia & Upjohn, Inc. 562
------
ELECTRIC POWER (3.2%)
18,000 Houston Industries, Inc. 437
10,000 Texas Utilities Co. 411
------
848
------
HEALTHCARE - DIVERSIFIED (3.8%)
5,000 American Home Products Corp. 485
6,000 Bristol-Myers Squibb Co. 515
------
1,000
------
INSURANCE - PROPERTY/CASUALTY (4.2%)
17,000 Allstate Corp. 699
8,000 Hartford Steam Boiler Inspection & Insurance Co. 400
------
1,099
------
MACHINERY - DIVERSIFIED (1.8%)
13,800 Deere & Co. 486
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (3.1%)
7,000 Caterpillar, Inc. 411
6,000 Minnesota Mining & Manufacturing Co. 398
------
809
------
OFFICE EQUIPMENT & SUPPLIES (1.6%)
3,000 Xerox Corp. 411
------
</TABLE>
- ----------------------------
B-44 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
--------- -------- ------
<C> <S> <C>
OIL - DOMESTIC (4.7%)
7,000 Amerada Hess Corp. $ 371
4,000 Atlantic Richfield Co. 443
20,000 Occidental Petroleum Corp. 428
------
1,242
------
OIL - INTERNATIONAL (4.9%)
7,000 Chevron Corp. 368
4,000 Mobil Corp. 448
6,000 Texaco, Inc. 471
------
1,287
------
PAPER & FOREST PRODUCTS (0.9%)
10,000 James River Corp. 241
------
RETAIL - GENERAL MERCHANDISING (1.2%)
8,000 Sears, Roebuck & Co. 312
------
TELEPHONES (3.7%)
10,000 GTE Corp. 440
10,000 NYNEX Corp. 540
------
980
------
TOBACCO (5.0%)
9,000 American Brands, Inc. 401
6,000 Philip Morris Companies, Inc. 543
15,000 Universal Corp. 366
------
1,310
------
TRANSPORTATION - MISCELLANEOUS (1.3%)
15,000 American President Companies, Ltd. 345
------
Total basic value stocks (cost: $12,422) 16,136
------
</TABLE>
----------------------------
1995 ANNUAL REPORT B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES (continued) December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE AND MUNICIPAL OBLIGATIONS (26.6%)
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
--------- -------- ------ -------- -------
<C> <S> <C> <C> <C>
BANK HOLDING COMPANIES - MAJOR REGIONAL (3.9%)
$1,000 First Tennessee National Corp. 6.75% 11/15/05 $ 1,026
-------
ELECTRONICS - INSTRUMENTATION (4.0%)
1,000 Tektronix, Inc. 7.50 8/01/03 1,050
-------
HEALTHCARE - MISCELLANEOUS (3.8%)
1,000 Caremark International, Inc., Notes 6.88 8/15/03 992
-------
MACHINE TOOLS (4.0%)
1,000 Giddings + Lewis, Inc. 7.50 10/01/05 1,049
-------
REAL ESTATE INVESTMENT TRUSTS (8.0%)
1,000 Merry Land + Investment Co., Notes 7.25 6/15/05 1,031
1,000 Nationwide Health Properties, Inc., MTN 8.61 3/01/02 1,089
-------
2,120
-------
RETAIL - GENERAL MERCHANDISING (2.9%)
1,000 K Mart Corp., Notes 8.13 12/01/06 757
-------
Total corporate and municipal obligations (cost: $6,966) 6,994
-------
U.S. GOVERNMENT & AGENCY ISSUES (9.8%)
U.S. GOVERNMENT
2,500 U.S. Treasury Bonds (cost: $2,357) 6.25 8/15/23 2,570
-------
SHORT-TERM (1.5%)
COMMERCIAL PAPER
405 Aristar, Inc. (cost: $405) 6.00 1/02/96 405
-------
Total investments (cost: $22,150) $26,105
=======
</TABLE>
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-47.
- ----------------------------
B-46 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENT IN SECURITIES
- --------------------------------------------------------------------------------
December 31, 1995
- -------------------------------------------------------------------------------
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
IDA Industrial Development
Authority/Agency
MTN Medium-Term Note
RB Revenue Bond
CATEGORIES & DEFINITIONS
The securities in USAA Life VA Money Market Fund are divided into three
categories - fixed rate instruments, put bonds, and variable rate demand notes.
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.
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.
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.
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.
See accompanying "Notes to Financial Statements" on page B-51.
----------------------------
1995 ANNUAL REPORT B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
(In Thousands) December 31, 1995
- --------------------------------------------------------------------------------
<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 $7,742, $22,858, $23,795,
22,546, and $22,150, respectively) $7,742 $25,474 $28,915 $24,778 $26,105
Cash 31 73 2 5 1
Cash denominated in foreign currencies
(identified cost of $46) - - - 46 -
Receivables:
Capital shares sold 105 6 20 10 6
Dividends and interest 15 292 82 32 222
Foreign currency contracts held, at value - - - 137 -
------ ------- ------- ------- -------
Total assets 7,893 25,845 29,019 25,008 26,334
------ ------- ------- ------- -------
LIABILITIES
Securities purchased - - 233 125 -
Foreign currency contracts held, at value - - - 137 -
Capital shares redeemed 86 - - - -
USAA Life Insurance Company 5 22 25 40 23
------ ------- ------- ------- -------
Total liabilities 91 22 258 302 23
------ ------- ------- ------- -------
Net assets applicable to capital shares
outstanding $7,802 $25,823 $28,761 $24,706 $26,311
====== ======= ======= ======= =======
REPRESENTED BY:
Paid-in capital $7,802 $23,207 $23,641 $22,474 $22,364
Accumulated net realized loss on investments - - - - (8)
Net unrealized appreciation of investments - 2,616 5,120 2,232 3,955
------ ------- ------- ------- -------
Net assets applicable to capital shares
outstanding $7,802 $25,823 $28,761 $24,706 $26,311
====== ======= ======= ======= =======
Capital shares outstanding, unlimited number
of shares authorized, no par value 7,802 2,282 2,282 2,226 2,200
====== ======= ======= ======= =======
Net asset value, redemption price,
and offering price per share $ 1.00 $ 11.32 $ 12.60 $ 11.10 $ 11.96
====== ======= ======= ======= =======
</TABLE>
See accompanying "Notes to Financial Statements" on page B-51.
- ----------------------------
B-48 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
(In Thousands) Period Ending December 31, 1995*
- --------------------------------------------------------------------------------
<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, $30, and $0, respectively):
Dividends $ - $ 215 $ 659 $ 331 $ 522
Interest 263 1,449 72 129 674
------ ------- ------- ------- -------
Total income 263 1,664 731 460 1,196
------ ------- ------- ------- -------
Expenses:
Management fees 9 45 46 42 45
Administrative fees 36 36 36 36 36
Custodian's fees 37 44 50 85 45
Trustees' fees 3 3 3 3 3
Audit fees 6 6 6 6 6
Legal fees 10 10 10 9 9
Other 1 1 1 1 1
------ ------- ------- ------- -------
Total expenses before reimbursement 102 145 152 182 145
Expenses reimbursed (86) (66) (71) (46) (66)
------ ------- ------- ------- -------
Total expenses after reimbursement 16 79 81 136 79
------ ------- ------- ------- -------
Net investment income 247 1,585 650 324 1,117
------ ------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments:
Investments - 642 598 1,447 277
Foreign currency transactions - - - (4) -
Change in net unrealized appreciation on
investments - 2,616 5,120 2,232 3,955
------ ------- ------- ------- -------
Net realized and unrealized gain - 3,258 5,718 3,675 4,232
------ ------- ------- ------- -------
Increase in net assets resulting from operations $ 247 $ 4,843 $ 6,368 $ 3,999 $ 5,349
====== ======= ======= ======= =======
</TABLE>
*Funds commenced operations on January 5, 1995.
See accompanying "Notes to Financial Statements" on page B-51.
- ----------------------------
1995 ANNUAL REPORT B-49
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(In Thousands) Period Ending December 31, 1995*
- --------------------------------------------------------------------------------
<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 $ 247 $ 1,585 $ 650 $ 324 $ 1,117
Net realized gain on investments - 642 598 1,447 277
Net realized loss on foreign currency
transactions - - - (4) -
Change in net unrealized appreciation on
investments - 2,616 5,120 2,232 3,995
-------- ------- ------- ------- -------
Increase in net assets resulting from operations 247 4,843 6,368 3,999 5,349
-------- ------- ------- ------- -------
Distributions to shareholders from:
Net investment income (247) (1,585) (650) (320) (1,117)
-------- ------- ------- ------- -------
Net realized gains - (642) (598) (1,447) (285)
-------- ------- ------- ------- -------
From capital share transactions:
Shares sold 22,742 21,078 22,675 20,852 21,130
Shares issued for dividends reinvested 247 2,227 1,248 1,768 1,402
Shares redeemed (15,187) (98) (282) (146) (168)
-------- ------- ------- ------- -------
Increase in net assets from capital
share transactions 7,802 23,207 23,641 22,474 22,364
-------- ------- ------- ------- -------
Net increase in net assets 7,802 25,823 28,761 24,706 26,311
Net assets:
Beginning of period - - - - -
-------- ------- ------- ------- -------
End of period $ 7,802 $25,823 $28,761 $24,706 $26,311
======== ======= ======= ======= =======
Change in shares outstanding:
Shares sold 22,742 2,093 2,205 2,079 2,097
Shares issued for dividends reinvested 247 197 99 159 117
Shares redeemed (15,187) (8) (22) (12) (14)
-------- ------- ------- ------- -------
Increase in shares outstanding 7,802 2,282 2,282 2,226 2,200
======== ======= ======= ======= =======
</TABLE>
*Funds commenced operations on January 5, 1995.
See accompanying "Notes to Financial Statements" on page B-51.
- -------------------------
B-50 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In Thousands) December 31, 1995
- --------------------------------------------------------------------------------
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. The funds
commenced operations January 5, 1995 with an intial investment from USAA Life
Insurance Company (USAA Life). USAA Life is a wholly owned subsidiary of United
Services Automobile Association (USAA).
The investment objective of USAA Life Variable Annuity Money Market Fund (USAA
Life VA Money Market Fund) is to seek the highest level of current income
consistent with preservation of capital and maintenance of liquidity. The
investment objective of USAA Life Variable Annuity Income Fund (USAA Life VA
Income Fund) is to seek maximum current income without undue risk to principal.
The investment objective of USAA Life Variable Annuity Growth and Income Fund
(USAA Life VA Growth and Income Fund) is to seek capital growth and current
income. The investment objective of USAA Life Variable Annuity World Growth Fund
(USAA Life VA World Growth Fund) is to seek long-term capital appreciation. The
investment objective of USAA Life Variable Annuity Diversified Assets Fund (USAA
Life VA Diversified Assets Fund) is to seek long-term capital growth, consistent
with preservation of capital and balanced by current income.
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 to members and families
of USAA members as well as the general public.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of results of operations during the reporting period.
Actual results could differ from those estimates.
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 securitie's 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 shareholder, the Separate Account.
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, is 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 and long-term securities are amortized over
the life of the respective securities.
-------------------------
1995 ANNUAL REPORT B-51
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In Thousands) (continued) December 31, 1995
- --------------------------------------------------------------------------------
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 accumulated 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
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 December 31, 1995. 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 INCOME FUND,
USAA LIFE VA GROWTH AND INCOME FUND,
USAA LIFE VA WORLD GROWTH FUND, AND
USAA LIFE VA DIVERSIFIED ASSETS FUND:
Distributions of net investment income and realized gains from security
transactions not offset by capital losses were made to the Separate Account in
December 1995.
- -------------------------
B-52 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In Thousands) (continued) December 31, 1995
- --------------------------------------------------------------------------------
3) INVESTMENT TRANSACTIONS
Purchases and sales/maturities of securities, excluding short-term
securities, for the period from January 5, 1995 to December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Income Fund Growth and Income Fund
--------------- ------------------------
<S> <C> <C>
Purchases $ 31,629 $ 26,257
Sales/Maturities $ 11,472 $ 3,820
<CAPTION>
USAA Life VA USAA Life VA
World Growth Fund Diversified Assets Fund
--------------- ------------------------
<S> <C> <C>
Purchases $ 34,830 $ 33,233
Sales/Maturities $ 14,506 $ 11,769
</TABLE>
Purchases and sales/maturities of securities for the period from January 5,
1995 to December 31, 1995 for the USAA Life VA Money Market Fund were $40,498
and $32,889, respectively. Gross unrealized appreciation and depreciation of
investments as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Income Fund Growth and Income Fund
----------------- ------------------------
<S> <C> <C>
UNREALIZED:
Appreciation $ 2,616 $ 5,507
Depreciation $ - $ 387
USAA Life VA USAA Life VA
World Growth Fund Diversified Assets Fund
----------------- ------------------------
UNREALIZED:
Appreciation $ 3,180 $ 4,321
Depreciation $ 948 $ 366
</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 December 31, 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 12/31/95 Received 12/31/95
---- --------- -------- -------- --------
<S> <C> <C> <C> <C>
01-03-96 425 Philippine Peso $ 16 16 U.S. Dollar $ 16
01-03-96 121 U.S. Dollar 121 165 Canadian Dollar 121
--------- --------
$ 137 $ 137
========= ========
</TABLE>
-----------------------
1995 ANNUAL REPORT B-53
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In Thousands (continued) December 31, 1995
- --------------------------------------------------------------------------------
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).
USAA IMCO is indirectly wholly-owned by USAA. The funds' management fees are
computed at an annualized rate of .20% 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 management 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. Fees are based on estimated time spent to provide
services.
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. Expenses include
management fees discussed above.
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 total amount of brokerage commissions
paid to USAA Brokerage Services during the year ended December 31, 1995, was $5,
$4, $2, 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 December 31, 1995, USAA Life, for the Separate Account, owned 2,100 shares
(26.9%) of the USAA Life VA Money Market Fund, 2,189 shares (95.9%) of the USAA
Life VA Income Fund, 2,078 shares (91.1%) of the USAA Life VA Growth and Income
Fund, 2,053 shares (92.2%) of the USAA Life VA World Growth Fund, and 2,112
shares (96.0%) of the USAA Life VA Diversified Assets Fund.
- ----------------------------
B-54 ANNUAL REPORT 1995
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In Thousands) (continued) December 31, 1995
- --------------------------------------------------------------------------------
6) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding January 5, 1995 to
December 31, 1995 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 0.06 (a) 0.78 (a) 0.34 (a) 0.17 (a) 0.55 (a)
Net realized and unrealized gain - 1.61 2.83 1.79 2.08
Distributions from net investment income (0.06) (0.76) (0.30) (0.16) (0.53)
Distributions of realized capital gains - (0.31) (0.27) (0.70) (0.14)
------- -------- ------- ------- ---------
Net asset value at end of period $ 1.00 $ 11.32 $ 12.60 $ 11.10 $ 11.96
======= ======== ======= ======= =========
Total return 5.69% (b) 23.88% (b) 31.72% (b) 19.55% (b) 26.33% (b)
Net assets at end of period (000) $ 7,802 $ 25,823 $28,761 $24,705 $ 26,311
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 5.55% (c,d) 7.07% (c,d) 2.82% (c,d) 1.55% (c,d) 4.93% (c,d)
Portfolio turnover - 55.08% 17.73% 78.86% 58.87%
Average commission rate per share - $ 0.040 $ 0.049 $ 0.007 $ 0.048
</TABLE>
(a) Calculated using weighted average shares.
(b) The total return of a fund refers to the percentage change in value of a
hypothetical investment, including the deduction of a proportional share of
fund expenses, and assumes all income and capital gains distributions are
reinvested. Total returns for the period do not reflect expenses that apply
at the separate account level including risk and expense charges. 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>
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets 2.29% (c) 0.65% (c) 0.66% (c) 0.87% (c) 0.64% (c)
Ratio of net investment income to
average net assets 3.61% (c) 6.77% (c) 2.51% (c) 1.33% (c) 4.64% (c)
</TABLE>
----------------------------
1995 ANNUAL REPORT B-55
<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)
================================================================================
[ARTWORK GOES HERE]
USAA Life Insurance Company
9800 Fredericksburg Road
San Antonio, Texas 78288
(C)Copyright, 1996, USAA. All rights Reserved.
