<PAGE>
USAA LIFE INSURANCE COMPANY
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1997
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TABLE OF CONTENTS
This report is for the information of USAA Life Variable Annuity contractowners
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.
<TABLE>
<CAPTION>
<S> <C>
PRESIDENT'S MESSAGE............................................................... 3
USAA LIFE VARIABLE ANNUITY SEPARATE ACCOUNT....................................... A-5--A-15
Overview of the Variable Annuity Fund Accounts.................................... A-7
Statement of Assets and Liabilities............................................... A-8
Statements of Operations.......................................................... A-9
Statements of Changes in Net Assets............................................... A-10
Notes to Financial Statements..................................................... A-12
USAA LIFE INVESTMENT TRUST........................................................ B-17--B-67
USAA Life VA Money Market Fund-An Overview........................................ B-19
USAA Life VA Income Fund -An Overview............................................. B-21
USAA Life VA Growth and Income Fund-An Overview................................... B-23
USAA Life VA World Growth Fund -An Overview....................................... B-25
USAA Life VA Diversified Assets Fund -An Overview................................. B-28
USAA Life VA Aggressive Growth Fund - An Overview................................. B-31
USAA Life VA International Fund - An Overview..................................... B-34
USAA Life VA Money Market Fund Portfolio of Investments in Securities............. B-36
USAA Life VA Income Fund Portfolio of Investments in Securities................... B-38
USAA Life VA Growth and Income Fund Portfolio of Investments in Securities........ B-39
USAA Life VA World Growth Fund Portfolio of Investments in Securities............. B-41
USAA Life VA Diversified Assets Fund Portfolio of Investments in Securities....... B-46
USAA Life VA Aggressive Growth Fund Portfolio of Investments in Securities........ B-48
USAA Life VA International Fund Portfolio of Investment in Securities............. B-52
Notes to Portfolios of Investments in Securities.................................. B-57
Statements of Assets and Liabilities.............................................. B-58
Statements of Operations.......................................................... B-59
Statements of Changes in Net Assets............................................... B-60
Notes to Financial Statements..................................................... B-62
SCUDDER VARIABLE LIFE INVESTMENT FUND(VLIF)
CAPITAL GROWTH PORTFOLIO....................................................... C-69--C-87
Letter from the Fund's President.................................................. C-71
Capital Growth Portfolio Management Discussion.................................... C-72
Capital Growth Portfolio Summary.................................................. C-73
Investment Portfolio.............................................................. C-74
Financial Statements.............................................................. C-78
Financial Highlights.............................................................. C-81
Notes to Financial Statements..................................................... C-83
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO................................................ D-89--100
Schedule of Investments........................................................... D-92
Financial Highlights.............................................................. D-94
Statement of Assets and Liabilities............................................... D-95
Statement of Operations........................................................... D-96
Statement of Changes in Net Assets................................................ D-97
Notes to Financial Statements..................................................... D-99
</TABLE>
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USAA LIFE VARIABLE ANNUITY SEMIANNUAL REPORT
PRESIDENT'S MESSAGE
FROM THE DESK OF ED ROSANE
[PHOTO OF ED ROSANE APPEARS HERE]
What many consider near perfect conditions--a firm economy, low inflation
and relatively stable long-term interest rates--have prevailed over the last
six months. As the second quarter came to a close on June 30, the Dow reached
7672.79, a year-to-date gain of 1224.52 points and an increase of 18.99% over
1996's year-end close.
Again, USAA Life's Variable Annuity fund accounts mirrored the market--
posting solid returns over the past six months. An overview of historical
performance, as well as accumulation unit values, can be found on page A-7 of
this Report. To receive accumulation unit value updates 24-hours-a-day,
seven-days-a week, call our toll-free Quoteline at 1-800-531-8233 (498-6860
in San Antonio).
Also during the first half of 1997, USAA Life issued 1,295 contracts bringing
the total number of contractowners to 4,968.
1997 SEMIANNUAL REPORT 3
<PAGE>
USAA LIFE VARIABLE ANNUITY SEMIANNUAL REPORT
PRESIDENT'S MESSAGE
PUTTING THINGS IN PERSPECTIVE
- -----------------------------
The '90s will undoubtedly be remembered for having one of the most relentless
bull markets. Volatility, heavy trading late in the day, and constantly changing
"record highs" are just a few of the trends which emerged. Statistics released
by Washington used to be the catalyst for market swings, but now, more than ever
before, market activity is also being driven by sentiment and perception. Many
find it hard to remain focused in such an environment. Here are a few points you
may want to consider:
. The impact of what we have thought of as large point declines has become far
less significant to the total value of today's market. With the Dow's rise
over the last few years, these point declines represent a smaller percentage
decline.
. If your goals are long term, price decreases shouldn't impact the overall
future value of your contract.
. Diversification is the basis for a sound and balanced strategy. A correctly
diversified portfolio can minimize risk, while at the same time provide
greater potential for optimizing returns. By their very nature, variable
annuity fund accounts are diversified. The fund accounts invest in an
underlying fund whose portfolio holds a mix of stocks and/or bonds. To further
diversify your portfolio, allocate money to a number of fund accounts with
different levels of risk and include those with international investment
programs as well as domestic ones.
. USAA Life's Variable Annuity provides flexibility to change investment
strategies, enabling you to move money among the fund accounts without
creating a taxable event. And, there is no contract fee for moving money among
any of our nine variable fund accounts.
. Make saving a habit. If you haven't already done so, put investing on
autopilot by establishing an Automatic Payment Plan (APP).
APP authorizes USAA Life to withdraw a specified amount of money from your
bank or credit union each month, automatically adding to the value of your
Variable Annuity contract. To further simplify the process, we've enclosed an
APP form and return envelope in case you're interested. If you already have
APP in place and wish to increase contributions, simply call a USAA LIFE
SERVICE REPRESENTATIVE AT 1-800-531-4265.
. Instead of trying to "time" the market, consider Dollar Cost Averaging. It
allows you to build a long-term financial plan by systematically allocating a
fixed dollar amount or a specified percentage to your contract. Through the
years, this strategy could produce a better return than any attempt to
selectively time the market with occasional purchases. Even though it has
proven to be an effective tactic, keep in mind that there is no guarantee
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. Always consider your
ability to continue through periods of both low and high price levels.
. If adding to your contract at your discretion, take advantage of dips in
variable annuity unit prices when the market is down.
. If altering your investment strategy, consider incremental changes. Try to
avoid making radical changes to your portfolio.
. If fund account performance is driving your investing decisions, consider both
current and historical performance. A top performer today may not have the
same historical track record and vice versa. Also keep in mind that past
performance is no guarantee of future returns.
LOOKING FORWARD
- ---------------
The Variable Annuity you purchased from USAA Life is an innovative product
which offers options, flexibility, and diversification at a fair price. We
strive to evaluate and update our Variable Annuity contract as much as
possible. For example, we recently added two fund accounts to our contract
because we know how important it is to have choices when designing a
financial portfolio.
So now, if you're intrigued by foreign markets explore our USAA Life VA
International Fund Account. Or, if you prefer the challenges of high risks
with opportunities for rapid growth, consider our USAA Life VA Aggressive
Growth Fund Account. Both of these options are managed by our own USAA
Investment Management Company (IMCO) portfolio managers and mirror similarly
named public mutual funds offered by IMCO.
Investment objectives and strategies for these two fund accounts, as well as
all of the others, are discussed later in this Report. I encourage you to
review these commentaries as they provide insight which may be helpful in
making investing decisions.
As always, simply call a USAA Life Account Representative to discuss this
Report or your own personal financial situation.
1-800-531-4440 (456-9050 in San Antonio)
Sincerely,
/s/ EDWIN L. ROSANE
- ----------------------------
Edwin L. Rosane, CLU, FLMI
President
USAA Life Insurance Company
4 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE
VARIABLE ANNUITY
SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
June 30, 1997
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<TABLE>
<CAPTION>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------------------------------------------------------------
AN OVERVIEW
Variable Annuity Fund Accounts June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation AUV Average Annual AUV Average Annual
Inception Unit Value Total Return Total Return
Objective Date (AUV) One Year Since Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USAA LIFE VA Seeks the highest level
MONEY MARKET of current income con-
FUND ACCOUNT sistent with preserva- 2/6/95 $ 1.10 3.86% 4.10%
tion of capital and
maintenance of liquidity
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks maximum current
INCOME FUND income without undue 2/6/95 $ 12.07 6.84% 8.01%
ACCOUNT risk to principal
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks capital growth
GROWTH AND and current income 2/6/95 $ 17.94 30.13% 27.12%
INCOME FUND
ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks long-term
WORLD GROWTH capital appreciation 2/6/95 $ 16.38 20.84% 22.49%
FUND ACCOUNT/1/
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks long-term capital
DIVERSIFIED ASSETS growth, consistent with
FUND ACCOUNT preservation of capital 2/6/95 $ 15.30 18.76% 19.12%
and balanced by current
income
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA
AGGRESSIVE GROWTH Appreciation of capital 5/1/97 $ 11.14 NA 11.28%/2/
FUND ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Capital appreciation with
INTERNATIONAL current income as a 5/1/97 $ 10.69 NA 6.79%/2/
FUND ACCOUNT/1/ secondary objective
- ---------------------------------------------------------------------------------------------------------------------------------
SCUDDER VLIF
CAPITAL GROWTH Seeks to maximize long-
PORTFOLIO term capital growth 2/6/95 $ 18.37 34.83% 28.35%
FUND ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN
GROWTH PORTFOLIO Seeks long-term
FUND ACCOUNT capital appreciation 2/6/95 $ 16.96 22.16% 24.25%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Foreign investing is subject to additional risks, such as currency
fluctuations, market illiquidity, and political instability, which are
discussed in the Variable Annuity prospectus.
/2/ Total returns for periods of less than one year are not annualized. These
two-month returns are cumulative.
The AUV total return figures are computed in accordance with a formula
prescribed by the Securities and Exchange Commission which includes the
deduction of all contract charges. The performance data quoted represent past
performance and do not represent the actual experience of amounts invested by a
particular owner. Past performance is not a guarantee for 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. The principal value
contributed to the other fund accounts will fluctuate. When variable annuity
accumulation units are redeemed, they may be worth more or less than their
original cost.
1997 SEMIANNUAL REPORT A-7
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
VARIABLE ANNUITY FUND ACCOUNTS (IN THOUSANDS) June 30, 1997 (Unaudited)
Investment at
Fund Shares Cost Market Value
--------------------- -------------- ----------------------
ASSETS
<S> <C> <C> <C>
Investments at market value:
USAA Life VA Money Market Fund 14,881 $ 14,881 $ 14,881
USAA Life VA Income Fund 468 5,036 5,050
USAA Life VA Growth and Income Fund 2,618 39,126 45,822
USAA Life VA World Growth Fund 1,098 13,961 15,958
USAA Life VA Diversified Assets Fund 1,219 15,914 17,101
USAA Life VA Aggressive Growth Fund 55 568 609
USAA Life VA International Fund 71 748 765
Scudder VLIF Capital Growth Portfolio -
Class A shares 833 13,339 15,773
Alger American Growth Portfoli 726 24,306 28,702
-------------- ---------------
Total investments $ 127,879 144,661
Other assets:
Receivable from USAA Life Insurance Company 1
---------------
Total assets 144,662
LIABILITIES
Payable to USAA Life Insurance Company 24
---------------
Net assets $ 144,638
===============
Fund Account Units Unit Price Annuity Reserves
--------------------- -------------- ----------------------
NET ASSETS
Deferred annuity contracts in the
accumulation period:
USAA Life VA Money Market Fund Account 13,472 $ 1.104529 $ 14,880
USAA Life VA Income Fund Account 418 12.068722 5,050
USAA Life VA Growth and Income Fund Account 2,552 17.935310 45,772
USAA Life VA World Growth Fund Account 971 16.381260 15,910
USAA Life VA Diversified Assets Fund Account 1,114 15.301283 17,053
USAA Life VA Aggressive Growth Fund Account 55 11.138991 609
USAA Life VA International Fund Account 72 10.689807 765
Scudder VLIF Capital Growth Portfolio Fund
Account 859 18.366959 15,770
Alger American Growth Portfolio Fund Account 1,684 16.959767 28,564
------------------
Net assets attributable to contractowners'
deferred annuity reserves 144,373
Annuity contracts in the annuity period:
USAA Life VA Growth and Income Fund Account 3 16.708253 43
USAA Life VA World Growth Fund Account 3 15.260525 45
USAA Life VA Diversified Assets Fund Account 3 14.254417 45
Alger American Growth Portfolio Fund Account 8 15.799442 132
------------------
Net assets attributable to contractowners' annuity payment reserves 265
------------------
Net assets $ 144,638
==================
</TABLE>
See accompanying "Notes to Financial Statements" on page A-12.
A-8 SEMIANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
VARIABLE ANNUITY FUND ACCOUNTS (In Thousands) Six-month period ended
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World VA Diversified VA Aggressive
Market VA Income and Income Growth Assets Growth
Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income dividends and
capital gains distributions $ 364 $ 15 $ 240 $ 169 $ 394 $ --
------- ------ ------ ------ ------ -------
EXPENSES
Mortality and expense risk
charge 74 26 178 67 69 1
Administrative charge 7 2 17 6 7 --
------- ------ ------ ------ ------ -------
Total expenses 81 28 195 73 76 1
------- ------ ------ ------ ------ -------
Net investment
income (loss) 283 (13) 45 96 318 (1)
------- ------ ------ ------ ------ -------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) -- (30) 416 159 112 --
Change in net unrealized
appreciation/depreciation -- 160 5,013 1,600 994 41
------- ------ ------ ------ ------ -------
Net realized and
unrealized gain -- 130 5,429 1,759 1,106 41
------- ------ ------ ------ ------ -------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 283 $ 117 $5,474 $1,855 $1,424 $ 40
======= ====== ====== ====== ====== =======
<CAPTION>
Scudder VLIF Alger
Capital American
USAA Life VA Growth Growth
International Portfolio Portfolio
Fund Account Fund Account Fund Account
------------- ------------ ------------
<S> <C> <C> <C>
NET INVESTMENT INCOME:
Income dividends and
capital gains distributions $ -- $ 921 $ 256
-------- -------- --------
EXPENSES
Mortality and expense risk
charge 1 66 133
Administrative charge -- 6 13
-------- -------- --------
Total expenses 1 72 146
-------- -------- --------
Net investment
income (loss) (1) 849 110
-------- -------- --------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) -- 114 682
Change in net unrealized
appreciation/depreciation 17 1,659 3,041
--------- -------- --------
Net realized and
unrealized gain 17 1,773 3,723
--------- -------- --------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 16 $ 2,622 $ 3,833
========= ======== ========
See accompanying "Notes to Financial Statements" on page A-12.
</TABLE>
1997 SEMIANNUAL REPORT A-9
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
VARIABLE ANNUITY FUND ACCOUNTS (IN THOUSANDS) SIX-MONTH PERIOD ENDED
JUNE 30, 1997 AND YEAR ENDED
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA Growth
Money Market Fund Account Income Fund Account and Income Fund Account
------------------------- ------------------------- -------------------------
6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 12/31/96
-------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ 283 $ 375 $ (13) $ 346 $ 45 $ 730
Net realized gain (loss)
on investment transactions -- -- (30) (77) 416 241
Change in net unrealized
appreciation/depreciation -- -- 160 (111) 5,013 1,670
----------- --------- ------------ --------- --------- ---------
Increase in net assets
resulting from operations 283 375 117 158 5,474 2,641
----------- --------- ------------ --------- --------- ---------
FROM CONTRACT TRANSACTIONS:
Units sold 32,747 62,988 1,677 7,926 18,652 20,119
Units redeemed (29,393) (57,822) (1,817) (4,062) (1,728) (1,917)
----------- --------- ------------ --------- --------- ---------
Increase (decrease) in net
assets from contract
transactions 3,354 5,166 (140) 3,864 16,924 18,202
----------- --------- ------------ --------- --------- ---------
Net increase (decrease)
in net assets 3,637 5,541 (23) 4,022 22,398 20,843
NET ASSETS:
Beginning of period 11,243 5,702 5,073 1,051 23,417 2,574
----------- --------- ------------ -------- -------- ---------
End of period $ 14,880 $ 11,243 $ 5,050 $ 5,073 $ 45,815 $ 23,417
=========== ========= ============ ======== ======== =========
CHANGE IN UNITS OUTSTANDING:
Units sold 30,690 60,478 155 729 1,152 1,457
Units redeemed (27,601) (55,573) (167) (388) (115) (144)
----------- ---------- ------------ -------- -------- ---------
Increase (decrease)
in units outstanding 3,089 4,905 (12) 341 1,037 1,313
=========== ========== ============ ======== ======== =========
<CAPTION>
USAA Life VA
World Growth Fund Account
-------------------------
6/30/97 12/31/96
-------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ 96 $ 428
Net realized gain (loss)
on investment transactions 159 106
Change in net unrealized
appreciation/depreciation 1,600 437
----------- ----------
Increase in net assets
resulting from operations 1,855 971
----------- ----------
FROM CONTRACT TRANSACTIONS:
Units sold 5,084 7,927
Units redeemed (932) (874)
----------- ----------
Increase (decrease) in net
assets from contract
transactions 4,152 7,053
----------- ----------
Net increase (decrease)
in net assets 6,007 8,024
NET ASSETS:
Beginning of period 9,948 1,924
----------- ----------
End of period $ 15,955 $ 9,948
=========== ==========
CHANGE IN UNITS OUTSTANDING:
Units sold 344 605
Units redeemed (65) (71)
----------- ----------
Increase (decrease)
in units outstanding 279 534
=========== ==========
*Fund accounts commenced operations on May 1, 1997.
See accompanying "Notes to Financial Statements" on page A-12.
</TABLE>
A-10 SEMIANNUAL REPORT 1997
<PAGE>
SEPARTATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
VARIABLE ANNUITY FUND ACCOUNTS (IN THOUSANDS) SIX-MONTH PERIOD ENDED
JUNE 30, 1997 AND YEAR ENDED
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA
Diversified Assets Aggressive Growth International Scudder VLIF Capital Growth Alger American Growth
Fund Account Fund Account Fund Account Portfolio Fund Account Portfolio Fund Account
-------------------- ------------ ------------ -------------------------- ----------------------
6/30/97 12/31/96 6/30/97* 6/30/97* 6/30/97 12/31/96 6/30/97 12/31/96
-------------------- ------------ ------------ -------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 318 $ 444 $ (1) $ (1) $ 849 $ 174 $ 110 $ 280
112 65 - - 114 41 682 382
994 192 41 17 1,659 743 3,041 1,269
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
1,424 701 40 16 2,622 958 3,833 1,931
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
7,042 8,616 572 758 4,644 8,781 4,995 19,923
(1,043) (689) (3) (9) (1,762) (638) (4,300) (5,931)
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
5,999 7,927 569 749 2,882 8,143 695 13,992
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
7,423 8,628 609 765 5,504 9,101 4,528 15,923
9,675 1,047 - - 10,266 1,165 24,168 8,245
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
$ 17,098 $ 9,675 $ 609 $ 765 $ 15,770 $ 10,266 $ 28,696 $ 24,168
======== ======== ========== ========== ========== ========== ========= ========
497 668 55 73 283 647 337 1,462
(79) (55) - (1) (113) (51) (293) (444)
- -------- -------- ---------- ---------- ---------- ---------- --------- --------
418 613 55 72 170 596 44 1,018
======== ======== ========== ========== ========== ========== ========= ========
</TABLE>
1997 SEMIANNUAL REPORT A-11
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1) ORGANIZATION
The Separate Account of USAA Life Insurance Company (the Separate Account) is
registered under the Investment Company Act of 1940, as amended, as a segregated
unit investment account of USAA Life Insurance Company (USAA Life), a wholly
owned subsidiary of United Services Automobile Association (USAA).
The Separate Account is divided into nine variable annuity fund accounts, each
of which invests in a corresponding fund. The funds' objectives can be found on
page A-7 in this report.
The fund accounts available within the Separate Account include: 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, USAA Life VA
Aggressive Growth Fund Account, and USAA Life VA International Fund Account; the
Fund Account of the Capital Growth Portfolio-Class A shares of the Scudder
Variable Life Investment Fund (Scudder VLIF Capital Growth Portfolio Fund
Account); and the Fund Account of the American Growth Portfolio of the Alger
American Fund (Alger American Growth Portfolio Fund Account).
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 Statement 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.
ANNUITY RESERVES
Annuity reserves for contracts in the payout phase are comprised of net contract
purchase payments, less benefits. These reserves are adjusted daily for the net
investment income and net realized gain (loss) and change in unrealized
appreciation/depreciation on investments. The mortality risk is fully borne by
USAA Life. The mortality calculations are based on the 1983a Individual
Annuitant Mortality Table at 3.0% interest. This may result in additional
amounts being transferred into the Separate Account by USAA Life to cover
greater longevity of annuitants than expected. Conversely, if reserves exceed
amounts required, transfers may be made to USAA Life.
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 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may affect the reported amounts in the financial statements.
3) RELATED PARTY TRANSACTIONS
During the six-month period ended June 30, 1997, advisory fees of $208,002 were
paid or payable to USAA Investment Management Company (USAA IMCO) by the funds
of the USAA Life Investment Trust (the Trust). USAA IMCO is indirectly wholly
owned by USAA. The funds' advisory fees are computed on an annualized rate of
0.20% of the monthly average net assets for each calendar month of each fund of
the Trust except for the USAA Life VA Aggressive Growth Fund, which accrues at
an annualized rate of 0.50%, and USAA Life VA International Fund, which accrues
at an annualized rate of 0.65%. 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
preceding advisory fees.
4) 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
contractowner 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. For the
six-month period ended June 30, 1997, contract maintenance charges totaled
$56,282.
Any premium tax levied by a state or government entity with respect to the
Separate Account will be charged against the contract.
A-12 SEMIANNUAL REPORT 1997
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<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
5) UNIT VALUES
A summary of unit values and units outstanding for variable annuity
contracts and the expense ratios, including expenses of the underlying funds,
for each period is as follows:
<TABLE>
<CAPTION>
USAA Life VA Money Market Fund Account USAA Life VA Income Fund Account
Six-Month Year Ended Period Ended Six-Month Year Ended Period Ended
Period Ended December 31, December 31, Period Ended December 31, December 31,
June 30, 1997 1996 1995 (a) June 30, 1997 1996 1995 (a)
------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At end of period:
Accumulation units (000) 13,472 10,383 5,478 418 430 89
Accumulation unit value $ 1.104529 $ 1.082816 $ 1.040729 $ 12.068722 $ 11.785992 $ 11.848795
Annuity units (000) - - - - - -
Annuity unit value - - - - - -
Net assets (000) $ 14,880 $ 11,243 $ 5,702 $ 5,050 $ 5,073 $ 1,051
Ratio of expenses to average
net assets 1.50%(c)(d) 1.50%(c) 1.50%(c)(d) 1.50%(c)(d) 1.50%(c) 1.50%(c)(d)
USAA Life VA Growth and Income Fund Account USAA Life VA World Growth Fund Account
Six-Month Year Ended Period Ended Six-Month Year Ended Period Ended
Period Ended December 31, December 31, Period Ended December 31, December 31,
June 30, 1997 1996 1995 (a) June 30, 1997 1996 1995 (a)
------------------------------------------- ---------------------------------------------
At end of period:
Accumulation units (000) 2,552 1,515 205 971 692 161
Accumulation unit value $ 17.935310 $ 15.432048 $ 12.579981 $ 16.381260 $ 14,314911 $ 11.947438
Annuity units (000) 3 3 - 3 3 -
Annuity unit value $ 16.708253 $ 14.588560 $ - $ 15.260525 $ 13.532488 $ -
Net assets (000) $ 45,815 $ 23,417 $ 2,574 $ 15,955 $ 9,948 $ 1,924
Ratio of expenses to average
net assets 1.50%(c)(d) 1.50%(c) 1.50%(c)(d) 1.80%(c)(d) 1.80%(c) 1.80%(c)(d)
(a) Variable annuity fund accounts commenced operations on February 6, 1995 with an initial accumulation unit value of $10.00 per
unit.
(b) Variable annuity fund accounts commenced operations on May 1, 1997 with an initial accumulation unit value of $10.00 per unit.
(c) The information contained in this table is based on actual expenses to the contractowner for the period, including the expenses
of the underlying fund, after giving effect to reimbursement of fund expenses by USAA Life. Absent such reimbursements, the
variable annuity fund accounts' ratios would have been:
<CAPTION>
Six-Month Year Ended Year Ended
Period Ended December 31, December 31,
June 30, 1997(d) 1996 1995(d)
------------------------------------------------
<S> <C> <C> <C>
USAA Life VA Money Market Fund Account 2.05% 2.39% 3.44%
USAA Life VA Income Fund Account 1.79% 1.80% 1.80%
USAA Life VA Growth and Income Fund Account 1.55% 1.68% 1.81%
USAA Life VA World Growth Fund Account 1.81% 1.97% 2.02%
USAA Life VA Diversified Assets Fund Account 1.67% 1.76% 1.79%
USAA Life VA Aggressive Growth Fund Account 2.16% - -
USAA Life VA International Fund Account 2.81% - -
(d) Annualized. The ratio is not necessarily indicative of 12 months of operations.
</TABLE>
A-14 SEMIANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
USAA Life VA Aggressive USAA Life VA International
USAA Life VA Diversified Assets Fund Account Growth Fund Account Fund Account
Six-Month Year Ended Period Ended Period Ended Period Ended
Period Ended December 31, December 31, June 30, June 30,
June 30, 1997 1996 1995(a) 1997(b) 1997(b)
- --------------------------------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
1,114 696 86 55 72
$ 15.301283 $ 13,844197 $ 12.243941 $ 11.138991 $ 10.689807
3 3 - - -
$ 14.254417 $ 13.087484 - - -
$ 17,098 9,675 $ 1,047 $ 609 765
1.50%(c)(d) 1.50%(c) 1.50%(c)(d) 1.85%(c)(d) 2.25%(c)(d)
<CAPTION>
Scudder VLIF Capital Growth Portfolio Fund Account Alger American Growth Portfolio Fund Account
Six-Month Year Ended Period Ended Six-Month Year Ended Period Ended
Period Ended December 31, December 31, Period Ended December 31, December 31,
June 30, 1997 1996 1995(a) June 30, 1997 1996 1995(a)
- --------------------------------------------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
859 689 93 1,684 1,639 630
$ 18.366959 $ 14.894774 $ 12.543192 $ 16.959767 $14.672583 $ 13.095503
- - - 8 9 -
- - - $ 15.799442 $13.870587 -
$ 15,770 10,266 $ 1,165 $ 28,696 $ 24,168 8,245
1.68%(d) 1.68% 1.72%(d) 1.94%(d) 1.94% 2.00%(d)
</TABLE>
1997 SEMIANNUAL REPORT A-15
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE
INVESTMENT TRUST
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
JUNE 30, 1997
[USAA LOGO APPEARS HERE]
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST TUESDAY OF EACH MONTH.
The graph above tracks the USAA Life VA Money Market Fund's 7-day yield compared
to a benchmark -- IBC/Donoghue's Money Fund Averages(TM)/First Tier, an average
of all major money market fund 7-day yields.
Information for the benchmark is based on a full calendar year in 1995, 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 Pam Bledsoe
CURRENT MARKET CONDITIONS
At the March 25, 1997 policy meeting, the Federal Open Market Committee (FOMC)
raised short-term interest rates 25 basis points to 5.50%. This widely
anticipated action was made in response to a persistently strong economy that
was viewed as "increasing the risk of inflation". Immediately after the March
meeting, the marketplace was convinced that the FOMC would increase rates again
in May. But when softer economic numbers were released in the following weeks,
attention quickly shifted to the July meeting. As economic statistics continue
to show a contradictory blend of slowing versus robust factors, the financial
marketplace is focusing on the possibility that additional rate increases will
be announced at future FOMC meetings.
STRATEGY
Our strategy is governed by the Variable Annuity contract's free-look period.
This necessitates that we manage the VA Money Market Fund with relatively short
maturities, usually 7 to 16 days. The portfolio contains three types of
holdings: Variable Rate Demand Notes, U.S. Government Agency Discount Notes, and
Commercial Paper. The mix among these types of holdings varies depending on
their availability and the cash needs of the Fund.
An investment in this Fund is neither insured nor guaranteed by the U.S.
Government and there is no assurance that the Fund will maintain a stable net
asset value of $1.
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.
As of June 30, 1997
SIMPLE 7-DAY YIELD: 5.24%
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
December 31, 1996
to June 30, 1997: 2.58%*
One Year: 5.26%
Since Inception
January 5, 1995: 5.41%
* Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
1997 SEMIANNUAL REPORT B-19
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
PERFORMANCE
According to Lipper Analytical Services /1/, USAA Life's VA Money Market Fund
ranked 17 out of 101 variable annuity money market funds for average annual NAV
total return for the 12 months ended June 30, 1997. The average yield for the
Fund was 5.15% compared to an average of 4.80% for all variable annuity money
market funds.
/1/ Lipper Analytical Services is an independent organization that monitors the
performance of mutual funds.
PORTFOLIO MIX
AS A PERCENTAGE OF NET ASSETS
as of June 30, 1997
-----------------------------
U.S. Agency Variable Rate
Discount Notes Demand Notes Commercial Paper
39.1% 29.4% 30.6%
[CHART APPEARS HERE]
B-20 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life VA Income Fund to two industry indexes 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 Lipper A Rated
Bond Fund Index is an unmanaged index made up of funds investing in corporate
debt issues rated A or better or government issues. The calculations for the
Lehman Brothers and Lipper Indexes are based on a full calendar year in 1995,
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.
MARKET CONDITIONS
Rising interest rates and bond market volatility continue to frustrate bond
investors. The fluctuating path of long-term interest rates in this six-month
reporting period can be seen in the chart below which shows daily yields for the
30-year U.S. Treasury bond. The low point was reached in mid-February, the high
point came two months later, and the subsequent decline to June 30, 1997 put
interest rates somewhat higher than their beginning level. The resulting up and
down bond value changes are not easily ignored;
30-YEAR U.S. TREASURY BOND YIELD
[CHART APPEARS HERE]
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.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
As of June 30, 1997
December 31, 1996
to June 30, 1997: 2.98%*
One Year: 8.27%
Since Inception
January 5, 1995: 10.48%
* Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
1997 SEMIANNUAL REPORT B-21
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
however, the income continues and is reinvested at the varying bond prices.
This produces the compounding of returns leading to capital accumulation which
is the benefit that accrues to bond investors. This compounding is enhanced in
a tax-deferred environment.
PORTFOLIO
We made adjustments which should reduce some of the portfolio's volatility
without reducing income. Reductions have been made in U.S. Treasury bonds and
mortgage pass-through securities in favor of some intermediate maturity
corporate bonds. Common stocks have also been reduced and preferred stocks
increased. Currently, the VA Income Fund's investment mix as percentages of net
assets is 16.0% in U.S. Treasury bonds, 54.1% in agency mortgage pass-through
securities, 11.4% in corporate bonds, 9.1% in preferred stocks, and 8.3% in high
yield common stocks.
OUTLOOK
Continued strength in the economy plus the Federal Reserve's tightening action
in March have caused the ongoing volatility in the bond market. Although further
tightening by the Federal Reserve is unlikely in the short run, convincing
evidence that the economy is slowing will be required before we can expect a
further decline in interest rates. Meanwhile, we continue to concentrate on
producing a high level of income for the fund.
TOP 10 SECURITIES
as of June 30, 1997
- --------------------------------------------------------------------------------
Coupon % of
Rate Net Assets
1) U.S. Treasury Bond 7.875% 16.0%
2) GNMA 7.50 12.3
3) FNMA 7.00 9.2
4) FNMA 7.50 8.1
5) GNMA 7.00 8.0
6) GNMA 8.00 4.9
7) GNMA 8.50 4.8
8) FNMA 8.50 3.5
9) FNMA 8.00 3.2
10) First Union Corp. 7.50 2.1
B-22 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
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 in
1995, 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
On a recent research trip to New Orleans, I was reminded of the popular
expression, "Laissez les bon temps roulez" (let the good times roll). It seems
that this expression aptly describes the recent activity in the U.S. equity
market. The "good times", or strong rise in the equity markets, continue despite
warnings from a host of market experts, including the Chairman of the Federal
Reserve Board.
As much as we would like the equity markets and the VA Growth and Income Fund to
continue their strong appreciation, the good times will not continue forever. At
some point, the current pace of economic expansion and market appreciation will
taper off. However, as we have remarked in previous reports, our strategy for
managing the Fund is not predicated on a particular economic or market outlook.
The Fund's performance was positively impacted by investments in manufacturing -
diversified industries (Hillenbrand Industries), heavy duty trucks & parts
(Aeroquip-Vickers); machinery - diversified (Deere & Co. and BW/IP, Inc.);
insurance (American International Group, Allstate Corp., and Everest
Reinsurance); finance related (Morgan Stanley, Dean Witter and Associates First
Capital); electronics - semiconductors (Applied Materials and Silicon Valley
Group); and leisure time (Brunswick). Note that this list of companies whose
stocks did well is quite diversified and is representative of our investment
approach of purchasing stocks based on value.
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.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
As of June 30, 1997
December 31, 1996
to June 30, 1997: 16.88%*
One Year: 31.80%
Since Inception
January 5, 1995: 29.15%
* Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
1997 SEMIANNUAL REPORT B-23
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
Investments that had a negative impact on performance were primarily in
commodity-oriented industries, such as chemicals (Dow and Union Carbide); oils
(Occidental Petroleum, Unocal, Gulf Canada Resources, and Apache); and metals
(Inco and Titanium Metals). Also having a negative impact on the Fund's
performance were retailing (Sears, J.C. Penney, and May Department Stores);
telephones (GTE and AT&T); and real estate investment trusts (Developers
Diversified and Storage USA). Our view toward the former commodity-oriented
investments is that they continue to represent good values, particularly as the
current strength of the economy could eventually result in higher commodity
prices.
OUR STANDARDS
Given our previous comments regarding the overall stock market's strength, it
seems appropriate to present some guidelines we follow in managing the Fund. We
maintain these guidelines as qualitative parameters in selecting stocks and
managing the portfolio in general.
STICK TO THE STRATEGY: One must have an investment strategy and adhere to it
in order to provide solid returns over the long term. We follow a value
strategy concurrent with the Fund's investment objective of capital growth
and current income. We will continue to do so.
BE PATIENT AND FOCUS ON THE LONG TERM: We focus on long-term returns; therefore,
the portfolio has relatively low turnover.
TRADE ONLY WHEN THERE IS A COMPELLING REASON: All trades have two cost
components -- commissions and execution costs. Although commissions are quite
low for the Fund, execution costs can be significant.
DON'T ACT ON EMOTION: Experience shows that emotional decisions are seldom
correct.
DON'T RELY ON MARKET TIMING: Experience has also shown that market timing does
not work over the long term. Historically, market timers are not successful in
every market cycle.
DON'T BASE DECISIONS ON ECONOMIC FORECASTS: As with market timing, history shows
that relying on economic forecasts can produce subpar returns. Economic
forecasts are unreliable and can lead to poor investment decisions.
TOP 10 HOLDINGS
as of June 30, 1997
- -----------------------------------------------
% of Net Assets
B.F. Goodrich Co. 2.3%
Boeing Co. 2.3
Lucent Technologies, Inc. 2.3
Avery Dennison Corp. 1.9
BankAmerica Corp. 1.7
Bausch & Lomb, Inc. 1.7
Everest Reinsurance Holdings, Inc. 1.7
Lear Corp. 1.7
Morgan Stanley, Dean Witter,
Discover & Co. 1.6
Xerox Corp. 1.6
TOP 10 INDUSTRIES
as of June 30, 1997
- -----------------------------------------------
% of Net Assets
Telecommunications Related 8.5%
Oil Related 7.8
Healthcare Related 5.3
Insurance-Property/Casualty 5.2
Aerospace/Defense 4.6
Electronics--Semi-Conductors 4.3
Bank Related 4.2
Publishing 4.2
Retail Related 4.2
Paper & Forest Products 3.7
B-24 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
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 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 in
1995, 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, Albert C. Sebastian, and
W. Travis Selmier, II (Foreign Stocks) and R. David Ullom (Domestic Stocks)
MARKET CONDITIONS
While past performance is no guarantee of future results, the VA World Growth
Fund return of 22.42% has outperformed the Lipper Global Fund Index/1/ return of
20.55% for the 12-month-period ended June 30, 1997. The performance in most
emerging markets, Europe, and the United States has been favorable while the
Japanese equity market has continued to underperform.
INTERNATIONAL
Europe - Over the past six months, European markets provided favorable returns
which reflect accelerated earnings growth and further corporate restructuring.
We increased our exposure to stocks which benefit from stronger economic growth
as well as increased export opportunities due to a stronger U.S. dollar. Our
holdings in Spain, Portugal, the Netherlands, and Switzerland made significant
contributions to our European performance.
/1/ Lipper Analytical Services is an independent organization that
monitors the performance of mutual funds.
Foreign investing is subject to additional risks such as currency
fluctuations, market illiquidity, and political instability which are
discussed in the prospectus. Since return on any investment is generally
commensurate with risk, investors should be aware of the potential
volatility associated with foreign markets.
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.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
As of June 30, 1997
December 31, 1996
to June 30, 1997: 15.09%*
One Year: 22.42%
Since Inception
January 5, 1995: 22.42%
* Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
1997 SEMIANNUAL REPORT B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
Japan - Since our last report, some political stability has returned and
economic growth has picked up. However, continued problems in the banking
system, rising interest rates, and higher equity valuation levels vis-a-vis
other developed markets lead us to maintain an underweighted position. We
continue to hold large capitalization stocks with an emphasis on export-related
companies.
Emerging Markets - Emerging markets have shown some rebound since the beginning
of the year, with Latin American and East European markets showing stronger
performance than Asian markets. Economic recovery in Argentina and Mexico and
economic structural reform in Brazil continue to support those markets. While
concerns about the Asian growth story have caused worries, we continue to
believe that Asian growth prospects are still bright. Hong Kong, China, Taiwan,
and Indonesia have remained strong performers, while Thailand, the Philippines,
and Korea have suffered because of concerns over currency weaknesses.
UNITED STATES
Over the past six months, the domestic stock weighting in the Fund increased
only slightly from 23.7% as of December 31, 1996 to 24.1% as of June 30, 1997.
This increase does not reflect a change in our outlook toward U.S. equities.
During this reporting period, we slightly reduced our holdings in healthcare,
tobacco, and specialty retailing and eliminated our holdings in paper & forest
products. In turn, weightings were increased in electronics - semiconductors,
communication - equipment manufacturers, and bank holding companies. Given our
increased exposure to technology-related industries, we continue to believe that
the future will produce strong earnings growth for these companies.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of June 30, 1997
- --------------------------------------------------------------------------------
Other* 44.0%
USA 24.1%
Japan 10.0%
United Kingdom 7.1%*
Canada 4.4%
Switzerland 4.1%
France 4.0%
Netherlands 3.6%
* Countries with less than 3% of the portfolio's assets and U.S. Government &
Agency Issue.
B-26 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
OUTLOOK
For the balance of 1997, we expect continuing economic improvement with
accelerating earnings growth in Europe. In the United States, we see slower
economic and earnings growth. Japan is still a market with selective
opportunities. The continuation of low inflation and good economic growth
provides a favorable backdrop for most emerging markets. The portfolio continues
to be overweighted in emerging markets, Europe and other developed markets at
the expense of Japan and the United States.
TOP 10 EQUITY HOLDINGS
as of June 30, 1997
- ------------------------------------------------
% of Net Assets
Sulzer AG P.C. (Switzerland) 1.3%
Novartis AG (Switzerland) 1.2
Akzo Nobel N.V. (Netherlands) 1.1
Elf Aquitaine ADS (France) 1.1
Nokia Corp. ADS (Finland) 1.0
Autoliv AB SDR (Sweden) 0.9
Lucent Technologies (U.S.) 0.9
Shiseido (Japan) 0.9
Telefonica de Espana, S.A. ADR
(Spain) 0.9
Terumo (Japan) 0.9
TOP 10 INDUSTRIES OF EQUITY HOLDINGS
as of June 30, 1997
- ------------------------------------------------
% of Net Assets
Oil Related 8.6%
Healthcare Related 8.1
Telecommunications Related 7.4
Bank Related 6.9
Retail Related 5.1
Electronics Related 4.5
Auto Parts 3.6
Computer Software & Service 3.3
Manufacturing - Diversified Ind. 2.6
Specialized Services 2.4
1997 SEMIANNUAL REPORT B-27
<PAGE>
USAA LIFE INVESTMENT FUND
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
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
in 1995, 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 Stocks -- The Standard & Poor's 500 Index registered a gain of more
than 20% for the first six months of 1997, despite the fact that the Federal
Reserve raised interest rates. Interest rates are still relatively low,
inflation appears to be in check, and overall corporate earnings have been
favorable - all factors that led to dynamic stock market performance in the
first half of 1997.
Debt Securities -- Over the past six months, interest rates have been quite
volatile. Many credit this movement to investors changing their opinions
about the economy. In February, March, and April, interest rates rose sharply
as strong economic numbers caused investors to fear higher rates of
inflation. However, since the end of April, interest rates have come down as
the economy showed signs of slowing, lessening the perceived need for the
Federal Reserve to raise overnight rates.
INVESTMENT PROGRAM:
Approximately 60% of the Fund's assets are invested in equity securities
selected for total return potential and approximately 40% are invested in
debt securities of varying maturities. On June 30, 1997, the portfolio mix
was 63.2% common stocks and 36.1% fixed-income securities.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
As of June 30, 1997
December 31, 1996
to June 30, 1997: 11.16%*
One Year: 20.32%
Since Inception
January 5, 1995: 20.63%
* Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
B-28 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
PORTFOLIO STRATEGIES
Common Stocks -- This portfolio holds blue chip common stocks which are
considered to be undervalued with regard to assets and/or earnings. The
portfolio is well diversified in 22 industries and 37 companies. The
industries with the highest percentage of assets are healthcare (diversified,
drugs, and medical products); oil (domestic and international); bank holding
companies (regional and money center); and telephones. The best performing
industries for the period were healthcare - diversified; medical products;
machinery - diversified; insurance - property/casualty; telecommunications
(long distance); and office equipment. The worst performing industries were
oils - domestic, aerospace/defense, and electrical equipment.
The following common stocks were up more than 30% during the period: Xerox,
Bristol-Myers Squibb, American Home Products, Bausch & Lomb, Caterpillar,
Deere, and Sprint. Company stocks with negative returns included Pharmacia &
Upjohn, Unocal, GTE, and Rockwell International.
In the last six months, we added Chase Manhattan, Bausch & Lomb, SouthTrust, RJR
Nabisco, Ford, and Kimberly-Clark. We sold Nordstrom, J.C. Penney, Dow Chemical,
and American Brands.
Debt Securities -- As of the end of the reporting period, the bond segment had
a weighted average maturity of 7.1 years and a modified duration of five
years. This represented very little change from the last reporting period.
We have kept these parameters steady because we are not relying on an
interest rate forecast. No one has been successful in predicting the course
of interest rates over time. Instead, we believe that our focus should be on
securities that have the potential to provide attractive levels of income and
total return. This philosophy has led us to invest primarily in mortgage
pass-throughs and BBB rated intermediate corporates, which has resulted in
lowering the Fund's volatility while providing higher income.
TOP 10 EQUITY HOLDINGS
as of June 30, 1997
- --------------------------------------------------------------
% of Net Assets
Bristol-Myers Squibb Co. 3.0%
Xerox Corp. 3.0
American Home Products Corp. 2.9
Allstate Corp. 2.7
SBC Communications 2.5
Bausch & Lomb, Inc. 2.4
NYNEX Corp. 2.3
Boeing Co. 2.2
Monsanto Co. 2.2
SouthTrust 2.1
TOP 5 DEBT HOLDINGS
as of June 30, 1997
- --------------------------------------------------------------
Coupon % of
Rate Net Assets
HUBCO, Inc. 8.20% 2.6%
Nationwide
Health Properties,
Inc., MTN 8.61 2.6
Tele-Communications,
Inc. 8.25 2.6
Capital One Bank,
MTN 7.35 2.5
Tektronix, Inc. 7.50 2.5
1997 SEMIANNUAL REPORT B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
While past performance is no guarnantee for future results, the total return for
the bond portfolio was 4.17% for the last six months versus 3.09% for the Lehman
Aggregate Bond Index/1/. Contributing to the Fund's strong performance was the
larger percentage of corporates and mortgages versus treasuries in the portfolio
compared to the Index. In addition, positive developments at Kmart, Washington
Real Estate Investment Trust, and Great Atlantic & Pacific Tea resulted in
additional price appreciation for the overall portfolio.
OUTLOOK
Common Stocks -- For the next six months, it appears interest rates and
inflation will remain relatively stable and corporate earnings growth will be
good. Stock market increases are expected to continue -- but returns are not
anticipated to be as good as the first six months. A rise in interest rates
would cause a correction in the stock market. We will remain overweighted in
healthcare, banks, and telephones.
Debt Securities -- There is still a great deal of uncertainty whether the
economy will pick up or slow down during the remainder of the year. Given
this uncertainty, we will continue our focus of trying to find securities
that will provide attractive yields for the long-term investor.
TOP 10 PORTFOLIO INDUSTRIES
as of June 30, 1997
- ----------------------------------------------
% of Net Assets
Bank Related 11.6%
Healthcare Related 9.9
Telephones 9.3
Retail Related 7.8
Real Estate Investment Trusts 7.6
Oil Related 7.2
Paper & Forest Products 4.1
Automobiles 3.6
Aerospace/Defense 3.5
Machinery - Diversified 3.4
/1/ 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.
B-30 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life VA Aggressive Growth Fund to the broad-based Russell 2000 (R)
Index, a widely recognized small-cap index which most closely resembles the
holdings of this Fund. The Russell 2000 (R) Index is an unmanaged index
consisting of the 2,000 smallest companies within the Russell 3000 (R) Index.
The calculations for the Russel 2000 (R) are based on a starting date of May 1,
1997, whereas the calculations for the VA Aggressive Growth Fund are based on a
starting date of May 5, 1997. This comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Managers John K. Cabell and
Eric M. Efron
The Market
On May 5, 1997, we began purchasing stocks for the USAA Life VA Aggressive
Growth Fund. Since that date, investors have enjoyed robust returns from both
small and large capitalization stocks. While past performance is no guarantee of
future returns, during this less than two month period, the Russell 2000 (R)
Index for small capitalization stocks appreciated 9.36%, while the S&P 500
Index* grew 6.61%. The VA Aggressive Growth Fund returned 11.60% over the same
period. We attribute the Fund's performance to a rebound in small capitalization
stocks that occurred in the second quarter and a more robust Initial Public
Offering (IPO) market.
Portfolio Strategy
Since this is a new Fund, we think it is appropriate to devote this
commentary to a discussion of our investment objective, strategy, underlying
philosophy, and the characteristics we expect the Fund to manifest.
Our investment objective is long-term capital appreciation pure and simple --
nothing more, nothing less. Our strategy is to invest in companies that are
experiencing, or are expected to experience, rapid growth in sales and
earnings over a prolonged period. We believe profits are the ultimate
determinant of value. The more a company earns, the more it is worth. The
more rapidly a company's
* The S&P 500 Index is an unmanaged index representing the average
performance of a group of 500 widely held, publicly traded stocks.
INVESTMENT PROGRAM:
Invests in Equity Securities. The Fund will invest in companies that have the
prospect of rapidly growing earnings.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF JUNE 30, 1997
December 31, 1996
to June 30, 1997: NA
One Year: NA
Since Inception
May 1, 1997: 11.60%*
* Total returns for periods of less than one year are not annualized. This
two-month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
1997 SEMIANNUAL REPORT B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
earnings grow, the more rapidly the company's value will appreciate, and thus be
reflected in stock price appreciation.
We are growth, not value, investors. Our main concern is not whether a stock is
cheap relative to underlying assets but rather whether we believe a company in
which we invest is going to grow and become more profitable in the future.
Consequently, we are willing to pay premium valuations for the companies in
which we invest because we look for these premiums to be repaid generously as a
result of rapid value build-ups.
On a philosophical level, we believe that change is central to existence. It is
the only constant. Things never stay the same. This principle applies in nature,
in history and culture, and in the business world. In the business world, the
rate of change is especially rapid. In order to flourish, much less survive, in
a constantly and relentlessly evolving environment, companies must embrace
change and adapt rapidly. Otherwise they are doomed to a marginal existence at
best.
In selecting investment candidates, we identify long-term trends of profound
change in our economy and society. Then we look for companies that are
likely to take early advantage of the trends. Some of the broader themes in
which we invest are telecommunications and computing revolutions, the drive
for efficiency, changing lifestyles and demographics, and industrial
consolidation, to name a few. Our thematic approach leads us to a broadly
diversified investment portfolio spread over a wide range of industries
including major concentrations in technology, communications, healthcare,
financial and other services, and energy.
We feel that small-to-midsize companies are particularly well suited to cope
with change. They tend to be less bureaucratic and tradition-bound than
their larger counterparts, and this puts them in a superior position to adapt
and be innovative. We hasten to say, however, that aggressive growth, as we
perceive it, does not preclude investing in large capitalization stocks. A
number of larger, dominant companies have remained nimble and flexible, and
we do not hesitate to invest in them.
TOP 10 EQUITY HOLDINGS
as of June 30, 1997
- ----------------------------------------------------------
% of Net Assets
3 Com Corp. 1.2%
HBO & Co. 1.1
St. John Knits, Inc. 0.9
Santa Fe International Corp. 0.9
Amgen, Inc. 0.6
Cascade Communications Corp. 0.6
Clear Channel
Communications, Inc. 0.6
ETEC Systems, Inc. 0.6
Falcon Drilling Co., Inc. 0.6
Orthodontic Centers
of America, Inc. 0.6
TOP 10 INDUSTRIES
as of June 30, 1997
- ----------------------------------------------------------
% of Net Assets
Healthcare Related 12.5%
Telecommunications Related 12.3
Computer Software & Service 11.2
Specialized Services 9.7
Electronics Related 7.8
Retail Related 5.5
Oil Related 5.0
Computer Systems 3.2
Broadcasters 2.4
Textiles 2.3
B-32 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
As of June 30, 1997, 34% of our investment positions were in companies with
market capitalizations in excess of $1 billion.
In our opinion, ground-floor investing is crucial to a successful track
record. For the most part, well-known situations are already reflected in
stock prices. Undiscovered situations have potentially higher
investment returns. With this in mind, we participate actively in the IPO
market.
We believe our investments can lead to strong long-term returns. However,
these results will come at a cost and that cost is risk. The stocks we
invest in are extremely volatile, particularly on a short-term basis, and
this is likely to be reflected in the overall performance of the portfolio.
The impact of volatility diminishes with the passage of time, but all
investors in this Fund should be willing and able to assume high levels of
risk.
OUTLOOK
We view the Fund as an exciting investment opportunity, and we face the
future with enthusiasm. We are confident that we can generate strong
investment returns over the long term. We caution, however, that there will
be bumps along the road and that at times, these bumps will occur when we
least expect them. Obviously, this volatility injects a high degree of risk
into the Fund. Over time, this risk has the potential to translate into
significant financial rewards for those investors who are able to live with
the volatility.
1997 SEMIANNUAL REPORT B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
AN OVERVIEW JUNE 30, 1997
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
DATA REPRESENT THE LAST BUSINESS DAY OF EACH MONTH.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life VA International Fund to the Morgan Stanley Capital Index (MSCI)-
EAFE. The MSCI EAFE Index is an unmanaged index which reflects the movements of
stock markets in Europe, Australia, and the Far East (EAFE) by representing a
broad selection of domestically listed companies within each market. The
calculations for the MSCI EAFE Index are based on a starting date of May 1,
1997, whereas the calculations for the VA International Fund are based on a
starting date of May 5, 1997. This comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Managers David Peebles, W. Travis
Selmier, II, and Albert C. Sebastian
MARKET CONDITIONS
The performance in most emerging markets and Europe has been favorable while
the Japanese equity market has continued to underperform.
Europe--The European markets provided favorable returns over the period
reflecting accelerated earnings growth and further corporate restructuring.
Our exposure to stocks has benefited from stronger economic growth as well as
increased export opportunities due to a stronger U.S. dollar. Our holdings in
Spain, Portugal, the Netherlands, and Switzerland made significant
contributions to our European performance.
INVESTMENT PROGRAM
At least 80% of the Fund's assets will be invested in Equity Securities of
foreign companies.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF JUNE 30, 1997
December 31, 1996
to June 30, 1997: NA
One Year: NA
Since Inception
May 1, 1997: 7.10%*
* Total returns for periods of less than one year are not annualized. This two-
month return is cumulative.
The total return calculations found in this section are calculated at the 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. More
specific information regarding the Fund expenses can be found in the Variable
Annuity prospectus. These NAV total return calculations represent past
performance which is no guarantee of future returns.
TOP 10 INDUSTRIES OF EQUITY HOLDINGS
as of June 30, 1997
- ---------------------------------------------------------
% of Net Assets
Telecommunications Related 7.4%
Oil Related 7.3
Bank Related 7.2
Healthcare Related 7.2
Retail Related 5.0
Auto Parts 4.5
Specialized Services 4.1
Automobiles 3.0
Steel 3.0
Electric Power 2.8
Foreign investing is subject to additional risks such as currency fluctuations,
market illiquidity, and political instability which are discussed in the
prospectus. Since return on any investment is generally commensurate with risk,
investors should be aware of the potential volatility associated with foreign
markets.
B-34 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
AN OVERVIEW (CONTINUED) JUNE 30, 1997
Japan -- Some political stability has returned to Japan and economic growth has
picked up. However, continued problems in the banking system, rising interest
rates and higher equity valuation levels vis-a-vis other developed markets lead
us to maintain an underweighted position. We continue to hold large
capitalization stocks with an emphasis on export-related companies.
Emerging Markets -- Emerging markets have shown some rebound since the beginning
of the year, with Latin American and East European markets showing stronger
performance than Asian markets. Economic recovery in Argentina and Mexico and
economic structural reform in Brazil continue to support those markets. While
concerns about the Asian growth story have caused worries, we continue to
believe that Asian growth prospects are still bright. Hong Kong, China, Taiwan,
and Indonesia have remained strong performers, while Thailand, the Philippines,
and Korea have suffered because of concerns over currency weakness.
TOP 10 EQUITY HOLDINGS
as of June 30, 1997
- -------------------------------------------------------
% of Net Assets
Reuters Holdings plc
(United Kingdom) 1.6%
Novartis AG (Switzerland) 1.5
Akzo Nobel N.V. (Netherlands) 1.4
Panamerican Beverages,
Inc. (Mexico) 1.4
Portugal Telecom S.A. ADS
(Portugal) 1.3
Autoliv AB SDR (Sweden) 1.2
Namco (Japan) 1.2
National Bank of Canada
(Canada) 1.2
Veba AG (Germany) 1.2
Volvo AB (Sweden) 1.2
OUTLOOK
For the balance of 1997, we expect continuing economic improvement with
accelerating earnings growth in Europe. Japan is still a market with
selective opportunities. The continuation of low inflation and good economic
growth provides a favorable backdrop for most emerging markets. The portfolio
continues to be overweighted in emerging markets, Europe, and other developed
markets at the expense of Japan.
COUNTRY WEIGHTINGS
as of June 30, 1997
- -----------------------------------------------------
[CHART APPEARS HERE]
* Countries with less than 3% of the portfolio's assets and U.S. Government &
Agency Issues.
1997 SEMIANNUAL REPORT B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- -----
<S> <C> <C> <C> <C>
FIXED RATE INSTRUMENTS (69.7%)
BANK HOLDING COMPANIES - MONEY CENTER
$ 671 JP Morgan & Co., Inc., CP 5.50% 7/23/97 $ 669
-------
ELECTRIC POWER
506 National Rural Utilities Cooperative
Finance Corp., CP 5.51 7/07/97 505
-------
ELECTRICAL EQUIPMENT
731 Emerson Electric Co., CP 5.47 7/09/97 730
-------
FINANCE - BUSINESS/COMMERCIAL
600 General Electric Capital Corp., CP 5.55 7/29/97 597
-------
FINANCE - CONSUMER
281 Ford Credit Europe plc, CP 5.52 7/02/97 281
615 Ford Motor Credit Co., CP 5.52 7/24/97 613
-------
894
-------
FOODS
536 H.J. Heinz Co., CP 5.55 7/28/97 534
-------
TELEPHONES
629 Bellsouth Telecommunications Inc., CP 5.50 7/11/97 628
-------
U.S. GOVERNMENT
400 Federal Farm Credit Bank, Discount Notes 5.42 7/30/97 398
738 Federal Home Loan Mortgage, Discount Note 5.43 7/01/97 738
402 Federal Home Loan Mortgage, Discount Note 5.41 7/03/97 402
853 Federal Home Loan Mortgage, Discount Note 5.43 7/14/97 851
701 Federal Home Loan Mortgage, Discount Note 5.43 7/17/97 699
698 Federal Home Loan Mortgage, Discount Note 5.40 7/24/97 696
630 Federal National Mortgage Assn., Discount Note 5.40 7/02/97 630
700 Federal National Mortgage Assn., Discount Note 5.43 7/08/97 699
710 Federal National Mortgage Assn., Discount Note 5.43 7/15/97 709
-------
5,822
-------
Total fixed rate instruments (cost: $10,379) 10,379
-------
Variable Rate Demand Notes (29.4%)
AUTO PARTS
200 Alabama IDA RB (Rehau Project) (CRE) 5.78 10/01/19 200
140 Bardstown, KY, RB, Series 1994 (CRE) 5.68 6/01/24 140
-------
340
-------
BUILDING MATERIALS
100 Sarasota County, FL, IDA RB, Series 1994 (CRE) 5.65 9/01/14 100
-------
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- -----
BUILDINGS
410 Downtown Marietta Development Auth., GA, RB (CRE) 5.68% 7/01/21 410
100 MMR Funding I, Floating Rate Option
Notes, Series A (CRE) 5.63 9/01/10 100
-------
510
-------
CHEMICALS
500 Wyckoff Chemical Company, Inc.,
Demand Notes, Series 1997 (CRE) 5.69 2/01/27 500
-------
EDUCATION
200 Dome Corp., Demand Bonds, Series 1991 (CRE) 5.70 8/31/16 200
-------
FINANCE - RECEIVABLES
150 Capital One Funding Corp., Notes,
Series 1993A (CRE) 5.63 6/02/08 150
196 Capital One Funding Corp., Notes,
Series 1995C (CRE) 5.63 10/01/15 196
-------
346
-------
HEALTHCARE - DIVERSIFIED
100 GMS Associates Project Health Care RB,
Series 1994 (CRE) 5.75 5/15/24 100
400 GMS Associates II Project Health Care
RB, Series 1995 (CRE) 5.75 8/15/25 400
-------
500
-------
HEALTHCARE - MISCELLANEOUS
100 Mason City Clinic, P.C., IA, Demand
Bonds, Series 1992 (CRE) 5.75 9/01/22 100
-------
HOSPITALS
350 Armstrong County Hospital Auth., PA,
RB, Series 1993B (CRE) 5.75 9/01/17 350
-------
HOTEL/MOTEL
100 Howard County, MD, Taxable RB,
Series 1994 (CRE) 5.65 10/01/09 100
-------
MULTI-FAMILY HOUSING
425 Arbor Properties, Inc., Notes (CRE) 5.70 11/01/21 425
-------
MACHINERY - DIVERSIFIED
200 DSL Funding Corp., Notes (CRE) 5.75 12/01/09 200
-------
NURSING CARE
200 Lincolnwood Funding Corp. RB,
Series 1995A (CRE) 5.76 8/01/15 200
-------
PAPER & FOREST PRODUCTS
400 Mac Papers Inc., Demand Bond (CRE) 5.65 8/03/15 400
-------
REAL ESTATE
100 H/M Partners, LLC, Bonds (CRE) 5.70 10/01/20 100
-------
Total variable rate demand notes (cost: $4,371) 4,371
-------
Total investments (cost: $14,750) $14,750
=======
</TABLE>
B-36 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1997 (UNAUDITED)
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<CAPTION>
<S> <C>
U.S. Government 39.1%
Finance - Consumer 6.0
Electrical Equipment 4.9
Bank Holding Companies - Money Center 4.5
Telephones 4.2
Finance - Business/Commercial 4.0
Foods 3.6
Buildings 3.4
Chemicals 3.4
Electric Power 3.4
Healthcare - Diversified 3.4
Multi-Family Housing 2.9
Paper & Forest Products 2.7
Auto Parts 2.3
Finance - Receivables 2.3
Hospitals 2.3
Education 1.3
Machinery - Diversified 1.3
Nursing Care 1.3
Building Materials .7
Healthcare - Miscellaneous .7
Hotel/Motel .7
Real Estate .7
----
Total 99.1%
====
</TABLE>
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
1997 SEMIANNUAL REPORT B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<S> <C> <C>
COMMON STOCKS (8.3%)
14,000 Allegheny Power System, Inc. $ 374
9,000 American Electric Power Co., Inc. 378
4,500 Entergy Corp. 123
11,000 General Public Utilities Inc. 395
3,300 Health Care Property Investors, Inc. 116
17,000 Houston Industries, Inc. 364
11,500 Public Service Enterprise Group, Inc. 287
--------
Total common stocks (cost: $1,734) 2,037
--------
PREFERRED STOCKS (9.1%)
15,000 Avalon Properties, Inc. "A", 9% cumulative redeemable 388
12,000 Duke Realty Investments, Inc. depositary shares "A", 9.10%
cumulative redeemable 315
12,000 Equity Residential Properties Trust depositary shares "C",
9.125% cumulative redeemable 310
6,000 Post Properties, Inc. "A", 8.5% cumulative redeemable 306
6,000 Security Capital Industrial Trust "C", 8.54% cumulative redeemable 303
12,000 Shurgard Storage Centers, Inc. "B", 8.8% cumulative redeemable 305
12,000 United Dominion Realty Trust, Inc. depositary shares "A",
9.25% cumulative redeemable 313
--------
Total preferred stocks (cost: $2,199) 2,240
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- ---------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS (11.4%)
$ 300 Caliber Systems, Inc., Notes 7.80% 8/01/06 $ 309
500 Chase Manhattan Corp., Subordinated Notes 7.13 2/01/07 500
500 First Union Corp., Subordinated Notes 7.50 7/15/06 511
500 Household Finance Corp., Notes 7.25 5/15/06 502
500 Province of Quebec, Global Debentures 7.00 1/30/07 497
500 Wells Fargo & Co., Subordinated Notes 6.88 4/01/06 491
--------
Total corporate obligations (cost: $2,742) 2,810
--------
U.S. GOVERNMENT & AGENCY ISSUES (70.1%)
FEDERAL NATIONAL MORTGAGE ASSN. (24.0%)
2,302 7.00%, 6/01/24 - 10/01/26 2,266
1,991 7.50%, 1/01/25 - 10/01/26 2,004
776 8.00%, 1/01/25 796
815 8.50%, 12/01/24 849
--------
5,915
--------
Government National Mortgage Assn. (30.1%)
1,991 7.00%, 8/15/23 - 4/15/26 1,966
3,017 7.50%, 8/15/23 - 8/15/26 3,036
1,175 8.00%, 5/15/24 1,206
1,137 8.50%, 12/15/24 1,187
--------
7,395
--------
U.S. Treasury Bonds (16.0%)
3,531 7.875%, 2/15/21 3,936
--------
Total U.S. government & agency issues (cost: $16,201) 17,246
--------
Total investments (cost: $22,876) $ 24,333
========
</TABLE>
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government 70.1%
Real Estate Investment Trusts 9.6
Electric Power 7.8
Bank Related 6.1
Foreign Government 2.0
Finance - Consumer 2.0
Truckers 1.3
------
Total 98.9%
======
See accompanying "Notes to Portfolios of Investments in Securities" on
page B-57.
B-38 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- --------- -------- -----
COMMON STOCKS (97.7%)
AEROSPACE/DEFENSE (4.6%)
35,000 B.F. Goodrich Co. $ 1,516
29,008 Boeing Co. 1,539
--------
3,055
--------
AIRLINES (1.4%)
10,000 AMR Corp.* 925
--------
ALUMINUM (1.3%)
11,100 Aluminum Co. of America 837
--------
AUTO PARTS (1.7%)
26,000 Lear Corp.* 1,154
--------
AUTOMOBILES (1.3%)
23,500 Ford Motor Co. 887
--------
BANK HOLDING COMPANIES - MAJOR
REGIONAL (1.2%)
20,000 PNC Bank Corp. 832
--------
BANK HOLDING COMPANIES - MONEY
CENTER (1.3%)
9,700 Bankers Trust New York Corp. 844
--------
BANK HOLDING COMPANIES - OTHER
MAJOR (1.7%)
18,000 BankAmerica Corp. 1,162
--------
BROKERAGE FIRMS (1.6%)
25,000 Morgan Stanley, Dean Witter,
Discover & Co. 1,077
--------
CHEMICALS (3.1%)
10,500 Dow Chemical Co. 915
43,071 Millennium Chemicals, Inc. 980
4,000 Union Carbide Corp. 188
--------
2,083
--------
COMMUNICATION - EQUIPMENT
MANUFACTURERS (3.2%)
9,000 Cisco Systems, Inc.* 604
21,668 Lucent Technologies, Inc. 1,562
--------
2,166
--------
CONTAINERS - METALS & GLASS (1.3%)
28,500 Ball Corp. 857
--------
DRUGS (1.4%)
27,000 Pharmacia & Upjohn, Inc. 938
--------
ELECTRIC POWER (2.0%)
22,000 Houston Industries, Inc. 471
35,000 Pacific Gas & Electric Co. 849
--------
1,320
--------
ELECTRICAL EQUIPMENT (1.2%)
13,500 Rockwell International Corp. 797
--------
ELECTRONICS - SEMICONDUCTORS(4.3%)
14,000 Applied Materials, Inc.* 992
33,700 National Semiconductor Corp.* 1,032
32,500 Silicon Valley Group, Inc.* 857
--------
2,881
--------
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
FINANCE - CONSUMER (1.4%)
17,300 Associates First Capital Corp. $ 960
--------
FINANCE - REAL ESTATE (1.3%)
14,000 PMI Group, Inc. 873
--------
FOODS (1.1%)
8,000 CPC International, Inc. 739
--------
HEALTHCARE - HMOs (1.3%)
37,000 Humana, Inc.* 856
--------
HEAVY DUTY TRUCKS & PARTS (1.4%)
20,200 Aeroquip-Vickers, Inc. 954
--------
HOUSEHOLD PRODUCTS (1.5%)
7,000 Procter & Gamble Co. 989
--------
INSURANCE - MULTI-LINE COMPANIES (1.5%)
10,000 Aetna, Inc. 1,024
--------
INSURANCE - PROPERTY/CASUALTY (5.2%)
13,000 Allstate Corp. 949
5,600 American International Group, Inc. 837
28,000 Everest Reinsurance Holdings, Inc. 1,109
29,000 Highlands Insurance Group, Inc.* 584
--------
3,479
--------
LEISURE TIME (1.3%)
28,300 Brunswick Corp. 884
--------
MACHINERY - DIVERSIFIED (2.8%)
44,000 BW/IP, Inc. 894
18,500 Deere & Co. 1,015
--------
1,909
--------
MANUFACTURING - DIVERSIFIED
INDUSTRIES (3.3%)
32,000 Avery Dennison Corp. 1,284
19,100 Hillenbrand Industries, Inc. 907
--------
2,191
--------
MEDICAL PRODUCTS & SUPPLIES (2.6%)
24,000 Bausch & Lomb, Inc. 1,131
12,000 Baxter International, Inc. 627
--------
1,758
--------
METALS - MISCELLANEOUS (2.3%)
28,000 Inco Ltd. 841
22,000 Titanium Metals Corp.* 696
--------
1,537
--------
NATURAL GAS DISTRIBUTION -
PIPELINES (2.2%)
20,000 NICOR, Inc. 717
15,000 Sonat, Inc. 769
--------
1,486
--------
OFFICE EQUIPMENT & SUPPLIES (1.6%)
13,900 Xerox Corp. 1,096
--------
1997 SEMIANNUAL REPORT B-39
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- --------- -------- -----
OIL - DOMESTIC (2.9%)
40,000 Occidental Petroleum Corp. $ 1,003
23,500 Unocal Corp. 912
--------
1,915
--------
OIL - EXPLORATION & PRODUCTION (2.7%)
24,000 Apache Corp. 780
127,000 Gulf Canada Resources Ltd.* 1,039
--------
1,819
--------
OIL - INTERNATIONAL (1.2%)
7,700 Texaco, Inc. 837
--------
Oil Well Equipment & Service (1.0%)
5,500 Schlumberger Ltd. 688
--------
PAPER & FOREST PRODUCTS (3.7%)
41,900 Jefferson Smurfit Corp.* 670
18,400 Kimberly-Clark Corp. 916
17,500 Weyerhaeuser Co. 910
--------
2,496
--------
POLLUTION CONTROL (1.3%)
27,000 Waste Management, Inc. 867
--------
PUBLISHING (4.2%)
27,500 American Greetings Corp. 1,021
32,100 Dun & Bradstreet Corp. 843
14,000 Houghton Mifflin Co. 934
--------
2,798
--------
RAILROADS (1.4%)
9,000 Norfolk Southern Corp. 907
--------
REAL ESTATE INVESTMENT TRUSTS (1.8%)
15,000 Developers Diversified Realty Corp. 600
15,000 Storage USA, Inc. 574
--------
1,174
--------
RETAIL - DEPARTMENT STORES (0.9%)
13,000 May Department Stores Co. 614
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -----
RETAIL - GENERAL MERCHANDISING (2.3%)
19,000 J.C. Penney Company, Inc. $ 992
10,500 Sears, Roebuck & Co. 564
--------
1,556
--------
RETAIL - SPECIALTY (0.9%)
42,000 Phillips-Van Heusen Corp. 630
--------
SPECIALTY PRINTING (1.4%)
27,500 Deluxe Corp. 938
--------
TELEPHONES (5.3%)
22,000 AT&T 771
20,500 GTE Corp. 899
16,000 NYNEX Corp. 922
18,500 Sprint Corp. 974
--------
3,566
--------
TOBACCO (3.3%)
19,200 Philip Morris Companies, Inc. 852
20,000 RJR Nabisco Holdings Corp. 660
21,100 Universal Corp. 670
--------
2,182
--------
Total common stocks (cost: $46,624) 65,537
--------
SHORT-TERM (2.3%)
Principal
Amount
(000)
- ---------
U. S. GOVERNMENT & AGENCY ISSUE
$1,555 Federal Home Loan Mortgage,
Discount Note, 5.75%, 7/01/97 (cost: $1,555) 1,555
--------
Total investments (cost: $48,179) $ 67,092
========
- -------------------
* Non-income producing.
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
B-40 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- --------- -------- -----
FOREIGN SECURITIES (70.2%)
FOREIGN STOCKS (69.7%)
ARGENTINA (0.5%)
2,100 Disco S.A. ADS * $ 83
2,000 IRSA Inversiones y Representaciones
S.A. GDS 88
--------
171
--------
AUSTRALIA (1.8%)
12,000 Broken Hill Proprietary Co. Ltd. 176
27,700 CSL Ltd. 170
30,000 Pasminco Ltd. 61
26,000 Village Roadshow Ltd. (Preferred) 66
22,289 Woodside Petroleum Ltd. 192
--------
665
--------
AUSTRIA (2.2%)
1,521 Austria Mikro Systeme International AG 129
2,200 Boehler Uddeholm AG 170
4,900 VA Stahl AG 222
1,550 VA Technologie AG 284
--------
805
--------
BELGIUM (1.3%)
425 Colruyt S.A. 208
2,800 Union Miniere S.A.* 262
--------
470
--------
BRAZIL (1.9%)
2,790,000 Companhia Energetica de Minas Gerais 144
5,000 Multicanal Participacoes S.A. ADS
(Preferred) * 68
550,000 Petroleo Brasileiro S.A. (Preferred) 153
1,300,000 Telebras PN S.A. (Preferred) 197
4,100 Uniao de Bancos Brasileiros S.A.
(Unibanco) GDR * 152
--------
714
--------
CANADA (4.4%)
4,500 Alliance Forest Products, Inc. * 110
8,600 Anderson Exploration Ltd. * 111
42,200 Beau Canada Exploration Ltd. * 95
5,900 Canadian National Railway Co. 258
13,300 Canadian Occidental Petroleum Ltd. 298
11,400 Gulf Canada Resources Ltd. * 93
20,600 National Bank of Canada 258
8,200 OSF, Inc. * 66
1,600 St. Laurent Paperboard, Inc. * 25
11,000 Suncor, Inc. 295
--------
1,609
--------
CHILE (0.4%)
2,500 Sociedad Quimica y Minera de Chile
S.A. ADS 165
--------
CHINA (0.5%)
50,000 Cosco Pacific Ltd. 116
24,000 New World Infrastructure Ltd. * 68
--------
184
--------
COLOMBIA (0.1%)
8,500 Banco de Colombia GDS 53
-------
CZECH REPUBLIC (0.4%)
3,000 Komercni Banka A.S. GDR 62
700 SPT Telecom A.S. * 74
--------
136
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -----
DENMARK (2.9%)
3,400 Carli Gry International A/S $ 194
4,200 ISS International Service System
A/S "B" * 151
1,600 Novo Nordisk A/S "B" 174
11,300 SAS Danmark A/S 132
1,300 Tele Danmark A/S "B" 68
7,900 Tele Danmark A/S ADS 206
2,500 Unidanmark A/S 140
--------
1,065
--------
EGYPT (0.2%)
3,500 Suez Cement Co. S.A.E. GDS * 71
--------
FINLAND (1.2%)
5,200 Nokia Corp. ADS 383
916 Raision Tehtaat 63
--------
446
--------
FRANCE (4.0%)
600 Accor S.A. 90
4,300 Bouygues Offshore S.A. ADR 54
6,100 Coflexip ADS * 184
7,400 Elf Aquitaine ADS 403
2,100 Eramet Group 97
675 Essilor International 182
2,400 Louis Dreyfus Citrus * 89
760 Pathe S.A. * 151
3,500 Valeo S.A. 217
--------
1,467
--------
GERMANY (2.2%)
100 Beta Systems Software AG * 12
3,200 Leica Camera AG * 79
3,300 Pfeiffer Vacuum Technology AG ADS * 96
6,600 Rofin-Sinar Technologies, Inc. * 126
400 SAP AG 80
800 SAP AG (Preferred) 166
4,300 Veba AG 242
--------
801
--------
HONG KONG (0.7%)
130,000 Amoy Properties Ltd. 143
4,000 Asia Satellite Telecommunications
Holdings Ltd. ADR 121
--------
264
--------
HUNGARY (0.6%)
10,000 Mol Magyar Olaj-Es Gazipari GDS 224
--------
INDIA (0.9%)
4,000 Hindalco Industries Ltd. GDR 141
6,000 Larsen & Toubro Ltd. GDR 104
5,000 Videsh Sanchar Nigam Ltd. GDR * 104
--------
349
--------
INDONESIA (0.9%)
17,500 PT Astra International, Inc. 72
175,250 PT Bank Dagang Nasional Indonesia 124
50,750 PT Bank Dagang Nasional Indonesia
Warrants * 12
14,000 PT HM Sampoerna 53
20,500 PT Jaya Real Property 28
11,000 PT Modern Photo Film 39
--------
328
--------
1997 SEMIANNUAL REPORT B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
ISRAEL (0.8%)
2,700 Blue Square - Israel Ltd. ADS * $ 47
3,000 ECI Telecommunications Ltd. 89
2,400 Teva Pharmaceutical Industries Ltd. 155
--------
291
--------
ITALY (1.8%)
4,800 ENI S.p.A. ADS 273
5,886 Instituto Bancario San Paulo di
Torino S.p.A. 43
7,400 Instrumentation Laboratory S.p.A. 20
ADS *
4,300 SAES Getters S.p.A. ADR 41
163,600 SEAT S.p.A. * 53
163,600 SEAT S.p.A. Savings * 34
57,800 STET S.p.A. 201
--------
665
--------
JAPAN (9.5%)
9,000 Bridgestone Corp. 209
8,000 Canon, Inc. 218
5,000 Daibiru Corp. 60
14,000 Hitachi Ltd. 156
7,000 Honda Motor Co. Ltd. 211
5,000 Hoya Corp. 222
3,000 Ito-Yokado Co. Ltd. 174
1,000 Kyocera Corp. 79
8,000 Laox Co. Ltd. 112
26,000 Minebea Co. Ltd. 277
19,000 Mitsubishi Heavy Industries Ltd. 146
8,000 Namco 308
400 Nippon Television Network 161
38,000 NKK Corp. 82
12,000 Nomura Securities Co. Ltd. 165
6 NTT Data Communications Systems Corp. 232
20,000 Shiseido Co. Ltd. 330
18,000 Terumo Corp. 344
--------
3,486
--------
KOREA (0.7%)
4,000 Korea Electric Power Corp. 120
1,399 Samsung Electronics Co. Ltd. 153
--------
273
--------
MALAYSIA (0.4%)
11,000 Edaran Otomobil Nasional Bhd 93
10,000 Telekom Malaysia Bhd 47
--------
140
--------
MEXICO (2.0%)
97,000 Controladora Comercial Mexicana, S.A.
de C.V. 90
7,391 Desc, Sociedad de Fomento Industrial,
S.A. de C.V. ADS 215
8,000 Panamerican Beverages, Inc. "A" 263
10,000 Tubos de Acero de Mexico, S.A. ADS * 185
--------
753
--------
NETHERLANDS (3.6%)
3,000 Akzo Nobel N.V. 411
2,000 Brunel International N.V. * 44
2,100 EVC International N.V. 53
4,900 ING Group N.V. 226
1,750 Oce-van der Grinten N.V. 226
2,500 Philips Electronics N.V. 180
8,000 Verenigd Besit VNU 177
--------
1,317
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -----
NORWAY (1.4%)
70,800 Christiania Bank og Kreditkasse $ 241
12,000 Nycomed ASA 177
4,400 Schibsted ASA 87
--------
505
--------
PERU (0.2%)
3,400 Telefonica del Peru S.A. "B" ADS 89
--------
PHILIPPINES (0.2%)
190,000 SM Prime Holdings, Inc. 56
--------
POLAND (0.4%)
11,539 Elektrim S.A. 100
9,000 Polifarb-Cieszyn S.A. 46
--------
146
--------
PORTUGAL (1.8%)
9,100 Banco Totta E Acores S.A. 152
8,900 Cimentos de Portugal S.A. 207
7,800 Portugal Telecom S.A. ADS 313
--------
672
--------
RUSSIA (1.0%)
700 LUKoil ADR 55
3,300 Mosenergo ADR 143
4,600 RAO Gazprom ADR 79
279,000 Unified Energy Systems ADR * 101
--------
378
--------
SINGAPORE (0.6%)
20,400 Overseas Union Bank Ltd. 127
20,000 Singapore Land Ltd. 91
--------
218
--------
SOUTH AFRICA (0.6%)
17,800 Gencor Ltd. 82
1,206 Nedcor Ltd. GDR 27
3,100 South African Breweries Ltd. 95
--------
204
--------
SPAIN (2.4%)
8,717 Autopistas del Mare Nostrum S.A. 135
3,000 Corporacion Bancaria de Espana S.A. 168
2,500 Corporacion Mapfre 133
3,700 Telefonica de Espana S.A. ADR 319
4,281 Vallehermoso S.A. 116
--------
871
--------
SWEDEN (2.3%)
8,600 Autoliv AB SDR * 331
4,600 Hemkopskedjan AB * 47
8,880 NK Cityfastigheter AB * 63
3,100 Nordbanken AB 105
11,000 Volvo AB 294
--------
840
--------
SWITZERLAND (4.1%)
40 Ares-Serono Group S.A. 58
273 Novartis AG 436(a)
1,100 Oerlikon Buhrle AG * 129
600 Selecta Group * 91
100 SGS Group AG 214
559 Sulzer AG P.C. 479
7,000 Tag Heuer International S.A. ADR * 105
--------
1,512
--------
B-42 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
TAIWAN (0.5%)
4,500 Acer, Inc. GDR * $ 80
5,125 China Steel Corp. GDS 109
--------
189
--------
THAILAND (0.1%)
7,100 Bank Of Ayudhya Public Co. Ltd. 11
--------
TURKEY (0.5%)
680,000 Erciyas Biracilik ve Malt Sanayi A.S. 81
685,000 Olmuksa Mukavva Sanayi ve Ticaret A.S 25
3,375,471 Yapi Ve Kredi Bankasi A.S. 77
--------
183
--------
UNITED KINGDOM (7.1%)
58,000 Avis Europe plc * 131
19,000 Cadbury Schweppes plc 170
67,000 Cookson Group plc 234
55,900 Corporate Services Group plc 174
8,000 DFS Furniture Co. plc 75
2,500 Doncasters plc ADS * 58
7,000 EMI Group plc 126
15,600 Harvey Nichols plc 73
40,000 LucasVarity plc 139
58,500 Medeva plc 250
18,000 National Westminster Bank plc 242
7,500 Northern Ireland Electricity plc 52
16,000 Reuters Holdings plc 169
44,000 Safeway plc 255
51,000 Tomkins plc 221
55,600 WPP Group plc 227
--------
2,596
--------
VENEZUELA (0.3%)
2,800 Compania Anonima Nacional Telefonos
De Venezuela ADS * 121
--------
OTHER HOLDINGS (0.3%)
120,000 Central European Growth Fund plc 133
--------
Total foreign stocks (cost: $19,688) 25,636
--------
Principal
Amount
(000)
- ----------
FOREIGN BONDS (0.5%)
JAPAN
$ 160 MBL International Finance (Bermuda)
Trust, Convertible Notes, 3.00%,
11/30/02 (cost: $166) 176
--------
Total foreign securities (cost: $19,854) 25,812
--------
Number
of Shares
- ----------
DOMESTIC STOCKS (24.1%)
AEROSPACE/DEFENSE (1.8%)
4,400 B.F. Goodrich Co. 191
5,336 Boeing Co. 283
3,000 Precision Castparts Corp. 179
--------
653
--------
ALUMINUM (0.5%)
2,400 Aluminum Co. of America 181
--------
AUTO PARTS (0.6%)
4,600 Lear Corp. * 204
--------
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
AUTOMOBILES (0.4%)
4,000 Ford Motor Co. $ 151
--------
BANK HOLDING COMPANIES -
MAJOR REGIONAL (0.5%)
4,400 SouthTrust Corp. 182
--------
BANK HOLDING COMPANIES -
MONEY CENTER (0.5%)
1,900 Bankers Trust New York Corp. 165
--------
BEVERAGES - SOFT DRINKS (0.6%)
5,700 PepsiCo, Inc. 214
--------
BIOTECHNOLOGY (0.3%)
2,000 Amgen, Inc. * 116
--------
BROKERAGE FIRMS (0.6%)
5,000 Morgan Stanley Dean Witter 215
--------
CHEMICALS (1.4%)
6,400 Avery Dennison Corp. 257
1,000 Dow Chemical Co. 87
3,800 Monsanto Co. 164
--------
508
--------
COMMUNICATION - EQUIPMENT
MANUFACTURERS (1.2%)
1,800 Cisco Systems, Inc. * 121
4,648 Lucent Technologies, Inc. 335
--------
456
--------
COMPUTER SOFTWARE & SERVICE (1.2%)
2,200 Microsoft Corp. * 278
4,400 Sterling Commerce, Inc. * 145
--------
423
--------
CONTAINERS - METALS & GLASS (0.3%)
4,000 Ball Corp. 120
--------
ELECTRICAL EQUIPMENT (0.6%)
4,000 Rockwell International Corp. 236
--------
ELECTRONICS - SEMICONDUCTORS (2.3%)
2,800 Applied Materials, Inc. * 198
1,300 Intel Corp. 185
3,000 Motorola, Inc. 228
8,000 National Semiconductor Corp. * 245
--------
856
--------
FINANCE - CONSUMER (0.5%)
3,200 Associates First Capital Corp. 178
--------
HEALTHCARE - DIVERSIFIED (0.5%)
2,400 Bristol-Myers Squibb Co. 194
--------
HEALTHCARE - MISCELLANEOUS (1.1%)
6,700 COHR, Inc. * 126
3,200 Total Renal Care Holdings, Inc. * 129
3,200 United HealthCare Corp. 166
--------
421
--------
HOUSEHOLD PRODUCTS (0.9%)
2,200 Procter & Gamble Co. 311
--------
INSURANCE - PROPERTY/CASUALTY (0.4%)
1,000 American International Group, Inc. 149
--------
MACHINERY - DIVERSIFIED (0.6%)
4,000 Deere & Co. 220
--------
1997 SEMIANNUAL REPORT B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
MEDICAL PRODUCTS & SUPPLIES (0.7%)
2,100 Medtronic, Inc. $ 170
2,200 St. Jude Medical, Inc. * 86
--------
256
--------
OFFICE EQUIPMENT & SUPPLIES (0.7%)
5,000 IKON Office Solutions, Inc. 125
1,800 Xerox Corp. 142
--------
267
--------
OIL - DOMESTIC (0.4%)
4,000 Unocal Corp. 155
--------
OIL - EXPLORATION & PRODUCTION (0.5%)
6,000 Apache Corp. 195
--------
OIL & GAS DRILLING (0.3%)
1,500 Transocean Offshore, Inc. 109
--------
OIL WELL EQUIPMENT & SERVICE (0.5%)
2,400 Halliburton Co. 190
--------
POLLUTION CONTROL (0.9%)
4,000 Browning-Ferris Industries, Inc. 133
6,000 Waste Management, Inc. 193
--------
326
--------
PUBLISHING (0.7%)
5,800 American Greetings Corp. 215
1,900 Dun & Bradstreet Corp. 50
--------
265
--------
Market
Number Value
of Shares Security (000)
- ---------- -------- -----
RESTAURANTS (0.2%)
5,000 Brinker International, Inc. * $ 71
--------
RETAIL - GENERAL MERCHANDISING
(0.6%)
6,187 Dollar General Corp. 232
--------
RETAIL - SPECIALTY (0.5%)
3,800 Abercrombie & Fitch Co. * 70
7,000 Phillips-Van Heusen Corp. 105
--------
175
--------
TELEPHONES (0.9%)
7,000 360 Communications Co. * 120
4,000 Sprint Corp. 210
--------
330
--------
TOBACCO (0.4%)
3,000 Philip Morris Companies, Inc. 133
--------
Total domestic stocks (cost: $5,845) 8,857
--------
Principal
Amount
(000)
- ----------
U.S. GOVERNMENT & AGENCY ISSUE (7.0%)
$ 2,560 Federal Home Loan Mortgage, Discount
Note, 5.75%, 7/01/97 (cost: $2,560) 2,560
--------
Total investments (cost: $28,259) $ 37,229
========
- ------------------
*Non-income producing.
B-44 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1997 (UNAUDITED)
PORTFOLIO SUMMARY BY INDUSTRY
Oil Related 8.6%
Healthcare Related 8.1
Telecommunications Related 7.4
U. S. Government & Agency Issues 7.0
Bank Related 6.9
Retail Related 5.1
Electronics Related 4.5
Auto Parts 3.6
Computer Software & Service 3.3
Manufacturing - Diversified Industries 2.6
Specialized Services 2.4
Automobiles 2.2
Electric Power 2.2
Steel 2.1
Beverages - Soft Drink 2.0
Publishing 2.0
Chemical Related 1.9
Aerospace/Defense 1.8
Machinery - Diversified 1.8
Metals - Miscellaneous 1.8
Electrical Equipment 1.7
Engineering & Construction 1.5
Real Estate 1.4
Office Equipment & Supplies 1.3
Conglomerates 1.1
Brokerage Firms 1.0
Broadcasters 1.0
Insurance - Multiple/Line Companies 1.0
Other 14.0
-------
Total 101.3%
=======
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
1997 SEMIANNUAL REPORT B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- ---------- -------- ---------
<S> <C> <C>
BASIC VALUE STOCKS (63.2%)
AEROSPACE/DEFENSE (3.5%)
12,000 B.F. Goodrich Co. $ 520
16,840 Boeing Co. 893
--------
1,413
--------
AUTOMOBILES (3.6%)
20,000 Chrysler Corp. 656
21,000 Ford Motor Co. 793
--------
1,449
--------
BANK HOLDING COMPANIES - MAJOR REGIONAL (3.7%)
16,000 PNC Bank Corp. 666
20,000 SouthTrust Corp. 828
--------
1,494
--------
BANK HOLDING COMPANIES - MONEY CENTER (2.8%)
5,000 Bankers Trust New York Corp. 435
7,000 Chase Manhattan Corp. 680
--------
1,115
--------
CHEMICALS (2.1%)
20,000 Monsanto Co. 861
--------
DISTRIBUTION & PIPELINES (1.3%)
14,000 NICOR, Inc. 502
--------
DRUGS (1.6%)
19,000 Pharmacia & Upjohn, Inc. 660
--------
ELECTRICAL EQUIPMENT (1.5%)
10,000 Rockwell International Corp. 590
--------
HEALTHCARE - DIVERSIFIED (5.9%)
15,000 American Home Products Corp. 1,148
15,000 Bristol-Myers Squibb Co. 1,215
--------
2,363
--------
INSURANCE - PROPERTY/CASUALTY (2.7%)
15,000 Allstate Corp. 1,095
--------
MACHINERY - DIVERSIFIED (3.4%)
7,000 Caterpillar, Inc. 751
11,000 Deere & Co. 604
--------
1,355
--------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.5%)
6,000 Minnesota Mining & Manufacturing Co. 612
--------
MEDICAL PRODUCTS & SUPPLIES (2.3%)
20,000 Bausch & Lomb, Inc. 943
--------
OFFICE EQUIPMENT & SUPPLIES (2.9%)
15,000 Xerox Corp. 1,183
--------
OIL - DOMESTIC (2.9%)
8,000 Atlantic Richfield Co. 564
15,000 Unocal Corp. 582
--------
1,146
Market
Number Value
of Shares Security (000)
- ---------- -------- ---------
OIL - INTERNATIONAL (4.3%)
7,000 Chevron Corp. $ 518
8,000 Mobil Corp. 559
6,000 Texaco, Inc. 652
--------
1,729
--------
PAPER & FOREST PRODUCTS (4.1%)
10,000 James River Corp. 370
15,000 Kimberly-Clark Corp. 746
10,000 Weyerhaeuser Co. 520
--------
1,636
--------
RAILROADS (1.3%)
5,000 Norfolk Southern Corp. 504
--------
RETAIL - DEPARTMENT STORES (1.1%)
9,000 May Department Stores Co. 425
--------
RETAIL - GENERAL MERCHANDISING (1.7%)
13,000 Sears, Roebuck & Co. 699
--------
TELEPHONES (6.8%)
10,000 GTE Corp. 439
16,000 NYNEX Corp. 922
16,000 SBC Communications Corp. 990
7,000 Sprint Corp. 368
--------
2,719
--------
TOBACCO (2.2%)
9,000 Philip Morris Companies, Inc. 399
15,000 RJR Nabisco Holdings Corp. 495
--------
894
--------
Total basic value stocks (cost: $17,078) 25,387
--------
Principal
Amount Coupon
(000) Rate Maturity
- --------- ------- --------
U.S. GOVERNMENT & AGENCY ISSUES (6.2%)
U.S. GOVERNMENT (6.2%)
$ 502 Government National Mortgage Assn. 7.50% 2/20/27 503
496 Government National Mortgage Assn. 8.00 3/20/27 506
546 Government National Mortgage Assn. 6.50 11/20/26 521
981 Government National Mortgage Assn. 7.00 6/20/26 961
------
Total U.S. government & agency
issues (cost: $2,446) 2,491
------
CORPORATE OBLIGATIONS (27.8%)
BANK HOLDING COMPANIES (2.6%)
1,000 HUBCO, Inc., Subordinated Debentures 8.20 9/15/06 1,041
------
BANKS (2.5%)
1,000 Capital One Bank, MTN 7.35 6/20/00 1,015
------
BROADCASTERS (2.6%)
1,000 Tele-Communications, Inc.,
Senior Notes 8.25 1/15/03 1,030
------
</TABLE>
B-46 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
- ---------- -------- ------- --------- ------
<S> <C> <C> <C> <C>
ELECTRONICS - INSTRUMENTATION (2.5%)
$ 1,000 Tektronix, Inc., Notes 7.50% 8/01/03 $ 1,015
--------
MACHINE TOOLS (2.5%)
1,000 Giddings and Lewis, Inc., Notes 7.50 10/01/05 990
--------
REAL ESTATE INVESTMENT TRUSTS (7.6%)
1,000 Merry Land and Investment Co., Notes 7.25 6/15/05 995
1,000 Nationwide Health Properties, Inc., MTN 8.61 3/01/02 1,058
1,000 Washington Real Estate Investment Trust,
Senior Notes 7.25 8/13/06 1,000
--------
3,053
--------
RETAIL - FOOD CHAINS (2.5%)
1,000 Great Atlantic & Pacific Tea, Inc.,
Senior Notes 7.70 1/15/04 1,012
--------
RETAIL - GENERAL MERCHANDISING (2.5%)
1,000 Kmart Corp., Notes 8.13% 12/01/06 $ 985
--------
TELEPHONES (2.5%)
1,000 WorldCom, Inc., Senior Notes 7.55 4/01/04 1,011
--------
Total corporate obligations (cost: $11,043) 11,152
--------
SHORT-TERM (2.1%)
COMMERCIAL PAPER
837 AT&T Capital Corp. (cost: $837) 6.50 7/01/97 837
--------
Total investments (cost: $31,404) $ 39,867
========
See accompanying "Notes to Portfolios of Investments in Securities" on page B-57.
</TABLE>
1997 SEMIANNUAL REPORT B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<S> <C> <C>
COMMON STOCKS (91.4%)
AEROSPACE/DEFENSE (0.7%)
3,200 AAR Corp. $103
4,500 First Aviation Services, Inc. * 44
3,800 Triumph Group, Inc. * 118
------
265
AIR FREIGHT (0.5%)
2,800 Atlas Air, Inc. * 97
6,500 Kitty Hawk, Inc. * 97
------
194
AIRLINES (0.2%)
3,300 Midwest Express Holdings, Inc. * 90
------
AUTO PARTS (0.7%)
4,800 Aftermarket Technology Corp. * 107
3,300 Dura Automotive Systems, Inc. * 92
4,600 Keystone Automotive Industries, Inc. * 78
------
277
------
BANK HOLDING COMPANIES - MAJOR REGIONAL (1.4%)
4,700 Bank United Corp. 179
7,600 Columbia Banking Systems, Inc. * 153
3,600 First Security Corp. 98
4,500 Hamilton Bancorp, Inc. * 120
------
550
------
BEVERAGES - ALCOHOLIC (0.3%)
2,300 The Robert Mondavi Corp. * 109
------
BEVERAGES - SOFT DRINKS (0.3%)
3,000 Starbucks Corp. * 117
------
BIOTECHNOLOGY (2.5%)
1,300 Agouron Pharmaceuticals, Inc. * 105
4,100 Amgen, Inc. * 238
6,500 BioChem Pharmaceuticals, Inc. * 145
3,000 CN Biosciences, Inc. * 57
4,100 Genzyme Corp. * 114
4,500 ILEX Oncology, Inc. * 71
1,500 Protein Design Labs, Inc. * 43
6,000 Techne Corp. * 182
------
955
------
BROADCASTERS (2.4%)
3,600 Argyle Television, Inc. * 92
3,600 Central European Media
Enterprises Ltd. "A" * 94
3,900 Clear Channel Communications, Inc. * 240
2,300 Emmis Broadcasting Corp. * 100
4,700 Gray Communications Systems, Inc. * 98
1,800 Heftel Broadcasting Corp. * 99
2,800 Outdoor Systems, Inc. * 107
2,700 Univision Communications, Inc. * 106
------
936
------
BROKERAGE FIRMS (0.6%)
2,300 Charles Schwab Corp. 94
3,700 Hambrecht & Quist Group * 121
------
215
------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
BUILDING MATERIALS (0.3%)
2,300 Comfort Systems USA, Inc. * $ 36
4,000 Wilmar Industries, Inc. * 97
------
133
------
CHEMICALS (0.2%)
5,500 NuCo2, Inc. * 95
------
CHEMICALS - SPECIALTY (0.3%)
2,800 Zoltek Companies, Inc. * 107
------
COMMUNICATION - EQUIPMENT MANUFACTURERS (8.1%)
10,150 3Com Corp. * 457
5,400 Act Networks, Inc. * 69
2,100 Advanced Fibre Communications, Inc. * 127
5,700 Aware, Inc. * 84
8,200 Cascade Communications Corp. * 227
2,000 CIENA Corp. * 94
3,200 Cisco Systems, Inc. * 215
3,700 Datum, Inc. * 115
8,800 FORE Systems, Inc. * 120
5,100 Harmonic Lightwaves, Inc. * 87
6,400 MAS Technology Ltd. * 95
6,800 ODS Networks, Inc. * 81
7,400 Orckit Communications Ltd. * 107
5,100 Ortel Corp. * 92
6,300 P-Com, Inc. * 208
4,200 Pairgain Technologies, Inc. * 65
5,500 Peerless Systems Corp. * 76
1,800 QualComm, Inc. * 92
5,250 REMEC, Inc. * 123
3,300 Sawtek, Inc. * 111
4,700 Spectrian Corp. * 173
2,000 Tellabs, Inc. * 112
8,500 ViaSat, Inc. * 123
4,500 Xylan Corp. * 76
800 Yurie Systems, Inc. * 14
------
3,143
COMPUTER SOFTWARE & SERVICE (11.2%)
3,200 Affiliated Computer Services, Inc. * 90
5,000 Alternative Resources Corp. * 102
3,600 Arbor Software Corp. * 127
1,300 ARIS Corp. * 28
3,800 Aspect Development, Inc. * 99
4,100 Avant Corp. * 133
11,400 Award Software International, Inc. * 137
5,100 CCC Information Services Group, Inc. * 99
5,800 Checkfree Corp. * 102
3,800 Claremont Technology Group, Inc. * 90
4,000 Complete Business Solutions, Inc. * 99
1,700 Computer Associates International, Inc. 95
7,100 Credit Management Solutions, Inc. * 94
1,600 DBT Online, Inc. * 86
5,700 Gemstar International Group Ltd. * 105
7,500 Geotel Communications Corp. * 100
800 Great Plains Software, Inc. * 22
3,800 Harbinger Corp. * 106
3,100 HNC Software, Inc. * 118
</TABLE>
B-48 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<C> <S> <C>
7,000 H.T.E., Inc. * 75
2,300 I2 Technologies, Inc. * 71
7,600 Industri-Matematik International
Corp. * 124
3,700 IONA Technologies plc * 73
8,600 Macrovision Corp. * 117
5,600 Mercury Interactive Corp. * 83
1,200 Microsoft Corp. * 152
3,500 New Era of Networks, Inc. * 58
3,300 Pegasystems, Inc. * 104
2,000 PeopleSoft, Inc. * 106
4,100 Phoenix International Ltd., Inc. * 94
6,400 PLATINUM Technology, Inc. * 85
15,300 Pure Atria Corp. * 216
1,100 RWD Technologies, Inc. * 19
2,700 Security Dynamics Technologies, Inc. * 100
6,700 Simulation Sciences, Inc. * 102
5,900 Smallworld plc ADR * 100
8,100 SRS Labs, Inc. * 82
3,100 Sterling Commerce, Inc. * 102
2,800 Tecnomatix Technologies Ltd. * 91
7,300 Transaction Network Services, Inc. * 103
3,100 Transaction Systems Architects, Inc. * 107
2,800 Wind River Systems, Inc. * 107
7,200 Wonderware Corp. * 102
6,500 XcelleNet, Inc. * 106
------
4,311
COMPUTER SYSTEMS (3.2%)
3,700 CHS Electronics, Inc. * 98
1,700 Dell Computer Corp. * 200
1,100 Genesys Telecommunications Laboratory,
Inc. * 30
3,700 Ingram Micro, Inc * 89
6,900 Invision Technologies, Inc. * 84
4,400 Iomega Corp. * 87
5,400 Komag, Inc. * 88
8,700 Melita International Corp. * 109
3,800 Micron Electronics, Inc. * 68
3,700 Pomeroy Computer Resources, Inc. * 92
3,200 Read-Rite Corp. * 67
7,200 Sandisk Corp. * 105
4,400 SBS Technologies, Inc. * 102
------
1,219
------
COSMETICS (0.6%)
1,200 Revlon, Inc. "A" * 62
3,100 The Estee Lauder Companies, Inc. 156
------
218
DRUGS (0.5%)
1,300 Elan Corp. plc ADR * 59
3,500 Kos Pharmaceuticals, Inc. * 97
800 Teva Pharmaceutical Industries Ltd. 52
------
208
ELECTRICAL EQUIPMENT (0.5%)
3,300 Chicago Miniature Lamp, Inc. * 82
5,200 Westinghouse Electric Corp. 120
------
202
Market
Number Value
of Shares Security (000)
- --------- -------- -------
ELECTRONICS - INSTRUMENTATION (3.7%)
4,800 Brooks Automation, Inc. * $ 92
2,800 CFM Technologies, Inc. * 92
2,000 Cymer, Inc. * 98
3,700 Electroglas, Inc. * 93
4,900 EMCORE Corp. * 82
5,500 Etec Systems, Inc. * 236
6,800 HMT Technology Corp. * 88
3,800 IKOS Systems, Inc. * 81
6,000 Integrated Measurement Systems, Inc. * 89
5,800 Integrated Process Equipment Corp. * 147
3,500 LeCroy Corp. * 129
2,500 Photronics, Inc. * 119
2,800 Speedfam International, Inc. * 101
------
1,447
ELECTRONICS - SEMICONDUCTORS (4.0%)
1,700 3DFX Interactive, Inc. * 23
2,200 Advanced Micro Devices, Inc. * 79
4,300 Benchmarq Microelectronics, Inc. * 74
6,000 ESS Technology, Inc. * 81
1,000 Intel Corp. 142
1,600 Lattice Semiconductors Corp. * 90
2,500 LSI Logic Corp. * 80
3,200 MEMC Electronic Materials, Inc. * 105
2,800 Microchip Technology, Inc. * 83
6,400 Peak International Ltd. * 77
4,600 PMC Sierra, Inc. * 121
2,600 RF Micro Devices Inc. * 50
4,500 SDL, Inc. * 86
2,400 SMART Modular Technologies, Inc. * 81
2,800 Triquint Semiconductor, Inc. * 96
2,600 Vitesse Semiconductor Corp. * 85
3,600 VLSI Technology, Inc. * 85
4,800 Zoran Corp. * 108
------
1,546
------
ENTERTAINMENT (0.2%)
5,200 Ballantyne of Omaha, Inc. * 94
------
FINANCE - BUSINESS/COMMERCIAL (0.2%)
4,100 Medallion Financial Corp. 78
------
FINANCE - CONSUMER (2.1%)
1,800 Associates First Capital Corp. 100
4,200 Conti Financial Corp. * 153
4,700 FIRSTPLUS Financial Group, Inc. * 160
1,200 Household International, Inc. 141
3,500 NCO Group, Inc. * 103
6,000 The Money Store, Inc. 172
------
829
------
FINANCE - REAL ESTATE (0.5%)
12,000 IMC Mortgage Co. * 199
------
FOODS (0.2%)
1,600 Suiza Foods Corp. * 66
------
</TABLE>
1997 SEMIANNUAL REPORT B-49
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<C> <S> <C>
GAMING COMPANIES (0.5%)
2,400 Anchor Gaming * $ 115
5,400 Penn National Gaming, Inc. * 80
------
195
------
HEALTHCARE - DIVERSIFIED (0.5%)
5,300 PhyCor, Inc. * 182
------
HEALTHCARE - MISCELLANEOUS (4.8%)
3,400 CRA Managed Care, Inc. * 178
3,800 Express Scripts, Inc. "A" * 159
6,000 HBO & Co. 413
2,900 HCIA, Inc. * 97
3,700 Nu Skin Asia Pacific, Inc. * 98
12,500 Orthodontic Centers of America, Inc. * 227
3,500 PAREXEL International Corp. * 111
4,000 Pediatrix Medical Group, Inc. * 183
2,500 Renal Care Group, Inc. * 104
6,300 Renal Treatment Centers, Inc. * 169
2,500 Total Renal Care Holdings, Inc. * 101
------
1,840
------
HOME FURNISHINGS & APPLIANCES (0.4%)
1,000 Ethan Allen Interiors, Inc. 57
4,000 Industrie Natuzzi S.p.A. ADR 102
------
159
------
HOSPITALS (1.0%)
7,200 HEALTHSOUTH Rehabilitation Corp. * 180
5,300 National Surgery Centers, Inc. * 187
------
367
------
HOTEL/MOTEL (0.7%)
3,900 Bristol Hotel Co. * 150
3,600 Four Seasons Hotels, Inc. 107
------
257
------
HOUSEHOLD PRODUCTS (0.2%)
8,000 USA Detergents, Inc. * 82
------
INSURANCE - LIFE (0.5%)
5,500 Hartford Life, Inc. * 206
------
INSURANCE - PROPERTY/CASUALTY (0.3%)
3,700 HCC Insurance Holdings, Inc. 99
------
LEISURE TIME (.9%)
3,500 Action Performance Companies, Inc. * 85
6,100 RockShox, Inc. * 105
6,000 West Marine, Inc. * 155
------
345
------
MACHINERY - DIVERSIFIED (0.7%)
900 JLK Direct Distribution, Inc. * 23
5,700 RDO Equipment Co. * 127
4,300 U. S. Rentals, Inc. * 109
------
259
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (0.3%)
4,800 United States Filter Corp. * 131
------
MEDICAL PRODUCTS & SUPPLIES (2.3%)
3,300 AmeriSource Health Corp. * 165
8,500 Bionx Implants, Inc. * 144
5,600 Omnicare, Inc. 176
Market
Number Value
of Shares Security (000)
- --------- -------- -------
5,000 Serologicals Corp. * $ 115
3,700 SONUS Pharmaceuticals, Inc. * 104
3,000 Spine-Tech, Inc. * 111
2,000 Vertex Pharmaceuticals, Inc. * 77
------
892
------
NURSING CARE (1.0%)
5,000 American Homepatient, Inc. * 125
3,900 Multicare Companies, Inc. 107
4,800 Sunrise Assisted Living, Inc. * 168
------
400
------
OIL - EXPLORATION & PRODUCTION (0.7%)
9,600 Chesapeake Energy Corp. 94
3,400 Stone Energy Corp. * 93
4,000 Swift Energy Co. * 96
------
283
------
OIL & GAS DRILLING (2.1%)
1,400 Diamond Offshore Drilling, Inc. * 109
4,100 Falcon Drilling Co., Inc. * 236
10,600 Santa Fe International Corp. * 361
1,500 Transocean Offshore, Inc. 109
------
815
------
OIL WELL EQUIPMENT & SERVICE (2.1%)
4,600 EVI, Inc. * 193
6,700 Halter Marine Group, Inc. * 161
4,500 Hvide Marine, Inc. "A" * 99
2,400 National-Oilwell, Inc. * 138
5,000 Trico Marine Services, Inc. * 109
3,500 Varco International, Inc. * 113
------
813
------
POLLUTION CONTROL (1.2%)
5,500 American Disposal Services, Inc. * 124
9,200 Superior Services, Inc. * 219
2,000 Waste Industries, Inc. * 35
6,400 Waterlink, Inc. * 83
------
461
------
PUBLISHING (0.5%)
3,000 C/NET, Inc. * 88
3,800 World Color Press, Inc. * 90
------
178
------
REAL ESTATE INVESTMENT TRUSTS (1.6%)
10,000 Alexandria Real Estate Equities, Inc. * 219
550 Crescent Operating, Inc. * 7
5,500 Crescent Real Estate Equities Co. 175
3,500 Golf Trust of America, Inc. 97
2,400 Starwood Lodging Trust 102
------
600
------
RESTAURANTS (0.9%)
4,400 Logan's Roadhouse, Inc. * 105
3,900 Papa John's International, Inc. * 143
5,600 PJ America, Inc. * 95
------
343
------
RETAIL - FOOD CHAINS (0.7%)
2,800 Disco S.A. ADS * 111
6,000 Dominick's Supermarkets, Inc. * 160
------
271
------
</TABLE>
B-50 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<C> <S> <C>
RETAIL - GENERAL MERCHANDISING (0.3%)
2,400 Dollar Tree Stores, Inc. * $ 121
RETAIL - SPECIALTY (4.5%)
6,500 99 Cents Only Stores * 196
5,700 Abercrombie & Fitch Co. * 106
4,600 CompUSA, Inc. * 99
4,400 Delia's, Inc. * 81
3,600 Fastenal Co. 176
3,000 Gadzooks, Inc. * 59
10,000 Garden Ridge Corp. * 125
6,000 Guitar Center, Inc. * 101
1,500 Home Depot, Inc. 104
8,400 Just For Feet, Inc. * 147
4,800 K&G Men's Center, Inc. * 104
2,700 MSC Industrial Direct Co., Inc. * 108
3,700 Nine West Group, Inc. * 141
4,000 Paul Harris Stores, Inc. * 67
3,600 U.S. Office Products Co. * 110
-------
1,724
-------
SPECIALIZED SERVICES (9.7%)
3,900 AccuStaff, Inc. * 92
4,700 Administaff, Inc. * 114
4,800 Altron, Inc. * 72
6,300 APAC TeleServices, Inc. * 122
2,500 Benchmark Electronics, Inc. * 101
3,700 COREStaff, Inc. * 100
4,300 Corrections Corp. of America * 171
3,700 Data Processing Resources Corp. * 86
5,400 Fine Host Corp. * 170
6,400 Getty Communications plc ADR * 94
5,000 Hertz Corp. * 180
2,800 Information Management Resources, Inc. * 127
4,600 International Network Services * 120
5,200 International Telecommunication Data
Systems, Inc. * 127
4,100 Lamar Advertising Co. "A"* 105
4,500 Mastech Corp. * 91
4,700 Maximus, Inc. * 84
5,200 Merix Corp. * 86
4,400 Nova Corp. * 114
6,100 PMT Services, Inc. * 93
4,200 Precision Response Corp. * 69
4,900 RemedyTemp, Inc. "A" * 86
1,300 Rental Service Corp. * 34
4,100 Romac International, Inc. * 134
3,400 SCB Computer Technology, Inc. * 80
7,300 SITEL Corp. * 151
3,400 Snyder Communications, Inc. * 92
5,200 Staff Leasing Inc. * 98
4,700 Staffmark, Inc. * 105
5,600 StarTek, Inc. * 84
4,500 Sykes Enterprises, Inc. * 117
3,600 Teletech Holdings, Inc. * 95
3,000 Universal Outdoor Holdings, Inc. * 105
4,700 Wackenhut Corrections Corp. * 137
3,700 Whittman-Hart, Inc. * 104
-------
3,740
-------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
TELECOMMUNICATIONS (1.5%)
3,600 ACC Corp. * $ 111
3,300 Pacific Gateway Exchange, Inc. * 93
3,400 Premiere Technologies, Inc. * 88
800 Qwest Communications International, Inc. * 22
6,200 SmartTalk TeleServices, Inc. * 96
3,900 STAR Telecommunications, Inc. * 52
6,500 Tel-Save Holdings, Inc. * 99
-------
561
-------
TELEPHONES (2.6%)
5,700 Brightpoint, Inc. * 186
3,600 Brooks Fiber Properties, Inc. * 122
6,500 InterCel, Inc. * 87
3,000 Intermedia Communications of Florida, Inc. * 97
3,800 IXC Communications, Inc. * 100
3,700 McLeod, Inc. * 125
5,900 Omnipoint Corp. * 98
3,000 Teleport Communications Group, Inc. * 102
7,500 Western Wireless Corp. "A" * 119
-------
1,036
-------
TEXTILES (2.3%)
9,800 Cutter & Buck, Inc. * 159
1,400 Gucci Group N.V. * 90
6,000 North Face, Inc. * 110
3,300 Polo Ralph Lauren Corp. * 90
6,300 St. John Knits, Inc. 340
2,300 Tommy Hilfiger Corp. * 93
-------
882
-------
Tobacco (0.1%)
1,300 800-Junior Cigar, Inc. * 27
-------
TOYS (0.3%)
3,000 Consolidated Stores Corp. * 104
-------
TRANSPORTATION - MISCELLANEOUS (0.3%)
3,600 Hub Group, Inc. "A" * 108
-------
MISCELLANEOUS (0.5%)
600 Arm Financial Group, Inc. * 12
4,300 Stewart Enterprises, Inc. 181
-------
193
-------
Total common stocks (cost: $32,330) 35,277
-------
Principal
Amount
(000)
________
SHORT-TERM (10.0%)
U.S. GOVERNMENT & AGENCY ISSUE
$3,860 Federal Home Loan Mortgage, Discount Note,
5.75%, 7/01/97 (cost: $3,860) 3,860
-------
Total investments (cost: $36,190) $39,137
=======
</TABLE>
*Non-income producing.
See accompanying "Notes to Portfolios of Investments in
Securities" on page B-57.
1997 SEMIANNUAL REPORT B-51
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<S> <C> <C>
STOCKS (90.5%)
ARGENTINA (0.9%)
2,000 Disco S.A. ADS * $ 79
2,600 IRSA Inversiones y Representaciones S.A. GDS 114
------
193
------
AUSTRALIA (2.3%)
8,600 Broken Hill Proprietary Co. Ltd. 127
23,300 CSL Ltd. 143
21,000 Village Roadshow Ltd. (Preferred) 53
19,500 Woodside Petroleum Ltd. 168
------
491
------
AUSTRIA (2.9%)
1,262 Austria Mikro Systeme International AG 107
2,000 Boehler Uddeholm AG 155
3,400 VA Stahl AG 154
1,200 VA Technologie AG 220
------
636
------
BELGIUM (1.6%)
400 Colruyt S.A. 195
1,700 Union Miniere S.A. * 159
------
354
------
BRAZIL (2.1%)
6,000 Multicanal Participacoes S.A. ADS (Preferred) * 82
1,600,000 Telebras PN S.A. (Preferred) 243
3,400 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR * 126
------
451
------
CANADA (5.9%)
3,500 Alliance Forest Products, Inc. * 85
7,600 Anderson Exploration Ltd. * 98
34,800 Beau Canada Exploration Ltd. * 78
4,800 Canadian National Railway Co. 210
9,500 Canadian Occidental Petroleum Ltd. 213
10,300 Gulf Canada Resources Ltd. * 84
21,400 National Bank of Canada 268
5,800 OSF, Inc. * 47
1,700 St. Laurent Paperboard, Inc. * 27
6,800 Suncor, Inc. 182
------
1,292
------
CHINA (1.0%)
62,000 Cosco Pacific Ltd. 144
28,000 New World Infrastructure Ltd. * 79
------
223
------
CZECH REPUBLIC (0.2%)
2,500 Komercni Banka A.S. GDR 52
------
DENMARK (3.7%)
1,400 Carli Gry International A/S 80
1,800 ISS International Service System A/S "B" * 64
Market
Number Value
of Shares Security (000)
- --------- -------- -------
1,300 Novo Nordisk A/S "B" $ 142
10,000 SAS Danmark A/S 117
10,000 Tele Danmark A/S ADS 261
2,700 Unidanmark A/S 152
------
816
------
EGYPT (0.2%)
2,500 Suez Cement Co. S.A.E. GDS * 50
------
FINLAND (1.2%)
3,100 Nokia Corp. ADS 229
400 Raision Tehtaat 27
------
256
------
FRANCE (4.4%)
4,000 Bouygues Offshore S.A. ADR 50
4,600 Coflexip ADS * 139
3,100 Elf Aquitaine ADS 169
1,400 Eramet Group 64
800 Essilor International 216
2,000 Louis Dreyfus Citrus * 75
500 Pathe S.A. * 99
2,500 Valeo S.A. 155
------
967
------
GERMANY (2.8%)
100 Beta Systems Software AG * 12
2,600 Leica Camera AG * 64
1,500 Pfeiffer Vacuum Technology AG ADS * 44
5,800 Rofin-Sinar Technologies, Inc. * 111
200 SAP AG 40
300 SAP AG (Preferred) 62
4,800 Veba AG 270
------
603
------
HONG KONG (1.0%)
120,000 Amoy Properties Ltd. 133
3,000 Asia Satellite Telecommunications Holdings Ltd. ADR 90
------
223
------
HUNGARY (0.6%)
6,000 Mol Magyar Olaj-Es Gazipari GDS 134
------
INDIA (1.0%)
3,000 Hindalco Industries Ltd. GDR 106
5,500 Videsh Sanchar Nigam Ltd. GDR * 114
------
220
------
INDONESIA (0.9%)
20,000 PT Astra International, Inc. 82
29,000 PT HM Sampoerna 111
------
193
------
ISRAEL (1.6%)
2,400 Blue Square - Israel Ltd. ADS * 41
4,500 ECI Telecommunications Ltd. 134
2,500 Teva Pharmaceutical Industries Ltd. 162
------
337
------
</TABLE>
B-52 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<C> <S> <C>
ITALY (2.3%)
4,100 ENI S.p.A. ADS $ 233
4,957 Instituto Bancario San Paulo di Torino S.p.A. 36
250,000 SEAT S.p.A. * 81
44,000 STET S.p.A. 153
-------
503
-------
JAPAN (13.8%)
8,000 Bridgestone Corp. 186
8,000 Canon, Inc. 218
5,000 Daibiru Corp. 60
14,000 Hitachi Ltd. 156
7,000 Honda Motor Co. Ltd. 211
5,000 Hoya Corp. 223
4,000 Ito-Yokado Co. Ltd. 232
1,000 Kyocera Corp. 79
2,600 Laox Co. Ltd. 37
19,000 Minebea Co. Ltd. 202
24,000 Mitsubishi Heavy Industries Ltd. 184
7,000 Namco 270
300 Nippon Television Network 120
29,000 NKK Corp. 62
8,000 Nomura Securities Co. Ltd. 110
5 NTT Data Communications Systems Corp. 193
16,000 Shiseido Co. Ltd. 264
11,000 Terumo Corp. 210
-------
3,017
-------
KOREA (0.6%)
4,000 Korea Electric Power Corp. 119
-------
MALAYSIA (0.4%)
11,000 Edaran Otomobil Nasional Bhd 94
-------
MEXICO (3.3%)
9,000 Desc, Sociedad de Fomento Industrial,
S.A. de C.V. ADS 262
9,000 Panamerican Beverages, Inc. "A" 296
9,000 Tubos de Acero de Mexico, S.A. ADS * 166
-------
724
-------
NETHERLANDS (4.4%)
2,300 Akzo Nobel N.V. 315
2,000 Brunel International N.V. * 44
1,900 EVC International N.V. 48
2,100 ING Group N.V. 97
1,000 Oce-van der Grinten N.V. 129
2,000 Philips Electronics N.V. 144
8,000 Verenigd Besit VNU 177
-------
954
-------
NORWAY (1.5%)
29,200 Christiania Bank og Kreditkasse 100
10,000 Nycomed ASA 147
4,000 Schibsted ASA 79
-------
326
-------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
PERU (0.2%)
2,000 Telefonica del Peru S.A. "B" ADS $ 52
-------
PHILIPPINES (0.2%)
180,000 SM Prime Holdings, Inc. 53
-------
POLAND (0.6%)
9,000 Elektrim S.A. 78
11,000 Polifarb-Cieszyn S.A. 56
-------
134
-------
PORTUGAL (2.6%)
7,000 Banco Totta E Acores S.A. 117
7,000 Cimentos de Portugal S.A. 163
7,000 Portugal Telecom S.A. ADS 281
-------
561
-------
RUSSIA (1.3%)
700 LUKoil ADR 55
2,800 Mosenergo ADR * 122(a)
279,000 Unified Energy Systems * 100
-------
277
-------
SINGAPORE (1.0%)
19,000 Overseas Union Bank Ltd. 118
3,800 Overseas Union Bank Ltd. Rights 5
20,000 Singapore Land Ltd. 91
-------
214
-------
SOUTH AFRICA (0.9%)
17,000 Gencor Ltd. 78
3,500 South African Breweries Ltd. 108
-------
186
-------
SPAIN (2.5%)
4,000 Corporacion Bancaria de Espana S.A. 224
2,500 Corporacion Mapfre 133
2,300 Telefonica de Espana S.A. ADR 198
-------
555
-------
SWEDEN (3.0%)
7,000 Autoliv AB SDR * 269
3,900 Hemkopskedjan AB * 40
10,220 NK Cityfastigheter AB * 73
10,000 Volvo AB 268
-------
650
-------
SWITZERLAND (4.1%)
200 Novartis AG 320
1,000 Oerlikon Buhrle AG * 117
400 Selecta Group * 61
70 SGS Group AG 150
200 Sulzer AG P.C. 171
5,000 Tag Heuer International S.A. ADR * 75
-------
894
-------
</TABLE>
1997 SEMIANNUAL REPORT B-53
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- -------
<C> <S> <C>
TAIWAN (0.9%)
4,500 Acer, Inc. GDR * $ 80
5,000 China Steel Corp. GDS 107
-------
187
-------
THAILAND (0.1%)
20,000 Bank Of Ayudhya Public Co. Ltd. 31
-------
TURKEY (0.4%)
4,194,000 Yapi Ve Kredi Bankasi A.S. 96
-------
UNITED KINGDOM (11.1%)
63,400 Avis Europe plc * 144
15,000 Cadbury Schweppes plc 134
49,000 Cookson Group plc 171
45,000 Corporate Services Group plc 140
6,800 DFS Furniture Co. plc 64
2,900 Doncasters plc ADS * 67
6,000 EMI Group plc 108
14,400 Harvey Nichols plc 68
30,000 LucasVarity plc 104
53,800 Medeva plc 230
18,200 National Westminster Bank plc 245
34,000 Reuters Holdings plc 358
34,000 Safeway plc 197
45,800 Tomkins plc 198
48,400 WPP Group plc 198
-------
2,426
-------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
VENEZUELA (0.4%)
1,900 Compania Anonima Nacional Telefonos
De Venezuela ADS * $ 82
-------
OTHER HOLDINGS (0.6%)
110,000 Central European Growth Fund plc 122
-------
Total stocks (cost: $18,770) 19,748
-------
Principal
Amount
(000)
- ---------
U.S. GOVERNMENT & AGENCY ISSUE (13.1%)
$2,875 Federal Home Loan Mortgage, 5.75%, 7/01/97
(cost: $2,875) 2,875
-------
Total investments (cost: $21,645) $22,623
=======
</TABLE>
*Non-income producing.
B-54 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) JUNE 30, 1997
PORTFOLIO SUMMARY BY INDUSTRY
<TABLE>
<S> <C>
U. S. Government & Agency Issues 13.1%
Telecommunications Related 7.4
Oil Related 7.3
Bank Related 7.2
Healthcare Related 7.2
Retail Related 5.0
Auto Parts 4.5
Specialized Services 4.1
Automobiles 3.0
Steel 3.0
Electric Power 2.8
Computer - Software Service 2.7
Electronics Related 2.4
Real Estate 2.4
Beverages - Soft Drink 2.3
Conglomerates 2.0
Manufacturing - Diversified Industries 1.8
Publishing 1.8
Chemical Related 1.7
Engineering & Construction 1.7
Broadcasters 1.4
Computer Systems 1.4
Machinery Diversified 1.4
Metals - Miscellaneous 1.4
Building Materials Group 1.2
Cosmetics 1.2
Electrical Equipment 1.0
Insurance - Multiple/Line Companies 1.0
Office Equipment & Supplies 1.0
Railroads 1.0
Other 8.2
-----
Total 103.6%
=====
</TABLE>
See accompanying "Notes to Portfolios of Investments in Securities" on
page B-57.
1997 SEMIANNUAL REPORT B-55
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO PORTFOLIOS OF INVESTMENTS IN SECURITIES
JUNE 30, 1997 (UNAUDITED)
General Notes
Market values of securities are determined by procedures and practices
discussed in Note 1 to the Trust's financial statements.
The cost of securities for federal income tax purposes is approximately the
same as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net
assets.
ADS/ADR - American Depositary Shares/ Receipts are foreign shares held by a
U.S. bank which issues a receipt evidencing ownership. Dividends are paid in
U.S. dollars.
GDS/GDR - Global Depositary Shares/Receipts are foreign shares held by a
non-U.S. bank which issues a receipt evidencing ownership. Dividends are
paid in U.S. dollars.
SPECIFIC NOTES
(a) Security is exempt from registration under the Securities Act of 1933 and
has been determined to be liquid by the Manager. Any resale of this security
may occur in an exempt transaction in the United States to a qualified
institutional buyer as defined by Rule 144A.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CP Commercial Paper
CRE Credit Enhanced
IDA Industrial Development
Authority/Agency
MTN Medium-Term Note
RB Revenue Bond
CATEGORIES AND DEFINITIONS
The securities in USAA Life VA Money Market Fund are divided into two
categories- fixed rate instruments and variable rate demand notes.
FIXED RATE INSTRUMENTS - consist of corporate and government notes and
commercial paper. The coupon rate is constant to maturity.
VARIABLE RATE DEMAND NOTES (VRDN) - provide the right, on any business day,
to sell the security 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. The VRDN's
effective maturity is the date on which the underlying principal amount may
be recovered or the next rate adjustment date consistent with applicable
regulatory requirements. Most VRDNs possess a credit enhancement.
CREDIT ENHANCEMENT - adds the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due.
The enhancement may be provided by either a high quality bank, insurance compa
ny, or other corporation, or a collateral trust. Typically, the rating
agencies evaluate the security based upon the credit standing of the credit
enhancement, rather than the credit standing of the issuer.
See accompanying "Notes to Financial Statements" on page B-62.
1997 SEMIANNUAL REPORT B-57
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
Money Market Income Growth and World Growth Diversified Aggressive International
Fund Fund Income Fund Fund Assets Fund Growth Fund Fund
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value (identified cost
of $14,750, $22,876, $48,179,
$28,259, $31,404, $36,190,
and $21,645, respectively) $ 14,750 $ 24,333 $ 67,092 $ 37,229 $ 39,867 $ 39,137 $ 22,623
Cash - 10 3 1 1 2 3
Cash denominated in foreign
currencies (identified cost
of $68 and $61, respectively) - - - 68 - - 61
Receivables:
Capital shares sold 216 5 92 20 12 2 25
Dividends and interest 21 271 151 98 304 2 29
Securities sold - - - 103 - - 48
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total assets 14,987 24,619 67,338 37,519 40,184 39,143 22,789
------------ ------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Securities purchased - - 60 706 - 521 929
Unrealized depreciation on
foreign currency contracts
held, at value - - - 2 - - 2
Capital shares redeemed 90 3 1 2 7 - -
Accrued advisory fees - - 30 19 10 8 3
Accounts payable and accrued
expenses 16 21 31 41 29 19 28
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 106 24 122 770 46 548 962
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets applicable to
capital shares outstanding $ 14,881 $ 24,595 $ 67,216 $ 36,749 $ 40,138 $ 38,595 $ 21,827
=========== =========== =========== =========== =========== =========== ===========
REPRESENTED BY:
Paid-in capital $ 14,881 $ 22,809 $ 45,880 $ 25,812 $ 30,619 $ 35,568 $ 20,748
Accumulated undistributed net
investment income - 862 594 263 730 18 63
Accumulated net realized gain
(loss) on investments - (533) 1,829 1,704 326 62 39
Net unrealized appreciation of
investments - 1,457 18,913 8,970 8,463 2,947 978
Net unrealized depreciation on
foreign currency translations - - - - - - (1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets applicable to
capital shares outstanding $ 14,881 $ 24,595 $ 67,216 $ 36,749 $ 40,138 $ 38,595 $ 21,827
=========== =========== =========== =========== =========== =========== ===========
Capital shares outstanding,
unlimited number of shares
authorized, no par value 14,881 2,279 3,841 2,530 2,860 3,459 2,038
=========== =========== =========== =========== =========== =========== ===========
Net asset value, redemption
price, and offering price
per share $ 1.00 $ 10.79 $ $17.50 $ 14.53 $ 14.03 $ 11.16 $ 10.71
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying "Notes to Financial Statements" on page B-62.
B-58 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(In Thousands) Six-month period ended June 30, 1997 (Unaudited)
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
Money Market Income Growth and World Growth Diversified Aggressive International
Fund Fund Income Fund Fund Assets Fund Growth Fund* Fund*
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income (net of foreign taxes
withheld of $0, $0, $2, $39,
$0, $0, and $7 respectively):
Dividends $ - $ 121 $ 650 $ 325 $ 290 $ 2 $ 50
Interest 389 784 46 66 498 42 44
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Income 389 905 696 391 788 44 94
------------ ------------ ------------ ------------ ------------ ------------ ------------
Expenses:
Advisory fees 14 24 60 37 35 20 19
Administrative fees 5 5 5 5 5 - -
Custodian's fees 20 22 25 52 23 9 18
Postage - - 1 1 1 - -
Shareholder reporting fees 1 2 4 2 2 1 1
Trustees' fees 2 2 2 2 2 1 1
Audit fees 12 12 12 12 12 5 5
Legal fees 9 9 9 9 9 2 2
Other 1 1 1 3 1 - 1
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total expenses before
reimbursement 64 77 119 123 90 38 47
Expenses reimbursed (39) (35) (15) (2) (29) (12) (16)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total expenses after
reimbursement 25 42 104 121 61 26 31
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net investment income 364 863 592 270 727 18 63
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss)
on:
Investments - (53) 1,829 1,756 326 62 39
Foreign currency
transactions - - - (7) - - -
Change in net unrealized
appreciation/depreciation
of:
Investments - (96) 7,131 3,115 2,771 2,947 978
Translation of assets and
liabilities in foreign
currencies - - - - - - (1)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net realized and
unrealized gain (loss) - (149) 8,960 4,864 3,097 3,009 1,016
------------ ------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets
resulting from operations $ 364 $ 714 $ 9,552 $ 5,134 $ 3,824 $ 3,027 $ 1,079
============ ============ ============ ============ ============ ============ ============
</TABLE>
* Funds commenced operations May 1, 1997.
See accompanying "Notes to Financial Statements" on page B-62.
1997 SEMIANNUAL REPORT B-59
<PAGE>
USSA LIFE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS) Six-month period ended June 30, 1997
and Year ended December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA
Money Market Fund Income Fund Growth and Income Fund
------------------------ ----------------------- -------------------------
6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 12/31/96
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income $ 364 $ 584 $ 863 $ 1,956 $ 592 $ 916
Net realized gain (loss) on:
Investments - - (53) (480) 1,829 1,524
Foreign currency transactions - - - - - -
Change in net unrealized appreciation/
depreciation of:
Investments - - (96) (1,063) 7,131 6,662
Foreign currency translations - - - - - -
---------- ---------- ---------- ---------- ----------- -----------
Increase in net assets resulting
from operations 364 584 714 413 9,552 9,102
---------- ---------- ---------- ---------- ----------- -----------
Distributions to shareholders from:
Net investment income (364) (584) (74) (1,883) - (914)
---------- ---------- ---------- ---------- ----------- -----------
Net realized gains - - - - (358) (1,166)
---------- ---------- ---------- ---------- ----------- -----------
From capital share transactions:
Proceeds from shares sold 32,746 62,988 1,677 7,926 18,652 20,120
Shares issued for dividends reinvested 364 584 74 1,883 358 2,080
Cost of shares redeemed (29,474) (60,129) (1,845) (10,113) (16,920) (2,051)
---------- ---------- ---------- ---------- ----------- -----------
Increase (decrease) in net assets from
capital share transactions 3,636 3,443 (94) (304) 2,090 20,149
---------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) in net assets 3,636 3,443 546 (1,774) 11,284 27,171
Net assets:
Beginning of period 11,245 7,802 24,049 25,823 55,932 28,761
---------- ---------- ---------- ---------- ----------- -----------
End of period $ 14,881 $ 11,245 $ 24,595 $ 24,049 $ 67,216 $ 55,932
========== ========== ========== ========== =========== ===========
Undistributed net investment income
included in net assets:
Beginning of period $ - $ - $ 73 $ - $ 2 $ -
========== ========== ========== ========== =========== ===========
End of period $ - $ - $ 862 $ 73 $ 594 $ 2
========== ========== ========== ========== =========== ===========
Change in shares outstanding:
Shares sold 32,746 62,988 158 725 1,167 1,440
Shares issued for dividends reinvested 364 584 7 178 22 137
Shares redeemed (29,474) (60,129) (174) (897) (1,061) (146)
---------- ---------- ---------- ---------- ----------- -----------
Increase (decrease) in shares
outstanding 3,636 3,443 (9) 6 128 1,431
========== ========== ========== ========== =========== ===========
</TABLE>
*Funds commenced operations May 1, 1997.
See accompanying "Notes to Financial Statements" on page B-62.
B-60 SEMIANNUAL 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(In Thousands) Six-month period ended June 30, 1997 and Year ended December 31, 1996 (Unaudited)
USAA Life VA USAA Life VA
USAA Life VA USAA Life VA Aggressive International
World Growth Fund Diversified Assets Fund Growth Fund* Fund*
------------------------- ---------------------------- ------------ -------------
6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 6/30/97
---------- ------------ ----------- -------------- ------------ -------------
From operations: <S> <C> <C> <C> <C> <C>
Net investment income $ 270 $ 451 $ 727 $ 1,375 $ 18 $ 63
Net realized gain (loss)
on:
Investments 1,756 1,771 326 1,197 62 39
Foreign currency
transactions (7) (2) - - - -
Change in net unrealized
appreciation/depreciation of:
Investments 3,115 3,623 2,771 1,737 2,947 978
Foreign currency
translations - - - - - (1)
---------- ------------ ----------- -------------- ------------ -------------
Increase in net assets
resulting from operations 5,134 5,843 3,824 4,309 3,027 1,079
---------- ------------ ----------- -------------- ------------ -------------
Distributions to
shareholders from:
Net investment income (48) (449) - (1,372) - -
---------- ------------ ----------- -------------- ------------ -------------
Net realized gains (347) (1,428) (955) (234) - -
---------- ------------ ----------- -------------- ------------ -------------
From capital share
transactions:
Proceeds from shares sold 5,084 7,927 7,041 8,615 35,572 20,758
Shares issued for
dividends reinvested 394 1,876 955 1,606 - -
Cost of shares redeemed (11,003) (940) (1,117) (8,845) (4) (10)
---------- ------------ ----------- -------------- ------------ -------------
Increase (decrease) in
net assets from capital
share transactions (5,525) 8,863 6,879 1,376 35,568 20,748
---------- ------------ ----------- -------------- ------------ -------------
Net increase (decrease) in
net assets (786) 12,829 9,748 4,079 38,595 21,827
Net assets:
Beginning of period 37,535 24,706 30,390 26,311 - -
---------- ------------ ----------- -------------- ------------ -------------
End of period $ 36,749 $ 37,535 $ 40,138 $ 30,390 $ 38,595 $ 21,827
========== ============ =========== ============== ============ =============
Undistributed net investment
income included in net
assets:
Beginning of period $ 48 $ - $ 3 $ - $ - $ -
========== ============ =========== ============== ============ =============
End of period $ 263 $ 48 $ 730 $ 3 $ 18 $ 63
========== ============ =========== ============== ============ =============
Change in shares
outstanding:
Shares sold 380 642 525 679 3,459 2,039
Shares issued for dividends
reinvested 29 147 71 123 - -
Shares redeemed (819) (75) (83) (655) - (1)
---------- ------------ ----------- -------------- ------------ -------------
Increase (decrease) in
shares outstanding (410) 714 513 147 3,459 2,038
========== ============ =========== ============== ============ =============
</TABLE>
1997 SEMIANNUAL REPORT B-61
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (Unaudited)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA LIFE INVESTMENT TRUST (the Trust), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company organized as a Delaware business trust consisting of seven separate
funds. The USAA Life VA Aggressive Growth and International Funds commenced
operations May 1, 1997 with an initial investment from USAA Life Insurance
Company (USAA Life). USAA Life is a wholly owned subsidiary of United Services
Automobile Association (USAA), a large, diversified financial services
institution.
The investment objectives of the Funds are as follows:
USAA LIFE VA MONEY MARKET FUND: Highest level of current income consistent
with preservation of capital and maintenance of liquidity.
USAA Life VA Income Fund: Maximum current income without undue risk to
principal.
USAA LIFE VA GROWTH AND INCOME FUND: Capital growth and current income.
USAA LIFE VA WORLD GROWTH FUND: Long-term capital appreciation
USAA LIFE VA DIVERSIFIED ASSETS FUND: Long-term capital growth, consistent
with preservation of capital and balanced by current income.
USAA LIFE VA AGGRESSIVE GROWTH FUND: Appreciation of capital.
USAA LIFE VA INTERNATIONAL FUND: Primary objective is capital appreciation.
Current income is a secondary objective.
Shares of the Funds 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.
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 Investment Company Act of 1940, as amended, all securities in
the USAA Life VA Money Market Fund are stated at amortized cost which
approximates market value.
4. Other debt and government securities are valued each business day by a
pricing service (the Service) approved by the Funds' Board of Trustees. The
Service uses the mean between quoted bid and asked prices or the last sale price
to price securities when, in the Service's judgement, these prices are readily
available and are representative of the securities' market values. For many
securities, such prices are not readily available. The Service generally prices
these securities based on methods which include consideration of yields or
prices of securities of comparable quality, coupon, maturity, and type,
indications as to values from dealers in securities, and general market
conditions.
5. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the investment advisor under the general supervision of the Board of
Trustees.
B. FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of their income to their shareholders, the Separate Account
and USAA Life. Therefore, no federal income or excise tax provision is required.
As a result of certain permanent differences between book and tax basis
accounting for investments in passive foreign investment companies,
reclassifications have been made on the statement of assets and liabilities of
the USAA Life VA World Growth Fund at December 31, 1996 to increase accumulated
undistributed net investment income by $47,807 and to decrease accumulated net
realized gain on investments by $47,807.
C. INVESTMENTS IN SECURITIES
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.
D. FOREIGN CURRENCY TRANSLATIONS
The assets of the USAA Life VA World Growth, Aggressive Growth, and
International Funds may be invested in the securities of foreign issuers. Since
the accounting records of the Funds are maintained in U.S. dollars, foreign
currency amounts are translated into U.S. dollars on the following basis:
B-62 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
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 Funds' 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/loss 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.
E. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may affect the reported amounts in the financial statements.
2) DISTRIBUTIONS
USAA LIFE VA MONEY MARKET FUND
Net investment income is accrued daily as dividends and distributed monthly
to its shareholder, the Separate Account. All net investment income
available for distribution was distributed at June 30, 1997. Distributions of
realized gains from security transactions not offset by capital losses are
made annually or as otherwise required to avoid the payment of federal taxes.
USAA LIFE VA INCOME, USAA LIFE VA GROWTH AND INCOME, USAA LIFE VA WORLD
GROWTH, USAA LIFE VA DIVERSIFIED ASSETS, USAA LIFE VA AGGRESSIVE GROWTH, AND
USAA LIFE VA INTERNATIONAL FUNDS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made to the shareholders, the
Separate Account and USAA Life, annually or as otherwise required to avoid
the payment of federal taxes. At December 31, 1996, the USAA Life VA Income
Fund had a capital loss carryover for federal income tax purposes of
approximately $480,000 which, if not offset by subsequent capital gains, will
expire in 2004. It is unlikely that the Board of Trustees of the Fund will
authorize a distribution of capital gains realized in the future until the
capital loss carryover has been utilized or expires.
3) INVESTMENT TRANSACTIONS
Purchases and sales/maturities of securities, excluding short-term securities,
for the six-month period ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
Income Growth and World Diversified Aggressive International
Fund Income Fund Growth Fund Assets Fund Growth Fund Fund
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $5,964,626 $8,886,790 $7,021,463 $10,433,659 $32,875,181 $19,332,821
Sales/Maturities $4,036,201 $6,200,832 $12,538,027 $3,763,573 $607,248 $602,208
Purchases and sales/maturities of securities for the six-month period ended June
30, 1997 for the USAA Life VA Money Market Fund were $86,744,851 and
$83,765,003, respectively.
Gross unrealized appreciation and depreciation of investments as of June 30,
1997 was as follows:
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
Income Growth and World Diversified Aggressive International
Fund Income Fund Growth Fund Assets Fund Growth Fund Fund
------------ ------------ ------------ ------------ ------------ -------------
Appreciation $1,478,795 $19,027,553 $9,659,620 $8,557,468 $3,725,519 $1,305,003
Depreciation (21,513) (115,103) (689,695) (94,776) (778,220) (326,706)
------------ ------------ ------------ ------------ ------------ -------------
Net $1,457,282 $18,912,450 $8,969,925 $8,462,692 $2,947,299 $ 978,297
============ ============ ============ ============ ============ =============
</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 and International Funds currently enter into currency
contracts only in connection with the purchase or sale of a security denominated
in a foreign currency. These contracts allow the Funds 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 Funds
foregoing the opportunity for potential profit.
1997 SEMIANNUAL REPORT B-63
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
At June 30, 1997, the terms of open foreign currency contracts were as follows
(in thousands):
USAA LIFE VA WORLD GROWTH FUND:
<TABLE>
<CAPTION>
U.S. Dollar U.S. Dollar
Value Value Unrealized
Exchange Currency to be as of Currency to be as of Appreciation
Date Delivered 6/30/97 Received 6/30/97 (Depreciation)
- -------- --------------- ----------- --------------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
7/01/97 33 U.S. Dollar $ 33 44 Australian Dollar $ 33 $ -
7/01/97 18 U.S. Dollar 18 11 British Pound 18 -
7/01/97 6 U.S. Dollar 6 10 Deutsche Mark 6 -
7/01/97 1 U.S. Dollar 1 1,023 Korean Won 1 -
7/01/97 16 U.S. Dollar 16 23 Singapore Dollar 16 -
7/01/97 53 U.S. Dollar 53 7,755 Spanish Peseta 53 -
7/01/97 15 U.S. Dollar 15 22 Swiss Franc 15 -
7/01/97 64 Brazilian Real 59 59 U.S. Dollar 59 -
7/01/97 12,746 Indonesian Rupiah 5 5 U.S. Dollar 5 -
7/02/97 55 U.S. Dollar 55 33 British Pound 55 -
7/02/97 37 U.S. Dollar 37 22 British Pound 37 -
7/02/97 41 U.S. Dollar 41 80 Dutch Guilder 41 -
7/02/97 1 U.S. Dollar 1 4 Swedish Krona 1 -
7/02/97 15 U.S. Dollar 15 22 Swiss Franc 15 -
7/02/97 1,593 Indonesian Rupiah 1 1 U.S. Dollar 1 -
7/03/97 92 U.S. Dollar 92 55 British Pound 92 -
7/03/97 1 U.S. Dollar 1 11 Swedish Krona 1 -
7/03/97 9,605 Indonesian Rupiah 4 4 U.S. Dollar 4 -
7/07/97 92 U.S. Dollar 92 1,108 Austrian Schilling 90 (2)
7/07/97 8 U.S. Dollar 8 91 Austrian Schilling 8 -
7/07/97 7 U.S. Dollar 7 86 Austrian Schilling 7 -
7/07/97 1 U.S. Dollar 1 13 Austrian Schilling 1 -
7/07/97 4,832 Indonesian Rupiah 2 2 U.S. Dollar 2 -
7/07/97 4,817 Indonesian Rupiah 2 2 U.S. Dollar 2 -
----------- ----------- --------------
$565 $563 $ (2)
=========== =========== ==============
USAA LIFE VA INTERNATIONAL FUND:
U.S. Dollar U.S. Dollar
Value Value Unrealized
Exchange Currency to be as of Currency to be as of Appreciation
Date Delivered 6/30/97 Received 6/30/97 (Depreciation)
- -------- --------------- ----------- --------------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
7/01/97 6 U.S. Dollar $ 6 10 Deutsche Mark $ 6 $ -
7/01/97 133 U.S. Dollar 133 19,387 Spanish Peseta 132 (1)
7/01/97 18 U.S. Dollar 18 11 British Pound 18 -
7/01/97 64 Brazilian Real 59 59 U.S. Dollar 59 -
7/02/97 15 U.S. Dollar 15 22 Swiss Franc 15 -
7/02/97 55 U.S. Dollar 55 33 British Pound 55 -
7/02/97 31 U.S. Dollar 31 19 British Pound 31 -
7/02/97 27 U.S. Dollar 27 53 Dutch Guilder 27 -
7/02/97 1 U.S. Dollar 1 3 Swedish Krona 1 -
7/03/97 15 U.S. Dollar 15 22 Swiss Franc 15 -
7/03/97 79 U.S. Dollar 79 48 British Pound 79 -
7/03/97 1 U.S. Dollar 1 9 Swedish Krona 1 -
7/07/97 7 U.S. Dollar 7 81 Austrian Schilling 7 -
7/07/97 1 U.S. Dollar 1 11 Austrian Schilling 1 -
7/07/97 6 U.S. Dollar 6 77 Austrian Schilling 6 -
7/15/97 201 U.S. Dollar 201 7,208 Belgian Franc 200 (1)
----------- ----------- --------------
$655 $653 $ (2)
=========== =========== ==============
</TABLE>
5) TRANSACTIONS WITH AFFILIATES
A. ADVISORY FEES
The investment policies of the Funds and 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' advisory fees are computed on an
annualized rate of .50% of the monthly average net assets of the USAA Life VA
Aggressive Growth Fund, .65% of the monthly average net assets of the USAA Life
VA International Fund, and .20% of the monthly average net assets for each of
the other Funds of the Trust for each calendar month.
B. ADMINISTRATIVE FEES
As outlined in the Underwriting and Administrative Services Agreement
(Underwriting Agreement) by and between USAA Life, the 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
Pursuant to the Underwriting Agreement, 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, .70% of the monthly average net assets of the
USAA Life VA Aggressive Growth Fund, 1.10% of the monthly average net assets of
the USAA Life VA International Fund, and .35% of the monthly average net assets
of each other Fund. Expenses include advisory fees discussed above. The
Underwriting Agreement is terminable by any party hereto upon 60 days notice to
the other parties.
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. USAA IMCO
receives no commissions or fees for this service.
B-64 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
E. BROKERAGE SERVICES
USAA Brokerage Services, a discount brokerage service of USAA IMCO, may execute
portfolio transactions for the Funds. The amount of brokerage commissions paid
to USAA Brokerage Services during the six-month period ended June 30, 1997 for
the USAA Life VA Growth and Income and USAA Life VA Aggressive Growth Funds were
$200 and $1,092, respectively.
F. SHARE OWNERSHIP
At June 30, 1997, USAA Life owned 1,810,828 shares (79.5%) of the USAA Life VA
Income Fund, 1,222,605 shares (31.8%) of the USAA Life VA Growth and Income
Fund, 1,431,615 shares (56.6%) of the USAA Life VA World Growth Fund, 1,641,084
shares (57.4%) of the USAA Life VA Diversified Assets Fund, 3,404,140 shares
(98.4%) of the USAA Life VA Aggressive Growth Fund, and 1,966,194 shares (96.5%)
of the USAA Life VA International Fund. All other shares are owned by the
Separate Account.
Certain trustees and officers of the Funds are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Funds.
1997 SEMIANNUAL REPORT B-65
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
6) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA
Money Market Fund Income Fund Growth and Income Fund
------------------------------------ ------------------------------------ ------------------------------------
Six-Month Six-Month Six-Month
Period Ended Year Ended December 31, Period Ended Year Ended December 31, Period Ended Year Ended December 31,
June 30, 1997 1996 1995* June 30, 1997 1996 1995* June 30, 1997 1996 1995*
------------- ---------- ----------- ------------- -------- ----------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 10.51 $ 11.32 $ 10.00 $ 15.06 $ 12.60 $ 10.00
Net investment income .03 .05(b) .06(b) .38 .92 .78(b) .15 .26 .34(b)
Net realized and
unrealized gain (loss) - - - (.07) (.84) 1.61 2.39 2.79 2.83
Distributions of
net investment income (.03) (.05) (.06) (.03) (.89) (.76) - (.26) (.30)
Distributions of
realized capital gains - - - - - (.31) (.10) (.33) (.27)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 10.79 $ 10.51 $ 11.32 $ 17.50 $ 15.06 $ 12.60
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return (%)*** 2.58 5.25 5.69 2.98 .67 23.88 16.88 24.13 31.72
Net assets at end
of period (000) $14,881 $11,245 $ 7,802 $24,595 $24,049 $25,823 $67,216 $55,932 $28,761
Ratio of expenses to
average net assets (%) .35(a)(c) .35(c) .35(a)(c) .35(a)(c) .35(c) .35(a)(c) .35(a)(c) .35(c) .35(a)(c)
Ratio of net investment
income to average net
assets (%) 5.17(a)(c) 5.10(c) 5.55(a)(c) 7.24(a)(c) 6.99(c) 7.07(a)(c) 1.98(a)(c) 2.25(c) 2.82(a)(c)
Portfolio turnover (%) - - - 17.21 97.74 55.08 10.63 14.55 17.73
Average commission rate
paid per share+ - - - $ .0500 $ .0500 $ .0400 $ .0498 $ .0490 $ .0489
- ------------------------------------------------------------------------------------------------------------------------------------
* Funds commenced operations January 5, 1995.
** Funds commenced operations May 1, 1997.
*** Assumes reinvestment of all dividend income and capital gains distributions
during the period. Total returns for each period do not reflect insurance
expenses that apply at the Separate Account level, such as risk and expense
charges. These expenses would reduce the total return for the period shown.
+ Calculated by aggregating all commissions paid on the purchase and sale of
securities and dividing by the actual number of shares purchased or sold
for which commissions were charged.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
(c) The information contained in the above 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:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets (%) .90(a) 1.24 2.29(a) .64(a) .65 .65(a) .40(a) .53 .66(a)
Ratio of net investment
income to average net
assets (%) 4.62(a) 4.21 3.61(a) 6.95(a) 6.69 6.77(a) 1.93(a) 2.07 2.51(a)
</TABLE>
B-66 SEMIANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
World Growth Fund Diversified Assets Fund
--------------------------------------- ---------------------------------------
Six-Month Six-Month
Period Ended Year Ended December 31, Period Ended Year Ended December 31,
June 30, 1997 1996 1995* June 30, 1997 1996 1995*
------------- ---------- ----------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 12.77 $ 11.10 $ 10.00 $ 12.95 $ 11.96 $ 10.00
Net investment income .11 .18 .17(b) .26 .62 .55(b)
Net realized and
unrealized gain (loss) 1.81 2.16 1.79 1.17 1.10 2.08
Distributions of
net investment income (.02) (.16) (.16) - (.62) (.53)
Distributions of
realized capital gains (.14) (.51) (.70) (.35) (.11) (.14)
------- ------- ------- ------- ------- -------
Net asset value at
end of period $ 14.53 $ 12.77 $ 11.10 $ 14.03 $ 12.95 $ 11.96
======= ======= ======= ======= ======= =======
Total return (%)*** 15.09 21.12 19.55 11.16 14.30 26.33
Net assets at end
of period (000) $36,749 $37,535 $24,706 $40,138 $30,390 $26,311
Ratio of expenses to
average net assets (%) .65(a)(c) .65(c) .65((a)(c) .35(a)(c) .35(c) .35(a)(c)
Ratio of net investment
income to average
net assets (%) 1.44(a)(c) 1.45(c) 1.55(a)(c) 4.19(a)(c) 4.46(c) 4.93(a)(c)
Portfolio turnover (%) 19.90 57.66 78.86 11.09 43.75 58.87
Average commission rate
paid per share+ $ .0055 $ .0006 $ .0076 $ .0574 $ .0471 $ .0482
USAA Life VA USAA Life VA
Aggressive International
Growth Fund Fund
------------- -------------
Two-Month Two-Month
Period Ended Period Ended
June 30, 1997** June 30, 1997**
------------- -------------
<S> <C> <C>
Net asset value at
beginning of period $ 10.00 $ 10.00
Net investment income .01(b) .05(b)
Net realized and
unrealized gain (loss) 1.15 .66
Distributions of
net investment income - -
Distributions of
realized capital gains - -
------- -------
Net asset value at
end of period $ 11.16 $ 10.71
======= =======
Total return (%)*** 11.60 7.10
Net assets at end
of period (000) $38,595 $21,827
Ratio of expenses to
average net assets (%) .70(a)(c) 1.10(a)(c)
Ratio of net investment income
to average net assets (%) .46(a)(c) 2.19(a)(c)
Portfolio turnover (%) 3.24 4.99
Average commission rate
paid per share+ $ .0475 $ .0085
- ------------------------------------------------------------------------------------------------------------------------------------
* Funds commenced operations January 5, 1995.
** Funds commenced operations May 1, 1997.
*** Assumes reinvestment of all dividend income and capital gains distributions
during the period. Total returns for each period do not reflect insurance
expenses that apply at the Separate Account level, such as risk and expense
charges. These expenses would reduce the total return for the period shown.
+ Calculated by aggregating all commissions paid on the purchase and sale of
securities and dividing by the actual number of shares purchased or sold
for which commissions were charged.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
(c) The information contained in the above 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:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets (%) .66(a) .82 .87(a) .52(a) .61 .64(a) 1.01(a) 1.66(a)
Ratio of net investment
income to average net
assets (%) 1.43(a) 1.28 1.33(a) 4.02(a) 4.20 4.64(a) .15(a) 1.63(a)
</TABLE>
1997 SEMIANNUAL REPORT B-67
<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.
1-800-531-4440
(456-9050 in San Antonio)
-----------------------------------------------
If you wish to discuss your particular contract,
transfer money from one fund account to another or select a payout option
call a Service Representative toll free,
Monday-Friday 8 a.m. to 5 p.m.
1-800-531-4265
-----------------------------------------------
For variable annuity unit values
call our recorded QUOTELINE,
24-hours a day, 7 days a week
1-800-531-8233
(498-6860 in San Antonio)
[LOGO OF USAA APPEARS HERE]
USAA Life Insurance Company
9800 Fredericksburg Road
San Antonio, Texas 78288
Copyright (C) 1997, USAA. All rights reserved.
