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Previous: SPANISH BROADCASTING SYSTEM INC, POS AM, 1998-03-03 |
Next: DUFF & PHELPS CREDIT RATING CO, SC 13G/A, 1998-03-03 |
<PAGE>
USAA LIFE INSURANCE COMPANY
VARIABLE ANNUITY
- -------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
[LOGO OF USAA APPEARS HERE]
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
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.
PRESIDENT'S MESSAGE .......................................................... 3
USAA LIFE VARIABLE ANNUITY SEPARATE ACCOUNT............................A-5--A-15
Overview of the Variable Annuity Fund Accounts............................. A-6
Independent Auditors' Report............................................... A-7
Statements 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
Independent Auditors' Report............................................... B-37
USAA Life VA Money Market Fund Portfolio of Investments in Securities...... B-38
USAA Life VA Income Fund Portfolio of Investments in Securities............ B-40
USAA Life VA Growth and Income Fund Portfolio of Investments in Securities B-41
USAA Life VA World Growth Fund Portfolio of Investments in Securities...... B-43
USAA Life VA Diversified Assets Fund Portfolio of Investments in Securities B-48
USAA Life VA Aggressive Growth Fund Portfolio of Investments in Securities. B-50
USAA Life VA International Fund Portfolio of Investments in Securities..... B-53
Notes to Portfolios of Investments in Securities........................... B-57
Statements of Assets and Liabilities....................................... B-58
Statements of Operations................................................... B-59
Statement 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-89
Letter from the Fund's President........................................... C-71
Capital Growth Portfolio Management Discussion............................. C-72
Capital Growth Portfolio Summary........................................... C-74
Investment Portfolio....................................................... C-75
Financial Statements....................................................... C-78
Financial Highlights....................................................... C-81
Notes to Financial Statements.............................................. C-83
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO................................... D-91-104
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
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE VARIABLE ANNUITY ANNUAL REPORT
PRESIDENT'S MESSAGE
FROM THE DESK OF ED ROSANE
[PHOTO OF ED ROSANE APPEARS HERE]
1997 drew to a close with a stronger than expected economy. The Dow closed at
7908.25 on December 31, an increase of 18.47% over 1996's year-end close. 1997
was also a year of solid returns for the fund accounts which comprise USAA
Life's Variable Annuity. An overview of historical performance, as well as
accumulation unit values, can be found on page A-6 of this Report. We issued an
additional 2,200 contracts bringing the total number of contractowners in 1997
to 5,873.
1997 ANNUAL REPORT 3
<PAGE>
USAA LIFE VARIABLE ANNUITY ANNUAL REPORT
PRESIDENT'S MESSAGE
A TIME OF CHANGES
- -----------------
IMPROVEMENTS TO OUR CONTRACT
On January 1, 1998, USAA Life lowered Variable Annuity mortality and expense
(M&E) risk charges 38% in a continuing effort to provide greater value for
your long-term investments. The M&E charge makes it possible for us to offer
the guaranteed death benefit which provides added protection and payout
options which can guarantee income for life. These important benefits can
only be found in an annuity.
This reduction also allows more money to remain in the contract working for you.
At a quick glance, it may not seem like the lower M&E will make much of a
difference. But factor in another of the contract's more popular features - the
power of tax-deferred earnings - and you may find that the value of your
contract may increase substantially over time. To fully appreciate the impact of
this reduction, compare the contract's old pricing structure with the new lower
M&E based on the following example.
Initial
Investment 10 Years 20 Years 30 Years
---------- -------- -------- --------
New Lower M&E (.65%) $5,000 $ 88,131 $290,461 $780,550
Old M&E (1.05%) $5,000 $ 86,120 $276,470 $720,932
This example updates the Nonqualified Variable Annuity Tax-Deferred Accumulation
graph as it appears on page 29A of your May 1,1997 prospectus. It assumes an
initial after-tax investment of $5,000 and that additional contributions of $400
are made at the beginning of each month. It further assumes a 10% rate of return
and reflects the deduction of all charges under the Variable Annuity contract.
This hypothetical example is for illustrative purposes only.
I think you will also be pleased to note that USAA Life's M&E charge is 42%
lower and total insurance charges are 41% lower than the average industry
contract. Here are the details as they are reported by Morningstar, Inc., an
independent organization that monitors the performance of variable annuities:
Average
Industry
USAA Life Contract
--------- ----------
M&E charge .65% 1.12%
- ------------------------------------------------------------
Administration Expense .10 .14
- ------------------------------------------------------------
Distribution Expense 0 .01
- ------------------------------------------------------------
Total Insurance Expenses .75% 1.27%
TAXPAYER RELIEF ACT
CREATES NEW
OPPORTUNITIES
- --------------------
At this time, I would also like to comment on the Taxpayer Relief Act of 1997
which provides Americans with new opportunities to save more for retirement.
Many will spend hours sorting through the details, evaluating options, and
changing strategies. But before making any changes, you should also review
your objectives, risk tolerance, and retirement horizon which will provide
important information. Then when considering your options, don't forget these
features which can be found only with a Variable Annuity:
FLEXIBILITY. Money can be moved among the investment options without creating
a taxable event.
LESS RECORD KEEPING. The insurance company keeps tax basis records for your
annuity. With other investments, your capital gains tax rate will depend on
the type of investment - when it was purchased and when it was sold - and you
will be responsible for keeping track of this information.
DEFERRAL OF TAXES. Over time, tax-deferred earnings and compounding may
significantly impact the value of your Variable Annuity. Even with the
lowering of capital gains tax rates, tax deferral is still a valuable feature
of annuities - especially for those who have longer retirement horizons.
ESTATE BENEFITS. Contract proceeds pass directly to your beneficiary avoiding
the cost and delays of probate.
LOOKING FORWARD
- ---------------
When the Variable Annuity was introduced three years ago, it was one of the
most competitive contracts available. In 1997, two investment options were
added to provide a broader range of diversification. On January 1, 1998 we
improved the inherent value of the contract by reducing the M&E. Later this
year, we plan to add even more options to the Variable Annuity's investment
lineup. The continued improvements we make, enable USAA Life to provide a
contract that offers greater value and more choices - important features you
require for your financial portfolio.
I encourage you to call a USAA Life Account Representative at any time if you
would like to discuss your financial situation, the details of our contract,
or information found in this Report.
1-800-531-2923
(456-9035 in San Antonio)
Sincerely,
/s/ Edwin L. Rosane
- ---------------------------
Edwin L. Rosane, CLU, FLMI
President
USAA Life Insurance Company
4 ANNUAL REPORT 1997
<PAGE>
USAA LIFE
VARIABLE ANNUITY
SEPARATE ACCOUNT
- -------------------------------------------------------------------------------
ANNUAL REPORT
December 31, 1997
[USAA LOGO APPEARS HERE]
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------------------------------------------------------------------
AN OVERIVEW
Variable Annuity Fund Accounts December 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
AUV Average
Accumulation AUV Average Annual
Inception Unit Value Annual Total Return Total Return
Objective Date (AUV) One Year Since Inception
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USAA LIFE VA Seeks the highest level of
MONEY MARKET current income consistent 2/6/95 $1.13 3.95% 4.13%
FUND ACCOUNT with preservation of capital
and maintenance of liquidity
- ----------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks maximum current
INCOME FUND income without undue risk 2/6/95 $13.00 10.14% 9.36%
ACCOUNT to principal
- ----------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks capital growth and
GROWTH AND current income 2/6/95 $19.29 24.83% 25.23%
INCOME FUND
ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Seeks long-term capital
WORLD GROWTH appreciation 2/6/95 $16.14 12.62% 17.82%
FUND ACCOUNT/1/
- ----------------------------------------------------------------------------------------------------------------------------------
Seeks long-term capital
USAA LIFE VA growth, consistent with 2/6/95 $16.52 19.15% 18.74%
DIVERSIFIED ASSETS preservation of capital and
FUND ACCOUNT balanced by current income
- ----------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA
AGGRESSIVE GROWTH Appreciation of capital 5/1/97 $11.74 NA 17.24%/2/
FUND ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
USAA LIFE VA Capital appreciation with
INTERNATIONAL FUND current income as a 5/1/97 $10.11 NA 1.03%/2/
ACCOUNT/1/ secondary objective
- ----------------------------------------------------------------------------------------------------------------------------------
SCUDDER VLIF
CAPITAL GROWTH Seeks to maximize long- 2/6/95 $19.99 34.05% 26.78%
PORTFOLIO term capital growth
FUND ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN
GROWTH PORTFOLIO Seeks long-term capital
FUND ACCOUNT appreciation 2/6/95 $18.24 24.15% 22.86%
- ----------------------------------------------------------------------------------------------------------------------------------
</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
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.
A-6 ANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF USAA LIFE INSURANCE COMPANY AND
CONTRACTOWNERS OF THE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY:
We have audited the accompanying statements of assets and liabilities as of
December 31, 1997, the related statements of operations for the year ended
December 31, 1997, the statements of changes in net assets for each of the
years in the two-year period ended December 31, 1997, and the unit value
information presented in note 5 for the periods ended December 31, 1997, 1996
and 1995 for the USAA Life Variable Annuity (VA) Money Market Fund Account,
USAA Life VA Income Fund Account, USAA Life VA Growth and Income Fund
Account, USAA Life VA World Growth Fund Account, USAA Life VA Diversified
Assets Fund Account, the 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 statements of assets and liabilities as of December 31, 1997,
the related statements of operations, changes in net assets, and unit value
information presented in note 5, for the period from May 1, 1997
(commencement of operations) through December 31, 1997, for USAA Life VA
Aggressive Growth Fund Account and USAA Life VA International Fund Account,
available within the Separate Account of USAA Life Insurance Company. These
financial statements are the responsibility of the Separate Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investments owned at December 31, 1997 were verified by examination of the
underlying portfolios of the USAA Life Investment Trust or through
confirmation for the Scudder and Alger Funds' portfolios. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the aforementioned fund
accounts of the Separate Account of USAA Life Insurance Company as of
December 31, 1997, the results of their operations for the year or period
ended December 31, 1997, the changes in their net assets for each of the
years or periods in the two-year period ended December 31, 1997, and the unit
value information, as described in the first paragraph, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG PEAT MARWICK LLP
San Antonio, Texas
February 11, 1998
1997 ANNUAL REPORT A-7
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
VARIABLE ANNUITY FUND ACCOUNTS (In Thousands) December 31, 1997
Investment at
Fund Shares Cost Market Value
----------- --------- ---------------
<S> <C> <C> <C>
ASSETS
Investments at market value:
USAA Life VA Money Market Fund 15,131 $ 15,131 $ 15,131
USAA Life VA Income Fund 646 7,078 7,082
USAA Life VA Growth and Income Fund 3,482 55,726 62,606
USAA Life VA World Growth Fund 1,416 18,714 18,894
USAA Life VA Diversified Assets Fund 1,602 21,677 23,197
USAA Life VA Aggressive Growth Fund 198 2,513 2,320
USAA Life VA International Fund 154 1,658 1,544
Scudder VLIF Capital Growth Portfolio - Class A shares 1,090 18,943 22,483
Alger American Growth Portfolio 738 25,695 31,540
--------- -----------
Total investments $ 167,135 184,797
Other assets:
Receivable from USAA Life Insurance Company 2
-----------
Total assets 184,799
LIABILITIES
Payable to USAA Life Insurance Company 12
-----------
Net Assets $ 184,787
===========
Fund Account Units Unit Price Annuity Reserves
------------------ ---------- ----------------
NET ASSETS
Deferred annuity contracts in the accumulation period:
USAA Life VA Money Market Fund Account 13,416 $ 1.127755 $ 15,130
USAA Life VA Income Fund Account 544 13.002940 7,080
USAA Life VA Growth and Income Fund Account 3,242 19.287258 62,537
USAA Life VA World Growth Fund Account 1,168 16.144375 18,849
USAA Life VA Diversified Assets Fund Account 1,401 16.518656 23,142
USAA Life VA Aggressive Growth Fund Account 198 11.735078 2,320
USAA Life VA International Fund Account 153 10.113861 1,544
Scudder VLIF Capital Growth Portfolio Fund Account 1,125 19.989715 22,484
Alger American Growth Portfolio Fund Account 1,722 18.239579 31,404
-----------
Net assets attributable to contractowners' deferred annuity reserves 184,490
Annuity contracts in the annuity period:
USAA Life VA Growth and Income Fund Account 4 17.701919 69
USAA Life VA World Growth Fund Account 3 14.817374 43
USAA Life VA Diversified Assets Fund Account 3 15.160881 48
Alger American Growth Portfolio Fund Account 8 16.740346 137
-----------
Net assets attributable to contractowners' annuity payment reserves 297
-----------
Net assets $ 184,787
==========
</TABLE>
See accompanying "Notes to Financial Statements" on page A-12.
A-8 ANNUAL REPORT 1997
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
Variable Annuity Fund Accounts (In Thousands) Year Ended December 31, 1997
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 Fund Fund Fund Fund Fund
Account Account Account Account Account Account
---------- ---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income dividends and capital
gains distributions $ 768 $ 452 $ 3,355 $ 1,557 $ 1,539 $ 24
---------- ---------- ----------- ----------- ------------ -------------
Expenses
Mortality and expense
risk charge 154 56 476 163 176 10
Administrative charge 15 5 45 16 17 1
---------- ---------- ----------- ----------- ------------ -------------
Total expenses 169 61 521 179 193 11
---------- ---------- ----------- ----------- ------------ -------------
Net investment
income (loss) 599 391 2,834 1,378 1,346 13
---------- ---------- ----------- ----------- ------------ -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) - (1) 1,125 332 249 115
Change in net unrealized
appreciation/depreciation - 150 5,197 (217) 1,327 (193)
---------- ---------- ----------- ----------- ------------ -------------
Net realized and
unrealized gain
on investments - 149 6,322 115 1,576 (78)
---------- ---------- ----------- ----------- ------------ -------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 599 $ 540 $ 9,156 $ 1,493 $ 2,922 $ (65)
========== ========== =========== =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
Scudder VLIF Alger
USAA Life Capital American
VA International Growth Growth
Fund Fund Portfolio Fund
Account Account Account
---------- ---------- -----------
<S> <C> <C> <C>
NET INVESTMENT INCOME:
Income dividends and capital
gains distributions $ 22 $ 1008 $ 256
---------- ---------- -----------
Expenses
Mortality and expense
risk charge 8 171 300
Administrative charge 1 16 28
---------- ---------- -----------
Total expenses 9 187 328
---------- ---------- -----------
Net investment
income (loss) 13 821 (72)
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain (loss) 11 464 1,524
Change in net unrealized
appreciation/depreciation (114) 2,765 4,490
---------- ---------- -----------
Net realized and
unrealized gain
on investments (103) 3,229 6,014
---------- ---------- -----------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (90) $ 4,050 $ 5,942
========== ========== ===========
</TABLE>
See accompanying "Notes to Financial Statements" on page A-12
1997 ANNUAL REPORT A-9
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
VARIABLE ANNUITY FUND ACCOUNTS (In Thousands) Years Ended December 31,
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World
Market VA Income and Income Growth
Fund Account Fund Account Fund Account Fund Account
--------------------- --------------------- ------------------- ----------------------
1997 1996 1997 1996 1997 1996 1997 1996
--------------------- --------------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ 599 $ 375 $ 391 $ 346 $ 2,834 $ 730 $ 1,378 $ 428
Net realized gain (loss)
on investment transactions - - (1) (77) 1,125 241 332 106
Change in net unrealized
appreciation/depreciation - - 150 (111) 5,197 1,670 (217) 437
--------- -------- --------- -------- ------- -------- --------- ---------
Increase in net assets
resulting from operations 599 375 540 158 9,156 2,641 1,493 971
--------- -------- --------- -------- ------- -------- --------- ---------
FROM CONTRACT TRANSACTIONS:
Units sold 60,064 62,988 3,968 7,926 33,823 20,119 9,018 7,927
Units redeemed (56,776) (57,822) (2,501) (4,062) (3,790) (1,917) (1,567) (874)
--------- -------- --------- -------- ------- -------- --------- ---------
Increase in net assets
from contract transactions 3,288 5,166 1,467 3,864 30,033 18,202 7,451 7,053
--------- -------- --------- -------- ------- -------- --------- ---------
Net increase in net assets 3,887 5,541 2,007 4,022 39,189 20,843 8,944 8,024
NET ASSETS:
Beginning of period 11,243 5,702 5,073 1,051 23,417 2,574 9,948 1,924
--------- -------- --------- -------- ------- -------- --------- ---------
End of period $ 15,130 $ 11,243 $ 7,080 $ 5,073 $62,606 $ 23,417 $ 18,892 $ 9,948
========= ======== ========= ======== ======= ======== ========= =========
CHANGE IN UNITS OUTSTANDING:
Units sold 58,727 60,478 348 729 1,980 1,457 594 605
Units redeemed (55,694) (55,573) (234) (388) (252) (144) (118) (71)
--------- -------- --------- -------- ------- -------- --------- ---------
Increase in units outstanding 3,033 4,905 114 341 1,728 1,313 476 534
========= ======== ========= ======== ======= ======== ========= =========
</TABLE>
* Fund accounts commenced operations on May 1, 1997.
See accompanying "Notes to Financial Statements" on page A-12.
A-10 ANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
VARIABLE ANNUITY FUND ACCOUNTS (In Thousands) Years Ended December 31,
<TABLE>
<CAPTION>
USAA Life USAA Life Scudder VLIF
VA Diversified VA Aggressive USAA Life Capital Growth Alger American
Assets Growth VA International Portfolio Growth Portfolio
Fund Account Fund Account Fund Account Fund Account Fund Account
- ------------------- ------------ ------------ ------------------- --------------------
1997 1996 1997* 1997* 1997 1996 1997 1996
- ------------------- ------------ ------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,346 $ 444 $ 13 $ 13 $ 821 $ 174 $ (72) $ 280
249 65 115 11 464 41 1,524 382
1,327 192 (193) (114) 2,765 743 4,490 1,269
-------- -------- -------- -------- -------- -------- -------- --------
2,922 701 (65) (90) 4,050 958 5,942 1,931
- -------- -------- -------- -------- -------- -------- -------- --------
12,395 8,616 3,066 1,912 11,094 8,781 9,279 19,923
(1,802) (689) (681) (278) (2,926) (638) (7,848) (5,931)
- -------- -------- -------- -------- -------- -------- -------- --------
10,593 7,927 2,385 1,634 8,168 8,143 1,431 13,992
- -------- -------- -------- -------- -------- -------- -------- --------
13,515 8,628 2,320 1,544 12,218 9,101 7,373 15,923
9,675 1,047 - - 10,266 1,165 24,168 8,245
- -------- -------- -------- -------- -------- -------- -------- --------
$ 23,190 $ 9,675 $ 2,320 $ 1,544 $ 22,484 $ 10,266 $ 31,541 $ 24,168
======== ======== ======== ======== ======== ======== ======== ========
846 668 259 180 626 647 592 1,462
(141) (55) (61) (27) (190) (51) (510) (444)
- -------- -------- -------- -------- -------- -------- -------- --------
705 613 198 153 436 596 82 1,018
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
1997 ANNUAL REPORT A-11
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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-6 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 Statements of Assets
and Liabilities at net asset value as reported by the fund. Gains or losses on
securities transactions are determined on the basis of the first-in first-out
(FIFO) cost method. Security transactions are recorded on the trade date.
Dividend income, if any, is recorded on ex-dividend date.
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.
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.
A-12 ANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) December 31, 1997
3) RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, advisory fees of $597,854 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.
Effective January 1, 1998, this charge will be reduced to 0.65% of the daily
net asset value of each variable annuity fund account
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 through a redemption of units from the accumulated
value of each contract. This charge will apply only while the contract is in the
accumulation phase. For the year ended December 31, 1997, contract maintenance
charges totaled $105,852 and such charges have been classified as contract
redemptions.
Any premium tax levied by a state or government entity with respect to the
Separate Account will be charged against the contract.
1997 ANNUAL REPORT A-13
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) DECEMBER 31, 1997
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 USAA Life VA
Money Market Fund Account Income Fund Account
---------------------------------------------- -------------------------------------------
Year Ended Year Ended Period Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995(a) 1997 1996 1995(a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At end of period:
Accumulation units (000) 13,416 10,383 5,478 545 430 89
Accumulation unit value $ 1.127755 $ 1.082816 $ 1.040729 $ 13.002940 $ 11.785992 $ 11.848795
Annuity units (000) - - - - - -
Annuity unit value - - - - - -
Net assets (000) $ 15,130 $ 11,243 $ 5,702 $ 7,080 $ 5,073 $ 1,051
Ratio of expenses to
average net assets 1.50%(c) 1.50%(c) 1.50%(c)(d) 1.50%(c) 1.50%(c) 1.50%(c)(d)
</TABLE>
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Growth and Income Fund Account World Growth Fund Account
---------------------------------------------- -------------------------------------------
Year Ended Year Ended Period Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995(a) 1997 1996 1995(a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At end of period:
Accumulation units (000) 3,242 1,515 205 1,168 692 161
Accumulation unit value $19.287258 $15.432048 $12.579981 $16.144375 $14.314911 $11.947438
Annuity units (000) 4 3 - 3 3 -
Annuity unit value $17.701919 $14.588560 - $14.817374 $13.532488 -
Net assets (000) $ 62,606 $ 23,417 $ 2,574 $ 18,892 $ 9,948 $ 1,924
Ratio of expenses to average
net assets 1.49% 1.50%(c) 1.50%(c)(d) 1.74% 1.80%(c) 1.80%(c)(d)
</TABLE>
(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:
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
1997 1996 1995(a)(d)
------------ ------------ ------------
<S> <C> <C> <C>
USAA Life VA Money Market Fund Account 1.85% 2.39% 3.44%
USAA Life VA Income Fund Account 1.67% 1.80% 1.80%
USAA Life VA Growth and Income Fund Account NA 1.68% 1.81%
USAA Life VA World Growth Fund Account NA 1.97% 2.02%
USAA Life VA Diversified Assets Fund Account 1.57% 1.76% 1.79%
USAA Life VA Aggressive Growth Fund Account 2.00% NA NA
USAA Life VA International Fund Account 2.39% NA NA
</TABLE>
(d) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
A-14 ANNUAL REPORT 1997
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) DECEMBER 31, 1997
<TABLE>
<CAPTION>
USAA Life
VA Agressive USAA Life
Growth VA International
USAA Life VA Diversified Assets Fund Account Fund Account Fund Account
- -------------------------------------------- ------------ -------------------
Year Ended Year Ended Period Ended Period Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995(a) 1997(b) 1997(b)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,401 696 86 197 153
$16.518656 $13.844197 $12.243941 $11.735078 $10.113861
3 3 - - -
$15.160881 $13.087484 - - -
$ 23,190 $ 9,675 $ 1,047 $ 2,320 $ 1,544
1.50%(c) 1.50%(c) 1.50%(c)(d) 1.85%(c)(d) 2.25%(c)(d)
</TABLE>
<TABLE>
<CAPTION>
Scudder VLIF Capital Growth Portfolio Alger American Growth Portfolio
Fund Account Fund Account
- -------------------------------------------- ----------------------------------------------
Year Ended Year Ended Period Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995(a) 1997 1996 1995(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,125 689 93 1,722 1,639 630
$19.989715 $14.894774 $12.543192 $18.239579 $14.672583 $13.095503
- - - 8 9 -
- - - $16.740346 $13.870587 -
$ 22,484 $ 10,266 $ 1,165 $ 31,541 $ 24,168 $ 8,245
1.66% 1.68% 1.72%(d) 1.94% 1.94% 2.00%(d)
</TABLE>
1997 ANNUAL REPORT A-15
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE
INVESTMENT TRUST
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
[LOGO OF USAA APPEARS HERE]
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
<TABLE>
<CAPTION>
IBC/Donoghue's IBC/Donoghue's
USAA Life VA Money Fund USAA Life VA Money Fund
Money Market Averages(TM)/ Money Market Averages(TM)/
Date Fund First Tier Date Fund First Tier
- ---------- ------------ --------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
01/31/95 5.77% 5.24% 07/30/96 5.08 4.74
02/28/95 5.70 5.46 08/27/96 5.05 4.73
03/30/95 5.84 5.49 09/24/96 5.10 4.75
04/25/95 5.76 5.47 10/29/96 4.97 4.75
05/30/95 5.74 5.45 11/26/96 5.03 4.75
06/27/95 5.79 5.41 12/31/96 5.23 4.82
07/25/95 5.51 5.29 01/28/97 5.12 4.75
08/29/95 5.45 5.22 02/25/97 5.01 4.73
09/26/95 5.42 5.18 03/25/97 5.05 4.74
10/31/95 5.50 5.18 04/29/97 5.26 4.89
11/28/95 5.68 5.19 05/27/97 5.32 4.93
12/28/95 5.52 5.14 06/24/97 5.25 4.94
01/30/96 4.99 4.97 07/29/97 5.21 4.93
02/27/96 5.00 4.74 08/26/97 5.26 4.93
03/26/96 5.03 4.68 09/30/97 5.24 4.95
04/30/96 5.00 4.68 10/28/97 5.29 4.93
05/28/96 5.04 4.67 11/25/97 5.30 4.96
06/25/96 5.06 4.71 12/30/97 5.54 5.07
</TABLE>
DATA REPRESENTS 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
With the Federal Reserve policymakers leaving rates unchanged since their
last action in March 1997, the money market arena has been uneventful.
Financial markets have focused on the crises in Asia and the potential impact
on the U.S. economy. Growth in the U.S. is expected to slow during 1998 but
the economic expansion we have enjoyed since 1991 should continue.
STRATEGY
Our strategy is governed by the free-look period of the Variable Annuity.
This necessitates that we manage the VA Money Market Fund with relatively
short maturities, usually 7 to 16 days. Principally 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
will vary based on availability and cash needs.
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.
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.
AS OF DECEMBER 31, 1997
SIMPLE 7-DAY YIELD: 5.55%
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
One Year: 5.35%
Since Inception
January 5, 1995: 5.43%
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 ANNUAL REPORT B-19
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
PERFORMANCE
According to Lipper Analytical Services/1/, compared to other variable annuity
money market funds, USAA Life's VA Money Market Fund ranked 18 out of 103
funds for average annual NAV total return for the 12 months ended December
31, 1997. The total return for the VA Money Market Fund was 5.35% compared to
a 5.13% average for all variable annuity money market funds.
/1/ Lipper Analytical Services is an independent organization that monitors the
performance of variable annuity funds.
PORTFOLIO MIX
AS A PERCENTAGE OF NET ASSETS*
as of December 31, 1997
U.S. Agency
Discount Notes Commercial Paper
37.9% 27.0%
[CHART APPEARS HERE]
Variable Rate
Demand Notes
33.7%
* Percentages are of Net Assets and may or may not be equal to 100%.
B-20 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
Lehman Brothers
USAA Life VA Aggregate Bond Lipper A Rated
Date Income Fund Index Bond Fund Index
---- ----------- -------------- ---------------
01/05/95 $10,000.00 $10,000.00 $10,000.00
01/31/95 10,290.00 10,198.00 10,178.00
02/28/95 10,520.00 10,440.71 10,424.31
03/31/95 10,530.00 10,504.40 10,500.41
04/30/95 10,700.00 10,651.46 10,650.56
05/31/95 11,210.00 11,063.67 11,127.71
06/30/95 11,220.00 11,144.44 11,206.71
07/31/95 11,200.00 11,119.92 11,151,80
08/31/95 11,400.00 11,254.47 11,306.81
09/30/95 11,650.00 11,363.64 11,428,92
10/31/95 11,870.00 11,511.37 11,601.50
11/30/95 12,100.00 11,684.04 11,791.76
12/31/95 12,388.65 11,847.61 11,981.61
01/31/96 12,454.32 11,925.81 12,037.93
02/29/96 12,027.50 11,718.30 11,765.87
03/31/96 11,863.34 11,636.27 11,670.57
04/30/96 11,688.23 11,571.11 11,578.37
05/31/96 11,666.35 11,547.97 11,552.90
06/30/96 11,863.34 11,702.71 11,697.31
07/31/96 11,830.51 11,734.31 11,721.87
08/31/96 11,786.73 11,714.36 11,685.53
09/30/96 12,005.61 11,918.19 11,901.72
10/31/96 12,333.93 12,182.77 12,190.93
11/30/96 12,585.65 12,391.10 12,435.96
12/31/96 12,472.26 12,275.86 12,292.95
01/31/97 12,519.73 12,313.92 12,310.16
02/28/97 12,567.20 12,344.70 12,352.02
03/29/97 12,329.85 12,207.67 12,180.32
04/30/97 12,495.99 12,390.79 12,350.85
05/31/97 12,642.11 12,508.50 12,462.00
06/30/97 12,844.48 12,657.35 12,629.00
07/31/97 13,225.41 12,999.10 13,033.12
08/31/97 13,106.37 12,888.61 12,865.00
09/30/97 13,380.16 13,078.07 13,081.13
10/31/97 13,570.63 13,267.70 13,256.42
11/30/97 13,725.38 13,328.73 13,317.39
12/31/97 13,919.16 13,463.36 13,454.56
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 AND PERFORMANCE
The past six-months reporting period ending December 31, 1997 covered the
best bond market we have seen in two years. Interest rates for the 30-year
U. S. Treasury bond (referred to as yield) declined from 6.82% on June 30,
1997 to 6.00% on December 31, 1997 as shown on the chart below. When
interest rates (yields) decline, bond prices rise. I am pleased to report
that our VA Income Fund has performed very well during this period. In fact,
for performance from January 1 through December 31, 1997, it ranked number 1
out of 29 funds in the Lipper Variable Annuity A Rated Bond Fund category.
The VA Income Fund average annual NAV total return was 11.60% compared to an
average of 9.24% for all variable annuity funds in Lipper's category.
30-YEAR U.S. TREASURY BOND YIELD
Date Yield Date Yield
---- ----- ---- -----
06/30/97 6.82 10/03/97 6.34
07/04/97 6.65 10/10/97 6.47
07/11/97 6.56 10/17/97 6.48
07/18/97 6.56 10/24/97 6.32
07/25/97 6.48 10/31/97 6.19
08/01/97 6.48 11/07/97 6.22
08/08/97 6.68 11/14/97 6.19
08/15/97 6.60 11/21/97 6.10
08/22/97 6.70 11/28/97 6.12
08/29/97 6.66 12/05/97 6.14
09/05/97 6.68 12/12/97 6.00
09/12/97 6.62 12/19/97 6.01
09/19/97 6.41 12/26/97 5.98
09/26/97 6.41 12/31/97 6.00
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
DECEMBER 31, 1997
One Year: 11.60%
Since Inception
January 5, 1995: 11.65%
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 ANNUAL REPORT B-21
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
PORTFOLIO
The Federal Reserve appears comfortable with the outlook that inflation will
remain low, and this has calmed the bond market. In light of this more
hospitable environment, we made some changes to the portfolio. The common
stocks, primarily electric utilities which are sensitive to changes in
interest rates, were sold when their appreciating prices made their dividend
yields well below those available in bonds and preferred stocks. Additional
investments were made in REIT preferred stocks at very attractive dividend
yields. We also increased long U. S. Treasury bonds while somewhat reducing
the agency mortgage pass-through securities (FNMA and GNMA). As of December
31, 1997, the Fund's portfolio mix as percentages of net assets was 29.5% U.
S. Treasury bonds, 45.8% agency mortgage pass-through securities, 10.4%
corporate bonds, and 13.0% preferred stocks.
OUTLOOK
Asian deflation, which is expected to deepen the U. S. trade deficit,
together with a shrinking U. S. budget deficit produces an interesting
supply/demand relationship for U. S. Treasury securities. If there are more
U. S. dollars in Asian hands, and less of a need by the U. S. Treasury to
issue securities, then this could cause prices for U. S. Treasury securities
to rise (lowering interest rates) because of strong demand versus smaller
supply. We expect that U. S. inflation will continue to experience a down
trend which could also lower interest rates. In any event, the potential for
rising interest rates appears to be low for the time being. We will continue
to seek a high level of income for the Fund to enhance the compounding of
potential returns which accrue through reinvestment of income.
Top 10 Securities
as of December 31, 1997
- ------------------------------------------
Coupon % of
Rate Net Assets
1) U.S. Treasury
Bond 7.875% 29.5%
2) GNMA 7.50 10.5
3) FNMA 7.00 7.9
4) FNMA 7.50 7.0
5) GNMA 7.00 6.8
6) GNMA 8.50 4.2
7) GNMA 8.00 4.2
8) FNMA 8.50 2.8
9) FNMA 8.00 2.5
10) First Industrial
Realty Trust 8.75 2.0
B-22 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
Growth and Growth and
Date S&P 500 Index Income Fund Date S&P 500 Index Income Fund
---- ------------- ------------ ---- ------------- ------------
<S> <C> <C> <C> <C> <C>
01/05/95 $10,000.00 $10,000.00 07/31/96 14,468.87 13,841.33
01/31/95 10,259.00 10,150.00 08/31/96 14,774.16 14,343.13
02/28/95 10,658.08 10,480.00 09/30/96 15,604.47 15,033.11
03/31/95 10,972.49 10,720.00 10/31/96 16,035.16 15,357.19
04/30/95 11,295.08 11,080.00 11/30/96 17,245.81 16,339.88
05/31/95 11,745.75 11,410.00 12/31/96 16,904.34 16,350.51
06/30/95 12,018.25 11,650.00 01/31/97 17,959.17 17,023.63
07/31/95 12,416.06 11,990.00 02/28/97 18,101.05 17,164.77
08/31/95 12,447.10 12,190.00 03/31/97 17,358.91 16,676.21
09/30/95 12,972.37 12,530.00 04/30/97 18,393.50 17,175.63
10/31/95 12,925.67 12,230.00 05/31/97 19,517.34 18,401.46
11/30/95 13,491.81 12,900.00 06/30/97 20,385.86 19,111.31
12/31/95 13,752.20 13,172.27 07/31/97 22,006.54 20,378.12
01/31/96 14,219.78 13,475.44 08/31/97 20,774.17 19,766.56
02/29/96 14,352.02 13,632.25 09/30/97 21,910.52 20,640.22
03/31/96 14,489.80 14,123.60 10/31/97 21,178.71 19,810.24
04/30/96 14,702.80 14,301.32 11/30/97 22,159.28 20,399.96
05/31/96 15,080.66 14,489.49 12/31/97 22,540.42 20,671.28
06/30/96 15,137.97 14,499.95
</TABLE>
DATA REPRESENTS 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
MARKET CONDITIONS
1997 proved to be the third straight year for more than 20% appreciation in
the U.S. stock market. This trend was the result of continued earnings
growth on the part of most companies and the large net inflow of cash into
most equity investment vehicles.
As we enter 1998, two major themes appear to be driving valuations in the
U.S. stock market - the Asian economic crisis and the deflationary impact it
is having on other economies. Although we have concerns regarding these two
factors, we believe that these market issues also present opportunities. This
follows with our investment strategy of focusing on stocks with poor investor
sentiment and low valuations. Of course, we continue to analyze and
determine the ability of these value companies to recover and provide
normalized earnings and returns.
PORTFOLIO STRATEGIES
Not all of our holdings in the VA Growth and Income Fund kept pace with the U.S.
stock market's overall appreciation. Due to concerns surrounding the
deflationary impact of the economic crisis in Korea and southeast Asia, the
Fund's investment in commodity-oriented companies tended to perform poorly. Such
stocks included: Aluminum Co. of America (aluminum), Inco and Titaniam Metals
(metals/mining), Jefferson Smurfit and Weyerhaeuser (paper & forest products),
Sonat (natural gas), Unocal (oil-domestic integrated) and Apache Corp (oil &
gas-exploration and production). However, we believe that fears of deflation are
overblown and that the shares of many commodity-oriented companies will recover.
Other
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
DECEMBER 31, 1997
One Year: 26.43%
Since Inception
January 5, 1995: 27.39%
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 ANNUAL REPORT B-23
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
groups that adversely impacted our performance included: Aetna (insurance-
life/health), Humana and Pacificare (healthcare-HMO's), Boeing
(aerospace/defense), Rockwell International (electrical equipment), B.F.
Goodrich (chemicals-diversified), Waste Management (waste management), May
Department Stores (retail-department stores), and Sears (retail-general
merchandising).
In 1997, all HMOs were impacted by problems controlling costs, Boeing had
production problems, and retailers reported sluggish sales growth. We believe
these conditions will begin to improve in 1998, thus the shares of companies in
these industries should return to normal valuation levels. Therefore, we will
continue to add to our exposure in HMOs, aerospace (Boeing), and selected
retailers.
The strongest performing stocks in the VA Growth and Income Fund continue to be
in the financial area (banks, insurance, and finance). Solid earnings growth and
share repurchase activity continued to fuel price appreciation for companies in
this area. Other groups with strong performance included: automobiles (Ford);
auto parts (Lear Corp.); telecommunications - long distance (AT&T and Sprint);
and telephones (Bell Atlantic and GTE Corp.). We believe that both auto parts
and telephones still do not reflect their earnings potential and will maintain
or increase our holdings in these industries. Conversely, we are becoming less
attracted to the shares of certain financial companies as their valuations have
improved dramatically over the past few years.
TOP 10 HOLDINGS
as of December 31, 1997
- ------------------------------------------
% of
Net Assets
AT&T 2.1%
Boeing Co. 2.1
Morgan Stanley, Dean
Witter, Discover & Co. 2.1
PMI Group 2.0
Lear Corp. 1.9
Allstate 1.8
B.F. Goodrich Co. 1.8
Avery Dennison Corp. 1.7
Dow Chemical 1.7
Travelers 1.6
TOP 10 INDUSTRIES
as of December 31, 1997
- ------------------------------------------
% of
Net Assets
Insurance- Property/Casualty 6.0%
Finance - Diversified 4.2
Telecommunications -
Long Distance 3.6
Chemicals 3.0
Telephones 3.0
Oil - Domestic Integrated 2.9
Banks - Money Center 2.8
Drugs 2.8
Machinery - Diversified 2.8
Tobacco 2.6
B-24 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
USAA Life VA Morgan Stanley
Date World Growth Fund Capital Index World
---- ----------------- -------------------
01/05/95 $10,000.00 $10,000.00
01/31/95 9,710.00 9,847.00
02/28/95 9,790.00 9,987.81
03/31/95 10,160.00 10,467.23
04/30/95 10,490.00 10,829.39
05/31/95 10,920.00 10,919.28
06/30/95 11,150.00 10,913.82
07/31/95 11,710.00 11,457.33
08/31/95 11,620.00 11,199.54
09/30/95 11,770.00 11,523.20
10/31/95 11,480.00 11,338.83
11/30/95 11,650.00 11,730.02
12/31/95 11,955.58 12,070.19
01/31/96 12,321.78 12,286.25
02/29/96 12,558.74 12,358.74
03/31/96 12,849.55 12,561.42
04/30/96 13,463.49 12,854.10
05/31/96 13,592.74 12,863.10
06/30/96 13,614.28 12,926.13
07/31/96 12,935.72 12,467.25
08/31/96 13,334.24 12,608.13
09/30/96 13,668.13 13,098.59
10/31/96 13,625.05 13,187.66
11/30/96 14,379.00 13,923.53
12/31/96 14,481.01 13,697.97
01/31/97 15,036.67 13,860.97
02/28/97 15,013.99 14,017.60
03/31/97 14,866.57 13,737.25
04/30/97 15,059.35 14,183.71
05/31/97 15,931.94 15,056.01
06/30/97 16,666.03 15,804.29
07/31/97 17,480.40 16,529.71
08/31/97 16,666.03 15,420.57
09/30/97 17,652.45 16,256.36
10/31/97 16,631.62 15,398.02
11/30/97 16,356.33 15,667.49
12/31/97 16,520.54 15,855.50
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
The Fund's total return of 14.08% has outperformed the Lipper Global Funds
Average/1/ return of 13.26% for the one-year period ended December 31, 1997/2/.
As mentioned in the last two Reports, European markets have continued to perform
favorably while performance in emerging markets has been mixed. The
underweighted position in Japan has proven correct.
INTERNATIONAL
Europe - European markets provided favorable returns during the period
because of earnings growth, falling interest rates, and corporate
restructuring. Our holdings in Italy, Portugal, and the United Kingdom made
significant contributions to our European performance. In fact, we increased
our exposure to the United Kingdom because of attractive valuations and a
stable, pro-business political environment.
/1/ The Lipper Global Funds Average is an average performance level of all
global funds, as reported by Lipper Analytical Services, an independent
organization that monitors the performance of variable annuity funds.
/2/ Past performance is no guarantee of future results, and the value of your
investment may vary according to the Fund's performance.
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
DECEMBER 31, 1997
One Year: 14.08%
Since Inception
January 5, 1995: 18.22%
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 ANNUAL REPORT B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
Emerging Markets -- A series of currency devaluations in Asia has caused
turmoil and political disarray in the region. This situation has brought
about a reduction in forecasted economic growth. We believe the Brazilian
economy will be affected by the Asian slowdown; however, Argentina, Peru, and
Mexico continue to recover, driven by improving domestic economies. In
Mexico's case, stronger economic ties with the U.S. are a driving force. Our
expectations that political and economic reform would gain momentum in Russia
and Hungary proved correct as did our decision to slightly increase our
exposure in these countries. Falling inflation and interest rates in Israel
have underpinned its market rally while the prospect of economic reform has
fueled Turkey's rise.
Japan -- Asia's currency crisis, combined with problems within the banking
system, has begun to take its toll on the Japanese economy and stock market.
We believe that decisive action on restructuring Japan's tax and financial
systems is needed. We continue to hold export-related stocks while looking
for quality domestic-related companies. Our underweighted position in Japan
remains unchanged for the time being.
Other Markets -- Our overweighted position in Canada reflects the
attractiveness of the economy as well as our favorable outlook for Canadian
energy stocks. In Australia, we have reduced equities to be more in line
with the world market's weighting.
UNITED STATES
Over the last six months, the allocation to domestic equities increased from
24.1% to 30.2%. Domestic returns were hampered by investments in healthcare,
selected investments in electronics -- semiconductors, and computer software &
service. These investments represent quality companies whose shares should
return to favor during the upcoming months. Our investments in retailing and
oil related services provided positive returns to the Fund. And although we
believe both industries will continue to do well, we have slightly reduced
our exposure.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of December 31, 1997
- -------------------------------------------------
Other* 25.4% USA 30.2%
Germany 2.2% United Kingdom 8.5%
Sweden 2.4%
Denmark 2.6%
Switzerland 3.0% Japan 8.1%
Italy 3.3%
Netherlands 3.9%
Canada 4.1% France 5.1%
[CHART APPEARS HERE]
* Each of the remaining countries' investments represented less than 2% of the
portfolio's assets and U.S. Government and Agency Issues.
B-26 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
OUTLOOK
We will continue to favor European markets because of economic and political
stability, favorable valuations, and more predictable earnings growth.
Divergence in emerging markets should continue as most Asian markets remain
weak while many Latin American, Eastern European, and other markets are
likely to recover sooner. We do not anticipate a marked improvement for the
Japanese economic picture and feel that it offers only selective
opportunities. While the U.S. market is fairly valued, it does offer political
and economic stability and continued prospects of lower interest rates.
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
TOP 10 EQUITY HOLDINGS
as of December 31, 1997
- -------------------------------------------------
% of Net Assets
Akzo Nobel N.V. (Netherlands) 1.2%
Elf Aquitaine ADS (France) 1.1
Novartis AG (Switzerland) 1.1
Cookson Group plc
(United Kingdom) 1.0
Autoliv SDR (Sweden) 0.9
Coflexip ADS (France) 0.9
National Bank of Canada
(Canada) 0.9
Portugal Telecom S.A.
ADS (Portugal) 0.9
Procter & Gamble Co. (U.S.) 0.9
Suncor (Canada) 0.9
TOP 10 INDUSTRIES OF
EQUITY HOLDINGS
as of December 31, 1997
- -------------------------------------------------
% of Net Assets
Banks - Major Regional 4.8%
Telephones 4.7
Auto Parts 4.1
Oil - International
Integrated 3.4
Computer Software &
Service 3.3
Oil & Gas -
Drilling/Equipment 2.4
Banks - Money Center 2.4
Oil & Gas -
Exploration & Production 2.3
Drugs 2.2
Machinery - Diversified 2.2
1997 ANNUAL REPORT B-27
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSET FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
USAA Life VA Lehman Brothers
Diversified Lipper Balanced Aggregate
Date S&P 500 Index Assets Fund Fund Average Bond Index
---- ------------- ------------ --------------- ---------------
01/05/95 $10,000.00 $10,000.00 $10,000.00 $10,000.00
01/31/95 10,259.00 10,120.00 10,110.00 10,198.00
02/28/95 10,658.08 10,330.00 10,393.08 10,440.71
03/31/95 10,972.49 10,550.00 10,572.88 10,504.40
04/30/95 11,295.08 10,860.00 10,748.39 10,651.46
05/31/95 11,745.75 11,240.00 11,097.71 11,063.67
06/30/95 12,018.25 11,300.00 11,299.69 11,144.44
07/31/95 12,416.06 11,450.00 11,556.19 11,119.92
08/31/95 12,477.10 11,640.00 11,664.82 11,254.47
09/30/95 12,972.37 11,970.00 11,912.12 11,363.64
10/31/95 12,925.67 11,890.00 11,862.09 11,511.37
11/30/95 13,491.81 12,270.00 12,223.88 11,684.04
12/31/95 13,752.20 12,633.12 12,377.90 11,847.61
01/31/96 14,219.78 12,833.81 12,594.51 11,925.81
02/29/96 14,352.02 12,844.38 12,598.29 11,718.30
03/31/96 14,489.80 13,108.45 12,649.94 11,636.27
04/30/96 14,702.80 13,002.82 12,754.94 11,571.11
05/31/96 15,080.66 13,150.70 12,904.17 11,547.97
06/30/96 15,137.97 13,340.83 12,918.37 11,702.71
07/31/96 14,468.87 13,002.82 12,566.99 11,734.31
08/31/96 14,774.16 13,192.95 12,788.17 11,714.36
09/30/96 15,604.47 13,678.84 13,279.23 11,918.19
10/31/96 16,035.16 14,059.10 13,539.50 12,182.77
11/30/96 17,245.81 14,650.62 14,117.64 12,391.10
12/31/96 16,904.34 14,440.16 13,943.99 12,275.86
01/31/97 17,959.17 14,808.13 14,366.50 12,313.92
02/28/97 18,101.05 14,964.24 14,336.33 12,344.70
03/31/97 17,358.91 14,573.96 13,914.84 12,207.67
04/30/97 18,393.50 14,941.94 14,315.59 12,390.79
05/31/97 19,517.34 15,616.43 14,945.47 12,508.50
06/30/97 20,385.86 16,051.18 15,380.39 12,657.35
07/31/97 22,006.54 16,863.46 16,241.69 12,999.10
08/31/97 20,774.17 16,337.19 15,780.42 12,888.61
09/30/97 21,910.52 16,966.42 16,367.46 13,078.07
10/31/97 21,178.71 16,783.37 16,113.76 13,267.70
11/30/97 22,159.28 17,183.80 16,355.47 13,328.73
12/31/97 22,540.42 17,428.85 16,577.90 13,483.38
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 and Poor's 500 Index closed at 970.43 on
December 31, 1997, a 9% gain over 885.14 as of our last reporting on June 30,
1997. The Index was up more than 33% for the year. A great deal of this
change is attributed to lower interest rates and good earnings reports. Other
favorable factors were lower unemployment and very low inflation.
Debt Securities - Over the past six months, interest rates have fallen
significantly. Even in the face of economic growth, investors are optimistic
that inflation will remain tame and the Federal Reserve won't raise overnight
rates anytime soon.
In looking at the year as a whole, bonds performed very well. The Lehman
Brothers Aggregate Bond Index return for 1997 was 9.65% which is up
considerably compared to the Index's 7.48% average annualized return over the
past five years.
INVESTMENT PROGRAM:
Approximately 60% of the Fund's assets are invested in equity securities
selected for toal return potential and approximately 40% are invested in debt
securities of varying maturities. On December 31, 1997, the portfolio mix was
61.9% common stocks and 36.2% fixed-income securities.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
As of December 31, 1997
One Year: 20.70%
Since Inception
January 5, 1995: 20.34%
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 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSET FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
PORTFOLIO STRATEGY
Common Stocks - Since our last Report of June 30, 1997 the stock market
dropped sharply, recovered and is now selling at a higher level than six
months ago. The total return for the stock portfolio was 27.07% for 1997.
New companies which were added to the equity portfolio in the last six months
include: Bell Atlantic (telephones) through merger with NYNEX, Meritor
Automotive (auto parts) through spin-off from Rockwell International, Fleet
Financial (banks), Intel (electronics - semiconductors), and PMI Group
(finance - diversified).
Companies which were deleted include: James River and Weyerhaeuser (paper &
forest products) and NYNEX (telephones) through merger with Bell Atlantic.
The Fund's best performing stocks were Fleet Financial, PNC Bank, SouthTrust and
Bankers Trust (banks); and GTE Corp., Bell Atlantic and SBC Communications
(telephones). Other top performers were Ford Motor (automobiles), RJR Nabisco
(tobacco), PMI Group (finance - diversified), Allstate (insurance), and NICOR
(natural gas). The poor performers included: Monsanto (chemicals), Boeing
(aerospace/defense), Caterpillar (machinery - diversified), Minnesota Mining
(manufacturing - diversified industries), Sears (retail - general merchandise),
American Home Products (healthcare - diversified), Bausch & Lomb (medical
products & supplies), Xerox (photography - imaging), and Norfolk Southern
(railroads/shipping). Some of these companies are multi-national and the market
discounted the possible Asian effect.
Debt Securities - As of the end of the reporting period, the bond segment had
a weighted average maturity of 7.08 years and a modified duration of 5.12.
This represented very little change from the last reporting period. We kept
these parameters steady because we are not relying on an interest rate
forecast. No one has been successful in predicting
TOP 10 EQUITY HOLDINGS
as of December 31, 1997
- -------------------------------------------------
% of Net Assets
Bristol-Myers Squibb Co. 2.9%
Allstate Corp. 2.8
SouthTrust 2.6
American Home
Products Corp. 2.4
SBC Communications 2.4
Bell Atlantic 2.3
Xerox 2.3
Ford 2.1
Pharmacia & Upjohn 2.1
PNC Bank Corp. 1.9
TOP 5 DEBT HOLDINGS
as of December 31, 1997
- -------------------------------------------------
Coupon % of
Rate Net Assets
FNMA 9.00% 2.2%
HUBCO, Inc. 8.20 2.2
Nationwide
Health Properties,
Inc., MTN 8.61 2.2
Tele-Communications,
Inc., Senior Notes 8.25 2.2
WorldCom, Inc.,
Senior Notes 7.55 2.2
1997 ANNUAL REPORT B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
the course of interest rates over time. We believe instead, 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 reduce our exposure in
lower-rated corporates and mortgage pass-through securities that carry high
coupons. We have replaced those securities with instruments that are AAA rated
and not as interest-rate sensitive as the higher coupon pass-throughs.
The total return for the bond portfolio was 11.27% for 1997. The larger
percentage of corporates and mortgages in the portfolio versus treasuries
contributed to the Fund outperforming the Lehman Aggregate Bond Index. Positive
developments at HUBCO, WorldCom, and Tele-Communications, Inc. resulted in
additional price appreciation for the overall portfolio.
OUTLOOK
Common Stocks - Interest rates and inflation remain low, which is good for
the stock market; however, we are seeing some earnings disappointments. The
Asian situation will be with us for some time which will effect our domestic
markets. We remain optimistic with regard to the U.S. stock market but do
not expect the same returns in 1998 that we have experienced during the past
few years.
The portfolio is broadly diversified in 27 industries with 39 issues. Common
stocks comprise 62% of the total net assets. We remain overweighted in
automobiles, banks, telephones, healthcare - diversified, drugs, and medical
products & supplies.
Debt Securities - I wish I had a crystal ball that could foretell where interest
rates are headed. Since I don't, the best way I can provide value is by
continuing with the strategy of finding securities that provide attractive
yields and offer value in terms of risk and reward.
TOP 10 PORTFOLIO INDUSTRIES
as of December 31, 1997
- -------------------------------------------
% of Net Assets
Banks - Major Regional 8.0%
Real Estate Investment Trusts 6.5
Telephones 5.8
Healthcare - Diversified 5.3
Asset Backed Financings 4.2
Telecommunications -
Long Distance 3.9
Oil - International Integrated 3.7
Automobiles 3.6
Retail - General Merchandising 3.3
Insurance - Property/Casualty 2.8
B-30 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON OF FUND TO BENCHMARK
USAA Life VA
Russell 2000(R) Aggressive
Index Growth Fund
--------------- -------------
05/01/97 $10,000.00 $10,000.00
05/31/97 11,112.00 10,670.00
06/30/97 11,588.70 11,160.00
07/31/97 12,127.58 12,060.00
08/31/97 12,405.30 12,330.00
09/30/97 13,313.37 13,530.00
10/31/97 12,728.91 12,640.00
11/30/97 12,646.17 12,120.00
12/31/97 12,867.48 11,825.53
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
(Registration Mark) Index, a widely recognized small-cap index which most
closely resembles the holdings of this Fund. The Russell 2000 (Registration
Mark) Index is an unmanaged index consisting of the 2,000 smallest companies
within the Russell 3000 (Registration Mark) Index. The calculations for the
Russell 2000 (Registration Mark) 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
Since the USAA Life VA Aggressive Growth Fund began on May 5, 1997, U.S.
equity markets have gone through two distinct phases. From May until
October, the market was in a positive phase, during which widely held
expectations for sustained low interest rates and healthy earnings growth
buoyed domestic stock prices. Then, from October through December, the Asian
currency and economic crises reduced investors' confidence in both the
international and domestic markets. This attitude was further fueled by
announcements of disappointing earnings from high-profile companies such as
Gillette and Coca Cola. As a result, stock prices retraced a good part of
the gains they enjoyed from May through September.
With this type of market activity, it should come as no surprise that small
capitalization (cap) growth stocks, which account for the bulk of this Fund's
investments, continued to underperform most other equity classes, and the Fund's
performance reflects this. In the May through December period, the Fund
generated a total return of 18.3% versus 21.7% for the Russell 2000
(Registration Mark) Index and 18.3% for the S&P 500/1/.
/1/ 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 December 31, 1997
One Year: NA
Since Inception
May 1, 1997: 18.26%*
* Total returns for periods of less than one year are not annualized. This
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 ANNUAL REPORT B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
THE PORTFOLIO STRATEGY
We continue to believe that sustained rapid earnings growth is the most
effective way to build value over the long term. We also believe that high
quality, smaller companies have the potential to capitalize quickly on emerging
trends in our economy and society, to grow faster, and therefore, to appreciate
more rapidly than larger ones. With this in mind, we continue to invest most of
the Fund's assets in small cap growth equities.
Nevertheless, we recognize that small cap stocks can be very volatile and that
despite their superior growth potential, small growth stocks can also
underperform larger stocks over extended periods of time. In order to mitigate
these problems, we have invested some of our funds in highly visible, well-known
large growth stocks such as Intel, Microsoft, Cisco Systems, Dell Computer, Home
Depot, Southwest Airlines, and Household International, just to name a few.
Although these are large companies, they are still innovative, rapidly growing,
and therefore, consistent with our investment style and spirit.
We cut back significantly on the number of equity holdings from 314 on June 30,
1997 to 209 on December 31, 1997. We feel that concentrating on fewer holdings
with larger positions will increase the impact each holding has on the portfolio
and will contribute to overall improved performance.
The Fund has invested heavily in technology, telecommunications services, and
energy sectors in recent months. Despite their potential volatility, technology
stocks are a core component to the portfolio and, on a long-term basis, well
worth the risks associated with them. Technology lies at the heart of many of
the changes that are transforming our world and is essential to enhancing
productivity and competitive positions. We have taken advantage of the weakness
of technology stocks, particularly small cap, in late 1997 to initiate new
positions and add to established ones at what we think will prove to be bargain
prices.
TOP 10 EQUITY HOLDINGS
as of December 31, 1997
- --------------------------------------------------
% of Net Assets
Bank United 2.3%
3Com 2.1
Cisco Systems 2.0
Dell Computer 2.0
Household International 1.9
Microsoft 1.9
AAR 1.8
Four Seasons Hotels 1.8
Friede Goldman International 1.7
Petroleum Geo-Services ADR 1.5
TOP 10 INDUSTRIES
as of December 31, 1997
- --------------------------------------------------
% of Net Assets
Oil & Gas -
Drilling/Equipment 11.5%
Computer Software & Service 8.7
Computers - Networking 5.2
Services - Commercial
& Consumer 4.7
Communication Equipment 4.0
Retail - Specialty 4.0
Banks - Major Regional 3.6
Electronics - Semiconductors 3.6
Telecommunications -
Long Distance 3.2
Telephones 3.2
B-32 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
Earnings at telecommunications services companies are not particularly sensitive
to the economy. Furthermore, we have invested in companies whose stock has
limited overseas exposure, and therefore, should not subject investors to
worries about problems overseas. Also, the regulatory climate is extremely
favorable. Local monopolies are being dismantled around the world, giving rise
to the creation of smaller, entrepreneurial service providers in the local, long
distance, and wireless sectors. These companies are poised for rapid growth and
consolidation. Accordingly, we have invested in a large number of companies in
this area including: Teleport, LCI, Omnipoint, and Pacific Gateway Exchange.
In addition, the Fund has invested heavily in the oil & gas-drilling/equipment
sector. Companies such as Friede Goldman, Santa Fe International, and Falcon
Drilling provide technology and equipment that enhance productivity and reduce
costs in the energy exploration and services area. Energy-related stocks have
declined in recent months over concerns about falling oil and gas costs, and
represent compelling investment opportunities at current levels.
OUTLOOK
Equity markets are likely to remain volatile. On the positive side, interest
rates are low and there appears to be no compelling reason why they should move
up significantly. The outlook also appears favorable on the inflation front.
However, concerns about the economy may temper investor enthusiasm in the months
to come. Investors should keep in mind that returns, particularly in aggressive
growth funds such as this one, are not generated at a steady rate over time.
Rather they tend to come in dramatic bursts, often in compressed time periods
and often when we least expect it. Patience is advised. We believe that this
strategy will be rewarded amply over the long term.
1997 ANNUAL REPORT B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
AN OVERVIEW DECEMBER 31, 1997
COMPARISON TO FUND TO BENCHMARK
Morgan Stanley USAA Life VA
Capital Index-EAFE International Fund
------------------ ------------------
05/01/97 $10,000.00 $10,000.00
05/31/97 10,651.00 10,300.00
06/30/97 11,237.87 10,710.00
07/31/97 11,419.92 11,080.00
08/31/97 10,566.86 10,470.00
09/30/97 11,158.60 11,180.00
10/31/97 10,300.50 10,440.00
11/30/97 10,195.44 10,110.00
12/31/97 10,284.14 10,191.92
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 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 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 G. Peebles, W. Travis Selmier, II, and Albert
C. Sebastian
MARKET CONDITIONS
For the six months ending December 31, 1997 European markets have continued
to perform favorably while the performance of emerging markets has been
mixed. Our underweighted position in Japan has proven to be a prudent
decision.
Europe - European markets provided favorable returns during the past six
months because of earnings growth, falling interest rates, and corporate
restructuring. Our holdings in Italy, Portugal, and the United Kingdom made
significant contributions to our European performance. In fact, we increased
our exposure to the United Kingdom because of attractive valuations and a
stable, pro-business political environment.
INVESTMENT PROGRAM:
At least 80% of the Fund's assets will be invested in equity securities of
foreign companies.
As of December 31, 1997
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
One Year: NA
Since Inception
May 1, 1997: 1.92%*
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.
* Total returns for periods of less than one year are not annualized. This
return is cumulative.
B-34 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
Emerging Markets - A series of currency devaluations in Asia have caused
turmoil and political disarray in many Asian countries. This situation has
brought about a reduction in forecasted economic growth. We believe the
Brazilian economy will be affected by the Asian slowdown; however, Argentina,
Peru, and Mexico continue to show signs of recovering, driven by improving
domestic economies. In Mexico's case, stronger economic ties with the U.S.
are a driving force. Our expectations that political and economic reform
would gain momentum in Russia and Hungary proved correct as did our decision
to slightly increase our exposure in these countries. Falling inflation and
interest rates in Israel have underpinned its market rally while the prospect
of economic reform has fueled Turkey's rise.
Japan - Asia's currency crisis, combined with problems within the banking
system, has begun to take its toll on the Japanese economy and stock market.
We believe that decisive action on restructuring Japan's tax and financial
systems is needed. We continue to hold export-related stocks while looking
for quality domestic-related companies. Our underweighted position in Japan
remains unchanged for the time being.
Other Markets - Our overweighted position in Canada reflects the
attractiveness of the economy as well as our favorable outlook for Canadian
energy stocks. In Australia, we have reduced equities to be more in line
with the world market's weighting.
TOP 10 EQUITY HOLDINGS
as of December 31, 1997
- ----------------------------------------------
% of Net Assets
Akzo Nobel N.V. (Netherlands) 1.8%
Elf Aquitaine ADS (France) 1.6
Tele Danmark ADS (Denmark) 1.6
Novartis AG (Switzerland) 1.5
Veba AG (Germany) 1.5
Autoliv SDR (Sweden) 1.4
Cookson Group plc
(United Kingdom) 1.4
National Westminster
Bank plc (United Kingdom) 1.4
Accor (France) 1.3
National Bank of Canada
(Canada) 1.3
TOP 10 INDUSTRIES OF EQUITY HOLDINGS
as of December 31, 1997
- ----------------------------------------------
% of Net Assets
Telephones 6.9%
Banks - Major Regional 5.7
Auto Parts 5.2
Oil - International Integrated 4.3
Drugs 3.2
Services - Commercial
& Consumer 3.0
Computer Software & Service 2.8
Oil & Gas - Exploration
& Production 2.6
Electric 2.5
Metals/Mining 2.2
1997 ANNUAL REPORT B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
AN OVERVIEW (Continued) DECEMBER 31, 1997
OUTLOOK
We will continue to favor European markets because of their economic and
political stability, favorable valuations, and more predictable earnings
growth. Divergence in emerging markets should continue as most Asian markets
remain weak while many Latin American, Eastern European, and other markets
are likely to recover sooner. We do not anticipate a marked improvement for
the Japanese economic picture and feel that it offers only selective
opportunities.
Foreign investing is subject to additional risks such as currency fluctations,
market illiquidty, 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.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of December 31, 1997
- ------------------------------------------------
Other* 35.7%
Germany 3.1%
Sweden 3.4%
Switzerland 3.5%
Italy 4.4% Japan 11.1%
Denmark 4.4%
Netherlands 5.6% United Kingdom 13.4%
Canada 6.0% France 8.1%
[CHART APPEARS HERE]
* Each of the remaining countries' investments represented less than 3% of the
portfolio's assets and U.S. Government and Agency Issues.
B-36 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
INDPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
USAA LIFE INVESTMENT TRUST
We have audited the accompanying statements of assets and liabilities and
portfolios of investments in securities of the USAA Life Variable Annuity
(VA) Money Market Fund, USAA Life VA Income Fund, USAA Life VA Growth and
Income Fund, USAA Life VA World Growth Fund, USAA Life VA Diversified Assets
Fund, USAA Life VA Aggressive Growth Fund, and USAA Life VA International
Fund, all funds of the USAA Life Investment Trust, as of December 31, 1997,
the statements of operations for the year then ended, and the statements of
changes in net assets for the years ended December 31, 1997 and 1996 and the
financial highlights for each of the years in the two-year period ended
December 31, 1997 and the period from January 5, 1995 (commencement of
operations) through December 31, 1995 for the Money Market Fund, Income Fund,
Growth and Income Fund, World Growth Fund and Diversified Assets Fund; and
the statements of operations, the statements of changes in net assets and the
financial highlights for the period from May 1, 1997 (commencement of
operations) through December 31, 1997 for the Aggressive Growth Fund and
International Fund. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
each of the funds constituting the USAA Life Investment Trust as of December
31, 1997, the results of their operations for the year or period then ended,
the changes in their net assets for each of the years or periods in the
two-year period then ended, and the financial highlights for each of the
years or periods in the three-year period then ended as described in the
first paragraph, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
San Antonio, Texas
February 6, 1998
1997 ANNUAL REPORT B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- ------
<S> <C> <C> <C> <C>
FIXED RATE INSTRUMENTS (64.9%)
BANKS - MONEY CENTER
$ 439 UBS Finance, Inc., CP 6.50% 1/02/98 $ 439
------
CHEMICALS
650 Monsanto Co., CP 5.82 1/15/98 649
------
ELECTRIC/GAS UTILITIES
600 National Rural Utilities Cooperative
Finance Corp., CP 5.80 1/20/98 598
------
ELECTRICAL EQUIPMENT
600 Emerson Electric Co., CP 5.63 1/26/98 598
------
FINANCE - CONSUMER
675 Ford Motor Credit Co., CP 5.80 1/07/98 674
471 Toyota Motor Credit Corp., CP 5.76 1/13/98 470
------
1,144
------
FINANCE - DIVERSIFIED
656 General Electric Capital Corp., CP 5.80 1/12/98 655
------
U.S. GOVERNMENT
161 Federal Home Loan Mortgage,
Discount Note 5.70 1/07/98 161
946 Federal Home Loan Mortgage,
Discount Note 5.65 1/09/98 945
313 Federal Home Loan Mortgage,
Discount Note 5.70 1/14/98 312
426 Federal Home Loan Mortgage,
Discount Note 5.75 1/14/98 425
980 Federal Home Loan Mortgage,
Discount Note 5.71 1/16/98 978
486 Federal Home Loan Mortgage,
Discount Note 5.70 1/21/98 484
405 Federal Home Loan Mortgage,
Discount Note 5.70 1/22/98 403
500 Federal Home Loan Mortgage,
Discount Note 5.75 1/30/98 498
710 Federal National Mortgage Assn.,
Discount Note 5.68 1/05/98 710
814 Federal National Mortgage Assn.,
Discount Note 5.68 1/08/98 813
------
5,729
------
Total fixed rate instruments (cost: $9,812) 9,812
------
VARIABLE RATE DEMAND NOTES (33.7%)
ASSET BACKED FINANCINGS
150 Capital One Funding Corp., Notes,
Series 1993A (CRE) 6.00 6/02/08 150
192 Capital One Funding Corp., Notes,
Series 1995C (CRE) 6.00 10/01/15 192
------
342
------
AUTO PARTS
200 Alabama IDA RB (Rehau Project) (CRE) 6.00 10/01/19 200
540 Bardstown, KY, RB, Series 1994 (CRE) 6.10 6/01/24 540
------
740
------
CHEMICALS
$ 500 Wyckoff Chemical Company, Inc.,
Demand Note, Series 1997 (CRE) 6.05 2/01/27 $ 500
------
GENERAL OBLIGATIONS
500 Syracuse, NY, GO, Series 1997A (CRE) 6.00 10/15/14 500
------
HEALTHCARE - DIVERSIFIED
300 GMS Associates II Project Health Care
RB, Series 1995 (CRE) 5.80 8/15/25 300
------
HEALTHCARE - SPECIALIZED SERVICES
500 Mason City Clinic, P.C., IA, Demand
Bonds, Series 1992 (CRE) 6.10 9/01/22 500
------
HOSPITALS
200 Dome Corp., Demand Bonds,
Series 1991 (CRE) 5.76 8/31/16 200
------
LEISURE TIME
500 BSL Golf of California, Inc., RB (CRE) 6.15 1/01/23 500
500 Fox Valley Ice Arena Taxable Demand
RB, IL, Series 1997 (CRE) 5.85 7/01/27 500
------
1,000
------
MACHINERY - DIVERSIFIED
200 DSL Funding Corp., Notes (CRE) 6.15 12/01/09 200
------
MULTI-FAMILY HOUSING
420 Arbor Properties, Inc., Note (CRE) 5.95 11/01/21 420
------
NURSING/CCRC
200 Lincolnwood Funding Corp. RB, Series
1995A (CRE) 6.04 8/01/15 200
------
REAL ESTATE - OTHER
100 H/M Partners, LLC, Bond (CRE) 5.95 10/01/20 100
100 MMR Funding I, Floating Rate Option
Note, Series A (CRE) 6.00 9/01/10 100
------
200
------
Total variable rate demand notes (cost: $5,102) 5,102
------
Total investments (cost: $14,914) $14,914
=======
</TABLE>
B-38 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government & Agency Issues 37.9 %
Chemicals 7.6
Finance - Consumer 7.6
Leisure Time 6.6
Auto Parts 4.9
Finance - Diversified 4.3
Electric/Gas Utilities 4.0
Electrical Equipment 3.9
General Obligations 3.3
Healthcare - Specialized Services 3.3
Banks - Money Center 2.9
Multi-Family Housing 2.8
Asset Backed Financings 2.3
Healthcare - Diversified 2.0
Hospitals 1.3
Machinery - Diversified 1.3
Nursing/CCRC 1.3
Real Estate - Other 1.3
----
Total 98.6%
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
1997 ANNUAL REPORT B-39
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INCOME FUND
PORTFOLIO OF INVESTENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- --------
<S> <C> <C>
PREFERRED STOCKS (13.0%)
15,000 Avalon Properties, Inc. "A", 9% cumulative redeemable $ 391
12,000 Duke Realty Investments, Inc. depositary
shares "A", 9.10% cumulative redeemable 321
10,000 Equity Residential Properties Trust depositary
shares "B", 9.125% cumulative redeemable 267
12,000 Equity Residential Properties Trust depositary
shares "C", 9.125% cumulative redeemable 323
22,000 First Industrial Realty Trust, Inc. depositary
shares "B", 8.75% cumulative redeemable 565
20,000 Gables Residential Trust "A", 8.3% cumulative
redeemable 501
6,000 Post Properties, Inc. "A", 8.5% cumulative
redeemable 323
6,000 Security Capital Industrial Trust "C", 8.54%
cumulative redeemable 339
12,000 Shurgard Storage Centers, Inc. "B", 8.8%
cumulative redeemable 318
12,000 United Dominion Realty Trust, Inc. depositary
shares "A", 9.25% cumulative redeemable 314
--------
Total preferred stocks (cost: $3,546) 3,662
--------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- ------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS (10.4%)
$ 300 Caliber Systems, Inc., Notes 7.80% 8/01/06 $ 322
500 Chase Manhattan Corp.,
Subordinated Notes 7.13 2/01/07 520
500 First Union Corp., Subordinated Notes 7.50 7/15/06 532
500 Household Finance Corp., Notes 7.25 5/15/06 522
500 Province of Quebec, Global Debentures 7.00 1/30/07 521
500 Wells Fargo & Co., Subordinated Notes 6.88 4/01/06 510
-------
Total corporate obligations (cost: $2,744) 2,927
-------
U.S. GOVERNMENT & AGENCY ISSUES (75.3%)
FEDERAL NATIONAL MORTGAGE ASSN. (20.2%)
2,213 7.00%, 6/01/24 - 10/01/26 2,237
1,925 7.50%, 1/01/25 - 10/01/26 1,974
681 8.00%, 1/01/25 706
752 8.50%, 12/01/24 786
--------
5,703
--------
GOVERNMENT NATIONAL MORTGAGE ASSN. (25.6%)
1,893 7.00%, 8/15/23 - 4/15/26 1,915
2,879 7.50%, 8/15/23 - 8/15/26 2,957
1,130 8.00%, 5/15/24 1,174
1,131 8.50%, 12/15/24 1,198
--------
7,244
--------
U.S. TREASURY BONDS (29.5%)
6,785 7.875%, 2/15/21 8,333
--------
Total U.S. government & agency issues (cost: $19,491) 21,280
--------
Total investments (cost: $25,781) $ 27,869
========
</TABLE>
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government & Agency Issues 75.3%
Real Estate Investment Trusts 13.0
Banks - Major Regional 3.7
Finance - Consumer 1.9
Foreign Government 1.9
Banks - Money Center 1.8
Truckers 1.1
------
Total 98.7%
------
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
B-40 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
COMMON STOCKS (96.7%)
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
AEROSPACE/DEFENSE (2.1%)
36,438 Boeing Co. $ 1,783
--------
AIRLINES (1.5%)
10,000 AMR Corp.* 1,285
--------
ALUMINUM (1.4%)
17,100 Aluminum Co. of America 1,203
--------
AUTOMOBILES (1.4%)
25,500 Ford Motor Co. 1,242
--------
AUTO PARTS (2.4%)
23,000 Intermet Corporation 403
35,000 Lear Corp.* 1,662
--------
2,065
--------
BANKS - MAJOR REGIONAL (1.4%)
21,000 PNC Bank Corp. 1,198
--------
BANKS - MONEY CENTER (2.8%)
18,000 BankAmerica Corp. 1,314
9,700 Bankers Trust New York Corp. 1,091
--------
2,405
--------
CHEMICALS (3.0%)
14,000 Dow Chemical Co. 1,421
50,000 Millennium Chemicals, Inc. 1,178
--------
2,599
--------
CHEMICALS - DIVERSIFIED (1.8%)
37,400 B.F. Goodrich Co. 1,550
--------
COMMUNICATION - EQUIPMENT MANUFACTURERS (1.5%)
16,668 Lucent Technologies, Inc. 1,331
--------
COMPUTER - NETWORKING (1.5%)
22,500 Cisco Systems, Inc.* 1,254
--------
CONSUMER JEWELRY AND NOVELTIES - MISCELLANEOUS (1.5%)
32,100 American Greetings Corp. 1,256
--------
CONTAINERS - METALS & GLASS (1.3%)
31,000 Ball Corp. 1,095
--------
DRUGS (2.8%)
33,000 Pharmacia & Upjohn, Inc. 1,209
24,000 SmithKline Beecham plc ADR "A" 1,234
--------
2,443
--------
ELECTRIC (2.3%)
26,000 Houston Industries, Inc. 694
43,000 Pacific Gas & Electric Co. 1,309
--------
2,003
--------
ELECTRICAL EQUIPMENT (1.4%)
22,500 Rockwell International Corp. 1,176
--------
ELECTRONICS - SEMICONDUCTORS (1.2%)
41,000 National Semiconductor Corp.* 1,063
--------
EQUIPMENT - SEMICONDUCTORS (1.0%)
29,500 Applied Materials, Inc.* $ 889
--------
FINANCE - CONSUMER (1.4%)
17,300 Associates First Capital Corp. 1,230
--------
FINANCE - DIVERSIFIED (4.2%)
31,000 Morgan Stanley, Dean Witter, Discover & Co. 1,833
24,000 PMI Group, Inc. 1,735
--------
3,568
--------
FOODS (1.3%)
10,000 CPC International, Inc.* 1,077
--------
HEALTHCARE - HMOS (2.0%)
40,000 Humana, Inc.* 830
17,000 Pacificare Health Systems, Inc.* 854
--------
1,684
--------
HEAVY DUTY TRUCKS & PARTS (1.5%)
25,500 Aeroquip-Vickers, Inc. 1,251
--------
HOUSEHOLD PRODUCTS (1.6%)
28,000 Kimberly-Clark Corp. 1,381
--------
INSURANCE - LIFE/HEALTH (1.2%)
14,000 Aetna, Inc. 988
--------
INSURANCE - MULTI-LINE COMPANIES (1.4%)
11,400 American International Group, Inc. 1,240
--------
INSURANCE - PROPERTY/CASUALTY (6.0%)
17,000 Allstate Corp. 1,545
33,000 Everest Reinsurance Holdings, Inc. 1,361
30,000 Highlands Insurance Group, Inc.* 851
32,000 Travelers Property Casualty Corp. 1,408
--------
5,165
--------
LEISURE TIME (1.3%)
36,300 Brunswick Corp. 1,100
--------
MACHINERY - DIVERSIFIED (2.8%)
21,500 Deere & Co. 1,254
40,159 Flowserve Corp. 1,122
--------
2,376
--------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.5%)
25,500 Hillenbrand Industries, Inc. 1,305
--------
MANUFACTURING - SPECIALIZED (1.7%)
33,000 Avery Dennison Corp. 1,477
--------
MEDICAL PRODUCTS & SUPPLIES (2.2%)
33,000 Bausch & Lomb, Inc. 1,308
12,000 Baxter International, Inc. 605
--------
1,913
--------
METALS/MINING (1.6%)
37,000 Inco Ltd. 629
27,000 Titanium Metals Corp.* 780
--------
1,409
--------
</TABLE>
1997 ANNUAL REPORT B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
NATURAL GAS (1.9%)
10,500 NICOR, Inc. $ 443
26,000 Sonat, Inc. 1,189
---------
1,632
---------
OIL - DOMESTIC INTEGRATED (2.9%)
46,000 Occidental Petroleum Corp. 1,349
28,500 Unocal Corp. 1,106
---------
2,455
---------
OIL - INTERNATIONAL INTEGRATED (1.2%)
19,400 Texaco, Inc. 1,055
---------
OIL & GAS - DRILLING/EQUIPMENT (2.3%)
15,500 Helmerich & Payne, Inc. 1,052
11,000 Schlumberger Ltd. 886
---------
1,938
---------
OIL & GAS - EXPLORATION & PRODUCTION (1.7%)
31,000 Apache Corp. 1,087
50,000 Gulf Canada Resources Ltd.* 350
---------
1,437
---------
PAPER & FOREST PRODUCTS (1.6%)
8,900 Jefferson Smurfit Corp.* 126
26,000 Weyerhaeuser Co. 1,275
---------
1,401
---------
PHOTOGRAPHY - IMAGING (0.9%)
9,900 Xerox Corp. 731
---------
PUBLISHING (1.3%)
28,000 Houghton Mifflin Co. 1,075
---------
RAILROADS/SHIPPING (1.2%)
34,500 Norfolk Southern Corp. 1,063
---------
REAL ESTATE INVESTMENT TRUSTS (0.9%)
22,000 Felcor Suite Hotels, Inc. 781
---------
RETAIL - DEPARTMENT STORES (2.4%)
19,000 J.C. Penney Company, Inc. 1,146
17,000 May Department Stores Co. 896
---------
2,042
---------
RETAIL - GENERAL MERCHANDISING (1.6%)
30,000 Sears, Roebuck & Co. 1,357
---------
SERVICES - COMMERCIAL & CONSUMER (1.3%)
35,100 Dun & Bradstreet Corp. 1,086
---------
SPECIALTY PRINTING (1.3%)
32,500 Deluxe Corp. 1,121
---------
TELECOMMUNICATIONS - LONG DISTANCE (3.6%)
29,000 AT&T Corp. 1,776
23,000 Sprint Corp. 1,349
---------
3,125
---------
TELEPHONES (3.0%)
13,824 Bell Atlantic Corp. 1,258
24,500 GTE Corp. 1,280
---------
2,538
---------
TOBACCO (2.6%)
29,500 Philip Morris Companies, Inc. 1,336
21,100 Universal Corp. 868
---------
2,204
---------
WASTE MANAGEMENT (1.0%)
31,000 Waste Management, Inc. 853
---------
Total common stocks (cost: $61,333) 82,898
---------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000)
_____
<C> <S> <C>
SHORT-TERM (3.3%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 2,885 Federal Home Loan Bank, 4.75%,
1/02/98, (cost: $2,885) 2,885
---------
Total investments (cost: $64,218) $85,783
=========
</TABLE>
B-42 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
FOREIGN SECURITIES (64.9%)
FOREIGN STOCKS (64.5%)
ARGENTINA (0.9%)
4,500 Banco Rio de La Plata S.A. ADR * $ 63
1,200 Disco S.A. ADS * 54
3,866 IRSA Inversiones y Representaciones S.A. GDS 146
2,100 Telefonica de Argentina S.A. ADR 78
------
341
------
AUSTRALIA (1.9%)
25,000 Broken Hill Proprietary Co. Ltd. 232
18,700 CSL Ltd. 117
80,000 Telstra Corp. * 169
32,289 Woodside Petroleum Ltd. 228
------
746
------
AUSTRIA (1.5%)
1,190 Austria Mikro Systeme International AG 60
1,900 Boehler Uddeholm AG 112
5,300 VA Stahl AG 204
1,550 VA Technologie AG 235
------
611
------
BELGIUM (0.6%)
140 Colruyt S.A. 72
2,600 Union Miniere S.A. * 180
------
252
------
BRAZIL (1.8%)
1,990,000 Companhia Energetica de Minas Gerais
(Cemig) (Preferred) 86
6,500 Panamerican Beverages, Inc. "A" 212
550,000 Petroleo Brasileiro S.A. (Preferred) 129
1,300,000 Telebras PN S.A. (Preferred) 148
3,200 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR * 103
6,000 Usinas Siderurgicas de Minas Gerais S.A. (Preferred) 36
------
714
------
CANADA (4.1%)
4,500 Alliance Forest Products, Inc. * 74
16,400 Anderson Exploration Ltd. * 161
3,500 Cadillac Fairview Corp. * 82
5,100 Canadian National Railway Co. 241
13,300 Canadian Occidental Petroleum Ltd. 301
20,600 National Bank of Canada 340
8,200 OSF, Inc. * 50
1,600 St. Laurent Paperboard, Inc. * 21
10,000 Suncor, Inc. 341
------
1,611
------
CHILE (0.4%)
1,950 Compania de Telefonos de Chile ADR 58
3,200 Distribucion y Servicio D & S S.A. ADS 60
1,300 Sociedad Quimica y Minera de Chile S.A. ADS 57
------
175
------
CHINA (0.4%)
50,000 Cosco Pacific Ltd. 41
224,000 Jiangsu Expressway Co. Ltd. * 46
24,000 New World Infrastructure Ltd. * 54
------
141
------
CZECH REPUBLIC (0.2%)
3,000 Komercni Banka A.S. GDR $ 36
400 SPT Telecom A.S. * 42
------
78
------
DENMARK (2.6%)
3,100 Carli Gry International A/S 174
4,200 ISS International Service System A/S "B" * 154
11,300 SAS Danmark A/S 165
1,300 Tele Danmark A/S "B" 81
8,900 Tele Danmark A/S ADS 274
2,500 Unidanmark A/S 184
------
1,032
------
EGYPT (0.2%)
3,500 Suez Cement Co. S.A.E. GDS 71
------
FINLAND (1.3%)
3,800 Nokia Corp. ADS 266
916 Raision Tehtaat 109
9,000 Rauma OY 140
------
515
------
FRANCE (5.1%)
900 Accor S.A. 167
4,300 Bouygues Offshore S.A. ADR 94
6,100 Coflexip ADS 339
7,400 Elf Aquitaine ADS 434
2,300 Eramet Group 87
675 Essilor International 202
1,240 ISIS S.A. * 136
2,400 Louis Dreyfus Citrus 73
3,600 Renault S.A. * 101
2,000 Simco S.A. 135
3,500 Valeo S.A. 237
------
2,005
------
GERMANY (2.2%)
4,300 Bayer AG 161
3,200 Leica Camera AG 52
7,600 Rofin-Sinar Technologies, Inc. * 92
400 SAP AG 121
400 SAP AG (Preferred) 131
4,300 Veba AG 293
------
850
------
HONG KONG (0.8%)
100,000 Amoy Properties Ltd. 88
4,000 Asia Satellite Telecommunications Holdings Ltd. ADR 67
18,000 Citic Pacific Ltd. 72
15,000 Hutchison Whampoa Ltd. 94
------
321
------
HUNGARY(1.0%)
3,900 Magyar Tavkozlesi RT. (MATAV) ADS * 101
10,000 Mol Magyar Olaj-Es Gazipari GDS 244
1,600 OTP Bank GDR * 61
------
406
------
</TABLE>
1997 ANNUAL REPORT B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
INDIA (0.6%)
4,000 Hindalco Industries Ltd. GDR $ 80
4,900 Larsen & Toubro Ltd. GDR 55
6,000 Videsh Sanchar Nigam Ltd. GDR 84
------
219
------
INDONESIA (0.1%)
57,500 PT Astra International, Inc. 15
30,000 PT HM Sampoerna 22
------
37
------
ISRAEL (0.7%)
2,700 Blue Square - Israel Ltd. ADS 33
3,700 ECI Telecommunications Ltd. 94
2,800 Teva Pharmaceutical Industries Ltd. ADR 133
------
260
------
ITALY (3.3%)
5,400 ENI S.p.A. ADS 308
22,000 Erg S.p.A. * 82
5,400 Gucci Group N.V. * 226
45,000 Italgas S.p.A. * 186
4,300 SAES Getters S.p.A. ADR 41
312,600 SEAT S.p.A. * 122
323,600 SEAT S.p.A. Savings * 82
57,800 Telecom Italia S.p.A. 255
------
1,302
------
JAPAN (7.6%)
9,000 Bridgestone Corp. 195
8,000 Canon, Inc. 186
7,000 Daibiru Corp. 51
21,000 Hitachi Ltd. 150
2,000 Hoya Corp. 63
3,000 Ito-Yokado Co. Ltd. 153
3,000 Justsystem Corp. 38
8,000 Laox Co. Ltd. 64
26,000 Minebea Co. Ltd. 279
21,000 Mitsubishi Heavy Industries Ltd. 87
7,000 Namco 203
1,500 Nichiei Co. Ltd. * 165
400 Nippon Television Network 117
15,000 Nomura Securities Co. Ltd. 200
5 NTT Data Communications Systems Corp. 269
21,000 Sekisui Chemical Co. Ltd. 107
17,000 Shiseido Co. Ltd. 232
2,300 Sony Corp. 204
15,000 Terumo Corp. 221
8,000 Yamada Denki Co. 62
------
3,046
------
MALAYSIA (0.1%)
8,000 Edaran Otomobil Nasional Bhd 16
------
MEXICO (1.0%)
60,000 Controladora Comercial Mexicana, S.A. de C.V. 78
4,391 Desc, Sociedad de Fomento Industrial,
S.A. de C.V. ADS 165
7,000 Tubos de Acero de Mexico, S.A. ADS * 151
------
394
------
NETHERLANDS (3.9%)
2,750 Akzo Nobel N.V. $474
3,400 Benckiser N.V. "B" ADR * 140
2,100 EVC International N.V. 47
5,900 ING Group N.V. 248
1,750 Oce-van der Grinten N.V. 191
2,700 Philips Electronics N.V. 163
600 Simac Techniek N.V. 70
8,000 Verenigd Besit VNU 226
------
1,559
------
NORWAY (1.4%)
70,800 Christiania Bank og Kreditkasse 286
8,500 Schibsted ASA 145
16,000 Storebrand ASA * 113
------
544
------
PERU (0.2%)
2,700 Telefonica del Peru S.A. "B" ADS 63
------
PHILIPPINES (0.1%)
190,000 SM Prime Holdings, Inc. 28
------
POLAND (0.4%)
11,539 Elektrim S.A. 111
9,000 Polifarb Cieszyn-Wroclaw S.A. 43
3,000 Polifarb Cieszyn-Wroclaw S.A. "D" * 14
------
168
------
PORTUGAL (1.8%)
4,600 Banco Totta E Acores S.A. 91
800 Brisa-Auto Estradas de Portugal S.A. * 27
8,900 Cimentos de Portugal S.A. 233
7,300 Portugal Telecom S.A. ADS 343
------
694
------
RUSSIA (1.1%)
2,000 LUKoil ADR 184
3,300 Mosenergo ADR * 122(a)
429,000 Unified Energy Systems 130
------
436
------
SINGAPORE (0.5%)
22,000 DBS Land Ltd. 34
26,400 Overseas Union Bank Ltd. 101
20,000 Singapore Land Ltd. 44
------
179
------
SOUTH AFRICA (0.2%)
3,100 South African Breweries Ltd. 76
------
SPAIN (1.6%)
2,500 Corporacion Bancaria de Espana S.A. * 152
5,000 Corporacion Mapfre 133
3,700 Telefonica de Espana S.A. ADR 337
------
622
------
SWEDEN (2.4%)
11,000 Autoliv, Inc. SDR 358
900 Munters AB * 8
10,900 NK Cityfastigheter AB * 79
27,700 Nordbanken Holding AB * 157
17,300 Swedish Match AB 58
11,000 Volvo "B" AB 295
------
955
------
</TABLE>
B-44 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
SWITZERLAND (3.0%)
273 Novartis AG $ 443
1,100 Selecta Group AG * 148
114 SGS Group AG 218
409 Sulzer AG P.C. 259
150 Tag Heuer International S.A. * 13
12,000 Tag Heuer International S.A. ADR * 99
------
1,180
------
TAIWAN (0.3%)
5,625 Acer, Inc. GDR * 43
5,125 China Steel Corp. GDS 77
------
120
------
TURKEY (0.2%)
2,575,471 Yapi Ve Kredi Bankasi A.S. 98
------
UNITED KINGDOM (8.5%)
58,000 Avis Europe plc 166
71,100 Billiton plc * 182
23,000 Cadbury Schweppes plc 232
118,000 Cookson Group plc 382
55,900 Corporate Services Group plc 196
8,000 DFS Furniture Co. plc 68
2,500 Doncasters plc ADS * 53
25,200 EMI Group plc 210
15,600 Harvey Nichols plc 49
24,000 Ionica Group plc * 55
88,000 LucasVarity plc 311
68,500 Medeva plc 182
18,000 National Westminster Bank plc 299
16,000 Reuters Holdings plc 175
58,700 Safeway plc 331
51,000 Tomkins plc 241
55,600 WPP Group plc 247
------
3,379
------
VENEZUELA (0.2%)
2,200 Compania Anonima Nacional Telefonos
de Venezuela ADS 92
------
OTHER HOLDINGS (0.3%)
120,000 Central European Growth Fund plc * 127
------
Total foreign stocks (cost: $21,700) 25,463
------
Principal
Amount
(000)
__________
FOREIGN BONDS (0.4%)
JAPAN (0.4%)
$ 160 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%, 11/30/02
(cost: $165) 167
------
Total foreign securities (cost: $21,865) 25,630
------
DOMESTIC STOCKS (30.2%)
Aerospace/Defense (1.3%)
5,336 Boeing Co. $ 261
4,000 Precision Castparts Corp. 241
------
502
------
ALUMINUM (0.4%)
2,400 Aluminum Co. of America 169
------
AUTOMOBILES (0.5%)
4,000 Ford Motor Co. 195
------
AUTO PARTS (0.7%)
6,100 Lear Corp. * 290
------
BANKS - MAJOR REGIONAL (0.7%)
4,400 SouthTrust Corp. 279
------
BANKS - MONEY CENTER (1.1%)
1,900 Bankers Trust New York Corp. 214
2,000 Chase Manhattan Corp. 219
------
433
------
BEVERAGES - NONALCOHOLIC (0.5%)
5,700 PepsiCo, Inc. 208
------
BIOTECHNOLOGY (0.5%)
4,000 Amgen, Inc. * 216
------
CHEMICALS (0.8%)
1,000 Dow Chemical Co. 101
5,000 Monsanto Co. 210
------
311
------
CHEMICALS - DIVERSIFIED (0.5%)
4,400 B.F. Goodrich Co. 182
------
COMMUNICATION - EQUIPMENT MANUFACTURERS (1.1%)
3,148 Lucent Technologies, Inc. 252
3,000 Motorola, Inc. 171
------
423
------
COMPUTER - NETWORKING (0.5%)
3,600 Cisco Systems, Inc. * 201
------
COMPUTER SOFTWARE & SERVICE (1.2%)
1,100 J.D. Edwards & Co. * 33
2,200 Microsoft Corp. * 284
4,400 Sterling Commerce, Inc. * 169
------
486
------
CONSUMER JEWELRY AND NOVELTIES - MISCELLANEOUS (0.6%)
5,800 American Greetings Corp. 227
------
ELECTRICAL EQUIPMENT (0.5%)
4,000 Rockwell International Corp. 209
------
ELECTRONICS - SEMICONDUCTORS (1.0%)
2,600 Intel Corp. 183
8,000 National Semiconductor Corp. * 207
------
390
------
</TABLE>
1997 ANNUAL REPORT B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
EQUIPMENT - SEMICONDUCTORS (0.4%)
5,600 Applied Materials, Inc. * $ 169
------
FINANCE - CONSUMER (0.6%)
3,200 Associates First Capital Corp. 228
------
FINANCE - DIVERSIFIED (0.8%)
5,000 Morgan Stanley, Dean Witter, Discover & Co. 296
------
FOODS (1.1%)
15,500 Authentic Specialty Foods, Inc. * 211
2,000 CPC International, Inc. * 216
------
427
------
HEALTHCARE - DIVERSIFIED (1.8%)
3,000 American Home Products Corp. 229
2,400 Bristol-Myers Squibb Co. 227
3,900 Johnson & Johnson 257
------
713
------
HEALTHCARE - HMOs (0.8%)
2,800 Pacificare Health Systems, Inc. * 140
3,800 United HealthCare Corp. 189
------
329
------
HEALTHCARE - SPECIALIZED SERVICES (0.8%)
9,700 COHR, Inc. * 124
6,833 Total Renal Care Holdings, Inc. * 188
------
312
------
HOUSEHOLD PRODUCTS (1.5%)
5,000 Kimberly-Clark Corp. 247
4,400 Procter & Gamble Co. 351
------
598
------
INSURANCE - MULTI-LINE COMPANIES (0.6%)
2,250 American International Group, Inc. 245
------
INSURANCE - PROPERTY/CASUALTY (0.6%)
5,500 Travelers Property Casualty Corp. 242
------
MACHINERY - DIVERSIFIED (1.2%)
4,000 Deere & Co. 233
9,000 Flowserve Corp. 252
------
485
------
MANUFACTURING - SPECIALIZED (0.7%)
6,400 Avery Dennison Corp. 286
------
MEDICAL PRODUCTS & SUPPLIES (0.7%)
4,200 Medtronic, Inc. 220
2,200 St. Jude Medical, Inc. * 67
------
287
------
OIL - DOMESTIC INTEGRATED (0.4%)
4,000 Unocal Corp. 155
------
OIL & GAS - DRILLING/EQUIPMENT (1.0%)
4,800 Halliburton Co. $ 249
3,000 Transocean Offshore, Inc. 145
------
394
------
OIL & GAS - EXPLORATION & PRODUCTION (0.6%)
6,500 Apache Corp. 228
------
PHOTOGRAPHY - IMAGING (0.6%)
3,000 IKON Office Solutions, Inc. 84
2,100 Xerox Corp. 155
------
239
------
RESTAURANTS (0.4%)
8,000 Brinker International, Inc. * 128
570 Tricon Global Restaurants, Inc. * 16
------
144
------
RETAIL - GENERAL MERCHANDISING (1.1%)
6,733 Dollar General Corp. 244
4,500 Sears, Roebuck & Co. 204
------
448
------
RETAIL - SPECIALTY (0.3%)
3,800 Abercrombie & Fitch Co. * 119
------
SERVICES - COMMERCIAL & CONSUMER (0.2%)
1,900 Dun & Bradstreet Corp. 59
------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.4%)
7,000 360 Communications Co. * 141
------
TELECOMMUNICATIONS - LONG DISTANCE (0.6%)
4,000 Sprint Corp. 234
------
TOBACCO (0.5%)
4,400 Philip Morris Companies, Inc. 199
------
WASTE MANAGEMENT (0.6%)
2,000 Browning-Ferris Industries, Inc. 74
6,000 Waste Management, Inc. 165
------
239
------
Total domestic stocks (cost: $8,224) 11,937
Principal
Amount
(000)
___________
U.S. GOVERNMENT & AGENCY ISSUE (3.7%)
DISCOUNT NOTE
$ 1,460 Federal Home Loan Bank, 4.75%, 1/02/98
(cost: $1,460) 1,460
-------
Total investments (cost: $31,549) $39,027
=======
</TABLE>
B-46 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
PORTFOLIO SUMMARY BY INDUSTRY
Banks - Major Regional 4.8%
Telephones 4.7
Auto Parts 4.1
U. S. Government & Agency Issue 3.7
Oil - International Integrated 3.4
Computer Software & Service 3.3
Oil & Gas - Drilling/Equipment 2.4
Banks - Money Center 2.4
Oil & Gas - Exploration & Production 2.3
Drugs 2.2
Machinery - Diversified 2.2
Services Commercial & Consumer 2.0
Communication - Equipment Manufacturers 2.0
Metals/Mining 1.9
Insurance - Multi-Line Companies 1.9
Household Products 1.9
Beverages - Nonalcoholic 1.8
Healthcare - Diversified 1.8
Medical Products & Supplies 1.8
Manufacturing - Diversified Industries 1.8
Retail - Specialty 1.7
Electric 1.6
Retail - Food 1.6
Automobiles 1.6
Manufacturing - Specialized 1.5
Electronics - Semiconductors 1.5
Iron & Steel 1.5
Foods 1.4
Aerospace/Defense 1.3
Telecommunications - Long Distance 1.2
Chemicals - Specialty 1.2
Chemicals 1.2
Oil - Domestic Integrated 1.2
Finance - Diversified 1.2
Retail - General Merchandising 1.1
Foreign Conglomerate 1.1
Publishing 1.1
Real Estate Investment Trusts 1.1
Engineering & Construction 1.0
Office Equipment & Supplies 1.0
Other 20.3
----
Total 98.8%
====
See accompanying "Notes to Portfolios of Investments in Securities" on
page B-57.
1997 ANNUAL REPORT B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
BASIC VALUE STOCKS (61.9%)
AEROSPACE/DEFENSE (1.7%)
16,840 Boeing Co. $ 824
------
AUTOMOBILES (3.6%)
20,000 Chrysler Corp. 704
21,000 Ford Motor Co. 1,022
------
1,726
------
AUTO PARTS (1.1%)
25,000 Meritor Automotive, Inc. 527
------
BANKS - MAJOR REGIONAL (5.8%)
8,000 Fleet Financial Group, Inc. 599
16,000 PNC Bank Corp. 913
20,000 SouthTrust Corp. 1,269
------
2,781
------
BANKS - MONEY CENTER (2.8%)
5,000 Bankers Trust New York Corp. 562
7,000 Chase Manhattan Corp. 767
------
1,329
------
CHEMICALS (1.7%)
20,000 Monsanto Co. 840
------
CHEMICALS - DIVERSIFIED (1.0%)
12,000 B.F. Goodrich Co. 497
------
DRUGS (2.1%)
27,000 Pharmacia & Upjohn, Inc. 989
------
ELECTRICAL EQUIPMENT (1.1%)
10,000 Rockwell International Corp. 523
------
ELECTRONICS - SEMICONDUCTORS (1.8%)
12,000 Intel Corp. 843
------
FINANCE - DIVERSIFIED (1.8%)
12,000 PMI Group, Inc. 868
------
HEALTHCARE - DIVERSIFIED (5.3%)
15,000 American Home Products Corp. 1,148
15,000 Bristol-Myers Squibb Co. 1,419
------
2,567
------
HOUSEHOLD PRODUCTS (1.5%)
15,000 Kimberly-Clark Corp. 740
------
INSURANCE - PROPERTY/CASUALTY (2.8%)
15,000 Allstate Corp. 1,363
------
MACHINERY - DIVERSIFIED (2.7%)
14,000 Caterpillar, Inc. 680
11,000 Deere & Co. 641
------
1,321
------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.0%)
6,000 Minnesota Mining & Manufacturing Co. 492
------
MEDICAL PRODUCTS & SUPPLIES (1.7%)
20,000 Bausch & Lomb, Inc. $ 793
------
NATURAL GAS (1.2%)
14,000 NICOR, Inc. 591
------
OIL - DOMESTIC INTEGRATED (2.5%)
8,000 Atlantic Richfield Co. 641
15,000 Unocal Corp. 582
------
1,223
------
OIL - INTERNATIONAL INTEGRATED (3.7%)
7,000 Chevron Corp. 539
8,000 Mobil Corp. 578
12,000 Texaco, Inc. 652
------
1,769
------
PHOTOGRAPHY - IMAGING (2.3%)
15,000 Xerox Corp. 1,107
------
RAILROADS/SHIPPING (1.0%)
15,000 Norfolk Southern Corp. 462
------
RETAIL - DEPARTMENT STORES (1.0%)
9,000 May Department Stores Co. 474
------
RETAIL - GENERAL MERCHANDISING (1.2%)
13,000 Sears, Roebuck & Co. 588
------
TELECOMMUNICATIONS - LONG DISTANCE (1.7%)
14,000 Sprint Corp. 821
------
TELEPHONES (5.8%)
12,288 Bell Atlantic Corp. 1,118
10,000 GTE Corp. 523
16,000 SBC Communications Corp. 1,172
------
2,813
------
TOBACCO (2.0%)
9,000 Philip Morris Companies, Inc. 408
15,000 RJR Nabisco Holdings Corp. 562
------
970
------
Total basic value stocks (cost: $19,747) 29,841
------
</TABLE>
B-48 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount Value
(000) Security (000)
- --------- -------- ---------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY ISSUES (10.3%)
$ 996 Federal National Mortgage Assn., 9.00%, 11/18/24 $1,071
960 Government National Mortgage
Assn., 6.50%, 11/20/26 948
997 Government National Mortgage
Assn., 6.50%, 9/20/27 984
952 Government National Mortgage
Assn., 7.00%, 6/20/26 957
991 Government National Mortgage
Assn., 7.00%, 6/20/27 996
------
Total U.S. government & agency issues (cost: $4,849) 4,956
------
CORPORATE OBLIGATIONS (25.9%)
ASSET BACKED FINANCINGS (4.2%)
1,000 Firstplus Home Loan Owner Trust, 6.62%, 9/10/15 998
1,000 Firstplus Home Loan Owner Trust, 7.08%, 7/10/17 1,030
------
2,028
------
BANKS - MAJOR REGIONAL (2.2%)
1,000 HUBCO, Inc., Subordinated Debentures,
8.20%, 9/15/06 1,081
------
BROADCASTING RADIO & TV (2.2%)
1,000 Tele-Communications, Inc., Senior Notes,
8.25%, 1/15/03 1,070
------
ELECTRONICS - INSTRUMENTATION (2.1%)
1,000 Tektronix, Inc., Notes,
7.50%, 8/01/03 1,042
------
MANUFACTURING - SPECIALIZED (2.2%)
1,000 Giddings and Lewis, Inc., Notes,
7.50%, 10/01/05 1,044
------
REAL ESTATE INVESTMENT TRUSTS (6.5%)
1,000 Merry Land and Investment Co., Notes,
7.25%, 6/15/05 1,026
1,000 Nationwide Health Properties, Inc., MTN,
8.61%, 3/01/02 1,078
1,000 Washington Real Estate Investment Trust,
Senior Notes, 7.25%, 8/13/06 1,036
------
3,140
------
RETAIL - FOOD (2.2%)
1,000 Great Atlantic & Pacific Tea, Inc.,
Senior Notes, 7.70%, 1/15/04 1,050
------
RETAIL - GENERAL MERCHANDISING (2.1%)
$ 1,000 Kmart Corp., Notes,
8.13%, 12/01/06 $1,010
------
TELECOMMUNICATIONS - LONG DISTANCE (2.2%)
1,000 WorldCom, Inc., Senior Notes,
7.55%, 4/01/04 1,052
------
Total corporate obligations (cost: $12,040) 12,517
------
SHORT-TERM (1.2%)
COMMERICAL PAPER
571 Aristar, Inc., 7.30%, 1/02/98 (cost: $571) 571
------
Total investments (cost: $37,207) $47,885
=======
1997 ANNUAL REPORT B-49
</TABLE>
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
COMMON STOCKS (97.5%)
ADVERTISING/MARKETING (0.4%)
4,100 Lamar Advertising Co. "A"* $ 163
------
AEROSPACE/DEFENSE (2.7%)
20,000 AAR Corp. 775
3,300 Aviation Sales Co.* 124
7,600 Triumph Group, Inc.* 253
------
1,152
------
AIRLINES (1.2%)
3,300 Midwest Express Holdings, Inc.* 128
15,000 Southwest Airlines Co. 369
------
497
------
ASSET BACKED FINANCINGS (0.5%)
8,200 IMC Mortgage Co.* 97
2,200 Sirrom Capital Corp. 115
------
212
------
BANKS - MAJOR REGIONAL (3.6%)
20,000 Bank United Corp. 979
8,100 Columbia Banking Systems, Inc.* 218
3,600 First Security Corp. 151
6,000 Hamilton Bancorp, Inc.* 175
------
1,523
------
BEVERAGES - ALCOHOLIC (1.0%)
8,200 Beringer Wine Estates Holdings, Inc.* 312
2,300 Robert Mondavi Corp.* 112
------
424
------
BIOTECHNOLOGY (3.1%)
10,000 Centocor, Inc.* 333
5,200 CN Biosciences, Inc.* 130
4,100 Genzyme Corp.* 114
1,000 IDEC Pharmaceuticals Corp.* 34
7,000 Immunex Corp.* 378
1,400 Med Immune, Inc.* 60
1,500 Protein Design Labs, Inc.* 60
12,000 Techne Corp.* 210
------
1,319
------
BROADCASTING RADIO & TV (2.1%)
3,900 Clear Channel Communications, Inc.* 310
4,700 Gray Communications Systems, Inc. "B" 121
4,259 Hearst - Argyle Television, Inc.* 127
3,600 Heftel Broadcasting Corp. "A"* 168
2,700 Univision Communications, Inc. "A"* 188
------
914
------
BUILDING MATERIAL GROUP (0.5%)
3,600 Fastenal Co. 138
4,000 Wilmar Industries, Inc.* 95
------
233
------
COMMUNICATION - EQUIPMENT MANUFACTURERS (4.0%)
6,200 Advanced Fibre Communications, Inc.* $ 181
11,400 Brightpoint, Inc.* 158
2,000 CIENA Corp.* 122
7,000 Datum, Inc.* 100
7,900 Harmonic Lightwaves, Inc.* 86
9,100 Innova Corp.* 139
10,100 Ortel Corp.* 159
12,600 P-Com, Inc.* 217
4,200 Pairgain Technologies, Inc.* 82
1,800 QualComm, Inc.* 91
5,250 REMEC, Inc.* 118
6,500 Spectrian Corp.* 125
7,100 ViaSat, Inc.* 97
800 Yurie Systems, Inc.* 16
------
1,691
------
COMPUTER - HARDWARE (2.3%)
9,900 Dell Computer Corp.* 832
7,500 Sandisk Corp.* 152
------
984
------
COMPUTER - NETWORKING (5.2%)
25,650 3Com Corp.* 896
5,740 Ascend Communications, Inc.* 141
14,850 Cisco Systems, Inc.* 828
8,800 FORE Systems, Inc.* 134
6,600 International Network Services* 153
4,500 Xylan Corp.* 68
------
2,220
------
COMPUTER - PERIPHERALS (1.0%)
11,700 HMT Technology Corp.* 152
9,400 Komag, Inc.* 140
8,500 Read-Rite Corp.* 134
------
426
------
COMPUTER SOFTWARE & SERVICE (8.7%)
3,800 Aspect Development, Inc.* 198
5,600 Axiom, Inc.* 22
7,000 Broderbund Software, Inc.* 179
5,100 CCC Information Services Group, Inc.* 101
4,000 Complete Business Solutions, Inc.* 174
8,300 CrossKeys Systems Corp.* 106
5,800 Crystal Systems Solutions Ltd.* 148
6,600 Geotel Communications Corp. "A"* 103
13,800 Harbinger Corp.* 388
7,600 Industri-Matematik International Corp.* 224
8,600 Macrovision Corp.* 137
6,300 Microsoft Corp.* 814
6,200 Pervasive Software, Inc.* 45
16,700 Pixar, Inc.* 361
6,400 PLATINUM Technology, Inc.* 181
5,900 QAD, Inc.* 74
13,770 Rational Software Corp.* 157
</TABLE>
B-50 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
COMPUTER SOFTWARE & SERVICE (8.7%)
2,700 Security Dynamics Technologies, Inc. * $ 97
3,100 Sterling Commerce, Inc.* 119
6,500 XcelleNet, Inc.* 85
------
3,713
------
DRUGS (1.6%)
8,000 Dura Pharmaceuticals, Inc. * 367
6,300 Elan Corp. plc ADR * 322
------
689
------
ELECTRONICS - COMPUTER DISTRIBUTORS (0.2%)
5,550 CHS Electronics, Inc. * 95
------
ELECTRONICS - SEMICONDUCTORS (3.6%)
3,100 Benchmarq Microelectronics, Inc. * 42
7,400 Intel Corp. 520
3,800 Lattice Semiconductor Corp. * 180
2,800 Microchip Technology, Inc. * 84
22,600 TranSwitch Corp. * 170
4,800 Triquint Semiconductor, Inc. * 97
2,600 Vitesse Semiconductor Corp. * 98
10,800 VLSI Technology, Inc. * 255
7,800 Zoran Corp. * 94
------
1,540
------
ENTERTAINMENT (0.2%)
4,000 Ballantyne of Omaha, Inc. * 72
------
EQUIPMENT - SEMICONDUCTORS (3.0%)
7,200 Brooks Automation, Inc. * 132
5,100 Cerprobe Corp. * 89
7,900 CFM Technologies, Inc. * 121
4,000 Cymer, Inc. * 60
7,400 Electroglas, Inc. * 114
5,500 Etec Systems, Inc. * 256
13,000 Integrated Process Equipment Corp. * 205
5,000 Photronics, Inc. * 121
6,700 Speedfam International, Inc. * 178
------
1,276
------
FINANCE - CONSUMER (3.1%)
1,800 Associates First Capital Corp. 128
6,200 Household International, Inc. 791
15,000 NCO Group, Inc. * 386
------
1,305
------
FOODS (1.1%)
8,100 Suiza Foods Corp. * 482
------
Healthcare - Diversified (0.7%)
3,500 PAREXEL International Corp. * 129
5,000 Superior Consultant Holdings Corp. * 150
------
279
------
HEALTHCARE - SPECIALIZED SERVICES (2.5%)
6,072 Concentra Managed Care, Inc. * 205
3,800 Express Scripts, Inc. "A" * 228
6,500 Orthodontic Centers of America, Inc. * 108
4,000 Pediatrix Medical Group, Inc. * 171
4,800 PMR Corp. * 96
3,750 Renal Care Group, Inc. * 120
4,166 Total Renal Care Holdings, Inc. * 115
------
1,043
------
HOME FURNISHINGS & APPLIANCES (0.9%)
10,000 Ethan Allen Interiors, Inc. $ 386
------
HOSPITAL (0.5%)
7,950 National Surgery Centers, Inc. * 209
------
INSURANCE - MULTI-LINE COMPANIES (0.2%)
3,100 Keystone Automotive Industries, Inc. * 74
------
INTERNET SERVICES (1.2%)
10,600 Concentric Network Corp. * 94
7,200 Network Solutions, Inc. "A" * 94
10,700 Preview Travel, Inc. * 81
11,900 Sportsline USA, Inc. * 128
11,500 USWeb Corp. * 108
------
505
------
INVESTMENT BANKS / BROKERAGE (0.8%)
3,450 Charles Schwab Corp. 145
10,000 Friedman, Billings, Ramsey Group, Inc. "A" * 179
------
324
------
LODGING/HOTEL (1.8%)
23,600 Four Seasons Hotels, Inc. 746
------
MACHINERY - DIVERSIFIED (0.2%)
4,300 U. S. Rentals, Inc. * 101
------
MEDICAL PRODUCTS & SUPPLIES (1.8%)
5,600 Omnicare, Inc. 174
5,000 Serologicals Corp. * 130
10,000 Sybron Corp. * 469
------
773
------
NURSING CARE (1.0%)
7,200 HEALTHSOUTH Rehabilitation Corp. * 200
4,800 Sunrise Assisted Living, Inc. * 207
------
407
------
OIL & GAS - DRILLING/EQUIPMENT (11.5%)
6,500 Cooper Cameron Corp. * 396
2,800 Diamond Offshore Drilling, Inc. * 135
5,000 Dril-Quip, Inc. * 176
9,600 EVI, Inc. * 497
8,200 Falcon Drilling Co., Inc. * 287
24,600 Friede Goldman International, Inc. * 735
15,000 Halter Marine Group, Inc. * 433
10,000 National-Oilwell, Inc. * 342
10,000 Petroleum Geo-Services ADR * 647
10,600 Santa Fe International Corp. 431
3,000 Transocean Offshore, Inc. 145
5,000 Trico Marine Services, Inc. * 147
13,300 UNIFAB International, Inc. * 256
7,000 Varco International, Inc. * 150
2,500 Veritas DGC, Inc. * 99
------
4,876
------
OIL & GAS - EXPLORATION & PRODUCTION (0.5%)
4,500 Hvide Marine, Inc. "A" * 116
3,400 Stone Energy Corp. * 114
------
230
------
PERSONAL CARE (0.5%)
3,100 Estee Lauder Companies, Inc. 160
1,200 Revlon, Inc. "A" * 42
------
202
------
</TABLE>
1997 ANNUAL REPORT B-51
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
RAILROADS/SHIPPING (0.3%)
5,000 MotivePower Industries, Inc. * $ 116
------
RESTAURANTS (0.3%)
3,900 Papa John's International, Inc. * 136
------
RETAIL - BUILDING SUPPLIES (1.0%)
7,250 Home Depot, Inc. 427
------
RETAIL - FOOD (1.4%)
16,000 Dominick's Supermarkets, Inc. * 584
------
RETAIL - GENERAL MERCHANDISING (0.3%)
3,600 Dollar Tree Stores, Inc. * 149
------
RETAIL - SPECIALTY (4.0%)
15,000 99 Cents Only Stores * 443
5,700 Abercrombie & Fitch Co. * 178
3,000 Consolidated Stores Corp. * 132
10,000 Cost Plus, Inc. * 290
12,000 Hibbett Sporting Goods, Inc. * 264
5,000 Party City Corp. * 161
1,300 Rental Service Corp. * 32
3,000 Starbucks Corp. * 115
5,400 U.S. Office Products Co. * 106
------
1,721
------
RETAIL - SPECIALTY APPAREL (0.7%)
4,400 Delia's, Inc. * 98
3,000 Gadzooks, Inc. * 63
2,000 Just For Feet, Inc. * 26
4,800 K&G Men's Center, Inc. * 100
------
287
------
SERVICES - COMMERCIAL & CONSUMER (4.7%)
13,500 Altron, Inc. * 179
5,400 Fine Host Corp. * 20(b)
3,000 Flextronics International Ltd. * 104
15,000 Hertz Corp. 604
9,700 International Total Services, Inc. * 154
5,900 Learning Tree International, Inc. * 170
7,700 MSC Industrial Direct Co. * 326
4,800 OutSource International, Inc. * 58
7,300 PRT Group, Inc. * 83
5,200 Staff Leasing, Inc. * 98
4,300 Stewart Enterprises, Inc. 201
------
1,997
------
SERVICES - COMPUTER SYSTEMS (0.3%)
4,500 Mastech Corp. * 143
------
SERVICES - DATA PROCESSING (1.2%)
5,800 Checkfree Corp. * 157
3,000 Computer Horizons Corp. * 137
12,100 Credit Management Solutions, Inc. * 157
4,600 SCB Computer Technology, Inc. * 75
------
526
------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (1.6%)
11,800 Aerial Communications, Inc. * 84
15,200 Microcell Telecommunications, Inc. "B" * 103
5,900 Omnipoint Corp. * 137
6,500 Powertel, Inc. * 109
14,000 Western Wireless Corp. "A" * 243
------
676
------
TELECOMMUNICATIONS - LONG DISTANCE (3.2%)
5,400 General Communication, Inc. "A" * $ 36
7,300 ITC DeltaCom, Inc. * 120
3,800 IXC Communications, Inc. * 119
3,600 LCI International, Inc. * 111
3,300 Pacific Gateway Exchange, Inc. * 178
9,900 Premiere Technologies, Inc. * 273
6,200 SmarTalk TeleServices, Inc. * 141
3,900 STAR Telecommunications, Inc. * 125
6,200 Startec Global Communications Corp. * 139
6,500 Tel-Save Holdings, Inc. * 129
------
1,371
------
TELEPHONES (3.2%)
8,800 Electric Lightware, Inc. "A" * 131
9,900 GST Telecommunications, Inc. * 118
3,000 Intermedia Communications of Florida, Inc. * 182
3,700 McLeod, Inc. * 118
7,400 Metromedia Fiber Network, Inc. "A" * 123
7,800 MetroNet Communications Corp. "B" * 135
5,900 NEXTLINK Communications, Inc. "A" * 126
3,000 Teleport Communications Group, Inc. * 165
5,700 Teligent, Inc. "A" * 140
5,000 Winstar Communications, Inc. * 125
------
1,363
------
TEXTILES - APPAREL (0.8%)
2,200 Cutter & Buck, Inc. * 41
9,300 North Face, Inc. * 204
2,300 Tommy Hilfiger Corp. * 81
------
326
------
TRUCKERS (0.7%)
9,000 Coach USA, Inc. * 301
------
WASTE MANAGEMENT (0.6%)
7,200 American Disposal Services, Inc. * 263
------
Total common stocks (cost: $37,394) 41,471
------
Principal
Amount
(000)
_____
SHORT-TERM (0.3%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 150 Federal Home Loan Bank, 4.75%,
1/02/98, (cost: $150) 150
-------
Total investments (cost: $37,544) $41,621
=======
</TABLE>
B-52 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
STOCKS (92.9%)
ARGENTINA (1.4%)
3,300 Banco Rio de La Plata S.A. ADR * $ 46
1,600 Disco S.A. ADS * 72
3,132 IRSA Inversiones y Representaciones S.A. GDS 118
1,900 Telefonica de Argentina S.A. ADR 71
------
307
------
AUSTRALIA (2.6%)
15,800 Broken Hill Proprietary Co. Ltd. 147
15,300 CSL Ltd. 96
59,000 Telstra Corp. * 124
26,700 Woodside Petroleum Ltd. 188
------
555
------
AUSTRIA (2.2%)
991 Austria Mikro Systeme International AG 50
1,400 Boehler Uddeholm AG 82
3,900 VA Stahl AG 151
1,200 VA Technologie AG 182
------
465
------
BELGIUM (0.6%)
1,700 Union Miniere S.A. * 118
------
BRAZIL (1.9%)
5,400 Panamerican Beverages, Inc. "A" 176
1,200,000 Telebras PN S.A. (Preferred) 137
2,300 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR * 74
5,000 Usinas Siderurgicas de Minas Gerais S.A. (Preferred) 30
------
417
------
CANADA (6.0%)
3,500 Alliance Forest Products, Inc. * 58
13,200 Anderson Exploration Ltd. * 129
1,300 Cadillac Fairview Corp. * 31
5,200 Canadian National Railway Co. 246
10,800 Canadian Occidental Petroleum Ltd. 244
16,500 National Bank of Canada 272
5,800 OSF, Inc. * 36
1,700 St. Laurent Paperboard, Inc. * 22
7,800 Suncor, Inc. 266
------
1,304
------
CHILE (0.6%)
1,260 Compania de Telefonos de Chile ADR 37
2,300 Distribucion y Servicio D & S S.A. ADS 43
1,000 Sociedad Quimica y Minera de Chile S.A. ADS 44
------
124
------
CHINA (0.5%)
36,000 Cosco Pacific Ltd. 29
168,000 Jiangsu Expressway Co. Ltd. * 35
22,000 New World Infrastructure Ltd. * 49
------
113
------
CZECH REPUBLIC (0.1%)
2,500 Komercni Banka A.S. GDR $ 30
------
DENMARK (4.4%)
1,400 Carli Gry International A/S 79
4,800 ISS International Service System A/S "B" * 176
10,000 SAS Danmark A/S 146
11,000 Tele Danmark A/S ADS 339
2,700 Unidanmark A/S 198
------
938
------
EGYPT (0.2%)
2,500 Suez Cement Co. S.A.E. GDS 51
------
FINLAND (1.7%)
3,100 Nokia Corp. ADS 217
400 Raision Tehtaat 47
6,000 Rauma OY 94
------
358
------
FRANCE (8.1%)
1,500 Accor S.A. 279
4,000 Bouygues Offshore S.A. ADR 87
4,600 Coflexip ADS 255
6,000 Elf Aquitaine ADS 352
1,800 Eramet Group 68
800 Essilor International 239
1,000 France Telecom S.A. * 36
560 ISIS S.A. * 61
2,000 Louis Dreyfus Citrus 61
2,900 Renault S.A. * 82
800 Simco S.A. 54
2,500 Valeo S.A. 170
------
1,744
------
GERMANY (3.1%)
1,600 Bayer AG 60
2,600 Leica Camera AG 43
6,800 Rofin-Sinar Technologies, Inc. * 82
200 SAP AG 61
300 SAP AG (Preferred) 98
4,800 Veba AG 327
------
671
------
HONG KONG (1.1%)
80,000 Amoy Properties Ltd. 70
3,000 Asia Satellite Telecommunications Holdings Ltd. ADR 50
12,000 CITIC Pacific Ltd. 48
10,000 Hutchison Whampoa Ltd. 63
------
231
------
HUNGARY (1.3%)
3,200 Magyar Tavkozlesi RT. (MATAV) ADS * 83
6,000 Mol Magyar Olaj-Es Gazipari GDS 147
1,300 OTP Bank GDR * 49
------
279
------
</TABLE>
1997 ANNUAL REPORT B-53
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
INDIA (0.6%)
3,000 Hindalco Industries Ltd. GDR $ 60
5,500 Videsh Sanchar Nigam Ltd. GDR 77
------
137
------
INDONESIA (0.2%)
62,500 PT Astra International, Inc. 16
29,000 PT HM Sampoerna 22
------
38
------
ISRAEL (1.1%)
2,400 Blue Square - Israel Ltd. ADS 30
4,000 ECI Telecommunications Ltd. 102
2,200 Teva Pharmaceutical Industries Ltd. ADR 104
------
236
------
ITALY (4.4%)
4,100 ENI S.p.A. ADS 234
17,000 Erg S.p.A. * 63
2,900 Gucci Group N.V. * 121
22,000 Italgas S.p.A. * 91
482,000 SEAT S.p.A. * 188
250,000 SEAT S.p.A. Savings * 64
44,000 Telecom Italia S.p.A. 194
------
955
------
JAPAN (11.1%)
8,000 Bridgestone Corp. 173
7,000 Canon, Inc. 163
6,000 Daibiru Corp. 44
17,000 Hitachi Ltd. 121
2,000 Hoya Corp. 63
4,000 Ito-Yokado Co. Ltd. 204
3,000 Justsystem Corp. 38
2,600 Laox Co. Ltd. 21
15,000 Minebea Co. Ltd. 161
24,000 Mitsubishi Heavy Industries Ltd. 100
5,000 Namco 145
1,100 Nichiei Co. Ltd. * 121
300 Nippon Television Network 88
11,000 Nomura Securities Co. Ltd. 147
4 NTT Data Communications Systems Corp. 215
16,000 Sekisui Chemical Co. Ltd. 81
13,000 Shiseido Co. Ltd. 177
1,700 Sony Corp. 151
9,000 Terumo Corp. 132
6,000 Yamada Denki Co. 47
------
2,392
------
MALAYSIA (0.1%)
8,000 Edaran Otomobil Nasional Bhd 16
------
MEXICO (1.6%)
37,000 Controladora Comercial Mexicana, S.A. de C.V. 48
4,600 Desc, Sociedad de Fomento Industrial, S.A. de C.V. ADS 172
6,000 Tubos de Acero de Mexico, S.A. ADS * 130
------
350
------
NETHERLANDS (5.6%)
2,250 Akzo Nobel N.V. 388
2,500 Benckiser N.V. "B" ADR * 103
1,900 EVC International N.V. 42
4,100 ING Group N.V. 173
1,000O Oce-van der Grinten N.V. 109
2,000 Philips Electronics N.V. 121
480 Simac Techniek N.V. 56
8,000 Verenigd Besit VNU 225
------
1,217
------
NORWAY (1.6%)
29,200 Christiania Bank og Kreditkasse 118
6,100 Schibsted ASA 104
17,000 Storebrand ASA * 120
------
342
------
PERU (0.2%)
2,000 Telefonica del Peru S.A. "B" ADS 47
------
PHILIPPINES (0.1%)
180,000 SM Prime Holdings, Inc. 27
------
POLAND (0.7%)
9,000 Elektrim S.A. 87
11,000 Polifarb Cieszyn-Wroclaw S.A. 52
3,666 Polifarb Cieszyn-Wroclaw S.A."D" * 18
------
157
------
PORTUGAL (2.4%)
3,500 Banco Totta E Acores S.A. 69
7,000 Cimentos de Portugal S.A. 183
5,400 Portugal Telecom S.A. ADS 254
------
506
------
RUSSIA (1.8%)
1,800 LUKoil ADR 166
2,800 Mosenergo ADR * 104(a)
369,000 Unified Energy Systems 111
------
381
------
SINGAPORE (0.7%)
18,000 DBS Land Ltd. 28
22,800 Overseas Union Bank Ltd. 87
20,000 Singapore Land Ltd. 44
------
159
------
SOUTH AFRICA (0.3%)
2,500 South African Breweries Ltd. 62
------
SPAIN (2.3%)
2,650 Corporacion Bancaria de Espana S.A. * 161
5,000 Corporacion Mapfre 133
2,300 Telefonica de Espana S.A. ADR 209
------
503
------
</TABLE>
B-54 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
Market
Number Value
of Shares Security (000)
- --------- -------- ---------
<S> <C> <C>
SWEDEN (3.4%)
9,100 Autoliv, Inc. SDR $ 296
700 Munters AB * 6
12,000 NK Cityfastigheter AB * 88
4,000 Nordbanken Holding AB * 23
12,900 Swedish Match AB 43
10,000 Volvo "B" AB 268
------
724
------
SWITZERLAND (3.5%)
200 Novartis AG 324
700 Selecta Group AG * 94
70 SGS Group AG 134
200 Sulzer AG P.C. 127
100 Tag Heuer International S.A. * 9
9,000 Tag Heuer International S.A. ADR * 74
------
762
------
TAIWAN (0.6%)
5,625 Acer, Inc. GDR * 43
5,000 China Steel Corp. GDS 75
------
118
------
TURKEY (0.5%)
2,994,000 Yapi Ve Kredi Bankasi A.S. 114
------
UNITED KINGDOM (13.4%)
63,400 Avis Europe plc 181
42,300 Billiton plc * 108
15,000 Cadbury Schweppes plc 151
93,000 Cookson Group plc 301
45,000 Corporate Services Group plc 157
6,800 DFS Furniture Co. plc 58
2,900 Doncasters plc ADS * 61
21,600 EMI Group plc 180
14,400 Harvey Nichols plc 45
19,000 Ionica Group plc * 43
75,000 LucasVarity plc 265
63,800 Medeva plc 170
18,200 National Westminster Bank plc 303
19,000 Reuters Holdings plc 208
42,000 Safeway plc 237
45,800 Tomkins plc 217
48,400 WPP Group plc 216
------
2,901
------
VENEZUELA (0.4%)
1,900 Compania Anonima Nacional
Telefonos de Venezuela ADS 79
------
OTHER HOLDINGS (0.5%)
110,000 Central European Growth Fund plc * 116
------
Total stocks (cost: $20,372) 20,044
------
Principal
Amount
(000)
_________
U.S. GOVERNMENT & AGENCY ISSUE (5.8%)
$ 1,255 Federal Home Loan Bank, 4.75%,
1/02/98 (cost: $1,255) 1,255
------
Total investments (cost: $21,627) $21,299
======
</TABLE>
1997 ANNUAL REPORT B-55
<PAGE>
USAA LIFE INVESTMENT TRUST
USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued) December 31, 1997
PORTFOLIO OF SUMMARY BY INDUSTRY
Telephones 6.9 %
U.S. Government & Agency Issue 5.8
Banks - Major Regional 5.7
Auto Parts 5.2
Oil - International Integrated 4.3
Drugs 3.2
Services - Commercial & Consumer 3.0
Computer Software & Service 2.8
Oil & Gas - Exploration/Production 2.6
Electric 2.5
Metals/Mining 2.2
Retail - Specialty 2.2
Publishing 2.2
Iron & Steel 2.2
Manufacturing - Diversified Industries 2.1
Retail - Food 2.0
Insurance - Multi-Line Companies 2.0
Oil & Gas - Drilling/Equipment 1.9
Beverages - Nonalcoholic 1.8
Chemicals - Specialty 1.8
Automobiles 1.8
Real Estate Investment Trusts 1.7
Medical Products & Supplies 1.7
Foreign Conglomerate 1.7
Machinery - Diversified 1.6
Communication - Equipment Manufacturers 1.5
Banks - Money Center 1.4
Building Material Group 1.4
Lodging/Hotel 1.3
Office Equipment & Supplies 1.3
Engineering & Construction 1.2
Railroads/Shipping 1.1
Oil - Domestic Integrated 1.1
Advertising/Marketing 1.0
Services - Data Processing 1.0
Other 15.5
-----
Total 98.7%
=====
See accompanying "Notes to Portfolios of Investments in Securities" on page
B-57.
B-56 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO PORTFOLIOS OF INVESTMENTS IN SECURITIES
December 31, 1997
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. Investments in foreign securities were 3.6% and 5.6% of net assets at
December 31, 1997, of the USAA Life VA Growth and Income Fund and the USAA
Life VA Aggressive Growth Fund, respectively.
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.
(b) Illiquid security valued using methods determined by the Manager under
general supervision of the Board of Trustees. At December 31, 1997, this
security represented .05% of the USAA Life VA Aggressive Growth Fund's net
assets.
* Non-income producing security.
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 (CRE) - 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 company, 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 ANNUAL REPORT B-57
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, Except Per Share Data) DECEMBER 31, 1997
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World USAA Life VA VA VA Inter-
Market VA Income and Income Growth Diversified Aggressive national
Fund Fund 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
$14,914, $25,781, $64,218,
$31,549, $37,207, $37,544
and $21,627, respectively) $14,914 $27,869 $85,783 $39,027 $47,885 $41,621 $21,299
Cash 1 2 8 4 1 5 3
Cash denominated in foreign currencies
(identified cost of $414 and
$321, respectively) - - - 405 - - 315
Receivables:
Capital shares sold 255 45 18 6 32 - -
Dividends and interest 26 372 157 39 342 6 17
Securities sold - - - 149 - 1,170 11
------- ------- ------- ------- ------- ------- -------
Total assets 15,196 28,288 85,966 39,630 48,260 42,802 21,645
------- ------- ------- ------- ------- ------- -------
LIABILITIES
Securities purchased - - 150 65 - 198 5
Capital shares redeemed 45 2 18 5 6 - 1
Accrued advisory fees - 8 14 7 10 21 22
Accounts payable and accrued expenses 20 32 34 43 32 38 35
------- ------- ------- ------- ------- ------- -------
Total liabilities 65 42 216 120 48 257 63
------- ------- ------- ------- ------- ------- -------
Net assets applicable to capital
shares outstanding $15,131 $28,246 $85,750 $39,510 $48,212 $42,545 $21,582
======= ======= ======= ======= ======= ======= =======
REPRESENTED BY:
Paid-in capital $15,131 $26,144 $62,925 $31,911 $37,482 $37,820 $21,927
Accumulated undistributed net
investment income (loss) - 32 30 44 34 - (3)
Accumulated net realized gain (loss)
on investments - (18) 1,230 86 18 648 (7)
Net unrealized appreciation (depreciation)
of investments - 2,088 21,565 7,478 10,678 4,077 (328)
Net unrealized depreciation
on foreign currency translations - - - (9) - - (7)
------- ------- ------- ------- ------- ------- -------
Net assets applicable to capital
shares outstanding $15,131 $28,246 $85,750 $39,510 $48,212 $42,545 $21,582
======= ======= ======= ======= ======= ======= =======
Capital shares outstanding, unlimited
number of shares authorized, no par
value 15,131 2,578 4,769 2,962 3,329 3,639 2,148
======= ======= ======= ======= ======= ======= =======
Net asset value, redemption price,
and offering price per share $ 1.00 $ 10.96 $ 17.98 $ 13.34 $ 14.48 $ 11.70 $ 10.05
======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying "Notes to Financial Statements" on page B-62.
B-58 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
(In Thousands) YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life
VA Money USAA Life VA Growth VA World USAA Life VA VA VA Inter-
Market VA Income and Income Growth Diversified Aggressive national
Fund Fund Fund Fund Assets Fund Growth Fund* Fund*
--------- --------- ---------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS):
Income (net of foreign taxes withheld
of $0, $0, $5, $55, $0, $0 and $18,
respectively):
Dividends $ - $ 288 $ 1,375 $ 546 $ 631 $ 63 $ 181
Interest 820 1,594 109 148 1,104 79 73
---- ------ ------- ------ ------ ------- -----
Total income 820 1,882 1,484 694 1,735 142 254
---- ------ ------- ------ ------ ------- -----
Expenses:
Advisory fees 29 50 139 77 79 130 92
Administrative fees 1 1 1 1 1 1 1
Custodian's fees 28 39 49 108 43 60 53
Shareholder reporting fees 9 3 8 6 5 3 2
Trustees' fees 4 4 4 4 4 2 2
Professional fees 32 32 32 32 32 25 25
Other - 1 1 1 1 - 1
---- ------ ------- ------ ------ ------- -----
Total expenses before reimbursement 103 130 234 229 165 221 176
Expenses reimbursed (51) (42) - - (26) (39) (21)
---- ------ ------- ------ ------ ------- -----
Total expenses after reimbursement 52 88 234 229 139 182 155
---- ------ ------- ------ ------ ------- -----
Net investment income (loss) 768 1,794 1,250 465 1,596 (40) 99
---- ------ ------- ------ ------ ------- -----
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments - 462 4,276 2,634 834 1,134 197
Foreign currency transactions - - - (11) - - (5)
Change in net unrealized appreciation/
depreciation of:
Investments - 535 9,783 1,623 4,986 4,077 (328)
Translation of assets and liabilities
in foreign currencies - - - (9) - - (7)
---- ------ ------- ------ ------ ------ -----
Net realized and unrealized gain
(loss) - 997 14,059 4,237 5,820 5,211 (143)
---- ------ ------- ------ ------ ------ -----
Increase (decrease) in net assets
resulting from operations $768 $2,791 $15,309 $4,702 $7,416 $5,171 $ (44)
==== ====== ======= ====== ====== ====== =====
</TABLE>
* Funds commenced operations May 1, 1997.
See accompanying "Notes to Financial Statements" on page B-62.
1997 ANNUAL REPORT B-59
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands) YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
USAA Life VA
USAA Life VA USAA Life VA Growth and
Money Market Fund Income Fund Income Fund
-------------------- --------------------- --------------------
1997 1996 1997 1996 1997 1996
----- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ 768 $ 584 $ 1,794 $ 1,956 $ 1,250 $ 916
Net realized gain (loss) on:
Investments - - 462 (480) 4,276 1,524
Foreign currency transactions - - - - - -
Change in net unrealized appreciation/depreciation of:
Investments - - 535 (1,063) 9,783 6,662
Foreign currency translations - - - - - -
-------- ------- ------- -------- -------- -------
Increase (decrease) in net assets resulting
from operations 768 584 2,791 413 15,309 9,102
-------- ------- ------- -------- -------- -------
Distributions to shareholders from:
Net investment income (768) (584) (1,835) (1,883) (1,222) (914)
-------- ------- ------- -------- -------- -------
Net realized gains - - - - (3,404) (1,166)
-------- ------- ------- -------- -------- -------
From capital share transactions:
Proceeds from shares sold 60,217 62,988 3,986 7,926 33,830 20,120
Shares issued for dividends reinvested 768 584 1,835 1,883 4,626 2,080
Cost of shares redeemed (57,099) (60,129) (2,580) (10,113) (19,321) (2,051)
-------- -------- ------- -------- -------- -------
Increase (decrease) in net assets from
capital share transactions 3,886 3,443 3,241 (304) 19,135 20,149
-------- -------- ------- -------- -------- -------
Net increase (decrease) in net assets 3,886 3,443 4,197 (1,774) 29,818 27,171
Net assets:
Beginning of period 11,245 7,802 24,049 25,823 55,932 28,761
------- ------- -------- ------- -------- -------
End of period $15,131 $11,245 $ 28,246 $24,049 $ 85,750 $55,932
======= ======= ======== ======= ======== =======
Undistributed net investment income included in net assets:
Beginning of period $ - $ - $ 73 $ - $ 2 $ -
======= ======= ======== ======= ======== =======
End of period $ - $ - $ 32 $ 73 $ 30 $ 2
======= ======= ======== ======= ======== =======
Change in shares outstanding:
Shares sold 60,217 62,988 362 725 1,986 1,440
Shares issued for dividends reinvested 768 584 168 178 260 137
Shares redeemed (57,099) (60,129) (240) (897) (1,190) (146)
-------- -------- -------- ------- -------- -------
Increase in shares outstanding 3,886 3,443 290 6 1,056 1,431
======== ======== ======== ======= ======== ======
</TABLE>
* Funds commenced operations May 1, 1997.
See accompanying "Notes to Financial Statements" on page B-62.
B-60 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands) YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
USAA Life VA USAA Life VA Aggressive International
World Growth Fund Diversified Assets Fund Growth Fund* Fund*
- ----------------- ----------------------- ------------- ---------------
1997 1996 1997 1996 1997 1997
- ---- ---- ---- ---- ---- ----
<S> <C> <C>
$ 465 $ 451 $ 1,596 $ 1,375 $ (40) $ 99
2,634 1,771 834 1,197 1,134 197
(11) (2) - - - (5)
1,623 3,623 4,986 1,737 4,077 (328)
(9) - - - - (7)
- ------- ------- ------- ------- ------- -------
4,702 5,843 7,416 4,309 5,171 (44)
- ------- ------- ------- ------- ------- -------
(458) (449) (1,565) (1,372) - (97)
- ------- ------- ------- ------- ------- -------
(2,843) (1,428) (1,771) (234) (446) (204)
- ------- ------- ------- ------- ------- -------
9,019 7,927 12,393 8,615 38,066 21,912
3,301 1,876 3,336 1,606 446 301
(11,746) (940) (1,987) (8,845) (692) (286)
- ------- ------- ------- ------- ------- -------
574 8,863 13,742 1,376 37,820 21,927
- ------- ------- ------- ------- ------- -------
1,975 12,829 17,822 4,079 42,545 21,582
37,535 24,706 30,390 26,311 - -
- ------- ------- ------- ------- ------- -------
$39,510 $37,535 $48,212 $30,390 $42,545 $21,582
======= ======= ======= ======= ======= =======
$ 48 $ - $ 3 $ - $ - $ -
======= ======= ======= ======= ======= =======
$ 44 $ 48 $ 34 $ 3 $ - $ (3)
======= ======= ======= ======= ======= =======
644 642 888 679 3,655 2,145
247 147 236 123 39 30
(869) (75) (142) (655) (55) (27)
- ------- ------- ------- ------- ------- -------
22 714 982 147 3,639 2,148
======= ======= ======= ======= ======= =======
</TABLE>
1997 ANNUAL REPORT B-61
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 average of the bid and asked
prices 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, reclassifications have been made on the statement of assets
and liabilities of the USAA Life VA Aggressive Growth Fund at December 31, 1997
to decrease accumulated net investment loss and to decrease accumulated net
realized gain on investments by approximately $40,000.
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 Growth
and Income, 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 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(Continued) DECEMBER 31, 1997
1. Market value of securities, other assets, and liabilities at the mean between
the bid and asked translation rates of such currencies against U.S. dollars.
2. Purchases and sales of securities, income, and expenses at the rate of
exchange obtained from an independent pricing service on the respective dates of
such transactions.
Net realized and unrealized foreign currency gains/losses occurring during
the holding period of investments are a component of realized gain/loss on
investments and unrealized appreciation/depreciation on investments,
respectively.
Net realized foreign currency gains/losses arise from sales of foreign
currency, currency gains/losses realized between the trade and settlement dates
on security transactions, and the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets and
liabilities as such amounts are treated as ordinary income/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 December 31, 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 annually
or as otherwise required to avoid the payment of federal taxes.
3) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities, excluding
short-term securities, for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
USAA Life VA Growth and World Growth Diversified Aggressive International
Income Fund Income Fund Fund Assets Fund Growth Fund Fund
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $11,881,427 $28,563,765 $17,558,228 $19,691,759 $62,227,461 $ 25,740,538
Sales/Maturities $ 7,590,363 $13,615,904 $19,536,592 $ 7,478,417 $25,967,877 $ 5,565,612
</TABLE>
Purchases and sales/maturities of securities for the year ended December 31,
1997 for the USAA Life VA Money Market Fund were $186,541,775 and $183,698,718,
respectively.
Gross unrealized appreciation and depreciation of investments as of December 31,
1997 was as follows:
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA USAA Life VA USAA Life VA USAA Life VA
USAA Life VA Growth and World Growth Diversified Aggressive International
Income Fund Income Fund Fund Assets Fund Growth Fund Fund
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $2,102,385 $22,678,451 $ 9,734,599 $10,814,812 $5,842,619 $ 1,977,969
Depreciation (14,400) (1,113,480) (2,256,521) (136,808) (1,765,303) (2,305,701)
---------- ----------- ----------- ----------- ----------- -----------
Net $2,087,985 $21,564,971 $ 7,478,078 $10,678,004 $4,077,316 $ (327,732)
========== =========== =========== =========== =========== ==========
</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 ANNUAL REPORT B-63
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(Continued) DECEMBER 31, 1997
At December 31, 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 12/31/97 Received 12/31/97 (Depreciation)
- -------- ----------------- ----------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
1/02/98 6 U.S. Dollar $ 6 51 Swedish Krona $ 6 $ -
1/06/98 1,986 Japanese Yen 15 15 U.S. Dollar 15 -
1/15/98 814 Belgian Franc 22 22 U.S. Dollar 22 -
1/15/98 549 Belgian Franc 15 15 U.S. Dollar 15 -
--- --- -----
$58 $58 $ -
=== === =====
</TABLE>
USAA LIFE VA INTERNATIONAL 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 12/31/97 Received 12/31/97 (Depreciation)
- -------- ----------------- ----------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
1/02/98 5 U.S. Dollar $ 5 38 Swedish Krona $ 5 $ -
1/06/98 1,489 Japanese Yen 11 11 U.S. Dollar 11 -
--- --- ----
$16 $16 $ -
=== === ====
</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 VA Life Aggressive Growth Fund, .65% of the monthly average net assets
of the USAA VA Life 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 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 - 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 and administrative fees discussed
above.
D. UNDERWRITING AND ADMINISTRATIVE SERVICES 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.
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 year ended
December 31, 1997 for the USAA Life VA Growth and Income, USAA Life VA
Diversified Assets, and USAA Life VA Aggressive Growth Funds were $484, $524,
and $1,456, respectively.
F. SHARE OWNERSHIP - At December 31, 1997, USAA Life owned 1,931,898 shares
(74.9%) of the USAA Life VA Income Fund, 1,287,098 shares (27.0%) of the USAA
Life VA Growth and Income Fund, 1,545,711 shares (52.2%) of the USAA Life VA
World Growth Fund, 1,726,561 shares (51.9%) of the USAA Life VA Diversified
Assets Fund, 3,440,665 shares (94.6%) of the USAA Life VA Aggressive Growth
Fund, and 1,993,958 shares (92.8%) 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.
B-64 ANNUAL REPORT 1997
<PAGE>
this page left blank intentionally
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(Continued) DECEMBER 31, 1997
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
--------------------------- --------------------------- --------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31,
1997 1996 1995* 1997 1996 1995* 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 (loss) .05 .05 .06(b) .75 .92 .78(b) .28 .26 .34(b)
Net realized and unrealized
gain (loss) - - - .46 (.84) 1.61 3.68 2.79 2.83
Distributions from net
investment income (.05) (.05) (.06) (.76) (.89) (.76) (.27) (.26) (.30)
Distributions of realized
capital gains - - - - - (.31) (.77) (.33) (.27)
------- ------- ------ ------- ------- ------- ------- ------- -------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 10.96 $ 10.51 $ 11.32 $ 17.98 $ 15.06 $ 12.60
======= ======= ======= ======== ======= ======= ======= ======= =======
Total return (%)*** 5.35 5.25 5.69 11.60 .67 23.88 26.43 24.13 31.72
Net assets at end
of period (000) $15,131 $11,245 $ 7,802 $28,246 $24,049 $25,823 $85,750 $55,932 $28,761
Ratio of expenses to
average net assets (%) .35 .35 .35(a) .35 .35 .35(a) .34 .35 .35(a)
Ratio of expenses to
average net assets, excluding
reimbursements(%) .70 1.24 2.29(a) .52 .65 .65(a) NA .53 .66(a)
Ratio of net investment income
to average net assets (%) 5.22 5.10 5.55(a) 7.16 6.99 7.07(a) 1.80 2.25 2.82(a)
Portfolio turnover (%) - - - 30.77 97.74 55.08 20.26 14.55 17.73
Average commission rate
paid per share+ - - - $ .0500 $ .0500 $ .0400 $ .0498 $ .0490 $ .0489
</TABLE>
* 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.
B-66 ANNUAL REPORT 1997
<PAGE>
USAA LIFE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
(Continued) DECEMBER 31, 1997
<TABLE>
<CAPTION>
USAA Life VA USAA Life VA
USAA Life VA USAA Life VA Aggressive International
World Growth Fund Diversified Assets Fund Growth Fund Fund
- -------------------------------- ------------------------------- --------------- --------------
Period Ended Period Ended
Year Ended December 31, Year Ended December 31, December 31, December 31,
1997 1996 1995* 1997 1996 1995* 1997** 1997**
- ---- ---- ------ ---- ---- ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12.77 $ 11.10 $ 10.00 $ 12.95 $ 11.96 $ 10.00 $ 10.00 $ 10.00
.17 .18 .17(b) .50 .62 .55(b) (.01)(b) .05(b)
1.62 2.16 1.79 2.14 1.10 2.08 1.83 .15
(.17) (.16) (.16) (.50) (.62) (.53) - (.05)
(1.05) (.51) (.70) (.61) (.11) (.14) (.12) (.10)
- -------- ------- ------- -------- ------- ------- ------- -------
$ 13.34 $ 12.77 $ 11.10 $ 14.48 $ 12.95 $ 11.96 $ 11.70 $ 10.05
======= ======= ======= ======= ======= ======= ======= =======
14.08 21.12 19.55 20.70 14.30 26.33 18.26 1.92
$39,510 $37,535 $24,706 $48,212 $30,390 $26,311 $42,545 $21,582
.59 .65 .65(a) .35 .35 .35(a) .70(a) 1.10(a)
NA .82 .87(a) .42 .61 .64(a) .85(a) 1.24(a)
1.20 1.45 1.55(a) 4.02 4.46 4.93(a) (.15)(a) .70(a)
48.89 57.66 78.86 19.19 43.75 58.87 73.77 30.57
$ .0063 $ .0006 $ .0076 $ .0507 $ .0471 $ .0482 $ .0489 $ .0082
</TABLE>
1997 ANNUAL REPORT B-67
<PAGE>
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<PAGE>
USAA LIFE INSURANCE COMPANY
To discuss your investment strategy,
the Variable Annuity's features or performance,
call an Account Representative toll free
Monday - Friday 7:15 a.m. to 8:00 p.m.
1-800-531-2923
(456-9050 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 (Copy Rights) 1998, USAA. All rights reserved.
26946-0298
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