<PAGE>
USAA Life Insurance Company
Variable Universal Life
================================================================
Annual Report
December 31, 1998
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<TABLE>
<CAPTION>
Table of Contents
====================================================================================================================================
<S> <C> <C>
USAA Life Insurance Separate Account...........................A-7 - A-17
Overview of the Variable Universal Life Fund Accounts.................A-8
Independent Auditors' Report..........................................A-9
Statements of Assets and Liabilities.................................A-10
Statements of Operations.............................................A-11
Statements of Changes in Net Assets..................................A-12
Notes to Financial Statements........................................A-14
USAA Life Investment Trust....................................B-19 - B-71
USAA Life Fund Overviews......................................B-21 - B-38
Independent Auditors' Report.........................................B-39
Portfolios of Investments.....................................B-40 - B-59
Notes to Portfolios of Investments...................................B-60
Statements of Assets and Liabilities.................................B-62
Statements of Operations.............................................B-63
Statements of Changes in Net Assets..................................B-64
Notes to Financial Statements........................................B-66
Scudder Variable Life Investment Fund (VLIF)
Capital Growth Portfolio...................................C-73 - C-94
Letter from the Fund's President....................................C-75
Capital Growth Portfolio Management Discussion......................C-76
Capital Growth Performance Update...................................C-77
Capital Growth Portfolio Summary....................................C-78
Investment Portfolios, Financial Statements, and Financial Highlights
Capital Growth Portfolio...................................C-79 - C-87
Notes to Financial Statements.......................................C-88
The Alger American Fund
Alger American Growth Portfolio...........................D-95 - D-108
Schedule of Investments............................................D-100
Financial Highlights...............................................D-102
Statement of Assets and Liabilities................................D-103
Statement of Operations............................................D-104
Statement of Changes in Net Assets.................................D-105
This report is for the information of USAA Life Notes to Financial Statements......................................D-106
Variable Universal Life policyowners and others
who have received a copy of the currently effective BT Insurance Funds Trust...................................E-109 - E-172
Variable Universal prospectus. It may be used as Equity 500 Index Fund......................................E-110 - E-125
sales literature only when preceded or accompanied Small Cap Index Fund.......................................E-126 - E-153
by a current prospectus which includes complete EAFE(R) Equity Index Fund..................................E-154 - E-172
information. The USAA Life Variable Universal Life
policy is distributed by USAA Investment Management
Company, a registered broker dealer.
</TABLE>
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USAA Life Insurance
Separate Account
================================================================================
Annual Report
December 31, 1998
<PAGE>
Life Insurance Separate Account of USAA Life
- --------------------------------------------------------------------------------
An Overview
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulation
Unit Value AUV Total Return/1/
(AUV) at Since Inception
Variable Fund Account Objective 12/31/98 to 12/31/98/2/
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Seeks the highest level of current income consistent with $ 1.18 0.80%
Money Market preservation of capital and maintenance of liquidity
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Income Seeks maximum current income $14.09 1.72%
without undue risk to principal
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Seeks capital growth and current income $20.47 20.17%
Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Seeks long-term capital appreciation $17.86 18.53%
World Growth/3/
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Seeks long-term capital growth, consistent with preservation $17.97 11.64%
Diversified Assets of capital and balanced by current income
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life Appreciation of capital $13.99 47.36%
Aggressive Growth
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life International/3/ Capital appreciation with current income $10.42 11.52%
as a secondary objective
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder VLIF Capital Seeks to maximize long-term capital growth $24.45 30.62%
Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Seeks long-term capital appreciation $26.81 36.58%
Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
BT EAFE(R) Seeks to match (before expenses) the total return of the Morgan $10.39 15.76%
Equity Index/3/ Stanley Capital International Europe Australia Far East (EAFE)
Index, a capitalization-weighted index containing approximately
1,100 equity securities
- ------------------------------------------------------------------------------------------------------------------------------------
BT Small Cap Index Seeks to match (before expenses) the total return of the Russell $ 8.83 24.52%
2000(R) Index, an index consisting of approximately 2,000
small-capitalization common stocks
- ------------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index Seeks to match (before expenses) the total return of the S&P $11.00 27.81%
500(R) Index, an index emphasizing 500 large-capitalization
stocks
- ------------------------------------------------------------------------------------------------------------------------------------
/1/ Total returns for periods of less than one year are not annualized. These returns are cumulative.
/2/ Inception date for all variable fund accounts for Variable Universal Life is 8/31/98 when sale of USAA Life's Variable
Universal Life insurance policy began. Year-to-date performance numbers reflect experience since USAA Life began selling the
product. All other data reflects the actual performance for the underlying funds in which the Life Insurance Separate Account
invests, adjusted to reflect a deduction of the M&E risk charge and a $5 monthly recurring maintenance charge. M&E charges
total 0.75% on an annual basis. The performance figures above do not reflect the cost of insurance protection, or the $10
administration charge (first policy year only), and, if they did, the performance quoted above would be significantly lower.
Investors should ask for a personal illustration that shows the effect on performance of the cost of insurance, other charges,
and other variables.
/3/ Foreign investing is subject to additional risks, such as currency fluctuations, market illiquidity, and political instability,
which are discussed in the Variable Universal Life prospectus.
The performance data quoted represent past performance and do not represent the actual experience of amounts invested by a
particular owner. Past performance is not a guarantee of future returns. * An investment in the USAA Life Money Market Fund is not
insured or guaranteed by the F. D. I. C. or any other Government agency. Although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the fund. * The principal value contributed to the other
fund accounts will fluctuate. When Variable Universal Life accumulation units are redeemed, they may be worth more or less than
their original cost. * Because accumulation units are part of an insurance policy, actual performance should always be considered in
conjunction with the policy's fees, cash value, and death benefit. * For more complete information about USAA Life's Variable
Universal Life, including the charges, fees, expenses, cash values, and death benefits, consult the prospectus. * This product is
not yet available in all states. This product is known in some states as Flexible Premium Variable Life. * USAA Life's Variable
Universal Life is distributed by USAA Investment Management Company, a registered broker dealer.
</TABLE>
- ----------------------------
A-8 Annual Report 1998
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Independent Auditors' Report
To the Board of Directors of USAA Life Insurance Company and Policyowners
of the Life Insurance Separate Account of USAA Life Insurance Company:
We have audited the accompanying statements of assets and liabilities as of
December 31, 1998, the related statements of operations, the statements of
changes in net assets, and the unit value information presented in note 6 for
the period August 31, 1998 (commencement of operations) through December 31,
1998, for the USAA Life Money Market Fund Account, USAA Life Income Fund
Account, USAA Life Growth and Income Fund Account, USAA Life World Growth Fund
Account, USAA Life Diversified Assets Fund Account, USAA Life Aggressive Growth
Fund Account, USAA Life 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), the Fund Account of
the American Growth Portfolio of the Alger American Fund (Alger American Growth
Portfolio Fund Account), and the Fund Accounts of the Equity 500 Index Fund,
Small Cap Index Fund and EAFE(R) Equity Index Fund, which are funds of the
Bankers Trust (BT) Insurance Funds Trust series (BT Equity 500 Index Fund
Account, BT Small Cap Index Fund Account, and BT EAFE(R) Equity Index Fund
Account), available within the Life Insurance Separate Account of USAA Life
Insurance Company. These financial statements and unit value information are the
responsibility of the Life Insurance 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 the audit to obtain
reasonable assurance about whether the financial statements and unit value
information are free of 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, 1998, were verified by examination
of the underlying portfolios of the USAA Life Investment Trust or through
confirmation for the Scudder, Alger, and BT Insurance Funds Trust 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 and unit value information referred to
above present fairly, in all material respects, the financial position of the
aforementioned fund accounts of the Life Insurance Separate Account of USAA Life
Insurance Company as of December 31, 1998, and the results of their operations,
the changes in their net assets, and the unit value information for the period
August 31, 1998 (commencement of operations), through December 31, 1998, in
conformity with generally accepted accounting principles.
San Antonio, Texas /s/KPMG LLP
February 5, 1999 KPMG LLP
------------------------
1998 Annual Report A-9
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
Variable Fund Accounts (In Thousands, Except Per Unit Data) December 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment at
Fund Shares Cost Market Value
----------- ---- -------------
Assets
Investments at market value:
USAA Life Money Market Fund 1 $ 1 $ 1
USAA Life Income Fund - - -
USAA Life Growth and Income Fund 1 3 3
USAA Life World Growth Fund - - -
USAA Life Diversified Assets Fund 3 39 38
USAA Life Aggressive Growth Fund - - -
USAA Life International Fund - - -
Scudder VLIF Capital Growth Portfolio - Class A Shares 1 2 3
Alger American Growth Portfolio - - -
BT Equity 500 Index Fund 1 3 3
BT Small Cap Index Fund - - -
BT EAFE(R) Equity Index Fund 1 2 2
---- -------
Total investments $ 50 50
Other assets:
Receivable from USAA Life Insurance Company -
-------
Total assets 50
Liabilities
Payable to USAA Life Insurance Company -
-------
Net assets $ 50
=======
Accumulation
Fund Account Units Unit Value Reserves
------------------ ------------ --------
Net assets
USAA Life Money Market Fund Account 1 $ 1.178565 $ 1
USAA Life Income Fund Account - 14.089499 -
USAA Life Growth and Income Fund Account 1 20.468785 3
USAA Life World Growth Fund Account - 17.860722 -
USAA Life Diversified Assets Fund Account 2 17.974654 38
USAA Life Aggressive Growth Fund Account - 13.993064 -
USAA Life International Fund Account - 10.417977 -
Scudder VLIF Capital Growth Portfolio Fund Account 1 24.448446 3
Alger American Growth Portfolio Fund Account - 26.806157 -
BT Equity 500 Index Fund Account 1 11.003536 3
BT Small Cap Index Fund Account - 8.825971 -
BT EAFE(R) Equity Index Fund Account 1 10.386978 2
------
Net assets attributable to policyowners' reserves $ 50
======
</TABLE>
See accompanying Notes to Financial Statements on page A-14.
- ----------------------------
A-10 Annual Report 1998
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Statements of Operations
<TABLE>
<CAPTION>
Variable Fund Accounts (In Thousands) Period Ended December 31, 1998*
- ------------------------------------------------------------------------------------------------------------------------------------
USAA Life USAA Life World USAA Life USAA Life USAA Life Scudder VLIF Alger
Money USAA Life Growth USAA Life Diversified Aggressive Inter- Capital American
Market Income and Income Growth Assets Growth national Growth Growth
Fund Fund Fund Fund Fund Fund Fund Portfolio Fund Portfolio Fund
Account Account Account Account Account Account Account Account Account
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Income dividends and
capital gains distributions $ - $ - $ - $ - $ 2 $ - $ - $ - $ -
----- ----- ----- ------ ----- ------ ----- ----- -----
Expenses
Mortality and expense
risk charge - - - - - - - - -
----- ----- ----- ------ ----- ------ ----- ----- -----
Net investment income - - - - 2 - - - -
----- ----- ----- ------ ----- ------ ----- ----- -----
Net realized and unrealized
gain (loss) on investments:
Net realized gain - - - - - - - - -
Change in net unrealized
appreciation/depreciation - - - - (1) - - 1 -
----- ----- ----- ------ ----- ------ ----- ----- -----
Net realized and
unrealized gain (loss)
on investments - - - - (1) - - 1 -
----- ----- ----- ------ ----- ------ ----- ----- -----
Increase in net assets
resulting from operations $ - $ - $ - $ - $ 1 $ - $ - $ 1 $ -
===== ===== ===== ====== ===== ====== ===== ===== =====
</TABLE>
BT BT BT
Equity 500 Small Cap EAFE(R) Equity
Index Fund Index Fund Index Fund
Account Account Account
------- ------- -------
Net investment income:
Income dividends and capital
gains distributions $ - $ - $ -
Expenses
Mortality and expense
risk charge - - -
----- ----- -----
Net investment income - - -
----- ----- -----
Net realized and unrealized
gain (loss) on investments:
Net realized gain - - -
Change in net unrealized
appreciation/depreciation - - -
----- ----- -----
Net realized and
unrealized gain (loss)
on investments - - -
----- ----- -----
Increase in net assets
resulting from operations $ - $ - $ -
===== ===== =====
* Variable fund accounts commenced operations August 31, 1998.
See accompanying Notes to Financial Statements on page A-14.
------------------------
1998 Annual Report A-11
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Variable Fund Accounts (In Thousands) Period Ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life Growth USAA Life
Money Market Fund Account Income Fund Account and Income Fund Account World Growth Fund Account
------------------------- ------------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
Increase in net assets
From operations:
Net investment income $ - $ - $ - $ -
Net realized gain
on investments - - - -
Change in net unrealized
appreciation/depreciation - - - -
----- ------- ------ ------
Increase in net assets
resulting from operations - - - -
----- ------- ------ ------
From policy transactions:
Units issued 48 - 3 -
Units redeemed (47) - - -
----- ------- ------ ------
Increase in net assets
from policy transactions 1 - 3 -
----- ------- ------ ------
Net increase in net assets 1 - 3 -
Net assets:
Beginning of period - - - -
----- ------- ------ ------
End of period $ 1 $ - $ 3 $ -
===== ======= ====== ======
Units issued and redeemed:
Beginning balance - - - -
Units issued 46 - 1 -
Units redeemed (45) - - -
----- ------- ------ ------
Ending balance 1 - 1 -
===== ======= ====== ======
BT Equity BT Small BT EAFE(R)
Scudder VLIF Capital Growth Alger American 500 Index Cap Index Equity Index
Portfolio Fund Account Growth Portfolio Fund Account Fund Account Fund Account Fund Account
--------------------------- ----------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Increase in net assets
From operations:
Net investment income $ - $ - $ - $ - $ -
Net realized gain
on investments - - - - -
Change in net unrealized
appreciation/depreciation 1 - - - -
------- ------- ------ ------- -------
Increase in net assets
resulting from operations 1 - - - -
------- ------- ------ ------- -------
From policy transactions:
Units issued 4 - 3 - 2
Units redeemed (2) - - - -
------- ------- ------ ------- -------
Increase in net assets
from policy transactions 2 - 3 - 2
------- ------- ------ ------- -------
Net increase in net assets 3 - 3 - 2
Net assets:
Beginning of period - - - - -
------- ------- ------ ------- -------
End of period $ 3 $ - $ 3 $ - $ 2
======= ======= ====== ======= =======
Units issued and redeemed:
Beginning balance - - - - -
Units issued 1 - 1 - 1
Units redeemed - - - - -
------- ------- ------ ------- -------
Ending balance 1 - 1 - 1
======= ======= ====== ======= =======
</TABLE>
- ----------------------------
A-12 Annual Report 1998
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Variable Fund Accounts (In Thousands) Period Ended December 31, 1998*
- --------------------------------------------------------------------------------
USAA Life Diversified USAA Life Aggressive USAA Life International
Assets Fund Account Growth Fund Account Fund Account
--------------------- -------------------- -----------------------
$ 2 $ - $ -
- - -
(1) - -
-------- --------- -------
1 - -
-------- --------- -------
37 - -
- - -
-------- --------- -------
37 - -
-------- --------- -------
38 - -
- - -
-------- --------- -------
$ 38 $ - $ -
======== ========= =======
- - -
2 - -
- - -
-------- --------- -------
2 - -
======== ========= =======
* Variable fund accounts commenced operations August 31, 1998.
See accompanying Notes to Financial Statements on page A-14.
-------------------------
1998 Annual Report A-13
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Notes To Financial Statements
December 31, 1998
- --------------------------------------------------------------------------------
1) Organization
The Life Insurance Separate Account of USAA Life Insurance Company is registered
under the Investment Company Act of 1940, as amended, as a segregated unit
investment account of USAA Life Insurance Company (USAA Life), a wholly owned
subsidiary of the United Services Automobile Association (USAA). The Life
Insurance Separate Account commenced operation August 31, 1998.
The Life Insurance Separate Account is divided into twelve variable fund
accounts, each of which invests in a corresponding fund. The funds' objectives
can be found on page A-8 in this report. Units of the Life Insurance Separate
Account are sold only in connection with the Variable Universal Life Policy.
The fund accounts available within the Life Insurance Separate Account include:
the USAA Life Money Market Fund Account, USAA Life Income Fund Account, USAA
Life Growth and Income Fund Account, USAA Life World Growth Fund Account, USAA
Life Diversified Assets Fund Account, USAA Life Aggressive Growth Fund Account,
and USAA Life 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); the Fund Account of the American
Growth Portfolio of the Alger American Fund (Alger American Growth Portfolio
Fund Account); the Fund Accounts of the Equity 500 Index Fund, Small Cap Index
Fund and EAFE(R) Equity Index Fund, which are funds of the Bankers Trust (BT)
Insurance Funds Trust series (BT Equity 500 Index Fund Account, BT Small Cap
Index Fund Account, and BT EAFE(R) Equity Index Fund Account), available within
the Life Insurance Separate Account of USAA Life Insurance Company.
The assets of the Life Insurance Separate Account are the property of USAA Life
and are not chargeable with liabilities arising out of any other business of
USAA Life.
2) Summary Of Significant Accounting Policies
Security Valuation
Investments in mutual fund securities are carried in the Statements of Assets
and Liabilities at net asset value as reported by the fund. Gains or losses on
securities transactions are determined on the basis of the first-in first-out
(FIFO) cost method. Security transactions are recorded on the trade date.
Dividend income, if any, is recorded on ex-dividend date.
Distributions
The net investment income (loss) and realized capital gains of the Life
Insurance Separate Account are not distributed, but instead are retained and
reinvested for the benefit of unit owners.
Federal Income Tax
Operations of the Life Insurance 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 Life Insurance 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.
3) Related Party Transactions
During the year ended December 31, 1998, advisory and administrative fees of
$1.1 million 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 Aggressive Growth Fund,
which accrues at an annualized rate of 0.50%, and USAA Life International Fund,
which accrues at an annualized rate of 0.65%. The funds are an investment option
for both the Variable Universal Life Policy and the Flexible Premium Deferred
Combination Fixed and Variable Annuity Contract. Administrative fees are based
on estimated time incurred to provide such services.
- ----------------------------
A-14 Annual Report 1998
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
- --------------------------------------------------------------------------------
4) Expenses
A mortality and expense risk charge is deducted by USAA Life from the Life
Insurance Separate Account on a daily basis which is equal, on an annual basis,
to 0.75% of the daily net assets of each variable fund account. The mortality
risk assumed is that insureds may live for a shorter period of time than
estimated. Thus a greater amount of death benefits than expected will be
payable. The expense risk assumed by USAA Life is that the costs of
administering the policies and the Life Insurance Separate Account may exceed
the amount recovered from the policy maintenance and administration expense
charges. The mortality and expense risk charge is guaranteed by USAA Life and
cannot be increased.
The following expenses are charged to reimburse USAA Life for the expenses it
incurs in the establishment and maintenance of the policies and each variable
fund account. On the policy's effective date, and each monthly anniversary
thereafter, certain monthly charges will be deducted by USAA Life through a
redemption of units from the cash value of the policy. The monthly deduction
will include cost of insurance charges, charges for any optional insurance
benefits provided by rider, an administrative charge of $10 during the first
twelve policy months, and a recurring maintenance charge of $5. For the period
ended December 31, 1998, monthly deduction charges totaled approximately $1,000
and such charges have been classified as policy redemptions.
A transfer charge of $25 will be deducted for each value transfer between
Variable Fund Accounts in excess of six per Policy Year. For each partial
surrender of cash value, a charge equal to the lesser of $25 or 2% of the amount
withdrawn will be deducted. This charge is also referred to as an
"administrative processing fee." For full surrenders, the amount of the
surrender charge will equal a percentage of the Annual Target Premium Payment
specified in the policy. The number of years the policy has been in force at the
time of surrender determines the applicable percentage.
A 3% premium charge is deducted from the policyholder's premium to compensate
USAA Life for sales charges and taxes. The charge will be deducted from the
policyholder's premium payments until the policyholder's gross amount of premium
payments received exceeds the sum of the policyholder's Annual Target Premium
payments payable over 10 years.
5) Year 2000 (unaudited)
Like other companies, the Life Insurance Separate Account could be adversely
affected if the computer systems used by its service providers are not able to
perform their intended functions effectively after 1999 because of the inability
of computer software to distinguish the year 2000 from the year 1900. USAA Life
is taking steps to address this potential year 2000 problem with respect to the
computer systems that they use and to obtain satisfactory assurances that
comparable steps are being taken by the Life Insurance Separate Account's
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Life Insurance
Separate Account from this problem.
-------------------------
1998 Annual Report A-15
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
- --------------------------------------------------------------------------------
6) UNIT VALUES
A summary of unit values and units outstanding for variable universal life
policies and the expense ratios, including expenses of the underlying funds,
for the period is as follows:
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
Money Market Income Growth and Income World Growth
Fund Account Fund Account Fund Account Fund Account
Period Ended Period Ended Period Ended Period Ended
December 31, December 31, December 31, December 31,
1998 (a) 1998 (a) 1998 (a) 1998(a)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
At end of period:
Accumulation units (000) 1 - 1 -
Accumulation unit value $ 1.178565 $14.089499 $20.468785 $17.860722
Net assets (000) $ 1 - $ 3 -
Ratio of expenses to average net assets (b) (c) 1.10% 1.10% 1.10% 1.40%
Ratio of expenses to average net assets,
excluding reimbursements (c) 1.55% 1.30% 1.12% 1.41%
Scudder VLIF Alger American
Capital Growth Portfolio Growth Portfolio
Fund Account Fund Account
Period Ended Period Ended
December 31, December 31,
1998 (a) 1998 (a)
---------------------------------------------------------
At end of period:
Accumulation units (000) 1 -
Accumulation unit value $24.448446 $26.806157
Net assets (000) $ 3 -
Ratio of expenses to average net assets (b) (c) 1.26% 1.54%
Ratio of expenses to average net assets,
excluding reimbursements (c) N/A N/A
BT Equity BT Small BT EAFE(R)
500 Index Cap Index Equity Index
Fund Account Fund Account Fund Account
Period Ended Period Ended Period Ended
December 31, December 31, December 31,
1998 (a) 1998 (a) 1998 (a)
-----------------------------------------------------
At end of period:
Accumulation units (000) 1 - 1
Accumulation unit value $11.003536 $ 8.825971 $10.386978
Net assets (000) $ 3 - $ 2
Ratio of expenses to average net assets (b), (c) 1.05% 1.20% 1.40%
Ratio of expenses to average net assets,
excluding reimbursements(c) 1.94% 2.33% 2.41%
</TABLE>
- ----------------------------
A-16 Annual Report 1998
<PAGE>
The Life Insurance Separate Account of USAA Life Insurance Company
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
- --------------------------------------------------------------------------------
USAA Life USAA Life USAA Life
Diversified Assets Aggressive Growth International
Fund Account Fund Account Fund Account
Period Ended Period Ended Period Ended
December 31, December 31, December 31,
1998 (a) 1998 (a) 1998 (a)
- ----------------------------------------------------------------------
2 - -
$17.974654 $13.993064 $10.417977
$ 38 - -
1.10% 1.45% 1.85%
1.20% 1.59% 2.10%
(a) Variable fund accounts commenced operations August 31, 1998 with the
following initial unit values per unit:
USAA Life Money Market Fund Account $ 1.162018
USAA Life Income Fund Account $13.766435
USAA Life Growth and Income Fund Account $16.937712
USAA Life World Growth Fund Account $14.981795
USAA Life Diversified Assets Fund Account $16.007256
USAA Life Aggressive Growth Fund Account $ 9.446371
USAA Life International Fund Account $ 9.285958
Scudder VLIF Capital Growth Portfolio Fund Account $18.614844
Alger American Growth Portfolio Fund Account $19.521151
BT Equity 500 Index Fund Account $ 8.561922
BT Small Cap Index Fund Account $ 7.048653
BT EAFE(R) Equity Index Fund Account $ 8.920584
(b) The information is based on actual expenses to the policyowner for the
period, including the expenses of the underlying fund, after giving effect to
reimbursement of fund expenses by USAA Life.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
-------------------------
1998 Annual Report A-17
<PAGE>
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<PAGE>
USAA LIFE INSURANCE COMPANY
To discuss your Variable Universal Life policy,
call an Account Representative toll free
1-800-531-8303
(456-9035 in San Antonio)
----------------------------------
If you wish to discuss your particular policy,
transfer money from one fund account to another or select a payout option,
call a Service Representative toll free
1-800-531-4256
----------------------------------
[LOGO OF USAA APPEARS HERE]
Copyright (C) 1999, USAA. All rights reserved. 33835-0299
