USAA LIFE INVESTMENT TRUST, 485APOS, 1997-02-14

USAA LIFE INVESTMENT TRUST
485APOS, 1997-02-14

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<PAGE>

As filed with the Securities and Exchange Commission on February 14, 1997.

Registration Nos.: 33-82270
811-8672
______________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-

Pre-Effective Amendment No.

Post-Effective Amendment No. 3
-

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
-

Amendment No. 4
-

USAA LIFE INVESTMENT TRUST
(Exact Name of Registrant As Specified in Charter)

9800 Fredericksburg Road, San Antonio, Texas 78288
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: 210-498-8000

RICHARD T. HALINSKI, JR., ESQ.
DWAIN A. AKINS, ESQ.
Life & Health Insurance Counsel
USAA Life Insurance Company
9800 Fredericksburg Road, C-3-W
San Antonio, Texas 78288
(Name and Address of Agents for Service)

Copies to:

GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036

<PAGE>

Approximate Date of Proposed Public Offering: Continuous.

It is proposed that this filing will become effective (check appropriate box):

Immediately upon filing pursuant to paragraph (b) of Rule 485
-------

On (date), pursuant to paragraph (b) of Rule 485
-------

60 days after filing pursuant to paragraph (a)(1) of Rule 485
-------

On (date) pursuant to paragraph (a)(1) of Rule 485
-------

75 days after filing pursuant to paragraph (a)(2) of Rule 485
-------

X On May 1, 1997 pursuant to paragraph (a)(2) of Rule 485.
-------

If appropriate, check the following:

This post-effective amendment designates a new effective date
------- for a previously filed post-effective amendment.

The Registrant has registered an indefinite number or amount of its securities
of each of its seven series under the Securities Act of 1933 pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant filed a Rule
24f-2 Notice on February 29, 1996.

<PAGE>

Cross-reference Sheet Required by
Rule 495 under the Securities Act of 1933

PART A
Form N-1A Item No. Caption in Prospectus
- ------------------ ---------------------
<S> <C>
1. Cover Page Cover Page

2. Synopsis Not applicable

3. Condensed Financial Information Financial Highlights

4. General Description of Cover Page; Introduction;
Registrant The Funds; Certain Investment
Policies, Techniques and
Restrictions; Special Risk
Considerations; Investment
Restrictions; Performance
Information

5. Management of the Fund Management

5A. Management's Discussion of Fund Not applicable
Performance

6. Capital Stock and Other Securities Introduction; Dividends and
Distributions; Tax Matters;
Additional Information About
the Trust

7. Purchase of Securities Being Purchase of Fund Shares;
Offered Valuation of Fund Shares

8. Redemption or Repurchase Redemption of Fund Shares

9. Pending Legal Proceedings Not applicable

</TABLE>

<PAGE>

Part B Caption in
Form N-1A Item No. Statement of Additional Information
- ------------------ -----------------------------------
<S> <C>
10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and History General Information and History

13. Investment Objectives and Investment Policies and Techniques;
Policies Investment Restrictions; Portfolio
Transactions--Portfolio Turnover
Rates

14. Management of the Fund The Trust's Adviser; Trustees and
Officers of the Trust

15. Control Persons and Principal Principal Holders of Securities
Holders of Securities

16. Investment Advisory and Other The Trust's Adviser; Custodian;
Services Transfer Agent; Independent Auditors

17. Brokerage Allocation and Other Portfolio Transactions
Practices

18. Capital Stock and Other Further Description of Trust Shares
Securities

19. Purchase, Redemption and Pricing Valuation of Securities; Additional
of Securities Being Offered Information Regarding Redemption of
Shares

20. Tax Status Certain Federal Income Tax
Considerations

21. Underwriters Distributor

22. Calculation of Performance Data Calculation of Performance Data

23. Financial Statements Financial Statements

Part C
- ------

Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.

</TABLE>

<PAGE>

THE TRUST

USAA LIFE INVESTMENT TRUST

9800 Fredericksburg Road
San Antonio, Texas 78288
Prospectus dated: May 1, 1997

USAA Life Investment Trust (the "Trust") is a Delaware business trust organized
on July 20, 1994. The Trust is a diversified open-end management investment
company (commonly referred to as a "mutual fund"), which consists of the
following seven separate series, each with its own investment objectives and
policies (individually, "Fund"; collectively "Funds"):

USAA Life Variable Annuity Money Market Fund ("VA Money Market Fund"). The VA
Money Market Fund's investment objective is to obtain the highest level of
current income consistent with preservation of capital and maintenance of
liquidity.

USAA Life Variable Annuity Income Fund ("VA Income Fund"). The VA Income Fund's
investment objective is maximum current income without undue risk to
principal.

USAA Life Variable Annuity Aggressive Growth Fund ("VA Aggressive Growth Fund").
The VA Aggressive Growth Fund's investment objective is appreciation of
capital.

USAA Life Variable Annuity Growth and Income Fund ("VA Growth and Income Fund").
The VA Growth and Income Fund's investment objective is capital growth and
current income.

USAA Life Variable Annuity World Growth Fund ("VA World Growth Fund"). The VA
World Growth Fund's investment objective is long-term capital appreciation.

USAA Life Variable Annuity International Fund ("VA International Fund"). The VA
International Fund's primary investment objective is capital appreciation with
current income as a secondary objective.

USAA Life Variable Annuity Diversified Assets Fund ("VA Diversified Assets
Fund"). The VA Diversified Assets Fund's investment objective is long-term
capital growth, consistent with preservation of capital and balanced by
current income.

Shares of the Trust currently are offered only to the Separate Account of USAA
Life Insurance Company (the "Separate Account") to serve as the funding medium
for certain variable annuity contracts (the "Contracts") that USAA Life
Insurance Company ("USAA Life") is offering to individual members and families
of members of the United Services Automobile Association ("USAA"), as well as to
the general public. USAA, a large diversified financial services institution, is
the parent company of the USAA Group of Companies, which includes USAA Life and
USAA Investment Management Company ("USAA IMCO"), the investment adviser
("Adviser") to the Trust. As Adviser to the Trust, USAA IMCO will use its
professional experience and expertise to assist the Funds in trying to meet
their objectives. However, there can be no assurance that these objectives will
be attained. SHARES OF THE TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, THE USAA FEDERAL SAVINGS BANK, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED. BECAUSE THE VA WORLD GROWTH FUND AND THE VA INTERNATIONAL FUND EACH
MAY INVEST PRIMARILY IN FOREIGN SECURITIES, THEY INVOLVE A HIGHER DEGREE OF RISK
AND MAY NOT BE APPROPRIATE FOR SOME INVESTORS. (SEE "SPECIAL RISK
CONSIDERATIONS" AT PAGE 40B.)

This Prospectus provides prospective purchasers of the Contracts with basic
information regarding the Trust that they should know before allocating premium
payments to any Fund. Please read it carefully and retain it for future
reference. Additional information regarding the Trust is contained in a
Statement of Additional Information ("SAI") dated May 1, 1997, which has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated in this Prospectus by reference. If you have any questions about
this Prospectus or desire a copy of the SAI at no charge, please write to the
Trust at the address shown above or call: (210) 456-9035 or toll free 1-800-531-
2923.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND
IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

30B
<PAGE>

TABLE OF CONTENTS:

INTRODUCTION................................................32B

FINANCIAL HIGHLIGHTS........................................33B

THE FUNDS...................................................32B

USAA Life Variable Annuity Money Market Fund...............33B
USAA Life Variable Annuity Income Fund.....................34B
USAA Life Variable Annuity Aggressive Growth Fund..........35B
USAA Life Variable Annuity Growth and Income Fund..........35B
USAA Life Variable Annuity World Growth Fund...............36B
USAA Life Variable Annuity International Fund..............36B
USAA Life Variable Annuity Diversified Assets Fund.........37B

CERTAIN INVESTMENT POLICIES, TECHNIQUES AND RESTRICTIONS....37B
Convertible Securities.....................................37B
Municipal Lease Obligations................................38B
Mortgage-Backed and Asset-Backed Securities................38B
Yankee and Eurodollar Obligations..........................38B
Depositary Receipts........................................39B
Forward Currency Contracts.................................39B
Repurchase Agreements......................................39B
Master Demand Notes........................................39B
Variable Rate Securities...................................40B
Put Bonds..................................................40B
When-Issued Securities.....................................40B
Liquidity..................................................40B
Portfolio Turnover.........................................40B

SPECIAL RISK CONSIDERATIONS.................................40B
REITS......................................................40B
Foreign Securities.........................................40B
Forward Currency Contracts.................................41B

INVESTMENT RESTRICTIONS.....................................41B

MANAGEMENT..................................................42B
Advisory Fees..............................................42B
Expenses...................................................42B
Portfolio Transactions.....................................42B
Portfolio Managers.........................................43B

PURCHASE OF FUND SHARES.....................................43B
Distributor................................................44B

REDEMPTION OF FUND SHARES...................................44B

VALUATION OF FUND SHARES....................................44B

DIVIDENDS AND DISTRIBUTIONS.................................45B

TAX MATTERS.................................................45B
Diversification............................................45B

PERFORMANCE INFORMATION.....................................45B

ADDITIONAL INFORMATION ABOUT THE TRUST......................46B
Organization and Capitalization............................46B
Voting Privileges..........................................46B

SERVICE PROVIDERS...........................................47B

31B
<PAGE>

Introduction

The Trust is registered with the SEC as a diversified, open-end management
investment company. The Trust currently consists of seven Funds, each of which
represents a separate series of shares of beneficial interest in the Trust. The
Trust serves as the funding vehicle for Contracts issued by USAA Life through
the Separate Account. The Separate Account, and not the individual Contract
Owners ("Contract Owners"), is the shareholder of the Trust. However, certain
voting instruction privileges with respect to Trust shares are extended to
Contract Owners. See "Voting Privileges," below. A prospectus describing the
Contracts accompanies this Prospectus.

Financial Highlights

Set out below are the Financial Highlights for each Fund (except the VA
Aggressive Growth Fund and the VA International Fund) of the Trust expressed in
terms of one share outstanding for each of the periods shown. The VA Aggressive
Growth Fund and the VA International Fund did not commence operations until May
1, 1997. The information contained in the Financial Highlights has been audited
by KPMG Peat Marwick, LLP, the Trust's independent auditors, whose report
thereon is contained in the Trust's Annual Report to Shareholders ("Annual
Report"). The Financial Highlights should be read in conjunction with the
Trust's audited financial statements and notes thereto which are contained in
the Annual Report. Additional information about the performance of the Trust and
the Funds has been included in the Annual Report, which may be obtained upon
request, without charge, by calling 1-800-531-2923 or writing the Trust at 9800
Fredericksburg Road, San Antonio, Texas 78288.

USAA LIFE INVESTMENT TRUST FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding for the period from
January 1, 1996 through December 31, 1996 is as follows:

(a) Calculated using weighted average shares.
(b) The total return of a Fund refers to the percentage change in value of a
hypothetical investment, including the deduction of a proportional share of
fund expenses, and assumes all income and capital gains distributions are
reinvested. Total returns for the period do not reflect expenses that apply
at the Separate Account level including risk and expense charges. These
expenses would reduce the total return for the period shown.
(c) The information contained in this table is based on actual expenses for the
period, after giving effect to reimbursements of expenses by USAA Life.
Absent such reimbursements, the funds' ratios would have been:
<TABLE>
<CAPTION>
USAA LIFE USAA LIFE USAA LIFE USAA LIFE USAA LIFE
VA MONEY VA INCOME VA GROWTH AND VA WORLD VA DIVERSIFIED
MARKET FUND FUND INCOME FUND GROWTH FUND ASSETS FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets
Ratio of net investment income to average
net assets
</TABLE>

32B
<PAGE>

USAA LIFE INVESTMENT TRUST FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding for the period from
January 5, 1995 (the Trust's date of inception) through December 31, 1995 is as
follows:

<TABLE>
<CAPTION>
USAA LIFE USAA LIFE USAA LIFE USAA LIFE USAA LIFE
VA MONEY VA INCOME VA GROWTH AND VA WORLD VA DIVERSIFIED
MARKET FUND FUND INCOME FUND GROWTH FUND ASSETS FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Net investment income 0.06(a) 0.78(a) 0.34(a) 0.17(a) 0.55(a)
Net realized and unrealized gain -- 1.61 2.83 1.79 2.08
Distributions from net investment income (0.06) (0.76) (0.30) (0.16) (0.53)
Distributions of realized capital gains -- (0.31) (0.27) (0.70) (0.14)
Net asset value at end of period $ 1.00 $ 11.32 $ 12.60 $ 11.10 $ 11.96
Total Return 5.69%(b) 23.88%(b) 31.72%(b) 19.55%(b) 26.33%(b)
Net assets at end of period ($000) $7,802 $25,823 $28,761 $24,705 $26,311
Ratio of expenses to average net assets 0.35%(c,d) 0.35%(c,d) 0.35%(c,d) 0.65%(c,d) 0.35%(c,d)
Ratio of net investment income to average
net assets 5.55%(c,d) 7.07%(c,d) 2.82%(c,d) 1.55%(c,d) 4.93%(c,d)
Portfolio turnover -- 55.08% 17.73% 78.86% 58.87%
Average commission rate per share -- $0.0400 $0.0489 $0.0076 $0.0482
</TABLE>
(a) Calculated using weighted average shares.
(b) The total return of a Fund refers to the percentage change in value of a
hypothetical investment, including the deduction of a proportional share of
fund expenses, and assumes all income and capital gains distributions are
reinvested. Total returns for the period do not reflect expenses that apply
at the Separate Account level including risk and expense charges. These
expenses would reduce the total return for the period shown.
(c) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(d) The information contained in this table is based on actual expenses for the
period, after giving effect to reimbursements of expenses by USAA Life.
Absent such reimbursements, the funds' ratios would have been:

The Funds

Set out below is a description of the investment objectives, investment program,
policies, and restrictions of each Fund. The investment objective of each Fund
is a fundamental policy that may not be changed without the approval of a
majority of that Fund's outstanding shares (within the meaning of the Investment
Company Act of 1940 ["1940 Act"]). The investment program, policies, and
restrictions except as otherwise noted or as required by law, are not
fundamental, and may be changed by the Board of Trustees of the Trust ("Board of
Trustees") without shareholder approval. There are risks in the ownership of any
security, and no assurance can be given that any Fund will achieve its
investment objective.

USAA LIFE VARIABLE ANNUITY MONEY MARKET FUND

INVESTMENT OBJECTIVE. The VA Money Market Fund's investment objective is to
obtain the highest level of current income consistent with preservation of
capital and maintenance of liquidity.

Investment Program. The Fund will pursue this objective by investing its assets
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. Consistent with regulatory requirements, the Fund will maintain an
overall dollar-weighted average portfolio maturity of no more than 90 days. The
Fund currently invests in money market instruments with relatively short
maturities. This is done primarily to facilitate the redemption of Fund shares
when Contract values are allocated from the Money Market Variable Annuity Fund
Account to other Variable Annuity Fund Accounts following the "Free Look" period
described in the accompanying Variable Annuity prospectus.

The Fund may invest in the following categories of money market instruments:
(1) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements collateralized by such obligations;
(2) corporate debt obligations such as notes, bonds, and commercial paper; (3)
U.S. bank or foreign bank obligations including certificates of deposit,
banker's acceptances, and time deposits; (4) obligations of state and local
governments and their agencies and instrumentalities; (5) municipal lease
obligations; (6) mortgage-backed securities; (7) asset-backed securities; (8)
dollar-denominated instruments issued outside the U.S. capital markets by
foreign corporations and financial institutions and by foreign branches of U.S.
corporations and financial institutions

33B
<PAGE>

("Eurodollar obligations"); (9) dollar-denominated instruments issued by foreign
issuers in the U.S. capital markets ("Yankee obligations"); (10) master demand
notes; and (11) other short-term debt obligations. As a matter of operating
policy, the Fund will limit its investments in any one issuer (other than the
U.S. Government, its agencies or instrumentalities) to no more than 5% of its
total assets.

The Fund will purchase only high quality debt securities that qualify, at the
time of purchase, as "first-tier" securities as defined by Rule 2a-7 under the
1940 Act. In general, a first-tier security means a security that is: (1) issued
or guaranteed by the U.S. Government or any agency or instrumentality thereof;
(2) rated in the highest category for short-term securities by at least two
Nationally Recognized Statistical Rating Organizations ("NRSROs"), or by one
NRSRO if the security is rated by only one NRSRO; (3) unrated but issued by an
issuer that has other comparable short-term debt obligations so rated; or (4)
unrated but determined to be of comparable quality by the Adviser. If a security
is downgraded after purchase, the Adviser will follow written procedures adopted
by the Board of Trustees to determine whether it is in the best interest of the
Fund's shareholders for the Fund to continue to hold the security. Current
NRSROs include: Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps
Inc. ("D&P"), Thompson BankWatch, Inc., and IBCA Inc. (See Appendix A to the SAI
for a further description of debt ratings provided by these NRSROs.)

The value of the VA Money Market Fund's securities is stated at amortized
cost, which approximates market value. This involves valuing a security at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates. While this
method provides certainty in valuation, it may result in periods during which
the value of an instrument, as determined by amortized cost, is higher or lower
than the price the Fund would receive upon the sale of the instrument. The
market value of a money market instrument can fluctuate due to changes in short-
term interest rates or changes in the actual or perceived creditworthiness of
the issuer or guarantor.

WHO SHOULD INVEST. The VA Money Market Fund is designed for investors seeking to
benefit from money market yields consistent with safety of principal. The Fund
does not constitute a balanced investment program, but rather, is a useful
component of a long-term balanced investment program for the conservative
investor. The securities in which the VA Money Market Fund may invest may not
yield as high a level of income as securities with a lesser degree of credit
safety and liquidity or longer-term debt obligations. Accordingly, the VA Money
Market Fund is expected to provide lower levels of income and risk than the VA
Income Fund. The Fund will endeavor to maintain a constant net asset value of
$1.00 per share, although there is no assurance that it will be able to do so.
The VA Money Market Fund's shares are neither insured nor guaranteed by the U.S.
Government. Moreover, because the Fund invests in securities backed by banks and
other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.

USAA LIFE VARIABLE ANNUITY INCOME FUND

INVESTMENT OBJECTIVE. The VA Income Fund's investment objective is to obtain
maximum current income without undue risk to principal.

INVESTMENT PROGRAM. The Fund will pursue this objective by investing, under
normal market conditions, primarily (i.e., not less than 65% of its total
assets) 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. Consistent with this policy, in periods of rising interest rates, the
Fund may invest a greater portion of its assets in securities the value of which
is believed to be less sensitive to interest rate changes.

The debt securities in which the Fund can invest include: (1) obligations of
the U.S. Government, its agencies or instrumentalities, and repurchase
agreements collateralized by such obligations; (2) mortgage-backed securities;
(3) corporate debt securities such as notes, bonds, and commercial paper; (4)
U.S. bank obligations, including certificates of deposit and banker's
acceptances; (5) obligations of state and local governments and their agencies
and instrumentalities; (6) asset-backed securities; (7) master demand notes; (8)
Eurodollar obligations; (9) Yankee obligations; and (10) other debt securities.
In addition to investments in debt securities, the Fund can invest in dividend
paying common stocks, preferred stocks, and securities that are convertible into
common stocks or that carry the right to buy common stocks ("convertible
securities"). For convenience, this Prospectus refers to common stocks,
preferred stocks and convertible securities collectively as "Equity Securities".
The Fund also may invest in U.S. real estate investment trusts ("REITS"). For a
discussion of risks associated with investments in REITS, see "Special Risk
Considerations--REITS," below.

As a temporary defensive measure, the Adviser may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments.

The debt securities must be investment grade at the time of purchase.
Investment grade securities are those issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, those rated in the top four
categories of any one NRSRO (e.g., those rated at least Baa by Moody's, BBB by
S&P, BBB by Fitch, or BBB by D&P), or those judged to be of equivalent quality
by the Adviser if not rated. Securities rated in the lowest level of investment
grade have speculative characteristics since adverse economic conditions
and

34B
<PAGE>

changing circumstances are more likely to have an adverse impact on such
securities. If the rating of a security is downgraded below investment grade,
the Adviser will determine whether it is in the best interest of the Fund's
shareholders to continue to hold such security in the Fund's portfolio. Unless
otherwise directed by the Board of Trustees, if downgrades result in more than
5% of the Fund's net assets being invested in securities that are less than
investment grade quality, the Fund's Adviser will take immediate action to
reduce the Fund's holdings in such securities to 5% or less of the Fund's net
assets. Investment grade debt securities typically do not generate as high a
level of income as lower-rated debt securities. The Fund, therefore, can be
expected to provide a lower level of income than mutual funds that invest in
securities of lesser quality. (See Appendix A to the SAI for a more complete
description of debt ratings.)

The Fund may invest in debt securities of any maturity, which will have a
bearing on the interest rate risk that the Fund assumes. Generally, longer-term
debt securities are more sensitive to interest rate changes than are shorter-
term debt securities.

WHO SHOULD INVEST. The VA Income Fund is designed primarily for investors
seeking to benefit from a level of income higher than that available from the VA
Money Market Fund, and who are willing to accept principal fluctuation. Like the
VA Money Market Fund, the VA Income Fund should not be relied upon as a complete
investment program.

USAA LIFE VARIABLE ANNUITY AGGRESSIVE GROWTH FUND

INVESTMENT OBJECTIVE. The VA Aggressive Growth Fund seeks appreciation of
capital.

INVESTMENT PROGRAM. The Fund will pursue this objective by investing, under
normal market conditions, primarily (i.e., not less than 65% of its total
assets) in Equity Securities. The Fund will invest in companies that have the
prospect of rapidly growing earnings. These investments may tend to be
made in smaller, less recognized companies, but may also include large, widely
recognized companies. Investments may also include foreign securities. The Fund
also may invest in REITS. For a discussion of risks associated with
investments in REITS, see "Special Risk Considerations--REITS," below.

While the portfolio will be broadly diversified, the Fund is expected to be
significantly more volatile than the average equity mutual fund. Investing in
smaller less well-known companies, especially those that have a narrow product
line or are thinly traded, often involves greater risk than investing in
established companies with proven track records.

Up to 30% of the Fund's total assets may be invested in foreign securities,
including American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs"), or similar forms of ownership interest in securities of foreign
issuers deposited with a depositary. Foreign holdings may include securities
issued in emerging as well as established markets. Foreign securities may
present greater risks than domestic securities. For a discussion of risks
associated with investments in foreign issuers, see "Special Risk Considerations
- --Foreign Securities," below.

As a temporary defensive measure, the Adviser may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments.

WHO SHOULD INVEST. The Fund is designed for investors seeking to benefit from
long-term growth of capital. This Fund is expected generally to have greater
potential for long-term capital appreciation than the VA Growth and Income Fund,
but also significantly greater volatility.

USAA LIFE VARIABLE ANNUITY GROWTH AND INCOME FUND

INVESTMENT OBJECTIVE. The VA Growth and Income Fund seeks capital growth and
current income.

INVESTMENT PROGRAM. The Fund will pursue this objective by investing, under
normal market conditions, not less than 65% of its assets in a diversified
portfolio of dividend paying common stocks, convertible securities,
nonconvertible preferred stock and nonconvertible debt securities of companies
that offer the prospect for growth of earnings. These securities may be listed
on a national securities exchange or traded in an established over-the-counter
securities market ("OTC market"). The debt securities in which the Fund may
invest will be of the type in which the VA Income Fund may invest.

The Fund also may invest in REITS. For a discussion of risks associated
with investments in REITS, see "Special Risk Considerations--REITS," below. The
Fund may invest up to 30% of its total assets in ADRs or similar forms of
ownership interests in securities of foreign issuers deposited with a
depositary, and securities of foreign issuers that are traded on U.S. securities
exchanges or in U.S. OTC markets. (See "Special Risk Considerations--Foreign
Securities," below.)

35B
<PAGE>

As a temporary defensive measure, the Adviser may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments.

WHO SHOULD INVEST. The Fund is designed for investors seeking to benefit from
long-term growth of capital and income. Because of the Fund's emphasis on
investments in common stocks, its value will fluctuate based on market
conditions. Consequently, the Fund should not be relied on for short-term
financial needs or for short-term investment in the stock market.

USAA LIFE VARIABLE ANNUITY WORLD GROWTH FUND

INVESTMENT OBJECTIVE. The VA World Growth Fund seeks long-term capital
appreciation.

INVESTMENT PROGRAM. The Fund will pursue this objective by investing, under
normal market conditions, not less than 65% of its total assets in a diversified
portfolio of Equity Securities of both foreign and domestic issuers representing
at least three countries, one of which may include the United States. The Fund
may purchase ADR's, GDRs or similar forms of ownership interest in securities
of foreign issuers deposited with a depositary. ( For a discussion of the risks
pertaining to investments in foreign securities, see "Special Risk
Considerations -- Foreign Securities," below.) The Fund also may invest in
REITS. For a discussion of risks associated with investments in REITS, see
"Special Risk Considerations--REITS," below.

The Fund may invest up to 35% of its total assets in marketable debt
securities having remaining maturities of less than one year that are issued or
guaranteed as to both principal and interest by the U.S. Government or by its
agencies or instrumentalities and in repurchase agreements collateralized by
such securities. As a temporary defensive measure, the Adviser may invest up to
100% of the Fund's assets in such securities.

The Fund may hold securities denominated in foreign currencies. As a result,
the value of the securities will be affected by changes in the exchange rate
between the dollar and foreign currencies. In managing exposure to currency
risk, the Fund may enter into forward currency contracts, which involves an
agreement to purchase or sell a specified currency at a specified future date or
over a specified time period at a price set at the time of the contract. (See
"Certain Investment Policies, Techniques and Restrictions--Forward Currency
Contracts," below.)

WHO SHOULD INVEST. The VA World Growth Fund is designed for investors seeking to
diversify by investing in securities of both foreign and domestic issuers, and
who are prepared to bear the risks of such investments. (For a discussion of the
risks pertaining to investments in foreign securities, see "Special Risk
Considerations--Foreign Securities," below.) Because of its emphasis on equity
securities and securities of foreign issuers, this Fund should not be relied
upon as a complete investment program.

USAA LIFE VARIABLE ANNUITY INTERNATIONAL FUND

INVESTMENT OBJECTIVE. The VA International Fund's primary investment objective
is capital appreciation with current income as a secondary objective.

INVESTMENT PROGRAM. The Fund will pursue the objective by investing, under
normal market conditions, at least 80% of the Fund's assets in Equity Securities
of foreign companies. For purposes of the Fund's investment, a company is deemed
to be a foreign company if: (1) it is organized under the laws of a foreign
country; and either (2)(a) the principal trading market for the stock is in a
foreign country; or (b) at least 50% of its revenues or profits are derived from
operations within a foreign country; or (c) at least 50% of its assets are
located within a foreign country.

These investments will be diversified in foreign companies organized in at
least four countries (not including the United States). There are no
restrictions as to the types of businesses or operations of companies in which
the Fund may invest.

The remainder of the Fund's assets may be invested in Equity Securities of
companies that meet either of the two criteria set forth above and certain
short-term instruments. These short-term instruments may include marketable
securities having remaining maturities of less than one year issued or
guaranteed as to both principal and interest by the U.S. Government or by its
agencies or instrumentalities and repurchase agreements collateralized by such
securities. As a temporary defensive measure, the Adviser may invest up to 100%
of the Fund's assets in such short-term securities.

The Adviser believes that attractive investment opportunities exist in several
nations of the world, and that investing internationally can improve overall
results at moderate risk. The Fund combines the advantages of investment in
diversified international markets with the convenience and liquidity of a mutual
fund based in the United States. For a discussion of risks associated with
investments in foreign issuers, see "Special Risk Considerations--Foreign
Securities," below.

WHO SHOULD INVEST. The Fund is designed primarily for investors seeking to
benefit from greater exposure to foreign securities investments than is
generally available through the VA World Growth Fund. The Fund's equity
investments ordinarily will consist entirely of securities of foreign issuers.

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Because of its greater emphasis on foreign securities investments, the Fund can
be expected to present a greater level of risk than the VA World Growth Fund.
(For a discussion of the risks pertaining to investments in foreign securities,
see "Special Risk Considerations--Foreign Securities," below.)

USAA LIFE VARIABLE ANNUITY DIVERSIFIED ASSETS FUND

INVESTMENT OBJECTIVE. The VA Diversified Assets Fund seeks long-term capital
growth, consistent with preservation of capital and balanced by current income.

INVESTMENT PROGRAM. To achieve its objective, the Fund will invest, under normal
market conditions, approximately 60% of its assets in Equity Securities,
selected for total return potential, and approximately 40% of its assets in debt
securities of varying maturities.

The equity component of the Fund will consist primarily of "basic value
stocks," which consist of Equity Securities of U.S. companies that the Adviser
believes are undervalued in relation to such factors as the company's assets and
current or prospective earnings. In most cases, these securities will be listed
on the New York Stock Exchange, though securities listed on other exchanges or
traded in an OTC market may be utilized. The Fund also may invest in REITs.
For a discussion of risks associated with investments in REITs, see "Special
Risk Considerations--REITS," below.

The income component of the Fund will consist primarily of debt securities of
the type in which the VA Income Fund may invest. The Fund may also invest in
municipal lease obligations. Subject to the policies above, the Fund may shift
its emphasis between the equity and income portions of its portfolio based on
the Adviser's analysis of relevant market, financial and economic conditions.

As a temporary defensive measure, the Adviser may invest up to 100% of the
Fund's assets in high quality, short-term debt instruments.

WHO SHOULD INVEST. The VA Diversified Assets Fund is designed for investors
seeking the benefits of both long-term capital appreciation and current income.
This Fund is expected generally to have less exposure to equity securities than
the VA Growth and Income Fund and, unlike that Fund, will not invest in
securities of foreign issuers other than Yankee and Eurodollar obligations.

Certain Investment Policies, Techniques and Restrictions

CONVERTIBLE SECURITIES

Each Fund, other than the VA Money Market Fund, may invest in bonds, notes,
debentures, preferred stocks and other securities that are convertible into or
carry the right to buy, common stock. Investments in convertible securities can
provide an opportunity for capital appreciation and/or income through interest
and dividend payments by virtue of their conversion or exchange features.

Convertible debt securities and convertible preferred stocks, until converted,
have general characteristics similar to both debt and equity securities.
Convertible securities are generally subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar non-
convertible securities. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.

Although to a lesser extent than with debt securities generally, the market
value of convertible debt securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates decline. In addition,
because of the conversion or exchange feature, the market value of convertible
securities typically changes as the market value of the underlying common stock
changes, and, therefore, also tends to follow movements in the general market
for equity securities. A unique feature of convertible securities is that as the
market price of the underlying common stock declines, convertible securities
tend to trade increasingly on a yield basis, and so may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock, although typically not as much as the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.

The convertible debt securities in which these Funds may invest include fixed
income or zero coupon debt securities that may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common stock.
Fixed income convertible securities pay interest with yields generally higher
than common stocks. Of course, like all fixed income securities, there can be no
assurance of income or principal payments because the issuers of the convertible
securities may default on their obligations.

Zero coupon notes and bonds, including Liquid Yield Option Notes ("LYONs"),
pay no interest and are sold at substantial discounts from their face value.
When held to maturity, their entire income comes from the difference between the
purchase price and their value at maturity. Zero coupon convertible securities
offer the opportunity for capital appreciation as increases (or decreases) in
market value of such securities closely follows the movements in

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the market value of the underlying common stock. Zero coupon convertible
securities are generally expected to be less volatile than the underlying common
stocks as they are usually issued with short to medium length maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.

MUNICIPAL LEASE OBLIGATIONS

The VA Money Market Fund and VA Diversified Assets Fund may invest in
municipal lease obligations and certificates of participation in such
obligations (collectively, "lease obligations"). A lease obligation does not
constitute a general obligation of the municipality for which the municipality's
taxing power is pledged, although the lease obligation is ordinarily backed by
the municipality's covenant to budget for the payments due under the lease
obligation.

Certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease obligation payments in
future years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. In evaluating a potential investment in such a lease obligation, the
Adviser will consider: (1) the credit quality of the obligor, (2) whether the
underlying property is essential to a governmental function, and (3) whether the
lease obligation contains covenants prohibiting the obligor from substituting
similar property if the obligor fails to make appropriations for the lease
obligation.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

Each Fund, other than the VA Aggressive Growth Fund, VA World Growth Fund and
the VA International Fund, may invest in mortgage-backed and asset-backed
securities. Mortgage-backed securities include, but are not limited to,
securities issued or guaranteed by the Government National Mortgage Association
("Ginnie Mae"), the Federal National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). These securities
represent ownership in a pool of mortgage loans. They differ from conventional
bonds in that principal is paid back to the investor as payments are made on the
underlying mortgages in the pool. Accordingly, the Fund receives monthly
scheduled payments of principal and interest along with any unscheduled
principal on the underlying mortgages. Because these scheduled and unscheduled
principal payments must be reinvested at prevailing interest rates, mortgage-
backed securities do not provide an effective means of locking in long-term
interest rates for the investor. Like other fixed income securities, when
interest rates rise, the value of a mortgage-backed security generally will
decline. However, when interest rates are declining, the value of mortgage-
backed securities with prepayment features may not increase as much as other
fixed income securities.

Mortgage-backed securities also include collateralized mortgage obligations
("CMOs"). CMOs are obligations fully collateralized by a portfolio of mortgages
or mortgage-related securities. CMOs are divided into pieces ("tranches") with
varying maturities and the cash flows from the underlying mortgages are used to
pay off each tranche separately. CMOs are designed to provide investors with
more predictable maturities than regular mortgage securities but such maturities
can be difficult to predict because of the effect of prepayments. Failure to
accurately predict prepayments can adversely affect the Fund's return on these
investments. CMOs may also be less marketable than other securities.

Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card, motor vehicle, or trade receivables. They may be pass-through
certificates, which have characteristics very similar to mortgage-backed
securities, discussed above. They may also be in the form of asset-backed
commercial paper, which is issued by a special purpose entity, organized solely
to issue the commercial paper and to purchase interests in the assets. The
credit quality of these securities depends primarily upon the quality of the
underlying assets and the level of credit support and enhancement provided.

The weighted-average life of mortgage and asset-backed securities is likely to
be substantially shorter than their stated final maturity as a result of
scheduled principal payments and unscheduled principal prepayments.

YANKEE AND EURODOLLAR OBLIGATIONS

Each Fund, other than the VA Aggressive Growth Fund, the VA World Growth Fund
and the VA International Fund, may invest in Yankee and Eurodollar obligations.
Yankee obligations include money market instruments and bonds of foreign issuers
who customarily register such securities with the SEC and borrow U.S. dollars by
issuing such securities for delivery in the United States. Although the
principal trading market for Yankee securities is the United States, foreign
buyers can and do participate in the Yankee securities market. Interest on such
Yankee bonds is customarily paid on a semi-annual basis. The marketability of
these "foreign bonds" in the United States is in many cases better than that for
foreign bonds in foreign markets, but is, of course dependent upon the quality
of the issuer.

Eurodollar obligations include money market instruments and bonds underwritten
by an international syndicate and sold "at issue" to non-U.S. investors. Such
securities are not registered with the SEC or issued domestically and generally

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may only be sold to U.S. investors after the initial offering and cooling-off
periods. The market for Eurodollar securities is dominated by foreign-based
investors and the primary trading market for these securities is London. While
investments in Eurodollar and Yankee obligations are intended to reduce risk by
providing further diversification, such investments involve certain political
and economic risks in addition to credit and market risk.

In addition, each Fund may invest in Eurodollar and Yankee obligations of
investment-grade emerging market countries. An emerging market country can be
considered to be a country which is in the initial stages of its industrial
cycle. Investments in emerging market countries involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. In the past, markets of
emerging market countries have been more volatile than the markets of developed
countries. (See "Special Risk Considerations--Foreign Securities," below.)

DEPOSITARY RECEIPTS

The VA World Growth Fund, the VA International Fund, the VA Growth and Income
Fund and the VA Aggressive Growth Fund may purchase ADRs, which are U.S. dollar-
denominated certificates issued by a U.S. bank or trust company and represent
the right to receive securities of a foreign issuer deposited in a domestic bank
or foreign branch of a U.S. bank and traded on a U.S. exchange or in an OTC
market. Generally, ADRs are in registered form. There are no fees imposed on the
purchase or sale of ADRs when purchased from the issuing bank or trust company
in the initial underwriting, although the issuing bank or trust company may
impose charges for the collection of dividends and the conversion of ADRs into
the underlying securities. Investment in ADRs has certain advantages over direct
investment in the underlying foreign securities since: (i) ADRs are U.S. dollar-
denominated investments that are registered domestically, easily transferable
and for which market quotations are readily available, and (ii) in some cases,
the issuers whose securities are represented by ADRs may be subject to the same
auditing, accounting, and financial reporting standards as domestic issuers.

The VA Aggressive Growth Fund, the VA World Growth Fund and the VA
International Fund may invest in GDRs. GDRs are typically issued by foreign
banks or trust companies, although they also may be issued by United States
banks or trust companies, and evidence ownership of underlying securities issued
by either a foreign or a United States corporation. Generally, GDRs in bearer
form are designed for use in foreign securities markets.

FORWARD CURRENCY CONTRACTS

The VA Aggressive Growth Fund, the VA World Growth Fund and the VA
International Fund may enter into forward currency contracts under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security. Second, when the Adviser of the Fund
believes that the currency of a specific country may deteriorate relative to the
U.S. dollar, it may enter into a forward contract to sell that currency. The
Funds may not enter a forward sale contract with respect to a particular
currency for an amount greater than the aggregate market value (determined at
the time of making the forward sale) of the securities held in its portfolio
denominated or quoted in, or bearing a substantial correlation to, such
currency. The Funds are not required to enter into such transactions and will
not do so unless deemed appropriate by the Adviser. (See "Special Risk
Considerations--Forward Currency Contracts.")

REPURCHASE AGREEMENTS

Each Fund may invest in repurchase agreements that are collateralized by
obligations issued or guaranteed by or backed by the full faith and credit of
the U.S. Government, its agencies and instrumentalities. A repurchase agreement
is a transaction in which a security is purchased with a simultaneous commitment
to sell the security back to the seller (a commercial bank or recognized
securities dealer) at an agreed-upon price on an agreed-upon date, usually not
more than seven days from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed-upon price, which
obligation is in effect secured by the value of the underlying security. In
these transactions, the securities purchased by the Fund will have a total value
equal to or in excess of the amount of the repurchase obligation and will be
held by the Fund's custodian or another third-party custodian until repurchased.
If the seller defaults and the value of the underlying security declines, the
Fund may incur a loss and may incur expenses in selling the collateral. If the
seller seeks relief under the bankruptcy laws, the disposition of the collateral
may be delayed or limited.

MASTER DEMAND NOTES

Each Fund, other than the VA Aggressive Growth Fund, the VA World Growth Fund
and the VA International Fund, may invest in variable rate master demand notes
("master demand notes"). Master demand notes are obligations that permit the
investment of fluctuating amounts by a Fund, at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes permit daily changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount, and the borrower may repay up

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to the full amount of the note without penalty. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided by
banks. Because master demand notes are direct lending arrangements between the
lender and borrower, it is not contemplated that such instruments generally will
be traded, and there generally is no secondary market for these notes, although
they are redeemable (and thus immediately repayable by the borrower) at face
value, plus accrued interest, at any time. Therefore, where master demand notes
are not secured by bank letters of credit or other credit support arrangements,
the Funds' right to redeem depends on the ability of the borrower to pay
principal and interest on demand. In connection with master demand note
arrangements, the Funds will continuously monitor the earning power, cash flow,
and other liquidity ratios of the issuer, and the borrower's ability to pay
principal and interest on demand. Master demand notes, as such, are not
typically rated by credit rating agencies. The Funds will invest in master
demand notes only if the Board of Trustees or its delegate has determined that
they are of credit quality comparable to the debt securities in which the Funds
generally may invest.

VARIABLE RATE SECURITIES

Each Fund may invest in securities that bear interest at rates that are
adjusted periodically to market rates. These interest rate adjustments can both
raise and lower the income generated by such securities. These changes will have
the same effect on the income earned by a Fund, depending on the proportion of
such securities held. The market value of fixed coupon securities fluctuates
with changes in prevailing interest rates, increasing in value when interest
rates decline and decreasing in value when interest rates rise. The value of
variable rate securities, however, is less affected by changes in prevailing
interest rates because of the periodic adjustment of their coupons to a market
rate. The shorter the period between adjustments, the smaller the impact of
interest rate fluctuations on the value of these securities. The market value of
variable rate securities usually tends toward par (100% of face value) at
interest rate adjustment time.

PUT BONDS

Each Fund may invest in securities (including securities with variable
interest rates) that may be redeemed or sold back (put) to the issuer of the
security or a third party generally at face value prior to stated maturity. Such
securities will normally trade as if maturity is the earlier put date, even
though stated maturity is longer.

WHEN-ISSUED SECURITIES

Each Fund may invest in new issues of securities offered on a when-issued
basis; that is, delivery and payment take place after the date of the commitment
to purchase, normally within 45 days. Both price and interest rate are fixed at
the time of commitment. The market value at the time the transaction is
completed may be more or less than the fixed purchase price. Although such
commitments are made with the intention of actually acquiring the securities, a
Fund can sell a commitment before settlement date, though as a matter of policy,
the Funds will not do so. No interest accrues to the purchaser of a when-issued
security during the period prior to settlement.

Securities purchased on a when-issued basis are subject to changes in value in
the same way as securities held in a Fund's portfolio, that is, both experience
appreciation when interest rates decline and depreciation when interest rates
rise. The value of such securities will also be affected by the public's
perception of the creditworthiness of the issuer and anticipated changes in the
level of interest rates. Purchasing securities on a when-issued basis involves a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. Cash or high
quality liquid debt securities equal to the amount of the when-issued
commitments are segregated at the Fund's custodian bank.

LIQUIDITY

Each Fund may invest up to 15% of its net assets (10% in the case of the VA
Money Market Fund) in illiquid securities. Commercial paper that is subject to
restrictions on transfer, securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, put bonds with restrictions on transfer, and
lease obligations will not be counted towards the limitation on illiquid
securities, provided that the Adviser determines that such securities have a
readily available trading market, in accordance with guidelines established by
the Board of Trustees.

PORTFOLIO TURNOVER

Although no Fund purchases securities with a view to rapid turnover, there are
no limitations on the length of time that securities must be held by any Fund. A
Fund's annual portfolio turnover rate may vary significantly from year to year.
The portfolio turnover rates for each Fund, other than the VA Money Market Fund
and the VA Aggressive Growth Fund are not expected to exceed 100%.

Because a high turnover rate increases transaction costs and may increase net
capital gains, the Adviser carefully weighs the anticipated benefits of trading.
See "Dividends and Distributions" and "Tax Matters," below.

Special Risk Considerations

REITS

Investments by a Fund in REITS may subject the Fund to many of the same risks
associated with the direct ownership of real estate. In addition, REITS are
dependent upon the capabilities of the REIT Manager(s) and have limited
diversification. See "REITS" in the SAI for more information.

FOREIGN SECURITIES

Investments by a Fund in foreign securities, including Eurodollar, Yankee, and
other foreign obligations, and ADRs and GDRs, may entail one or more of the
following risks:

CURRENCY RISK. The value of the Fund's foreign investments may be affected by
changes in currency exchange

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rates. The U.S. dollar value of a foreign security generally decreases when the
value of the U.S. dollar rises against the foreign currency in which the
security is denominated, and tends to increase when the value of the U.S. dollar
falls against such currency. In developing markets, it may be difficult or in
some cases impossible to hedge currency risk, due to the lack of available
hedging instruments and illiquidity in these markets.

POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which the
Fund may invest are not as developed as the U.S. economy and may be subject to
significantly different forces. Political or social instability, expropriation
or confiscatory taxation, and limitations on the removal of funds or other
assets could also adversely affect the value of the Fund's investments. For
example, the Fund may invest in Eastern Europe and former states of the Soviet
Union (also known as the Commonwealth of Independent States or CIS). These
countries were under communist systems that had nationalized private industry.
There is no guarantee that nationalization may not occur again in this region or
others in which the Fund invests, in which case the Fund may lose all or part of
its investment in that country's issuers.

REGULATORY RISK. Foreign companies are generally not subject to the regulatory
controls imposed on U.S. issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the Fund may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable by the Fund. There is generally
less government regulation and supervision of foreign stock exchanges, brokers
and issuers, which may make it difficult to enforce contractual obligations,
obtain judgments or effect collections thereon.

MARKET RISK. The securities markets in many of the countries in which the Fund
invests will have substantially less trading volume than the major U.S. markets.
As a result, the securities of some foreign companies and governments may be
less liquid and may experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative difficulties
(such as the need to use foreign custodians) may be associated with the
maintenance of assets in foreign jurisdictions. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the U.S.

FORWARD CURRENCY CONTRACTS

The use of forward currency contracts to protect the value of a Fund's assets
against a decline in the value of a currency does not eliminate fluctuations in
the value of the Fund's underlying security holdings. In addition, although the
use of forward currency contracts can minimize the risk of loss due to a decline
in value of the foreign currency, the use of such contracts will tend to limit
any potential gain resulting from an increase in the relative value of the
foreign currency to the U.S. dollar. Under certain circumstances, a Fund that
has entered into forward currency contracts to hedge its currency risks may be
in a less favorable position than a Fund that had not entered into such
contracts. The projection of short-term currency market movements is extremely
difficult and successful execution of a short-term hedging strategy is
uncertain.

The use of forward contracts involves certain risks. The precise matching of
contract amounts and the value of securities involved generally will not be
possible since the future value of such securities in currencies more than
likely will change between the date the contract is entered into and the date it
matures. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment strategies. The
Adviser believes it is important, however, to have the flexibility to enter into
such contracts when it determines it is in the best interest of the Fund to do
so. It is impossible to forecast what the market value of a portfolio security
will be at the expiration of a contract. Accordingly, it may be necessary for
the Fund to purchase additional currency (and bear the expense of such purchase)
if the market value of the security is less than the amount of currency the Fund
is obligated to deliver, and if a decision is made to sell the security and make
delivery of the currency. Conversely, it may be necessary to sell some of the
foreign currency received on the sale of the portfolio security if its market
value exceeds the amount of currency the Fund is obligated to deliver.

Investment Restrictions

Except as otherwise indicated, the following restrictions are fundamental and
may not be changed without the approval of a majority of the outstanding voting
securities of any Fund of the Trust, which means the approval of the lesser of:
(i) the holders of 67% or more of the shares represented in a meeting if the
holders of more than 50% of the outstanding shares are present in person or by
proxy or (ii) the holders of more than 50% of the outstanding shares. (See
"Additional Information About the Trust," below.)

A FUND MAY NOT:

A. Borrow money, except that a Fund may borrow money for temporary or emergency
purposes in an amount not exceeding 33-1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings). A Fund will
not purchase securities when its borrowings

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exceed 5% of its total assets.

B. With respect to 75% of its total assets, purchase the securities of any
issuer (except Government Securities, as such term is defined in the 1940
Act) if, as a result, the Fund would own more than 10% of the outstanding
voting securities of such issuer or the Fund would have more than 5% of the
value of its total assets invested in the securities of such issuer. As a
non-fundamental operating policy, the VA Money Market Fund, in accordance
with Rule 2a-7 under the Investment Company Act of 1940, as amended, will
not invest more than 5% of its total assets in the securities (other than
securities issued by the U.S. Government or any of its agencies or
instrumentalities) issued by a single issuer.

C. Invest more than 25% of the value of its total assets (taken at current
value at the time of each investment) in securities of issuers whose
principal business activities are in the same industry. With respect to the
VA Money Market Fund, banks are not considered a single industry for
purposes of this policy. This limitation does not apply to securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.

Management

The Trust has a Board of Trustees which has the primary responsibility for the
overall management of the Trust and each of the Funds.

USAA IMCO serves as the Adviser to the Trust pursuant to an Investment
Advisory Agreement dated December 16, 1994, as amended February 7, 1997 to
include the VA Aggressive Growth Fund and VA International Fund ("Advisory
Agreement"). Under the Advisory Agreement, USAA IMCO is responsible for
furnishing a continuous investment program for each Fund; selecting the
investments of each Fund, including determining what investments each Fund will
purchase, hold, sell, or exchange, and what portion, if any, of the assets of
each Fund will remain uninvested; placing all orders for the purchase and sale
of investments for each Fund with brokers and dealers selected by the Adviser;
assisting the Trust in the preparation of various regulatory reports; and
providing office space facilities and personnel in connection with the
foregoing. USAA IMCO will render such services in accordance with the investment
objectives, investment programs, policies, and restrictions of each Fund, under
the supervision of the Board of Trustees.

USAA IMCO was organized in May 1970, and is registered as an investment
adviser with the SEC. USAA IMCO is an indirect wholly-owned subsidiary of USAA
and an affiliate of USAA Life and the Trust. As of the date of this Prospectus,
the Adviser had approximately $ billion in total assets under management,
$ billion of which are in publicly available mutual funds. The Adviser's
mailing address is 9800 Fredericksburg Road, San Antonio, Texas 78288 which is
also the Home Office of USAA, USAA Life, and other affiliates.

Officers and employees of the Trust and the Manager are permitted to engage in
personal securities transactions subject to restrictions and procedures set
forth in the Joint Code of Ethics adopted by the Trust and the Manager. Such
restrictions and procedures include substantially all of the recommendations of
the Advisory Group of the Investment Company Institute and comply with
SEC rules and regulations.

ADVISORY FEES

For its services under the Advisory Agreement, for the Trust's most recent
fiscal year ended December 31, 1996, the Trust paid the Adviser a monthly
investment advisory fee for each Fund (other than the VA Aggressive Growth Fund
and the VA International Fund) equal to an annualized rate of 0.20% of the
monthly average net assets of each Fund. With respect to the VA Aggressive
Growth Fund and the VA International Fund, which commenced operations on
May 1, 1997, the Trust has agreed to pay the Adviser, pursuant to the Advisory
Agreement, a monthly investment advisory fee equal to an annualized rate of
0.50% and 0.65%, respectively, of each Fund's monthly average net assets.
Pursuant to an Underwriting and Administrative Services Agreement, dated
December 16, 1994 as amended February 7, 1997, by and between USAA Life, USAA
IMCO, and the Trust ("Underwriting Agreement"), USAA Life, out of its General
Account, will reimburse USAA IMCO for the expenses that it incurs in rendering
services to the Trust under the Advisory Agreement, but only to the extent these
expenses exceed the amount of the above advisory fees.

EXPENSES

For the Trust's most recent fiscal year ended December 31, 1996, the total
expenses for each Fund, other than the VA Aggressive Growth Fund and VA
International Fund, were limited to .35% of the monthly average net assets of
such Fund (other than the World Growth Fund, whose expenses were limited to .65%
of that Fund's monthly average net assets). Actual total expenses for each Fund,
other than the VA Aggressive Growth Fund and VA International Fund, exceeded the
foregoing expense ratios, and the excess was borne by USAA Life, out of its
General Account, pursuant to the Underwriting Agreement. (See notes to
"Financial Highlights" for further information.) USAA Life has agreed, pursuant
to the Underwriting Agreement, to limit the expenses of the VA Aggressive Growth
Fund and the VA International Fund to 0.70% and 1.10% of each Fund's respective
monthly average net assets. The Underwriting Agreement is terminable by any
party thereto upon 60 days' notice to the other parties.

PORTFOLIO TRANSACTIONS

The Adviser directs the placement of orders for the purchase and sale of the
Funds' portfolio securities. In doing so, the Adviser seeks the best combination
of price and execution, which involves a number of judgmental factors. When the
Adviser believes that more than one broker or dealer is capable of providing the
best combination of price and execution in a particular portfolio transaction,
normally

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a broker or dealer is selected that furnishes research services. The Adviser, a
registered broker-dealer, also may act as a broker for the Trust in conformity
with the securities laws and rules thereunder.

PORTFOLIO MANAGERS

Set out below are the names, titles, years of investment management
experience, and prior business experience (if they have been with the Adviser
for less than 5 years) of the individuals who are primarily responsible for the
day-to-day management of the Funds.

VA MONEY MARKET FUND. Pamela K. Bledsoe, Executive Director of Money Market
Funds at USAA IMCO, is primarily responsible for managing the Money Market
Fund and has managed the Fund since June 10, 1996. Ms. Bledsoe has eight years
investment management experience and has worked for USAA IMCO for five years,
where she has held various positions in Fixed Income Investments.

VA INCOME FUND. John W. Saunders, Jr., Senior Vice President of Fixed Income
Investments at USAA IMCO, is primarily responsible for managing the VA Income
Fund and has managed the Fund since its inception. Mr. Saunders has 28 years
investment management experience and has been affiliated with USAA IMCO for 27
years.

VA AGGRESSIVE GROWTH FUND. John K. Cabell Jr., and Eric M. Efron, Assistant Vice
Presidents of Equity Investments at USAA IMCO, together are primarily
responsible for managing the Fund, which commenced operations on May 1, 1997.
Mr. Cabell has 19 years investment management experience and has been affiliated
with USAA IMCO for seven years. His business experience during the past five
years also included the following position: Chief Economist for Retirement
Systems of Alabama from March 1991 to March 1994.

Mr. Efron has 22 years investment management experience and has been affiliated
with USAA IMCO for five years.

VA GROWTH AND INCOME FUND. R. David Ullom, Assistant Vice President of Equity
Investments at USAA IMCO, is primarily responsible for managing the VA Growth
and Income Fund and has managed the Fund since its inception. Mr Ullom has 22
years investment management experience and has been affiliated with USAA IMCO
for 12 years.

VA WORLD GROWTH FUND. David G. Peebles, Vice President of Equity Investments at
USAA IMCO, is the asset allocation manager for the Fund. He has been the
portfolio manager for the Fund's investments in foreign securities since its
inception. He has 31 years investment management experience and has worked for
IMCO for 13 years. Since October 1, 1996, Albert C. Sebastian and W. Travis
Selmier, II, have co-managed the Fund's investments in foreign securities with
Mr. Peebles, who coordinates the activities of the Managers. Messrs. Sebastian
and Selmier, each an Assistant Vice President of Equity Investments at USAA
IMCO, have 13 and ten years of investment management experience, respectively.
Each has worked for IMCO for over five years, during which time each has held
various positions in Equity Investments.

R. David Ullom, Assistant Vice President of Equity Investments at USAA IMCO,
has managed the Fund's investments in domestic stocks since February 1995. Mr.
Ullom has 22 years investment management experience and has worked for IMCO for
12 years.

VA INTERNATIONAL FUND. David G. Peebles, Vice President of Equity Investments,
Albert C. Sebastian, Assistant Vice President of Equity Investments and W.
Travis Selmier, II, Assistant Vice President of Equity Investments at USAA IMCO,
together are primarily responsible for managing the Fund, which commenced
operations on May 1, 1997. Mr. Peebles will coordinate the activities of the
Managers.

Mr. Peebles has 31 years investment management experience and has been
affiliated with USAA IMCO for 13 years. Mr. Sebastian has 13 years investment
management experience and has been affiliated with USAA IMCO for five years.
Mr. Selmier has ten years investment experience and has been affiliated with
USAA IMCO for five years.

VA DIVERSIFIED ASSETS FUND. Harry W. Miller, Senior Vice President of Equity
Investments at USAA IMCO, and Paul H. Lundmark, Assistant Vice President of
Fixed Income Investments, together are primarily responsible for managing the
fixed income and equity components, respectively, of the VA Diversified Assets
Fund and have managed the Fund since its inception. Mr. Miller also acts as
Asset Allocation Manager for the Fund. Mr. Miller has 40 years investment
management experience and has been affiliated with USAA IMCO for 23 years. Mr.
Lundmark has 11 years investment management experience and has been associated
with USAA IMCO for five years.

Purchase of Fund Shares

Shares of the Funds are currently sold in a continuous offering only to the
Separate Account to fund benefits under the Contracts issued by USAA Life. The
Separate Account is divided into nine Variable Annuity Fund Accounts, seven of
which invest in a corresponding Fund of the Trust, as directed by the Contract
Owners. The Variable Annuity Fund Accounts that purchase Trust shares do so at
the net asset value per share ("NAV") of the corresponding Funds, without a
sales charge, next determined after the Company receives a premium payment or
request for a transfer into a Fund.

Investments in each Fund are credited to each corresponding Variable Annuity
Fund Account in the form of full and fractional shares of the designated Fund.
The Funds do not issue share certificates. Initial and subsequent premium
payments

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<PAGE>

allocated to a specific Fund are subject to the limits applied by the Contracts.

In the future, the Trust may offer its shares to other separate accounts of
USAA Life as well as unaffiliated life insurance companies to fund benefits
under variable annuity contracts and variable life insurance policies. The Trust
does not foresee any disadvantage to purchasers of variable annuity contracts
and variable life insurance policies arising out of these arrangements.
Nevertheless, the Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken in response thereto.

DISTRIBUTOR

USAA IMCO serves as the distributor of the Fund shares pursuant to the
Underwriting Agreement, and receives no separate compensation for its services
in that capacity. No commissions are paid in connection with the sale of Fund
shares to the Separate Account. Pursuant to the Underwriting Agreement, USAA
Life has agreed to reimburse USAA IMCO for expenses that it incurs in rendering
services to the Trust within the limits specified in the agreement.

Redemption of Fund Shares

USAA Life redeems shares of the appropriate Fund to make withdrawals or
transfers under the terms of the Contracts. Redemptions are processed on each
day on which the New York Stock Exchange (the "Exchange") is open for business.
Redemptions due to Contract Owner withdrawals or transfers are processed at the
Fund's NAV next determined after USAA Life receives instructions from the
Contract Owner. Redemptions that are not based on actions by Contract Owners
will be effected at the Fund's NAV next determined after the Fund receives the
redemption request.

Payment for redeemed shares will be made promptly, but in no event later than
seven days after USAA Life receives the redemption order in proper form.
However, the Trust may suspend the right of redemption or postpone the date of
payment during any period that the Exchange is closed, or trading in the markets
the Trust normally utilizes is restricted, or during any period that redemption
is otherwise permitted to be suspended by the SEC. The amount received upon the
redemption of the shares of the Funds may be more or less than the amount paid
for the shares, depending upon the fluctuations in the market value of the
assets owned by a particular Fund.

Valuation of Fund Shares

The price at which shares of the Funds are purchased and redeemed by the
Separate Account is equal to the NAV per share determined on the effective date
of the purchase or redemption. The NAV is calculated by adding the value of all
securities and other assets in a Fund, deducting liabilities, and dividing that
sum by the number of outstanding shares of the Fund. The NAV per share for each
Fund is calculated at the close of the regular trading session of the Exchange,
which is usually 4:00 p.m. Eastern time.

VALUATION OF SECURITIES OF THE FUNDS (OTHER THAN THE VA MONEY MARKET FUND)

Securities traded on a U.S. exchange are generally valued at the last sales
price on the exchange. If no sale is reported, the latest bid price is generally
used. Securities traded in a U.S. OTC market are generally priced at the last
sales price or, if not available, at the average of the bid and asked prices.
Debt securities purchased with maturities of 60 days or less are carried at
amortized cost, which generally approximates market value. Other debt securities
are valued each business day at their current market value as determined by a
pricing service approved by the Board of Trustees or its delegate. Securities
that cannot be valued by the methods set forth above are valued in good faith at
fair market value using methods determined by the Adviser under the general
supervision of the Board of Trustees.

Securities primarily traded on foreign securities exchanges are generally
valued at the preceding closing value of such security on the exchange where
they are primarily traded. If no sale is reported, the latest bid price is
generally used depending on local custom or regulation. Securities traded in a
foreign OTC market are valued at the last sales price, or, if not available, at
the average of the bid and asked prices. If there is not active trading in a
particular security for a given day, the latest bid price is generally used.
Because of the need to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of net asset value does not take
place contemporaneously with the determination of the prices of the foreign
portfolio securities of a particular Fund. If an event were to occur after the
value of an instrument was established, but before the net asset value per share
was determined, which was likely to materially change the net asset value of a
particular Fund, then that instrument would be valued using fair value
considerations by the Board of Trustees or its delegate.

VALUATION OF THE VA MONEY MARKET FUND'S SECURITIES

The valuation of the VA Money Market Fund's securities is based upon their
amortized cost, which does not take into account unrealized capital gain or
loss. This involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which the value of an instrument, as determined by amortized cost, is
higher or lower than the price the Fund would receive upon the sale of the
instrument. (See "Valuation of Trust Shares" in the SAI.)

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Dividends and Distributions

Each Fund, other than the VA Money Market Fund, declares and pays to the
appropriate Variable Fund Account of the Separate Account at least once each
year: (1) all net investment income, which includes dividends and interest paid
on each Fund's investments less expenses incurred in the Fund's operations; and
(2) all net realized short-term and long-term capital gains, if any, earned
during the year.

The VA Money Market Fund declares a dividend each day the Fund's NAV is
calculated, equal to all of its daily net income, payable to the corresponding
Variable Fund Account of the Separate Account as of the close of business the
preceding business day. The amount of the dividend of the VA Money Market Fund
may fluctuate from day to day and may be omitted on some days, depending on
changes in the factors that comprise the VA Money Market Fund's net income.

All distributions, whether from net capital gains or net investment income,
will be paid in the form of additional shares of that Fund at NAV. Because the
value of each Fund's shares, other than those of the VA Money Market Fund, is
based directly on the amount of its net assets, including any undistributed net
income, any distribution of income or capital gains will result in a decrease in
the value of that Fund's shares equal to the amount of the distribution. The
price of each Fund's shares is quoted ex-dividend on the business day following
the record date.

Tax Matters

Each Fund has elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"), as amended, and
to take all other actions required so that no federal income tax will be payable
by the Funds. Each Fund will be treated as a separate entity for federal income
tax purposes. As a regulated investment company, each Fund will not be subject
to federal income tax provided it distributes all of its investment company
income and net capital gains for each taxable year in accordance with the Code.

The VA World Growth Fund and the VA International Fund may make an election to
pass through to USAA Life any taxes withheld by foreign taxing jurisdictions on
foreign source income. Such an election will result in additional taxable income
and income tax to USAA Life. The amount of additional income tax, however, may
be more than offset by credits for the foreign taxes withheld, which are also
passed through. These credits may provide a benefit to USAA Life.

DIVERSIFICATION

Each Fund is subject to asset diversification requirements described by the
U.S. Treasury Department under Section 1.817-5 of the Treasury Regulations. The
regulations generally provide that, as of the end of each calendar quarter or
within 30 days thereafter, no more than 55% of the total assets of a Fund may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment. Furthermore, each U.S. Government agency or instrumentality
is treated as a separate issuer. There are also alternative diversification
requirements that may be satisfied by the Funds under the regulations.

The Funds intend to comply with the diversification requirements. If the Funds
or a Fund should fail to comply with these diversification requirements, or
fails to meet the requirements of Subchapter M of the Code, Contracts invested
in the Funds would not be treated as annuity contracts for income tax purposes
under the Code. (See "Certain Federal Income Tax Considerations" in the Trust's
SAI for further information.)

For more detailed information regarding the federal income tax treatment of
the Contracts and distributions to Contract Owners, please refer to the
accompanying Prospectus that describes the Contracts.

Performance Information

The Funds may, from time to time, include quotations of their TOTAL RETURN or
YIELD in advertisements, sales literature or reports to Contract Owners or to
prospective investors.

The TOTAL RETURN of a Fund refers to the percentage change in value of a
hypothetical investment in the Fund, including the deduction of a proportional
share of Fund expenses, and assumes that all dividends and capital gains
distributions during the period are reinvested. CUMULATIVE TOTAL RETURN reflects
the total change in value of an investment in the Fund over a specified period,
including, but not limited to, periods of one, five and ten years, or the period
since the Fund's inception through a stated ending date. AVERAGE ANNUAL TOTAL
RETURN is the constant rate of return that would produce the cumulative total
return over the specified period, if compounded annually. Average annual total
return figures are calculated according to a formula prescribed by the SEC.

The YIELD of a Fund refers to the income generated by an investment in the
Fund over a specific period (seven days in the case of the VA Money Market Fund,
30 days in the case of all other Funds), excluding realized and unrealized
capital gains and losses in the Fund's investments. This income is then
"annualized" and shown as a percentage of the investments. The VA Money Market
Fund may also provide quotations of its EFFECTIVE YIELD, which is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The EFFECTIVE YIELD of the VA Money Market Fund
will be slightly

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<PAGE>

higher than its yield because of the compounding effect of this assumed
reinvestment.

A Fund may also, from time to time, compare its performance in advertisements,
sales literature and reports to Contract Owners or to prospective investors to:
(1) widely recognized indices (e.g., the Standard & Poors 500 Composite Stock
Index, the Dow Jones Industrial Average, etc.); (2) other mutual funds whose
performance is reported by Lipper Analytical Services, Inc., ("Lipper"),
Variable Annuity Research & Data Service ("VARDS") and Morningstar, Inc.
("Morningstar") or reported by other services, companies, individuals or other
industry or financial publications of general interest, such as Forbes, Money,
The Wall Street Journal, Business Week, Barron's, Changing Times and Fortune,
which rank and/or rate mutual funds by overall performance or other criteria;
and (3) the Consumer Price Index. Lipper, VARDS and Morningstar are widely
quoted independent research firms that rank mutual funds by overall performance,
investment objectives, and assets. Unmanaged indices may assume the reinvestment
of dividends but usually do not reflect any "deduction" for the expense of
operating or managing a fund.

Total return and yield quotations reflect only the performance of a
hypothetical investment in the Fund during a specified period. These quotations
are based on historical data and do not in any way indicate or project future
performance. Quotations of a Fund's total return and yield do not reflect
charges or deductions against the Variable Fund Account or charges and
deductions against the Contracts. The yield and share price of the VA Income
Fund, VA Growth and Income Fund, VA World Growth Fund and VA Diversified Assets
Fund will vary, and shares, when redeemed, may be worth more or less than the
original purchase price. The yield of the VA Money Market Fund will also vary.
See the SAI for more information about the Funds' performance.

Additional Information About the Trust

ORGANIZATION AND CAPITALIZATION

The Trust was organized as a Delaware business trust on July 20, 1994. The
Trust is authorized to issue an unlimited number of full and fractional shares
of beneficial interest, having no par value, in one or more series. The Board of
Trustees currently has authorized the issuance of seven series of shares
representing interests in the respective Funds and may, in the future, authorize
the issuance of additional series of shares. Each share of beneficial interest
of each Fund represents an equal proportionate interest in that Fund with each
other share, and each share is entitled to such dividends and distributions of
income belonging to that Fund as may be declared by the Board of Trustees.

USAA Life has agreed to provide the initial capitalization of the VA
Aggressive Growth Fund and VA International Fund and, as a result, initially
will own all of the shares of beneficial interest in these Funds. In addition,
USAA Life provided the initial capitalization of each of the five other Funds
and, as of April 1, 1997, beneficially owned, either directly or through the
Separate Account, more than 25% of the shares of beneficial interest in each of
these Funds, other than the VA Money Market Fund. As a result of such ownership,
USAA Life may be deemed to be in control of each Fund, other than the VA Money
Market Fund.

VOTING PRIVILEGES

The voting privileges of Contract Owners, and limitations on those privileges,
are explained in the accompanying prospectus relating to the Contracts. USAA
Life, as the owner of the assets in the Separate Account, will vote Fund shares
that are held in the Separate Account to fund benefits under the Contracts in
accordance with the instructions of Contract Owners. This practice is commonly
referred to as "pass-through" voting. USAA Life also will vote for or against
any proposition, or will abstain from voting, any Fund shares attributable to a
Contract for which no timely voting instructions are received, and any Fund
shares held by USAA Life for its own account, in proportion to the voting
instructions that it receives with respect to all Contracts participating in
that Fund. This practice is commonly referred to as "mirror" or "echo" voting.
If USAA Life determines, however, that it is permitted to vote any Fund shares
in its own right, it may elect to do so, subject to the then current
interpretation of the 1940 Act and the rules thereunder.

Each Fund share is entitled to one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the Fund
shares. Accordingly, the number of votes obtained will generally vary depending
upon which Fund's shares are purchased. For example, a $100 investment in shares
of the VA Money Market Fund purchased at its initial NAV of $1 would result in
100 votes, whereas the same investment in shares of any one of the other Funds
purchased at its initial NAV of $10 would result in only 10 votes.

On matters affecting an individual Fund differently from any other Fund, a
separate vote of the shares of that Fund is required. Shares of a Fund are not
entitled to vote on any matter not affecting that Fund. The shares of all the
Funds vote together on matters that do not affect one Fund differently from
another, such as the election of Trustees.

Under Delaware law, the Trust is not required to hold annual or special
meetings of shareholders and the Trust does not expect to hold any such meeting
unless required by the 1940 Act. Special meetings may be called for purposes
such as electing or removing Trustees, changing fundamental policies, or
approving an investment advisory contract. Also, the holders of an aggregate of
at least 10% of the outstanding shares of the Trust may request a meeting at any
time for the purpose of voting to remove one or more of the Trustees.

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Service Providers

DISTRIBUTOR:
USAA Investment Management Company
9800 Fredericksburg Rd.
San Antonio, Texas 78288

CUSTODIAN:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

TRANSFER AGENT:
USAA Life Insurance Company
9800 Fredericksburg Road
San Antonio, Texas 78288

LEGAL COUNSEL:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036

INDEPENDENT AUDITORS:
KPMG Peat Marwick LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205

No dealer, salesperson, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized. This Prospectus does not constitute an offering of any
securities other than the registered securities to which it relates or an offer
to any person in any jurisdiction where such offer would be unlawful.

USAA LIFE INVESTMENT TRUST
May 1, 1997

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This page left blank intentionally.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

USAA LIFE INVESTMENT TRUST

MAY 1, 1997

This Statement of Additional Information ("SAI") is not a Prospectus, but should
be read in conjunction with the Prospectus for the USAA Life Investment Trust.
The Prospectus sets forth information that a prospective investor ought to know
before investing. Capitalized terms used in this SAI that are not otherwise
defined herein have the same meaning given to them in the Prospectus. A copy of
the Prospectus may be obtained by writing USAA Life Insurance Company at 9800
Fredericksburg Road, San Antonio, Texas 78288, or by calling 1-800-531-2923.
This SAI and the Prospectus are dated May 1, 1997, and may be amended from
time to time.

1
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

CAPTION PAGE
- ------- ----
<S> <C>

GENERAL INFORMATION AND HISTORY......................................... 3
DISTRIBUTOR............................................................. 3
INVESTMENT ADVISER...................................................... 3
CUSTODIAN............................................................... 3
TRANSFER AGENT.......................................................... 4
INDEPENDENT AUDITORS.................................................... 4
LEGAL MATTERS........................................................... 4
VALUATION OF SECURITIES................................................. 4
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES................... 6
INVESTMENT POLICIES AND TECHNIQUES...................................... 6
Section 4(2) Commercial Paper and Rule 144A Securities................ 6
Liquidity Determinations.............................................. 7
Lending of Securities................................................. 7
Forward Currency Contracts............................................ 8
When-Issued Securities................................................ 8
REITS................................................................. 8
INVESTMENT RESTRICTIONS................................................. 9
Additional Restrictions............................................... 10
PORTFOLIO TRANSACTIONS.................................................. 10
Portfolio Turnover Rates.............................................. 12
FURTHER DESCRIPTION OF TRUST SHARES..................................... 12
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................... 13
TRUSTEES AND OFFICERS OF THE TRUST...................................... 14
Committees of the Board of Trustees................................... 16
THE TRUST'S ADVISER..................................................... 17
The Advisory Agreement................................................ 18
PRINCIPAL HOLDERS OF SECURITIES......................................... 20
CALCULATION OF PERFORMANCE DATA......................................... 21
Yield - VA Money Market Fund.......................................... 21
Yield - Other Funds................................................... 21
Total Return.......................................................... 22
FINANCIAL STATEMENTS.................................................... 23
APPENDIX A - LONG-TERM AND SHORT-TERM DEBT RATINGS...................... 24
APPENDIX B - COMPARISON OF FUND PERFORMANCE............................. 29
</TABLE>

2
<PAGE>

GENERAL INFORMATION AND HISTORY

USAA Life Investment Trust (the "Trust") is a diversified open-end
management investment company formed as a business trust under laws of the State
of Delaware on July 20, 1994. The Trust was established by USAA Life Insurance
Company ("USAA Life" or the "Company") to serve as the investment vehicle for
premium payments received by the Company from the sale of variable annuity
contracts (the "Contracts") funded through the Separate Account of USAA Life
Insurance Company (the "Separate Account"). The Trust is currently made up of
seven investment Funds: USAA Life Variable Annuity Money Market Fund (the "VA
Money Market Fund"), USAA Life Variable Annuity Income Fund (the "VA Income
Fund"), the USAA Life Variable Annuity Aggressive Growth Fund (the "VA
Aggressive Growth Fund"), USAA Life Variable Annuity Growth and Income Fund (the
"VA Growth and Income Fund"), USAA Life Variable Annuity World Growth Fund (the
"VA World Growth Fund"), the USAA Life Variable Annuity International Fund (the
"VA International Fund"), and USAA Life Variable Annuity Diversified Assets Fund
(the "VA Diversified Assets Fund"), collectively referred to herein as the
"Funds." Each Fund represents a separate series of shares of beneficial interest
in the Trust. Each share of beneficial interest issued with respect to an
individual Fund represents a pro-rata interest in the assets of that Fund and
has no interest in the assets of any other Fund. Each Fund bears its own
liability and also its proportionate share of the general liabilities of the
Trust. The Trust is registered under the Investment Company Act of 1940 (the
"1940 Act") and its shares are registered under the Securities Act of 1933 (the
"1933 Act"). This registration does not imply any supervision by the Securities
and Exchange Commission (the "SEC" or the "Commission") over the Trust's
management or its investment policies or practices.

DISTRIBUTOR

The Contracts are primarily sold in a continuous offering by direct
response through salaried sales account representatives who are appropriately
licensed under state law to sell variable annuity contracts and registered with
the National Association of Securities Dealers, Inc. (the "NASD") as registered
representatives and/or principals. The Contracts are distributed through USAA
Investment Management Company ("USAA IMCO" or the "Adviser"), an affiliate of
USAA Life, which is registered as a broker-dealer with the SEC and is a member
of the NASD.

INVESTMENT ADVISER

USAA IMCO, registered as an investment adviser with the SEC under the
Investment Advisers Act of 1940, is the investment adviser to the Trust.

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA,
02110, is the Trust's custodian ("Custodian"). The Custodian is responsible for,
among other things, safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest on the Trust's investments. In addition, each Fund's investments in
foreign securities may be held by certain foreign banks and foreign securities
depositories as agents of the Custodian in accordance with the rules and
regulations established by the SEC.

<PAGE>

TRANSFER AGENT

USAA Life, the depositor of the Separate Account, serves as transfer agent
for the Trust pursuant to a Transfer Agent Agreement. USAA Life may be
reimbursed for its expenses incurred in connection with providing services under
the Transfer Agent Agreement.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, 112 East Pecan, Suite 2400, San Antonio, Texas
78205, independent auditors, will perform an annual audit of USAA Life, the
Separate Account, the Trust and USAA IMCO.

LEGAL MATTERS

Freedman, Levy, Kroll and Simonds, Washington, D.C., has passed upon the
legal validity of the Funds' shares and has advised the Trust on certain federal
securities law matters.

VALUATION OF SECURITIES

Shares of each Fund are offered on a continuing basis to the Separate
Account through USAA IMCO. The offering price for shares of each Fund is equal
to the current net asset value (the "NAV") per share. The NAV per share of each
Fund is calculated by adding the value of each of the Fund's portfolio
securities and other assets, deducting its liabilities, and dividing the
remainder by the number of Fund shares outstanding.

A Fund's NAV per share is calculated each day, Monday through Friday,
except days on which the New York Stock Exchange (the "Exchange") is closed. The
Exchange is currently scheduled to be closed on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas, and on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.

The value of the securities of each Fund, other than the VA Money Market
Fund is determined by one or more of the following methods:

(1) Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange, are valued at the last sales price on that
exchange. If no sale is reported, the latest bid price is generally used
depending upon local custom or regulation.

(2) Securities traded in a U.S. over-the-counter ("OTC") market are priced
at the last sales price or, if not available, at the average of the bid
and asked prices at the time regular trading of listed securities closes
on the Exchange.

4
<PAGE>

(3) Debt securities purchased with maturities of 60 days or less are stated
at amortized cost, which generally approximates market value. Repurchase
agreements are valued at cost.

(4) Other debt securities are valued each business day by a pricing service
(the "Service") approved by the Board of Trustees of the Trust (the "Board
of Trustees"). The Service uses the mean between quoted bid and asked
prices, or the last sales price, to price securities when, in the
Service's judgment, 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 those
securities based on methods which include consideration of yields or
prices of securities of comparable quality, coupon, maturity and type,
indicators as to values from dealing in securities, and general market
conditions.

(5) Securities primarily traded on foreign securities exchanges are
generally valued at the preceding closing value of such security on the
exchange where they are primarily traded. If no closing price is
available, the latest bid price is generally used, depending upon local
custom or regulation.

(6) All foreign securities traded in the OTC market are valued at the last
sales price, or, if not available, at the average of the bid and asked
prices. If there is not active trading in a particular security for a
given day, the latest bid price is generally used.

(7) Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair market value using methods
determined by the Adviser under the general supervision of the Board of
Trustees. For purposes of determining each Fund's net asset value, all
assets and liabilities initially expressed in foreign currency values will
be converted into U.S. dollar values at the spot price of such currencies
against U.S. dollars as last quoted by any recognized broker-dealer.

Securities trading in foreign markets may not take place on all days on
which the Exchange is open. Further, trading takes place in various foreign
markets on days on which the Exchange is not open. The calculation of a Fund's
net asset value therefore may not take place contemporaneously with the
determination of the prices of securities held by a Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of normal trading on the Exchange on a day a Fund's net
asset value is calculated will not be reflected in a Fund's net asset value,
unless the Adviser determines that the particular event would materially affect
net asset value. In such a case, the Fund's Adviser, under the supervision of
the Board of Trustees, will use all relevant available information to determine
a fair value for the affected portfolio securities.

The value of the VA Money Market Fund's securities is stated at amortized
cost, which generally approximates market value. This involves valuing a
security at its cost and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates. While this method provides certainty in valuation, it may result in
periods during which the value of an instrument, as determined by amortized
cost, is higher or lower than the price the Fund would receive upon the sale of
the instrument.

The valuation of the VA Money Market Fund's portfolio instruments based
upon their amortized cost is subject to the Fund's adherence to certain
procedures and conditions. The Adviser will purchase U.S. dollar-denominated
securities with remaining maturities of 397 days or less and will maintain a
dollar-weighted average portfolio maturity of no more than 90 days. The Adviser
will invest only in securities

5
<PAGE>

that are judged to present minimal credit risk and that satisfy the quality and
diversification requirements of applicable rules and regulations of the SEC.

The Board of Trustees has established procedures designed to stabilize the
VA Money Market Fund's price per share, as computed for the purpose of sales and
redemptions, at $1.00. There can be no assurance, however, that the Fund will at
all times be able to maintain a constant $1.00 NAV per share. Such procedures
include review of the Fund's holdings at such intervals as is deemed appropriate
to determine whether the Fund's NAV, calculated by using available market
quotations, deviates from $1.00 per share and, if so, whether such deviation may
result in material dilution, or is otherwise unfair to existing shareholders. In
the event that it is determined that such a deviation exists, the Board of
Trustees will take such corrective action as it regards as necessary and
appropriate. Such action may include selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends, or establishing an NAV per share by using
available market quotations.

ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES

The Trust reserves the right to suspend the redemption of Trust shares (1)
for any periods during which the Exchange is closed, (2) when trading in the
markets the Trust normally utilizes is restricted, or an emergency exists as
determined by the SEC so that disposal of the Trust's investments or
determination of its NAV is not reasonably practicable, or (3) for such other
periods as the SEC by order may permit for protection of the Trust's
shareholders.

INVESTMENT POLICIES AND TECHNIQUES

The Prospectus describes certain fundamental investment objectives and
certain investment policies applicable to each Fund. The following is provided
as additional information.

SECTION 4(2) COMMERCIAL PAPER AND RULE 144A SECURITIES

The Funds may invest in commercial paper issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the 1933 Act
("Section 4(2) Commercial Paper"). Section 4(2) Commercial Paper is restricted
as to disposition under the federal securities laws; therefore, any resale of
Section 4(2) Commercial Paper must be effected in a transaction exempt from
registration under the Securities Act of 1933 ("1933 Act"). Section 4(2)
Commercial Paper is normally resold to other investors through or with the
assistance of the issuer or investment dealers who make a market in Section 4(2)
Commercial Paper, thus providing liquidity.

The Funds may also purchase restricted securities eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the 1933 Act ("Rule
144A Securities"). Rule 144A provides a non-exclusive safe harbor from the
registration requirements of the 1933 Act for resales of certain securities to
institutional investors.

Certain foreign securities (including Eurodollar obligations) may be
eligible for resale pursuant to Rule 144A in the United States and may also
trade without restriction in one or more foreign markets. Such securities may be
determined to be liquid based upon these foreign markets without regard to their
eligibility for resale pursuant to Rule 144A. In such cases, these securities
will not be treated as Rule

6
<PAGE>

144A securities for purposes of the liquidity guidelines established by the
Board of Trustees.

LIQUIDITY DETERMINATIONS

The Board of Trustees has established guidelines pursuant to which
municipal lease obligations, Section 4(2) Commercial Paper, Rule 144A
Securities, and certain restricted debt securities that are subject to
unconditional put or demand features exercisable within seven days ("Demand
Feature Securities") may be determined to be liquid for purposes of complying
with a Fund's investment restriction applicable to investments in illiquid
securities. In determining the liquidity of municipal lease obligations, Section
4(2) Commercial Paper and Rule 144A Securities, the Adviser will, among other
things, consider the following factors established by the Board of Trustees: (1)
the frequency of trades and quotes for the security, (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (3) the willingness of dealers to undertake to make a market in the
security, and (4) the nature of the security and the nature of the marketplace
trades, including the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer. Additional factors considered
by the Adviser in determining the liquidity of a municipal lease obligation are:
(1) whether the lease obligation is of a size that will be attractive to
institutional investors, (2) whether the lease obligation contains a non-
appropriation clause and the likelihood that the obligor will fail to make an
appropriation therefor, and (3) such other factors as the Adviser may determine
to be relevant to such determination. In determining the liquidity of Demand
Feature Securities, the Adviser will evaluate the credit quality of the party
(the "Put Provider") issuing (or unconditionally guaranteeing performance on)
the unconditional put or demand feature of the Demand Feature Securities. In
evaluating the credit quality of the Put Provider, the Adviser will consider all
factors that it deems indicative of the capacity of the Put Provider to meet its
obligations under the Demand Feature Securities based upon a review of the Put
Provider's outstanding debt and financial statements and general economic
conditions.

LENDING OF SECURITIES

Each Fund may lend its securities. A lending policy may be authorized by
the Board of Trustees and implemented by the Adviser, but securities may be
loaned only to qualified broker-dealers or institutional investors that agree to
maintain cash collateral with the Trust's custodian or another third party
custodian equal at all times to at least 100% of the value of the loaned
securities. The Board of Trustees will establish procedures and monitor the
creditworthiness of any institution or broker-dealer during such times as any
loan is outstanding. The Trust will continue to receive interest on the loaned
securities and will invest the cash collateral in short-term obligations of the
U.S. Government or of its agencies or instrumentalities or in repurchase
agreements, thereby earning additional interest.

No loan of securities will be made if, as a result, the aggregate of such
loans would exceed 33 1/3% of the value of a Fund's total assets, except that
this limitation does not apply to purchases of debt securities or to repurchase
agreements. The Trust may terminate such loans at any time.

<PAGE>

FORWARD CURRENCY CONTRACTS

The VA Aggressive Growth Fund, VA World Growth Fund and the VA
International Fund may enter into forward currency contracts in order to
protect against uncertainty in the level of future foreign exchange rates.

A forward currency contract involves an agreement to purchase or sell a
specific currency at a specified time period at a price set at the time of the
contract. These contracts are usually traded directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirements, and no commissions are charged.

Although the Fund values its assets each business day in terms of U.S.
dollars, it does not intend to convert its foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and may incur currency
conversion costs. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (spread) between
the prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell that currency to the Fund at one rate, while offering a
lesser rate of exchange should the Fund desire to resell that currency to the
dealer.

WHEN-ISSUED SECURITIES

Each Fund may invest in new issues of debt securities offered on a when-
issued basis; that is, delivery of and payment for the securities take place
after the date of the commitment to purchase, normally within 45 days. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the buyer enters into the commitment. A Fund may sell
these securities before the settlement date if it is deemed advisable.

Cash or high quality liquid debt securities equal to the amount of the
when-issued commitments are segregated at the Fund's custodian bank. The
segregated securities are valued at market, and daily deposit adjustments are
made to keep the value of the cash and segregated securities at least equal to
the amount of such commitments by the Fund. On the settlement date of the when-
issued securities, the Fund will meet its obligations from then available cash,
sale of segregated securities, sale of other securities, or from the sale of the
when-issued securities themselves (which may have a value greater or less than
the Fund's payment obligations).

REITS

Because each Fund (other than the VA Money Market Fund and VA International
Fund) may invest a portion of its assets in REITs, each Fund may also be subject
to certain risks associated with direct investments in REITs. REITs may be
affected by changes in the value of their underlying properties and by defaults
by borrowers or tenants. Furthermore, REITs are dependent upon specialized
management skills of their managers and may have limited geographic
diversification, thereby, subjecting them to risks inherent in financing a
limited number of projects. REITs depend generally on their ability to generate
cash flow to make distributions to shareholders, and certain REITs have self-
liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time.

<PAGE>

INVESTMENT RESTRICTIONS

In addition to the restrictions described in the prospectus, the following
investment restrictions have been adopted by the Trust for and are applicable to
each Fund as stated. They are considered to be fundamental policies of the
Funds, and may not be changed for any given Fund without approval by the lesser
of (1) 67% or more of the voting securities present at a meeting of the Fund if
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy or (2) more than 50% of the Fund's outstanding voting
securities. The investment restrictions of one Fund thus may be changed without
affecting those of any other Fund.

Under the restrictions, each Fund may not:

(1) Issue senior securities, except for borrowings described under
"Investment Restrictions" in the Trust's Prospectus and as permitted under
the 1940 Act;

(2) Underwrite securities of other issuers, except to the extent that it
may be deemed to act as a statutory underwriter in the distribution of any
restricted securities or not readily marketable securities;

(3) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent investments
in securities secured by real estate or interests therein);

(4) Lend any securities or make any loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, except that
this limitation does not apply to purchases of debt securities or to
repurchase agreements; or

(5) Purchase or sell commodities or commodities contracts.

With respect to the Funds' concentration policy as described in the
Prospectus, the Adviser uses industry classifications for industries based on
categories established by Standard & Poor's Corporation (S&P) for the Standard &
Poor's 500 Composite Index, with certain modifications. Because the Adviser has
determined that certain categories within, or in addition to, those set forth by
S&P have unique investment characteristics, additional industries are included
as industry classifications. The Adviser classifies municipal obligations by
projects with similar characteristics, such as toll road revenue bonds, housing
revenue bonds or higher education revenue bonds.

9
<PAGE>

ADDITIONAL RESTRICTIONS

The following restrictions are not considered to be fundamental policies of
the Funds. Nevertheless, the Trust and each Fund will comply with them if and so
long as they are required by any state where the Fund's shares are offered for
sale. These additional restrictions may be changed by the Board of Trustees
without notice to or approval by the shareholders.

Under the additional restrictions, each Fund may not:

(1) Pledge, mortgage or hypothecate its assets to any extent greater than
33 1/3% of the value of its total assets;

(2) Purchase or retain the securities of any issuer if any officer of the
Adviser or officer or Trustee of the Trust own individually more than 1/2%
of the outstanding securities of such issuer, and together beneficially own
more than 5% of such securities;

(3) Purchase securities on margin or sell securities short, except that it
may obtain such short-term credits as are necessary for the clearance of
securities transactions and make short sales against the box; for purposes
of this restriction, the deposit or repayment of initial or variation
margin in connection with financial futures contracts or related options
will not be deemed to be a purchase of securities on margin by a Fund;

(4) Purchase securities of other investment companies, except to the extent
permitted by applicable law;

(5) Purchase or sell puts, calls, straddles or spreads or any combination
thereof, except to the extent permitted by applicable law; or

(6) Purchase interests in oil, gas, or other mineral exploration or
development programs, except that it may purchase securities of issuers
whose principal business activities fall within such areas.

PORTFOLIO TRANSACTIONS

The Adviser, pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), and subject to the general control of the Board of Trustees, places
all orders for the purchase and sale of Fund securities. In executing portfolio
transactions and selecting brokers and dealers, it is the Trust's policy to seek
the best combination of price and execution available. The Adviser
will consider such factors as it deems relevant, including the breadth of the
market in the security, the financial condition and execution capability of the
broker-dealer, and the reasonableness of the commission, if any, for the
specific transaction or on a continuing basis. Securities purchased or sold in
the over-the-counter market will be executed through principal market makers,
except when, in the opinion of the Adviser, better prices and execution are
available elsewhere.

In the allocation of brokerage business used to purchase securities for the
Funds, preference may be given to those broker-dealers who provide research or
other services to the Adviser. Such research and other services may include, for
example: advice concerning the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or the purchasers or sellers

<PAGE>

of securities; analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of accounts;
and various functions incidental to effecting securities transactions, such as
clearance and settlement. In return for such services, a Fund may pay to those
brokers a higher commission than may be charged by other brokers, provided that
the Adviser determines in good faith that such commission is reasonable in terms
of either that particular transaction or of the overall responsibility of the
Adviser to the Funds and its other clients. The receipt of research from broker-
dealers that execute transactions on behalf of the Trust may be useful to the
Adviser in rendering investment management services to other clients (including
affiliates of the Adviser), and conversely, such research provided by broker-
dealers who have executed transaction orders on behalf of other clients may be
useful to the Adviser in carrying out its obligations to the Trust. While such
research is available to and may be used by the Adviser in providing investment
advice to all its clients (including affiliates of the Adviser), not all of such
research may be used by the Adviser for the benefit of the Trust. Such research
and services will be in addition to and not in lieu of research and services
provided by the Adviser, and the expenses of the Adviser will not necessarily be
reduced by the receipt of such supplemental research. See "The Trust's Adviser."

Securities of the same issuer may be purchased, held, or sold at the same
time by the Trust for any or all of its Funds, or other accounts or companies
for which the Adviser provides investment advice (including affiliates of the
Adviser). On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Trust, as well as the Adviser's other clients,
the Adviser, to the extent permitted by applicable laws and regulations, may
aggregate such securities to be sold or purchased for the Trust with those to be
sold or purchased for other customers in order to obtain best execution and
lower brokerage commissions, if any. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be most equitable and
consistent with its fiduciary obligations to all such customers, including the
Trust, and in accordance with procedures approved by the Board of Trustees. In
some instances, this procedure may impact the price and size of the position
obtainable for the Trust.

The Trust pays no brokerage commissions as such for debt securities. The
market for such securities is typically a "dealer" market in which investment
dealers buy and sell the securities for their own accounts, rather than for
customers, and the price may reflect a dealer's mark-up or mark-down. In
addition, some securities may be purchased directly from issuers.

For the period from January 5, 1995 (the Trust's date of inception)
through December 31, 1995, and for the Trust's most recently completed fiscal
year ended December 31, 1996, the Funds paid the following amounts in brokerage
commissions:
1/1-12/31/96* 1/5-12/31/95**
------------ ------------
VA Money Market Fund N/A N/A
VA Income Fund $ 5,212
VA Growth and Income Fund $ 42,257
VA World Growth Fund $103,114
VA Diversified Assets Fund $ 23,619
VA Aggressive Growth Fund N/A N/A
VA International Fund N/A N/A

- -----------

*Includes $___, $___, $___, and $___, paid by the VA Income Fund, VA Growth and
Income Fund, VA World Growth Fund, and VA Diversified Assets Fund, respectively,
to USAA Brokerage Services, a discount brokerage service of the Adviser. Those
amounts are ____%, ____%, ____%, and ____%, respectively, of the aggregate
brokerage fees paid by each Fund. For the year ended December 31, 1996, ___%,
___%, ___%, and ___% of the aggregate dollar amounts of transactions involving
the payment of commissions by the VA Income Fund, VA Growth and Income Fund, VA
World Growth Fund, and VA Diversified Assets Fund, respectively, were effected
through USAA Brokerage Services.

**Includes $5,212, $3,880, $1,700, and $4,240 paid by the VA Income Fund, VA
Growth and Income Fund, VA World Growth Fund, and VA Diversified Assets Fund,
respectively, to USAA Brokerage Services, a discount brokerage service of the
Adviser.

11
<PAGE>

Certain Funds paid brokerage commissions in connection with brokerage
transactions that were directed to brokers because of brokerage and research
services provided by such brokers. For the Trust's most recently completed
fiscal year ended December 31, 1996, the amount of such brokerage transactions
and related commissions paid by these Funds were as follows:

Transaction
Fund Commissions Amounts
- ---- ----------- -----------
<S> <C> <C>
VA Income Fund $ $
VA Growth and Income Fund $ $
VA World Growth Fund $ $
VA Diversified Assets Fund $ $

</TABLE>

PORTFOLIO TURNOVER RATES

The rate of portfolio turnover in any of the Funds will not be a limiting
factor when the Adviser deems changes in a Fund's portfolio appropriate in view
of its investment objective. Although no Fund will purchase or sell securities
solely to achieve short-term trading profits, a Fund may sell portfolio
securities without regard to the length of time held if consistent with the
Fund's investment objective. A higher degree of equity portfolio activity will
increase brokerage costs to a Fund. It is not anticipated that the portfolio
turnover rate of any Fund, other than the VA Money Market Fund and the VA
Aggressive Growth Fund, will exceed 100%.

The portfolio turnover rate is computed by dividing the dollar amount of
securities purchased or sold (whichever is smaller) by the average value of
securities owned during the year. Short-term investments such as commercial
paper and short-term U.S. Government securities are not considered when
computing the turnover rate.

FURTHER DESCRIPTION OF TRUST SHARES

The Trust is authorized to issue shares of beneficial interest in separate
Funds. Seven Funds have been established. Under the Master Trust Agreement
("Trust Agreement"), the Board of Trustees is authorized to create new Funds in
addition to those already existing without shareholder approval.

The assets of each Fund and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
each Fund. They constitute the underlying assets of each Fund, are required to
be segregated on the books of account, and are to be charged with the expenses
of such Fund. Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund are allocated on the basis of the Funds' relative
net assets during the fiscal year or in such other manner as the Board of
Trustees determines to be fair and equitable. Each share of each Fund represents
an equal proportionate interest in that Fund with every other share of that Fund
and is entitled to dividends and distributions out of the net income and capital
gains belonging to that Fund when declared by the Board of Trustees. Upon
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets belonging to such Fund available for distribution.

12
<PAGE>

Under the Bylaws of USAA Life Investment Trust (the "Trust Bylaws") no
annual or regular meeting of shareholders is required. Thus, there will
ordinarily be no shareholder meeting unless otherwise required by the 1940 Act.

Pursuant to the Trust Agreement, any Trustee may be removed by the vote of
two-thirds of the Trust shares then outstanding, cast in person or by proxy at
any meeting called for the purpose. Under the Trust Bylaws, the Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon removal of any Trustee when requested to do so in writing by
shareholders holding not less then 10% of the shares then outstanding.

On any matter submitted to the shareholders, the holder of each Fund share
is entitled to one vote per share (with proportionate voting for fractional
shares) regardless of the relative NAV of the Fund's shares. However, on matters
affecting an individual Fund differently from the other Funds, a separate vote
of the shareholders of that Fund is required. Shareholders of a Fund are not
entitled to vote on any matter that does not affect that Fund but that requires
a separate vote of another Fund. Shares do not have cumulative voting rights,
which means the holders of more than 50% of the shares voting for the election
of Trustees can elect 100% of the Board of Trustees, and the holders of less
than 50% of the shares voting for the election of Trustees will not be able to
elect any person as a Trustee. Shareholders of a particular Fund might have the
power to elect all of the Trustees of the Trust because that Fund has a majority
of the total outstanding shares of the Trust.

When issued, each Fund's shares are fully paid and nonassessable, have no
pre-exemptive or subscription rights, and are fully transferable. There are no
conversion rights.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"), as amended.
Accordingly, no Fund will be liable for federal income taxes on its taxable net
investment income and net capital gains (capital gains in excess of capital
losses) that are distributed to shareholders, provided that each Fund
distributes at least 90% of its net investment income and net short-term capital
gain for the taxable year.

To qualify as a regulated investment company, a Fund must, among other
things, (1) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies (the 90% test); (2) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock or
securities, and certain options, futures contracts, forward contracts, and
foreign currencies, held less than three months (the 30% test); and (3) satisfy
certain diversification requirements at the close of each quarter of the Fund's
taxable year. Each of the Funds intends to satisfy these requirements. To deduct
the dividends it pays, and therefore not be subject to federal income tax at the
Trust level, each Fund must pay dividends each taxable year equal to 90% of its
taxable income and 90% of its non-taxable income.

As discussed in the Prospectus, each Fund is also subject to asset
diversification requirements set forth in Section 817(h) of the Code and Section
1.817-5 of the Treasury Regulations. Each of the Funds intends to conduct its
investment operations in such a manner as to comply with these diversification
requirements.

<PAGE>

In addition to these rules, the Treasury has indicated that it might in the
future issue a regulation or a revenue ruling on the issue of whether a variable
contract owner is exercising impermissible "control" over the investments
underlying a segregated asset account, thereby causing the income earned on a
Contract to be taxed currently.

The Code imposes a nondeductible 4% excise tax on a regulated investment
company that fails to distribute during each calendar year an amount at least
equal to the sum of (1) 98% of its taxable net investment income for the
calendar year, (2) 98% of its capital gain net income for the 12-month period
ending on October 31, and (3) any prior amounts not distributed. Each Fund
intends to make such distributions as are necessary to avoid imposition of the
excise tax.

The ability of the VA Aggressive Growth Fund, VA World Growth Fund and the
VA International Fund to make certain investments may be limited by provisions
of the Code that require inclusion of certain unrealized gains or losses in the
Fund's income for purposes of the 90% test, the 30% test, and the distribution
requirements of the Code, and by provisions of the Code that characterize
certain income or loss as ordinary income or loss rather than capital gain or
loss. Such recognition, characterization and timing rules generally apply to
investments in certain forward currency contracts, foreign currencies and debt
securities denominated in foreign currencies, as well as certain other
investments.

If the VA World Growth Fund or the VA International Fund invests in an
entity that is classified as a Passive Foreign Investment Company ("PFIC") for
federal income tax purposes, the application of certain provisions of the Code
applying to PFICs could result in the imposition of certain federal income taxes
on the Fund. It is anticipated that any taxes on the Fund with respect to
investments in PFICs would be insignificant.

TRUSTEES AND OFFICERS OF THE TRUST

The Board of Trustees consists of five Trustees. Set forth below are the
Trustees and officers of the Trust, their ages and their respective offices and
principal occupations during the last five years. Unless otherwise indicated,
the business address of each is 9800 Fredericksburg Road, San Antonio, TX
78288. Asterisks denote Trustees who are interested persons of the Trust within
the meaning of the 1940 Act.

Principal Occupation During
Name, Address and Age Position with Trust the Past Five Years
- -------------------------- ------------------- --------------------------------------------
<S> <C> <C>

Edwin L. Rosane* Chairperson and Chief Executive Officer and President,
Age 59 President USAA Life, since 1993 and 1990,
respectively

Michael J.C. Roth* Vice Chairperson Chief Executive Officer and President,
Age 55 USAA IMCO, since October 1993 and
January 1990, respectively
</TABLE>

14
<PAGE>

Principal Occupation During
Name, Address and Age Position with Trust the Past Five Years
- -------------------------- ------------------- --------------------------------------------
<S> <C> <C>

June R. Reedy/1/ Trustee Chairman, Mayor's Task Force To
211 N. Presa Revitalize the Historic Civic Center of San
San Antonio, Texas Antonio; City Commissioner, Historic
78205, Design & Review, City of San Antonio
Age 66 (Volunteer)

Neil H. Stone Trustee Attorney (Associate), Gendry & Sprague,
10100 Reunion Place, P.C. (known as Gendry, Sprague &
Suite 850 Wachsmuth until November 1994), since
San Antonio, Texas December 1992; prior thereto, Attorney
78216, (Associate, Shareholder, Vice President),
Age 53 Coatney, Sprague & Wachsmuth, P.C.

Gary W. West Trustee President, Radiation Oncology of San
8038 Wurzbach, Antonio, Professional Association
Suite 870
San Antonio, Texas
78229,
Age 56

Kenneth McClure Vice President Senior Vice President, Life & Health
Age 48 Marketing, USAA Life, since January
1997; prior thereto, Senior Vice President,
Life Operations, USAA Life, since January
1995; prior thereto, Senior Vice President,
Life & Health Marketing, USAA Life, since
August 1992; prior thereto, Vice
President, Life & Health Sales, USAA Life

John W. Douglas Vice President Senior Vice President, Life Operations,
Age 52 USAA Life, since January 1997; prior thereto,
Senior Vice President, Life & Health
Marketing, USAA Life, since January
1995; prior thereto, Senior Vice President,
Life Operations, USAA Life, since 1990

John W. Saunders, Jr. Vice President Senior Vice President - Investments,
Age 62 USAA IMCO

Richard T. Halinski, Jr. Secretary Vice President, USAA, and Assistant
Age 44 Secretary, USAA Life, since November
1994 and April 1991, respectively; prior
thereto, Assistant Vice President, USAA
Life and USAA, since April 1991 and
November 1990, respectively

James A. Robinson Treasurer Senior Vice President, Finance, USAA
Age 46 Life, since April 1992; prior thereto, Vice
President, Controller, USAA Life
</TABLE>

15
<PAGE>

Principal Occupation During
Name, Address and Age Position with Trust the Past Five Years
- -------------------------- ------------------- --------------------------------------------
<S> <C> <C>

Dwain A. Akins Assistant Secretary Assistant Vice President, USAA, since
Age 45 November 1994; Assistant Vice President
& Assistant Secretary since April,
1995, USAA Life, prior thereto, Executive
Director, USAA, since February 1991

Larkin W. Fields Assistant Treasurer Vice President, Life & Health Marketing,
Age 41 USAA Life, since November 1995; prior thereto,
Vice President - Operational Accounting,
USAA Life, since August 1993; prior
thereto, Assistant Vice President,
Operational Accounting, USAA Life, since
May 1990

Layne Roetzel Assistant Treasurer Director - Financial Statement Reporting,
Age 37 USAA Life, since September 1995; prior
thereto, Director - Management Accounting,
USAA Life, since December 1992; prior
thereto, Director - Financial Statement
Reporting, USAA Life

</TABLE>

- ----------------
/1/ Ms. Reedy retired as a Vice President of USAA Life Insurance Company on
December 31, 1985.

COMMITTEES OF THE BOARD OF TRUSTEES

The Trust has an Audit Committee, an Executive Committee and a Pricing and
Investment Committee. The duties of these three Committees and their present
membership are as follows:

AUDIT COMMITTEE: The members of the Audit Committee consult with the Trust's
independent public accountants from time to time regarding financial and
accounting matters pertaining to the Trust and meet with the Trust's independent
public accountants at least once annually to discuss the scope and results of
the annual audit of the Funds and such other matters as the Committee members
deem appropriate or desirable. Trustees Reedy, Stone and West are members of the
Audit Committee.

EXECUTIVE COMMITTEE: During intervals between meetings of the Board of
Trustees, the Executive Committee possesses and may exercise all of the powers
of the Board of Trustees in the management of the Trust except as to those
matters that specifically require action by the Board of Trustees. Trustees
Rosane, Roth and Reedy are members of the Executive Committee.

PRICING AND INVESTMENT COMMITTEE: During intervals between meetings of the
Board of Trustees, the Pricing and Investment Committee reviews each Fund's
investments and confers with USAA IMCO at such times and as to such matters as
the Committee members deem appropriate. Trustees Roth, Stone, and West are
members of the Pricing and Investment Committee.

16
<PAGE>

No remuneration will be paid by the Trust to any Trustee or officer of the
Trust who is affiliated with USAA Life or the Adviser. Trustees' fees consisting
of an annual retainer of $3,500 for serving on the Board of Trustees, an annual
retainer of $500 for serving on one or more committees of the Board of Trustees,
and a $500 fee for each regular or special Board meeting will be paid to each
Trustee who is not an interested person of the Trust, presently Trustees Reedy,
Stone and West. The Trustees are also reimbursed for their expenses incurred in
attending any meeting of the Board of Trustees. The Board of Trustees generally
meets quarterly.

The following table sets forth the compensation of the current Trustees for
their services as Trustees for the Trust's most recently completed fiscal year
ended December 31, 1996:

AGGREGATE AGGREGATE COMPENSATION
COMPENSATION FROM THE USAA
TRUSTEE: FROM THE TRUST: FAMILY OF FUNDS(a):
- -------- --------------- ----------------------

Edwin L. Rosane(b)................ None None
Michael J.C. Roth(c).............. None None
June R. Reedy..................... $ None
Neil H. Stone..................... $ None
Gary W. West...................... $ None

(a) As of April 1, 1997, the USAA Family of Funds consisted of four registered
investment companies, not including the Trust, offering a total of 33
individual funds.

(b) Trustee Rosane is the President and CEO of USAA Life, which is affiliated
with the Trust's investment adviser, USAA IMCO, and, accordingly, receives
no remuneration from the Trust.

(c) Trustee Roth is affiliated with the Trust's investment adviser, USAA IMCO,
and, accordingly, receives no remuneration from the Trust or any other fund
within the USAA Family of Funds, although he presently serves on the board
of each registered investment company within the USAA Family of Funds.

THE TRUST'S ADVISER

As described in the Prospectus, USAA IMCO is the Adviser to the Trust and
provides services under the Advisory Agreement. USAA IMCO was organized in May
1970 and has served as adviser and distributor for the USAA Life Investment
Trust from its inception. USAA IMCO is a wholly-owned indirect subsidiary of
United Services Automobile Association.

17
<PAGE>

In addition to providing investment advice to the Trust, the Adviser
advises and manages the investments for USAA and its affiliated companies as
well as those of USAA Investment Trust, USAA Mutual Fund, Inc., USAA Tax Exempt
Fund, Inc., and USAA State Tax-Free Trust. As of the date of this SAI, total
assets under management by the Adviser were in excess of $__ billion, of
which approximately $__ billion of which are in publicly available mutual
funds.

THE ADVISORY AGREEMENT

Under the Advisory Agreement, the Adviser provides an investment program,
carries out the investment policy and manages the portfolio assets for each
Fund. The Adviser is authorized, subject to the control of the Board of
Trustees, to determine the selection, amount and time to buy or sell securities
for each Fund. For these services under the Advisory Agreement, the Trust has
agreed to pay the Adviser a monthly fee equal to the annual rate of 0.20% of the
monthly average net assets of each Fund, other than the VA Aggressive Growth
Fund and the VA International Fund, for which the annual rates are 0.50% and
0.65%, respectively. See "Management" in the Prospectus for further details.

USAA IMCO received the following investment advisory fees for the Trust's
most recently completed fiscal year ended December 31, 1996:

VA Money Market Fund $
VA Income Fund $
VA Growth and Income Fund $
VA World Growth Fund $
VA Diversified Assets Fund $

The Advisory Agreement was approved on December 14, 1994, by the Board of
Trustees and was subsequently approved by the initial shareholder of each Fund,
USAA Life on behalf of the Separate Account, following its investment of the
initial capitalization of each Fund. On December 5, 1996, the Board of Trustees
approved the continuation of the Advisory Agreement for another term ending
January 3, 1998. The Board of Trustees approved an amendment to the Advisory
Agreement on February 7, 1997 to include the VA Aggressive Growth and VA
International Funds, for an initial term beginning on May 1, 1997 and continuing
through January 3, 1998. The Advisory Agreement will continue in effect from
year to year thereafter for each Fund as long as it is approved at least
annually by a vote of the outstanding voting securities of such Fund (as defined
by the 1940 Act) or by the Board of Trustees (on behalf of such Fund) and, in
either event, a majority of the Trustees who are not interested persons of the
Adviser or of the Trust (otherwise than as Trustees), at a meeting called for
the purpose of voting on such approval. The Advisory Agreement may be
terminated, without penalty, at any time by the Board of Trustees, the Adviser
or, with respect to any Fund, by vote of that Fund's shareholders, in each case
on 60 days' written notice. It will automatically terminate in the event of its
assignment (as defined in the 1940 Act).

Pursuant to an Underwriting and Administrative Services Agreement, dated
December 16, 1994, ("Underwriting Agreement") - USAA Life, out of its General
Account, assumes the expense of: (a) organizing the Trust; (b) compensation and
travel expenses of those Trustees of the Trust who are "interested persons" of
the Trust within the meaning of the 1940 Act; and (c) any activity that may be
attributable to the Trust as primarily intended to result in the sale of Trust
shares to other than current shareholders and/or Contract Owners, including the
preparation, setting in type, printing in quantity and

18
<PAGE>

distribution of such materials as prospectuses, statements of additional
information, supplements to prospectuses and statements of additional
information, sales literature (including the Trust's periodic reports to
shareholders and any Separate Account periodic report to Contract Owners),
advertising and other promotional material relating to either the Trust or the
Account and compensation paid to sales personnel.

In addition, pursuant to the Underwriting Agreement, USAA Life, out of its
General Account, has agreed to pay directly or reimburse the Trust for these
Trust expenses to the extent that such expenses exceed 0.70% of the monthly
average net assets of the VA Aggressive Growth Fund, 0.65% of the monthly
average net assets of the VA World Growth Fund, 1.10% of the monthly average net
assets of the VA International Fund, and 0.35% of the monthly average net assets
of each other Fund. Subject to the expense limitation described in the preceding
paragraph, the Trust will bear the expense of: (a) all charges, commissions and
fees agreed to by it pursuant to the Advisory Agreement by and between the Trust
and USAA IMCO in its capacity as Adviser; (b) the charges and expenses of
independent auditors and outside counsel retained by the Trust; (c) brokerage
commissions for transactions in the portfolio investments of the Trust and
similar fees and charges for the acquisition, disposition, lending or borrowing
of such portfolio investments; (d) all taxes, including issuance and transfer
taxes, and corporate fees, payable by the Trust to Federal, state or other
governmental agencies; (e) interest payable on the Trust's borrowings; (f)
extraordinary or non-recurring expenses, such as legal claims and liabilities
and litigation costs and indemnification payments by the Trust in connection
therewith; and (g) all expenses of Shareholders and Trustees' meetings
(exclusive of compensation and travel expenses of those Trustees of the Trust
who are "interested persons" of the Trust within the meaning of the 1940 Act),
including those in the following item; (h) compensation and travel expenses of
those Trustees who are not "interested persons" within the meaning of the 1940
Act; (i) the charges and expenses of any registrar, stock transfer or dividend
disbursing agent, custodian, or depository appointed by the Trust for the
safekeeping of its cash, portfolio securities and other property; (j) the fees
and expenses involved in registering and maintaining registrations of the Trust
and its shares with the SEC and various states and other jurisdictions (other
than any such expenses referred to in the following paragraph); (k) membership
or association dues for the Investment Company Institute or similar
organization; (l) the cost of the fidelity bond required by 1940 Act Rule 17g-1
and any errors and omissions insurance or other liability insurance covering the
Trust and/or its officers, Trustees and employees; (m) the preparation, setting
in type, printing in quantity and distribution of materials distributed to then-
current shareholders and/or Contract Owners of such material as prospectuses,
statements of additional information, supplements to prospectuses and statements
of additional

19
<PAGE>

information, periodic reports to Shareholders and/or Contract Owners,
communications, and proxy materials (including proxy statements, proxy cards and
voting instruction forms) relating to either the Trust or the Separate Account
and the processing, including tabulation, of the results of voting instruction
and proxy solicitations; (n) furnishing, or causing to be furnished, to each
Shareholder statements of account, including the expense of mailing; and (o)
postage.

PRINCIPAL HOLDERS OF SECURITIES

As of April 1, 1997, USAA Life, either directly or through the Separate
Account, owned of record and beneficially the percentages of each Fund's
outstanding shares as shown below. In addition, USAA Life has agreed to provide
the initial capitalization of the VA Aggressive Growth Fund and the VA
International Fund, and therefore, initially will own beneficially all of the
shares of those Funds. As a result of its beneficial ownership, USAA Life may
be presumed to control (with the exception of the VA Money Market Fund) each
Fund of the Trust. Such control may dilute the effect of the votes of other
shareholders of each Fund presumed to be controlled. USAA Life will vote its
fund shares owned through the Separate Account in accordance with instructions
received from variable annuity contract owners, annuitants and beneficiaries.
If USAA Life determines, however, that it is permitted to vote any such Fund
Shares in its own right, it may elect to do so, subject to the then-current
interpretation of the 1940 Act and the rules thereunder. The address of USAA
Life is 9800 Fredericksburg Road, San Antonio, Texas 78288. USAA Life, a Texas
corporation, is wholly-owned by United Services Automobile Association.

VA Money Market Fund ______%
VA Income Fund ______%
VA Growth and Income Fund ______%
VA World Growth Fund ______%
VA Diversified Assets Fund ______%

As of April 1, 1997, the Separate Account owned of record the percentages
of each Fund's outstanding shares attributable to the Contracts as shown below.
The VA Aggressive Growth Fund and the VA International Fund were not available
as investment options under the Contracts until May 1, 1997. The Separate
Account is located at 9800 Fredericksburg Road, San Antonio, Texas 78288.
Contract Owners may be deemed to beneficially own shares of one or more of the
Funds, to the extent that they are given the right to provide voting
instructions with regard to shares in those Funds. To the knowledge of the
Trust, no Contract Owner beneficially owns five percent or more of any Fund.

VA Money Market Fund ______%
VA Income Fund ______%
VA Growth and Income Fund ______%
VA World Growth Fund ______%
VA Diversified Assets Fund ______%

20
<PAGE>

As of April 1, 1997, the Trustees and officers, as a group, owned less than 1%
of the Trust's outstanding voting securities through any Contract. There are no
family relationships among the Trustees, officers, and managerial level
employees of the Trust or its Adviser.

CALCULATION OF PERFORMANCE DATA

Information regarding the total return and yield of the Funds is provided
under Performance Information in the Prospectus. See "Valuation of Securities"
in this SAI for a discussion of the manner in which the Funds' price per share
is calculated.

YIELD - VA MONEY MARKET FUND

When the VA Money Market Fund quotes a current annualized yield, it is
based on a specified recent seven day calendar period. It is computed by (1)
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, (2) dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base return, then (3)
multiplying the base period by 52.14 (365/7). The resulting yield figure is
carried to the nearest hundredth of one percent.

The calculation includes the value of additional shares purchased with
dividends on the original share, and other dividends declared on both the
original share and any such additional shares. The calculation includes the
effect of all expense reimbursements to the Fund. The capital changes excluded
from the calculation are realized capital gains and losses from the sale of
securities and unrealized appreciation and depreciation.

The Fund's effective (compounded) yield will be computed by dividing
the seven-day annualized yield as defined above by 365, adding one to the
quotient, raising the sum to a power equal to 365 divided by seven, and
subtracting one from the result.

Current and effective yields fluctuate daily and will vary with factors
such as interest rates and the quality, length of maturities, and type of
investments in the portfolio.

For the seven days ended December 31, 1996, the current yield of the VA
Money Market Fund was ____%.

YIELD - OTHER FUNDS

The Funds may advertise performance in terms of a 30-day (or one month)
yield quotation. The 30-day yield quotation is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:

[(a-b ) /6/ ]
YIELD = 2 [(----- +1) - 1]
[(cd ) ]

21
<PAGE>

Where:
a= dividends and interest earned during the period
b= expenses accrued for the period (net of reimbursement)
c= the average daily number of shares outstanding during the period that were
entitled to receive dividends
d= the maximum offering price per share on the last day of the period

TOTAL RETURN

The Funds may advertise performance in terms of average annual total
return for one, five and ten year periods, or for such lesser periods as any of
such Funds have been in existence. Average annual total return is computed by
finding the average annual compounded rates of return over the periods that
would equate the initial amount invested to the ending redeemable value,
according to the following formula prescribed by the SEC:

P(1 + T)/N/ = ERV

Where: P= a hypothetical initial investment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value of a
hypothetical $1,000 investment made at
the beginning of the one, five or ten year
periods at the end of the year or period

The calculation assumes all dividends and distributions by such Fund are
reinvested at the price stated in the Prospectus on the reinvestment dates
during the period, and includes all Fund expenses, net of reimbursements.

In addition, the Funds may each advertise performance in terms of
cumulative total return. Cumulative total return reflects the total change in
value of an investment in the Fund over a specified period, including, but not
limited to, periods of one, five and ten years, or the period since the Fund's
inception through a stated ending date. The SEC has not prescribed a standard
formula for computing cumulative total return.

22
<PAGE>

For the Trust's most recently completed fiscal year ended December 31, 1996
and since the Trust's inception on January 5, 1995, the average annual and
cumulative total returns* for each Fund that had operations was as follows:

<TABLE>
<CAPTION>
Fund Average Annual Total Return Cumulative Total Return
--------------------------- -----------------------
From inception
Since Inception Year Ended (January 5, 1995) through
(January 5, 1995) December 31, 1996 December 31, 1996
----------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
VA Money Market Fund
VA Income Fund
VA Growth and Income Fund
VA World Growth Fund
VA Diversified Assets Fund
</TABLE>

* These values reflect the deduction of a .20% annual management fee, but
do not reflect Fund expenses that are voluntarily paid by USAA Life or
reimbursed by USAA Life. Without the payment or reimbursement of expenses
by USAA Life, these total returns would have been lower.

FINANCIAL STATEMENTS

The financial statements for each Fund of the Trust (other than the VA
Aggressive Growth Fund and VA International Fund), and the report of the Trust's
independent auditors thereon, for the Trust's most recently completed fiscal
year ended December 31, 1996, are incorporated into this SAI by reference to the
Trust's Annual Report, which accompanies this SAI.

Only those sections of the Annual Report that are specifically identified
immediately below are incorporated by reference into this SAI:

Independent Auditors' Report
Portfolios of Investments in Securities
Notes to Portfolios of Investments in Securities
Statements of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements

23
<PAGE>

APPENDIX A - LONG-TERM AND SHORT-TERM DEBT RATINGS

1. LONG-TERM DEBT RATINGS:

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")

Aaa Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
"high grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

STANDARD & POOR'S RATINGS GROUP ("S&P")

AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

<PAGE>

FITCH INVESTORS SERVICE, INC. ("FITCH")

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.

A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment.

DUFF & PHELPS, INC. ("D&P"):

AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A Protection factors are average but adequate. However, risk factors are
variable and greater in periods of economic stress.

BBB Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.

2. SHORT-TERM DEBT RATINGS:

MOODY'S CORPORATE AND GOVERNMENT

Prime-1 Issuers have a superior ability for repayment of senior short term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:

. Leading market positions in well-established industries.

. High rates of return on funds employed.

. Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

25
<PAGE>

. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

. Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2 Issuers have a strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

Prime-3 Issuers (or supporting institutions) have an acceptable capacity for
repayment of short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained.

MOODY'S MUNICIPAL

MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.

MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.

S&P CORPORATE AND GOVERNMENT

A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-3 Designation indicates a satisfactory capacity for timely payment. Issues
with this designation, however, are somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.

<PAGE>

S&P MUNICIPAL

SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

FITCH

F-1+ Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1 Very strong credit quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.

F-2 Good credit quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 ratings.

F-3 Fair credit quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change is likely to cause these securities to be rated below
investment grade.

D&P

Duff 1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or ready access to alternative sources of funds,
is clearly outstanding, and safety is just below risk-free U.S. Treasury short-
term obligations.

Duff 1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

Duff 1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

Duff 2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Duff 3 Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

THOMPSON BANKWATCH, INC. ("TBW")

TBW-1 The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.

27
<PAGE>

TBW-2 The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated TBW-1.

TBW-3 The lowest investment grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, the capacity to service
principal and interest in a timely fashion is considered adequate.

IBCA INC.

A1 Obligations supported by the highest capacity for timely repayment.
Where issues possess a particularly strong credit feature, a rating of A1+ is
assigned.

A2 Obligations supported by a good capacity for timely repayment.

A3 Obligations supported by a satisfactory capacity for timely repayment.

<PAGE>

APPENDIX B - COMPARISON OF FUND PERFORMANCE

The Trust may make comparisons in advertising and sales literature between the
Funds contained in this SAI and other comparable funds in the industry. These
comparisons may include such topics as risk and reward, investment objectives,
investment strategies, and performance.

Fund performance also may be compared to the performance of broad groups of
mutual funds with similar investment goals or unmanaged indexes of comparable
securities. Evaluations of Fund performance made by independent sources also
may be used in advertisements concerning the Fund, including reprints of, or
selections from, editorials or articles about the Fund. The Fund or its
performance may also be compared to products and services not constituting
securities subject to registration under the 1933 Act such as, but not limited
to, certificates of deposit and money market accounts. Sources for performance
information and articles about the Fund may include the following:

AAII Journal, a monthly association magazine for members of the American
Association of Individual Investors.

Arizona Republic, a newspaper which may cover financial and investment news.

Austin American-Statesman, a newspaper that may cover financial news.

Bank Rate Monitor, a service that publishes rates on various bank products such
as certificates of deposit, money market deposit accounts and credit cards.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.

Chicago Tribune, a newspaper that may cover financial news.

Consumer Reports, a monthly magazine that from time to time reports on companies
in the mutual fund industry.

Dallas Morning News, a newspaper that may cover financial news.

Denver Post, a newspaper that may quote financial news.

Financial Planning, a monthly magazine that may periodically review mutual fund
companies.

Financial Services Week, a weekly newspaper that covers financial news.

Financial World, a monthly magazine that periodically features companies in the
mutual fund industry.

29
<PAGE>

Forbes, a national business publication that periodically reports the
performance of companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Fund Action, a mutual fund news report.

Houston Chronicle, a newspaper that may cover financial news.

Houston Post, a newspaper that may cover financial news.

IBC/Donoghue's Moneyletter, a biweekly newsletter that covers financial news and
from time to time rates specific mutual funds.

IBC's Money Market Insight, a monthly money market industry analysis prepared by
IBC USA, Inc.

Income and Safety, a monthly newsletter that rates mutual funds.

InvesTech, a bi-monthly investment newsletter.

Investment Advisor, a monthly publication directed primarily to the adviser
community; includes ranking of mutual funds using a proprietary methodology.

Investment Company Institute, the national association of the U.S. investment
company industry.

Investor's Business Daily, a newspaper that covers financial news.

Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.

Lipper Analytical Services, Inc.'s Fixed Income Fund Performance Analysis, a
monthly publication of industry-wide mutual fund performance averages by type of
fund.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a monthly
publication of industry-wide mutual fund averages by type of fund.

Los Angeles Times, a newspaper that may cover financial news.

Louis Rukeyser's Wall Street, a publication for investors.

Medical Economics, a monthly magazine providing information to the medical
profession.

Money, a monthly magazine that features the performance of both specific funds
and the mutual fund industry as a whole.

<PAGE>

Money Fund Report, a weekly publication of the Donoghue Organization, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity, and including certain averages as performance
benchmarks, specifically "Donoghue's Taxable First Tier Fund Average."

Morningstar 5 Star Investor, a monthly newsletter which covers financial news
and rates mutual funds produced by Morningstar, Inc. (a data service which
tracks open-end mutual funds).

Mutual Fund Forecaster, a monthly newsletter that ranks mutual funds.

Mutual Fund Investing, a newsletter covering mutual funds.

Mutual Fund Performance Report, a monthly publication of mutual fund performance
and rankings, produced by Morningstar, Inc.

Mutual Funds Magazine, a monthly publication reporting on mutual fund investing.

Mutual Fund Source Book, an annual publication produced by Morningstar, Inc.
that describes and rates mutual funds.

Mutual Fund Values, a biweekly guidebook to mutual funds produced by
Morningstar, Inc.

Newsweek, a national news weekly that may cover business matters.

New York Times, a newspaper that may cover financial news.

No Load Fund Investor, a newsletter covering companies in the mutual fund
industry.

Personal Investor, a monthly magazine that from time to time features mutual
fund companies and the mutual fund industry.

San Antonio Business Journal, a weekly newspaper that periodically covers mutual
fund companies as well as financial news.

San Antonio Express-News, a newspaper that may cover financial news.

San Francisco Chronicle, a newspaper that may cover financial news.

Smart Money, a monthly magazine featuring news and articles on investing and
mutual funds.

USA Today, a newspaper which may cover financial news.

U.S. News and World Report, a national business weekly that periodically reports
on mutual fund performance data.

Wall Street Journal, a Dow Jones and Company, Inc. newspaper that covers
financial news.

Washington Post, a newspaper that may cover financial news.

31
<PAGE>

Weisenberger Mutual Funds Investment Report, a monthly newsletter that reports
on both specific mutual fund companies and the mutual fund industry as a whole.

World Monitor, The Christian Science Monitor Monthly.

Worth, a magazine that covers financial and investment subjects including mutual
funds.

Your Money, a monthly magazine directed toward the novice investor.

Among the organizations cited above, Lipper Analytical Services, Inc.'s
tracking results may be used. A Fund will be compared to Lipper's appropriate
fund category according to fund objective and portfolio holdings. The Growth &
Income Fund will be compared to Lipper's growth & income funds category, the
Income Fund to Lipper's corporate debt-A rated category, the World Growth
Fund to Lipper's global fund category, the Diversified Assets Fund to Lipper's
balanced funds category, and the Money Market Fund to Lipper's taxable money
market funds category. Footnotes in advertisements and other marketing
literature will include the time period applicable for any rankings used.

For comparative purposes, unmanaged indexes of comparable securities may be
cited. Examples include the following:

- -Ibbotson Associates, Inc., Stocks, Bonds, Bills, and Inflation Yearbook;

- -Lehman Brothers 1-3 year Government/Corporate Index, an unmanaged index of all
the government, agency, and corporate bonds longer than one year and less than
three years;

- -Lehman Brothers Aggregate Bond Index, an unmanaged index of the
Government/Corporate Index, the Mortgage Backed Securities Index, and the Asset-
Backed Securities Index;

- -Morgan Stanley Capital Index (MSCI) - World, an unmanaged index which reflects
the movements of world stock markets by representing a broad selection of
domestically listed companies within each market;

- -NASDAQ Industrials, a composite index of approximately 3000 unmanaged
securities of industrial corporations traded over the counter;

- -S&P 500 Index, a broad based unmanaged composite index that represents the
average performance of a group of 500 securities widely held, publicly traded
stocks.

Other sources for total return and other performance data that may be used
by a Fund or by those publications listed previously are Morningstar, Inc.,
Schabaker Investment Management, and Investment Company Data, Inc. These are
services that collect and compile data on open-end mutual fund companies.

32
<PAGE>

REGISTRATION STATEMENT ON FORM N-1A
PART C - OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(a) List of Financial Statements

1. Part A. The Financial Highlights of the USAA Life Investment Trust ("Trust")
for the period from January 5, 1995 (the Trust's date of inception) through
December 31, 1995, and for the Trust's most recently completed fiscal year
ended December 31, 1996, are included in Part A of this Registration Statement.

2. Part B. The financial statements for each Fund of the Trust, and the report
of the Trust's independent auditor's thereon, for the Trust's most recently
completed fiscal year ended December 31, 1996, are incorporated into this
Registration Statement by reference to the Trust's Annual Report.

Only those sections of the Annual Report that are specifically identified
immediately below are incorporated by reference into this Registration
Statement:

(b) Exhibits:

Exhibit
No. Description of Exhibits
--- -----------------------

(1) (a) Certificate of Trust of USAA Life Investment Trust./1/

(b)(i) Master Trust Agreement of USAA Life Investment Trust./3/

(b)(ii) Amendment to Master Trust Agreement of USAA Life Investment
Trust.

1
<PAGE>

(2) Bylaws of USAA Life Investment Trust./3/

(3) Not Applicable.

(4) Not Applicable.

(5) (a) Investment Advisory Agreement by and between USAA Life Investment
Trust and USAA Investment Management Company, dated December 16, 1994./3/

(b) Amendment to Investment Advisory Agreement by and between USAA
Life Investment Trust, with respect to its VA Aggressive Growth and VA
International Funds, and USAA Investment Management Company, dated February 7,
1997.

(6) (a) Underwriting and Administrative Services Agreement by and between
USAA Life Insurance Company, USAA Life Investment Trust and USAA Investment
Management Company, dated December 16, 1994./3/

(b) Amendment to Underwriting and Administrative Services Agreement
by and between USAA Life Insurance Company, USAA Life Investment Trust, with
respect to its VA Aggressive Growth and VA International Funds, and USAA
Investment Management Company, dated February 7, 1997.

(7) Not Applicable.

(8) (a) Custodian Agreement by and between USAA Life Investment Trust and
State Street Bank and Trust Company, dated December 16, 1994./3/

(b) Amendment to Custodian Agreement by and between USAA Life
Investment Trust and State Street Bank and Trust Company, dated December 16,
1994./3/

(c) First Amendment to the Amendment to the Custodian Agreement by
and between USAA Life Investment Trust and State Street Bank and Trust
Company, dated July 24, 1996.

(d) Form of Second Amendment to Custodian Agreement by and between
USAA Life Investment Trust and State Street Bank and Trust Company, dated
_________, 1997.

(9) (a) Third Party Administrator Agreement by and between USAA Life
Insurance Company and Vantage Computer Systems, Inc., (now known as Continuum
Administrative Services Corporation) dated July 5, 1994 (excluding
exhibits)./2/

(b) Transfer Agent Agreement by and between USAA Life Investment
Trust and USAA Life Insurance Company, dated December 15, 1994./3/

(c) Letter Agreement by and between USAA Life Investment Trust and
USAA Life Insurance Company, dated February 7, 1997, appointing USAA Life as the
Transfer Agent and Dividend Disbursing Agent for the VA Aggressive Growth and VA
International Funds.

(10) (a) Opinion and Consent of Counsel concerning the VA Money Market, VA
Income, VA Growth and Income, VA World Growth and VA Diversified Assets
Funds./4/

(b) Opinion and Consent of Counsel concerning the VA Aggressive
Growth and VA International Funds.

(11) Consent of KPMG Peat Marwick LLP, Independent Auditors (to be filed
by amendment).

(12) Not Applicable.

(13) (a) Subscription Agreement by and between USAA Life Insurance Company
and USAA Life Investment Trust, with respect to its VA Money Market, VA Income,
VA Growth and Income, VA World Growth and VA Diversified Assets Funds, dated
December 16, 1994./3/

(b) Ratification of Subscription Agreement Modification, approved by
the Trust's Board of Trustees on November 30, 1995./5/

(c) Subscription Agreement by and between USAA Life Insurance Company
and USAA Life Investment Trust, with respect to its VA Aggressive Growth and VA
International Funds, dated February 7, 1997.

(14) Not Applicable.

(15) Not Applicable.

2
<PAGE>

(16) Schedule for Computations of Performance Quotations included in
response to Form N-1A, Item 22./5/

(17) The Financial Data Schedule required to be filed pursuant to Form
N-1A, Item 24(b)(17), will be filed herewith by amendment as Exhibit 27, as
dictated by the Commission's Electronic Data Gathering, Analysis, and Retrieval
System.

(18) Not Applicable.

(19) (a) Powers of Attorney for: Edwin L. Rosane and James A.
Robinson./1/

(b) Powers of Attorney for: Michael J.C. Roth, June R. Reedy, Neil
H. Stone and Gary W. West./3/

(20) Persons Controlled by or Under Common Control with Registrant (to be
filed by amendment).

(27) Financial Data Schedule (to be filed by amendment)

_________________________

/1/Previously filed with the initial filing, on August 1, 1994, of Registrant's
Form N-1A Registration Statement.

/2/Incorporated by reference to Exhibit 8(a) of the initial filing, on August 1,
1994, of the Form N-4 Registration Statement for the Separate Account of USAA
Life Insurance Company, File No. 33-82268 and No. 811-8670.

/3/Previously filed on December 22, 1994, with Pre-Effective Amendment No. 1 to
Registrant's Form N-1A Registration Statement.

/4/Previously filed on July 3, 1995, with Post-Effective Amendment No. 1 to the
Registrant's Form N-1A Registration Statement.

/5/Previously filed on April 29, 1996, with Post-Effective Amendment No. 2 to
the Registrant's Form N-1A Registration Statement.

ITEM 25. Persons Controlled by or Under Common Control with Registrant

No person is controlled by Registrant. All of the outstanding shares of
beneficial interest of Registrant are owned of record by USAA Life Insurance
Company ("USAA Life"), which is a wholly-owned subsidiary of United Services
Automobile Association ("USAA"), and the Separate Account of USAA Life Insurance
Company (the "Separate Account"), a segregated asset account of USAA Life. USAA
Life beneficially owns, both directly and through the Separate Account,
more than 25% of the shares of each of Registrant's Funds (other than the VA
Money Market Fund), and as a result, may be deemed to control (with the
exception of the VA Money Market Fund) each Fund of the Registrant. Various
companies affiliated with Registrant may, therefore, be deemed to be under
common control with each Fund (other than the VA Money Market Fund) of the
Registrant. The names of these companies, their relationship to the Registrant
and other information about the companies is set forth in an organization chart
that is filed herewith in this Form N-1A Registration Statement as Exhibit 20
and incorporated herein by reference.

3
<PAGE>

ITEM 26. Number of Holders of Securities

As of February 1, 1997, the Trust had the following number of shareholders
on record.

Title of Funds Number of Record Holders
----------------------------------------------------------------

VA Money Market 1
VA Income 2
VA Growth and Income 2
VA World Growth 2
VA Diversified Assets 2

As of February 1, 1997, there were no shareholders of the VA Aggressive
Growth or VA International Funds, because such Funds had not yet commenced
operations.

ITEM 27. Indemnification

Indemnification against liability is provided to the Trustees and officers
of the Registrant, the underwriter of the Registrant and the following
affiliated persons of the Registrant, in the following ways:

(a) Directors' and Officers' Liability Policy: The Registrant and its
Trustees and officers are covered under a joint liability insurance policy
("policy") along with USAA IMCO, other mutual funds managed by USAA IMCO, and
USAA Shareholder Account Services. The policy insures against errors and
omissions as described therein.

(b) Indemnification Under the Master Trust Agreement: Under Article V of
the Registrant's Master Trust Agreement (incorporated herein by reference to
Exhibit (1) (b)(i) of this Registration Statement), the Registrant has agreed to
indemnify any Shareholder or former Shareholder, and each of its Trustees and
officers, including persons serving at the Registrant's request as Directors,
officers or trustees of another organization in which the Registrant has any
interest as a shareholder, creditor or otherwise, against liability as specified
therein.

(c) Indemnification Under the Underwriting and Administrative Services
Agreement: Under Section 9 of the Underwriting and Administrative Services
Agreement by and between the Registrant, USAA Life and USAA IMCO (incorporated
herein by reference to Exhibit (6) of this Registration Statement), USAA Life
and USAA IMCO have agreed to indemnify the Registrant and one another, and each
of the Trustees, Directors and officers (or former Trustees, Directors and
officers) of each party, and any person who controls any party, against
liability as specified therein.

(d) Indemnification under the Custodian Agreement, as Amended: Under
Section 2.12(6) and Section 8 of the Custodian Agreement by and between the
Registrant and State Street Bank and Trust Company ("State Street")
(incorporated herein by reference to Exhibit (8)(a) of this Registration
Statement), State Street has agreed to be responsible to the Registrant for
negligence or misconduct, as specified therein. Under Section 9 of the
Amendment to the Custodian Agreement by and between the Registrant and State
Street (incorporated herein by reference to Exhibit (8)(b) of this Registration
Statement), any foreign banking institution employed by the Custodian ("Sub-
Custodian") shall indemnify State Street and the Registrant, against liability
as specified therein. Under Section 10 of the

4
<PAGE>

Amendment to the Custodian Agreement, the Custodian has agreed to be liable for
the acts or omissions of a foreign banking institution as specified therein.

(e) Indemnification under the Transfer Agent Agreement: Under Section 12
of the Transfer Agent Agreement between the Registrant and USAA Life
(incorporated herein by reference to Exhibit (8)(c) of this Registration
Statement), USAA Life has agreed to indemnify the Registrant against liability
as specified therein, and the Registrant shall indemnify USAA Life against
liability as specified therein.

(f) Indemnification under the Distribution and Administration Agreement:
Under Section 14 of the Distribution and Administration Agreement by and between
USAA Life and USAA IMCO (incorporated herein by reference to Exhibit 3 of Pre-
Effective Amendment No. 1 to the Form N-4 Registration Statement of the Separate
Account, filed on December 22, 1994), USAA Life, on its own behalf and on
behalf of the Separate Account, has agreed to indemnify USAA IMCO, its agents,
employees and any person who controls USAA IMCO, against liability as specified
therein, and USAA IMCO has agreed to indemnify USAA Life, its Directors and
officers, the Separate Account, and any person who controls USAA Life, against
liability as specified therein.

(g) Indemnification under the Bylaws of USAA Life: Under Article IX of the
Bylaws of USAA Life (incorporated herein by reference to Exhibit 6(b) of the
initial filing, on August 1, 1994, of the Form N-4 Registration Statement of the
Separate Account), USAA Life has agreed to indemnify any Director, officer,
former Director or former officer of USAA Life against liability as specified
therein.

(h) Indemnification under the Delaware Business Trust Act: Under Section
3803(b) of the Delaware Business Trust Act, except to the extent otherwise
provided in the governing instrument of a business trust, a Trustee, when acting
in such capacity, is not personally liable to any person other than the business
trust or a beneficial owner for any act, omission or obligation of the business
trust or any Trustee thereof.

Insofar as indemnification for liabilities arising under Securities Act of
1933 (the "1933 Act") may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

ITEM 28. Business and Other Connections of Investment Adviser

Information in response to this item is incorporated by reference to Item
28 of Post-Effective Amendment No. 41 of the Registration Statement of USAA
Mutual Fund, Inc., filed April 26, 1996 (File No. 2-49560).

5
<PAGE>

ITEM 29. Principal Underwriters

(a) USAA IMCO acts as principal underwriter of the Registrant's shares on a
best-efforts basis and receives no fee or commission for its underwriting
services. USAA IMCO, an affiliate of USAA, also serves as principal underwriter
for the Separate Account, USAA Investment Trust, USAA State Tax-Free Trust, USAA
Mutual Fund, Inc. and USAA Tax Exempt Fund, Inc.

(b) Following is certain information concerning Directors and executive
officers of USAA IMCO.

NAME AND PRINCIPAL BUSINESS POSITION AND OFFICES WITH POSITION AND OFFICES WITH
ADDRESS* UNDERWRITER REGISTRANT
- --------------------------- --------------------------- -------------------------
<S> <C> <C>
Robert G. Davis Director and Chairman None

Michael J. C. Roth Director and Vice Trustee and
Chairman, Chief Executive Vice Chairman
Officer and President

Harry W. Miller Director and Senior Vice None
President,
Equity Investments

John W. Saunders, Jr. Director and Senior Vice Vice President
President,
Fixed Income Investments

John J. Dallahan Senior Vice President, None
Investment Services

Carl W. Shirley Senior Vice President None

Alex M. Ciccone Vice President, Compliance
Compliance/Assistant Secretary Officer

</TABLE>

6
<PAGE>

Joseph H. L. Jimenez Vice President None

Sherron A. Kirk Vice President and None
Controller

William R. Pederson Vice President None

David G. Peebles Vice President None

Michael D. Wagner Vice President, None
Secretary and Counsel

Kenneth E. Willmann Vice President None

John K. Cabell Assistant Vice President None

Patricia P. Cavazos Vice President None

Eric M. Efron Assistant Vice President None

R. Matthew Freund Assistant Vice President None

Clifford A. Gladson Assistant Vice President None

Jane L. Hill Vice President None

Mark W. Johnson Assistant Vice President None

Stephan J. Klaffe Assistant Vice President None

David G. Miller Vice President None

Paul H. Lundmark Assistant Vice President None

Robert R. Pariseau Assistant Vice President None

David G. Parsons Assistant Vice President None

Curt Rohrman Assistant Vice President None

Thomas Ramos Vice President None

Albert C. Sebastian Assistant Vice President None

R. David Ullom Assistant Vice President None

W. Travis Selmier, II Assistant Vice President None
</TABLE>

*The principal business address for all of the above Directors and officers of
USAA IMCO is 9800 Fredericksburg Road, San Antonio, TX 78288
- ------------------------------------------------------------------------------

ITEM 30. Location of Accounts and Records

The following entities prepare, maintain and preserve the records required
by Section 31(a) of the 1940 Act for the Registrant. These services are
provided to the Registrant through written agreements between the parties to the
effect that such records will be maintained on behalf of the Registrant for the

7
<PAGE>

periods prescribed by the rules and regulations of the Commission under the 1940
Act and that such records are the property of the entity required to maintain
and preserve such records and will be surrendered promptly on request:

(1) USAA Life Insurance Company
9800 Fredericksburg Road,
San Antonio, Texas 78288

(2) USAA Investment Management Company
10750 Robert F. McDermott Freeway
San Antonio, Texas 78288

(3) Continuum Administrative Services Corporation
Variable Annuity Service Department
301 West 11th Street
Kansas City, Missouri 64105

(4) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

ITEM 31. Management Services

Not Applicable.

ITEM 32. Undertakings

(a) Not Applicable.

(b) Registrant hereby undertakes to file a Post-Effective Amendment, using
financial statements which need not be certified, for the VA Aggressive Growth
and VA International Funds, within four to six months from the effective date
of the Registration Statement, as amended to include these Funds.

(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.

(d) Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10% of the Registrant's
outstanding shares of beneficial interest and in connection therewith to comply
with the provisions of Section 16(c) of the Investment Company Act of 1940.

8
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant has duly caused this amended registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio and State of Texas on the 14th day of
February, 1997.

USAA LIFE INVESTMENT TRUST

BY: /s/ EDWIN L. ROSANE*
-----------------------
Edwin L. Rosane
President and Principal Executive Officer
USAA LIFE INVESTMENT TRUST

*By: /s/ DWAIN A. AKINS
--------------------
(Attorney-in-Fact)

9
<PAGE>