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USAALIFE
INVESTMENT TRUST
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ANNUAL REPORT
December 31, 1998
[USAA LOGO APPEARS HERE]
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USAA LIFE INVESTMENT TRUST
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USAA LIFE MONEY MARKET FUND
AN OVERVIEW DECEMBER 31, 1998
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
USAA LIFE IBC/DONOGHUE'S
MONEY MARKET MONEY FUND
DATE FUND 4.98% AVERAGES (TM)/FIRST TIER 4.52%
==== ============ ==============================
01/31/95 5.77% 5.24%
02/28/95 5.70% 5.46%
03/30/95 5.84% 5.49%
04/25/95 5.76% 5.47%
05/30/95 5.74% 5.45%
06/27/95 5.79% 5.41%
07/25/95 5.51% 5.29%
08/29/95 5.45% 5.22%
09/26/95 5.42% 5.18%
10/31/95 5.50% 5.18%
11/28/95 5.68% 5.19%
12/26/95 5.52% 5.14%
01/30/96 4.99% 4.97%
02/27/96 5.00% 4.74%
03/26/96 5.03% 4.68%
04/30/96 5.00% 4.68%
05/28/96 5.04% 4.67%
06/25/96 5.06% 4.71%
07/30/96 5.08% 4.74%
08/27/96 5.05% 4.73%
09/24/96 5.10% 4.75%
10/29/96 4.97% 4.75%
11/26/96 5.03% 4.75%
12/31/96 5.23% 4.82%
01/28/97 5.12% 4.75%
02/25/97 5.01% 4.73%
03/25/97 5.05% 4.74%
04/29/97 5.26% 4.89%
05/27/97 5.32% 4.93%
06/24/97 5.25% 4.94%
07/29/97 5.21% 4.93%
08/26/97 5.26% 4.93%
09/30/97 5.24% 4.95%
10/28/97 5.29% 4.93%
11/25/97 5.30% 4.96%
12/30/97 5.54% 5.07%
01/27/98 5.24% 4.99%
02/24/98 5.18% 4.94%
03/31/98 5.28% 4.93%
04/28/98 5.28% 4.90%
05/26/98 5.19% 4.90%
06/30/98 5.30% 4.94%
07/28/98 5.29% 4.92%
08/25/98 5.29% 4.91%
09/29/98 5.29% 4.87%
10/27/98 4.84% 4.64%
11/24/98 4.91% 4.55%
12/29/98 4.98% 4.52%
Data represent the last Tuesday of each month.
The graph above tracks the USAA Life Money Market Fund's 7-day yield compared to
a benchmark- IBC/Donoghue's Money Fund Averages(TM)/First Tier, an average of
all major money market fund 7-day yields. Information for the benchmark is based
on a full calendar year in 1995, whereas the Money Market Fund yields are based
on a starting date of January 5, 1995 - the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Manager Pam Bledsoe
CURRENT MARKET CONDITIONS
Globalization and technological advances continue to link almost all
countries in the world. As worldwide trading grows, the U.S. economy will be
influenced by economic and financial events occurring in foreign countries.
Since our report in June, the Federal Reserve has lowered the Federal Funds
rate by .75%. This was the first change in interest rate policy since the
Federal Reserve increased rates on March 25, 1997. This change in Fed policy
was driven by the impact on the U.S. economy caused by financial instability
in Russia, Asia and Latin America. Financial instability in these regions
may result in the slowing of demand for U.S. goods (exports). By lowering
interest rates, the Federal Reserve is trying to stimulate our domestic
economy to offset the slowdown that may be caused by reduced trade with other
countries.
PORTFOLIO STRATEGY
The yield on one-year treasury bills decreased from 5.37% at the end of June
to 4.52% at the end of December, while the index for 30-day commercial paper
decreased from 5.54% to 4.90% over the same period. Both of these decreases
reflect the decline in interest rates that occurred during the fourth
quarter. Regardless of the interest rate environment, the Fund is invested in
short term, high quality commercial paper, highly liquid variable rate demand
notes, or U.S. Government Agency discount notes. The weighted average
maturity at the end of the reporting period was 14 days which reflects the
influence of the free look period associated with the Variable Annuity product.
INVESTMENT PROGRAM:
This Fund invests in a diversified portfolio of high-quality U.S. dollar-
denominated debt instruments that present minimal credit risk with remaining
maturities of 397 days or less.
SIMPLE 7-DAY YIELD: 5.00%*
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 5.29%
Three Year: 5.29%
Since Inception 5.39%
January 5, 1995:
* The 7-DAY yield quotation more closely reflects the current earnings of the
Fund than the total return quotation.
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
1998 ANNUAL REPORT B-21
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USAA LIFE INVESTMENT TRUST
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USAA LIFE MONEY MARKET FUND
AN OVERVIEW (Continued) December 31, 1998
PERFORMANCE
Although past performance is no guarantee of future results, for the one-year
period ended December 31, 1998, the Fund had a total return of 5.29% which
compares favorably to the average return of 5.10% for all variable annuity
money market funds as reported by Lipper Analytical Services, Inc./1/.
/1/ Lipper Analytical Services, Inc. is an independent organization that
monitors the performance of variable annuity funds. . An investment in the
USAA Life Money Market Fund is not insured or guaranteed by the F. D. I.
C. or any other government agency. Although the fund seeks to preserve the
value of your investment at $1 per share, it is possible to lose money by
investing in the fund.
PORTFOLIO MIX AS A PERCENTAGE OF NET ASSETS*
as of December 31, 1998
- --------------------------------------------
U.S. Government
Agency Commercial Paper
Discount Notes [GRAPH APPEARS HERE] 46.7%
28.7%
Variable Rate
Demand Notes
23.9%
* Percentages are of Net Assets and may or may not be equal to 100%.
B-22 ANNUAL REPORT 1998
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USAA LIFE INVESTMENT TRUST
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USAA LIFE INCOME FUND
AN OVERVIEW December 31, 1998
COMPARISON OF FUND TO BENCHMARKS
[GRAPH APPEARS HERE]
USAA LIFE INCOME FUND $15,196
01/95 $10,290.00
02/95 $10,520.00
03/95 $10,530.00
04/95 $10,700.00
05/95 $11,210.00
06/95 $11,220.00
07/95 $11,200.00
08/95 $11,400.00
09/95 $11,650.00
10/95 $11,870.00
11/95 $12,100.00
12/95 $12,388.65
01/96 $12,454.32
02/96 $12,027.50
03/96 $11,863.34
04/96 $11,688.23
05/96 $11,666.35
06/96 $11,863.34
07/96 $11,830.51
08/96 $11,786.73
09/96 $12,005.61
10/96 $12,333.93
11/96 $12,585.65
12/96 $12,472.26
01/97 $12,519.73
02/97 $12,567.20
03/97 $12,329.85
04/97 $12,495.99
05/97 $12,642.11
06/97 $12,844.48
07/97 $13,225.41
08/97 $13,106.37
09/97 $13,380.16
10/97 $13,570.63
11/97 $13,725.38
12/97 $13,919.15
01/98 $14,109.64
02/98 $14,084.24
03/98 $14,122.34
04/98 $14,173.14
05/98 $14,377.21
06/98 $14,568.22
07/98 $14,606.43
08/98 $14,810.18
09/98 $15,039.40
10/98 $15,064.87
11/98 $15,141.27
12/98 $15,195.78
LEHMAN BROTHERS AGGREGATE
BOND INDEX $14,631
1/1/95 $10,000.00
01/95 $10,198.00
02/95 $10,440.71
03/95 $10,504.40
04/95 $10,651.46
05/95 $11,063.67
06/95 $11,144.44
07/95 $11,119.92
08/95 $11,254.47
09/95 $11,363.64
10/95 $11,511.37
11/95 $11,684.04
12/95 $11,847.61
01/96 $11,925.81
02/96 $11,718.30
03/96 $11,636.27
04/96 $11,571.11
05/96 $11,547.97
06/96 $11,702.71
07/96 $11,734.31
08/96 $11,714.36
09/96 $11,918.19
10/96 $12,182.77
11/96 $12,391.10
12/96 $12,275.86
01/97 $12,313.92
02/97 $12,344.70
03/97 $12,207.67
04/97 $12,390.79
05/97 $12,508.50
06/97 $12,657.35
07/97 $12,999.10
08/97 $12,888.61
09/97 $13,078.07
10/97 $13,267.70
11/97 $13,328.73
12/97 $13,463.36
01/98 $13,635.69
02/98 $13,624.78
03/98 $13,671.10
04/98 $13,742.19
05/98 $13,872.74
06/98 $13,990.66
07/98 $14,020.04
08/98 $14,248.57
09/98 $14,581.98
10/98 $14,504.70
11/98 $14,587.38
12/98 $14,631.14
LIPPER A RATED BOND
FUND INDEX $14,482
1/1/95 $10,000.00
01/95 $10,178.00
02/95 $10,424.31
03/95 $10,500.41
04/95 $10,650,56
05/95 $11,127.71
06/95 $11,206.71
07/95 $11,151.80
08/95 $11,306.81
09/95 $11,428.92
10/95 $11,601.50
11/95 $11,791.76
12/95 $11,981.61
01/96 $12,037.93
02/96 $11,765.87
03/96 $11,670.57
04/96 $11,580.70
05/96 $11,555.22
06/96 $11,699.66
07/96 $11,724.23
08/96 $11,691.41
09/96 $11,913.54
10/96 $12,205.42
11/96 $12,454.42
12/96 $12,313.68
01/97 $12,332.15
02/97 $12,375.31
03/97 $12,204.53
04/97 $12,376.62
05/97 $12,491.72
06/97 $12,660.36
07/97 $13,068.02
08/97 $12,902.06
09/97 $13,122.68
10/97 $13,291.97
11/97 $13,354.44
12/97 $13,496.00
01/98 $13,656.60
02/98 $13,633.38
03/98 $13,683.82
04/98 $13,746.77
05/98 $13,895.24
06/98 $14,018.90
07/98 $14,021.71
08/98 $14,146.50
09/98 $14,461.97
10/98 $14,279.75
11/98 $14,435.40
12/98 $14,481.59
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Income Fund to two industry indexes which most closely resemble
the holdings of this Fund. The Lehman Brothers Aggregate Bond Index is an
unmanaged index made up of the government/corporate index, the mortgage-backed
securities index, and the asset-backed securities index. The Lipper A Rated Bond
Fund Index is an unmanaged index made up of funds investing in corporate debt
issues rated A or better or government issues.
The calculations for the Lehman Brothers and Lipper Indexes are based on a
full calendar year in 1995, whereas the Income Fund calculations are based on
a starting date of January 5, 1995 - the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
By Portfolio Manager J. W. Saunders, Jr.
MARKET CONDITIONS AND PERFORMANCE
The high volatility in the bond market during this reporting period can be
seen in the chart below showing interest yields for the 30-year U. S.
Treasury bond.
30-YEAR U.S. TREASURY BOND YIELD
[GRAPH APPEARS HERE]
06/30/98 5.627
07/01/98 5.629
07/02/98 5.600
07/03/98 5.599
07/06/98 5.572
07/07/98 5.603
07/08/98 5.626
07/09/98 5.605
07/10/98 5.625
07/13/98 5.692
07/14/98 5.717
07/15/98 5.705
07/16/98 5.727
07/17/98 5.746
07/20/98 5.713
07/21/98 5.663
07/22/98 5.681
07/23/98 5.657
07/24/98 5.686
07/27/98 5.708
07/28/98 5.740
07/29/98 5.769
07/30/98 5.722
07/31/98 5.713
08/03/98 5.659
08/04/98 5.631
08/05/98 5.671
08/06/98 5.671
08/07/98 5.631
08/10/98 5.624
08/11/98 5.602
08/12/98 5.609
08/13/98 5.650
08/14/98 5.590
08/17/98 5.598
08/18/98 5.608
08/19/98 5.613
08/20/98 5.576
08/21/98 5.504
08/24/98 5.543
08/25/98 5.499
08/26/98 5.495
08/27/98 5.426
08/28/98 5.417
08/31/98 5.350
09/1/98 5.422
09/2/98 5.405
09/3/98 5.375
09/4/98 5.359
09/7/98 5.356
09/8/98 5.434
09/9/98 5.333
09/10/98 5.288
09/11/98 5.305
09/14/98 5.315
09/15/98 5.345
09/16/98 5.311
09/17/98 5.278
09/18/98 5.247
09/21/98 5.253
09/22/98 5.280
09/23/98 5.256
09/24/98 5.259
09/25/98 5.227
09/28/98 5.266
09/29/98 5.230
09/30/98 5.199
10/01/98 5.025
10/02/98 4.965
10/05/98 4.851
10/06/98 4.870
10/07/98 4.998
10/08/98 5.140
10/09/98 5.265
10/12/98 5.281
10/13/98 5.256
10/14/98 5.197
10/15/98 5.115
10/16/98 5.138
10/19/98 5.141
10/20/98 5.229
10/21/98 5.239
10/22/98 5.303
10/23/98 5.334
10/26/98 5.223
10/27/98 5.209
10/28/98 5.221
10/29/98 5.189
10/30/98 5.268
11/02/98 5.380
11/03/98 5.352
11/04/98 5.459
11/05/98 5.474
11/06/98 5.556
11/09/98 5.430
11/10/98 5.435
11/11/98 5.431
11/12/98 5.398
11/13/98 5.389
11/16/98 5.418
11/17/98 5.440
11/18/98 5.378
11/19/98 5.393
11/20/98 5.380
11/23/98 5.434
11/24/98 5.392
11/25/98 5.365
11/26/98 5.367
11/27/98 5.347
11/30/98 5.251
12/01/98 5.221
12/02/98 5.225
12/03/98 5.213
12/04/98 5.261
12/07/98 5.270
12/08/98 5.222
12/09/98 5.182
12/10/98 5.171
12/11/98 5.262
12/14/98 5.227
12/15/98 5.263
12/16/98 5.231
12/17/98 5.245
12/18/98 5.236
12/21/98 5.288
12/22/98 5.369
12/23/98 5.423
12/24/98 5.451
12/25/98 5.452
12/28/98 5.381
12/29/98 5.330
12/30/98 5.303
12/31/98 5.312
INVESTMENT PROGRAM:
This Fund invests in a diversified portfolio of U.S. dollar-denominated debt and
income-producing equity securities selected for their high yields relative to
the risk involved.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 9.17%
Three Year: 7.04%
Since Inception
January 5, 1995: 11.03%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
1998 ANNUAL REPORT B-23
<PAGE>
USAA LIFE INVESTMENT TRUST
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USAA Life Income Fund
AN OVERVIEW (Continued) DECEMBER 31, 1998
Beginning with the Russian government bond default in mid-August, a "flight to
quality" started a strong rally in U. S. Treasury bonds, moving interest yields
lower. This rally accelerated when some highly leveraged hedge funds collapsed.
The result was unsustainably lower interest yields on U. S. Treasury bonds,
while liquidity in the rest of the bond market vanished when bond dealers
refused to bid for bonds. This lack of liquidity caused interest rates in the
rest of the bond market to move sharply higher. A rally in the Japanese yen in
October then caused several hedge funds to sell U. S. Treasury bonds, thereby
reversing the diverging trend and forcing U.S. Treasury bond yields higher. As
the dust has settled, interest rates are lower on balance but not as low as they
were in early October. Average maturities in the Fund's bond portfolio were
shortened to reduce price volatility in this turbulent period. The Fund
continued its good performance and completed the year ranked as number 6 of 30
funds in the Lipper Variable Annuity A Rated Bond Fund category/1/. The Fund's
average annual NAV total return was 9.17% versus an average of 8.07% for all
variable annuity funds in Lipper's category.
PORTFOLIO
As of December 31, 1998, the Fund's portfolio mix as percentages of net
assets was 4.5% U. S. Treasury bonds, 4.9% U. S. Government Agency bonds,
47.4% agency mortgage pass-through securities, 26.9% corporate bonds, 8.4%
preferred stocks, and 7.3% in short term instruments.
OUTLOOK
The Federal Reserve has overtly announced an "easing" in monetary policy with
its three reductions since late September in both the Fed Funds target rate
and its own discount window rate. Therefore, interest rates should stabilize
around current levels. We continue to focus on maintaining a high level of
income in this portfolio.
/1/ Lipper Analytical Service is an independent organization that monitors the
performance of variable annuity funds. Rankings are based on total returns.
The USAA Life Income Fund's three year ranking was number 6 of 27 funds.
Top 10 Securities
as of December 31, 1998
Coupon % of
Rate Net Assets
GNMA 6.00% 11.9%
FNMA MTN 5.65 5.6
Federal Home
Loan Bank Bond 5.575 4.9
U.S. Treasury Bond 7.875 4.5
GNMA 6.50 3.6
GNMA 6.00 3.6
GNMA 6.00 3.6
FNMA 7.00 2.5
Chrysler Financial 6.05 2.5
The CIT Group
Holdings, Inc. 6.20 2.5
B-24 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
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USAA LIFE GROWTH AND INCOME FUND
AN OVERVIEW DECEMBER 31, 1998
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
S&P 500 INDEX $28,983
1/1/95 $10,000.00
01/95 $10,259.00
02/95 $10,658.08
03/95 $10,972.49
04/95 $11,295.08
05/95 $11,745.75
06/95 $12,018.25
07/95 $12,416.06
08/95 $12,447.10
09/95 $12,972.37
10/95 $12,925.67
11/95 $13,491.81
12/95 $13,752.20
01/96 $14,219.78
02/96 $14,352.02
03/96 $14,489.80
04/96 $14,702.80
05/96 $15,080.66
06/96 $15,137.97
07/96 $14,468.87
08/96 $14,774.16
09/96 $15,604.47
10/96 $16,035.16
11/96 $17,245.81
12/96 $16,904.34
01/97 $17,959.17
02/97 $18,101.05
03/97 $17,358.91
04/97 $18,393.50
05/97 $19,517.34
06/97 $20,385.86
07/97 $22,006.54
08/97 $20,774.17
09/97 $21,910.52
10/97 $21,178.71
11/97 $22,159.28
12/97 $22,540.42
01/98 $22,788.37
02/98 $24,431.41
03/98 $25,682.30
04/98 $25,944.26
05/98 $25,498.02
06/98 $26,533.23
07/98 $26,251.98
08/98 $22,458.57
09/98 $23,898.17
10/98 $25,838.70
11/98 $27,404.52
12/98 $28,983.02
USAA LIFE GROWTH AND
INCOME FUND $22,103
01/95 $10,150.00
02/95 $10,480.00
03/95 $10,720.00
04/95 $11,080.00
05/95 $11,410.00
06/95 $11,650.00
07/95 $11,990.00
08/95 $12,190.00
09/95 $12,530.00
10/95 $12,230.00
11/95 $12,900.00
12/95 $13,172.27
01/96 $13,475.44
02/96 $13,632.25
03/96 $14,123.60
04/96 $14,301.32
05/96 $14,489.49
06/96 $14,499.95
07/96 $13,841.33
08/96 $14,343.13
09/96 $15,033.11
10/96 $15,357.19
11/96 $16,339.88
12/96 $16,350.51
01/97 $17,023.63
02/97 $17,164.77
03/97 $16,676.21
04/97 $17,175.63
05/97 $18,401.46
06/97 $19,111.31
07/97 $20,378.12
08/97 $19,766.56
09/97 $20,640.22
10/97 $19,810.24
11/97 $20,399.96
12/97 $20,671.28
01/98 $20,510.33
02/98 $21,993.42
03/98 $23,131.60
04/98 $23,269.56
05/98 $22,688.80
06/98 $22,700.43
07/98 $21,525.27
08/98 $18,244.12
09/98 $18,837.52
10/98 $20,315.20
11/98 $21,536.90
12/98 $22,102.73
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Growth and Income Fund to the S&P 500(R) Index. The S&P 500 Index
is an unmanaged index representing the average performance of a group of 500
widely held, publicly traded stocks. It is not possible to invest directly in
the S&P 500 Index.
The calculations for the S&P 500 Index are based on a full calendar year in
1995, whereas the calculations for the Growth and Income Fund are based on a
starting date of January 5, 1995-the inception date of this Fund.
This comparison is for illustrative purposes only.
GENERAL DISCUSSION
By Portfolio Manager R. David Ullom
PERFORMANCE
For the year 1998 an investment approach of focusing on value did not prove
to be rewarding, as evidenced by the subpar performance of the Fund. For the
year-ended December 31, 1998, the Fund's total return of 6.93% compared
unfavorably to the S&P 500 return of 28.6%. Beginning in April of 1998, the
market developed an acute concern over economic problems in Southeast Asia,
Russia and Latin America. This concern was manifested in the poor performance
of many cyclical sectors such as basic materials (chemicals, metals and paper
and forest products), capital goods (aerospace/defense, machinery and
manufacturing), and consumer cyclicals (auto parts, retailing, leisure, and
publishing). What has surprised us this past year is the degree to which
stocks in these sectors underperformed the major market averages. In late
summer/early fall, we began to shift the focus of the Fund more towards
technology and healthcare securities.
As implied, the worst performing stocks were those in the cyclical sectors
such as chemical related (Dow Chemical, Millennium Chemicals, and B. F.
Goodrich), paper and forest products (Weyerhaeuser and Unisource Worldwide),
aerospace/defense (Boeing Co.), machinery (Deere and Flowserve), trucks
(Aeroquip Vickers), manufacturing (Avery Dennison), energy (Schlumberger,
Helmrich & Payne, Apache Corp., Occidental Petroleum, Unocal and Exxon), and
auto parts (Lear Corp and Intermet). All of these sectors are potentially
affected by economic conditions in various emerging markets, however we felt
that most of the concern was already reflected in the valuation of the
shares. What also surprised us was
INVESTMENT PROGRAM:
Not less than 65% of its assets are invested in a diversified portfolio of
dividend-paying common stocks and convertible securities of companies that offer
the prospect for growth of earnings.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 6.93%
Three Year: 18.83%
Since Inception
January 5, 1995: 21.93%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
1998 ANNUAL REPORT B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
AN OVERVIEW (Continued) December 31, 1998
the strength in other parts of the market, particularly given that few areas
will be unscathed by the economic turmoil in various emerging markets. Finally,
we were struck by the swiftness of the rebound in the markets in October of
1998. In a matter of six weeks, the market recovered virtually the entire 20%
decline that the Dow Jones Industrial Average had suffered over the preceding
three months.
Performance of the Fund was aided by weightings in technology (Lucent, Cisco,
Intel, Microsoft, IBM, Xerox and Applied Materials) and healthcare (Pharmacia
& Upjohn, Smithkline Beecham, Merck, American Home Products, Bristol Myers,
Pfizer and Bausch & Lomb). Our weightings in these two sectors were increased
during the course of the year, as we became more concerned with the earnings
sensitivity of the more cyclical names in the Fund.
MARKET CONDITIONS
It should come as no surprise that we are increasingly concerned with the
continued narrowness of the market's appreciation and the overall valuation of
the market. By narrowness we are referring to the fact that the market's rise
continues to be driven by relatively few names. In fact, the top 50 names in the
S & P 500 by market capitalization accounted for approximately 19% of the S & P
500's return. Also, the current valuation of the market is of concern given that
it is selling at over 30 times estimated 1998 earnings and over 27 times
forecasted earnings for 1999. Finally, note that the market in general has
become increasingly volatile. During the past year, the market experienced a
daily movement of over 1% some 31% of the time. This compares to an average of
14% of the time during recent years.
PORTFOLIO STRATEGY AND OUTLOOK
The strategy of the USAA Life Growth & Income Fund is to continue to focus on
stocks that will provide superior returns. Despite our concerns with the
market in general, we feel that there are many issues that offer compelling
appreciation potential. Many of these names are in cyclical sectors where we
should begin to see signs of a recovery in fundamentals late in 1999.
Healthcare should also continue to provide relatively stable earnings growth
at reasonable valuations. Also, there are many companies that have
historically shown solid earnings growth that continue to sell at discounts
to the market in general and to their peer group.
TOP 10 EQUITY HOLDINGS
as of December 31, 1998
% of
Net Assets
Pharmacia & Upjohn 2.5%
Microsoft 2.3
American Home Products 2.2
Kimberly-Clark 2.0
Bell Atlantic 2.0
Merck & Co., 2.0
Morgan Stanley,
Dean Witter, Discover & Co. 2.0
Bausch & Lomb 2.0
Intel 2.0
Sears, Roebuck & Co. 1.9
TOP 10 INDUSTRIES
as of December 31, 1998
% of
Net Assets
Drugs 5.9%
Healthcare - Diversified 4.9
Banks - Money Center 4.1
Telephones 3.6
Retail - General Merchandising 3.2
Household Products 3.0
Computer Software & Service 2.9
Electrical Equipment 2.9
Finance - Diversified 2.8
Electric Utilities 2.6
B-26 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
AN OVERVIEW DECEMBER 31, 1998
COMPARISON OF FUND TO BENCHMARK
[GRAPH APPEARS HERE]
MORGAN STANLEY CAPITAL INDEX WORLD $19,713
1/1/95 $10,000.00
01/95 $ 9,847.00
02/95 $ 9,987.81
03/95 $10,467.23
04/95 $10,829.39
05/95 $10,919.28
06/95 $10,913.82
07/95 $11,457.33
08/95 $11,199.54
09/95 $11,523.20
10/95 $11,338.83
11/95 $11,730.02
12/95 $12,070.19
01/96 $12,286.25
02/96 $12,358.74
03/96 $12,561.42
04/96 $12,854.10
05/96 $12,863.10
06/96 $12,926.13
07/96 $12,467.25
08/96 $12,608.13
09/96 $13,098.59
10/96 $13,187.66
11/96 $13,923.53
12/96 $13,697.97
01/97 $13,860.97
02/97 $14,017.60
03/97 $13,737.25
04/97 $14,183.71
05/97 $15,056.01
06/97 $15,804.29
07/97 $16,529.71
08/97 $15,420.57
09/97 $16,256.36
10/97 $15,398.02
11/97 $15,667.49
12/97 $15,855.50
01/98 $16,294.70
02/98 $17,394.59
03/98 $18,126.90
04/98 $18,300.92
05/98 $18,068.50
06/98 $18,494.91
07/98 $18,461.62
08/98 $15,997.00
09/98 $16,276.94
10/98 $17,745.13
11/98 $18,797.41
12/98 $19,712.84
USAA LIFE WORLD GROWTH FUND $18,414
01/95 $ 9,710.00
02/95 $ 9,790.00
03/95 $10,160.00
04/95 $10,490.00
05/95 $10,920.00
06/95 $11,150.00
07/95 $11,710.00
08/95 $11,620.00
09/95 $11,770.00
10/95 $11,480.00
11/95 $11,650.00
12/95 $11,955.58
01/96 $12,321.78
02/96 $12,558.74
03/96 $12,849.55
04/96 $13,463.49
05/96 $13,592.74
06/96 $13,614.28
07/96 $12,935.72
08/96 $13,334.24
09/96 $13,668.13
10/96 $13,625.05
11/96 $14,379.00
12/96 $14,481.01
01/97 $15,036.67
02/97 $15,013.99
03/97 $14,866.57
04/97 $15,059.35
05/97 $15,931.94
06/97 $16,666.03
07/97 $17,480.40
08/97 $16,666.03
09/97 $17,652.45
10/97 $16,631.62
11/97 $16,356.33
12/97 $16,520.54
01/98 $16,557.69
02/98 $17,808.49
03/98 $18,836.38
04/98 $19,145.99
05/98 $18,815.02
06/98 $18,765.28
07/98 $18,504.13
08/98 $15,407.67
09/98 $15,320.62
10/98 $16,564.18
11/98 $17,297.88
12/98 $18,414.39
Data represents the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life World Growth Fund to its benchmark, the Morgan Stanley Capital
Index-World, an unmanaged index which reflects the movement of world stock
markets by representing a broad selection of domestically listed companies
within each market.
Calculations for the Morgan Stanley Index are based on a full calendar year in
1995, whereas the World Growth Fund calculations are based on a starting date of
January 5, 1995 - the inception date of this Fund. This comparison is for
illustrative purposes only.
GENERAL DISCUSSION
By Portfolio Managers David G. Peebles, Curt Rohrman, Albert Sebastian, and
W. Travis Selmier, II
MARKET CONDITIONS
For the year-ended December 31, 1998, your Fund's total return was 11.46%, which
compares unfavorably with the Lipper Global Funds Average return of 16.19%/1/.
Along with U.S. equities, European equities turned downward around mid-year.
While Asian markets were also weak, they had the best relative performance
because of currency appreciation and a decline in local interest rates. Latin
American markets were hurt by emerging market woes, while Canada continued to
perform poorly.
INTERNATIONAL
Europe - European markets performed poorly over the second half of 1998
primarily because of further deterioration in the economic fundamentals of
Russia and lower forecasted economic growth. The financial sector, which had
led the market in the first half of 1998, sharply underperformed during the
second half of 1998, as many banks had to increase their credit loss
provisions on account of their emerging markets exposure. Defensive stocks,
such as utilities and consumer non-durables (e.g. tobacco, food), outperformed
the general indices. European markets rebounded sharply in the fourth
quarter as the U.S. and selected European central banks cut interest rates.
INVESTMENT PROGRAM:
Not less than 65% of the Fund's assets are invested in a diversified portfolio
of common stocks and other equity securities of both foreign and domestic
issuers representing at least three countries, one of which may include the
United States. The remainder of the Fund's assets may be invested in marketable
debt securities having remaining maturities of less than one year which are
issued or guaranteed as to both principal and interest by the U.S. government or
by its agencies.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 11.46%
Three Year: 15.49%
Since Inception
January 5, 1995: 16.49%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
1998 ANNUAL REPORT B-27
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
AN OVERVIEW (Continued) December 31, 1998
Emerging Markets - The last six months of 1998 were a tale of two quarters for
emerging markets; a tumultuous summer culminating in August's massive
sell-off was followed by a strong recovery in investor sentiment. This
resulted in a strong recovery in global emerging markets during the last
quarter. The change in investor sentiment has been key. Asia's economies are
showing signs of bottoming, while Latin markets have bounced as Brazil has
begun to take the hard medicine needed to solve its fiscal problems. European
and Mediterranean market participants have realized that Russia's collapse
does not mean the end of the world for these countries' economic growth.
Japan - A change in Prime Minister may hold the promise of progress on Japan's
banking crisis and economic slowdown, but we are still cautious with an
underweighted position. While concerned about the overall market, we have
continued our selective strategy of buying financially sound industrial and
financial companies. We have also added to our technology and telecommunications
holdings over the period.
UNITED STATES
Concerns about troubled international economies weighed heavily on U.S.
stocks through the summer, even though domestic business activity remained
fairly robust. Cyclical sectors were most hard hit, particularly basic
materials, capital goods, energy and consumer cyclicals. Rising credit risks
impacted stocks in the financial sector. Sectors holding up relatively well
included technology and healthcare.
Sectors with increased weightings include technology, consumer staples and
consumer cyclicals. Weightings have been reduced in areas offering prospects
for slower growth, namely basic materials, capital goods, energy and
utilities.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of December 31, 1998
- ------------------------------------------------
Other* 13.3%
Spain 2.0%
Sweden 2.2% USA 35.6%
Switzerland 3.2%
Germany 3.2%
Italy 3.3% [GRAPH APPEARS HERE]
Denmark 3.5%
Finland 3.6%
Canada 3.6%
France 5.5% United Kingdom 9.1%
Japan 5.9% Netherlands 6.0%
* Each of the remaining countries' investments represented less than 2% of the
portfolio's assets and U.S. Government & Agency Issues.
B-28 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
AN OVERVIEW (Continued) December 31, 1998
OUTLOOK
Although forecasted economic growth for Europe has been revised downward,
European stocks still offer the best earnings growth next year. The introduction
of the euro which is the currency of the European monetary union, on January 1,
1999, will further financial and economic integration. We also expect to see
continued mergers, acquisition activity and shareholder-oriented policies in
Europe. Local dynamics and events in mature markets-economic growth, bank
restructuring (especially in Japan), multilateral institutions' support and
interest rate policies- will prove critical for emerging markets in 1999. The
Federal Reserve's series of rate cuts in 1998 should set the stage for steady or
accelerating profit growth in the U.S. in 1999.
/1/ The Lipper Global Funds Average is the average perfomance level of all
global funds, as reported by Lipper Analytical Services, an independent
organization that monitors the performance of mutual funds.
Foreign investing is subject to additional risks such as currency
fluctuations, market illiquidity, and political instability, which are
discussed in the prospectus. Since return on any investment is generally
commensurate with risk, investors should be aware of the potential
volatility associated with foreign markets.
TOP 10 EQUITY HOLDINGS
as of December 31, 1998
- -----------------------
% of
Net Assets
Nokia Corp. ADR (Finland) 2.0%
America Online (U.S.) 1.5
Microsoft (U.S.) 1.4
Novartis AG (Switzerland) 1.3
Telecom Italia S.p.A. (Italy) 1.3
Network Associates (U.S.) 1.3
Autoliv SDR (Sweden) 1.1
Cisco Systems (U.S.) 1.1
Akzo Nobel N.V. (Netherlands) 1.1
Avon Products (U.S.) 1.1
TOP 10 INDUSTRIES
OF EQUITY HOLDINGS
as of December 31, 1998
- -----------------------
% of
Net Assets
Telephones 7.0%
Banks - Major Regional 6.3
Drugs 6.0
Computer Software & Service 4.7
Electronics - Semiconductors 4.0
Auto Parts 3.7
Communication Equipment 3.3
Insurance - Multi-Line
Companies 2.8
Oil - International Integrated 2.3
Telecommunications -
Long Distance 2.2
1998 ANNUAL REPORT B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
AN OVERVIEW December 31, 1998
INVESTMENT PROGRAM:
Approximately 60% of the Fund's assets are invested in equity securities
selected for total return potential and approximately 40% are invested in debt
securities of varying maturities. On June 30, 1998 the portfolio mix was 61.3%
common stocks and 35.6% fixed-income securities, as a percentage of net assets.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 9.63%
Three Year: 14.79%
Since Inception
January 5, 1995: 17.57%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
COMPARISON OF FUND TO BENCHMARKS
[GRAPH APPEARS HERE]
S&P 500 INDEX $28,983
1/1/95 $10,000.00
01/95 $10,259.00
02/95 $10,658.08
03/95 $10,972.49
04/95 $11,295.08
05/95 $11,745.75
06/95 $12,018.25
07/95 $12,416.06
08/95 $12,447.10
09/95 $12,972.37
10/95 $12,925.67
11/95 $13,491.81
12/95 $13,752.20
01/96 $14,219.78
02/96 $14,352.02
03/96 $14,489.80
04/96 $14,702.80
05/96 $15,080.66
06/96 $15,137.97
07/96 $14,468.87
08/96 $14,774.16
09/96 $15,604.47
10/96 $16,035.16
11/96 $17,245.81
12/96 $16,904.34
01/97 $17,959.17
02/97 $18,101.05
03/97 $17,358.91
04/97 $18,393.50
05/97 $19,517.34
06/97 $20,385.86
07/97 $22,006.54
08/97 $20,774.17
09/97 $21,910.52
10/97 $21,178.71
11/97 $22,159.28
12/97 $22,540.42
01/98 $22,788.37
02/98 $24,431.41
03/98 $25,682.30
04/98 $25,944.26
05/98 $25,498.02
06/98 $26,533.23
07/98 $26,251.98
08/98 $22,458.57
09/98 $23,898.17
10/98 $25,838.70
11/98 $27,404.52
12/98 $28,983.02
USAA LIFE DIVERSIFIED ASSETS $19,108
01/95 $10,120.00
02/95 $10,330.00
03/95 $10,550.00
04/95 $10,860.00
05/95 $11,240.00
06/95 $11,300.00
07/95 $11,450.00
08/95 $11,640.00
09/95 $11,970.00
10/95 $11,890.00
11/95 $12,270.00
12/95 $12,633.12
01/96 $12,833.81
02/96 $12,844.38
03/96 $13,108.45
04/96 $13,002.82
05/96 $13,150.70
06/96 $13,340.83
07/96 $13,002.82
08/96 $13,192.95
09/96 $13,678.84
10/96 $14,059.10
11/96 $14,650.62
12/96 $14,440.16
01/97 $14,808.13
02/97 $14,964.24
03/97 $14,573.96
04/97 $14,941.94
05/97 $15,616.43
06/97 $16,051.18
07/97 $16,863.46
08/97 $16,337.19
09/97 $16,966.42
10/97 $16,783.37
11/97 $17,183.80
12/97 $17,428.85
01/98 $17,609.40
02/98 $18,319.55
03/98 $18,813.05
04/98 $18,849.16
05/98 $18,817.01
06/98 $18,913.38
07/98 $18,503.79
08/98 $16,973.86
09/98 $17,576.19
10/98 $18,142.39
11/98 $18,865.19
12/98 $19,107.81
LIPPER BALANCED FUND AVERAGE $19,018
1/1/95 $10,000.00
01/95 $10,121.00
02/95 $10,399.33
03/95 $10,577.16
04/95 $10,755.91
05/95 $11,107.63
06/95 $11,303.12
07/95 $11,557.44
08/95 $11,661.46
09/95 $11,909.85
10/95 $11,858.64
11/95 $12,228.63
12/95 $12,397.38
01/96 $12,615.57
02/96 $12,616.84
03/96 $12,672.35
04/96 $12,763.59
05/96 $12,909.10
06/96 $12,940.08
07/96 $12,598.46
08/96 $12,813.89
09/96 $13,300.82
10/96 $13,576.15
11/96 $14,168.07
12/96 $13,990.97
01/97 $14,414.89
02/97 $14,399.04
03/97 $13,980.03
04/97 $14,384.05
05/97 $15,005.44
06/97 $15,446.60
07/97 $16,300.80
08/97 $15,828.07
09/97 $16,418.46
10/97 $16,159.05
11/97 $16,383.66
12/97 $16,614.67
01/98 $16,735.96
02/98 $17,370.25
03/98 $17,880.93
04/98 $18,002.52
05/98 $17,856.70
06/98 $18,165.63
07/98 $17,906.35
08/98 $16,455.28
09/98 $17,136.52
10/98 $17,724.31
11/98 $18,348.20
12/98 $19,017.91
LEHMAN BROTHERS AGGREGATE BOND INDEX $14,631
1/1/95 $10,000.00
01/95 $10,198.00
02/95 $10,440.71
03/95 $10,504.40
04/95 $10,651.46
05/95 $11,063.67
06/95 $11,144.44
07/95 $11,119.92
08/95 $11,254.47
09/95 $11,363.64
10/95 $11,511.37
11/95 $11,684.04
12/95 $11,847.61
01/96 $11,925.81
02/96 $11,718.30
03/96 $11,636.27
04/96 $11,571.11
05/96 $11,547.97
06/96 $11,702.71
07/96 $11,734.31
08/96 $11,714.36
09/96 $11,918.19
10/96 $12,182.77
11/96 $12,391.10
12/96 $12,275.86
01/97 $12,313.92
02/97 $12,344.70
03/97 $12,207.67
04/97 $12,390.79
05/97 $12,508.50
06/97 $12,657.35
07/97 $12,999.10
08/97 $12,888.61
09/97 $13,078.07
10/97 $13,267.70
11/97 $13,328.73
12/97 $13,463.36
01/98 $13,635.69
02/98 $13,624.78
03/98 $13,671.10
04/98 $13,742.19
05/98 $13,872.74
06/98 $13,990.66
07/98 $14,020.04
08/98 $14,248.57
09/98 $14,581.98
10/98 $14,504.70
11/98 $14,587.38
12/98 $14,631.14
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Diversified Assets Fund to two industry indexes and an independent
rating agency's average which most closely resemble the holdings of this Fund.
The S&P 500 Index is an unmanaged index representing the average performance of
a group of 500 widely held, publicly traded stocks. It is not possible to invest
directly in the S&P 500 Index. The Lehman Brothers Aggregate Bond Index is an
unmanaged index made up of the government/corporate index, the mortgage-backed
securities index, and the asset-backed securities index. The Lipper Balanced
Fund Average is the average performance level of all variable annuity balanced
funds as reported by Lipper Analytical Services, an independent organization
that monitors the performance of variable annuity funds and mutual funds.
The calculations for all indexes and averages are based on a full calendar
year in 1995, whereas the Diversified Assets Fund calculations are based on a
starting date of January 5, 1995 - the inception date of this Fund. This
comparison is for illustrative purposes only.
GENERAL DISCUSSION
By Portfolio Managers R. David Ullom (Common Stocks) and Paul Lundmark
(Debt Securities)
MARKET CONDITIONS
Common Stocks - The stock market in 1998 continued on a double-digit
appreciation pace as measured by the S & P 500, which had a 28.6% total
return in 1998. In fact, the top 50 names in the S & P 500 by market
capitalization accounted for approximately 19% of the S&P 500's return. Due
to investor's concerns with economic events in Southeast Asia, Russia and
Latin America, the shares of commodity oriented companies were under pressure
for much of the year. However, the stocks of companies where investors had a
high level of confidence in earnings growth did well. Thus, companies in such
sectors as technology, healthcare and consumer staples outperformed the major
averages.
Debt Securities - We manage the bond sector so that income is the primary
component of total return. Since the beginning of the year, the difference
between short and long-term Treasury rates has been minimal. Because of this,
we invested in intermediate-term corporate bonds and mortgage and
asset-backed securities, which offered higher yields, rather than Treasuries.
B-30 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
AN OVERVIEW (Continued) December 31, 1998
In addition, we could get these higher yields without taking on as much
interest rate risk as we would have incurred by investing in long-term
Treasuries. This management style worked well until the recent market
turmoil. The months of August and September saw a "flight to quality" as
investors dumped investments that had any element of credit risk and then
scrambled to buy Treasuries at inflated prices. Further disrupting the market
was the sell-off of mortgage and corporate securities by hedge funds. All of
this market turmoil resulted in the bond sector of your Fund underperforming
Treasuries.
PERFORMANCE
As the graph on the previous page illustrates, the return for the USAA Life
Diversified Assets Fund was 9.63% during 1998. A discussion of the
performance of the two sectors of the fund follows.
Common Stocks - The return on the common stock portion of the Fund was 11.9%,
as compared to the S&P 500 return of 28.6%. Performance was hindered by
holdings in sectors such as basic materials (Monsanto and B. F. Goodrich),
capital goods (Boeing, Rockwell International and Deere), and consumer
cyclicals (Meritor Automotive, May Department Stores and Sears). Also, due to
the decline in oil and gas prices, holdings in the energy area (oil and gas
drilling, domestic - integrated and international - integrated) also failed
to appreciate in line with the overall market.
The Fund's exposure to the technology and healthcare sectors aided
performance. Companies whose stocks performed well include Pharmacia &
Upjohn, Bristol Myers Squibb, American Home Products, Bausch & Lomb, Intel
Corp. and Xerox. Also, selected securities such as Chrysler, Ford, SBC
Communications and Bell Atlantic outperformed the major averages.
TOP 10 EQUITY HOLDINGS
as of December 31, 1998
% of
Net Assets
Pharmacia & Upjohn 2.5%
American Home Products 2.3
Bristol-Myers Squibb 2.3
Applied Materials 1.8
South Trust 1.8
Intel 1.8
Meritor Automotive 1.8
Ford Motor Co. 1.7
Bell Atlantic 1.6
GTE 1.6
TOP 5 DEBT HOLDINGS
as of December 31, 1998
Coupon % of
Rate Net Assets
Tele-Communications,
Senior Notes 8.25% 1.8%
Giddings and
Lewis, Notes 7.50 1.8
HUBCO
Subordinated
Debentures 8.20 1.8
Kmart, Notes 8.13 1.8
Great Atlantic &
Pacific Tea,
Senior Notes 7.70 1.7
1998 ANNUAL REPORT B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
AN OVERVIEW (Continued) December 31, 1998
Debt Securities - Within the Fund's bond portion the best performing holdings
were Kmart and Giddings & Lewis. Kmart continues to improve its business and
financial position and Giddings & Lewis continues to perform well since it
was acquired by Tyssen. Corporacion Andina De Fomento underperformed due to
the recent market turmoil. We continue to hold this bond because the
fundamentals of this multi-lateral lending institution are sound and the
price of the bond should rebound once market conditions improve.
PORTFOLIO STRATEGY
Common Stocks - Our strategy has been to balance long term growth in capital
with current income through an allocation plan of 55% to 60% of the Fund
invested in equities, with the remainder invested in debt securities. In
terms of the common stock portion of the Fund, we have attempted to maintain
a diversified portfolio of large capitalization basic value stocks. In an
effort to create greater balance in the Fund, we reduced and/or sold the
holdings in Monsanto, Boeing, Chrysler, May Department Stores, RJR Nabisco
Holdings, Bankers Trust, Allstate Group, Bristol Myers Squibb, American Home
Products, Intel, Sprint Corp., Bell Atlantic and SBC Communications. Stocks
added to the Fund include Alcoa, Millennium Chemicals, Avery Dennison, Coca-
Cola, Walt Disney, Ralston Purina, Procter & Gamble, Aetna, Microsoft, Oracle
and First Data.
Debt Securities - The negative market sentiment became overdone which provided
buying opportunities. We were able to purchase Merrill Lynch corporate bonds
that have subsequently risen in price. Going forward, we will continue to
purchase securities that provide high income and total return.
OUTLOOK
Common Stocks - The strategy for the common stock portion of the Fund is to
continue to focus on stocks that provide superior returns. In the current
market, we are concerned with the valuation levels overall and believe that
this market cannot continue to register double-digit gains that it has over
the last three years. However, there are many stocks, which offer compelling
values and should continue to post earnings gains over the coming year.
Debt Securities - Looking to the future, we feel that market conditions will
continue to improve which will result in corporates, mortgages and
asset-backed securities increasing in relative value. The bond sector of
your Fund is well positioned to benefit from this improvement.
TOP 10 INDUSTRIES
as of December 31, 1998
% of
Net Assets
Real Estate Investment Trusts 9.8%
Banks - Major Regional 7.8
Asset Backed Securities 5.0
Healthcare - Diversified 4.6
Telephones 4.6
Oil - International Integrated 3.4
Retail - General Merchandising 2.9
Drugs 2.5
Manufacturing - Specialized 2.3
Oil - Domestic Integrated 2.3
B-32 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
AN OVERVIEW December 31, 1998
Comparison of Fund to Benchmark
[CHART APPEARS HERE]
USAA LIFE AGGRESSIVE GROWTH FUND $14,207
05/97 $10,670.00
06/97 $11,160.00
07/97 $12,060.00
08/97 $12,330.00
09/97 $13,530.00
10/97 $12,640.00
11/97 $12,120.00
12/97 $11,825.53
01/98 $11,855.85
02/98 $13,169.80
03/98 $13,624.63
04/98 $13,877.31
05/98 $12,947.15
06/98 $13,531.00
07/98 $12,598.89
08/98 $ 9,566.96
09/98 $10,652.72
10/98 $11,472.16
11/98 $12,629.62
12/98 $14,207.04
RUSSEL 2000(R) INDEX $12,538
5/1/97 $10,000.00
05/97 $11,112.00
06/97 $11,588.70
07/97 $12,127.58
08/97 $12,405.30
09/97 $13,313.37
10/97 $12,728.91
11/97 $12,646.17
12/97 $12,867.48
01/98 $12,664.18
02/98 $13,600.06
03/98 $14,160.38
04/98 $14,238.26
05/98 $13,470.82
06/98 $13,499.11
07/98 $12,405.68
08/98 $ 9,996.50
09/98 $10,779.22
10/98 $11,219.02
11/98 $11,806.89
12/98 $12,537.74
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Aggressive Growth Fund to the broad-based Russell 2000(R) Index,
a widely recognized small-cap index which most closely resembles the
holdings of this Fund. The Russell 2000 Index is an unmanaged index consisting
of the 2,000 smallest companies within the Russell 3000 Index.
The calculations for the Russell 2000 are based on a starting date of May 1,
1997, whereas the calculations for the Aggressive Growth Fund are based on a
starting date of May 5, 1997. This comparison is for illustrative purposes only.
GENERAL DISCUSSION
By Portfolio Managers John K. Cabell and Eric M. Efron
MARKET CONDITIONS
During 1998, investors in small cap equities, which constitute most of the
assets in the Fund, experienced both the dark and the bright sides of
volatility. The Russell 2000 Index, perhaps the best known indicator of
small-cap stock performance, had a total return of 12.4% between January 1,
1998, and April 22, 1998, when it peaked for the year. It then plummeted
36.8%, hitting bottom on October 8, 1998, and then rebounded 36.0% through
the end of the year.
Unfortunately, the healthy October-December recovery was not enough to fully
offset the weakness earlier in the year. For the full year, the Russell 2000
Index/1/ generated a total return of -3.4%, vastly underperforming the robust
results of large-cap stocks as represented by the total return of the Dow
Jones Industrial Average (+18.13%), the S&P 500/2/ (+28.6%) and the NASDAQ
Composite (+40.2%) Indices. This extended a trend set over the several
previous years in which investors have overlooked the superior growth
prospects and modest valuations of small-cap stocks in favor of the liquidity
and perceived safety of large-cap equities.
INVESTMENT PROGRAM:
Invests in equity securities. The Fund will invest in companies that have the
prospect of rapidly growing earnings.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 20.14%
Since Inception
May 1, 1997: 23.45%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
1998 ANNUAL REPORT B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
AN OVERVIEW (Continued) December 31, 1998
PERFORMANCE
For the year, the Fund had a total return of 20.14%. Although we are pleased
that we were able to outperform the Russell 2000 Index and most comparable funds
by a wide margin, we remain disappointed and frustrated over our inability to
match the returns of the S&P 500 Index, which so many investors equate to "the
market."
PORTFOLIO STRATEGY
We remain steadfast in our commitment to growth as the ultimate builder and
determinant of value. Because there appears to be a positive correlation
between growth rates and stock price appreciation over the longer term, we
believe that companies with the greatest growth potential represent the most
attractive investment opportunities. Likewise, we continue to believe that
well-managed smaller companies represent excellent vehicles through which to
achieve rapid growth. Because they are relatively unencumbered by legacy
products and infrastructures, innovative and smaller young companies often
have superior flexibility to rapidly seize upon the commercial opportunities
brought about by ongoing societal and economic change.
At the same time, we do not think that aggressive growth is exclusively a
small-cap phenomenon. There are many larger companies that have retained
their vigor and dynamism as they have grown and remain suitable investment
vehicles for funds such as ours. Also, because their short-term price
movements tend not to move in lockstep with those of smaller stocks, larger
stocks also have the potential to contribute to more consistent portfolio
returns for the Fund over time. With this in mind, we have dedicated a
portion of the portfolio to large-cap stocks such as Intel, Microsoft, Cisco
Systems, Dell Computer, Ascend Communications, Home Depot, Clear Channel
Communications and Infinity Broadcasting. Large-cap stocks contributed
significantly to the performance of the Fund in 1998 - particularly during
the first nine months when small-cap stocks were so extremely out of favor.
TOP 10 EQUITY HOLDINGS
as of December 31, 1998
% of
Net Assets
Abercombine & Fitch "A" 2.4%
Cisco Systems 2.4
Network Solutions "A" 2.4
Dell Computer 2.2
Immunex 2.2
99 Cents Only Stores 2.1
Microsoft Corp. 1.8
Metromedia
Fiber Network "A" 1.7
3Com Corp. 1.7
Express Scripts "A" 1.6
TOP 10 INDUSTRIES
as of December 31, 1998
% of
Net Assets
Electronics - Semiconductors 7.1%
Retail - Specialty 7.1
Biotechnology 7.0
Computer - Networking 5.7
Telephones 5.3
Internet Services 5.1
Healthcare - Specialized Services 5.1
Computer Software & Service 4.2
Medical Products & Supplies 2.8
Telecommunications -
Long Distance 2.8
B-34 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life Aggressive Growth Fund
An Overview (Continued) December 31, 1998
During 1998, the Fund had significant investment positions in the following
sectors (companies): biotechnology (Immunex, Sepracor), health care (Express
Scripts), retailing (Abercrombie & Fitch, and 99 Cents Only Stores),
financial services (NCO Group), and technology. Within the technology sector,
the Fund has invested in a broad range of industries including communication
equipment, semiconductors, semiconductor capital equipment, networking,
computer software and services, and internet services (Network Solutions).
The internet area, which has excellent growth prospects, has provided
spectacular returns over the past year and, in our opinion, has become very
speculative. We have sold off many of our internet holdings at significant
profits in order to limit our exposure.
OUTLOOK
Over the past year or so, U.S. equity markets have passed through a gauntlet of
economic and political crises in Asia and Russia, continued skirmishes in the
Middle East, domestic political scandals, hedge fund failures, a punishing mid
1998 correction and various other obstacles. Despite these ordeals, U.S.
equities have performed very well due, in our opinion, to moderate overall
economic growth, low inflation and interest rates and generally good corporate
earnings. If, as we expect, these conditions persist into 1999, the environment
should remain positive for stock market investments, particularly in the growth
area.
We are also encouraged by the improved performance of small cap stocks
relative to large cap equities over the past few months. Perhaps this spells
the beginning of a reversal of the chronic underperformance that has
afflicted small cap investors and portfolio managers for so long. Small cap
stocks certainly appear to have the attractive growth and valuation
characteristics to merit a return of investor confidence in them.
At the same time, we are mindful that the net asset value of the Fund has
increased sharply since early October. Given the historical volatility of the
Fund, we do not believe that such performance is sustainable indefinitely
into the future. With the release of many companies' annual earnings results
approaching, it would not be too surprising to see investors become nervous
and stock prices briefly give back some of their recent gains in the months
that lie ahead. If this occurs, it should not be viewed with concern but
rather should be seen positively as an excellent opportunity to add to
holdings at more attractive prices.
/1/ The Russell 2000 Index is an unmanaged index, which consists of
approximately 2,000 of the smallest companies within the Russell 3000 Index
and is a widely recognized small cap index.
/2/ The S&P 500 Index is an unmanaged index representing the average performance
of a group of 500 widely held, publicly traded stocks. It is not possible to
invest directly in the S&P 500 Index.
1998 ANNUAL REPORT B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
AN OVERVIEW December 31, 1998
INVESTMENT PROGRAM:
At least 80% of the Fund's assets will be invested in equity securities of
foreign companies.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURN
AS OF
DECEMBER 31, 1998
One Year: 3.78%
Since Inception
May 1, 1997: 3.43%
The total return calculations found in this section are calculated at the Fund's
investment level and reflect the change in the net asset value (NAV), the
reinvestment of income dividends, and the deductions of Fund expenses. It does
not include other costs associated with this contract, and if it did, the
performance quoted above would be lower. More specific information regarding the
Fund expenses and other insurance contract costs can be found in the prospectus.
These NAV total return calculations represent past performance which is no
guarantee of future returns.
Comparison of Fund to Benchmark
[GRAPH APPEARS HERE]
MORGAN STANLEY CAPITAL INDEX - EAFE $12,338
5/1/97 $10,000.00
05/97 $10,651.00
06/97 $11,237.87
07/97 $11,419.92
08/97 $10,566.86
09/97 $11,158.60
10/97 $10,300.50
11/97 $10,195.44
12/97 $10,284.14
01/98 $10,754.12
02/98 $11,444.54
03/98 $11,797.03
04/98 $11,890.23
05/98 $11,831.96
06/98 $11,921.89
07/98 $12,042.30
08/98 $10,550.26
09/98 $10,226.36
10/98 $11,291.95
11/98 $11,870.10
12/98 $12,337.78
USAA LIFE INTERNATIONAL FUND $10,577
05/97 $10,300.00
06/97 $10,710.00
07/97 $11,080.00
08/97 $10,470.00
09/97 $11,180.00
10/97 $10,440.00
11/97 $10,110.00
12/97 $10,191.92
01/98 $10,171.63
02/98 $10,830.81
03/98 $11,530.56
04/98 $11,773.94
05/98 $11,585.69
06/98 $11,311.78
07/98 $11,261.05
08/98 $ 9,404.50
09/98 $ 9,079.86
10/98 $ 9,911.75
11/98 $10,175.53
12/98 $10,577.39
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life International Fund to the Morgan Stanley Capital Index (MSCI)-
EAFE. The MSCI EAFE is an unmanaged index which reflects the movements of stock
markets in Europe, Australia, and the Far East (EAFE) by representing a broad
selection of domestically listed companies within each market.
The calculations for the MSCI EAFE are based on a starting date of May 1,
1997, whereas the calculations for the International Fund are based on a
starting date of May 5, 1997. This comparison is for illustrative purposes
only.
GENERAL DISCUSSION
By Portfolio Managers Curt Rohrman, W. Travis Selmier II, Albert Sebastian,
and David G. Peebles
MARKET CONDITIONS
For the year-ended December 31, 1998, your Fund's total return was 3.78%
which compares unfavorably with the Lipper International Funds Average return
of 13.26% and the EAFE return of 20%/1/. Along with the U.S., European equities
turned downward around mid-year while Asian markets staged a rebound on
currency strength. Latin America and Canada continued to perform poorly.
Europe - European markets performed poorly over the period primarily because
of further deterioration in the economic fundamentals of Russia and lower
forecasted economic growth. The financial sector, which had led the market in
the first half of 1998, sharply underperformed, as many banks had to increase
their credit loss provisions due to their emerging markets exposure.
Defensive stocks, such as utilities and consumer non-durables (e.g. tobacco,
food) outperformed the general indices. European markets rebounded sharply in
the fourth quarter as the U.S. and selected European central banks cut
interest rates.
B-36 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life International Fund
An Overview (Continued) December 31, 1998
Emerging Markets - The last six months of 1998 have been a tale of two
quarters for emerging markets; a tumultuous summer culminating in August's
massive sell-off was followed by a strong recovery in investor sentiment.
This resulted in a strong recovery in global emerging markets during the
last quarter. The change in investor sentiment has been key. Asia's economies
are showing signs of bottoming, while Latin markets have bounced as Brazil
has begun to take the hard medicine needed to solve its fiscal problems.
European and Mediterranean market participants have realized that Russia's
collapse does not mean the end of the world for these countries' economic
growth.
Japan - A change in Prime Minister may hold the promise of progress on
Japan's banking crisis and economic slowdown, but we are still
cautious with an underweighted position. While concerned about the overall
market, we have continued our selective strategy of buying financially sound
industrial and financial companies. We have also added to our technology and
telecommunications holdings over the period.
TOP 10 EQUITY HOLDINGS
as of December 31, 1998
% of
Net Assets
Nokia Corp. ADR (Finland) 3.0%
Novartis AG (Switzerland) 2.3
Tele Danmark
A/S ADR (Denmark) 2.3
Telecom Italia S.p.A. (Italy) 2.1
Koninklijke
KPN N.V. (Netherlands) 1.7
Autoliv, Inc. SDR (Sweden) 1.7
Akzo Nobel N.V. (Netherlands) 1.7
Merita plc "A" (Finland) 1.6
Elf Aquitaine ADR (France) 1.6
Veba AG (Germany) 1.5
TOP 10 EQUITY INDUSTRIES OF
EQUITY HOLDINGS
as of December 31, 1998
% of
Net Assets
Telephones 11.2%
Banks - Major Regional 8.3
Drugs 7.0
Auto Parts 5.8
Communication Equipment 3.6
Insurance -
Multi-Line Companies 3.4
Oil - International Integrated 3.4
Computer Software & Service 2.9
Chemicals - Specialty 2.3
Retail - Specialty 2.1
1998 ANNUAL REPORT B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life International Fund
An Overview (Continued) December 31, 1998
Outlook - Although forecasted economic growth for Europe has been revised
downward, European stocks may have the potential to offer the best earnings
growth next year. The introduction of the euro, which is the currency of the
European monetary union, on January 1, 1999, will further financial and
economic integration. We also expect to see continued mergers, acquisition
activity and shareholder-oriented policies in Europe. Local dynamics and
events in mature markets -- economic growth, bank restructuring (especially in
Japan), multilateral institutions' support and interest rate policies -- will
prove critical for emerging markets in 1999.
/1/ The Lipper International Funds Average is the average performance level of
all international funds, as reported by Lipper Analytical Services, an
independent organization that monitors the performance of mutual funds.
Foreign investing is subject to additional risks such as currency
fluctuations, market illiquidity, and political instability, which are
discussed in the prospectus. Since return on any investment is generally
commensurate with risk, investors should be aware of the potential volatility
associated with foreign markets.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of December 31, 1998
United Kingdom 14.1%
Netherlands 9.8%
France 8.8%
Japan 8.3%
Denmark 5.6%
Switzerland 5.6%
Canada 5.5% [CHART APPEARS HERE]
Finland 5.4%
Italy 5.1%
Germany 5.0%
Sweden 3.5%
Spain 3.3%
Portugal 2.6%
Austria 2.4%
Norway 2.1%
Other* 13.2%
* Each of the remaining countries' investments represented less than 3% of the
portfolio's assets and U.S. Government & Agency Issues.
B-38 ANNUAL REPORT 1998
<PAGE>
SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
USAA LIFE INVESTMENT TRUST:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments of the USAA Life Money Market Fund,
USAA Life Income Fund, USAA Life Growth and Income Fund, USAA Life World
Growth Fund, USAA Life Diversified Assets Fund, USAA Life Aggressive Growth
Fund, and USAA Life International Fund, all funds of the USAA Life Investment
Trust, as of December 31, 1998, the statements of operations for the year
then ended, and the statements of changes in net assets for years or periods
ended December 31, 1998 and 1997 and the financial highlights, presented in
note 7 to the financial statements, for each of the years or periods in the
four-year period ended December 31, 1998. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA Life Money Market Fund, USAA Life Income Fund, USAA Life Growth and Income
Fund, USAA Life World Growth Fund, USAA Life Diversified Assets Fund, USAA Life
Aggressive Growth Fund, and USAA Life International Fund as of December 31,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the years or periods in the two-year period then
ended, and the financial highlights for each of the years or periods in the
four-year period then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
--------------------
KPMG LLP
San Antonio, Texas
February 5, 1999
1998 ANNUAL REPORT B-39
<PAGE>
USAA Life Investment Trust
- --------------------------------------------------------------------------------
USAA Life Diversified Assets Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- -------
FIXED RATE INSTRUMENTS (75.4%)
BEVERAGES - NONALCOHOLIC
$ 900 PepsiCo, Inc., CP 5.25% 1/22/1999 $ 897
-------
CHEMICALS
900 E.I. DuPont De Nemours and Co., CP 5.15 1/15/1999 898
-------
ELECTRIC UTILITIES
900 Georgia Power Co., CP 5.27 1/27/1999 896
527 Virginia Electric and Power Co., CP 5.18 1/29/1999 525
-------
1,421
-------
ELECTRICAL EQUIPMENT
1,010 Emerson Electric Co., CP 5.32 1/11/1999 1,009
-------
FINANCE - CONSUMER
1,000 American Honda Finance Corp., CP 5.30 1/21/1999 997
600 Associates Corp. of North America, CP 5.05 1/04/1999 600
899 General Motors Acceptance Corp., CP 5.30 1/08/1999 898
900 Household Finance Corp., CP 5.36 1/07/1999 899
-------
3,394
-------
FINANCE - DIVERSIFIED
951 General Electric Capital Corp., CP 5.35 1/19/1999 949
-------
FOODS
635 H.J. Heinz Co., CP 5.23 1/11/1999 634
-------
INSURANCE - MULTI-LINE COMPANIES
488 Prudential Funding Corp., CP 5.28 1/13/1999 487
-------
OIL - DOMESTIC INTEGRATED
643 Shell Oil Co., CP 5.00 1/04/1999 643
-------
U.S. GOVERNMENT
1,000 Federal Farm Credit Bank, DN 5.10 1/25/1999 997
1,339 Federal Home Loan Bank, DN 5.13 1/06/1999 1,338
264 Federal Home Loan Bank, DN 5.09 1/13/1999 263
890 Federal Home Loan Bank, DN 5.03 2/03/1999 886
210 Federal Home Loan Mortgage, DN 5.09 1/12/1999 210
220 Federal Home Loan Mortgage, DN 5.10 1/12/1999 220
800 Federal Home Loan Mortgage, DN 5.08 1/14/1999 798
990 Federal Home Loan Mortgage, DN 5.08 1/20/1999 987
651 Federal National Mortgage Assn., DN 4.98 2/05/1999 648
-------
6,347
-------
Total fixed rate instruments (cost: $16,679) 16,679
-------
VARIABLE RATE DEMAND NOTES (23.9%)
ASSET BACKED SECURITIES
787 Capital One Funding Corp., Notes,
Series 1995C (LOC) 5.57 10/01/2015 787
-------
AUTO PARTS
600 Alabama IDA RB
(Rehau Project) (LOC) 5.60 10/01/2019 600
Principal
Amount Coupon Value
(000) Security Rate Maturity (000)
- --------- -------- ------ -------- -------
$ 750 Bardstown, KY, RB,
Series 1994 (LOC) 5.58% 6/01/2024 $ 750
-------
1,350
-------
CHEMICALS
440 Wyckoff Chemical Co., Inc., Note,
Series 1997 (LOC) 5.27 2/01/2027 440
-------
HEALTHCARE - DIVERSIFIED
300 GMS Associates II Project Health
Care RB, Series 1995 (LOC) 5.70 8/15/2025 300
-------
HEALTHCARE - SPECIALIZED SERVICES
400 Mason City Clinic, P.C., IA, Bonds,
Series 1992 (LOC) 6.00 9/01/2022 400
-------
HOSPITALS
700 Dome Corp., Bonds,
Series 1991 (LOC) 5.70 8/31/2016 700
-------
LEISURE TIME
500 Fox Valley Ice Arena, IL, RB,
Series 1997 (LOC) 5.70 7/01/2027 500
-------
NURSING/CONTINUING CARE CENTERS
400 Lincolnwood Funding Corp.
RB, Series 1995A (LOC) 5.70 8/01/2015 400
-------
REAL ESTATE - OTHER
295 H/M Partners, LLC, Bond (LOC) 5.55 10/01/2020 295
100 MMR Funding I, Note, Series A (LOC) 5.57 9/01/2010 100
-------
395
-------
Total variable rate demand notes (cost: $5,272) 5,272
-------
Total investments (cost: $21,951) $21,951
=======
B-40 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government 28.7%
Finance - Consumer 15.3
Electric Utilities 6.4
Auto Parts 6.1
Chemicals 6.0
Electrical Equipment 4.6
Finance - Diversified 4.3
Beverages - Nonalcoholic 4.1
Asset Backed Securities 3.6
Hospitals 3.2
Foods 2.9
Oil - Domestic Integrated 2.9
Leisure Time 2.3
Insurance - Multi-Line Companies 2.2
Healthcare - Specialized Services 1.8
Nursing/Continuing Care Centers 1.8
Real Estate - Other 1.8
Healthcare - Diversified 1.3
----
Total 99.3%
====
See accompanying Notes to Portfolios of Investments on page B-60.
1998 ANNUAL REPORT B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life Income Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
PREFERRED STOCKS (8.4%)
15,000 Avalon Bay Communities, Inc."F",
9.00% cumulative redeemable $ 380
12,000 Duke Realty Investments, Inc. depositary
shares "A", 9.10% cumulative redeemable 324
10,000 Equity Residential Properties Trust depositary
shares "B", 9.125% cumulative redeemable 259
12,000 Equity Residential Properties Trust depositary
shares "C", 9.125% cumulative redeemable 310
22,000 First Industrial Realty Trust, Inc. depositary
shares "B", 8.75% cumulative redeemable 509
20,000 Gables Residential Trust "A", 8.30%
cumulative redeemable 464
6,000 Post Properties, Inc. "A", 8.50% cumulative
redeemable 301
6,000 Prologis Trust, Inc. "C", 8.54% cumulative
redeemable 298
12,000 Shurgard Storage Centers, Inc. "B", 8.80%
cumulative redeemable 319
12,000 United Dominion Realty Trust, Inc. depositary
shares "A", 9.25% cumulative redeemable 294
-------
Total preferred stocks (cost: $3,546) 3,458
-------
Principal
Amount Coupon
(000) Rate Maturity
- --------- ------ --------
CORPORATE OBLIGATIONS (26.9%)
$ 300 Caliber Systems, Inc., Notes 7.80% 8/01/2006 322
1,000 Caterpillar Financial Services
Corp., MTN, Series F 5.83 10/16/2000 1,006
500 Chase Manhattan Corp.,
Subordinated Notes 7.13 2/01/2007 542
1,000 Chrysler Financial Corp., MTN 6.05 3/06/2001 1,015
500 First Union Corp., Subordinated
Notes 7.50 7/15/2006 553
750 Ford Motor Credit Co., Senior
Note 6.25 11/08/2000 761
1,000 General Electric Credit Corp.,
MTN 5.73 6/19/2000 1,007
560 General Motors Acceptance
Corp., MTN 5.80 8/07/2000 563
440 General Motors Acceptance
Corp., MTN 5.95 4/20/2001 445
250 Heller Financial, Inc., MTN 5.93 7/24/2000 250
500 Household Finance Corp., Notes 7.25 5/15/2006 542
1,000 Kroger Co., Notes, 7/01/2000
mandatory put 6.00 7/01/2010 1,004
500 Province of Quebec, Global
Debentures 7.00 1/30/2007 542
1,000 The CIT Group Holdings, Inc.,
MTN 6.20 10/20/2000 1,013
1,000 Wal-Mart Stores, Inc. Notes,
6/01/2000 mandatory put 5.85 6/01/2018 1,011
500 Wells Fargo & Co., Subordinated
Notes 6.88 4/01/2006 535
-------
Total corporate obligations (cost: $10,757) 11,111
-------
Principal Market
Amount Value
(000) Security (000)
- --------- -------- ------
U.S. GOVERNMENT & AGENCY ISSUES (56.8%)
FEDERAL HOME LOAN BANK BOND (4.9%)
$ 2,000 5.575%, 6/22/2000 $ 2,017
-------
FEDERAL NATIONAL MORTGAGE ASSN. (7.4%)
1,700 7.00%, 6/01/2024 - 10/01/2026 1,738
1,288 7.50%, 1/01/2025 - 10/01/2026 1,325
-------
3,063
-------
FEDERAL NATIONAL MORTGAGE ASSN., MTN (5.6%)
2,290 5.65%, 6/12/2000 2,311
-------
GOVERNMENT NATIONAL MORTGAGE ASSN. (34.4%)
8,885 6.00%, 4/15/2028 - 9/15/2028 8,819
1,471 6.50%, 5/15/2028 1,487
1,593 7.00%, 8/15/2023 - 4/15/2026 1,633
2,191 7.50%, 8/15/2023 - 8/15/2026 2,261
-------
14,200
-------
U.S. TREASURY BONDS (4.5%)
1,401 7.875%, 2/15/2021 1,847
-------
Total U.S. government & agency issues
(cost: $22,355) 23,438
-------
SHORT-TERM (7.3%)
COMMERCIAL PAPER
1,500 Commercial Credit Corp., 4.90%, 1/04/1999 1,499
1,507 Ford Credit Europe PLC, 4.76%, 1/04/1999 1,507
-------
Total short-term (cost: $3,006) 3,006
-------
Total investments (cost: $39,664) $41,013
=======
B-42 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life Income Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
PORTFOLIO SUMMARY BY INDUSTRY
U.S. Government 56.8%
Real Estate Investment Trusts 8.4
Finance - Consumer 8.1
Insurance - Multi-Line Companies 7.3
Finance - Diversified 3.1
Banks - Money Center 2.7
Electrical Equipment 2.4
Machinery - Diversified 2.4
Retail - Food 2.4
Retail - General Merchandising 2.4
Banks - Major Regional 1.3
Foreign Government 1.3
Truckers .8
----
Total 99.4%
====
See accompanying Notes to Portfolios of Investments on page B-60.
1998 ANNUAL REPORT B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life Growth and Income Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
COMMON STOCKS (95.9%)
AEROSPACE/DEFENSE (1.0%)
31,500 Boeing Co. $1,028
------
ALUMINUM (1.7%)
23,000 Aluminum Co. of America 1,715
------
AUTOMOBILES (1.6%)
28,000 Ford Motor Co. 1,643
------
AUTO PARTS (2.0%)
32,000 Intermet Corp. 418
41,000 Lear Corp.* 1,578
------
1,996
------
BANKS - MAJOR REGIONAL (0.7%)
4,200 PNC Bank Corp. 227
14,000 SouthTrust Corp. 517
------
744
------
BANKS - MONEY CENTER (4.1%)
20,368 BankAmerica Corp. 1,225
6,000 Bankers Trust Corp. 513
20,000 Chase Manhattan Corp. 1,361
20,000 Citigroup, Inc. 990
------
4,089
------
BEVERAGES - ALCOHOLIC (1.8%)
28,000 Anheuser-Busch Cos., Inc. 1,837
------
BEVERAGES - NONALCOHOLIC (1.0%)
15,500 Coca-Cola Co. 1,037
------
CHEMICALS (1.0%)
50,000 Millennium Chemicals, Inc. 994
------
CHEMICALS - DIVERSIFIED (2.1%)
37,000 B.F. Goodrich Co. 1,327
13,000 FMC Corp. 728
------
2,055
------
COMMUNICATION EQUIPMENT (1.8%)
16,836 Lucent Technologies, Inc. 1,852
------
COMPUTER - HARDWARE (1.7%)
9,200 IBM Corp. 1,700
------
COMPUTER - NETWORKING (1.8%)
19,500 Cisco Systems, Inc.* 1,810
------
COMPUTER SOFTWARE & SERVICE (2.9%)
16,500 Microsoft Corp.* 2,288
14,200 Oracle Corp.* 613
------
2,901
------
CONSUMER JEWELRY AND NOVELTIES-
MISCELLANEOUS (1.3%)
32,100 American Greetings Corp. "A" 1,318
------
CONTAINERS - METALS & GLASS (1.9%)
15,400 APTARGroup, Inc. 432
31,500 Ball Corp. 1,441
------
1,873
------
DRUGS (5.9%)
13,500 Merck & Co., Inc. 1,994
11,500 Pfizer, Inc. 1,443
44,000 Pharmacia & Upjohn, Inc. 2,491
------
5,928
------
ELECTRIC UTILITIES (2.6%)
40,000 Houston Industries, Inc. 1,285
43,000 PG & E Corp. 1,354
------
2,639
------
ELECTRICAL EQUIPMENT (2.9%)
16,500 General Electric Co. 1,684
25,000 Rockwell International Corp. 1,214
------
2,898
------
ELECTRONICS - SEMICONDUCTORS (2.0%)
16,500 Intel Corp. 1,956
------
ENGINEERING & CONSTRUCTION (0.9%)
20,700 Fluor Corp. 881
------
ENTERTAINMENT (0.6%)
20,000 Walt Disney Co. 600
------
EQUIPMENT - SEMICONDUCTORS (1.7%)
39,000 Applied Materials, Inc.* 1,665
------
FINANCE - CONSUMER (1.5%)
35,966 Associates First Capital Corp."A" 1,524
------
FINANCE - DIVERSIFIED (2.8%)
28,000 Morgan Stanley, Dean Witter, Discover & Co. 1,988
17,000 PMI Group, Inc. 839
------
2,827
------
FOODS (1.6%)
28,000 Bestfoods 1,491
2,500 Corn Products International, Inc. 76
------
1,567
------
HEALTHCARE - DIVERSIFIED (4.9%)
38,500 American Home Products Corp. 2,168
11,500 Bristol-Myers Squibb Co. 1,539
14,000 Johnson & Johnson, Inc. 1,174
------
4,881
------
HEALTHCARE - HMOs (1.2%)
17,000 Pacificare Health Systems, Inc. "A"* 1,237
------
HEAVY DUTY TRUCKS & PARTS (0.8%)
25,500 Aeroquip-Vickers, Inc. 763
------
B-44 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
HOMEBUILDING (0.6%)
39,500 Walter Industries, Inc.* $ 605
--------
HOUSEHOLD PRODUCTS (3.0%)
37,000 Kimberly-Clark Corp. 2,017
11,000 Procter & Gamble Co. 1,004
--------
3,021
--------
INSURANCE - LIFE/HEALTH (1.3%)
17,000 Aetna, Inc. 1,337
--------
INSURANCE - MULTI-LINE COMPANIES (1.6%)
17,100 American International Group, Inc. 1,652
--------
INSURANCE - PROPERTY/CASUALTY (0.9%)
23,000 Everest Reinsurance Holdings, Inc. 896
--------
LEISURE TIME (1.5%)
61,000 Brunswick Corp. 1,510
--------
MACHINERY - DIVERSIFIED (1.3%)
25,000 Deere & Co. 828
30,159 Flowserve Corp. 500
--------
1,328
--------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.4%)
25,500 Hillenbrand Industries, Inc. 1,450
--------
MANUFACTURING - SPECIALIZED (1.5%)
33,000 Avery Dennison Corp. 1,487
--------
MEDICAL PRODUCTS & SUPPLIES (2.0%)
33,000 Bausch & Lomb, Inc. 1,980
--------
OIL - DOMESTIC INTEGRATED (1.0%)
61,000 Occidental Petroleum Corp. 1,029
--------
OIL - INTERNATIONAL INTEGRATED (2.3%)
20,000 Royal Dutch Petroleum Co. 957
26,000 Texaco, Inc. 1,375
--------
2,332
--------
OIL & GAS - DRILLING/EQUIPMENT (1.1%)
42,000 Helmerich & Payne, Inc. 814
6,000 Schlumberger Ltd. 277
--------
1,091
--------
OIL & GAS - EXPLORATION & PRODUCTION (1.0%)
39,000 Apache Corp. 987
--------
PAPER & FOREST PRODUCTS (1.5%)
9,100 Unisource Worldwide, Inc. 66
28,000 Weyerhaeuser Co. 1,423
--------
1,489
--------
PHOTOGRAPHY - IMAGING (1.5%)
13,000 Xerox Corp. 1,534
--------
RAILROADS/SHIPPING (1.7%)
53,000 Norfolk Southern Corp. 1,679
--------
RETAIL - DEPARTMENT STORES (1.2%)
25,000 J.C. Penney Company, Inc. 1,172
--------
RETAIL - GENERAL MERCHANDISING (3.2%)
44,000 Sears, Roebuck & Co. 1,870
17,000 Wal-Mart Stores, Inc. 1,384
--------
3,254
--------
SERVICES - DATA PROCESSING (1.0%)
30,000 First Data Corp. 951
--------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.2%)
10,000 Sprint PCS* 231
--------
TELECOMMUNICATIONS - LONG DISTANCE (2.5%)
10,500 AT&T Corp. 790
20,000 Sprint Corp. 1,683
--------
2,473
--------
TELEPHONES (3.6%)
38,000 Bell Atlantic Corp. 2,014
24,000 GTE Corp. 1,560
--------
3,574
--------
TOBACCO (1.2%)
23,000 Philip Morris Companies, Inc. 1,231
--------
Total common stocks (cost: $73,974) 96,251
========
Principal
Amount
(000)
- ----------
SHORT-TERM (3.9%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 3,950 Federal Home Loan Mortgage Corp., 4.50%,
1/04/1999 (cost: $3,949) 3,949
--------
Total investments (cost: $77,923) $100,200
========
See accompanying Notes to Portfolios of Investments on page B-60.
1998 ANNUAL REPORT B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life World Growth Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
FOREIGN SECURITIES (60.8%)
FOREIGN STOCKS (60.5%)
ARGENTINA (0.1%)
2,202 IRSA Inversiones y Representaciones S.A. GDR $ 61
------
AUSTRALIA (0.6%)
16,500 Cable & Wireless Optus Ltd.* 35
18,700 CSL Ltd. 160
9,900 Smith (Howard) Ltd. 65
------
260
------
AUSTRIA (1.4%)
3,600 Boehler Uddeholm AG 168
5,450 VA Flughafen Wien AG 267
1,850 VA Technologie AG 160
------
595
------
BRAZIL (0.6%)
2,600 Companhia Brasileira de Distribuicao Grupo Pao de Acucar
ADR 40
2,435,302 Companhia Energetica de Minas Gerais (Cemig) (Preferred) 46
5,800 Panamerican Beverages, Inc."A" 127
400,000 Petroleo Brasileiro S.A. (Preferred) 45
------
258
------
CANADA (3.6%)
23,800 Anderson Exploration Ltd.* 216
6,400 Canadian National Railway Co. 332
17,300 Canadian Occidental Petroleum Ltd. 181
16,700 National Bank of Canada 271
3,100 Northern Telecom Ltd. 155
8,200 OSF, Inc.* 60
9,900 Suncor, Inc. 296
------
1,511
------
CHILE (0.1%)
1,300 Sociedad Quimica y Minera de Chile S.A. ADR 44
------
CHINA (0.1%)
24,000 New World Infrastructure Ltd.* 35
------
DENMARK (3.5%)
2,800 Carli Gry International A/S 169
2,700 ISS International Service System A/S "B" 176
11,300 SAS Danmark A/S 128
1,300 Tele Danmark A/S "B" 176
6,400 Tele Danmark A/S ADR 434
4,100 Unidanmark A/S 370
------
1,453
------
EGYPT (0.1%)
3,500 Suez Cement Co. S.A.E. GDR 50
------
Market
Number Value
of Shares Security (000)
- --------- -------- ------
FINLAND (3.6%)
68,000 Merita plc "A" $ 429
6,900 Nokia Corp. ADR 831
9,160 Raisio Group plc 101
9,400 Rauma OYJ 136
------
1,497
------
FRANCE (5.5%)
900 Accor S.A. 195
3,978 CNP Assurances* 121
5,600 Coflexip ADR 180
7,600 Elf Aquitaine ADR 430
2,300 Eramet Group 69
475 Essilor International 187
1,540 ISIS S.A. 110
2,400 Louis Dreyfus Citrus 60
4,100 Renault S.A. 184
3,100 Rhone Poulenc S.A. 160
3,914 SEITA 245
2,000 Simco S.A. 181
2,500 Valeo S.A. 197
------
2,319
------
GERMANY (3.2%)
7,100 Continental AG 196
8,000 Hoechst AG 332
3,300 Merck KGaA 148
341 SAP AG 147
324 SAP AG (Preferred) 155
6,400 Veba AG 383
------
1,361
------
GREECE (0.5%)
5,500 Hellenic Telecommunications Organization S.A. (OTE)* 146
1,480 National Bank of Greece S.A. GDR* 65
------
211
------
HONG KONG (0.3%)
3,200 Asia Satellite Telecommunications Holdings Ltd. ADR 56
11,000 Hutchison Whampoa Ltd. 78
------
134
------
HUNGARY (0.6%)
3,100 Magyar Tavkozlesi RT. (MATAV) ADR 92
6,000 Mol Magyar Olaj-Es Gazipari GDR 166
------
258
------
INDIA (0.4%)
4,000 Hindalco Industries Ltd. GDR 46
4,900 Larsen & Toubro Ltd. GDR 39
6,000 Videsh Sanchar Nigam Ltd. GDR 74
------
159
------
B-46 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life World Growth Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
ISRAEL (0.1%)
2,700 Blue Square - Israel Ltd. ADR $ 28
------
ITALY (3.3%)
4,000 ENI S.p.A. ADR 271
39,000 Erg S.p.A. 135
4,400 Gucci Group N.V. 214
45,000 Italgas S.p.A. 243
86,700 Telecom Italia S.p.A. 545
------
1,408
------
JAPAN (5.6%)
9,000 Bridgestone Corp. 204
7,000 Daibiru Corp. 45
2,000 Honda Motor Co. Ltd. 66
3,000 Ito-Yokado Co. Ltd. 210
8,000 Laox Co. Ltd. 59
6,000 Namco 120
5 Nippon Telegraph & Telephone Corp. (NTT) 39
68 NTT Data Corp. 337
2 NTT Mobile Communication Network, Inc.* 82
12,000 Sankyo Co. Ltd. 262
11,000 Sanwa Bank Ltd. 85
28,000 Sharp Corp. 252
2,400 Sony Corp. 175
31,000 Toko, Inc. 107
53,000 Toshiba Corp. 315
------
2,358
------
MALAYSIA (0.1%)
37,200 Genting Bhd/b/ 56
------
MEXICO (0.3%)
4,391 Desc, Sociedad de Fomento Industrial,
S.A. de C.V. ADR 84
9,000 Tubos de Acero de Mexico, S.A. ADR 58
------
142
------
NETHERLANDS (6.0%)
10,000 Akzo Nobel N.V. 455
5,300 Benckiser N.V. "B" 347
2,100 EVC International N.V. 17
5,900 ING Group N.V. 359
8,300 Koninklijke KPN N.V. 415
7,600 Koninklijke Pakhoed N.V. (Certificates) 192
5,600 Oce-van der Grinten N.V. 201
3,800 Philips Electronics N.V. 257
3,750 Simac Techniek N.V. 95
4,500 VNU N.V. 170
------
2,508
------
Market
Number Value
of Shares Security (000)
- --------- -------- ------
NORWAY (1.4%)
70,800 Christiania Bank og Kreditkasse $ 246
8,500 Schibsted ASA 107
22,000 Storebrand ASA* 167
21,200 Tandberg Data ASA* 74
------
594
------
PHILIPPINES (0.2%)
390,000 SM Prime Holdings, Inc. 74
------
POLAND (0.4%)
11,539 Elektrim S.A. 125
12,071 Polifarb Cieszyn-Wroclaw S.A. 29
------
154
------
PORTUGAL (1.6%)
6,336 Banco Pinto & Sotto Mayor S.A. 120
1,700 Brisa-Auto Estradas de Portugal S.A. 100
5,988 Cimentos de Portugal S.A. 191
5,700 Portugal Telecom S.A. ADR 255
------
666
------
RUSSIA (0.1%)
2,500 LUKoil ADR 40
------
SINGAPORE (0.2%)
22,000 Overseas Union Bank Ltd. 96
------
SOUTH AFRICA (0.2%)
52,600 Sanlam Ltd.* 52
2,100 South African Breweries Ltd. 36
------
88
------
SPAIN (2.0%)
11,976 Argentaria, Caja Postal y
Banco Hipotecario de Espana, S.A. 310
5,000 Corporacion Mapfre 136
2,958 Telefonica de Espana S.A. ADR 400
------
846
------
SWEDEN (2.2%)
13,000 Autoliv, Inc. SDR 466
72,300 Swedish Match AB 262
8,600 Volvo AB 197
------
925
------
SWITZERLAND (3.2%)
288 Novartis AG 566
800 Selecta Group AG 221
313 Sulzer AG P.C. 191
660 Swisscom AG* 276
350 Tag Heuer International S.A. 24
12,300 Tag Heuer International S.A. ADR 88
------
1,366
------
1998 ANNUAL REPORT B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life World Growth Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
TAIWAN (0.2%)
5,637 China Steel Corp. GDR $ 69
-------
TURKEY (0.1%)
2,331,080 Yapi Ve Kredi Bankasi A.S. 27
-------
UNITED KINGDOM (9.1%)
14,700 Bank of Scotland 176
86,000 Billiton plc 171
10,300 British Telecommunications plc 156
11,600 Cable & Wireless plc 142
13,000 Cadbury Schweppes plc 222
118,000 Cookson Group plc 257
63,200 Corporate Services Group plc 160
2,500 Doncasters plc ADR* 41
16,800 EMI Group plc 113
2,900 Glaxo Wellcome plc ADR 202
20,700 Laporte plc 161
54,000 LucasVarity plc 180
81,200 Medeva plc 144
18,000 National Westminster Bank plc 348
20,240 Reuters Group plc 214
52,700 Safeway plc 264
68,600 Tomkins plc 326
56,064 WPP Group plc 340
4,400 Zeneca Group plc 192
-------
3,809
-------
Total foreign stocks (cost: $20,724) 25,460
-------
Principal
Amount
(000)
- ---------
FOREIGN BONDS (0.3%)
JAPAN (0.3%)
$ 120 MBL International Finance (Bermuda) Trust,
Convertible Notes, 3.00%, 11/30/2002 (cost: $123) 116
-------
Total foreign securities (cost: $20,847) 25,576
-------
Number
of Shares
- ---------
DOMESTIC STOCKS (35.6%)
ALUMINUM (0.4%)
2,400 Aluminum Co. of America 179
-------
BANKS - MAJOR REGIONAL (0.9%)
4,000 Fleet Financial Group, Inc. 179
3,000 Mellon Bank Corp. 206
-------
385
=======
Market
Number Value
of Shares Security (000)
- --------- -------- ------
BANKS - MONEY CENTER (0.4%)
3,000 First Union Corp. $ 183
-------
BEVERAGES - NONALCOHOLIC (0.9%)
9,000 PepsiCo, Inc. 369
-------
BIOTECHNOLOGY (0.5%)
2,000 Amgen, Inc.* 209
-------
BROADCASTING - RADIO & TV (1.0%)
8,000 Clear Channel Communications, Inc.* 436
-------
CHEMICALS (0.7%)
6,000 Monsanto Co. 285
-------
COMMUNICATION EQUIPMENT (0.9%)
3,596 Lucent Technologies, Inc. 396
-------
COMPUTER - HARDWARE (1.2%)
2,000 Dell Computer Corp.* 146
5,000 Hewlett-Packard Co. 342
-------
488
-------
COMPUTER - NETWORKING (1.1%)
5,000 Cisco Systems, Inc.* 464
-------
COMPUTER SOFTWARE & SERVICE (2.7%)
4,400 Microsoft Corp.* 610
8,000 Network Associates, Inc.* 530
-------
1,140
-------
DRUGS (1.7%)
3,000 Pfizer, Inc. 376
6,000 Schering-Plough Corp. 332
-------
708
-------
ELECTRICAL EQUIPMENT (1.0%)
4,000 General Electric Co. 408
-------
ELECTRONICS - SEMICONDUCTORS (3.0%)
13,200 Analog Devices, Inc.* 414
3,500 Intel Corp. 415
5,000 Texas Instruments, Inc. 428
-------
1,257
-------
ENTERTAINMENT (0.7%)
10,000 Walt Disney Co. 300
-------
EQUIPMENT - SEMICONDUCTORS (1.5%)
10,000 Applied Materials, Inc.* 427
2,000 KLA-Tencor Corp.* 87
3,000 Teradyne, Inc.* 127
-------
641
-------
FINANCE - DIVERSIFIED (1.2%)
2,000 Fannie Mae 148
5,000 Morgan Stanley, Dean Witter, Discover & Co. 355
-------
503
-------
B-48 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life World Growth Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- ------
FOODS (1.2%)
4,000 Hershey Foods Corp. $ 249
7,000 Keebler Foods Co.* 263
-------
512
-------
HEALTHCARE - DIVERSIFIED (1.6%)
2,400 Bristol-Myers Squibb Co. 321
4,000 Johnson & Johnson, Inc. 336
-------
657
-------
HEALTHCARE - SPECIALIZED SERVICES (0.1%)
1,000 ALZA Corp.* 52
-------
HOUSEHOLD PRODUCTS (1.0%)
4,400 Procter & Gamble Co. 402
-------
HOUSEWARES (0.8%)
8,000 Newell Co. 330
-------
INSURANCE - MULTI-LINE COMPANIES (0.8%)
3,375 American International Group, Inc. 326
-------
INTERNET SERVICES (1.6%)
4,000 America Online, Inc.* 640
400 Ticketmaster Online-CitySearch, Inc. "B"* 22
-------
662
-------
LEISURE TIME (0.5%)
9,000 Mattel, Inc. 205
-------
MANUFACTURING - SPECIALIZED (0.6%)
5,400 Avery Dennison Corp. 243
-------
MEDICAL PRODUCTS & SUPPLIES (0.9%)
5,000 Medtronic, Inc. 371
-------
OIL & GAS - DRILLING/EQUIPMENT (0.3%)
5,000 Halliburton Co. 148
-------
PERSONAL CARE (1.1%)
10,000 Avon Products, Inc. 443
2,000 Helen of Troy Ltd.* 29
-------
472
-------
RETAIL - DRUGS (1.1%)
7,000 CVS Corp. 385
2,000 Duane Reade, Inc.* 77
-------
462
-------
RETAIL - GENERAL MERCHANDISING (1.0%)
8,000 Dayton Hudson Corp. 434
-------
RETAIL - SPECIALTY APPAREL (1.0%)
7,500 Gap, Inc. 422
-------
SERVICES - COMMERCIAL & CONSUMER (0.2%)
4,000 Applied Graphics Technologies, Inc.* 66
-------
SERVICES - DATA PROCESSING (0.4%)
5,000 First Data Corp. 158
-------
Market
Number Value
of Shares Security (000)
- --------- -------- ------
TELECOMMUNICATIONS - LONG DISTANCE (1.6%)
5,000 MCI Worldcom, Inc.* $ 359
4,000 Sprint Corp. 336
-------
695
-------
Total domestic stocks (cost: $9,137) 14,968
-------
Principal
Amount
(000)
- ----------
SHORT-TERM (3.6%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 1,540 Federal Home Loan Mortgage Corp., 4.50%,
1/04/1999 (cost: $1,540) 1,540
-------
Total investments (cost: $31,524) $42,084
=======
1998 ANNUAL REPORT B-49
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life World Growth Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
PORTFOLIO SUMMARY BY INDUSTRY
Telephones 7.0%
Banks - Major Regional 6.3
Drugs 6.0
Computer Software & Service 4.7
Electronics - Semiconductors 4.0
Auto Parts 3.7
U.S. Government & Agency Issue 3.6
Communication Equipment 3.3
Insurance - Multi-Line Companies 2.8
Oil - International Integrated 2.3
Telecommunications - Long Distance 2.2
Beverages - Nonalcoholic 1.8
Household Products 1.8
Electrical Equipment 1.6
Healthcare - Diversified 1.6
Internet Services 1.6
Chemicals 1.5
Chemicals - Specialty 1.5
Equipment - Semiconductors 1.5
Foods 1.5
Banks - Money Center 1.4
Retail - Specialty Apparel 1.4
Medical Products & Supplies 1.3
Retail - Specialty 1.3
Computer - Hardware 1.2
Finance - Diversified 1.2
Manufacturing - Diversified Industries 1.2
Manufacturing - Specialized 1.2
Railroads/Shipping 1.2
Tobacco 1.2
Automobiles 1.1
Computer - Networking 1.1
Personal Care 1.1
Retail - Drugs 1.1
Broadcasting - Radio & TV 1.0
Electrical Utilities 1.0
Entertainment 1.0
Oil & Gas - Drilling/Equipment 1.0
Retail - General Merchandising 1.0
Services - Commercial & Consumer 1.0
Other 16.7
-----
Total 100.0%
=====
See accompanying Notes to Portfolios of Investments on page B-60.
B-50 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
BASIC VALUE STOCKS (54.7%)
AEROSPACE/DEFENSE (0.7%)
12,840 Boeing Co. $ 419
--------
ALUMINUM (0.7%)
6,000 Aluminum Co. of America 447
--------
AUTOMOBILES (1.7%)
17,000 Ford Motor Co. 998
--------
AUTO PARTS (1.8%)
50,000 Meritor Automotive, Inc. 1,059
--------
BANKS - MAJOR REGIONAL (4.4%)
16,000 Fleet Financial Group, Inc. 715
16,000 PNC Bank Corp. 866
30,000 SouthTrust Corp. 1,108
--------
2,689
--------
BANKS - MONEY CENTER (1.9%)
2,500 Bankers Trust Corp. 213
14,000 Chase Manhattan Corp. 953
--------
1,166
--------
BEVERAGES - NONALCOHOLIC (0.4%)
4,000 Coca-Cola Co. 268
--------
CHEMICALS (1.1%)
20,000 Millennium Chemicals, Inc. 397
6,000 Monsanto Co. 285
--------
682
--------
CHEMICALS - DIVERSIFIED (1.4%)
24,000 B.F. Goodrich Co. 861
--------
COMPUTER SOFTWARE & SERVICE (0.8%)
1,500 Microsoft Corp.* 208
5,600 Oracle Corp.* 242
--------
450
--------
DRUGS (2.5%)
27,000 Pharmacia & Upjohn, Inc. 1,529
--------
ELECTRICAL EQUIPMENT (0.8%)
10,000 Rockwell International Corp. 486
--------
ELECTRONICS - SEMICONDUCTORS (1.8%)
9,000 Intel Corp. 1,067
--------
ENTERTAINMENT (0.5%)
10,000 Walt Disney Co. 300
--------
EQUIPMENT - SEMICONDUCTORS (1.8%)
26,000 Applied Materials, Inc.* 1,110
--------
FINANCE - CONSUMER (0.9%)
13,406 Associates First Capital Corp."A" 568
--------
FINANCE - DIVERSIFIED (1.0%)
12,000 PMI Group, Inc. 592
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
FOODS (0.8%)
15,000 Ralston Purina Group $ 486
--------
HEALTHCARE - DIVERSIFIED (4.6%)
25,000 American Home Products Corp. 1,408
10,500 Bristol-Myers Squibb Co. 1,405
--------
2,813
--------
HOUSEHOLD PRODUCTS (2.0%)
15,000 Kimberly-Clark Corp. 818
4,000 Procter & Gamble Co. 365
--------
1,183
--------
INSURANCE - LIFE/HEALTH (0.3%)
2,500 Aetna, Inc. 197
--------
INSURANCE - PROPERTY/CASUALTY (0.8%)
13,000 Allstate Corp. 502
--------
MACHINERY - DIVERSIFIED (1.7%)
14,000 Caterpillar, Inc. 644
11,000 Deere & Co. 364
--------
1,008
--------
MANUFACTURING - SPECIALIZED (0.5%)
7,000 Avery Dennison Corp. 315
--------
MEDICAL PRODUCTS & SUPPLIES (1.6%)
16,000 Bausch & Lomb, Inc. 960
--------
NATURAL GAS UTILITIES (1.0%)
14,000 NICOR, Inc. 592
--------
OIL - DOMESTIC INTEGRATED (2.3%)
8,000 Atlantic Richfield Co. 522
26,000 Occidental Petroleum Corp. 439
15,000 Unocal Corp. 438
--------
1,399
--------
OIL - INTERNATIONAL INTEGRATED (3.4%)
7,000 Chevron Corp. 581
8,000 Mobil Corp. 697
15,000 Texaco, Inc. 793
--------
2,071
--------
PAPER & FOREST PRODUCTS (0.1%)
4,300 Unisource Worldwide, Inc. 31
--------
RAILROADS/SHIPPING (1.5%)
28,000 Norfolk Southern Corp. 887
--------
RETAIL - DEPARTMENT STORES (1.7%)
13,000 J.C. Penney Company, Inc. 609
7,000 May Department Stores Co. 423
--------
1,032
--------
RETAIL - GENERAL MERCHANDISING (1.1%)
16,000 Sears, Roebuck & Co. 680
--------
1998 ANNUAL REPORT B-51
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
SERVICES - DATA PROCESSING (0.4%)
7,400 First Data Corp. $ 234
--------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.2%)
5,500 Sprint PCS* 127
--------
TELECOMMUNICATIONS - LONG DISTANCE (1.5%)
11,000 Sprint Corp. 925
--------
TELEPHONES (4.6%)
18,576 Bell Atlantic Corp. 985
15,000 GTE Corp. 975
15,000 SBC Communications Corp. 804
--------
2,764
--------
TOBACCO (0.4%)
4,500 Philip Morris Cos., Inc. 241
--------
Total basic value stocks (cost: $23,500) 33,138
--------
Principal
Amount
(000)
- ---------
U.S. GOVERNMENT & AGENCY ISSUES (5.8%)
$ 1,000 Federal Home Loan Bank,
5.43%, 9/24/2008 1,005
885 Federal Home Loan Mortgage Corp.,
Series 1998-7 H, 9.00%, 3/18/2025 931
777 Federal National Mortgage Assn.,
Series 1997-72 CA, 9.50%, 9/18/2023 798
779 Federal National Mortgage Assn.,
Series 1997-79U, 9.00%, 11/18/2024 806
--------
Total U.S. government & agency issues (cost: $3,649) 3,540
--------
CORPORATE OBLIGATIONS (27.0%)
ASSET BACKED SECURITIES (5.0%)
1,000 Firstplus Home Loan Owner Trust, Series
1997-3, Class A-6, 7.08%, 7/10/2017 1,030
1,000 Firstplus Home Loan Owner Trust, Series
1997-4, Class A-5, 6.62%, 9/10/2015 1,010
1,000 Firstplus Home Loan Owner Trust, Series
1998-1, Class A-5, 6.25%, 11/10/2016 1,007
--------
3,047
--------
Principal Market
Amount Value
(000) Security (000)
- --------- -------- -------
BANKS - MAJOR REGIONAL (3.4%)
$ 1,000 Corporacion Andina de Fomento,
Bonds, 6.75%, 3/15/2005 $ 967
1,000 HUBCO, Inc., Subordinated Debentures,
8.20%, 9/15/2006 1,088
--------
2,055
--------
BROADCASTING - RADIO & TV (1.8%)
1,000 Tele-Communications, Inc., Senior Notes,
8.25%, 1/15/2003 1,098
--------
INVESTMENT BANKS/BROKERAGE (1.7%)
1,000 Merrill Lynch & Co., Inc.,
Notes, 6.50%, 7/15/2018 1,002
--------
MANUFACTURING - SPECIALIZED (1.8%)
1,000 Giddings and Lewis, Inc., Notes,
7.50%, 10/01/2005 1,090
--------
REAL ESTATE INVESTMENT TRUSTS (9.8%)
1,000 Equity Operating LP, Notes,
6.38%, 2/15/2012 998
1,000 Glenborough Properties LP, Senior
Notes, 7.63%, 3/15/2005/a/ 960
1,000 HRPT Property Trust, Senior Notes,
6.70%, 2/23/2005 935
1,000 Merry Land and Investment Co.,
Notes, 7.25%, 6/15/2005 1,007
1,000 Nationwide Health Properties, Inc.,
MTN, 8.61%, 3/01/2002 1,040
1,000 Washington Real Estate Investment Trust,
Senior Notes, 7.25%, 8/13/2006 1,009
--------
5,949
--------
RETAIL - FOOD (1.7%)
1,000 Great Atlantic & Pacific Tea, Inc.,
Senior Notes, 7.70%, 1/15/2004 1,014
--------
RETAIL - GENERAL MERCHANDISING (1.8%)
1,000 Kmart Corp., Notes, 8.13%, 12/01/2006 1,073
--------
Total corporate obligations (cost: $15,967) 16,328
--------
SHORT-TERM (11.3%)
COMMERCIAL PAPER
1,493 A T & T Capital Corp., 5.40%, 1/05/1999 1,492
996 A T & T Capital Corp., 6.70%, 1/05/1999 995
2,000 Countrywide Home Loans Inc., 6.75%, 1/04/1999 1,999
2,359 PHH Corp., 6.00%, 1/04/1999 2,358
--------
Total short-term (cost: $6,844) 6,844
--------
Total investments (cost: $49,960) $59,850
========
See accompanying Notes to Portfolios of Investments on page B-60.
B-52 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
COMMON STOCKS (91.9%)
AEROSPACE/DEFENSE (2.1%)
10,000 AAR Corp. $ 239
5,000 Aviation Sales Co.* 203
3,000 TriStar Aerospace Co.* 21
5,000 Triumph Group, Inc.* 160
--------
623
--------
AIRLINES (0.9%)
7,000 Atlantic Coast Airlines, Inc.* 175
3,000 Midwest Express Holdings, Inc.* 79
--------
254
--------
BANKS - MAJOR REGIONAL (1.7%)
5,000 Bank United Corp. "A" 196
7,000 Columbia Banking Systems, Inc.* 130
6,800 Hamilton Bancorp, Inc.* 181
--------
507
--------
BEVERAGES - ALCOHOLIC (1.5%)
7,000 Beringer Wine Estates Holdings, Inc. "B"* 313
4,000 Golden State Vintners, Inc.* 43
2,000 Robert Mondavi Corp. "A"* 82
--------
438
--------
BIOTECHNOLOGY (7.0%)
5,000 Centocor, Inc.* 226
4,100 Genzyme Corp.* 204
443 Genzyme-Molecular Oncology* 2
3,000 IDEC Pharmaceuticals Corp.* 141
5,000 Immunex Corp.* 629
4,600 Med Immune, Inc.* 457
3,000 Sepracor, Inc.* 264
6,000 Techne Corp.* 127
--------
2,050
--------
BROADCASTING - RADIO & TV (2.2%)
4,900 Clear Channel Communications, Inc.* 267
5,100 Cumulus Media, Inc. "A"* 85
3,550 Gray Communications Systems, Inc. "B" 48
4,800 Infinity Broadcasting Corp.* 131
2,700 Univision Communications, Inc."A"* 98
--------
629
--------
BUILDING MATERIAL GROUP (0.4%)
2,400 Fastenal Co. 106
--------
COMMUNICATION EQUIPMENT (2.7%)
3,100 Advanced Fibre Communications, Inc.* $ 34
10,000 Brightpoint, Inc.* 138
1,000 CIENA Corp.* 15
5,200 Datum, Inc.* 34
5,415 Digital Microwave Corp.* 37
7,600 Harmonic Lightwaves, Inc.* 142
6,500 Ortel Corp.* 57
6,300 P-Com, Inc.* 25
5,500 Pairgain Technologies, Inc.* 42
4,600 REMEC, Inc.* 83
5,000 Spectrian Corp.* 64
3,500 Terayon Communication Systems, Inc.* 130
--------
801
--------
COMPUTER - HARDWARE (2.6%)
8,700 Dell Computer Corp.* 637
8,100 Sandisk Corp.* 114
--------
751
--------
COMPUTER - NETWORKING (5.7%)
10,750 3Com Corp.* 482
2,840 Ascend Communications, Inc.* 187
7,600 Cisco Systems, Inc.* 705
5,300 FORE Systems, Inc.* 97
10,900 Xylan Corp.* 191
--------
1,662
--------
COMPUTER - PERIPHERALS (1.2%)
8,700 HMT Technology Corp.* 111
6,700 Maxtor Corp* 94
8,900 Read-Rite Corp.* 132
--------
337
--------
COMPUTER SOFTWARE & SERVICE (4.2%)
5,400 DSET Corp.* 56
5,400 Macrovision Corp.* 228
3,800 Microsoft Corp.* 527
1,700 Microstrategy, Inc.* 54
3,200 PLATINUM Technology, Inc.* 61
6,970 Rational Software Corp.* 185
3,700 Saville Systems plc* 70
6,900 Softworks, Inc.* 49
--------
1,230
--------
DISTRIBUTIONS - FOOD/HEALTH (0.4%)
5,000 United Natural Foods, Inc.* 121
--------
Drugs (1.3%)
5,000 Elan Corp. plc ADR* 348
1,000 Roberts Pharmaceutical Corp.* 22
-------
370
-------
1998 ANNUAL REPORT B-53
<PAGE>
USAA Life Investment Trust
- --------------------------------------------------------------------------------
USAA Life Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
ELECTRONICS - SEMICONDUCTORS (7.1%)
4,600 Applied Micro Circuits Corp.* $ 156
6,300 Genesis Microchip, Inc.* 153
3,700 Intel Corp. 439
3,200 Lattice Semiconductor Corp.* 147
4,700 MIPS Technologies, Inc.* 150
4,500 MMC Networks, Inc.* 60
2,300 Rambus, Inc.* 221
10,800 TranSwitch Corp.* 421
3,700 Triquint Semiconductor, Inc.* 71
5,900 Vitesse Semiconductor Corp.* 269
-------
2,087
-------
EQUIPMENT - SEMICONDUCTORS (2.5%)
3,600 Brooks Automation, Inc.* 52
4,200 Cerprobe Corp.* 56
6,000 CFM Technologies, Inc.* 51
5,600 Cymer, Inc.* 82
5,000 Electroglas, Inc.* 59
2,800 Etec Systems, Inc.* 112
7,600 Integrated Process Equipment Corp.* 82
3,700 Photronics, Inc.* 89
3,100 PRI Automation, Inc.* 80
4,600 Speedfam International, Inc.* 79
-------
742
-------
FINANCE - CONSUMER (1.1%)
7,000 NCO Group, Inc.* 315
-------
FINANCE - DIVERSIFIED (0.3%)
3,400 Heller Financial, Inc. "A" 100
-------
FOODS (1.6%)
5,000 American Italian Pasta Co."A"* 132
5,000 Horizon Organic Holding Corp.* 77
5,000 Suiza Foods Corp.* 255
-------
464
-------
HEALTHCARE - DIVERSIFIED (1.2%)
5,000 ICON plc ADR* 167
3,500 PAREXEL International Corp.* 88
3,000 Professional Detailing, Inc.* 85
-------
340
-------
HEALTHCARE - SPECIALIZED SERVICES (5.1%)
7,000 Express Scripts, Inc. "A"* 470
5,100 Orthodontic Centers of America, Inc.* 99
5,000 Pediatrix Medical Group, Inc.* 300
5,000 QuadraMed Corp.* 103
5,000 Renal Care Group, Inc. 144
5,000 Superior Consultant Holdings Corp.* 217
5,000 Total Renal Care Holdings, Inc.* 148
-------
1,481
-------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
HOME FURNISHINGS & APPLIANCES (0.7%)
5,000 Ethan Allen Interiors, Inc. $ 205
-------
HOSPITALS (0.6%)
5,000 Province Healthcare Co.* 179
-------
INSURANCE - LIFE/HEALTH (0.2%)
2,000 MONY Group, Inc.* 63
-------
INTERNET SERVICES (5.1%)
2,700 24 / 7 Media, Inc.* 76
5,300 Concentric Network Corp.* 176
4,600 Digital River, Inc.* 163
3,000 Entrust Technologies, Inc.* 72
2,700 NetGravity, Inc.* 45
5,300 Network Solutions, Inc. "A"* 694
6,100 Preview Travel, Inc.* 112
5,800 USWeb Corp.* 153
-------
1,491
-------
INVESTMENT BANKS / BROKERAGE (0.4%)
5,000 Knight/Trimark Group, Inc.* 120
-------
LODGING/HOTEL (0.8%)
5,000 Four Seasons Hotels, Inc. 146
5,000 ResortQuest International, Inc.* 73
-------
219
-------
MEDICAL PRODUCTS & SUPPLIES (2.8%)
4,000 Henry Schein, Inc.* 179
7,800 Omnicare, Inc. 271
7,500 Serologicals Corp.* 225
5,000 Sybron Corp.* 136
-------
811
-------
NURSING CARE (1.1%)
3,700 American Retirement Corp.* 58
5,000 Sunrise Assisted Living, Inc.* 259
-------
317
-------
OIL & GAS - DRILLING/EQUIPMENT (0.8%)
5,000 Friede Goldman International, Inc.* 57
5,600 Halter Marine Group, Inc.* 27
5,000 National-Oilwell, Inc.* 56
5,000 Petroleum Geo-Services ADR* 79
-------
219
-------
PERSONAL CARE (1.5%)
5,000 Estee Lauder Companies, Inc."A" 427
1,200 Revlon, Inc. "A"* 20
-------
447
-------
RAILROADS/SHIPPING (0.6%)
5,000 MotivePower Industries, Inc.* 161
-------
B-54 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
RESTAURANTS (0.8%)
400 P. F. Chang's China Bistro, Inc.* $ 9
5,000 Papa John's International, Inc.* 221
--------
230
--------
RETAIL - BUILDING SUPPLIES (1.1%)
5,000 Home Depot, Inc. 306
--------
RETAIL - FOOD (0.5%)
5,000 Wild Oats Markets, Inc.* 157
--------
RETAIL - GENERAL MERCHANDISING (0.7%)
5,000 Dollar Tree Stores, Inc.* 218
--------
RETAIL - SPECIALTY (7.1%)
12,500 99 Cents Only Stores* 614
10,000 Abercrombie & Fitch Co. "A"* 707
6,400 Cost Plus, Inc.* 201
6,000 Hibbett Sporting Goods, Inc.* 145
5,000 Party City Corp.* 72
3,000 Rental Service Corp.* 47
3,000 Restoration Hardware, Inc.* 81
5,000 Williams-Sonoma, Inc.* 202
--------
2,069
--------
RETAIL - SPECIALTY APPAREL (0.3%)
8,000 Delia's, Inc.* 100
--------
SERVICES - COMMERCIAL & CONSUMER (1.8%)
5,000 Barra, Inc.* 118
4,100 Carreker-Antinori, Inc.* 27
1,500 Flextronics International Ltd.* 129
5,000 MSC Industrial Direct Co. "A"* 113
6,000 Stewart Enterprises, Inc. "A" 134
--------
521
--------
SERVICES - COMPUTER SYSTEMS (0.3%)
1,545 Sanmina Corp.* 97
--------
SERVICES - DATA PROCESSING (0.3%)
4,300 Checkfree Holdings Corp.* 100
--------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (1.8%)
3,900 Crown Castle International Corp.* 91
7,600 Microcell Telecommunications, Inc. "B"* 45
3,000 Omnipoint Corp.* 28
3,300 Powertel, Inc.* 45
14,000 Western Wireless Corp. "A"* 308
--------
517
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
TELECOMMUNICATIONS - LONG DISTANCE (2.8%)
1,500 Global Crossing Ltd.* $ 67
5,200 IDT Corp.* 80
7,300 ITC DeltaCom, Inc.* 111
1,900 IXC Communications, Inc.* 64
1,600 Level 3 Communications, Inc.* 69
1,700 Pacific Gateway Exchange, Inc.* 82
2,600 Qwest Communications International, Inc.* 130
4,100 RSL Communications Ltd. "A"* 121
3,995 STAR Telecommunications, Inc.* 49
3,100 Startec Global Communications Corp.* 30
--------
803
--------
TELEPHONES (5.3%)
4,400 e.spire Communications, Inc.* 28
4,400 Electric Lightwave, Inc. "A"* 36
2,500 Global TeleSystems Group, Inc.* 140
5,000 GST Telecommunications, Inc* 33
4,700 Hyperion Telecommunications, Inc. "A"* 71
2,200 ICG Communications, Inc.* 47
3,000 Intermedia Communications of Florida, Inc.* 52
1,900 McLeod, Inc.* 59
14,800 Metromedia Fiber Network, Inc."A"* 496
3,900 MetroNet Communications Corp."B"* 131
3,000 NEXTLINK Communications, Inc."A"* 85
8,700 Northeast Optic Network, Inc.* 90
2,900 Teligent, Inc. "A"* 83
5,000 Winstar Communications, Inc.* 195
--------
1,546
--------
TEXTILES - APPAREL (0.9%)
5,000 Columbia Sportswear Co.* 84
4,000 North Face, Inc.* 52
2,300 Tommy Hilfiger Corp.* 138
--------
274
--------
TRUCKERS (0.8%)
7,000 Coach USA, Inc.* 243
--------
Total common stocks (cost: $17,848) 26,821
--------
Principal
Amount
(000)
- ---------
SHORT-TERM (8.1%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 2,380 Federal Home Loan Mortgage Corp., 4.50%,
1/04/1999 (cost: $2,379) 2,379
--------
Total investments (cost: $20,227) $ 29,200
========
1998 ANNUAL REPORT B-55
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life International Fund
PORTFOLIO OF INVESTMENTS December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
STOCKS (95.4%)
ARGENTINA (0.2%)
1,864 IRSA Inversiones y Representaciones S.A. GDR $ 52
--------
AUSTRALIA (1.0%)
13,500 Cable & Wireless Optus Ltd.* 28
15,300 CSL Ltd. 131
8,100 Smith (Howard) Ltd. 54
--------
213
--------
AUSTRIA (2.4%)
3,300 Boehler Uddeholm AG 154
4,650 VA Flughafen Wien AG 228
1,850 VA Technologie AG 160
--------
542
--------
BRAZIL (0.7%)
2,100 Companhia Brasileira de
Distribuicao Grupo Pao de Acucar ADR 32
5,400 Panamerican Beverages, Inc."A" 118
--------
150
--------
CANADA (5.5%)
19,400 Anderson Exploration Ltd.* 177
5,200 Canadian National Railway Co. 270
14,300 Canadian Occidental Petroleum Ltd. 149
13,400 National Bank of Canada 217
2,500 Northern Telecom Ltd. 125
5,800 OSF, Inc.* 43
8,100 Suncor, Inc. 242
--------
1,223
--------
CHILE (0.2%)
1,000 Sociedad Quimica y Minera de Chile S.A. ADR 34
--------
CHINA (0.1%)
22,000 New World Infrastructure Ltd.* 32
--------
DENMARK (5.6%)
2,400 Carli Gry International A/S 145
2,700 ISS International Service System A/S "B" 176
10,000 SAS Danmark A/S 113
7,400 Tele Danmark A/S ADR 502
3,400 Unidanmark A/S 307
--------
1,243
--------
EGYPT (0.2%)
2,500 Suez Cement Co. S.A.E. GDR 36
--------
FINLAND (5.4%)
57,200 Merita plc "A" 361
5,600 Nokia Corp. ADR 675
6,000 Raisio Group plc 66
7,300 Rauma OYJ 106
--------
1,208
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
FRANCE (8.8%)
900 Accor S.A. $ 195
3,140 CNP Assurances* 95
4,600 Coflexip ADR 148
6,200 Elf Aquitaine ADR 351
1,800 Eramet Group 54
500 Essilor International 197
1,360 ISIS S.A. 97
2,000 Louis Dreyfus Citrus 50
3,300 Renault S.A. 148
2,500 Rhone Poulenc S.A. 129
3,600 SEITA 225
1,500 Simco S.A. 136
1,700 Valeo S.A. 134
--------
1,959
--------
GERMANY (5.0%)
6,200 Continental AG 171
7,200 Hoechst AG 299
2,800 Merck KGaA 126
170 SAP AG 73
243 SAP AG (Preferred) 116
5,500 Veba AG 329
--------
1,114
--------
GREECE (0.9%)
5,500 Hellenic Telecommunications Organization S.A. (OTE)* 146
1,360 National Bank of Greece S.A. GDR* 60
--------
206
--------
HONG KONG (0.5%)
2,500 Asia Satellite Telecommunications Holdings Ltd. ADR 44
10,000 Hutchison Whampoa Ltd. 70
--------
114
--------
HUNGARY (0.9%)
2,800 Magyar Tavkozlesi RT (MATAV) ADR 83
4,200 Mol Magyar Olaj-Es Gazipari (MOL) GDR 116
--------
199
--------
INDIA (0.5%)
3,000 Hindalco Industries Ltd. GDR 35
5,500 Videsh Sanchar Nigam Ltd. GDR 68
--------
103
--------
ISRAEL (0.1%)
2,400 Blue Square - Israel Ltd. ADR 25
--------
B-56 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
ITALY (5.1%)
3,000 ENI S.p.A. ADR $ 203
31,000 Erg S.p.A. 107
3,200 Gucci Group N.V. 156
39,000 Italgas S.p.A. 211
72,600 Telecom Italia S.p.A. 457
--------
1,134
--------
JAPAN (8.3%)
8,000 Bridgestone Corp. 182
6,000 Daibiru Corp. 38
2,000 Ito-Yokado Co. Ltd. 140
2,600 Laox Co. Ltd. 19
4,000 Namco 80
5 Nippon Telegraph & Telephone Corp. (NTT) 39
58 NTT Data Corp. 288
2 NTT Mobile Communication Network, Inc.* 82
10,000 Sankyo Co. Ltd. 219
9,000 Sanwa Bank Ltd. 69
23,000 Sharp Corp. 207
2,000 Sony Corp. 146
25,000 Toko, Inc. 86
42,000 Toshiba Corp. 250
--------
1,845
--------
MALAYSIA (0.2%)
33,000 Genting Bhd/b/ 50
--------
MEXICO (0.5%)
3,600 Desc, Sociedad de Fomento Industrial,
S.A. de C.V. ADR 69
7,300 Tubos de Acero de Mexico, S.A. ADR 47
--------
116
--------
NETHERLANDS (9.8%)
8,400 Akzo Nobel N.V. 382
4,500 Benckiser N.V. "B" 295
1,900 EVC International N.V. 15
5,100 ING Group N.V. 311
7,700 Koninklijke KPN N.V. 385
6,100 Koninklijke Pakhoed N.V. (Certificates)* 154
4,800 Oce-van der Grinten N.V. 172
3,200 Philips Electronics N.V. 217
3,150 Simac Techniek N.V. 80
4,500 VNU N.V. 169
--------
2,180
--------
NORWAY (2.1%)
44,200 Christiania Bank og Kreditkasse 153
7,100 Schibsted ASA 90
21,000 Storebrand ASA* 159
17,400 Tandberg Data ASA* 61
--------
463
--------
Market
Number Value
of Shares Security (000)
- --------- -------- -------
PHILIPPINES (0.3%)
380,000 SM Prime Holdings, Inc. $ 72
--------
POLAND (0.6%)
9,000 Elektrim S.A. 97
14,737 Polifarb Cieszyn-Wroclaw S.A. 35
--------
132
--------
PORTUGAL (2.6%)
6,160 Banco Pinto & Sotto Mayor S.A. 117
1,400 Brisa-Auto Estradas de Portugal S.A. 83
4,734 Cimentos de Portugal S.A. 151
5,000 Portugal Telecom S.A. ADR 223
--------
574
--------
RUSSIA (0.2%)
2,500 LUKoil ADR 40
--------
SINGAPORE (0.4%)
19,000 Overseas Union Bank Ltd. 83
--------
SOUTH AFRICA (0.4%)
52,600 Sanlam Ltd.* 52
1,700 South African Breweries Ltd. 29
--------
81
--------
SPAIN (3.3%)
10,764 Argentaria, Caja Postal y Banco
Hipotecario de Espana, S.A. 278
5,000 Corporacion Mapfre 135
2,346 Telefonica de Espana S.A. ADR 318
--------
731
--------
SWEDEN (3.5%)
10,700 Autoliv, Inc. SDR 383
65,000 Swedish Match AB 236
7,300 Volvo AB 167
--------
786
--------
SWITZERLAND (5.6%)
265 Novartis AG 521
700 Selecta Group AG 194
263 Sulzer AG P.C. 160
540 Swisscom AG* 226
600 Tag Heuer International S.A. 41
13,000 Tag Heuer International S.A. ADR 93
--------
1,235
--------
TAIWAN (0.3%)
5,500 China Steel Corp. GDR 67
--------
TURKEY (0.1%)
2,680,458 Yapi Ve Kredi Bankasi A.S. 31
--------
1998 ANNUAL REPORT B-57
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Market
Number Value
of Shares Security (000)
- --------- -------- -------
UNITED KINGDOM (14.1%)
11,900 Bank of Scotland $ 142
70,700 Billiton plc 141
8,700 British Telecommunications plc 132
9,600 Cable & Wireless plc 117
10,800 Cadbury Schweppes plc 185
93,000 Cookson Group plc 202
51,500 Corporate Services Group plc 130
2,900 Doncasters plc ADR* 47
14,400 EMI Group plc 96
2,300 Glaxo Wellcome plc ADR 160
17,100 Laporte plc 133
44,300 LucasVarity plc 148
63,800 Medeva plc 114
14,200 National Westminster Bank plc 275
16,520 Reuters Group plc 174
45,000 Safeway plc 226
56,200 Tomkins plc 267
45,611 WPP Group plc 277
3,700 Zeneca Group plc* 161
-------
3,127
-------
Total stocks (cost: $19,825) 21,200
-------
Principal
Amount
(000)
- ---------
SHORT-TERM (4.9%)
U.S. GOVERNMENT & AGENCY ISSUE
$ 1,083 Federal Home Loan Mortgage Corp.,
4.5%, 1/04/1999 (cost: $1,082) 1,082
-------
Total investments (cost: $20,908) $22,282
=======
B-58 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
USAA Life International Fund
Portfolio of Investments (Continued) December 31, 1998
PORTFOLIO SUMMARY BY INDUSTRY
Telephones 11.2%
Banks - Major Regional 8.3
Drugs 7.0
Auto Parts 5.8
U. S. Government & Agency Issue 4.9
Communication Equipment 3.6
Insurance - Multi-Line Companies 3.4
Oil - International Integrated 3.4
Computer Software & Service 2.9
Chemicals - Specialty 2.3
Retail - Specialty 2.1
Tobacco 2.1
Railroads/Shipping 1.9
Manufacturing - Diversified Industries 1.8
Beverages - Nonalcoholic 1.6
Electric Utilities 1.5
Electronics - Semiconductors 1.5
Oil & Gas - Exploration & Production 1.5
Automobiles 1.4
Chemicals 1.4
Services - Commercial & Consumer 1.4
Services - Facilities & Environment 1.4
Household Products 1.3
Retail - Food 1.3
Advertising/Marketing 1.2
Iron & Steel 1.2
Banks - Money Center 1.1
Foreign Conglomerate 1.1
Oil & Gas - Drilling/Equipment 1.1
Building Material Group 1.0
Electrical Equipment 1.0
Metals/Mining 1.0
Telecommunications - Long Distance 1.0
Other 15.6
-----
Total 100.3%
=====
See accompanying Notes to Portfolios of Investments on page B-60.
1998 ANNUAL REPORT B-59
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Notes To Portfolios of Investments
December 31, 1998
GENERAL NOTES
Market values of securities are determined by procedures and practices
discussed in Note 1 to the Trust's financial statements.
The cost of securities for federal income tax purposes is approximately the
same as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net
assets. At December 31, 1998, investments in foreign securities were 1.2% of
the net assets of the USAA Life Growth & Income Fund and 5.5% of the net
assets of the USAA Life Aggressive Growth Fund.
ADR - American Depositary Receipts are receipts issued by a U.S. bank
evidencing ownership of foreign shares. Dividends are paid in U.S. dollars.
GDR - Global Depositary Receipts are foreign shares held by a U.S. or foreign
bank which issues a receipt evidencing ownership. Dividends are paid in U.S.
dollars.
SPECIFIC NOTES
(a) Security is exempt from registration under the Securities Act of 1933 and
has been determined to be liquid by USAA Investment Management Company (the
Manager). Any resale of this security may occur in an exempt transaction in
the United States to a qualified institutional buyer as defined by Rule 144A.
(b) Illiquid security valued using methods determined by the Manager under
the general supervision of the Board of Trustees. At December 31, 1998,
these securities represented .13% and .23% of the USAA Life World Growth
Fund's and the USAA Life International Fund's net assets, respectively.
* Non-income producing security.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CP Commercial Paper
DN Discount Note
IDA Industrial Development
Authority/Agency
LLC Limited Liability Company
LP Limited Partnership
MTN Medium-Term Note
RB Revenue Bond
CATEGORIES AND DEFINITIONS
The securities in USAA Life Money Market Fund are divided into two categories
- - fixed rate instruments and variable rate demand notes.
FIXED RATE INSTRUMENTS - consist of corporate and government notes and
commercial paper. The interest rate is constant to maturity. Prior to
maturity, the market price of a fixed-rate instrument generally varies
inversely to the movement of interest rates.
VARIABLE RATE DEMAND NOTES (VRDN) - provide the right, on any business day,
to sell the security at face value on either that day or in seven days. The
interest rate is adjusted at the stipulated daily, weekly, or monthly
interval to a rate that reflects current market conditions. In money market
funds, the effective maturity of these instruments is deemed to be less than
397 days in accordance with detailed regulatory requirements. In bond funds,
the effective maturity is the next put date.
CREDIT ENHANCEMENT - adds the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due.
The enhancement may be provided by either a high quality bank, insurance
company, or other corporation, or a collateral trust.
The USAA Life Money Market Fund's investments consist of securities meeting
the requirements to qualify as "eligible securities" under the Securities and
Exchange Commission (SEC) rules applicable to money market funds. The
Manager attempts to minimize credit risk in the USAA Life Money Market Fund
through rigorous internal credit research and by investing in securities
rated in one of the two highest categories for short-term securities, or, if
not rated, of comparable quality, at the time of purchase.
(LOC) - Enhanced by a bank letter of credit.
See accompanying Notes to Financial Statements on page B-66.
B-60 ANNUAL REPORT 1998
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
(In Thousands, Except Per Share Data) December 31, 1998
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life
Money Market Income Growth and World Growth Diversified Aggressive International
Fund Fund Income Fund Fund Assets Fund Growth Fund Fund
------------ --------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market value (identified cost of
$21,951, $39,664, $77,923,
$31,524, $49,960, $20,227 and
$20,908, respectively) $21,951 $41,013 $100,200 $42,084 $59,850 $29,200 $22,282
Cash 1 1 1 3 1 52 1
Cash denominated in foreign
currencies (identified cost
of $3 and $3, respectively) - - - 3 - - 3
Receivables:
Capital shares sold 167 - - 3 - - -
Dividends and interest 25 369 144 46 404 1 27
Securities sold - - 184 29 462 12 -
------- ------- -------- ------- ------- ------- -------
Total assets 22,144 41,383 100,529 42,168 60,717 29,265 22,313
------- ------- -------- ------- ------- ------- -------
LIABILITIES
Securities purchased - - - 47 104 4 34
Capital shares redeemed - 103 40 - 6 5 1
Accrued advisory fees 4 - 17 1 2 21 17
Accrued administrative fees 3 3 3 3 3 3 3
Accounts payable and accrued expenses 26 28 31 37 32 31 32
------- ------- -------- ------- ------- ------- -------
Total liabilities 33 134 91 88 147 64 87
------- ------- -------- ------- ------- ------- -------
Net assets applicable to capital
shares outstanding $22,111 $41,249 $100,438 $42,080 $60,570 $29,201 $22,226
======= ======= ======== ======= ======= ======= =======
REPRESENTED BY:
Paid-in capital $22,111 $39,848 $ 77,893 $31,672 $48,045 $20,075 $22,027
Accumulated undistributed net
investment income (loss) - 34 30 27 26 - -.
Accumulated net realized gain (loss)
on investments - 18 238 (181) 2,609 153 (1,176)
Net unrealized appreciation of
investments - 1,349 22,277 10,560 9,890 8,973 1,374
Net unrealized appreciation
on foreign currency translations - - - 2 - - 1
------- ------- -------- ------- ------- ------- -------
Net assets applicable to
capital shares outstanding $22,111 $41,249 $100,438 $42,080 $60,570 $29,201 $22,226
======= ======= ======== ======= ======= ======= =======
Capital shares outstanding,
unlimited number of shares
authorized, no par value 22,111 3,786 5,535 2,928 4,020 2,105 2,153
======= ======= ======== ======= ======= ======= =======
Net asset value, redemption
price, and offering price
per share $ 1.00 $ 10.89 $ 18.15 $ 14.37 $ 15.07 $ 13.87 $ 10.32
======= ======= ======== ======= ======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements on page B-66.
B-62 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(In Thousands) Year Ended December 31, 1998
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life
Money Market Income Growth and World Growth Diversified Aggressive International
Fund Fund Income Fund Fund Assets Fund Growth Fund Fund
------------ -------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS):
Income (net of foreign taxes
withheld of $0, $0, $6, $60,
$0, $0 and $50, respectively):
Dividends $ - $ 305 $1,705 $ 614 $ 741 $ 52 $ 401
Interest 1,007 2,077 138 109 1,526 75 79
------ ------ ------ ------ ------ ------ -------
Total income 1,007 2,382 1,843 723 2,267 127 480
------ ------ ------ ------ ------ ------ -------
Expenses:
Advisory fees 37 68 194 83 112 215 147
Administrative fees 39 39 44 44 44 40 40
Custodian's fees 18 33 53 94 37 60 70
Shareholder reporting fees 4 1 18 7 8 - -
Trustees' fees 4 4 4 4 4 4 4
Professional fees 44 41 41 43 43 41 43
Other - 1 1 1 1 1 1
------ ------ ------ ------ ------ ------ -------
Total expenses before
reimbursement 146 187 355 276 249 361 305
Expenses reimbursed (82) (68) (16) (6) (54) (59) (57)
------ ------ ------ ------ ------ ------ -------
Total expenses after
reimbursement 64 119 339 270 195 302 248
------ ------ ------ ------ ------ ------ -------
Net investment income (loss) 943 2,263 1,504 453 2,072 (175) 232
------ ------ ------ ------ ------ ------ -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments - 1,473 3,229 706 3,572 150 (1,157)
Foreign currency transactions - - - (17) - - (14)
Change in net unrealized appreciation/
depreciation of:
Investments - (739) 712 3,082 (788) 4,896 1,702
Foreign currency translations - - - 11 - - 8
------ ------ ------ ------ ------ ------ -------
Net realized and
unrealized gain - 734 3,941 3,782 2,784 5,046 539
------ ------ ------ ------ ------ ------ -------
Increase in net assets resulting
from operations $ 943 $2,997 $5,445 $4,235 $4,856 $4,871 $ 771
====== ====== ====== ====== ====== ====== =======
</TABLE>
See accompanying Notes to Financial Statements on page B-66.
1998 ANNUAL REPORT B-63
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Statements of Changes In Net Assets
(In Thousands) Years Ended December 31,
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life
Money Market Fund Income Fund Growth and Income Fund
--------------------- ------------------- -----------------------
1998 1997 1998 1997 1998 1997
-------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ 943 $ 768 $ 2,263 $ 1,794 $ 1,504 $ 1,250
Net realized gain (loss) on:
Investments - - 1,473 462 3,229 4,276
Foreign currency transactions - - - - - -
Change in net unrealized
appreciation/depreciation of:
Investments - - (739) 535 712 9,783
Foreign currency translations - - - - - -
-------- -------- ------- ------- -------- --------
Increase (decrease) in net assets
resulting from operations 943 768 2,997 2,791 5,445 15,309
-------- -------- ------- ------- -------- --------
Distributions to shareholders from:
Net investment income (943) (768) (2,261) (1,835) (1,504) (1,222)
-------- -------- ------- ------- -------- --------
Net realized gains - - (1,437) - (4,221) (3,404)
-------- -------- ------- ------- -------- --------
From capital share transactions:
Proceeds from shares sold 31,712 60,217 13,641 3,986 17,540 33,830
Dividend reinvestments 943 768 3,698 1,835 5,725 4,626
Cost of shares redeemed (25,675) (57,099) (3,635) (2,580) (8,297) (19,321)
-------- -------- ------- ------- -------- --------
Increase (decrease) in net assets
from capital share transactions 6,980 3,886 13,704 3,241 14,968 19,135
-------- -------- ------- ------- -------- --------
Net increase (decrease) in net assets 6,980 3,886 13,003 4,197 14,688 29,818
Net assets:
Beginning of period 15,131 11,245 28,246 24,049 85,750 55,932
-------- -------- ------- ------- -------- --------
End of period $ 22,111 $ 15,131 $41,249 $28,246 $100,438 $ 85,750
======== ======== ======= ======= ======== ========
Accumulated undistributed
net investment income:
End of period $ - $ - $ 34 $ 32 $ 30 $ 30
======== ======== ======= ======= ======== ========
Change in shares outstanding:
Shares sold 31,712 60,217 1,185 362 918 1,986
Shares issued for dividends reinvested 943 768 339 168 310 260
Shares redeemed (25,675) (57,099) (316) (240) (462) (1,190)
-------- -------- ------- ------- -------- --------
Increase (decrease) in shares
outstanding 6,980 3,886 1,208 290 766 1,056
======== ======== ======= ======= ======== ========
</TABLE>
* Funds commenced operations May 1, 1997
See accompanying Notes to Financial Statements on page B-66.
B-64 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Statements of Changes In Net Assets
(In Thousands) Years Ended December 31,
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
World Growth Fund Diversified Assets Fund Aggressive Growth Fund* International Fund*
- -------------------------- ------------------------- ----------------------- -----------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------- ----------- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 453 $ 465 $ 2,072 $ 1,596 $ (175) $ (40) $ 232 $ 99
706 2,634 3,572 834 150 1,134 (1,157) 197
(17) (11) - - - - (14) (5)
3,082 1,623 (788) 4,986 4,896 4,077 1,702 (328)
11 (9) - - - - 8 (7)
------- ------- ------- ------- -------- ------- ------- -------
4,235 4,702 4,856 7,416 4,871 5,171 771 (44)
------- ------- ------- ------- -------- ------- ------- -------
(453) (458) (2,080) (1,565) - - (225) (97)
------- ------- ------- ------- -------- ------- ------- -------
(973) (2,843) (981) (1,771) (645) (446) (10) (204)
------- ------- ------- ------- -------- ------- ------- -------
2,169 9,019 10,152 12,393 3,262 38,066 754 21,912
1,426 3,301 3,061 3,336 645 446 235 301
(3,834) (11,746) (2,650) (1,987) (21,477) (692) (881) (286)
------- ------- ------- ------- -------- ------- ------- -------
(239) 574 10,563 13,742 (17,570) 37,820 108 21,927
------- ------- ------- ------- -------- ------- ------- -------
2,570 1,975 12,358 17,822 (13,344) 42,545 644 21,582
39,510 37,535 48,212 30,390 42,545 - 21,582 -
------- ------- ------- ------- -------- ------- ------- -------
$42,080 $39,510 $60,570 $48,212 $ 29,201 $42,545 $22,226 $21,582
======= ======= ======= ======= ======== ======= ======= =======
$ 27 $ 44 $ 26 $ 34 $ - $ - $ - $ (3)
======= ======= ======= ======= ======== ======= ======= =======
147 644 663 888 271 3,655 69 2,145
99 247 203 236 49 39 23 30
(280) (869) (175) (142) (1,854) (55) (87) (27)
------- ------- ------- ------- -------- ------- ------- -------
(34) 22 691 982 (1,534) 3,639 5 2,148
======= ======= ======= ======= ======== ======= ======= =======
</TABLE>
1998 ANNUAL REPORT B-65
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Notes To Financial Statements
December 31, 1997
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA LIFE INVESTMENT TRUST (the Trust), registered under the Investment
Company Act of 1940, as amended, is a diversified, open-end management
investment company organized as a Delaware business trust consisting of seven
separate funds.
The investment objectives and policies of the Funds are as follows:
USAA LIFE MONEY MARKET FUND: Highest level of current income consistent with
preservation of capital and maintenance of liquidity, through a diversified
portfolio of high quality U.S. dollar-denominated debt instruments that
present minimal credit risk and have remaining maturities of 397 days or
less.
USAA LIFE INCOME FUND: Maximum current income without undue risk to principal,
through a diversified portfolio of U.S. dollar-denominated debt and income
producing equity securities selected for their high yields relative to the risk
involved.
USAA LIFE GROWTH AND INCOME FUND: Capital growth and current income, through
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.
USAA LIFE WORLD GROWTH FUND: Long-term capital appreciation, through a
diversified portfolio of equity securities of both foreign and domestic
issuers.
USAA LIFE DIVERSIFIED ASSETS FUND: Long-term capital growth, consistent with
preservation of capital and balanced by current income, through a strategy of
investing approximately 60% of the Fund's assets in equity securities,
selected for total return potential, and approximately 40% of its assets in
debt securities of varying maturities.
USAA LIFE AGGRESSIVE GROWTH FUND: Appreciation of capital, through a
portfolio of equity securities of companies that have the prospect of rapidly
growing earnings.
USAA LIFE INTERNATIONAL FUND: Capital appreciation with a secondary objective
of current income, through a strategy of investing at least 80% of the Fund's
assets in equity securities of foreign companies.
Shares of the Funds currently are offered only to the Separate Accounts of
USAA Life Insurance Company (the Separate Accounts) to serve as the funding
medium for certain variable annuity contracts and variable universal life
insurance contracts offered by USAA Life.
A. SECURITY VALUATION - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange. Portfolio securities traded primarily on foreign securities exchanges
are generally valued at the closing values of such securities on the exchange
where primarily traded. If no sale is reported, the average of the bid and asked
prices is generally used depending upon local custom or regulation.
2. Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less and, pursuant to Rule
2a-7 under the Investment Company Act of 1940, as amended, all securities in the
USAA Life Money Market Fund are stated at amortized cost which approximates
market value.
4. Other debt and government securities are valued each business day by a
pricing service (the Service) approved by the Funds' Board of Trustees. The
Service uses the mean between quoted bid and asked prices or the last sale price
to price securities when, in the Service's judgement, these prices are readily
available and are representative of the securities' market values. For many
securities, such prices are not readily available. The Service generally prices
these securities based on methods which include consideration of yields or
prices of securities of comparable quality, coupon, maturity and type,
indications as to values from dealers in securities, and general market
conditions.
5. Securities which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the investment adviser under the general supervision of the Board of
Trustees.
B. FEDERAL TAXES - The Funds' policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of their income to their shareholders, the Separate
Accounts and USAA Life. Therefore, no federal income or excise tax provision is
required. As a result of certain permanent differences between book and tax
basis accounting, reclassifications have been made on the statement of assets
and liabilities of the USAA Life Aggressive Growth Fund to decrease accumulated
net investment loss and to decrease paid-in capital by $175,000 and on the
statement of assets and liabilities of the USAA Life International Fund to
increase accumulated net investment income by $10,000, decrease paid-in capital
by $8,000, and increase accumulated net realized loss on investments by $2,000.
B-66 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- -------------------------------------------------------------------------------
Notes to Financial Statements
(Continued) December 31, 1998
C. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income, less foreign taxes, if any, is recorded on the ex-dividend date. If the
ex-dividend date has passed, certain dividends from foreign securities are
recorded upon notification. Interest income is recorded on the accrual basis.
Discounts and premiums on short-term and long-term securities are amortized over
the life of the respective securities.
D. FOREIGN CURRENCY TRANSLATIONS - The assets of the USAA Life World Growth,
USAA Life Aggressive Growth, and USAA Life International Funds may be invested
in the securities of foreign issuers. Since the accounting records of the Funds
are maintained in U.S. dollars, foreign currency amounts are translated into
U.S. dollars on the following basis:
1. Market value of securities, other assets, and liabilities at the mean between
the bid and asked translation rates of such currencies against U.S. dollars on a
daily basis.
2. Purchases and sales of securities, income, and expenses at the rate of
exchange obtained from an independent pricing service on the respective dates
of such transactions.
Net realized and unrealized foreign currency gains/losses occurring during the
holding period of investments are a component of realized gain/loss on
investments and unrealized appreciation/depreciation on investments,
respectively.
Net realized foreign currency gains/losses arise from sales of foreign currency,
currency gains/losses realized between the trade and settlement dates on
security transactions, and the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income/loss on the statements of assets
and liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities other than investments in
securities resulting from changes in the exchange rate.
E. USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
F. EURO CONVERSION RISK - On January 1, 1999, countries participating in the
European Monetary Union began converting their currencies into a new currency
unit called the euro. The countries initially participating in the conversion
are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
Netherlands, Portugal, and Spain. Conversion to the euro may present certain
risks to investments of the USAA Life International and USAA Life World Growth
Funds held in one of the currencies being replaced. The accounting conversion
did not have a material impact on the Funds.
2) DISTRIBUTIONS
USAA LIFE MONEY MARKET FUND
Net investment income is accrued daily as dividends and distributed monthly to
its shareholders, the Separate Accounts. All net investment income available for
distribution was distributed at December 31, 1998. Distributions of realized
gains from security transactions not offset by capital losses are made annually
or as otherwise required to avoid the payment of federal taxes.
USAA LIFE INCOME, USAA LIFE GROWTH AND INCOME, USAA LIFE WORLD GROWTH, USAA
LIFE DIVERSIFIED ASSETS, USAA LIFE AGGRESSIVE GROWTH, AND USAA LIFE
INTERNATIONAL FUNDS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made to the shareholders, the
Separate Accounts and USAA Life, annually or as otherwise required to avoid the
payment of federal taxes.
At December, 31, 1998, the USAA Life International Fund had a capital loss
carryover for federal income tax purposes of $910,000 which, if not offset by
subsequent capital gains, will expire in 2006. It is unlikely that the Board of
Trustees of the Fund will authorize a distribution of capital gains realized in
the future until the capital loss carryover has been utilized or expires.
1998 ANNUAL REPORT B-67
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
3) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life
Money Income Growth and World Diversified Aggressive International
Market Fund Fund Income Fund Growth Fund Assets Fund Growth Fund Fund
(000) (000) (000) (000) (000) (000) (000)
---------- --------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $229,667 $29,950 $44,703 $21,863 $18,678 $20,622 $9,499
Sales/Maturities $223,361 $20,667 $35,285 $22,673 $15,733 $40,314 $8,888
</TABLE>
For all Funds except the USAA Life Money Market Fund, cost of purchases and
proceeds from sales/maturities excludes short-term securities.
Gross unrealized appreciation and depreciation of investments as of December 31,
1998 was as follows:
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life USAA Life USAA Life
Income Growth and World Diversified Aggressive International
Fund Income Fund Growth Fund Assets Fund Growth Fund Fund
(000) (000) (000) (000) (000) (000)
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $ 1,488 $25,696 $13,113 $11,221 $10,302 $ 3,883
Depreciation (139) (3,419) (2,553) (1,331) (1,329) (2,509)
-------- ------- ------- ------- ------- -------
Net $ 1,349 $22,277 $10,560 $ 9,890 $ 8,973 $ 1,374
======== ======= ======= ======= ======= =======
</TABLE>
4) FOREIGN CURRENCY CONTRACTS
A forward currency contract (currency contract) is a commitment to purchase or
sell a foreign currency at a specified date, at a negotiated price. The USAA
Life World Growth and USAA Life International Funds currently enter into
currency contracts only in connection with the purchase or sale of a security
denominated in a foreign currency. These contracts allow the Funds to "lock in"
the U.S. dollar price of the security. Currency contracts are valued on a daily
basis using foreign currency exchange rates obtained from an independent pricing
service. Risks of entering into currency contracts include the potential
inability of the counterparty to meet the terms of the contract and the Funds
foregoing the opportunity for potential profit.
At December 31, 1998, the terms of open foreign currency contracts were as
follows:
USAA LIFE WORLD GROWTH FUND:
Foreign Currency Contracts to Sell (000):
<TABLE>
<CAPTION>
U.S. Dollar
Exchange Contracts to Value at In Exchange Unrealized Unrealized
Date Deliver 12/31/98 for U.S. Dollar Appreciation Depreciation
- ---------------- ----------------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
01/08/99 18 Pound Sterling $29 $29 - -
</TABLE>
5) TRANSACTIONS WITH AFFILIATES
A. ADVISORY FEES - USAA Investment Management Company (USAA IMCO) carries out
each Fund's investment policies and manages each Fund's portfolio. USAA IMCO is
indirectly wholly owned by USAA. The Funds' advisory fees are paid monthly and
computed on an annualized rate of .50% of the monthly average net assets of the
USAA Life Aggressive Growth Fund, .65% of the monthly average net assets of the
USAA Life International Fund, and .20% of the monthly average net assets for
each of the other Funds of the Trust.
B-68 ANNUAL REPORT 1998
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
B. ADMINISTRATIVE FEES - As outlined in the Underwriting and Administrative
Services Agreement by and between USAA Life, the Trust and USAA IMCO, USAA Life
provides certain management, administrative, legal, clerical, accounting, and
record-keeping services necessary or appropriate to conduct the Trust's business
and operations. Fees are based on estimated time incurred to provide such
services. Under a separate arrangement between USAA Life and USAA IMCO, USAA
Life delegates certain mutual fund accounting duties under the Underwriting and
Administrative Services Agreement to USAA IMCO and reimburses USAA IMCO for its
costs in providing these services.
C. EXPENSES REIMBURSED - USAA Life, out of its general account, has agreed to
pay directly or reimburse the Trust for Trust expenses to the extent that
such expenses exceed .65% of the monthly average net assets of the USAA Life
World Growth Fund, .70% of the monthly average net assets of the USAA Life
Aggressive Growth Fund, 1.10% of the monthly average net assets of the USAA
Life International Fund, and .35% of the monthly average net assets of each
other Fund. Expenses include advisory and administrative fees discussed above.
D. UNDERWRITING AND ADMINISTRATIVE SERVICES AGREEMENT - The Trust has an
agreement with USAA IMCO for exclusive underwriting and distribution of the
Funds' shares on a continuing best efforts basis. USAA IMCO receives no
commissions or fees for this service.
E. BROKERAGE SERVICES - USAA Brokerage Services, a discount brokerage service
of USAA IMCO, may execute portfolio transactions for the Funds. The amount
of brokerage commissions paid to USAA Brokerage Services during the year
ended December 31, 1998 for the USAA Life Growth and Income, USAA Life World
Growth, USAA Life Diversified Assets, and USAA Life Aggressive Growth Funds
were $6,000, $2,000, $4,000, and $1,000, respectively.
F. SHARE OWNERSHIP - At December 31, 1998, USAA Life owned 2.1 million shares
(56%) of the USAA Life Income Fund, 1.4 million shares (25%) of the USAA Life
Growth and Income Fund, 1.6 million shares (55%) of the USAA Life World
Growth Fund, 1.8 million shares (45%) of the USAA Life Diversified Assets
Fund, 1.8 million shares (85%) of the USAA Life Aggressive Growth Fund, and
2.0 million shares (93%) of the USAA Life International Fund. All other
shares are owned by the Separate Accounts.
As of the date of this report, USAA Life has redeemed 367,000 shares of the
USAA Life Income Fund, 569,000 shares of the USAA Life Growth and Income
Fund, 970,000 shares of the USAA Life World Growth Fund, 1,373,000 shares of
the USAA Life Diversified Assets Fund, and 412,000 shares of the USAA Life
Aggressive Growth Fund. USAA Life will redeem all of its remaining shares in
the USAA Life Income, USAA Life Growth and Income, and USAA Life Diversified
Assets Funds by March 31, 1999.
Certain trustees and officers of the Funds are also directors, officers,
and/or employees of USAA Life or USAA IMCO. None of the affiliated trustees
or Fund officers received any compensation from the Funds.
6) YEAR 2000 (UNAUDITED)
Like other investment companies, the Trust could be adversely affected if the
computer systems used by the Trust's investment adviser, USAA IMCO and the
Trust's other service providers are not able to perform their intended functions
effectively after 1999 because of the inability of computer software to
distinguish the year 2000 from the year 1900. USAA IMCO is taking steps to
address this potential year 2000 problem with respect to the computer systems
that they use and to obtain satisfactory assurance that comparable steps are
being taken by the Trust's other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Trust from this problem.
1998 ANNUAL REPORT B-69
<PAGE>
USAA LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
USAA Life Money Market Fund USAA Life Income Fund
----------------------------------------------- ------------------------------------------
Year Ended December 31, Year Ended December 31,
1998 1997 1996 1995* 1998 1997 1996 1995*
-------- -------- --------- ---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 10.96 $ 10.51 $ 11.32 $ 10.00
Net investment income .05 .05 .05 .06(b) .66 .75 .92 .78(b)
Net realized and unrealized
gain (loss) - - - - .35 .46 (.84) 1.61
Distributions from net
investment income (.05) (.05) (.05) (.06) (.66) (.76) (.89) (.76)
Distributions of realized
capital gains - - - - (.42) - - (.31)
------- ------- ------- ------ ------- ------- -------- -------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 10.89 $ 10.96 $ 10.51 $ 11.32
======= ======= ======= ====== ======= ======= ======== =======
Total return (%)*** 5.29 5.35 5.25 5.69 9.17 11.60 .67 23.88
Net assets at end of period (000) $22,111 $15,131 $11,245 $7,802 $41,249 $28,246 $24,049 $25,823
Ratio of expenses to average
net assets (%) .35 .35 .35 .35(a) .35 .35 .35 .35(a)
Ratio of expenses to average
net assets, excluding
reimbursements (%) .80 .70 1.24 2.29(a) .55 .52 .65 .65(a)
Ratio of net investment income
to average net assets (%) 5.17 5.22 5.10 5.55(a) 6.62 7.16 6.99 7.07(a)
Portfolio turnover (%) - - - - 61.79 30.77 97.74 55.08
</TABLE>
<TABLE>
<CAPTION>
USAA Life
USAA Life Diversified Assets Fund Aggressive Growth Fund
----------------------------------------- -----------------------------
Eight-month
Year Ended December 31, Year Ended Period Ended
December 31, December 31,
1998 1997 1996 1995* 1998 1997**
-------- --------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 14.48 $ 12.95 $ 11.96 $ 10.00 $ 11.70 $ 10.00
Net investment income (loss) .55 .50 .62 .55(b) (.05)(b) (.01)(b)
Net realized and unrealized gain .85 2.14 1.10 2.08 2.39 1.83
Distributions from net investment income (.55) (.50) (.62) (.53) - -
Distributions of realized capital gains (.26) (.61) (.11) (.14) (.17) (.12)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 15.07 $ 14.48 $ 12.95 $ 11.96 $ 13.87 $ 11.70
======= ======= ======= ======= ======= =======
Total return (%)*** 9.63 20.70 14.30 26.33 20.14 18.26
Net assets at end of period (000) $60,570 $48,212 $30,390 $26,311 $29,201 $42,545
Ratio of expenses to average
net assets (%) .35 .35 .35 .35(a) .70 .70(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .45 .42 .61 .64(a) .84 .85(a)
Ratio of net investment income (loss)
to average net assets (%) 3.72 4.02 4.46 4.93(a) (.41) (.15)(a)
Portfolio turnover (%) 29.67 19.19 43.75 58.87 50.48 73.77
</TABLE>
* Funds commenced operations January 5, 1995.
** Funds commenced operations May 1, 1997.
*** Assumes reinvestment of all dividend income and capital gains distributions
during the period. Total returns for each period do not reflect insurance
expenses that apply at the Separate Account level, such as risk and expense
charges. These expenses would reduce the total return for the period shown.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Calculated using weighted average shares.
B-70 ANNUAL REPORT 1998
<PAGE>
<TABLE>
<CAPTION>
USAA LIFE INVESTMENT TRUST
- ---------------------------------------------------------------------------------------------------------
Notes To Financial Statements
(Continued) December 31, 1998
USAA Life Growth and Income Fund USAA Life World Growth Fund
- ----------------------------------------------- --------------------------------------------------
Year Ended December 31, Year Ended December 31,
1998 1997 1996 1995* 1998 1997 1996 1995*
- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 17.98 $ 15.06 $ 12.60 $ 10.00 $ 13.34 $ 12.77 $ 11.10 $ 10.00
.28 .28 .26 .34(b) .16 .17 .18 .17 (b)
.97 3.68 2.79 2.83 1.37 1.62 2.16 1.79
(.28) (.27) (.26) (.30) (.16) (.17) (.16) (.16)
(.80) (.77) (.33) (.27) (.34) (1.05) (.51) (.70)
- -------- -------- -------- -------- -------- -------- -------- --------
$ 18.15 $ 17.98 $ 15.06 $ 12.60 $ 14.37 $ 13.34 $ 12.77 $ 11.10
======= ======== ======== ======== ======== ======== ======== ========
6.93 26.43 24.13 31.72 11.46 14.08 21.12 19.55
$100,428 $ 85,750 $ 55,932 $ 28,761 $ 42,080 $ 39,510 $ 37,535 $ 24,706
.35 .34 .35 .35 (a) .65 .59 .65 .65 (a)
.37 N/A .53 .66 (a) .66 N/A .82 .87 (a)
1.55 1.80 2.25 2.82 (a) 1.09 1.20 1.45 1.55 (a)
37.75 20.26 14.55 17.73 55.47 48.89 57.66 78.86
</TABLE>
USAA Life
International Fund
- ---------------------------
Eight-month
Year Ended Period Ended
December 31, December 31,
1998 1997**
-------- ---------
$ 10.05 $ 10.00
.11 .05 (b)
.27 .15
(.11) (.05)
- (.10)
-------- --------
$ 10.32 $ 10.05
======== ========
3.78 1.92
$ 22,226 $ 21,582
1.10 1.10 (a)
1.35 1.24 (a)
1.03 .70 (a)
42.30 30.57
1998 ANNUAL REPORT B-71
<PAGE>
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