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USAA LIFE
INVESTMENT TRUST
================================================================================
SEMIANNUAL REPORT
June 30, 2000
[USAA LOGO APPEARS HERE]
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[THIS PAGE LEFT BLANK INTENTIONALLY]
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USAA LIFE INVESTMENT TRUST
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USAA LIFE MONEY MARKET FUND
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AN OVERVIEW JUNE 30, 2000
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COMPARISON OF FUND PERFORMANCE TO BENCHMARK
[GRAPH APPEARS HERE]
USAA LIFE iMONEYNET, INC.
MONEY MARKET MONEY FUND
DATE FUND 6.28% AVERAGES (TM)/FIRST TIER 5.85%
==== ============ ==============================
1/31/95 5.77% 5.24%
2/28/95 5.70% 5.46%
3/30/95 5.84% 5.49%
4/25/95 5.76% 5.47%
5/30/95 5.74% 5.45%
6/27/95 5.79% 5.41%
7/25/95 5.51% 5.29%
8/29/95 5.45% 5.22%
9/26/95 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%
1/30/96 4.99% 4.97%
2/27/96 5.00% 4.74%
3/26/96 5.03% 4.68%
4/30/96 5.00% 4.68%
5/28/96 5.04% 4.67%
6/25/96 5.06% 4.71%
7/30/96 5.08% 4.74%
8/27/96 5.05% 4.73%
9/24/96 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%
1/28/97 5.12% 4.75%
2/25/97 5.01% 4.73%
3/25/97 5.05% 4.74%
4/29/97 5.26% 4.89%
5/27/97 5.32% 4.93%
6/24/97 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%
1/26/99 4.59% 4.37%
2/23/99 4.54% 4.26%
3/30/99 4.60% 4.22%
4/27/99 4.56% 4.19%
5/25/99 4.64% 4.18%
6/29/99 4.71% 4.26%
7/26/99 4.80% 4.38%
8/30/99 4.93% 4.55%
9/27/99 4.99% 4.65%
10/25/99 4.96% 4.76%
11/29/99 5.15% 4.97%
12/27/99 5.79% 5.15%
1/25/00 5.40% 5.10%
2/29/00 5.46% 5.19%
3/28/00 5.72% 5.29%
4/25/00 5.86% 5.39%
5/30/00 6.21% 5.69%
6/28/00 6.28% 5.85%
Data represent the last Tuesday of each month.
The graph above tracks the USAA Life Money Market Fund's seven-day yield
compared to a benchmark -- iMoneyNet, Inc. Money Fund Averages(TM)/First Tier,
an average of all major money market fund seven-day yields. Information for the
benchmark is based on a full calendar year in 1995, whereas the USAA Life 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 Noble
CURRENT MARKET CONDITIONS
We have experienced six interest-rate increases since June 1999. At its most
recent meeting June 28, 2000, the Federal Reserve (the Fed) left the federal
funds rate unchanged at 6.50%. At that time, the Fed stated that "the committee
believes the risks continue to be weighted mainly toward conditions that may
generate heightened inflation pressures in the foreseeable future." If economic
statistics indicate that the economy continues to grow in excess of 3.5% - 4.0%,
then the odds are favorable that the federal funds rate will be further
increased.
The rising-interest-rate environment has had a positive impact on the USAA Life
Money Market Fund. Since our report to you one year ago, the seven-day yield has
increased from 4.72% to 6.33%. By maintaining a very short weighted average
maturity, the Fund is well positioned to take advantage of rising short-term
interest rates.
STRATEGY
The USAA Life Money Market Fund is managed to provide the highest degree of
liquidity and safety while maintaining a stable net asset value. We use
commercial paper, variable-rate demand notes, and U.S. government agency
discount notes to pursue this objective. The mix among these investment vehicles
varies based on product availability, cash flows of the Fund, and market
conditions.
INVESTMENT PROGRAM
The Fund invests its assets in high-quality, U.S. dollar-denominated debt
securities of domestic and foreign issuers that have been determined to present
minimal credit risk.
SIMPLE SEVEN-DAY YIELD: 6.33%*
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
--------------------------------------------------
December 31, 1999
to June 30, 2000: 2.91%**
One-Year: 5.58%
Five-Year: 5.32%
Since Inception
January 5, 1995: 5.37%
* The seven-day yield quotation more closely reflects the current earnings of
the Fund than the total return quotation.
** Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
-----
B-3
<PAGE>
USAA LIFE INVESTMENT TRUST
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USAA LIFE MONEY MARKET FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE
According to Lipper Analytical Services, Inc., the USAA Life Money Market Fund
was ranked 20 out of 108 variable insurance product money market funds for the
six months ended June 30, 2000. The total return for the USAA Life Money Market
Fund was 2.91% compared to an average of 2.80% for all variable insurance
product money market funds. Past performance is no guarantee of future results.
PORTFOLIO MIX AS A PERCENTAGE OF NET ASSETS
as of June 30, 2000
-------------------------------------------
U.S. Agency
Discount Notes
14.9%
[GRAPH APPEARS HERE]
Commercial Paper
39.3%
Variable-Rate
Demand Notes
45.3%
* Percentages are of net assets and may not be equal to 100%.
* Lipper Analytical Services, Inc. is an independent organization that monitors
fund performance of variable insurance products.
* An investment in the USAA Life Money Market Fund is not insured or guaranteed
by the FDIC or any other government agency. Although the under-lying Fund
seeks to preserve the value of the Fund at $1 per share, it is possible to
lose money by investing in the Fund.
-----
B-4
<PAGE>
USAA LIFE INVESTMENT TRUST
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USAA LIFE INCOME FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
COMPARISON OF FUND PERFORMANCE TO BENCHMARKS
[GRAPH APPEARS HERE]
USAA LIFE INCOME LEHMAN BROTHERS AGGREGATE LIPPER A-RATED BOND
DATE FUND $15,153 BOND INDEX $15,091 FUND INDEX* $14,097
==== ================ ========================= ===================
01/01/95 10,000.00 10,000.00 10,000.00
01/95 10,290.00 10,197.90 10,163.53
02/95 10,520.00 10,440.37 10,388.96
03/95 10,530.00 10,504.42 10,453.96
04/95 10,700.00 10,651.15 10,595.39
05/95 11,210.00 11,063.32 11,034.53
06/95 11,220.00 11,144.43 11,111.70
07/95 11,200.00 11,119.54 11,053.41
08/95 11,400.00 11,253.74 11,195.54
09/95 11,650.00 11,363.22 11,310.45
10/95 11,870.00 11,511.00 11,472.27
11/95 12,100.00 11,683.49 11,648.15
12/95 12,388.66 11,847.46 11,820.02
01/96 12,454.32 11,926.13 11,875.46
02/96 12,027.50 11,718.83 11,618.71
03/96 11,863.34 11,637.37 11,527.11
04/96 11,688.24 11,571.92 11,443.24
05/96 11,666.35 11,548.42 11,417.18
06/96 11,863.34 11,703.51 11,543.49
07/96 11,830.51 11,735.54 11,565.91
08/96 11,786.73 11,715.87 11,543.74
09/96 12,005.61 11,920.04 11,739.71
10/96 12,333.94 12,184.08 11,984.84
11/96 12,585.65 12,392.78 12,186.85
12/96 12,472.26 12,277.55 12,075.37
01/97 12,519.73 12,315.15 12,097.76
02/97 12,567.20 12,345.78 12,130.62
03/97 12,329.86 12,208.97 11,981.85
04/97 12,496.00 12,391.74 12,135.52
05/97 12,642.12 12,508.88 12,239.86
06/97 12,844.48 12,657.35 12,390.50
07/97 13,225.41 12,998.68 12,747.40
08/97 13,106.37 12,887.80 12,600.29
09/97 13,380.17 13,077.87 12,797.20
10/97 13,570.63 13,267.60 12,934.69
11/97 13,725.39 13,328.69 12,984.40
12/97 13,919.15 13,462.89 13,104.82
01/98 14,109.65 13,635.73 13,258.61
02/98 14,084.25 13,625.46 13,244.69
03/98 14,122.35 13,672.28 13,290.41
04/98 14,173.15 13,743.65 13,347.75
05/98 14,377.22 13,874.02 13,474.81
06/98 14,568.23 13,991.68 13,578.37
07/98 14,606.44 14,021.44 13,587.93
08/98 14,810.19 14,249.63 13,706.17
09/98 15,039.41 14,583.30 14,021.46
10/98 15,064.88 14,506.20 13,887.31
11/98 15,141.28 14,588.53 14,010.09
12/98 15,195.79 14,632.39 14,060.13
01/99 15,279.51 14,736.82 14,165.14
02/99 15,000.43 14,479.57 13,850.26
03/99 15,000.43 14,559.81 13,943.30
04/99 15,014.39 14,605.93 13,983.50
05/99 14,812.55 14,478.00 13,804.36
06/99 14,672.67 14,431.88 13,738.77
07/99 14,560.78 14,370.43 13,677.13
08/99 14,504.83 14,363.12 13,635.17
09/99 14,658.69 14,529.87 13,776.95
10/99 14,686.66 14,583.48 13,788.92
11/99 14,630.71 14,582.44 13,796.07
12/99 14,411.84 14,512.12 13,729.55
01/00 14,396.07 14,464.60 13,674.89
02/00 14,632.59 14,639.53 13,812.03
03/00 14,869.11 14,832.38 13,966.57
04/00 14,806.04 14,789.91 13,855.99
05/00 14,806.04 14,783.13 13,802.82
06/00 15,152.93 15,090.69 14,097.35
Data represent the last business day of each month.
* Total returns may change over time due to funds being added and deleted from
the category.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Income Fund to two industry indexes that 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 USAA Life 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.
Lipper Analytical Services, Inc. is an independent organization that monitors
fund performance of variable insurance products.
GENERAL DISCUSSION
By Portfolio Manager Didi Weinblatt
MARKET CONDITIONS AND PERFORMANCE
For the six months ended June 30, 2000, the USAA Life Income Fund had a total
return of 5.14%, well above the 3.23% average return for the Variable Annuity
A-Rated Bond Fund category of Lipper Analytical Services, Inc. and the 3.99%
return for the Lehman Aggregate Bond Index.
The Federal Reserve (the Fed) increased the federal funds rate (the rate used
for overnight lending between banks) six times since June 1999 for a total of
1.75%. However, in mid-January, faced with a large budget surplus, the U. S.
government announced a buyback of long-term Treasury bonds. This created strong
demand for long-term Treasury bonds; their prices rose and yields fell as a
result. In general, when interest rates rise, bond prices fall and when interest
rates fall, bond prices rise.
But the Fed's tightening of the economy caused yields on short-term Treasury
bonds to rise. The result was an inverted Treasury yield curve -- a condition
under which long-term bond interest rates are lower than those of short-term
bonds (6/30/00). Normally, long-term bond interest rates are higher than those
of short-term bonds (12/31/99). These conditions are illustrated in the Yield
Curve for U.S. Treasuries chart on page B-6.
INVESTMENT PROGRAM
The Fund invests its assets primarily in U. S. dollar-denominated debt and
income-producing securities that have been selected for their high yields
relative to the risk involved.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
-------------------------------------
December 31, 1999
to June 30, 2000 5.14%*
One-Year: 3.27%
Five-Year: 6.19%
Since Inception
January 5, 1995: 7.87%
* Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
-----
B-5
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INCOME FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
30-YEAR U.S. TREASURY BOND YIELD
[GRAPH APPEARS HERE]
Beginning Yield: 6.47%
Low Yield: 5.69%
Ending Yield: 5.90%
DATE 30 YEAR 10 YEAR DATE 30 YEAR 10 YEAR
==== ======= ======= ==== ======= =======
12/31/99 6.3252 6.4606 4/3/00 6.0551 5.9266
1/3/00 6.3397 6.4785 4/4/00 6.0447 5.9071
1/4/00 6.351 6.4861 4/5/00 6.0331 5.8891
1/5/00 6.3647 6.5031 4/6/00 6.0217 5.8778
1/6/00 6.3761 6.5095 4/7/00 6.0077 5.8501
1/7/00 6.3865 6.5155 4/10/00 5.9903 5.819
1/10/00 6.3957 6.5274 4/11/00 5.978 5.7983
1/11/00 6.4083 6.5471 4/12/00 5.9665 5.7822
1/12/00 6.4225 6.5746 4/13/00 5.9552 5.7737
1/13/00 6.4336 6.5981 4/14/00 5.9434 5.7685
1/14/00 6.4484 6.6201 4/17/00 5.9363 5.7804
1/17/00 6.4634 6.6268 4/18/00 5.9285 5.7941
1/18/00 6.4817 6.6477 4/19/00 5.918 5.801
1/19/00 6.4979 6.6574 4/20/00 5.9073 5.8046
1/20/00 6.5156 6.6768 4/21/00 5.8956 5.8163
1/21/00 6.5333 6.6916 4/24/00 5.8858 5.8371
1/24/00 6.5482 6.6981 4/25/00 5.8807 5.8537
1/25/00 6.5591 6.6945 4/26/00 5.8761 5.8667
1/26/00 6.5673 6.6797 4/27/00 5.8742 5.886
1/27/00 6.5716 6.6663 4/28/00 5.8729 5.9044
1/28/00 6.5742 6.6418 5/1/00 5.8724 5.9101
1/31/00 6.5758 6.6219 5/2/00 5.8738 5.9202
2/1/00 6.5745 6.5895 5/3/00 5.8791 5.9471
2/2/00 6.5689 6.5463 5/4/00 5.8873 5.9796
2/3/00 6.5572 6.4852 5/5/00 5.894 6.0157
2/4/00 6.55 6.4429 5/8/00 5.9029 6.0525
2/7/00 6.5459 6.4121 5/9/00 5.9107 6.0802
2/8/00 6.5378 6.3718 5/10/00 5.9166 6.1008
2/9/00 6.5335 6.3461 5/11/00 5.9255 6.1168
2/10/00 6.5339 6.3371 5/12/00 5.9379 6.1409
2/11/00 6.5269 6.3188 5/15/00 5.9493 6.1574
2/14/00 6.5138 6.2925 5/16/00 5.9606 6.1676
2/15/00 6.504 6.2748 5/17/00 5.9742 6.1744
2/16/00 6.4922 6.2729 5/18/00 5.9886 6.1817
2/17/00 6.481 6.2811 5/19/00 6.0051 6.1835
2/18/00 6.4381 6.2697 5/22/00 6.0224 6.1777
2/21/00 6.4539 6.2515 5/23/00 6.0354 6.1724
2/22/00 6.4344 6.2369 5/24/00 6.0481 6.1768
2/23/00 6.4147 6.2181 5/25/00 6.0585 6.1728
2/24/00 6.3975 6.1889 5/26/00 6.068 6.1587
2/25/00 6.3785 6.1749 5/29/00 6.0722 6.1493
2/28/00 6.3618 6.1709 5/30/00 6.0783 6.1472
2/29/00 6.3416 6.1603 5/31/00 6.0837 6.1296
3/1/00 6.3229 6.1496 6/1/00 6.0875 6.1012
3/2/00 6.3024 6.1409 6/2/00 6.0914 6.0751
3/3/00 6.2837 6.1383 6/5/00 6.0927 6.0481
3/6/00 6.2668 6.1367 6/6/00 6.0918 6.0229
3/7/00 6.2505 6.1427 6/7/00 6.0906 5.9943
3/8/00 6.2368 6.1462 6/8/00 6.0873 5.9723
3/9/00 6.2246 6.1477 6/9/00 6.0851 5.9559
3/10/00 6.2154 6.1524 6/12/00 6.0812 5.937
3/13/00 6.2047 6.1507 6/13/00 6.0792 5.9227
3/14/00 6.1936 6.1457 6/14/00 6.0723 5.9129
3/15/00 6.1868 6.1379 6/15/00 6.0646 5.9109
3/16/00 6.1837 6.129 6/16/00 6.0539 5.9033
3/17/00 6.1747 6.1159 6/19/00 6.0422 5.9009
3/20/00 6.1634 6.1019 6/20/00 6.0316 5.8997
3/21/00 6.1547 6.0843 6/21/00 6.0256 5.9057
3/22/00 6.1428 6.064 6/22/00 6.0195 5.9133
3/23/00 6.1254 6.0395 6/23/00 6.0141 5.9279
3/24/00 6.1159 6.0205 6/26/00 6.0083 5.9387
3/27/00 6.1076 6.0013 6/27/00 6.0023 5.9371
3/28/00 6.0987 5.99 6/28/00 5.9946 5.9413
3/29/00 6.089 5.9795 6/29/00 5.9828 5.9364
3/30/00 6.0777 5.963 6/30/00 5.9725 5.9391
3/31/00 6.0667 5.9458
YIELD CURVES FOR U.S. TREASURY BONDS
DATE YIELD MATURITY
==== ===== ========
3 mo 5.312 5.86
6 mo 5.726 6.125
1yr 5.962 6.062
2 yr 6.235 6.358
5 yr 6.342 6.179
10 yr 6.435 6.023
30 yr 6.479 5.896
-----
B-6
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INCOME FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
TOP 10 SECURITIES
as of June 30, 2000
-----------------------------------------------
Coupon % of
Rate Net Assets
GNMA 6.00% 20.1%
FNMA 7.00 8.2
GNMA 7.00 7.4
U. S. Treasury Bond 6.63 6.0
Phillips Petroleum
Co. Notes 8.75 4.2
DaimlerChrysler
NA Holding Global
Debentures 8.00 4.1
FNMA 7.50 4.0
Washington Mutual
Subordinated Notes 8.25 4.0
Yosemite Security
Trust I Bonds 8.25 4.0
Province of Quebec
Global Debentures 7.00 3.9
PORTFOLIO
The bonds in the USAA Life Income Fund were well positioned to take advantage of
the rally in long- and intermediate-term Treasury bonds. The Fund's Government
National Mortgage Association (GNMA) securities also performed well, because the
U.S. government backs them with full faith and credit. Real estate investment
trust (REIT) preferred stocks also added to the Fund's performance. Since the
beginning of the year, yields on corporate bonds have increased relative to
those on Treasury bonds. This created a buying opportunity that we used to
increase the Fund's corporate bond allocation from 20% to 38%.
OUTLOOK
Our outlook for the bond market continues to depend on Fed policy. After a year
of Fed tightening, the economy is beginning to show signs of slowing. This would
be good news for the bond market, because it would signal that the tightening
cycle might be near its end. This gives us reason to be cautiously optimistic
about the course of interest rates.
-----
B-7
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
INVESTMENT PROGRAM
The Fund invests its assets primarily in dividend-paying equity securities.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
---------------------------------------------
December 31, 1999
to June 30, 2000: 1.94%*
One-Year: 0.22%
Five-Year: 17.27%
Since Inception
January 5, 1995: 18.88%
* Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
COMPARISON OF FUND PERFORMANCE TO BENCHMARK
[GRAPH APPEARS HERE]
USAA LIFE GROWTH AND S&P 500 INDEX
DATE INCOME FUND $25,836 $34,946
==== ==================== =============
1/1/95 10,000.00 10,000.00
01/95 10,150.00 10,259.15
02/95 10,480.00 10,658.57
03/95 10,720.00 10,972.59
04/95 11,080.00 11,295.45
05/95 11,410.00 11,746.22
06/95 11,650.00 12,018.58
07/95 11,990.00 12,416.96
08/95 12,190.00 12,447.96
09/95 12,530.00 12,972.99
10/95 12,230.00 12,926.64
11/95 12,900.00 13,493.45
12/95 13,172.27 13,753.37
01/96 13,475.44 14,220.93
02/96 13,632.26 14,353.23
03/96 14,123.60 14,491.42
04/96 14,301.32 14,704.87
05/96 14,489.50 15,083.46
06/96 14,499.95 15,140.96
07/96 13,841.34 14,472.41
08/96 14,343.14 14,778.14
09/96 15,033.12 15,609.15
10/96 15,357.20 16,039.49
11/96 16,339.89 17,250.82
12/96 16,350.51 16,909.09
1/97 17,023.64 17,964.92
2/97 17,164.78 18,105.96
3/97 16,676.22 17,363.40
4/97 17,175.64 18,399.05
5/97 18,401.48 19,523.93
6/97 19,111.32 20,391.89
7/97 20,378.13 22,014.03
8/97 19,766.57 20,781.69
9/97 20,640.23 21,919.19
10/97 19,810.25 21,187.97
11/97 20,399.97 22,168.00
12/97 20,671.30 22,548.44
1/98 20,510.34 22,797.59
2/98 21,993.43 24,440.89
3/98 23,131.62 25,691.47
4/98 23,269.58 25,954.56
5/98 22,688.82 25,509.05
6/98 22,700.45 26,544.45
7/98 21,525.29 26,263.91
8/98 18,244.14 22,469.40
9/98 18,837.54 23,910.05
10/98 20,315.22 25,851.91
11/98 21,536.93 27,418.11
12/98 22,102.75 28,997.04
1/99 22,711.64 30,209.14
2/99 22,139.28 29,270.41
3/99 23,223.11 30,441.17
4/99 24,903.65 31,619.99
5/99 24,606.78 30,874.14
6/99 25,780.28 32,586.46
7/99 24,973.50 31,569.95
8/99 24,374.52 31,413.65
9/99 23,543.30 30,553.54
10/99 24,508.99 32,486.17
11/99 24,570.11 33,146.50
12/99 25,345.60 35,096.04
1/00 24,277.70 33,332.94
2/00 23,088.15 32,702.62
3/00 25,697.06 35,899.81
4/00 25,724.09 34,820.12
5/00 25,931.24 34,106.30
6/00 25,836.36 34,946.29
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 weighted 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 1995 calculations for the S&P 500 Index are based on a full calendar year
1995, whereas the calculations for the USAA Life 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
The performance of the USAA Life Growth and Income Fund for the six-month period
ended June 30, 2000, bested the performance of the S&P 500. The performance for
this period was 1.94% versus a return of -0.43% for the S&P 500. This
performance is also positive when compared to that of the average variable
annuity growth and income fund as defined by Lipper Analytical Services, Inc.,
which had a total return of -1.12%.
The solid relative performance by the USAA Life Growth and Income Fund can be
attributed largely to the Fund's exposure in four sectors of the market:
consumer staples, energy, financials, and technology. Within the consumer
staples area, the Fund's holdings of food and beverage stocks (Pepsi Bottling,
Nabisco Holdings, and Bestfoods) aided performance the most. Dutch food
conglomerate Unilever's bid to acquire Bestfoods particularly helped to raise
the valuation and share prices of most consumer staple shares. The continued
rise in energy prices through the end of June was responsible largely for the
performance of the Fund's holdings in the energy sector. Despite the Federal
Reserve's (the Fed's) efforts to restrain inflation through higher interest
rates, the shares of selected financial services companies performed well.
However, this performance was limited to brokerage firms (Morgan Stanley Dean
Witter) and insurance companies (American International Group and Everest RE
Group). The Fund's holdings in technology shares also performed well.
-----
B-8
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
Holdings in basic materials and communication services hindered the Fund's
performance most. Although higher interest rates could slow economic growth and
hurt demand for such commodities as aluminum, paper, wood, and various
chemicals, we feel that the market has overly discounted what will eventually
happen to these industries. Strong competitive forces have worried investors in
both the local and long-distance communications industries. However, this
competition could bring opportunities to buy undervalued "winners."
PORTFOLIO STRATEGY AND OUTLOOK
Our overall strategy for the USAA Life Growth and Income Fund will remain the
same. We focus on quantitative and qualitative analysis of company fundamentals.
We also attempt to maintain a balance and diversification among the major
economic sectors.
As discussed in our 1999 Annual Report, we continue to be concerned with not
only the overall valuation of the market, but also the continued price
volatility. Some of this volatility is the result of momentum investing, whereby
investors move from one sector to another based on recent share-price
performance. This strategy tends to ignore valuation, which has always been a
fundamental part of our investment strategy.
We continue to favor the energy sector because we believe that share prices have
not adequately valued the tighter market for crude oil and natural gas. We also
favor financials, particularly banks, because these shares have declined to
levels that overly discount the potential for an economic slowdown or recession.
TOP 10 EQUITY HOLDINGS
as of June 30, 2000
-------------------------------------------
% of
Net Assets
Intel Corp. 3.1%
Oracle Corp. 3.1
Cisco Systems, Inc. 2.7
General Electric Co. 2.5
American International Group 2.4
IBM Corp. 2.3
Bausch & Lomb Inc. 2.2
Avery Dennison Corp. 2.1
Merck & Co., Inc. 2.1
Microsoft Corp. 2.1
TOP 10 INDUSTRIES
as of June 30, 2000
-------------------------------------------
% of
Net Assets
Computer Software & Service 6.3%
Health Care - Diversified 5.9
Drugs 4.7
Finance - Diversified 4.6
Computer - Hardware 3.9
Telephones 3.7
Electrical Equipment 3.1
Electronics - Semiconductors 3.1
Aerospace/Defense 2.9
Retail - General Merchandising 2.9
Lipper Analytical Services, Inc. is an independent organization that monitors
fund performance of variable insurance products.
------
B-9
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
INVESTMENT PROGRAM
The Fund invests its assets primarily in equity securities of both foreign and
domestic issuers. The Fund may invest the remainder of its assets in investment-
grade, short-term debt instruments with remaining maturities of less than one
year that are issued and guaranteed as to principal and interest by the U. S.
government or by its agencies, or in repurchase agreements collateralized by
such securities.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
----------------------------------
December 31, 1999
to June 30, 2000: 3.00%*
One-Year: 22.06%
Five-Year: 17.37%
Since Inception
January 5, 1995: 18.02%
* Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
COMPARISON OF FUND PERFORMANCE TO BENCHMARK
[GRAPH APPEARS HERE]
USAA LIFE WORLD MORGAN STANLEY CAPITAL
GROWTH FUND INTERNATIONAL, INC. - WORLD
DATE $24,832 $24,005
==== =============== ===========================
01/01/95 10,000.00 10,000.00
01/95 9,710.00 9,847.50
02/95 9,790.00 9,988.67
03/95 10,160.00 10,467.69
04/95 10,490.00 10,830.07
05/95 10,920.00 10,920.27
06/95 11,150.00 10,914.45
07/95 11,710.00 11,458.09
08/95 11,620.00 11,200.36
09/95 11,770.00 11,524.16
10/95 11,480.00 11,340.24
11/95 11,650.00 11,731.52
12/95 11,955.58 12,072.03
01/96 12,321.79 12,287.92
02/96 12,558.74 12,360.23
03/96 12,849.56 12,563.35
04/96 13,463.49 12,856.19
05/96 13,592.74 12,864.73
06/96 13,614.28 12,927.20
07/96 12,935.72 12,467.75
08/96 13,334.24 12,608.46
09/96 13,668.14 13,099.52
10/96 13,625.05 13,188.37
11/96 14,379.01 13,924.82
12/96 14,481.02 13,699.20
01/97 15,036.68 13,861.73
02/97 15,014.00 14,018.57
03/97 14,866.58 13,738.66
04/97 15,059.36 14,185.12
05/97 15,931.95 15,058.09
06/97 16,666.03 15,806.53
07/97 17,480.41 16,531.95
08/97 16,666.03 15,423.44
09/97 17,652.46 16,258.74
10/97 16,631.62 15,400.40
11/97 16,356.34 15,670.30
12/97 16,520.55 15,858.66
1/98 16,557.70 16,297.98
2/98 17,808.50 17,397.80
3/98 18,836.39 18,129.78
4/98 19,146.00 18,304.23
5/98 18,815.03 18,072.10
6/98 18,765.29 18,498.25
7/98 18,504.14 18,465.83
8/98 15,407.68 16,000.59
9/98 15,320.63 16,280.82
10/98 16,564.19 17,749.82
11/98 17,297.89 18,802.60
12/98 18,414.41 19,718.35
1/99 18,862.91 20,147.25
2/99 18,247.82 19,608.45
3/99 19,067.95 20,422.00
4/99 19,747.11 21,224.20
5/99 19,228.01 20,445.78
6/99 20,343.98 21,396.54
7/99 20,549.22 21,329.46
8/99 20,728.80 21,288.65
9/99 20,420.94 21,079.33
10/99 21,062.31 22,172.14
11/99 22,191.10 22,793.02
12/99 24,109.10 24,635.09
1/00 23,112.73 23,221.50
2/00 24,094.00 23,281.34
3/00 25,120.57 24,887.62
4/00 24,335.55 23,832.46
5/00 23,794.81 23,226.26
6/00 24,832.68 24,005.46
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 World Growth Fund to its benchmark, the Morgan Stanley Capital
International, Inc. (MSCI)-World Index, an unmanaged index that reflects the
movement of world stock markets by representing a broad selection of
domestically listed companies within each market.
The 1995 calculations for the Morgan Stanley Index are based on a full calendar
year, whereas the USAA Life 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 Albert Sebastian, Kevin P. Moore, and Curt Rohrman
MARKET CONDITIONS
For the six-month period ended June 30, 2000, the USAA Life World Growth Fund's
total return was 3.0%, compared to the Lipper Variable Annuity Global Funds
Average return of -0.22% and the Morgan Stanley Capital International
(MSCI)-World Index return of -2.56%. The Fund's under-representation in Asian
and Internet equities had a negative impact on its performance last year. The
recent poor performance of these same stocks contributed to the Fund's improved
relative performance this year.
INTERNATIONAL
Europe - In 2000, the Fund benefited from its overweighted position in European
equities. This is in spite of a weaker euro versus the U.S. dollar. Within
Europe, the Fund benefited from good stock selection and an overweighted
position in energy and health care. Consumer staples and financials have also
performed well, while metal and mining stocks performed poorly.
Canada - The Canadian equity market has rebounded strongly this year and the
Fund benefited from its overweighted position. Energy stocks were particularly
strong because of higher oil and natural gas prices. Technology and financial
stocks also positively contributed to performance.
------
B-10
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
Japan - Our overweight position in the technology sector worked very well in
1999. Despite the recent turmoil in technology stocks, it was the primary reason
for our outperformance over the last six months. Our underweighted position in
bank stocks and other old-economy stocks turned out to be a good one. We believe
the corporate restructuring story is still intact and earnings outlook continues
to be favorable. However, we are skeptical about the Japanese government's
commitment to tighter fiscal policy and deregulation. We remain underweighted
until we see more progress.
Emerging Markets - Most emerging markets started 2000 on a strong upswing, only
to be caught in the negative sentiment beginning in March that gripped equity
markets. Economic growth in most Asian emerging markets continues to rebound
from the lows of regional crisis. Latin American markets also rebounded on the
back of strong exports and improving domestic economies. The South African
economy, while suffering from currency and interest pressures, continues to
grow. Economic performance in East European and Middle Eastern countries is
mixed. We believe that improving domestic demand coupled with the potential for
falling interest rates provide a favorable backdrop for emerging markets over
the next 12 months.
UNITED STATES
U.S. stocks performed well through the period despite a series of Federal
Reserve Board (the Fed) interest-rate hikes. A combination of robust domestic
growth, strengthening overseas economies, and low inflation worldwide provided
the perfect environment for accelerating earnings growth. The technology sector
remained the performance leader, driven by global demand for Internet
infrastructure, software and services, and wireless communications equipment and
services. Concerns that slow computer sales would follow year 2000 preparations
proved unfounded. Domestic holdings benefited from a heavy weighting in
technology. Several stocks in the health care, consumer, and financial
industries also showed good gains.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of June 30, 2000
--------------------------------------------------
Other* 20.3%
USA 32.3%
Spain 2.4%
Italy 2.7%
Sweden 2.8% [GRAPH APPEARS HERE]
France 4.7%
Finland 3.3%
Canada 5.8% United Kingdom 10.0%
Netherlands 6.6% Japan 9.1%
* Countries representing less than 2% of the portfolio and U. S. government and
agency issues.
------
B-11
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
OUTLOOK
In our view, the strength of the global economy is encouraging and recent signs
that the U.S. economy may be slowing are positive. We continue to favor Europe
and Canada based on attractive valuations, sustainable economic growth,
corporate restructuring, and a benign inflation outlook. Large-capitalization
growth stocks in the telecommunication and technology sectors will continue to
lead the market in Japan. We are, however, less positive about Japan due to the
high level of financial and government debt and the uncertain political outlook.
In emerging markets we favor Brazil and Mexico, and technology stocks in Korea
and Taiwan. Overall in the portfolio, we continue to underweight the financial
and utility sectors and overweight the technology, industrial, and energy
sectors.
Our outlook for the United States market is constructive. Interest-rate
increases in the first half of 2000 may have slowed the economy to a point where
aggregate supply and demand are in general balance. Technology investments
should provide sufficient productivity increases to offset any potential labor
shortages. An extension of 1999's healthy global economic environment could
allow for double-digit earnings growth and at least average stock market returns
for the year.
The Lipper Global Funds Average is the average performance level of all global
funds, as reported by Lipper Analytical Services, Inc., 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.
TOP 10 EQUITY HOLDINGS
as of June 30, 2000
---------------------------------------------
% of
Net Assets
Nokia Corp. ADR (Finland) 2.4%
Cisco Systems, Inc. (U.S.) 1.6
Intel Corp. (U.S.) 1.5
Koninklijke Philips Electronics
N.V. ADR (Netherlands) 1.5
Nortel Networks Corp. (Canada) 1.4
General Electric Co. (U.S.) 1.3
Oracle Corp. (U.S.) 1.3
Texas Instruments, Inc. (U.S.) 1.3
Total Fina S.A. (France) 1.3
Avon Products, Inc. (U.S.) 1.1
TOP 10 INDUSTRIES
as of June 30, 2000
---------------------------------------------
% of
Net Assets
Drugs 6.7%
Telephones 6.5
Communication Equipment 6.4
Electronics - Semiconductors 5.3
Computer Software & Service 4.5
Banks - Money Center 4.1
Insurance - Multiline Companies 3.7
Electrical Equipment 3.0
Oil - International Integrated 2.7
Beverages - Nonalcoholic 2.6
------
B-12
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
COMPARISON OF FUND PERFORMANCE TO BENCHMARKS
[GRAPH APPEARS HERE]
USAA LIFE LIPPER BALANCED LEHMAN BROTHERS
DIVERSIFIED S&P 500 FUND AGGREGATE BOND
DATE ASSETS FUND $21,117 INDEX $34,946 AVERAGE $21,687 INDEX $15,091
==== =================== ============= =============== ================
1/1/95 10,000.00 10,000.00 10,000.00 10,000.00
01/95 10,120.00 10,259.15 10,126.25 10,197.90
02/95 10,330.00 10,658.57 10,409.74 10,440.37
03/95 10,550.00 10,972.59 10,597.54 10,504.42
04/95 10,860.00 11,295.45 10,778.69 10,651.15
05/95 11,240.00 11,746.22 11,136.57 11,063.32
06/95 11,300.00 12,018.58 11,355.56 11,144.43
07/95 11,450.00 12,416.96 11,616.84 11,119.54
08/95 11,640.00 12,447.96 11,714.76 11,253.74
09/95 11,970.00 12,972.99 11,958.79 11,363.22
10/95 11,890.00 12,926.64 11,926.97 11,511.00
11/95 12,270.00 13,493.45 12,275.42 11,683.49
12/95 12,633.12 13,753.37 12,414.80 11,847.46
01/96 12,833.81 14,220.93 12,636.46 11,926.13
02/96 12,844.38 14,353.23 12,661.46 11,718.83
03/96 13,108.45 14,491.42 12,711.70 11,637.37
04/96 13,002.82 14,704.87 12,833.89 11,571.92
05/96 13,150.70 15,083.46 12,995.92 11,548.42
06/96 13,340.83 15,140.96 12,996.51 11,703.51
07/96 13,002.82 14,472.41 12,658.92 11,735.54
08/96 13,192.95 14,778.14 12,886.94 11,715.87
09/96 13,678.84 15,609.15 13,404.79 11,920.04
10/96 14,059.10 16,039.49 13,643.06 12,184.08
11/96 14,650.62 17,250.82 14,230.54 12,392.78
12/96 14,440.15 16,909.09 14,018.43 12,277.55
1/97 14,808.13 17,964.92 14,445.32 12,315.15
2/97 14,964.24 18,105.96 14,399.18 12,345.78
3/97 14,573.96 17,363.40 13,958.39 12,208.97
4/97 14,941.93 18,399.05 14,394.92 12,391.74
5/97 15,616.42 19,523.93 15,011.68 12,508.88
6/97 16,051.17 20,391.89 15,464.40 12,657.35
7/97 16,863.45 22,014.03 16,363.30 12,998.68
8/97 16,337.18 20,781.69 15,850.57 12,887.80
9/97 16,966.41 21,919.19 16,450.32 13,077.87
10/97 16,783.36 21,187.97 16,193.49 13,267.60
11/97 17,183.79 22,168.00 16,428.02 13,328.69
12/97 17,428.84 22,548.44 16,642.07 13,462.89
1/98 17,609.39 22,797.59 16,771.80 13,635.73
2/98 18,319.54 24,440.89 17,437.28 13,625.46
3/98 18,813.04 25,691.47 17,959.23 13,672.28
4/98 18,849.15 25,954.56 18,083.59 13,743.65
5/98 18,817.00 25,509.05 17,935.18 13,874.02
6/98 18,913.38 26,544.45 18,358.01 13,991.68
7/98 18,503.79 26,263.91 18,162.64 14,021.44
8/98 16,973.85 22,469.40 16,541.53 14,249.63
9/98 17,576.19 23,910.05 17,280.84 14,583.30
10/98 18,142.38 25,851.91 17,880.21 14,506.20
11/98 18,865.19 27,418.11 18,545.04 14,588.53
12/98 19,107.81 28,997.04 19,305.07 14,632.39
1/99 19,171.21 30,209.14 19,684.88 14,736.82
2/99 18,981.02 29,270.41 19,147.56 14,479.57
3/99 19,488.19 30,441.17 19,662.94 14,559.81
4/99 20,730.77 31,619.99 20,246.42 14,605.93
5/99 20,608.25 30,874.14 19,909.72 14,478.00
6/99 21,123.79 32,586.46 20,550.90 14,431.88
7/99 20,608.25 31,569.95 20,145.09 14,370.43
8/99 20,309.78 31,413.65 19,916.38 14,363.12
9/99 19,848.50 30,553.54 19,729.20 14,529.87
10/99 20,255.51 32,486.17 20,345.16 14,583.48
11/99 20,214.81 33,146.50 20,614.81 14,582.44
12/99 20,555.48 35,096.04 21,378.49 14,512.12
1/00 20,008.88 33,332.94 20,821.50 14,464.60
2/00 19,478.85 32,702.62 20,838.21 14,639.53
3/00 20,919.88 35,899.81 21,987.50 14,832.38
4/00 20,886.76 34,820.12 21,514.65 14,789.91
5/00 20,918.49 34,106.30 21,183.42 14,783.13
6/00 21,117.40 34,946.29 21,687.39 15,090.69
* Total Returns may change over time due to funds being added and deleted from
the category.
Data represent the last business of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Diversified Assets Fund to the Lipper Balanced Fund Average and
two industry indexes that most closely resemble the holdings of this Fund.
The S&P 500 Index is an unmanaged index representing the weighted 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
insurance product balanced funds as reported by Lipper Analytical Services,
Inc., an independent organization that monitors the performance of variable
insurance product funds.
The 1995 calculations for all indexes and averages are based on a full calendar
year, whereas the USAA Life 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 Stock) and Paul Lundmark (Debt
Securities)
PERFORMANCE
For the six months ended June 30, 2000, the USAA Life Diversified Assets Fund's
total return was 2.73% versus a return of 1.27% for the similar variable
insurance product funds as reported by Lipper Analytical Services, Inc. Details
regarding the performance of the common stocks and debt securities sectors
follow.
Common Stocks - The common stock portion's solid relative performance can be
attributed largely to the Fund's exposure in four sectors of the market:
consumer staples, energy, financials, and technology. Within the consumer
staples area, the Fund's holdings of food and beverage stocks (Pepsi Bottling
and Nabisco Holdings) aided performance the most. In particular, Dutch food
conglomerate Unilever's bid to acquire Bestfoods helped to raise the valuation
and share prices of most consumer staple shares. The continued rise in energy
prices through the end of June was responsible largely for the performance of
the Fund's holdings in the energy sector. Despite the Federal Reserve's (the
Fed's) efforts to restrain inflation through higher interest rates, the shares
of selected financial services companies performed well. However, this
performance was limited to brokerage firms (Morgan Stanley Dean Witter) and
INVESTMENT PROGRAM
The Fund invests its assets in a diversified program within one mutual fund
by allocating the Fund's assets, under normal market conditions, in
approximately 60% equity securities and approximately 40% in debt securities of
varying maturities. The Fund's assets also may be invested in shares of real
estate investment trusts (REITs).
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
-------------------------------------------
December 31, 1999
to June 30, 2000: 2.73%*
One-Year: -0.03%
Five-Year: 13.32%
Since Inception
January 5, 1995: 14.59%
* Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
------
B-13
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
insurance companies (American International Group and Everest RE Group). The
Fund's holdings in technology shares performed well also.
Holdings in basic materials and communication services hindered the Fund's
performance most. Although higher interest rates could slow economic growth and
hurt demand for such commodities as aluminum, paper, wood, and various
chemicals, we feel that the market has overly discounted what will eventually
happen to these industries. Strong competitive forces have worried investors in
both the local and long-distance communications industries. However, this
competition could bring opportunities to buy undervalued "winners."
Debt Securities - Over the past six and 12 months, the bond portion of the Fund
has outperformed the Lipper Average for its peer group. The best performing
holdings were Glenborough Properties, Empire District Electric Company, and
Giddings and Lewis. Our investments in Finova Capital, Imperial Bank, and
Nationwide Health Properties underperformed. We continue to hold these
securities because they are turning around their operations and have a
potentially good outlook.
MARKET OUTLOOK AND STRATEGY
Common Stocks - Our overall strategy for the USAA Life Diversified Assets Fund
will remain the same. We focus on quantitative and qualitative analysis of
company fundamentals. At the same time, we attempt to maintain a balance and
diversification among the major economic sectors.
As discussed in our 1999 Annual Report, we continue to be concerned with not
only the overall valuation of the market, but also the continued price
volatility. Some of this volatility is the result of momentum investing, whereby
investors move from one sector to another based on recent share-price
performance. This strategy tends to ignore valuation, which has always been a
fundamental part of our investment strategy
TOP 10 EQUITY HOLDINGS
as of June 30, 2000
------------------------------------------------------
% of
Net Assets
Intel Corp. 2.7%
Oracle Corp. 2.2
American Home Products Corp. 1.8
Bausch & Lomb, Inc. 1.8
Alcoa, Inc. 1.5
American International Group, Inc. 1.3
Avery Dennison Corp. 1.3
Bristol-Meyers Squibb Co. 1.3
CIGNA Corp. 1.3
General Electric Co. 1.3
TOP 5 DEBT HOLDINGS
as of June 30, 2000
----------------------------------------------------------------
Coupon % of
Rate Net Assets
Litton Industries, Inc. 8.00 2.9
Empire District Electric Co. 7.70 2.9
Ford Motor Credit Co. 7.38 2.8
Giddings and Lewis, Inc. 7.50 2.8
Nationwide Health Properties, Inc. 8.61 2.8
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--------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
We continue to favor the energy sector because we believe that share prices have
not adequately valued the tighter market for crude oil and natural gas. We also
favor financials, particularly banks, because these shares have declined to
levels that overly discount the potential for an economic slowdown or recession.
Debt Securities - While there have been recent signs of a slowdown, the economy
is still performing above expectations and the fear is that inflation will rise
as a result. The Fed has raised the federal funds rate six times over the past
year to slow down the economy. At the same time, investors are demanding higher
yields on non-Treasury securities, concerned that more rate increases by the Fed
could halt the record economic expansion. Based on our assessment of where there
is value in the marketplace, we have invested in higher-yielding instruments
such as corporate bonds and mortgage-backed securities.
Looking to the future, we feel that the economy will slow to a manageable pace
that will alleviate the need for the Fed to continue to raise rates. This
economic soft landing may result in an increase in the relative value of
corporate bonds and mortgage-backed securities. Our continued emphasis is on
finding securities that represent good risk/reward characteristics.
TOP 10 INDUSTRIES
as of June 30, 2000
-------------------------------------------------------
% of
Net Assets
Banks - Major Regional 7.8%
Finance - Diversified 7.2
Real Estate Investment Trusts 5.3
Manufacturing - Specialized 4.4
Computer Software & Service 3.6
Finance - Consumer 3.6
Manufacturing - Diversified Industries 3.5
Health Care - Diversified 3.2
Electric Utilities 2.9
Electronics - Defense 2.9
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--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
INVESTMENT PROGRAM
The Fund invests its assets primarily in equity securities of companies with the
prospect of rapidly growing earnings.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL TOTAL RETURNS
AS OF
JUNE 30, 2000
---------------------------------------------
December 31, 1999
to June 30, 2000: 5.36%*
One-Year: 61.78%
Three-Year: 37.62%
Since Inception
May 1, 1997: 40.10%
* Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
COMPARISON OF FUND PERFORMANCE TO BENCHMARKS
USAA LIFE AGGRESSIVE RUSSELL 2000(R)
DATE GROWTH FUND $29,090 INDEX $15,667 S&P 500 INDEX $18,994
==== ==================== ================= ======================
5/1/97 10,000.00 10,000.00 10,000.00
5/97 10,670.00 11,112.50 10,611.38
6/97 11,160.00 11,588.73 11,083.12
7/97 12,060.00 12,127.97 11,964.76
8/97 12,330.00 12,405.48 11,294.98
9/97 13,530.00 13,313.48 11,913.21
10/97 12,640.00 12,728.63 11,515.79
11/97 12,120.00 12,646.30 12,048.45
12/97 11,825.53 12,867.65 12,255.21
1/98 11,855.86 12,664.34 12,390.63
2/98 13,169.80 13,600.78 13,283.78
3/98 13,624.63 14,161.71 13,963.47
4/98 13,877.32 14,240.07 14,106.46
5/98 12,947.15 13,473.14 13,864.33
6/98 13,531.00 13,501.48 14,427.08
7/98 12,598.89 12,408.49 14,274.60
8/98 9,566.96 9,999.01 12,212.26
9/98 10,652.72 10,781.51 12,995.26
10/98 11,472.16 11,221.18 14,050.68
11/98 12,629.62 11,809.08 14,901.91
12/98 14,207.04 12,539.85 15,760.07
1/99 15,743.49 12,706.49 16,418.86
2/99 14,319.71 11,677.33 15,908.65
3/99 15,477.17 11,859.64 16,544.97
4/99 16,368.31 12,922.35 17,185.66
5/99 16,063.13 13,111.14 16,780.29
6/99 17,980.81 13,704.02 17,710.95
7/99 18,176.70 13,328.00 17,158.46
8/99 18,156.08 12,834.75 17,073.52
9/99 18,238.56 12,837.55 16,606.04
10/99 19,465.46 12,889.54 17,656.43
11/99 22,187.33 13,659.03 18,015.33
12/99 27,609.83 15,205.24 19,074.92
1/00 28,260.64 14,961.06 18,116.66
2/00 35,651.21 17,431.67 17,774.08
3/00 30,919.04 16,282.38 19,511.77
4/00 25,922.13 15,302.59 18,924.96
5/00 23,249.51 14,410.73 18,536.99
6/00 29,089.59 15,666.93 18,993.53
Data represent the last business day of each month.
The graph above compares the performance of a $10,000 hypothetical investment in
the USAA Life Aggressive Growth Fund to the S&P 500(R) Index and to the broad-
based Russell 2000(R) Index, a widely recognized, small-cap index that 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 S&P 500 Index is an unmanaged index representing the weighted 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 Russell 2000 and S&P 500 Index are based on a starting
date of May 1, 1997, whereas the calculations for the USAA Life 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 the six-month period that ended on June 30, 2000, U.S. equity markets in
general encountered high levels of volatility. The year started off on an
encouraging note, extending the gains of 1999. Buoyed by strong earnings
reports, encouraged by a heady market for initial public offerings (IPOs), and
infatuated with the new economy, growth stock prices moved up sharply between
the beginning of the year and early March, while value stocks lagged. A series
of interest-rate hikes by the Federal Reserve (the Fed) seemed not to matter.
Technology stocks, particularly Internet-related ones, led the charge upward,
joined by biotech and communications equities. As a result, valuations reached
unsustainable levels. In this highly charged environment, long-discredited small
market capitalization equities particularly were strong.
In early March, however, there was a sea change in investor psychology. Internet
stocks, particularly the "dot-coms" in the business-to-consumer space, started
to show evidence that their business models might not work. Prices of IPOs and
secondary offerings began to soften. Questions arose regarding the ownership of
intellectual property in the genome and biotech areas. Rising prices at the gas
pump fueled fears of inflation. The Fed continued to boost interest rates to
slow the economy, and this time people took notice. The confluence of these
factors prompted investors to sell stocks aggressively, which led to a dramatic
drop in equity valuations and prices that lasted well into April. Between March
10, when it
------
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--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
peaked at 614.16 on an intraday basis, and April 17, when bearish sentiment
dragged it down to its year-to-date low (441.56, intraday), the Russell 2000
Index plummeted 28.1%. The peak-to-trough decline for the NASDAQ Composite was
even more extreme, 40.7%. The movement was especially violent in the technology,
biotech, and communications areas that had been so strong earlier in the year.
Between late April and June 30, fears over the issues listed above subsided, and
U.S. equity markets staged a strong recovery, but not strong enough to offset
the damage of the preceding months. As of the end of June, most leading stock
market benchmarks had generated negative six-month total returns. The large-cap-
oriented Dow Jones 30 Industrials and the S&P 500 Index were off 8.44% and
0.43%, respectively. The technology-rich NASDAQ lost 2.54%. On the other hand,
the small-cap-intensive Russell 2000 and the S&P SmallCap 600 generated positive
total returns -- 3.04% and 6.93%, respectively -- thus continuing a trend of
improving relative performance that started in 1999.
PERFORMANCE
The USAA Life Aggressive Growth Fund participated fully in the volatility
discussed above. For the six months ended June 30, it generated a total return
of 5.36%, outperforming all of the major stock market indicators that we follow,
with the exception of the S&P 600 SmallCap Stock Index.
PORTFOLIO STRATEGY
The USAA Life Aggressive Growth Fund's strategy remains unchanged. It continues
to focus on the following three factors:
. Change. We invest in innovative companies that are well positioned to take
advantage of long-term trends that transform our economy and society. It is
our firm belief that companies that embrace change, and even initiate it,
have much better prospects for survival, success, and growth than those that
resist it. We think that some of today's most significant changes are
occurring in industries such as the Internet, broadband and wireless
communications, and genome sciences. Therefore, these are major areas of
emphasis for our investments.
. Speed. Earnings are the ultimate builders of value. Over the long term, there
is a direct correlation between rates of earnings growth and stock price
appreciation, in our analysis. With this in mind, we invest exclusively in
companies that have rapidly growing earnings or the prospect thereof. We are
not interested in stocks that have modest valuations if the potential for
rapid growth is lacking. We are more interested in whether the companies
underlying our investments will be much larger and more profitable in the
future. The stocks of most of the companies that meet our criteria for change
and speed are in the small- and mid-market capitalization ranges, and this is
reflected in our portfolio. Nevertheless, there are some large companies such
as Cisco Systems and Home Depot that have
TOP 10 EQUITY HOLDINGS
as of June 30, 2000
% of
Net Assets
-----------------------------------------------------
Genentech, Inc. 4.4
IDEC Pharmaceuticals Corp. 3.9
Sepracor, Inc. 3.1
Verisign, Inc. 2.9
TranSwitch Corp. 2.4
Metromedia Fiber Network, Inc. "A" 2.3
Immunex Corp. 2.1
JDS Uniphase Corp. 2.1
Home Depot, Inc. 1.9
Millennium Pharmaceuticals, Inc. 1.7
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--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
remained innovative and rapidly growing, and we have not hesitated to include
their stocks in the Fund. This is an all-cap fund, not a small-cap one.
. Being Early. We believe that the most lucrative time to invest in emerging
trends and companies is before they become widely known. By the time the
investment community at large discovers these opportunities, much of their
investment potential has been realized. To get in early, we invest in IPOs
and companies with short trading histories. At no time, however, do IPOs
account for a major part of the Fund's total assets or potential investment
returns.
Within this strategic framework, we made two meaningful shifts in the portfolio
during the first half of 2000:
. We eliminated our holdings in personal-computer-related stocks such as Dell
Computer, Microsoft, and Intel. Although these stocks represent great
companies with bright futures, we feel the personal-computer phenomenon has
begun to mature and that more exciting growth opportunities lie elsewhere. We
used the proceeds from these sales to increase our exposure in newer, fresher
areas of growth such as data networking, broadband and wireless
communications, and business-to-business commerce.
. We sold some of our more speculative holdings and used the cash from these
sales to establish and enhance positions in what we consider to be higher-
quality companies with greater leadership potential. Recent purchases include
Active Software, Portal Software, Akamai Technologies, Juniper Networks,
Redback Networks, Extreme Networks, Brocade Communications Systems,
GlobeSpan, Commerce One, and Ariba. The prices and valuations of these stocks
had come down sharply to more affordable levels in the March-May correction,
and presented opportunities that we felt we could not afford to forgo. We
felt that when investors renewed their interest in small- and mid-cap growth
stocks in the technology area, they would buy the quality names first, and we
wanted to be there beforehand to take full advantage of the change in
sentiment. In the aggregate, these purchases helped the Fund participate
fully in the June recovery, and will have the potential to contribute
favorably to future performance, in our opinion.
TOP 10 INDUSTRIES
as of June 30, 2000
--------------------------------------------------------
% of
Net Assets
Biotechnology 20.0
Electronics - Semiconductors 8.5
Communications Equipment 7.9
Health Care - Drugs 6.8
Telephones 6.0
Computer Software & Service 5.9
Internet Services 5.2
Computer - Networking 4.1
Telecommunications - Cellular/Wireless 3.2
Retail - Building Supplies 2.2
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--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
OUTLOOK
The performance of the USAA Life Aggressive Growth Fund during the stock market
correction earlier this year serves as a stark reminder that funds of its type
are very volatile. This is a risk that investors should be aware of at all
times. The long-term growth prospects for the stocks in the Fund look good. The
stocks that we have invested in usually carry a high valuation. But this should
not be a problem so long as the underlying companies realize their perceived
growth potential, interest rates behave, and other disruptive events remain at a
manageable level. Because this is not a perfect world, we think that equity
markets will continue to encounter air pockets. Although we are optimistic about
the long-term success of our investment journey, we urge our investors to keep
their seat belts fastened.
The NASDAQ Composite Index is a market-value-weighted index that measures all
domestic and non-U.S.-based securities.
The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded blue chip stocks, primarily industrials.
The S&P SmallCap 600 Index is an unmanaged index representing the weighted
average performance of a group of 600 domestic stocks chosen for market size,
liquidity, and industry group representation. It is not possible to invest
directly in the S&P SmallCap 600 Index.
The performance of the Fund will reflect the volatility of investments in small-
cap stocks and initial public offerings.
------
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USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
AN OVERVIEW JUNE 30, 2000
--------------------------------------------------------------------------------
INVESTMENT PROGRAM
The Fund invests at least 80% of its assets in equity securities of foreign
companies. The remainder of the assets is invested in equity securities of
companies that meet any of the criteria as described in the definition of a
foreign company, and in investment-grade, short-term debt instruments with
remaining maturities of one year that are issued and guaranteed as to principal
and interest by the U.S. government or by its agencies, or in repurchase
agreements collateralized by such securities.
NET ASSET VALUE (NAV)
AVERAGE ANNUAL
TOTAL RETURNS
AS OF
JUNE 30, 2000
-----------------------------------------
December 31, 1999
to June 30, 2000: 0.12%*
One-Year: 21.09%
Three-Year: 8.26%
Since Inception
May 1, 1997: 10.17%
* Total returns for periods of less than one year are not annualized. This six-
month return is cumulative.
The total-return calculations found in this section are calculated at the Fund
level and reflect the change in the net asset value (NAV), the reinvestment of
income dividends, and the deductions of Fund expenses. They do not reflect
insurance contract charges at the Separate Account level, such as the mortality
and expense charge. If they did, the performance quoted above would be lower.
More specific information regarding the Fund expenses and insurance contract
charges can be found in the Variable Annuity and Variable Universal Life
prospectuses. These NAV total-return calculations represent past performance,
which is no guarantee of future returns.
COMPARISON OF FUND PERFORMANCE TO BENCHMARK
USAA LIFE INTERNATIONAL MORGAN STANLEY CAPITAL
DATE FUND $13,590 INTERNATIONAL - EAFE $15,033
==== ======================= ============================
5/1/97 10,000.00 10,000.00
5/97 10,300.00 10,650.74
6/97 10,710.00 11,238.10
7/97 11,080.00 11,419.91
8/97 10,470.00 10,567.02
9/97 11,180.00 11,158.97
10/97 10,440.00 10,301.24
11/97 10,110.00 10,196.22
12/97 10,191.91 10,285.16
1/98 10,171.63 10,755.54
2/98 10,830.81 11,445.67
3/98 11,530.55 11,798.10
4/98 11,773.94 11,891.49
5/98 11,585.69 11,833.77
6/98 11,311.77 11,923.36
7/98 11,261.05 12,044.24
8/98 9,404.50 10,552.09
9/98 9,079.85 10,228.58
10/98 9,911.75 11,294.81
11/98 10,175.52 11,873.46
12/98 10,577.39 12,341.87
1/99 10,731.13 12,305.43
2/99 10,351.90 12,012.16
3/99 10,577.39 12,513.57
4/99 11,110.36 13,020.60
5/99 10,823.37 12,350.05
6/99 11,223.10 12,831.55
7/99 11,622.83 13,212.95
8/99 11,756.07 13,261.20
9/99 11,776.57 13,394.68
10/99 11,889.31 13,896.39
11/99 12,565.77 14,379.21
12/99 13,573.50 15,669.77
1/00 13,046.67 14,674.13
2/00 13,552.84 15,069.16
3/00 13,945.38 15,653.30
4/00 13,284.26 14,829.57
5/00 12,969.88 14,467.38
6/00 13,589.96 15,033.17
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 International,
Inc. (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 EAFE are based on a starting date of May 1, 1997,
whereas the calculations for the USAA Life International Fund are based on a
starting date of May 5, 1997. This comparison is for illustrative purposes only.
GENERAL DISCUSSION
by Portfolio Mangers Albert Sebastian and Kevin P. Moore
MARKET CONDITIONS
For the six-month period ended June 30, 2000, the USAA Life International Fund's
total return was 0.12%, which compares with the Lipper International Funds
Average return of -3.57% and the Morgan Stanley Capital International, Inc.
(MSCI)-EAFE return of -4.63%. Last year, under-representation in Asian and
Internet equities had a negative impact on the Fund's performance. The recent
poor performance of these same stocks contributed to the Fund's improved
relative performance this year.
EUROPE
In 2000, the USAA Life International Fund benefited from its overweighted
position in European equities. This is in spite of a weaker euro versus the
U.S. dollar. Within Europe, the Fund benefited from good stock selection and an
overweighted position in energy and health care. Consumer staples and financials
also performed well, while metal and mining stocks have performed poorly.
CANADA
The Canadian equity market has performed exceptionally well this year relative
to other developed markets, and the USAA Life International Fund benefited from
its overweighted position. Energy stocks have been particularly strong based on
higher oil and natural gas prices. Technology and financial stocks also
contributed positively to performance.
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USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
JAPAN
We remain underweighted in Japanese equities. Our negative view on bank stocks
and other old economy stocks has turned out to be correct. We are overweighted
in the telecom services area and have added to our pharmaceutical holdings. We
believe the corporate restructuring story is still intact and the earnings
outlook continues to be favorable. However, we are skeptical about the political
commitment to tighter fiscal policy and deregulation. The recent elections have
produced a weaker coalition government.
EMERGING MARKETS
Most emerging markets started 2000 on a strong upswing, only to be caught in the
negative sentiment beginning in March that gripped equity markets. Economic
growth in most Asian emerging markets continues to rebound from the lows of the
regional crisis. Latin American markets have also rebounded on the back of
strong exports and improving domestic economies. The South African economy,
while suffering from currency and interest pressures, continues to grow.
Economic performance in East European and Middle Eastern countries is mixed. We
believe that improving domestic demand coupled with the potential for falling
interest rates provide a favorable backdrop for emerging markets over the next
12 months.
OUTLOOK
In our view, the strength of the global economy is encouraging and the recent
signs that the U.S. economy may be slowing are positive. We continue to favor
Europe and Canada based on attractive valuations, sustainable economic growth,
corporate restructuring, and a benign inflation outlook. In Japan, large-
capitalization growth stocks in the telecommunication and technology sectors
will continue to lead the market. We are, however, less positive on Japan due to
the high level of financial and government debt and the uncertain political
TOP 10 EQUITY HOLDINGS
as of June 30, 2000
------------------------------------------------------------
% of
Net Assets
Nokia Corp. ADR (Finland) 3.7%
Koninklijke Philips Electronics
N.V. ADR (Netherlands) 2.5
Nortel Networks Corp. (Canada) 2.3
Total Fina S.A. (France) 1.9
Telefonica de Espana S.A. ADR (Spain) 1.6
ING Group N.V. (Netherlands) 1.5
Nordic Baltic Holding (Sweden) 1.5
Akzo Nobel N.V. (Netherlands) 1.3
Christiania Bank og Kreditkasse (Norway) 1.3
WPP Group plc (U.K.) 1.3
TOP 10 INDUSTRIES OF EQUITY HOLDINGS
as of June 30, 2000
------------------------------------------------------------
% of
Net Assets
Telephones 10.4%
Communication Equipment 7.4
Drugs 6.5
Banks - Money Center 6.1
Insurance - Multiline Companies 4.5
Oil - International Integrated 4.0
Electronics - Semiconductors 3.3
Banks - Major Regional 3.0
Electrical Equipment 2.7
Chemicals - Specialty 2.4
------
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--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
AN OVERVIEW (CONTINUED) JUNE 30, 2000
--------------------------------------------------------------------------------
outlook. In emerging markets we favor Brazil and Mexico, and technology stocks
in Korea and Taiwan. Overall in the portfolio, we continue to underweight the
financial and utility sectors and overweight the technology, industrial, and
energy sectors.
The Lipper International Funds Average is the average performance level of all
international funds, as reported by Lipper Analytical Services, Inc., 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.
COUNTRY WEIGHTINGS AS A PERCENTAGE OF NET ASSETS
as of June 30, 2000
-----------------------------------------------------
Other* 15.8% United Kingdom 15.0%
Norway 2.2%
Switzerland 2.2%
Denmark 2.2%
Japan 14.5%
Portugal 2.4%
[GRAPH APPEARS HERE]
Germany 2.8%
Spain 3.9%
Italy 4.2% Netherlands 9.9%
Sweden 4.3%
Finland 5.1% Canada 8.4%
France 7.2%
* Countries representing less than 2% of the portfolio and U.S. government and
agency issues.
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USAA LIFE MONEY MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Principal Coupon or
Amount Discount Value
(000) Security Rate Maturity (000)
--------- -------- ---------- -------- -------
FIXED-RATE INSTRUMENTS (54.2%)
ALUMINUM
$ 640 Aluminum Company of America, CP 6.52% 7/05/2000 $ 640
577 Aluminum Company of America, CP 6.60 7/26/2000 574
-------
1,214
-------
BANKS - MONEY CENTER
939 UBS Finance, Inc., CP 6.54 7/20/2000 936
-------
ELECTRIC UTILITIES
900 Alabama Power Co., CP 6.52 7/11/2000 898
1,311 National Rural Utilities Cooperative
Finance Corp., CP 6.50 7/10/2000 1,309
-------
2,207
-------
FINANCE - CONSUMER
1,283 General Motors Acceptance Corp., CP 6.55 7/19/2000 1,279
1,000 Homeside Lending, CP 6.62 7/25/2000 996
992 Household Finance Corp., CP 6.53 7/20/2000 988
-------
3,263
-------
FINANCE - DIVERSIFIED
910 General Electric Capital Corp., CP 6.53 7/18/2000 907
-------
OIL & GAS - REFINING/MANUFACTURING
1,277 Motiva Enterprises, CP 6.51 7/13/2000 1,274
-------
TELEPHONES
1,136 BellSouth Telecommunications Inc., CP 6.52 7/07/2000 1,135
-------
U.S. GOVERNMENT
1,354 Federal Home Loan Bank
Consolidated, DN 6.39 7/12/2000 1,351
1,000 Federal Home Loan Bank
Consolidated, DN 6.47 7/21/2000 996
509 Federal Home Loan Bank, DN 6.50 7/03/2000 509
1,302 Federal Home Loan Mortgage, DN 6.42 7/06/2000 1,301
-------
4,157
-------
Total fixed-rate instruments (cost: $15,093) 15,093
-------
VARIABLE-RATE DEMAND NOTES (45.3%)
ASSET-BACKED SECURITIES
$ 595 Capital One Funding Corp., Notes,
Series 1995C (LOC) 6.70% 10/01/2015 $ 595
654 Capital One Funding Corp., Notes,
Series 1996E (LOC) 6.70 7/02/2018 654
1,000 Cornerstone Funding Corp. I,
Series 2000A (LOC) 6.71 4/01/2020 1,000
-------
2,249
-------
AUTO PARTS
600 Alabama IDA RB (Rehau Project) (LOC) 6.83 10/01/2019 600
985 Bardstown, KY, RB, Series 1994 (LOC) 6.74 6/01/2024 985
-------
1,585
-------
HEALTH CARE - DIVERSIFIED
300 GMS Associates II Project Health Care
RB, Series 1995 (LOC) 6.70 8/15/2025 300
-------
HEALTH CARE - SPECIALIZED SERVICES
800 Mason City Clinic, P.C., IA, Bonds,
Series 1992 (LOC) 6.70 9/01/2022 800
-------
HOME FURNISHINGS & APPLIANCES
1,300 Mississippi Business Finance Corp.,
RB (LOC) 6.74 6/01/2015 1,300
-------
HOSPITALS
700 Dome Corp., Bonds, Series 1991 (LOC) 6.77 8/31/2016 700
-------
LEISURE TIME
25 Fox Valley Ice Arena, IL, RB,
Series 1997 (LOC) 6.73 7/01/2027 25
-------
NURSING/CONTINUING CARE CENTERS
945 Lincolnwood Funding Corp. RB,
Series 1995A (LOC) 6.77 8/01/2015 945
-------
PAPER & FOREST PRODUCTS
924 Bancroft Bag, Inc., Notes,
Series 1998 (LOC) 6.70 11/01/2008 924
-------
REAL ESTATE - OTHER
1,200 LAM Funding L.L.C., Notes,
Series A (LOC) 6.73 12/15/2027 1,200
1,300 Shepherd Capital, L.L.C., Notes,
Series 1997 (LOC) 6.72 7/15/2047 1,300
-------
2,500
-------
RETAIL - DEPARTMENT STORES
1,300 Belk, Inc. RB, Series 1998 (LOC) 6.78 7/01/2008 1,300
-------
Total variable-rate demand notes (cost: $12,628) 12,628
-------
Total investments (cost: $27,721) $27,721
-------
------
B-24
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE MONEY MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY CONCENTRATION
U.S. Government 14.9%
Finance - Consumer 11.7
Real Estate - Other 9.0
Asset-Backed Securities 8.1
Electric Utilities 7.9
Auto Parts 5.7
Home Furnishings & Appliances 4.7
Retail - Department Stores 4.7
Oil & Gas - Refining/Manufacturing 4.6
Aluminum 4.3
Telephones 4.1
Nursing/Continuing Care Centers 3.4
Banks - Money Center 3.3
Paper & Forest Products 3.3
Finance - Diversified 3.2
Health Care - Specialized Services 2.9
Hospitals 2.5
Health Care - Diversified 1.1
Leisure Time 0.1
----
Total 99.5%
====
See accompanying Notes to Portfolio of Investments, page B-43.
------
B-25
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
PREFERRED STOCKS (13.4%)
15,000 Avalon Bay Communities, Inc., "F", 9.00%
cumulative redeemable $ 345
12,000 Duke-Weeks Realty Investments, Inc. depository
shares "A", 9.10% cumulative redeemable 282
12,000 Equity Residential Properties Trust depository
shares "C", 9.125% cumulative redeemable 284
6,000 Post Properties, Inc. "A", 8.50% cumulative
redeemable 255
6,000 Prologis Trust, Inc. "C", 8.54% cumulative
redeemable 257
12,000 Shurgard Storage Centers, Inc. "B", 8.80%
cumulative redeemable 251
------
Total preferred stocks (cost: $1,892) 1,674
------
Principal Coupon or
Amount Discount Value
(000) Security Rate Maturity (000)
--------- -------- ---------- -------- -------
CORPORATE OBLIGATIONS (37.8%)
$ 300 Caliber Systems, Inc., Notes 7.80% 8/01/2006 $ 293
500 DaimlerChrysler NA Holding Corp.,
Global Debentures 8.00 6/15/2010 510
500 Finova Capital Corp., MTN 7.25 11/08/2004 441
500 First Union Corp., Subordinated
Notes 7.50 7/15/2006 490
500 Household Finance Corp., Notes 7.25 5/15/2006 484
500 Phillips Petroleum Co., Notes 8.75 5/25/2010 530
500 Province of Quebec, Global
Debentures 7.00 1/30/2007 491
500 Washington Mutual, Inc.,
Subordinated Notes 8.25 4/01/2010 494
500 Wells Fargo & Co., Subordinated
Notes(c) 6.88 4/01/2006 484
500 Yosemite Security Trust I,
Bonds(a) 8.25 11/15/2004 498
-------
Total corporate obligations (cost: $4,739) 4,715
-------
U.S. GOVERNMENT & AGENCY ISSUES (45.7%)
FEDERAL NATIONAL MORTGAGE ASSN. (12.2%)
1,057 7.00%, 6/01/2024 - 10/01/2026(c) 1,023
505 7.50%, 7/01/2030(b) 498
-------
1,521
-------
GOVERNMENT NATIONAL MORTGAGE ASSN. (27.5%)
2,709 6.00%, 4/15/2028 2,511
945 7.00%, 6/15/2029 920
-------
3,431
-------
U.S. TREASURY BONDS (6.0%)
704 6.25%, 2/15/2027 747
-------
Total U.S. government & agency issues (cost: $5,795) 5,699
-------
MONEY MARKET INSTRUMENTS (6.1%)
COMMERCIAL PAPER
263 MCN Energy Enterprises(a) 7.32 7/03/2000 263
500 Prudential Funding Corp. 6.76 7/06/2000 500
-------
Total money market instruments (cost: $763) 763
-------
Total investments (cost: $13,189) $12,851
=======
PORTFOLIO SUMMARY BY CONCENTRATION
U.S. Government 45.7%
Real Estate Investment Trusts 13.4
Finance - Diversified 5.6
Oil - Domestic Integrated 4.2
Automobiles 4.1
Insurance - Multiline Companies 4.0
Natural Gas Utilities 4.0
Savings & Loan Holding Co. 4.0
Foreign Government 3.9
Banks - Major Regional 3.9
Banks - Money Center 3.9
Finance - Consumer 3.9
Truckers 2.4
------
Total 103.0%
======
See accompanying Notes to Portfolio of Investments page, B-43.
------
B-26
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
---------- -------- ------
COMMON STOCKS (95.5%)
AEROSPACE/DEFENSE (2.9%)
37,000 B.F. Goodrich Co. $1,261
26,000 Boeing Co. 1,087
------
2,348
------
ALUMINUM (1.9%)
54,000 Alcoa, Inc. 1,566
------
AUTOMOBILES (1.0%)
19,000 Ford Motor Co. 817
------
AUTO PARTS (0.9%)
35,000 Lear Corp.* 700
2,488 Visteon Corp. 30
------
730
------
BANKS - MAJOR REGIONAL (2.3%)
7,500 Bank One Corp. 199
28,134 Fleet Boston Financial Corp. 957
4,500 PNC Financial Services Group 211
20,000 SouthTrust Corp. 452
------
1,819
------
BANKS - MONEY CENTER (2.6%)
22,368 Bank of America Corp. 962
21,000 Chase Manhattan Corp. 967
7,500 First Union Corp. 186
------
2,115
------
BEVERAGES - ALCOHOLIC (0.5%)
5,000 Anheuser-Busch Cos., Inc. 373
------
BEVERAGES - NONALCOHOLIC (1.2%)
34,000 Pepsi Bottling Group, Inc. 992
------
CHEMICALS (0.9%)
45,000 Lyondell Petrochemical Co. 754
------
COMMUNICATION EQUIPMENT (1.8%)
24,672 Lucent Technologies, Inc. 1,462
------
COMPUTER - HARDWARE (3.9%)
10,500 Hewlett-Packard Co. 1,311
17,000 IBM Corp. 1,863
------
3,174
------
COMPUTER - NETWORKING (2.7%)
34,700 Cisco Systems, Inc.* 2,206
------
COMPUTER SOFTWARE & SERVICE (6.3%)
12,000 Computer Associates International, Inc. 614
21,000 Microsoft Corp.* 1,680
30,100 Oracle Corp.* 2,531
18,000 Unisys Corp.* 262
------
5,087
------
CONSUMER JEWELRY AND NOVELTIES - MISCELLANEOUS (0.6%)
25,000 American Greetings Corp. "A" 475
------
CONTAINERS - METALS & GLASS (0.4%)
9,500 Ball Corp. 306
------
DRUGS (4.7%)
22,000 Merck & Co., Inc. 1,686
21,915 Pharmacia Corp. 1,133
18,000 Watson Pharmaceuticals, Inc.* 967
------
3,786
------
ELECTRIC UTILITIES (0.7%)
20,000 Reliant Energy, Inc. 591
------
ELECTRICAL EQUIPMENT (3.1%)
37,500 General Electric Co. 1,988
15,000 Honeywell International, Inc. 505
------
2,493
------
ELECTRONICS - INSTRUMENTATION (0.4%)
4,004 Agilent Technologies, Inc. 295
------
ELECTRONICS - SEMICONDUCTORS (3.1%)
18,500 Intel Corp. 2,473
------
ENTERTAINMENT (1.1%)
22,000 Walt Disney Co. 854
------
EQUIPMENT - SEMICONDUCTORS (1.6%)
14,000 Applied Materials, Inc.* 1,269
------
FINANCE - CONSUMER (1.1%)
19,000 PMI Group, Inc. 903
------
FINANCE - DIVERSIFIED (4.6%)
28,966 Associates First Capital Corp. "A" 646
24,000 Citigroup, Inc. 1,446
19,000 Morgan Stanley Dean Witter & Co. 1,582
------
3,674
------
FOODS (1.2%)
19,000 Nabisco Holdings Corp. "A" 998
------
HEALTH CARE - DIVERSIFIED (5.9%)
15,500 Abbot Laboratories 691
25,000 American Home Products Corp. 1,469
23,300 Bristol-Myers Squibb Co. 1,357
12,000 Johnson & Johnson, Inc. 1,222
------
4,739
------
HOUSEHOLD PRODUCTS (2.1%)
22,000 Kimberly-Clark Corp. 1,262
8,000 Procter & Gamble Co. 458
------
1,720
------
INSURANCE - LIFE/HEALTH (0.8%)
14,000 MetLife, Inc.* 295
11,000 Stancorp Financial Group, Inc. 353
------
648
------
INSURANCE - MULTILINE COMPANIES (2.4%)
16,375 American International Group, Inc. 1,924
------
INSURANCE - PROPERTY/CASUALTY (0.9%)
23,000 Everest RE Group Ltd. 756
------
------
B-27
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
---------- -------- ------
LEISURE TIME (0.7%)
33,000 Brunswick Corp. $ 547
-------
LODGING/HOTEL (0.8%)
20,000 Starwood Hotels & Resorts Worldwide, Inc. 651
-------
MACHINERY - DIVERSIFIED (1.1%)
25,000 Deere & Co. 925
-------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.4%)
16,600 Eaton Corp. 1,112
-------
MANUFACTURING - SPECIALIZED (2.1%)
25,000 Avery Dennison Corp. 1,678
-------
MEDICAL PRODUCTS & SUPPLIES (2.2%)
23,000 Bausch & Lomb, Inc. 1,780
-------
NATURAL GAS UTILITIES (1.4%)
18,000 Coastal Corp. 1,096
-------
OIL - DOMESTIC INTEGRATED (2.0%)
28,000 Conoco, Inc. "A" 616
48,000 Occidental Petroleum Corp. 1,011
-------
1,627
-------
OIL - INTERNATIONAL INTEGRATED (2.7%)
17,000 Royal Dutch Petroleum ADR 1,047
22,000 Texaco, Inc. 1,171
-------
2,218
-------
OIL & GAS - DRILLING/EQUIPMENT (1.5%)
32,400 Helmerich & Payne, Inc. 1,211
-------
OIL & GAS - EXPLORATION & PRODUCTION (1.7%)
19,000 Apache Corp. 1,117
12,000 Union Pacific Resources, Inc. 264
-------
1,381
-------
PAPER & FOREST PRODUCTS (0.8%)
8,500 Jefferson Smurfit Group plc ADR 150
12,000 Weyerhaeuser Co. 516
-------
666
-------
PHOTOGRAPHY - IMAGING (0.8%)
31,000 Xerox Corp. 643
-------
RAILROADS/SHIPPING (0.7%)
36,000 Norfolk Southern Corp. 536
-------
RESTAURANTS (0.3%)
13,200 Wendy's International, Inc. 235
-------
RETAIL - GENERAL MERCHANDISING (2.9%)
27,000 Sears, Roebuck & Co. 881
26,000 Wal-Mart Stores, Inc. 1,498
-------
2,379
-------
SAVINGS & LOAN HOLDING CO. (1.1%)
30,000 Washington Mutual, Inc. 866
-------
SERVICES - COMMERCIAL & CONSUMER (0.8%)
22,000 Hertz Corp. "A" 617
-------
SERVICES - DATA PROCESSING (0.7%)
12,000 First Data Corp. 596
-------
TELECOMMUNICATIONS - LONG DISTANCE (2.5%)
12,000 AT&T Corp. 380
13,500 MCI WorldCom, Inc.* 619
19,200 Sprint Corp. 979
-------
1,978
-------
TELEPHONES (3.7%)
24,000 Bell Atlantic Corp. 1,219
21,000 GTE Corp. 1,307
10,000 SBC Communications Corp. 433
-------
2,959
-------
Total common stocks (cost: $53,482) 77,048
-------
Principal
Amount
(000)
----------
MONEY MARKET INSTRUMENT (4.4%)
$ 3,529 Federal Home Loan Bank, DN, 6.50%,
7/03/2000 (cost: $3,527) 3,527
-------
Total investments (cost: $57,009) $80,575
=======
See accompanying Notes to Portfolio of Investments, page B-43.
------
B-28
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- -------
FOREIGN SECURITIES (60.5%)
FOREIGN STOCKS (60.4%)
ARGENTINA (0.2%)
31,000 PC Holdings S.A. $ 57
-------
AUSTRALIA (0.1%)
1,400 CSL Ltd. 28
50,000 Pasminco Ltd.* 26
-------
54
-------
AUSTRIA (1.0%)
2,500 Bank Austria AG 122
3,000 Boehler Uddeholm AG 105
1,150 VA Technologie AG 60
2,250 Vienna Airport (Flughafen Wien) 80
-------
367
-------
BRAZIL (0.6%)
1,600 Companhia Brasileira de Distribuicao Grupo Pao
de Acucar ADR 51
900 Companhia Cervejaria Brahma 15
2,100 Embratel Participacoes S.A. ADR 50
1,790 Petroleo Brasileiro S.A. (Preferred) 54
1,800 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR 52
-------
222
-------
CANADA (5.8%)
8,900 Anderson Exploration Ltd.* 162
3,800 C-MAC Industries, Inc.* 180
4,000 Canadian Imperial Bank of Commerce 110
8,800 Canadian National Railway Co. 257
8,000 Canadian Occidental Petroleum Ltd. 217
7,300 Manulife Financial Corp. 130
7,900 Nortel Networks Corp. 539
10,000 Sun Life Financial Services 169
11,000 Suncor Energy, Inc. 256
4,900 Toronto-Dominion Bank 119
-------
2,139
-------
CHINA (0.4%)
10,600 China Mobile Ltd.* 93
53,000 Cosco Pacific Ltd. 42
24,000 Legend Holding 23
8,000 Petrochina Co. Ltd. 2
-------
160
-------
DENMARK (1.5%)
33,219 Nordic Baltic Holding* 242
6,000 SAS Danmark A/S 50
4,200 Tele Danmark A/S "B" 283
-------
575
-------
FINLAND (3.3%)
7,261 Metso OYJ 87
17,600 Nokia Corp. ADR 879
3,400 Perlos Corp. 108
3,700 Sampo Insurance Co. "A" 150
-------
1,224
-------
FRANCE (4.7%)
2,500 Accor S.A. 102
800 Alcatel ADR 53
3,675 Aventis S.A. 268
3,978 CNP Assurances 136
4,700 Coflexip ADR 284
1,700 Eramet Group 72
1,040 ISIS S.A. 74
2,400 Renault S.A. 109
4,200 Rhodia S.A. 71
6,207 Total Fina S.A. 477
1,700 Valeo S.A. 91
-------
1,737
-------
GERMANY (1.8%)
4,700 Continental AG 79
5,200 Merck KGaA 167
990 SAP AG 148
6,000 Veba AG 289
-------
683
-------
GREECE (0.3%)
2,700 Hellenic Telecommunications Organization S.A. (OTE) 66
3,878 National Bank of Greece S.A. GDR* 31
-------
97
-------
HONG KONG (0.2%)
3,400 HSBC Holdings 39
3,300 Hutchison Whampoa Ltd. 41
-------
80
-------
HUNGARY (0.1%)
800 Magyar Tavkozlesi RT. (MATAV) ADR 28
-------
INDIA (0.1%)
2,700 Videsh Sanchar Nigam Ltd. GDR 43
-------
ISRAEL (0.3%)
5,593 Bank Hapoalim Ltd. 16
1,800 Blue Square Ltd. ADR 18
200 Check Point Software Technologies Ltd.* 42
500 Teva Pharmaceutical Industries Ltd. ADR 28
-------
104
-------
ITALY (2.7%)
4,000 ENI S.p.A. ADR 233
2,200 Gucci Group N.V. 208
45,000 Italgas S.p.A. 199
7,400 Telecom Italia S.p.A. 102
42,400 Telecom Italia S.p.A. Savings 281
-------
1,023
-------
---------
B-29
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- -------
JAPAN (9.0%)
2,200 Asatsu DK $ 90
5,000 Daibiru Corp. 40
21 DDI Corp. 202
6,000 Fujitsu Ltd. 208
200 Funai Electric Co. Ltd. 33
300 Internet Initiative, Inc. ADR* 18
2,000 Ito-Yokado Co. Ltd. 120
10,000 Kikkoman Corp. 77
5,000 Kirin Brewery Co. Ltd. 62
1,000 Murata Manufacturing Co. Ltd. 144
13,000 Nikko Securities Co. Ltd. 129
42,000 Nippon Steel Corp. 88
18 Nippon Telegraph & Telephone Corp. 239
40 Nippon Television Network 26
4 NTT Mobile Communication Network, Inc. 108
3,000 Paris Miki, Inc. 195
1,000 Pasona Softbank, Inc. 27
1,100 Ryohin Keikaku Co. 140
4,000 Sailor Pen Co. Ltd. 72
2,100 Sanix, Inc.* 111
3,000 Shin-Etsu Chemical Co., Ltd. 152
2,500 Sony Corp.* 233
17,000 Sumitomo Corp. 191
4,000 Sumitomo Electric Industries, Ltd. 69
3,000 Takeda Chemical Industries 197
18,000 Toshiba Corp. 203
22 West Japan Railway 89
3,200 Zenrin Co. 93
-------
3,356
-------
KOREA (0.9%)
5,700 Korea Electric Power Corp. ADR 105
1,599 Korea Telecom Corp. ADR 77
2,000 Samsung Corp. 17
355 Samsung Electronics Co. Ltd. 118
-------
317
-------
MALAYSIA (0.1%)
700 Malayan Bank Bhd 3
3,500 Malaysian Pacific Industries Bhd 36
4,000 Telekom Malaysia Bhd 14
-------
53
-------
MEXICO (0.7%)
4,100 Coca Cola Femsa S.A. ADR 77
1,400 Fomento Economico Mexicano, S.A. de C.V. ADR 60
1,500 Telefonos de Mexico, S.A. de C.V. ADR 86
2,700 Tubos de Acero de Mexico, S.A. ADR 38
-------
261
-------
NETHERLANDS (6.6%)
7,300 Akzo Nobel N.V. 310
2,500 EVC International N.V.* 23
5,100 Fortis NL N.V. 149
2,100 Getronics N.V. 32
5,600 ING Group N.V. 379
6,800 Koninklijke KPN N.V. 304
11,600 Koninklijke Philips Electronics N.V. ADR 551
7,600 Oce-van der Grinten N.V. 124
4,600 Versatel Telecom * 193
4,300 VNU N.V. 222
6,800 Vopak Kon 149
-------
2,436
-------
NORWAY (1.3%)
51,600 Christiania Bank og Kreditkasse 277
3,100 Schibsted ASA 58
21,600 Storebrand ASA 156
-------
491
-------
PORTUGAL (1.5%)
8,996 Banco Pinto & Sotto Mayor S.A. 200
15,000 Brisa-Auto Estrada de Portugal S.A. 129
19,000 Portugal Telecom S.A. ADR 214
-------
543
-------
RUSSIA (0.1%)
700 LUKoil ADR 36
-------
SINGAPORE (0.2%)
5,300 Natsteel Electronics Ltd. 16
7,300 Singapore Airlines Ltd. 73
-------
89
-------
SOUTH AFRICA (0.1%)
25,000 Firstrand Ltd. 26
2,889 South African Breweries plc 21
-------
47
-------
SPAIN (2.4%)
9,365 Altadis S.A. 144
14,793 Banco Bilbao Vizcaya Argentaria 221
8,650 Repsol S.A. 172
5,498 Telefonica de Espana S.A. ADR* 352
-------
889
-------
SWEDEN (2.8%)
8,000 Autoliv, Inc. GDR 196
14,400 Ericsson L M Tel Co. ADR 288
50,616 Nordic Baltic Holding* 377
7,080 Skandinaviska Enskilda Banken "A" 84
33,615 Swedish Match AB 103
-------
1,048
-------
SWITZERLAND (1.4%)
168 Novartis AG 266
400 Selecta Group AG 124
193 Sulzer AG P.C.* 128
60 Swisscom AG 21
-------
539
-------
TURKEY (0.2%)
1,200,000 Eregli Demir ve Celik Fabrikalari T.A.S.* 49
1,459,375 Yapi ve Kredi Bankasi A.S. 16
-------
65
-------
---------
B-30
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- -------
UNITED KINGDOM (10.0%)
7,000 AstraZeneca Group plc $ 327
16,800 Bank of Scotland 160
53,400 Billiton plc 217
5,200 BOC Group plc 75
100 Bookham Technology* 6
13,400 Cable & Wireless plc 227
33,700 Cadbury Schweppes 221
15,028 Celltech Group plc 291
14,000 CGU plc 233
85,700 Cookson Group plc 286
57,100 Corporate Services Group plc* 84
1,900 Glaxo Wellcome plc ADR 110
13,000 Laporte plc* 94
35,000 Old Mutual plc 77
9,200 Powergen plc 79
22,500 Reckitt & Colman 252
16,540 Reuters Group plc 282
12,340 Royal Bank Scot Group 206
45,300 Tomkins plc 147
22,864 WPP Group plc 334
-------
3,708
-------
Total foreign stocks (cost: $15,888) 22,471
-------
Principal
Amount
(000)
---------
FOREIGN BOND (0.1%)
JAPAN (0.1%)
$ 20 MBL International Finance (Bermuda) Trust
Convertible Notes, 3.00%, 11/30/2002 (cost: $20) 21
-------
Total foreign securities (cost: $15,909) 22,492
-------
Number
of Shares
---------
DOMESTIC STOCKS (32.3%)
ALUMINUM (0.6%)
7,400 Alcoa, Inc. 215
-------
BANKS - MAJOR REGIONAL (0.6%)
4,000 Mellon Financial Corp. 160
1,300 Wachovia Corp. 71
-------
231
-------
BEVERAGES - NONALCOHOLIC (1.8%)
12,800 Pepsi Bottling Group, Inc. 373
6,900 PepsiCo, Inc. 307
-------
680
-------
BIOTECHNOLOGY (0.6%)
3,300 Amgen, Inc.* 232
-------
BROADCASTING - RADIO & TV (1.1%)
5,500 Clear Channel Communications, Inc.* 413
-------
COMMUNICATION EQUIPMENT (1.6%)
900 JDS Uniphase Corp.* 108
5,500 Lucent Technologies, Inc. 326
2,800 QualComm, Inc,* 168
-------
602
-------
COMPUTER - HARDWARE (1.8%)
6,300 Dell Computer Corp.* 311
2,800 Hewlett-Packard Co. 349
-------
660
-------
COMPUTER - NETWORKING (1.9%)
9,300 Cisco Systems, Inc.* 591
900 Juniper Networks, Inc.* 131
-------
722
-------
COMPUTER SOFTWARE & SERVICE (4.0%)
6,400 America Online, Inc.* 338
1,700 BMC Software, Inc.* 62
800 I2 Technologies, Inc.* 83
800 Lycos, Inc.* 43
4,800 Microsoft Corp.* 384
5,800 Oracle Corp.* 488
600 Yahoo! Inc.* 74
-------
1,472
-------
DRUGS (2.2%)
2,900 Merck & Co., Inc. 222
7,225 Pfizer, Inc. 347
5,000 Pharmacia Corp. 258
-------
827
-------
ELECTRICAL EQUIPMENT (1.3%)
9,100 General Electric Co. 482
-------
ELECTRONICS - SEMICONDUCTORS (3.6%)
4,000 Analog Devices, Inc.* 304
4,100 Intel Corp. 548
7,000 Texas Instruments, Inc. 481
-------
1,333
-------
ENTERTAINMENT (0.8%)
7,700 Walt Disney Co. 299
-------
EQUIPMENT - SEMICONDUCTORS (1.0%)
4,100 Applied Materials, Inc.* 372
-------
FINANCE - DIVERSIFIED (0.5%)
2,400 Morgan Stanley Dean Witter & Co. 200
-------
FOODS (0.9%)
8,800 Keebler Foods Co.* 327
-------
HEALTH CARE - DIVERSIFIED (1.2%)
2,800 Bristol-Myers Squibb Co. 163
2,700 Johnson & Johnson, Inc. 275
-------
438
-------
---------
B-31
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- -------
HOSPITALS (0.1%)
3,500 Health Management Associates, Inc.* $ 46
-------
INSURANCE - MULTILINE COMPANIES (0.8%)
2,400 American International Group, Inc. 282
-------
INTERNET SERVICES (0.2%)
1,700 Priceline.com Inc.* 65
-------
MANUFACTURING - SPECIALIZED (0.7%)
3,700 Avery Dennison Corp. 248
-------
MEDICAL PRODUCTS & SUPPLIES (1.3%)
3,200 Guidant Corp.* 158
6,400 Medtronic, Inc. 319
-------
477
-------
OIL & GAS - DRILLING/EQUIPMENT (0.9%)
7,000 Halliburton Co. 330
-------
PERSONAL CARE (1.1%)
9,400 Avon Products, Inc. 418
-------
RETAIL - DRUGS (0.1%)
1,800 Duane Reade, Inc.* 46
-------
RETAIL - FOOD (0.4%)
2,900 Safeway, Inc.* 131
-------
RETAIL - GENERAL MERCHANDISING (0.8%)
5,300 Target Corp. 307
-------
RETAIL - SPECIALTY APPAREL (0.4%)
4,100 Gap, Inc. 128
-------
Total domestic stocks (cost: $6,000) 11,983
-------
Principal
Amount
(000)
---------
MONEY MARKET INSTRUMENT (7.2%)
$ 2,688 Federal Home Loan Bank Consolidated DN,
6.50%, 7/03/2000 (cost: $2,687) 2,687
-------
Total investments (cost: $24,596) $37,162
=======
---------
B-32
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE WORLD GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
PORTFOLIO SUMMARY BY CONCENTRATION
U. S. Government 7.2%
Drugs 6.7
Telephones 6.5
Communication Equipment 6.4
Electronics - Semiconductors 5.3
Computer Software & Service 4.5
Banks - Money Center 4.1
Insurance - Multiline Companies 3.7
Electrical Equipment 3.0
Oil - International Integrated 2.7
Beverages - Nonalcoholic 2.6
Banks - Major Regional 2.4
Computer - Networking 1.9
Oil & Gas - Drilling/Equipment 1.9
Computer - Hardware 1.8
Chemicals - Specialty 1.7
Retail - Specialty 1.6
Manufacturing - Diversified Industries 1.5
Finance - Diversified 1.4
Electric Utilities 1.3
Medical Products & Supplies 1.3
Railroads/Shipping 1.3
Broadcasting - Radio & TV 1.2
Health Care - Diversified 1.2
Oil & Gas - Exploration & Production 1.2
Advertising/Marketing 1.1
Equipment - Semiconductors 1.1
Foods 1.1
Manufacturing - Specialized 1.1
Personal Care 1.1
Auto Parts 1.0
Other 19.1
-----
Total 100.0%
=====
See accompanying Notes to Portfolio of Investments, page B-43.
---------
B-33
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- -------
COMMON STOCKS (61.3%)
AEROSPACE/DEFENSE (2.1%)
13,000 B.F. Goodrich Co. $ 443
7,440 Boeing Co. 311
-------
754
-------
ALUMINUM (1.5%)
18,000 Alcoa, Inc. 522
-------
AUTOMOBILES (0.7%)
6,000 Ford Motor Co. 258
-------
AUTO PARTS (0.4%)
11,000 Meritor, Inc. 121
785 Visteon Corp. 10
-------
131
-------
BANKS - MAJOR REGIONAL (2.6%)
11,000 Fleet Boston Financial Corp. 374
7,000 PNC Financial Services Group 328
10,000 SouthTrust Corp. 226
-------
928
-------
BANKS - MONEY CENTER (0.8%)
6,000 Chase Manhattan Corp. 276
-------
BEVERAGES - NONALCOHOLIC (1.0%)
1,000 Coca-Cola Co. 57
10,000 Pepsi Bottling Group, Inc. 292
-------
349
-------
CHEMICALS (0.7%)
15,000 Lyondell Petrochemical Co. 251
-------
COMMUNICATION EQUIPMENT (1.2%)
7,000 Lucent Technologies, Inc. 415
-------
COMPUTER - HARDWARE (2.3%)
3,500 Hewlett-Packard Co. 437
3,500 IBM Corp. 384
-------
821
-------
COMPUTER - NETWORKING (0.9%)
5,000 Cisco Systems, Inc.* 318
-------
COMPUTER SOFTWARE & SERVICE (3.6%)
5,500 Microsoft Corp.* 440
9,000 Oracle Corp.* 756
5,000 Unisys Corp.* 73
-------
1,269
-------
CONSUMER JEWELRY AND NOVELTIES - MISCELLANEOUS (0.4%)
8,000 American Greetings Corp. "A" 152
-------
DRUGS (2.3%)
4,000 Merck & Co., Inc. 307
6,020 Pharmacia Corp. 311
3,500 Watson Pharmaceuticals, Inc.* 188
-------
806
-------
ELECTRICAL EQUIPMENT (1.3%)
9,000 General Electric Co. 477
-------
ELECTRONICS - INSTRUMENTATION (0.3%)
1,334 Agilent Technologies, Inc. 98
-------
ELECTRONICS - SEMICONDUCTORS (2.7%)
7,000 Intel Corp. 936
-------
ENTERTAINMENT (0.8%)
7,000 Walt Disney Co. 272
-------
EQUIPMENT - SEMICONDUCTORS (1.0%)
4,000 Applied Materials, Inc.* 363
-------
FINANCE - CONSUMER (0.8%)
6,000 PMI Group, Inc. 285
-------
FINANCE - DIVERSIFIED (1.6%)
10,406 Associates First Capital "A" 232
4,000 Morgan Stanley Dean Witter & Co. 333
-------
565
-------
FOODS (1.7%)
5,500 Nabisco Holdings Corp. "A" 289
15,000 Ralston Purina Group 299
-------
588
-------
HEALTH CARE - DIVERSIFIED (3.2%)
11,000 American Home Products Corp. 646
8,000 Bristol-Myers Squibb Co. 466
-------
1,112
-------
HOUSEHOLD PRODUCTS (1.1%)
7,000 Kimberly-Clark Corp. 402
-------
INSURANCE - LIFE/HEALTH (0.4%)
4,000 Stancorp Financial Group, Inc. 129
-------
INSURANCE - MULTILINE COMPANIES (2.7%)
4,000 American International Group, Inc. 470
5,000 CIGNA Corp. 467
-------
937
-------
INSURANCE - PROPERTY/CASUALTY (0.6%)
9,000 Allstate Corp. 200
-------
LEISURE TIME (0.4%)
8,000 Brunswick Corp. 133
-------
LODGING/HOTEL (0.6%)
7,000 Starwood Hotels & Resorts Worldwide, Inc. 228
-------
MACHINERY - DIVERSIFIED (1.4%)
7,000 Caterpillar, Inc. 237
7,000 Deere & Co. 259
-------
496
-------
MANUFACTURING - DIVERSIFIED INDUSTRIES (0.8%)
4,000 Eaton Corp. 268
-------
---------
B-34
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE DIVERSIFIED ASSETS FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
MANUFACTURING - SPECIALIZED (1.6%)
7,000 Avery Dennison Corp. $ 470
5,000 Energizer Holdings, Inc.* 91
-------
561
-------
MEDICAL PRODUCTS & SUPPLIES (1.8%)
8,000 Bausch & Lomb, Inc. 619
-------
NATURAL GAS UTILITIES (1.2%)
3,000 Coastal Corp. 183
7,000 NICOR, Inc. 228
-------
411
-------
OIL - DOMESTIC INTEGRATED (1.0%)
17,000 Occidental Petroleum Corp. 358
-------
OIL - INTERNATIONAL INTEGRATED (2.0%)
4,000 Chevron Corp. 339
7,000 Texaco, Inc. 373
-------
712
-------
OIL & GAS - DRILLING/EQUIPMENT (1.1%)
10,100 Helmerich & Payne, Inc. 377
-------
OIL & GAS - EXPLORATION & PRODUCTION (1.0%)
15,500 Union Pacific Resources, Inc. 341
-------
PAPER & FOREST PRODUCTS (0.1%)
2,200 Jefferson Smurfit Group plc ADR 39
-------
PHOTOGRAPHY - IMAGING (0.6%)
9,500 Xerox Corp. 197
-------
RAILROADS/SHIPPING (0.5%)
13,000 Norfolk Southern Corp. 193
-------
RESTAURANTS (0.2%)
4,000 Wendy's International, Inc. 72
-------
RETAIL - GENERAL MERCHANDISING (2.1%)
12,000 Sears, Roebuck & Co. 391
6,000 Wal-Mart Stores, Inc. 346
-------
737
-------
SAVINGS & LOAN HOLDING CO. (0.7%)
9,000 Washington Mutual, Inc. 260
-------
SERVICES - COMMERCIAL & CONSUMER (0.4%)
5,000 Hertz Corp. "A" 140
-------
SERVICES - DATA PROCESSING (0.6%)
4,000 First Data Corp. 199
-------
TELECOMMUNICATIONS - LONG DISTANCE (1.9%)
8,500 MCI WorldCom, Inc.* 390
5,200 Sprint Corp. 265
-------
655
-------
TELEPHONES (2.6%)
6,576 Bell Atlantic Corp. 334
6,000 GTE Corp. 374
5,000 SBC Communications, Inc. 216
-------
924
-------
Total common stocks (cost: $16,112) 21,534
-------
Principal Market
Amount Coupon Value
(000) Security Rate Maturity (000)
--------- -------- ------ -------- ------
COLLATERALIZED MORTGAGE OBLIGATIONS (4.8%)
$ 428 Federal National Mortgage Assn.,
Series 1997-72 CA 9.50% 9/18/2023 $ 444
516 Federal National Mortgage Assn.,
Series 1997-79 U 9.00 11/18/2024 536
670 Federal National Mortgage Assn.,
Series 1998-7 H 9.00 3/18/2025 701
------
Total collateralized mortgage obligations
(cost: $1,743) 1,681
------
CORPORATE OBLIGATIONS (29.8%)
BANKS - MAJOR REGIONAL (5.2%)
1,000 Corporacion Andina de Fomento,
Global Bonds 6.75 3/15/2005 950
1,000 Imperial Bank, Subordinated Notes 8.50 4/01/2009 897
-------
1,847
-------
ELECTRIC UTILITIES (2.9%)
1,000 Empire District Electric Co.,
Senior Notes 7.70 11/15/2004 1,004
-------
ELECTRONIC DEFENSE (2.9%)
1,000 Litton Industries, Inc.,
Senior Notes 8.00 10/15/2009 1,004
-------
FINANCE - CONSUMER (2.8%)
1,000 Ford Motor Credit Co., Notes 7.38 10/28/2009 970
-------
FINANCE - DIVERSIFIED (2.5%)
1,000 Finova Capital Corp., Notes 7.25 11/08/2004 882
MANUFACTURING - DIVERSIFIED INDUSTRIES (2.7%)
1,000 Pactiv Corp., Notes 7.20 12/15/2005 942
-------
MANUFACTURING - SPECIALIZED (2.8%)
1,000 Giddings and Lewis, Inc., Notes 7.50 10/01/2005 984
-------
REAL ESTATE INVESTMENT TRUSTS (5.3%)
1,000 American Health Properties, Inc.,
Notes 7.50 1/15/2007 891
1,000 Nationwide Health Properties, Inc., MTN 8.61 3/01/2002 991
-------
1,882
-------
RETAIL - FOOD (2.7%)
1,000 Great Atlantic & Pacific Tea, Inc.,
Senior Notes 7.70 1/15/2004 955
-------
Total corporate obligations (cost: $10,747) 10,470
-------
MONEY MARKET INSTRUMENT (3.1%)
1,103 MCN Energy Group, Inc., CP,(a)
(cost: $1,102) 7.32 7/03/2000 1,102
-------
Total investments (cost: $29,704) $34,787
=======
See accompanying Notes to Portfolio of Investments, page B-43.
------
B-35
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
COMMON STOCKS (94.9%)
AEROSPACE/DEFENSE (0.4%)
7,000 AAR Corp. $ 84
10,000 HEICO Corp. "A" 123
5,000 Triumph Group, Inc.* 139
-------
346
-------
AIR FREIGHT (0.3%)
3,000 EGL, Inc.* 92
3,000 United Parcel Service "B" 177
-------
269
-------
AIRLINES (0.3%)
5,000 Atlantic Coast Airlines, Inc.* 159
3,000 Midwest Express Holdings, Inc.* 64
-------
223
-------
BANKS - MAJOR REGIONAL (0.2%)
8,000 Hamilton Bancorp, Inc.* 140
-------
BEVERAGES - ALCOHOLIC (0.4%)
7,000 Beringer Wine Estates Holdings, Inc. "B"* 247
2,000 Robert Mondavi Corp. "A"* 62
-------
309
-------
BIOTECHNOLOGY (20.0%)
800 Aclara Biosciences, Inc.* 41
5,000 Affymetrix, Inc. * 826
3,500 Diversa Corp.* 116
20,000 Genentech, Inc.* 3,440
4,100 Genzyme Corp.* 244
7,000 Human Genome Sciences, Inc.* 934
26,000 IDEC Pharmaceuticals Corp.* 3,050
33,000 Immunex Corp.* 1,631
3,000 Invitrogen Corp.* 226
1,500 Luminex Corp.* 62
6,400 Maxygen, Inc.* 363
18,000 Med Immune, Inc.* 1,332
5,000 Medarex, Inc. 423
12,000 Millennium Pharmaceuticals, Inc.* 1,342
5,600 Sequenom, Inc.* 254
10,000 Techne Corp.* 1,300
-------
15,584
-------
BROADCASTING - RADIO & TV (1.3%)
3,700 Clear Channel Communications, Inc.* 277
1,900 Entercom Communications Corp.* 93
4,800 Infinity Broadcasting Corp.* 175
3,000 Spanish Broadcasting Systems, Inc. "A"* 62
2,700 Univision Communications, Inc. "A"* 279
3,000 Wink Communications, Inc.* 92
-------
978
-------
CHEMICALS (0.3%)
5,000 Symyx Technologies* 213
-------
COMMUNICATION EQUIPMENT (7.9%)
400 Accelerated Networks, Inc. 17
6,000 Advanced Fibre Communications, Inc.* 272
3,800 Airnet Communications Corp.* 99
1,000 Avanex Corp.* 95
1,300 Breezecom Ltd.* 57
2,800 CIENA Corp.* 467
3,700 Clarent Corp.* 264
6,115 Digital Microwave Corp.* 233
5,000 Ditech Communications Corp.* 473
1,000 Efficient Networks, Inc.* 74
15,200 Harmonic, Inc.* 376
5,300 interWAVE Communications International, Ltd* 74
13,424 JDS Uniphase Corp.* 1,609
4,300 MCK Communications, Inc.* 99
5,800 Metawave Communications Corp.* 155
3,600 Netro Corp.* 207
300 New Focus, Inc.* 25
1,400 Next Level Communications, Inc.* 120
500 ONI Systems Corp.* 59
3,700 Paradyne Networks, Inc.* 120
4,700 PC-Tel, Inc.* 179
3,100 Sierra Wireless, Inc.* 167
800 Sonus Networks, Inc.* 126
900 Sycamore Networks, Inc.* 99
1,200 Telaxis Communications Corp.* 37
7,000 Terayon Communication Systems, Inc.* 450
3,700 UTStarcom, Inc.* 112
2,400 Vyyo, Inc.* 65
-------
6,130
-------
COMPUTER - HARDWARE (1.4%)
300 Handspring, Inc. 8
2,300 Palm, Inc.* 77
16,200 Sandisk Corp.* 991
-------
1,076
-------
COMPUTER - NETWORKING (4.1%)
2,000 Alteon Websystems, Inc.* 200
1,500 Brocade Communications Systems, Inc.* 275
10,800 Cisco Systems, Inc.* 687
9,300 Extreme Networks, Inc.* 981
4,500 Finisar Corp.* 118
1,200 Foundry Networks, Inc.* 132
2,000 Juniper Networks, Inc.* 291
1,300 Network Appliance, Inc.* 105
2,300 Redback Networks, Inc.* 409
400 Stratos Lightwave, Inc. 11
-------
3,209
-------
COMPUTER SOFTWARE & SERVICE (5.9%)
3,000 Active Software, Inc.* 233
5,000 Bluestone Software, Inc.* 128
3,600 BroadVision, Inc.* 183
---------
B-36
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
7,500 ClickSoftware Technologies, Inc. $ 53
3,600 Commerce One, Inc.* 163
4,800 Crossworlds Software, Inc.* 87
2,700 HNC Software, Inc.* 167
1,200 I2 Technologies, Inc.* 125
2,000 InterTrust Technologies Corp.* 41
3,400 Liberate Technologies, Inc.* 100
1,000 Nuance Communications, Inc.* 83
900 Numerical Technologies, Inc.* 44
1,000 OpenTV Corp. "A"* 45
2,500 OTG Software, Inc.* 71
2,500 Phone.com, Inc.* 163
3,100 Portal Software, Inc.* 198
1,100 Primus Knowledge Solutions, Inc.* 50
4,200 Scientific Learning Corp.* 93
3,200 Sequoia Software Corp.* 52
800 Ulticom, Inc.* 19
12,900 Verisign, Inc.* 2,277
4,300 Vignette Corp.* 224
1,700 Virage, Inc. 31
------
4,630
------
DRUGS (6.8%)
10,000 Alpharma, Inc. "A" 623
6,000 Andrx Corp.* 384
20,000 Biovail Corp.* 1,109
7,000 Elan Corp. plc ADR* 339
3,500 Ivax Corp.* 145
3,000 Jones Pharma, Inc. 120
4,500 King Pharmaceuticals, Inc.* 197
20,000 Sepracor, Inc.* 2,412
------
5,329
------
ELECTRICAL EQUIPMENT (1.6%)
500 Capstone Turbine Corp. 23
9,700 DDI Corp.* 276
6,000 Flextronics International Ltd.* 412
4,200 Manufacturers Services, Ltd. 86
3,090 Sanmina Corp.* 264
12,100 Viasystems Group, Inc.* 196
------
1,257
------
ELECTRONICS - INSTRUMENTATION (0.1%)
1,600 Cabot Microelectronics Corp.* 73
------
ELECTRONICS - SEMICONDUCTORS (8.5%)
9,200 Applied Micro Circuits Corp.* 908
5,000 Arm Holdings plc* 164
1,500 Centillium Communications, Inc.* 104
2,700 Exar Corp.* 235
100 Exfo Electro-Optical Engineering, Inc. 4
2,400 GlobeSpan, Inc.* 293
6,400 Insilicon, Inc.* 100
1,600 Intersil Holding Corp.* 87
700 Marvell Technology Group Ltd. 40
7,500 Metalink Ltd.* 222
5,300 MMC Networks, Inc.* 283
2,000 Parthus Technologies plc ADR* 57
600 Quantum Effect Devices, Inc.* 34
400 Silicon Image, Inc.* 20
300 Silicon Laboratories, Inc.* 16
1,600 Stanford Microdevices, Inc.* 70
24,300 TranSwitch Corp.* 1,876
11,100 Triquint Semiconductor, Inc.* 1,062
3,600 Virata Corp.* 215
11,800 Vitesse Semiconductor Corp.* 868
------
6,658
------
ENGINEERING & CONSTRUCTION (1.1%)
15,000 Quanta Services, Inc.* 825
------
EQUIPMENT - SEMICONDUCTORS (0.7%)
6,500 Cymer, Inc.* 310
3,100 PRI Automation, Inc.* 203
------
513
------
FINANCE - CONSUMER (0.7%)
12,000 Metris Companies, Inc. 302
10,000 NCO Group, Inc.* 231
------
533
------
FINANCE - DIVERSIFIED (0.1%)
3,400 Heller Financial, Inc. "A" 70
------
FOODS (0.4%)
5,000 American Italian Pasta Co. "A"* 104
5,000 Suiza Foods Corp.* 244
------
348
------
HEALTH CARE - DIVERSIFIED (1.3%)
18,000 Accredo Health, Inc.* 622
10,000 ICON plc ADR* 166
5,600 Professional Detailing, Inc.* 191
------
979
------
HEALTH CARE - HMOS (0.5%)
6,000 Express Scripts, Inc. "A"* 373
------
HEALTH CARE - SPECIALIZED SERVICES (2.0%)
10,400 Advance Paradigm, Inc.* 213
4,000 Ebenx, Inc.* 85
15,000 Omnicare, Inc. 136
5,100 Orthodontic Centers of America, Inc.* 115
9,000 Priority Healthcare Corp. "B"* 669
15,000 Renal Care Group, Inc.* 367
------
1,585
------
HOME FURNISHINGS & APPLIANCES (0.2%)
7,500 Ethan Allen Interiors, Inc. 180
------
HOSPITALS (0.2%)
4,000 Province Healthcare Co.* 144
------
HOUSEWARES (0.1%)
3,000 Yankee Candle Co., Inc.* 65
------
---------
B-37
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
INTERNET SERVICES (5.2%)
400 724 Solutions, Inc.* $ 18
1,900 Akamai Technologies, Inc.* 226
2,200 Ariba, Inc.* 216
1,800 Be Free, Inc.* 16
6,200 CAIS Internet, Inc.* 87
5,000 CareInsite, Inc.* 89
1,600 Click Commerce, Inc. 36
2,177 CMGI, Inc.* 100
4,400 Cysive, Inc.* 105
1,900 Data Return Corp.* 55
3,200 Digex, Inc.* 218
4,000 Digital Island, Inc.* 195
3,000 Entrust Technologies, Inc.* 248
1,500 Freemarkets, Inc.* 71
3,200 GoAmerica, Inc.* 49
3,200 GRIC Communications, Inc.* 57
8,500 Homestore.com, Inc.* 248
1,600 i3 Mobile, Inc.* 29
5,800 Ibeam Broadcasting Corp.* 105
2,900 Infospace, Inc.* 160
3,500 Interliant, Inc.* 82
3,800 InterNAP Network Services Corp.* 158
2,900 Internet Capital Group, Inc.* 107
8,354 Internet Pictures Corp,* 126
6,900 Loudeye Technologies, Inc.* 120
2,441 MedicaLogic, Inc.* 23
2,200 MyPoints.com, Inc.* 42
1,200 Navisite, Inc.* 50
6,700 Netcentives, Inc.* 125
11,600 Promotions.com, Inc.* 58
3,300 PurchasePro.com, Inc.* 135
1,300 Register.com, Inc.* 40
2,100 Retek, Inc.* 67
2,100 Selectica, Inc.* 147
400 StorageNetworks, Inc. 36
5,600 Tumbleweed Communications Corp.* 285
7,000 Viador, Inc.* 111
------
4,040
------
INVESTMENT BANKS / BROKERAGE (0.4%)
11,000 Knight Trading Group, Inc.* 328
------
LODGING/HOTEL (0.4%)
5,000 Four Seasons Hotels, Inc. 311
------
MEDICAL PRODUCTS & SUPPLIES (0.9%)
7,100 Caliper Technologies Corp.* 327
4,500 Charles River Laboratories International 100
6,000 Henry Schein, Inc.* 103
5,000 SciQuest.com, Inc.* 57
5,000 Sybron Corp.* 99
------
686
------
OIL & GAS - DRILLING/EQUIPMENT (1.8%)
5,000 Cooper Cameron Corp.* 330
10,000 Grant Prideco, Inc.* 250
6,000 Smith International, Inc.* 437
10,000 Weatherford International, Inc.* 398
------
1,415
------
PERSONAL CARE (0.4%)
6,000 Estee Lauder Companies, Inc. "A" 297
------
RESTAURANTS (0.9%)
2,800 Krispy Kreme Doughnuts, Inc.* 206
7,000 P.F. Chang's China Bistro, Inc.* 223
10,000 Papa John's International, Inc.* 245
------
674
------
RETAIL - BUILDING SUPPLIES (2.2%)
5,000 Fastenal Co. 253
30,000 Home Depot, Inc. 1,498
------
1,751
------
RETAIL - DISCOUNTERS (0.8%)
16,500 Dollar Tree Stores, Inc.* 653
------
RETAIL - FOOD (0.1%)
6,000 Wild Oats Markets, Inc.* 75
------
RETAIL - GENERAL MERCHANDISING (0.3%)
8,000 Costco Wholesale Corp.* 264
------
RETAIL - SPECIALTY (2.2%)
9,333 99 Cents Only Stores* 372
2,000 Bed Bath & Beyond, Inc.* 73
16,500 Cost Plus, Inc.* 473
2,000 Tuesday Morning Corp.* 21
25,000 Williams-Sonoma, Inc.* 811
------
1,750
------
RETAIL - SPECIALTY APPAREL (0.4%)
10,000 Abercrombie & Fitch Co. "A"* 122
5,000 Charlotte Russe Holding, Inc.* 53
6,000 Chico's FAS, Inc.* 120
600 Too, Inc.* 15
------
310
------
SERVICES - COMMERCIAL & CONSUMER (0.5%)
5,000 Barra, Inc.* 248
5,000 MSC Industrial Direct Co. "A"* 104
------
352
------
SERVICES - DATA PROCESSING (0.1%)
3,000 MedQuist, Inc.* 102
------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (3.2%)
800 Aether Systems, Inc.* 164
4,900 Alamosa PCS Holdings, Inc.* 102
10,000 Dobson Communications Corp. "A"* 192
7,600 Microcell Telecommunications, Inc. "B"* 275
3,000 Nextel Partners, Inc. "A"* 98
3,300 Powertel, Inc.* 234
3,300 Tritel, Inc.* 98
---------
B-38
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
300 Triton PCS Holdings, Inc. "A"* $ 17
6,200 UbiquiTel, Inc.* 59
6,500 US Unwired, Inc. "A"* 85
7,000 VoiceStream Wireless Corp.* 814
7,000 Western Wireless Corp. "A"* 381
-------
2,519
-------
TELECOMMUNICATIONS - LONG DISTANCE (1.1%)
4,200 CapRock Communications Corp.* 82
5,000 Global Crossing Ltd.* 132
2,400 IMPSAT Fibre Networks, Inc.* 40
9,300 ITC DeltaCom, Inc.* 207
1,600 Level 3 Communications, Inc.* 141
3,100 Startec Global Communications Corp.* 33
3,600 Universal Access, Inc.* 88
5,000 Williams Communications Group* 166
-------
889
-------
TELEPHONES (6.0%)
4,700 Adelphia Business Solutions* 109
2,300 Allegiance Telecom, Inc.* 147
5,700 Allied Riser Communications Corp.* 80
3,800 Choice One Communications, Inc.* 155
2,475 Covad Communications Group, Inc.* 40
7,900 Cypress Communications, Inc.* 57
4,000 DSL.net, Inc.* 41
1,500 Focal Communications Corp.* 54
12,400 Global TeleSystems, Inc.* 150
11,300 GT Group Telecom, Inc. "B"* 179
3,800 Intermedia Communications, Inc.* 113
11,400 McLeod, Inc.* 236
44,400 Metromedia Fiber Network, Inc. "A"* 1,762
4,100 Network Access Solutions Corp.* 39
12,000 NEXTLINK Communications, Inc. "A"* 455
8,700 Northeast Optic Network, Inc.* 536
2,500 NorthPoint Communications Group, Inc.* 28
3,900 Pac-West Telecomm, Inc.* 78
4,500 Rhythms NetConnections, Inc.* 57
2,900 Teligent, Inc. "A"* 68
1,500 Time Warner Telecom, Inc. "A"* 97
6,750 Winstar Communications, Inc.* 229
-------
4,710
-------
TEXTILES - APPAREL (0.2%)
5,000 Columbia Sportswear Co.* 134
4,500 Cutter and Buck, Inc.* 36
-------
170
-------
TRUCKERS (0.6%)
11,850 Forward Air Corp.* 474
-------
WASTE MANAGEMENT (0.4%)
15,000 Waste Connections, Inc.* 296
-------
Total common stocks (cost: $40,901) 74,105
-------
Principal
Amount
(000)
---------
MONEY MARKET INSTRUMENT (4.9%)
$ 3,878 Federal Home Loan Bank, DN, 6.50%, 7/03/2000
(cost: $3,877) $ 3,877
-------
Total investments (cost: $44,778) $77,982
=======
See accompanying Notes to Portfolio of Investments, page B-43.
B-39
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
_________ ________ ______
STOCKS (93.8%)
ARGENTINA (0.2%)
38,800 PC Holdings S.A. $ 71
------
AUSTRALIA (0.2%)
1,700 CSL Ltd. 33
67,000 Pasminco Ltd.* 36
------
69
------
AUSTRIA (1.4%)
2,700 Bank Austria AG 132
3,500 Boehler Uddeholm AG 122
1,150 VA Technologie AG 61
2,850 Vienna Airport (Flughafen Wien) 101
------
416
------
BRAZIL (0.8%)
2,000 Companhia Brasileira de
Distribuicao Grupo Pao de Acucar ADR 64
1,500 Companhia Cervejaria Brahma 26
2,600 Embratel Participacoes S.A. ADR 61
2,080 Petroleo Brasileiro S.A. (Preferred) 63
1,100 Uniao de Bancos Brasileiros S.A. (Unibanco) GDR 32
------
246
------
CANADA (8.4%)
11,900 Anderson Exploration Ltd.* 216
4,400 C-MAC Industries, Inc.* 208
4,300 Canadian Imperial Bank of Commerce 118
11,200 Canadian National Railway Co. 327
10,300 Canadian Occidental Petroleum Ltd. 280
7,600 Manulife Financial Corp.* 135
9,900 Nortel Networks Corp. 676
4,800 Sun Life Financial Services 81
13,200 Suncor Energy, Inc. 308
6,500 Toronto-Dominion Bank 158
------
2,507
------
CHINA (0.7%)
10,900 China Mobile, Ltd.* 96
70,000 Cosco Pacific Ltd. 55
42,000 Legend Holding 41
10,000 Petrochina Co. Ltd. 2
------
194
------
DENMARK (2.2%)
36,841 Nordic Baltic Holding* 269
8,000 SAS Danmark A/S 67
4,900 Tele Danmark A/S "B" 330
------
666
------
FINLAND (5.1%)
9,866 Metso OYJ 119
21,800 Nokia Corp. ADR 1,088
3,900 Perlos Corp. 123
4,800 Sampo Insurance Co. "A" 195
------
1,525
------
FRANCE (7.2%)
3,500 Accor S.A. $ 143
900 Alcatel ADR 60
4,776 Aventis S.A. 349
4,440 CNP Assurances 151
6,000 Coflexip ADR 363
2,000 Eramet Group 85
1,360 ISIS S.A. 97
3,000 Renault S.A. 136
5,000 Rhodia S.A. 84
7,370 Total Fina S.A. 566
1,900 Valeo S.A. 102
------
2,136
------
GERMANY (2.8%)
6,200 Continental AG 104
6,000 Merck KGaA 192
1,260 SAP AG 188
7,200 Veba AG 347
------
831
------
GREECE (0.5%)
4,000 Hellenic Telecommunications
Organization S.A. (OTE) 98
5,607 National Bank of Greece S.A. GDR* 44
------
142
------
HONG KONG (0.4%)
4,600 HSBC Holdings 53
4,500 Hutchison Whampoa Ltd. 56
------
109
------
HUNGARY (0.1%)
1,300 Magyar Tavkozlesi RT. (MATAV) ADR 45
------
INDIA (0.2%)
3,700 Videsh Sanchar Nigam Ltd. GDR 58
------
ISRAEL (0.6%)
8,000 Bank Hapoalim Ltd. 23
2,400 Blue Square Ltd. ADR 24
400 Check Point Software Technologies Ltd.* 85
600 Teva Pharmaceutical Industries Ltd. ADR 33
------
165
------
ITALY (4.2%)
5,000 ENI S.p.A. ADR 291
2,700 Gucci Group N.V. 256
56,000 Italgas S.p.A. 247
10,300 Telecom Italia S.p.A. 142
47,700 Telecom Italia S.p.A. Savings 316
------
1,252
------
JAPAN (14.5%)
2,800 Asatsu DK 115
6,000 Daibiru Corp. 48
28 DDI Corp. 269
7,000 Fujitsu Ltd. 242
300 Funai Electric Co. Ltd. 50
----
B-40
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
400 Internet Initiative, Inc. ADR* $ 24
2,000 Ito-Yokado Co. Ltd. 120
17,000 Kikkoman Corp. 131
7,000 Kirin Brewery Co. Ltd. 87
2,000 Murata Manufacturing Co. Ltd. 287
18,000 Nikko Securities Co. Ltd. 178
55,000 Nippon Steel Corp. 116
22 Nippon Telegraph & Telephone Corp. (NTT) 292
5 NTT Mobile Communication Network, Inc. 135
3,900 Paris Miki, Inc. 254
2,000 Pasona Softbank, Inc. 55
1,300 Ryohim Keikaku Co. 165
6,000 Sailor Pen Co. Ltd. 107
3,600 Sanix, Inc.* 190
3,000 Shin-Etsu Chemical Co., Ltd. 152
3,200 Sony Corp.* 299
21,000 Sumitomo Corp. 236
5,000 Sumitomo Electric Industries, Ltd. 86
3,000 Takeda Chemical Industries 197
23,000 Toshiba Corp. 259
28 West Japan Railway 114
3,300 Zenrin Co. 96
-------
4,304
-------
KOREA (1.3%)
5,000 Korea Electric Power Corp. ADR 92
2,512 Korea Telecom Corp. ADR 122
3,000 Samsung Corp. 26
450 Samsung Electronics Co. Ltd. 149
-------
389
-------
MALAYSIA (0.3%)
11,900 Malayan Bank Bhd 48
1,900 Malaysian Pacific Industries Bhd 20
7,000 Telekom Malaysia Bhd 24
-------
92
-------
MEXICO (1.0%)
4,100 Coca Cola Femsa S.A. ADR 78
1,400 Fomento Economico Mexicano, S.A. de C.V. ADR 60
1,800 Telefonos de Mexico, S.A. de C.V. ADR 103
3,400 Tubos de Acero de Mexico, S.A. ADR 47
-------
288
-------
NETHERLANDS (9.9%)
9,100 Akzo Nobel N.V. 387
2,900 EVC International N.V.* 26
6,500 Fortis NL N.V. 189
2,400 Getronics N.V. 37
6,700 ING Group N.V. 453
8,400 Koninklijke KPN N.V. 376
15,376 Koninklijke Philips Electronics N.V. ADR 730
8,100 Oce-van der Grinten N.V. 133
5,500 Versatel Telecom* 231
4,300 VNU N.V. 222
7,700 Vopak Kon 169
-------
2,953
-------
NORWAY (2.2%)
72,000 Christiania Bank og Kreditkasse 387
3,900 Schibsted ASA 72
26,900 Storebrand ASA 194
-------
653
-------
PORTUGAL (2.4%)
10,300 Banco Pinto & Sotto Mayor S.A. 229
16,000 Brisa-Auto Estrada de Portugal S.A. 138
30,000 Portugal Telecom S.A. ADR 337
-------
704
-------
RUSSIA (0.2%)
1,000 LUKoil ADR 51
-------
SINGAPORE (0.4%)
8,700 Natasteel Electronics Ltd. 27
7,900 Singapore Airlines Ltd. 78
-------
105
-------
SOUTH AFRICA (0.2%)
34,600 Firstrand Ltd. 36
3,508 South African Breweries plc 26
-------
62
-------
SPAIN (3.9%)
12,900 Altadis S.A. 198
19,606 Banco Bilbao Vizcaya Argentaria 293
9,750 Repsol S.A. 194
7,319 Telefonica de Espana S.A. ADR* 469
-------
1,154
-------
SWEDEN (4.3%)
9,200 Autoliv, Inc. GDR 225
18,300 Ericsson L M Tel Co. ADR 366
58,650 Nordic Baltic Holding* 437
9,240 Skandinaviska Enskilda Banken "A" 109
43,643 Swedish Match AB 135
-------
1,272
-------
SWITZERLAND (2.2%)
205 Novartis AG 325
490 Selecta Group AG 152
233 Sulzer AG P.C.* 155
80 Swisscom AG 27
-------
659
-------
TAIWAN (0.7%)
28,000 Taiwan Semiconductor Manufacturing Co. 133
28,000 United Microelectronics Corp. 78
-------
211
-------
TURKEY (0.3%)
1,500,000 Eregli Demir ve Celik Fabrikalari T.A.S.* 61
2,169,246 Yapi ve Kredi Bankasi A.S. 24
-------
85
-------
UNITED KINGDOM (15.0%)
6,200 AstraZeneca Group plc 289
21,400 Bank of Scotland 204
------
B-41
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Number Value
of Shares Security (000)
--------- -------- ------
63,500 Billiton plc $ 258
6,100 BOC Group plc 88
100 Bookham Technology* 6
15,400 Cable & Wireless plc 261
45,600 Cadbury Schweppes 299
18,434 Celltech Group plc 357
18,400 CGU plc 306
104,000 Cookson Group plc 347
77,500 Corporate Services Group plc* 114
2,600 Glaxo Wellcome plc ADR 150
13,400 Laporte plc* 97
49,000 Old Mutual plc* 108
9,900 Powergen plc 85
25,500 Reckitt & Colman 286
19,820 Reuters Group plc 338
15,824 Royal Bank Scot Group 265
58,600 Tomkins plc 190
27,311 WPP Group plc 399
-------
4,447
-------
Total stocks (cost: $21,984) 27,861
-------
Principal
Amount
(000)
---------
MONEY MARKET INSTRUMENT (6.3%)
$ 1,856 Federal Home Loan Bank Consolidated DN, 6.50%,
7/03/2000 (cost: $1,856) 1,856
-------
Total investments (cost: $23,840) $29,717
=======
PORTFOLIO SUMMARY BY CONCENTRATION
Telephones 10.4%
Communication Equipment 7.4
Drugs 6.5
U. S. Government 6.2
Banks - Money Center 6.1
Insurance - Multiline Companies 4.5
Oil - International Integrated 4.0
Electronics - Semiconductors 3.3
Banks - Major Regional 3.0
Electrical Equipment 2.7
Chemicals - Specialty 2.4
Manufacturing - Diversified Industries 2.3
Retail - Specialty 2.3
Railroads/Shipping 2.1
Oil & Gas - Exploration & Production 1.9
Electric Utilities 1.8
Advertising/Marketing 1.7
Oil & Gas - Drilling/Equipment 1.5
Auto Parts 1.4
Telecommunications - Cellular/Wireless 1.4
Beverages-Nonalcoholic 1.3
Metals/Mining 1.3
Services - Commercial & Consumer 1.3
Iron & Steel 1.2
Investment Banks/Brokerage 1.1
Services - Data Processing 1.1
Telecommunications - Long Distance 1.1
Tobacco 1.1
Household Products 1.0
Leisure Time 1.0
Manufacturing - Specialized 1.0
Oil - Domestic Integrated 1.0
Other 13.7
------
Total 100.1%
======
See accompanying Notes to Portfolio of Investments, page B-43.
------
B-42
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
GENERAL NOTES
Market values of securities are determined by procedures and practices discussed
in Note 1 to the Trust's financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
Investments in foreign securities at June 30, 2000, were 1.5%, 2.8%, and 4.9% of
the net assets of the USAA Life Growth and Income Fund, the USAA Life
Diversified Assets Fund, and the USAA Life Aggressive Growth Fund, respectively.
ADR American Depository Receipts are receipts issued by a U. S. bank evidencing
ownership of foreign shares. Dividends are paid in U. S. dollars.
GDR Global Depository Receipts are receipts issued by a U. S. or foreign bank
evidencing ownership of foreign shares. 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) At June 30, 2000, the cost of securities purchased on a delayed-delivery
basis was $498,000.
(c) At June 30, 2000, portions of these securities were segregated to cover
delayed-delivery purchases.
* 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 yield 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 within seven days. The
interest rate is adjusted at the stipulated daily, weekly, or monthly interval
to a rate that reflects current market conditions. The effective maturity of
these instruments is deemed to be less than 397 days in accordance with detailed
regulatory requirements.
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 time of purchase.
LOC - Enhanced by a bank letter of credit.
See accompanying Notes to Financial Statements on page B-48.
------
B-43
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<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
$27,721, $13,189, $57,009,
$24,596, $29,704, $44,778, and
$23,840, respectively) $27,721 $12,851 $80,575 $37,162 $34,787 $77,982 $29,717
Cash 1 1 - 1 1 1 1
Cash denominated in foreign
currencies (identified cost
of $22 and $107, respectively) - - - 22 - - 107
Receivables:
Capital shares sold 99 - 1 - 4 94 -
Dividends and interest 57 134 105 48 257 1 52
Securities sold - - 347 290 143 114 189
------- ------- ------- ------- ------- ------- -------
Total assets 27,878 12,986 81,028 37,523 35,192 78,192 30,066
------- ------- ------- ------- ------- ------- -------
LIABILITIES
Securities purchased - 498 104 318 64 40 334
Unrealized depreciation on
foreign currency contracts
held, at value - - - 1 - - 1
Capital shares redeemed 1 7 221 19 - - 2
Accrued advisory fees - - 13 - - - -
Accrued administrative fees 2 - 2 - - 9 17
Accounts payable and accrued expenses 11 3 12 5 5 21 17
------- ------- ------- ------- ------- ------- -------
Total liabilities 14 508 352 343 69 70 371
------- ------- ------- ------- ------- ------- -------
Net assets applicable to
capital shares outstanding $27,864 $12,478 $80,676 $37,180 $35,123 $78,122 $29,695
======= ======= ======= ======= ======= ======= =======
REPRESENTED BY:
Paid-in capital $27,864 $13,393 $54,056 $23,123 $28,949 $44,059 $23,386
Accumulated undistributed net
investment income (loss) - 467 541 205 641 (103) 155
Accumulated net realized gain
(loss) on investments - (1,044) 2,513 1,287 450 962 278
Net unrealized appreciation/
depreciation of investments - (338) 23,566 12,566 5,083 33,204 5,877
Net unrealized depreciation
on foreign currency translations - - - (1) - - (1)
------- ------- ------- ------- ------- ------- -------
Net assets applicable to
capital shares outstanding $27,864 $12,478 $80,676 $37,180 $35,123 $78,122 $29,695
======= ======= ======= ======= ======= ======= =======
Capital shares outstanding,
unlimited number of shares
authorized, no par value 27,864 1,298 4,233 2,285 2,756 2,975 2,257
======= ======= ======= ======= ======= ======= =======
Net asset value, redemption
price, and offering price
per share $ 1.00 $ 9.61 $ 19.06 $ 16.27 $ 12.74 $ 26.25 $ 13.15
======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements, page B-48.
------
B-44
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
(IN THOUSANDS) SIX-MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<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:
Dividends (net of foreign taxes
withheld of $0, $0, $2, $36,
$0, $0, and $47, respectively) $ - $ 71 $ 598 $ 258 $ 197 $ 9 $ 283
Interest 924 408 83 70 506 139 42
---- ------- ------- ------- ------- ------- -------
Total income 924 479 681 328 703 148 325
---- ------- ------- ------- ------- ------- -------
Expenses:
Advisory fees 30 13 80 35 36 180 94
Administrative fees 25 24 24 36 25 30 36
Custodian's fees 12 13 25 45 19 40 43
Shareholder reporting fees 3 2 6 2 3 1 -
Trustees' fees 2 2 2 2 2 2 2
Professional fees 18 17 17 20 18 19 21
Other - - 1 - 1 1 -
---- ------- ------- ------- ------- ------- -------
Total expenses before
reimbursement 90 71 155 140 104 273 196
Expenses reimbursed (37) (48) (15) (25) (41) (22) (36)
---- ------- ------- ------- ------- ------- -------
Total expenses after
reimbursement 53 23 140 115 63 251 160
---- ------- ------- ------- ------- ------- -------
Net investment income (loss) 871 456 541 213 640 (103) 165
---- ------- ------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain (loss) on:
Investments - (737) 2,513 1,425 703 992 593
Foreign currency transactions - - - (6) - - (9)
Change in net unrealized
appreciation/depreciation of:
Investments - 935 (1,671) (543) (468) 1,844 (698)
---- ------- ------- ------- ------- ------- -------
Net realized and
unrealized gain (loss) - 198 842 876 235 2,836 (114)
---- ------- ------- ------- ------- ------- -------
Increase in net
assets resulting from operations $871 $ 654 $ 1,383 $ 1,089 $ 875 $2,733 $ 51
==== ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements, page B-48
B-45
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
(IN THOUSANDS) SIX-MONTH PERIOD ENDED JUNE 30, 2000, AND
YEAR ENDED DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life
Money Market Fund Income Fund Growth and Income Fund
-------------------- -------------------- ----------------------
6/30/00 12/31/99 6/30/00 12/31/99 6/30/00 12/31/99
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ 871 $ 1,416 $ 456 $ 1,506 $ 541 $ 1,083
Net realized gain (loss) on:
Investments - - (737) 36 2,513 7,211
Foreign currency transactions - - - - - -
Change in net unrealized appreciation/depreciation of:
Investments - - 935 (2,623) (1,671) 2,960
Foreign currency translations - - - - - -
--------- -------- --------- --------- ---------- --------
Increase (decrease) in net assets resulting
from operations 871 1,416 654 (1,081) 1,383 11,254
--------- -------- --------- --------- ---------- --------
Distributions to shareholders from:
Net investment income (871) (1,416) - (1,529) (35) (1,078)
--------- -------- --------- --------- ---------- --------
Net realized gains - - - (360) (187) (7,262)
--------- -------- --------- --------- ---------- --------
From capital share transactions:
Proceeds from shares sold 20,104 45,735 1,175 6,832 2,364 8,632
Dividend reinvestments 871 1,416 - 1,889 222 8,340
Cost of shares redeemed (24,606) (37,767) (5,572) (30,779) (7,183) (36,212)
--------- -------- --------- --------- ---------- --------
Increase (decrease) in net assets from
capital share transactions (3,631) 9,384 (4,397) (22,058) (4,597) (19,240)
--------- -------- --------- --------- ---------- --------
Net increase (decrease) in net assets (3,631) 9,384 (3,743) (25,028) (3,436) (16,326)
Net assets:
Beginning of period 31,495 22,111 16,221 41,249 84,112 100,438
--------- -------- --------- --------- ---------- --------
End of period $ 27,864 $ 31,495 $ 12,478 $ 16,221 $ 80,676 $ 84,112
========= ======== ========= ========= ========== ========
Accumulated undistributed net investment income:
End of period $ - $ - $ 467 $ 11 $ 541 $ 35
========= ======== ========= ========= ========== ========
Change in shares outstanding:
Shares sold 20,104 45,735 125 636 127 434
Shares issued for dividends reinvested 871 1,416 - 206 12 445
Shares redeemed (24,606) (37,767) (601) (2,854) (393) (1,927)
--------- -------- --------- --------- ---------- --------
Increase (decrease) in shares outstanding (3,631) 9,384 (476) (2,012) (254) (1,048
========= ======== ========= ========= ========== ========
</TABLE>
See accompanying Notes to Financial Statements, page B-48.
B-46
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
(IN THOUSANDS) SIX-MONTH PERIOD ENDED JUNE 30, 2000, AND
YEAR ENDED DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life USAA Life USAA Life USAA Life
World Growth Fund Diversified Assets Fund Aggressive Growth Fund International Fund
----------------------- ------------------------ ------------------------ ------------------------
6/30/00 12/31/99 6/30/00 12/31/99 6/30/00 12/31/99 6/30/00 12/31/99
-------- -------- -------- --------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 213 $ 265 $ 640 $ 1,368 $ (103) $ (142) $ 165 $ 240
1,425 5,234 703 5,652 992 4,190 593 861
(6) (9) - - - - (9) (7)
(543) 2,549 (468) (4,339) 1,844 22,387 (698) 5,201
- (3) - - - - - (2)
-------- ------- -------- --------- ------- -------- -------- ---------
1,089 8,036 875 2,681 2,733 26,435 51 6,293
-------- ------- -------- --------- ------- -------- -------- ---------
(24) (237) (25) (1,365) - - (12) (222)
-------- ------- -------- --------- ------- -------- -------- ---------
(353) (4,862) - (8,514) (263) (3,965) - -
-------- ------- -------- --------- ------- -------- -------- ---------
2,785 1,927 754 8,345 22,199 9,842 1,235 736
376 5,099 25 9,879 263 3,965 13 222
(611) (18,125) (6,479) (31,623) (5,561) (6,727) (285) (562)
-------- ------- -------- --------- ------- -------- -------- ---------
2,550 (11,099) (5,700) (13,399) 16,901 7,080 963 396
-------- ------- -------- --------- ------- -------- -------- ---------
3,262 (8,162) (4,850) (20,597) 19,371 29,550 1,002 6,467
33,918 42,080 39,973 60,570 58,751 29,201 28,693 22,226
-------- ------- -------- --------- ------- -------- -------- ---------
$ 37,180 $33,918 $ 35,123 $39,973 $78,122 $ 58,751 $29,695 $28,693
======== ======= ======== ========= ======= ======== ======== =========
$ 205 $ 22 $ 641 $ 27 $ (103) $ - $ 155 $ 11
======== ======= ======== ========= ======= ======== ======== =========
174 121 61 542 819 532 94 66
25 321 2 755 14 165 1 17
(38) (1,246) (527) (2,097) (205) (455) (22) (52)
-------- ------- -------- --------- ------- -------- -------- ---------
161 (804) (464) (800) 628 242 73 31
======== ======= ======== ========= ======= ======== ======== =========
</TABLE>
B-47
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA LIFE INVESTMENT TRUST (the Trust), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company organized as a Delaware business trust consisting of seven separate
funds.
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 Insurance Company (USAA Life).
The investment objectives 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 strategy of
investing the Fund's assets in high-quality, U.S. dollar-denominated debt
instruments that have been determined to 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 strategy of investing the Fund's assets primarily in U.S. dollar-
denominated debt and income-producing securities selected for their high yields
relative to the risk involved.
USAA LIFE GROWTH AND INCOME FUND: Capital growth and current income, through a
strategy of investing the Fund's assets primarily in dividend-paying equity
securities.
USAA LIFE WORLD GROWTH FUND: Long-term capital appreciation, through a strategy
of investing the Fund's assets primarily in 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 the Fund's assets approximately 60% in equity securities (selected for
their potential return), and approximately 40% in debt securities of varying
maturities.
USAA LIFE AGGRESSIVE GROWTH FUND: Appreciation of capital, through a strategy of
investing the Fund's assets primarily in 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.
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 last quoted sales price, or the most recently
determined closing price calculated according to local market convention,
available at the time the Fund is valued. If no sale is reported, the average of
the bid and asked prices is generally used.
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 judgment, these prices are readily
available and are representative of the securities' market values. For many
securities, such prices are not readily available. The Service generally prices
these securities based on methods that 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 that 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 realized gain on investments and increase paid-in-capital by approximately
$3,000.
C. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income, less foreign taxes, if any, is recorded on the ex-dividend date. If the
ex-dividend date has passed, certain dividends from foreign securities are
recorded upon notification. Interest income is recorded on the accrual
B-48
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
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 and may be traded in foreign currency.
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 from the difference between amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books and the
U.S. dollar equivalent of the amounts received. Net realized foreign currency
gains/losses have been reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income on the statement of assets and
liabilities as such amounts are treated as ordinary income/loss for tax
purposes. Net unrealized foreign currency exchange gains/losses arise from
changes in the value of assets and liabilities other than investments in
securities resulting from changes in the exchange rate.
E. USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
2) LINE OF CREDIT
The Funds participate in a joint short-term committed revolving loan agreement
of $5 million with USAA Capital Corporation (CAPCO), an affiliate of USAA Life
and USAA Investment Management Company (USAA IMCO). Prior to March 1, 2000, the
amount of the agreement was $13 million.
The purpose of the agreement is to meet temporary or emergency cash needs,
including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability, each Fund may borrow from
CAPCO an amount up to 5% of its total assets at CAPCO's borrowing rate with no
markup. During the six-month period ended June 30, 2000, the USAA Life
Diversified Assets Fund had one borrowing of $650,000 for three days, incurring
$295 in interest expense. The USAA Life Money Market, USAA Life Income, USAA
Life Growth and Income, USAA Life World Growth, USAA Life Aggressive Growth, and
USAA Life International Funds had no borrowings under this agreement during the
period.
3) 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 June 30, 2000.
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. USAA Life is a shareholder only in the USAA Life World
Growth, USAA Life Aggressive Growth, and USAA Life International Funds.
At June 30, 2000, the USAA Life Income Fund had a capital loss carryover of
approximately $1,044,000 for federal income tax purposes which, if not offset by
subsequent capital gains, will expire in 2008. It is unlikely that the Board of
Trustees of the Funds will authorize a distribution of capital gains realized in
the future until the capital loss carryover has been utilized or expires.
B-49
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the six-
month period ended June 30, 2000, were as follows (000):
<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
----------- ---------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $ 168,877 $ 6,757 $ 8,812 $ 8,636 $ 7,532 $ 22,998 $ 6,746
Sales/Maturities $ 173,613 $ 10,941 $ 13,683 $ 6,921 $ 13,621 $ 7,958 $ 5,861
</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 June 30, 2000, were as
follows (000):
<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
--------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Appreciation $ 1,125 $ 27,589 $ 13,738 $ 6,912 $ 37,688 $ 7,533
Depreciation (463) (4,023) (1,172) (1,829) (4,484) (1,656)
------- -------- -------- ------- -------- -------
Net $ (338) $ 23,566 $ 12,566 $ 5,083 $ 33,204 $ 5,877
======= ======== ======== ======= ======== =======
</TABLE>
5) 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 Fund's
forgoing the opportunity for potential profit.
At June 30, 2000, the terms of open foreign currency contracts were as follows:
USAA LIFE WORLD GROWTH FUND:
Foreign Currency Contracts to Buy (000):
<TABLE>
<CAPTION>
U.S. $ Value at In Exchange Unrealized Unrealized
Exchange Date Contracts to Receive June 30, 2000 for U.S. $ Appreciation Depreciation
------------- -------------------- ---------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
07/03/00 10,983 Japanese Yen $ 103 $ 104 $ - $ (1)
07/03/00 1,741 Japanese Yen 16 16 - -
07/05/00 1,748 Japanese Yen 16 16 - -
07/05/00 348 Danish Krone 45 45 - -
----- ----- --- ----
$ 180 $ 181 $ - $ (1)
===== ===== === ====
</TABLE>
Foreign Currency Contracts to Sell (000):
<TABLE>
<CAPTION>
U.S. $ Value at In Exchange Unrealized Unrealized
Exchange Date Contracts to Receive June 30, 2000 for U.S. $ Appreciation Depreciation
------------- -------------------- ---------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
07/05/00 75 Swiss Franc $ 46 $ 46 $ - $ -
07/05/00 374 Danish Krone 48 48 - -
---- ---- --- ---
$ 94 $ 94 $ - $ -
==== ==== === ===
</TABLE>
B-50
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
USAA LIFE INTERNATIONAL FUND:
Foreign Currency Contracts to Buy (000):
<TABLE>
<CAPTION>
U.S. $ Value at In Exchange Unrealized Unrealized
Exchange Date Contracts to Receive June 30, 2000 for U.S. $ Appreciation Depreciation
------------- -------------------- ---------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
07/03/00 10,983 Japanese Yen $ 103 $ 104 $ - $ (1)
07/03/00 3,483 Japanese Yen 33 33 - -
07/05/00 1,748 Japanese Yen 16 16 - -
07/05/00 348 Danish Krone 45 45 - -
----- ----- --- ----
$ 197 $ 198 $ - $ (1)
===== ===== === ====
</TABLE>
Foreign Currency Contracts to Sell (000):
<TABLE>
<CAPTION>
U.S. $ Value at In Exchange Unrealized Unrealized
Exchange Date Contracts to Receive June 30, 2000 for U.S. $ Appreciation Depreciation
------------- -------------------- ---------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
07/05/00 92 Swiss Franc $ 56 $ 56 $ - $ -
07/05/00 374 Danish Krone 48 48 - -
---- ---- --- ---
$104 $104 $ - $ -
==== ==== === ===
</TABLE>
6) 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 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 for each calendar month.
B. ADMINISTRATIVE FEES - As outlined in the Underwriting and Administrative
Services Agreement by and among USAA Life, the Trust, and USAA IMCO, USAA Life
provides certain management, administrative, legal, clerical, accounting, and
record-keeping services necessary or appropriate to conduct the Trust's business
and operations. Fees are based on estimated time spent to provide 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 six-month
period ended June 30, 2000, for the USAA Life Diversified Assets Fund was $60.
F. SHARE OWNERSHIP - At June 30, 2000, USAA Life owned approximately 667,000
shares (29%) of the USAA Life World Growth Fund, 1.5 million shares (50%) of the
USAA Life Aggressive Growth Fund, and 2.0 million shares ( 89%) of the USAA Life
International Fund. All other shares are owned by the Separate Accounts.
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.
B-51
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
USAA Life Money Market Fund
-----------------------------------------------------------------------------
Six-month Year ended December 31,
period ended ----------------------------------------------------------
June 30, 2000 1999 1998 1997 1996 1995*
------------- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .05 .05 .05 .05 .06(b)
Distributions from net investment income (.03) (.05) (.05) (.05) (.05) (.06)
--------- -------- --------- -------- --------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ========= ======== ========= ========
Total return (%)** 2.91 4.93 5.29 5.35 5.25 5.69
Net assets at end of period (000) $ 27,864 $ 31,495 $ 22,111 $ 15,131 $ 11,245 $ 7,802
Ratio of expenses to average net assets (%) .35(a) .35 .35 .35 .35 .35(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .59(a) .56 .80 .70 1.24 2.29(a)
Ratio of net investment income
to average net assets (%) 5.79(a) 4.85 5.17 5.22 5.10 5.55(a)
<CAPTION>
USAA Life Income Fund
----------------------------------------------------------------------------
Six-month Year ended December 31,
period ended ---------------------------------------------------------
June 30, 2000 1999 1998 1997 1996 1995*
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.14 $ 10.89 $ 10.96 $ 10.51 $ 11.32 $ 10.00
Net investment income .35 .96 .66 .75 .92 .78(b)
Net realized and unrealized gain (loss) .12 (1.52) .35 .46 (.84) 1.61
Distributions from net investment income - (.96) (.66) (.76) (.89) (.76)
Distributions of realized capital gains - (.23) (.42) - - (.31)
-------- -------- ------- ------- ------ -------
Net asset value at end of period $ 9.61 $ 9.14 $ 10.89 $ 10.96 $ 10.51 $ 11.32
======== ======== ======= ======= ======= =======
Total return (%)** 5.14 (5.17) 9.17 11.60 .67 23.88
Net assets at end of period (000) $ 12,478 $ 16,221 $ 41,249 $ 28,246 $ 24,049 $ 25,823
Ratio of expenses to average net assets (%) .35(a) .35 .35 .35 .35 .35(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) 1.08(a) .68 .55 .52 .65 .65(a)
Ratio of net investment income
to average net assets (%) 6.91(a) 6.56 6.62 7.16 6.99 7.07(a)
Portfolio turnover (%) 51.85 41.36 61.79 30.77 97.74 55.08
</TABLE>
B-52
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life Growth & Income Fund
----------------------------------------------------------------------------
Six-month Year ended December 31,
period ended ---------------------------------------------------------
June 30, 2000 1999 1998 1997 1996 1995*
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 18.75 $ 18.15 $ 17.98 $ 15.06 $ 12.60 $ 10.00
Net investment income .13 .27 .28 .28 .26 .34(b)
Net realized and unrealized gain (loss) .23 2.39 .97 3.68 2.79 2.83
Distributions from net investment income (.01) (.27) (.28) (.27) (.26) (.30)
Distributions of realized capital gains (.04) (1.79) (.80) (.77) (.33) (.27)
-------- -------- ------- ------- ------- -------
Net asset value at end of period $ 19.06 $ 18.75 $ 18.15 $ 17.98 $ 15.06 $ 12.60
======== ======== ======= ======= ======= =======
Total return (%)** 1.94 14.67 6.93 26.43 24.13 31.72
Net assets at end of period (000) $ 80,676 $ 84,112 $100,438 $ 85,750 $55,932 $28,761
Ratio of expenses to average net assets (%) .35(a) .35 .35 .34 .35 .35(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .39(a) .37 .37 NA .53 .66(a)
Ratio of net investment income
to average net assets (%) 1.35(a) 1.31 1.55 1.80 2.25 2.82(a)
Portfolio turnover (%) 11.45 19.50 37.75 20.26 14.55 17.73
</TABLE>
* Funds commenced operations January 5, 1995.
** Assumes reinvestment of all dividend income and capital gains distributions
during the period. The total return calculations for each period do not
reflect insurance contract charges that apply at the Separate Account level,
such as the mortality and expense charge. 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-53
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
USAA Life World Growth Fund
----------------------------------------------------------------------------
Six-month Year ended December 31,
period ended ---------------------------------------------------------
June 30, 2000 1999 1998 1997 1996 1995*
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 15.97 $ 14.37 $ 13.34 $ 12.77 $ 11.10 $ 10.00
Net investment income .09 .13 .16 .17 .18 .17(b)
Net realized and unrealized gain .38 4.30 1.37 1.62 2.16 1.79
Distributions from net investment income (.01) (.13) (.16) (.17) (.16) (.16)
Distributions of realized capital gains (.16) (2.70) (.34) (1.05) (.51) (.70)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 16.27 $ 15.97 $ 14.37 $ 13.34 $ 12.77 $ 11.10
======= ======= ======= ======= ======= =======
Total return (%)*** 3.00 30.93 11.46 14.08 21.12 19.55
Net assets at end of period (000) $37,180 $33,918 $42,080 $39,510 $37,535 $24,706
Ratio of expenses to average net assets (%) .65(a) .65 .65 .59 .65 .65(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .80(a) .75 .66 NA .82 .87(a)
Ratio of net investment income to average
net assets (%) 1.21(a) .91 1.09 1.20 1.45 1.55(a)
Portfolio turnover (%) 21.03 29.62 55.47 48.89 57.66 78.86
</TABLE>
<TABLE>
<CAPTION>
USAA Life Diversified Assets Funds
----------------------------------------------------------------------------
Six-month Year ended December 31,
period ended ---------------------------------------------------------
June 30, 2000 1999 1998 1997 1996 1995*
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.41 $ 15.07 $ 14.48 $ 12.95 $ 11.96 $ 10.00
Net investment income .23 .52 .55 .50 .62 .55(b)
Net realized and unrealized gain .11 .64 .85 2.14 1.10 2.08
Distributions from net investment income (.01) (.52) (.55) (.50) (.62) (.53)
Distributions of realized capital gains - (3.30) (.26) (.61) (.11) (.14)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 12.74 $ 12.41 $ 15.07 $ 14.48 $ 12.95 $ 11.96
======= ======= ======= ======= ======= =======
Total return (%)*** 2.73 7.58 9.63 20.70 14.30 26.33
Net assets at end of period (000) $35,123 $39,973 $60,570 $48,212 $30,390 $26,311
Ratio of expenses to average net assets (%) .35(a) .35 .35 .35 .35 .35(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .58(a) .50 .45 .42 .61 .64(a)
Ratio of net investment income to average
net assets (%) 3.61(a) 3.37 3.72 4.02 4.46 4.93(a)
Portfolio turnover (%) 21.60 38.75 29.67 19.19 43.75 58.87
</TABLE>
B-54
<PAGE>
USAA LIFE INVESTMENT TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED) JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
USAA Life Growth & Income Fund
--------------------------------------------------------
Eight-month
Six-month Year ended December 31, period ended
period ended ----------------------- December 31,
June 30, 2000 1999 1998 1997**
------------- -------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 25.03 $ 13.87 $ 11.70 $ 10.00
Net investment loss (.04)(b) (.07)(b) (.05)(b) (.01)(b)
Net realized and unrealized gain 1.35 13.06 2.39 1.83
Distributions of realized capital gains (.09) (1.83) (.17) (.12)
-------- -------- -------- -------
Net asset value at end of period $ 26.25 $ 25.03 $ 13.87 $ 11.70
======== ======== ======== =======
Total return (%)*** 5.36 94.34 20.14 18.26
Net assets at end of period (000) $ 78,122 $ 58,751 $ 29,201 $42,545
Ratio of expenses to average net assets (%) .70 (a) .70 .70 .70(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) .76 (a) .94 .84 .85(a)
Ratio of net investment loss to average
net assets (%) (.29)(a) (.43) (.41) (.15)(a)
Portfolio turnover (%) 11.88 56.63 50.48 73.77
<CAPTION>
USAA Life Growth & Income Fund
--------------------------------------------------------
Eight-month
Six-month Year ended December 31, period ended
period ended ----------------------- December 31,
June 30, 2000 1999 1998 1997**
------------- -------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 13.14 $ 10.32 $ 10.05 $ 10.00
------- ------- ------- -------
Net investment income .07 .11 .11 .05(b)
Net realized and unrealized gain (loss) (.05) 2.81 .27 .15
Distributions from net investment income (.01) (.10) (.11) (.05)
Distributions of realized capital gains - - - (.10)
------- ------- ------- -------
Net asset value at end of period $ 13.15 $ 13.14 $ 10.32 $ 10.05
======= ======= ======= =======
Total return (%)*** .12 28.33 3.78 1.92
Net assets at end of period (000) $29,695 $28,693 $22,226 $21,582
Ratio of expenses to average net assets (%) 1.10(a) 1.10 1.10 1.10(a)
Ratio of expenses to average net assets,
excluding reimbursements (%) 1.36(a) 1.29 1.35 1.24(a)
Ratio of net investment income to average
net assets (%) 1.15(a) 1.00 1.03 .70(a)
Portfolio turnover (%) 21.37 41.55 42.30 30.57
</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. The total return calculations for each period do not
reflect insurance contract charges that apply at the Separate Account level,
such as the mortality and expense charge. 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.
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B-55
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