-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qhuie6B9bomIXpsh/RpqVKqgJuHffnw7vPtsoSkwnwK1vEH1Xg2ug8boSsN37KUX c+DUWrFIJlb8BMifZ3g5Lg== 0000899243-99-001892.txt : 19990902 0000899243-99-001892.hdr.sgml : 19990902 ACCESSION NUMBER: 0000899243-99-001892 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE CO CENTRAL INDEX KEY: 0001052863 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 741472662 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08625 FILM NUMBER: 99704742 BUSINESS ADDRESS: STREET 1: USAA BUILDING STREET 2: 9800 FREDERICKBURG RD CITY: SAN ANTONIO STATE: TX ZIP: 78288 BUSINESS PHONE: 2104980676 MAIL ADDRESS: STREET 1: USAA BUILDING STREET 2: 9800 FREDERICKSBURG RD CITY: SAN ANTONIO STATE: TX ZIP: 78288 N-30D 1 LIFE INS SEP ACCT OF USAA LIFE VUL SEMIANNUAL RPT USAA LIFE INSURANCE COMPANY VARIABLE UNIVERSAL LIFE ========================================== Semiannual Report June 30, 1999 [USAA LOGO APPEARS HERE] TABLE of CONTENTS - ----------------------------------------------------------------------------- PRESIDENT'S MESSAGE.................................................... iii USAA LIFE VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT CAPITAL GROWTH PORTFOLIO Overview of the Variable Universal Life Fund Accounts.................. A-3 Statements of Assets and Liabilities................................... A-4 Statements of Operations............................................... A-5 Statements of Changes in Net Assets.................................... A-6 Notes to Financial Statements.......................................... A-8 USAA LIFE INVESTMENT TRUST USAA Life Fund Overviews............................................... B-3 Portfolios of Investments.............................................. B-22 Notes to Portfolios of Investments..................................... B-40 Statements of Assets and Liabilities................................... B-42 Statements of Operations............................................... B-43 Statements of Changes in Net Assets.................................... B-44 Notes to Financial Statements.......................................... B-46 SCUDDER VARIABLE LIFE INVESTMENT FUND (VLIF) CAPITAL GROWTH PORTFOLIO Letter from the Fund's President....................................... C-3 Capital Growth Portfolio Management Discussion......................... C-4 Capital Growth Performance Update...................................... C-5 Capital Growth Portfolio Summary....................................... C-6 Investment Portfolios, Financial Statements, and Financial Highlights Capital Growth Portfolio............................................... C-7 Notes to Financial Statements.......................................... C-16 THE ALGER AMERICAN FUND ALGER AMERICAN GROWTH PORTFOLIO Schedule of Investments................................................ D-4 Financial Highlights................................................... D-6 Statement of Assets and Liabilities.................................... D-7 Statement of Operations................................................ D-8 Statement of Changes in Net Assets..................................... D-9 Notes to Financial Statements.......................................... D-10 TABLE OF CONTENTS, continued - ----------------------------------------------------------------------------- BT INSURANCE FUNDS TRUST Equity 500 Index Fund Letter to Shareholders................................................. E-5 Schedule of Investments................................................ E-7 Statement of Assets and Liabilities.................................... E-12 Statement of Operations................................................ E-13 Statements of Changes in Net Assets.................................... E-14 Financial Highlights................................................... E-15 Notes to Financial Statements.......................................... E-16 Small Cap Index Fund Letter to Shareholders................................................. E-21 Schedule of Investments................................................ E-23 Statement of Assets and Liabilities.................................... E-40 Statement of Operations................................................ E-41 Statements of Changes in Net Assets.................................... E-42 Financial Highlights................................................... E-43 Notes to Financial Statements.......................................... E-44 EAFE (Registered Trademark) Equity Index Fund Letter to Shareholders................................................. E-49 Schedule of Investments................................................ E-52 Statement of Assets and Liabilities.................................... E-59 Statement of Operations................................................ E-60 Statements of Changes in Net Assets.................................... E-61 Financial Highlights................................................... E-62 Notes to Financial Statements.......................................... E-63 This report is for the information of USAA Life Variable Universal Life policyowners and others who have received a copy of the currently effective Variable Universal Life prospectus. It may be used as sales literature only when preceded or accompanied by a current prospectus which includes complete information. The USAA Life Variable Universal Life policy is distributed by USAA Investment Management Company, a registered broker dealer. USAA LIFE VARIABLE UNIVERSAL LIFE INSURANCE SEMIANNUAL REPORT PRESIDENT'S MESSAGE FROM THE DESK OF ED ROSANE On the next pages you'll find some valuable information about planning and managing your long-term financial strategy, about funding your policy, and about services available with your Variable Universal Life* policy. Also included is an overview of policy performance and accumulation unit values that introduces the Life Insurance Separate Account financial information and subsequent USAA Life Investment Trust reports. We continue to look for ways to improve our Variable Universal Life policy to ensure we are providing you with the value and service you expect from USAA. I encourage you to review this report and call one of my associates at 1-800-531-8303 to discuss any questions you may have. Sincerely, /s/ Edwin Rosane - ------------------------ Edwin Rosane, CLU, FLMI President USAA Life Insurance Company * Known in some states as Flexible Premium Variable Life. 1999 Semiannual Report iii USAA LIFE VARIABLE UNIVERSAL LIFE INSURANCE SEMIANNUAL REPORT ABOUT YOUR POLICY Owning a Variable Universal Life insurance policy is the result of innovative thinking. You need life insurance protection, and you want to benefit from its tax advantages. The policy's flexibility and its self-directed investments are features that make your policy a unique choice for your long-term financial plan. The basics are simple... Your Variable Universal Life insurance policy gives you coverage for a lifetime (to age 100). As long as you maintain enough cash value to keep your policy in force, you don't need to requalify, unless you wish to increase your coverage. Money you contribute to your policy is placed in investments that you choose. The potential growth of your policy depends on how those investments perform. You may, within limits, adjust your premium payments and death benefit according to your needs. Tax-Wise Funding of Your Policy To make the most of your life insurance policy's tax advantages, it is important to pay enough premiums into your policy in the early years to have cash value to help pay the higher cost of insurance in later years. Point to remember: Many tax advantages disappear if your policy funding exceeds Internal Revenue Service premium payment or withdrawal restrictions. Maintaining Sufficient Cash Value For convenience, you determine the amount and frequency of your premium payments, but you must maintain sufficient cash value to keep your policy in effect. Be sure your personal payment strategy includes paying premiums sufficient to cover the cost of insurance and the monthly maintenance and mortality and expense risk charges. Otherwise, the policy may lapse. And remember to contribute enough in the early years to allow the cash value to help pay for the higher cost of insurance as you age. Reducing Investment Risk Even during times of market speculation, keeping the investment portion of your policy on track may be simpler than you think, if you apply the time-honored strategies of diversification and dollar-cost-averaging. Diversification By their very nature, variable fund accounts are diversified. The 12 fund accounts invest in an underlying mix of stocks and/or bonds. They may be domestic, international, or a combination of the two. You can further diversify by allocating dollars to fund accounts with different objectives to achieve a balance of growth, income, and risk. Dollar-Cost-Averaging Another financial planning strategy is to make regular contributions with a program called dollar-cost-averaging. By allocating a fixed amount or percentage every month, you're able to buy more units when prices are low, and fewer units when prices are high. Over time, this strategy may be more effective than attempting to selectively time the market with occasional purchases. Keep in mind there is no guarantee that dollar-cost-averaging will result in a profit or protect against a loss. Systematic investing involves continuous investment in securities regardless of fluctuations in the price of these securities, and you should consider your ability to continue through periods of both low and high price levels. 24-Hour Access to Policy Values You can access current daily fund account values, 24 hours a day, 7 days a week, through USAA TouchLine (Registered Trademark) at 1-800-531-5433. To access this information, you need your USAA number and a unique TouchLine (Registered Trademark) personal identification number (PIN). To establish a PIN, use the last four digits of your Social Security number to get started, then decide on a new four-digit number. Pursuing a Consistent Strategy You can pursue a consistent financial strategy with USAA Life. If you would like to discuss your personal financial goals, or learn more about payment strategies, diversification, or dollar-cost-averaging, please call an Account Representative at 1-800-531-8303 any time. USAA Life's Variable Universal Life is distributed by USAA Investment Management Company, a registered broker dealer. The Variable Universal Life insurance policy is subject to surrender charges and possible tax consequences. The surrender charge can be as much as 50% of the annual target premium in the first year. The charge declines each policy year and is eliminated after 10 policy years. A 10% federal penalty tax may apply to withdrawals made before age 59 1/2. This material should be preceded by a USAA Life Variable Universal Life prospectus. iv Semiannual Report 1999 USAA LIFE VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT ======================================= SEMIANNUAL REPORT June 30, 1999 [LOGO OF USAA APPEARS HERE] this page left blank intentionally VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- AN OVERVIEW - -------------------------------------------------------------------------------- Fund Accounts June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE AUV TOTAL RETURN FUND ACCOUNT OBJECTIVE (AUV) SINCE INCEPTION - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE Seeks the highest level of current income consistent with MONEY MARKET preservation of capital and maintenance of liquidity $ 1.20 1.99% (7-day yield is 2.47%) - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE INCOME Seeks maximum current income without undue risk to principal $13.55 -2.87% - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE GROWTH Seeks capital growth and current income AND INCOME $23.79 38.83% - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE Seeks long-term capital appreciation WORLD GROWTH* $19.66 29.68% - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE Seeks long-term capital growth, consistent with DIVERSIFIED ASSETS preservation of capital and balanced by current income $19.80 22.17% - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE Seeks appreciation of capital AGGRESSIVE GROWTH $17.64 84.98% - ----------------------------------------------------------------------------------------------------------------------- USAA LIFE Seeks capital appreciation with current income INTERNATIONAL* as a secondary objective $11.01 17.12% - ----------------------------------------------------------------------------------------------------------------------- SCUDDER VLIF CAPITAL Seeks to maximize long-term capital growth GROWTH PORTFOLIO $27.05 43.72% - ----------------------------------------------------------------------------------------------------------------------- ALGER AMERICAN Seeks long-term capital appreciation GROWTH PORTFOLIO $30.98 57.05% - ----------------------------------------------------------------------------------------------------------------------- BT EQUITY 500 INDEX Seeks to match as closely as possible the performance of the S&P 500 (Registered Trademark) Index before the deduction of Fund expenses $12.27 41.76% - ----------------------------------------------------------------------------------------------------------------------- BT SMALL CAP INDEX Seeks to match as closely as possible the performance of the Russell 2000 (Registered Trademark) Small Stock Index before the deduction of Fund expenses $ 9.48 33.00% - ----------------------------------------------------------------------------------------------------------------------- BT EAFE(Registered Seeks to match as closely as possible the performance of the Trademark) Morgan Stanley Capital International Europe Australia Far East $10.77 19.31% EQUITY INDEX* (EAFE) Index before the deduction of Fund expenses - -----------------------------------------------------------------------------------------------------------------------
The 7-day yield quotation more closely reflects the current earnings of the fund than the total return quotation. An investment in the USAA Life Money Market Fund is not insured or guaranteed by the FDIC or any other Government agency. Although the fund seeks to preserve a stable value, it is possible to lose money by investing in the fund. The 7-day yield reflects the 7-day period ending June 30, 1999. * Foreign investing is subject to additional risks, such as currency fluctuations, market illiquidity, and political instability, which are discussed in the Variable Universal Life prospectus. The performance data quoted represent past performance and do not represent the actual experience of amounts invested by a particular owner. Past performance is not a guarantee of future results. The variable insurance products are subject to market risk, including potential fluctuations in investment return and the potential loss of principal. Total returns for periods of less than one year are not annualized. These returns are cumulative. Inception date for all variable fund accounts for Variable Universal Life is 8/31/98 when sale of USAA Life's Variable Universal Life insurance policy began. Since inception performance numbers reflect experience since USAA Life began selling the product. All other data reflects the actual performance of the underlying funds in which the Life Insurance Separate Account invests, adjusted to reflect a deduction of the M&E risk charge and a $5 monthly maintenance charge. M&E charges total 0.75% on an annual basis. The performance figures above do not reflect the cost of insurance protection and other insurance policy fees and, if they did, the performance quoted above would be significantly lower. Investors should ask for a personal illustration that shows the effect on performance of the cost of insurance, other charges, and other variables. Because accumulation units are part of an insurance policy, actual performance should always be considered in conjunction with the policy's fees, cash value, and death benefit. This product is not yet available in all states. This product is known in some states as Flexible Premium Variable Life. 1999 Semiannual Report A-3 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- VARIABLE FUND ACCOUNTS (In Thousands, Except Per Unit Data) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- Investment at Fund Shares Cost Market Value ----------- ------ -------------- Assets Investments at market value: USAA Life Money Market Fund 117 $ 117 $ 117 USAA Life Income Fund 2 24 24 USAA Life Growth and Income Fund 8 155 164 USAA Life World Growth Fund 1 22 24 USAA Life Diversified Assets Fund 5 70 70 USAA Life Aggressive Growth Fund 6 90 104 USAA Life International Fund 1 5 5 Scudder VLIF Capital Growth Portfolio - Class A Shares 4 105 104 Alger American Growth Portfolio 2 98 99 BT Equity 500 Index Fund 16 216 225 BT Small Cap Index Fund 1 9 9 BT EAFE (Registered Trademark) Equity Index Fund 1 3 3 ---- ---- Total investments $914 $948 ==== Fund Account Accumulation Units Unit Value Reserves ------------ ------------ -------- Net assets USAA Life Money Market Fund Account 98 $ 1.201222 $117 USAA Life Income Fund Account 2 13.553955 24 USAA Life Growth and Income Fund Account 7 23.785966 164 USAA Life World Growth Fund Account 1 19.659120 24 USAA Life Diversified Assets Fund Account 4 19.797394 70 USAA Life Aggressive Growth Fund Account 6 17.644394 104 USAA Life International Fund Account 1 11.012953 5 Scudder VLIF Capital Growth Portfolio Fund Account 4 27.048748 104 Alger American Growth Portfolio Fund Account 3 30.980503 99 BT Equity 500 Index Fund Account 19 12.271729 225 BT Small Cap Index Fund Account 1 9.483757 9 BT EAFE (Registered Trademark) Equity Index Fund Account 1 10.774232 3 ---- Net assets attributable to policyowners' reserves $948 ==== See accompanying Notes to Financial Statements on page A-8. A-4 Semiannual Report 1999 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- Variable Fund Accounts (In Thousands) Six-month period ended June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
USAA Life USAA Life USAA Life USAA Life USAA Life Growth USAA Life Diversified Aggressive USAA Life Money Market Income and Income World Growth Assets Growth International Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account Fund Account ------------ ------------ ------------ ------------ ------------ ------------ -------------- Net investment income: Income Dividends $ 1 $ - $ - $ - $ - $ - $ - Expenses Mortality and expense risk charge - - 1 - - - - -------- ---------- ---------- ---------- ---------- ---------- ---------- Net investment income (loss) 1 - (1) - - - - -------- ---------- ---------- ---------- ---------- ---------- ---------- Net realized and unrealized gain (loss) on investments: Realized gain - - 3 - - - - Capital gains distributions - - - - 4 1 - -------- ---------- ---------- ---------- ---------- ---------- ---------- Net realized gain - - 3 - 4 1 - Change in net unrealized appreciation/depreciation - - 9 2 1 14 - -------- ---------- ---------- ---------- ---------- ---------- ---------- Net realized and unrealized gain on investments - - 12 2 5 15 - -------- ---------- ---------- ---------- ---------- ---------- ---------- Increase in net assets resulting from operations $ 1 $ - $ 11 $ 2 $ 5 $ 15 $ - ======== ========== ========== ========== ========== ========== ========== BT EAFE Scudder Alger (Registered VLIF Capital American BT Equity BT Small Trademark) Growth Portfolio Growth Portfolio 500 Index Cap Index Equity Index Fund Account Fund Account Fund Account Fund Account Fund Account ---------------- ---------------- ------------ ------------ ------------ Net investment income: $ - $ - $ - $ - $ - Income Dividends Expenses Mortality and expense risk charge - - - - - ------------ ----------- ---------- --------- --------- Net investment income (loss) - - - - - ------------ ----------- ---------- --------- --------- Net realized and unrealized gain (loss) on investments: Realized gain - - 4 - - Capital gains distributions 9 6 - - - ------------ ----------- ---------- --------- --------- Net realized gain 9 6 4 - - Change in net unrealized appreciation/depreciation (2) 1 9 - - ------------ ----------- ---------- --------- --------- Net realized and unrealized gain on investments 7 7 13 - - ------------ ----------- ---------- --------- --------- Increase in net assets resulting from operations $ 7 $ 7 $ 13 $ - $ - ============ =========== ========== ========= =========
See accompanying Notes to Financial Statements on page A-8. 1999 Semiannual Report A-5 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Variable Fund Accounts (In Thousands) Six-month period ended June 30, 1999 and Period ended December 31, 1998* (Unaudited) - --------------------------------------------------------------------------------
USAA Life USAA Life USAA Life Growth USAA Life Money Market Fund Account Income Fund Account and Income Fund Account World Growth Fund Account ------------------------- ------------------- ----------------------- ------------------------- 6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98 ------------ ------------ --------- --------- --------- ---------- ---------- ----------- Increase in net assets From operations: Net investment income (loss) $ 1 $ - $ - $ - $ (1) $ - $ - $ - Net realized gain - - - - 3 - - - Change in net unrealized appreciation/depreciation - - - - 9 - 2 - --------- ----------- --------- ------- -------- --------- -------- ---------- Increase in net assets resulting from operations 1 - - - 11 - 2 - --------- ----------- --------- ------- -------- --------- -------- ---------- From policy transactions: Purchases 790 48 24 - 180 3 23 - Monthly deduction charges (3) (1) - - (1) - - - Other redemptions (672) (46) - - (29) - (1) - --------- ----------- --------- ------- -------- --------- -------- ---------- Increase in net assets from policy transactions 115 1 24 - 150 3 22 - --------- ----------- --------- ------- -------- --------- -------- ---------- Net increase in net assets 116 1 24 - 161 3 24 - Net assets: Beginning of period 1 - - - 3 - - - --------- ----------- --------- ------- -------- --------- -------- ---------- End of period $ 117 $ 1 $ 24 $ - $ 164 $ 3 $ 24 $ - ========= =========== ========= ======= ======== ========= ======== ========== Units issued and redeemed: Beginning balance 1 - - - 1 - - - Units issued 905 46 2 - 8 1 1 - Units redeemed (808) (45) - - (2) - - - --------- ----------- --------- ------- -------- --------- -------- ---------- Ending balance 98 1 2 - 7 1 1 - ========= =========== ========= ======= ======== ========= ======== ========== Scudder VLIF Capital Alger American Growth BT Equity 500 Index BT Small Cap Index Growth Portfolio Fund Account Portfolio Fund Account Fund Account Fund Account ----------------------------- ---------------------- -------------------- ------------------ 6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98 ------------ ------------ ---------- --------- --------- ---------- ------- -------- Increase in net assets From operations: Net investment income (loss) $ - $ - $ - $ - $ - $ - $ - $ - Net realized gain 9 - 6 - 4 - - - Change in net unrealized appreciation/depreciation (2) 1 1 - 9 - - - -------- ----------- --------- ------- -------- --------- -------- ------ Increase in net assets resulting from operations 7 1 7 - 13 - - - -------- ----------- --------- ------- -------- --------- -------- ------ From policy transactions: Purchases 98 4 94 - 245 3 9 - Monthly deduction charges (1) - (1) - (3) - - - Other redemptions (3) (2) (1) - (33) - - - -------- ----------- --------- ------- -------- --------- -------- ------ Increase in net assets from policy transactions 94 2 92 - 209 3 9 - -------- ----------- --------- ------- -------- --------- -------- ------ Net increase in net assets 101 3 99 - 222 3 9 - Net assets: Beginning of period 3 - - - 3 - - - -------- ----------- --------- ------- -------- --------- -------- ------ End of period $ 104 $ 3 $ 99 $ - $ 225 $ 3 $ 9 $ - ======== =========== ========= ======= ======== ========= ======== ====== Units issued and redeemed: Beginning balance 1 - - - 1 - - - Units issued 4 1 3 - 23 1 1 - Units redeemed (1) - - - (5) - - - -------- ----------- --------- ------- -------- --------- -------- ------ Ending balance 4 1 3 - 19 1 1 - ======== =========== ========= ======= ======== ========= ======== ======
A-6 Semiannual Report 1999 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Variable Fund Accounts (In Thousands) Six-month period ended June 30, 1999 and Period ended December 31, 1998* (Unaudited) - -------------------------------------------------------------------------------- USAA Life Diversified USAA Life Aggressive USAA Life International Assets Fund Account Growth Fund Account Fund Account - --------------------- -------------------- ----------------------- 6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98 - ---------- ---------- --------- ---------- --------- ---------- $ - $ 1 $ - $ - $ - $ - 4 1 1 - - - 1 (1) 14 - - - -------- -------- ------- -------- ------- -------- 5 1 15 - - - -------- -------- ------- -------- ------- -------- 28 37 95 - 5 - (1) - (1) - - - - - (5) - - - -------- -------- ------- -------- ------- -------- 27 37 89 - 5 - -------- -------- ------- -------- ------- -------- 32 38 104 - 5 - 38 - - - - - -------- -------- ------- -------- ------- -------- $ 70 $ 38 $ 104 $ - $ 5 $ - ======== ======== ======= ======== ======= ======== 2 - - - - - 2 2 6 - 1 - - - - - - - -------- -------- ------- -------- ------- -------- 4 2 6 - 1 - ======== ======== ======= ======== ======= ======== BT EAFE (Registered Trademark) Equity Index Fund Account - ----------------------- 6/30/99 12/31/98 - ---------- ----------- $ - $ - - - - - -------- -------- - - -------- -------- 1 2 - - - - -------- -------- 1 2 -------- -------- 1 2 2 - -------- -------- $ 3 $ 2 ======== ======== 1 - - 1 - - -------- -------- 1 1 ======== ======== * Variable fund accounts commenced operations August 31, 1998. See accompanying Notes to Financial Statements on page A-8. 1999 Semiannual Report A-7 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 1) ORGANIZATION The Life Insurance Separate Account of USAA Life Insurance Company is registered under the Investment Company Act of 1940, as amended, as a segregated unit investment account of USAA Life Insurance Company (USAA Life), a wholly owned subsidiary of the United Services Automobile Association (USAA). The Life Insurance Separate Account commenced operation August 31, 1998. The Life Insurance Separate Account is divided into twelve variable fund accounts, each of which invests in a corresponding fund. The funds' objectives can be found on page A-2 in this report. Units of the Life Insurance Separate Account are sold only in connection with the Variable Universal Life Policy. The fund accounts available within the Life Insurance Separate Account include: the USAA Life Money Market Fund Account, USAA Life Income Fund Account, USAA Life Growth and Income Fund Account, USAA Life World Growth Fund Account, USAA Life Diversified Assets Fund Account, USAA Life Aggressive Growth Fund Account, and USAA Life International Fund Account; the Fund Account of the Capital Growth Portfolio-Class A shares of the Scudder Variable Life Investment Fund (Scudder VLIF Capital Growth Portfolio Fund Account); the Fund Account of the American Growth Portfolio of the Alger American Fund (Alger American Growth Portfolio Fund Account); the Fund Accounts of the Equity 500 Index Fund, Small Cap Index Fund and EAFE (Registered Trademark) Equity Index Fund, which are funds of the Bankers Trust (BT) Insurance Funds Trust series (BT Equity 500 Index Fund Account, BT Small Cap Index Fund Account, and BT EAFE (Registered Trademark) Equity Index Fund Account). The assets of the Life Insurance Separate Account are the property of USAA Life and are not chargeable with liabilities arising out of any other business of USAA Life. 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Security Valuation Investments in mutual fund securities are carried in the Statements of Assets and Liabilities at net asset value as reported by the fund. Gains or losses on securities transactions are determined on the basis of the first-in first-out (FIFO) cost method. Security transactions are recorded on the trade date. Dividend income, if any, is recorded on ex-dividend date. Distributions The net investment income (loss) and realized capital gains of the Life Insurance Separate Account are not distributed, but instead are retained and reinvested for the benefit of unit owners. Federal Income Tax Operations of the Life Insurance Separate Account are included in the federal income tax return of USAA Life, which is taxed as a "Life Insurance Company" under the Internal Revenue Code. Under current federal income tax law, no income taxes are payable with respect to operation of the Life Insurance Separate Account. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts in the financial statements. 3) RELATED PARTY TRANSACTIONS During the six-month period ended June 30, 1999, advisory and administrative fees of $479 thousand were paid or payable to USAA Investment Management Company (USAA IMCO) by the funds of the USAA Life Investment Trust (the Trust). USAA IMCO is indirectly wholly owned by USAA. The funds' advisory fees are computed on an annualized rate of 0.20% of the monthly average net assets for each calendar month of each fund of the Trust except for the USAA Life Aggressive Growth Fund, which accrues at an annualized rate of 0.50%, and USAA Life International Fund, which accrues at an annualized rate of 0.65%. The funds are an investment option for both the Variable Universal Life Policy and the Flexible Premium Deferred Combination Fixed and Variable Annuity Contract. Administrative fees are based on estimated time incurred to provide such services. A-8 Semiannual Report 1999 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Continued) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 4) EXPENSES A mortality and expense risk charge is deducted by USAA Life from the Life Insurance Separate Account on a daily basis which is equal, on an annual basis, to 0.75% of the daily net assets of each variable fund account. The mortality risk assumed is that insureds may live for a shorter period of time than estimated. Thus a greater amount of death benefits than expected will be payable. The expense risk assumed by USAA Life is that the costs of administering the policies and the Life Insurance Separate Account may exceed the amount recovered from the policy maintenance and administration expense charges. The mortality and expense risk charge is guaranteed by USAA Life and cannot be increased. The following expenses are charged to reimburse USAA Life for the expenses it incurs in the establishment and maintenance of the Policies and each variable fund account. On the policy's effective date, and each monthly anniversary thereafter, certain monthly charges will be deducted by USAA Life through a redemption of units from the cash value of the policy. The monthly deduction will include cost of insurance charges, charges for any optional insurance benefits provided by rider, an administrative charge of $10 during the first twelve policy months, and a recurring maintenance charge of $5. A transfer charge of $25 will be deducted for each value transfer between Variable Fund Accounts in excess of six per Policy Year. For each partial surrender of cash value, a charge equal to the lesser of $25 or 2% of the amount withdrawn will be deducted. This charge is also referred to as an "administrative processing fee." For full surrenders, the amount of the surrender charge will equal a percentage of the Annual Target Premium Payment specified in the policy. The number of years the policy has been inforce at the time of surrender determines the applicable percentage. A 3% premium charge is deducted from the policyholder's premium to compensate USAA Life for sales charges and taxes. The charge will be deducted from the policyholder's premium payments until the policyholder's gross amount of premium payments received exceeds the sum of the policyholder's Annual Target Premium payments payable over 10 years. 5) YEAR 2000 Like other companies, the Life Insurance Separate Account could be adversely affected if the computer systems used by its service providers are not able to perform their intended functions effectively after 1999 because of the inability of computer software to distinguish the year 2000 from the year 1900. USAA Life is taking steps to address this potential year 2000 problem with respect to the computer systems that they use and to obtain satisfactory assurances that comparable steps are being taken by the Life Insurance Separate Account's service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Life Insurance Separate Account from this problem. 1999 Semiannual Report A-9 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Continued) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 6) UNIT VALUES A summary of unit values and units outstanding for variable universal life policies and the expense ratios, including expenses of the underlying funds, for the period is as follows:
USAA Life USAA Life USAA Life Growth Money Market Fund Account Income Fund Account and Income Fund Account ----------------------------- ----------------------------- --------------------------- Six-month Period Ended Six-month Period Ended Six-month Period Ended Period Ended December 31, Period Ended December 31, Period Ended December 31, June 30, 1999 1998(a) June 30, 1999 1998(a) June 30, 1999 1998(a) -------------- ------------ -------------- ------------ ------------- ------------ At end of period: Accumulation units (000) 98 1 2 - 7 1 Accumulation unit value $ 1.201222 $ 1.178565 $ 13.553955 $ 14.089499 $ 23.785966 $ 20.468785 Net assets (000) $ 117 $ 1 $ 24 $ - $ 164 $ 3 Ratio of expenses to average net assets (b)(c) 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% Ratio of expenses to average net assets, excluding reimbursements (c) 1.33% 1.55% 1.37% 1.30% 1.11% 1.12% Scudder VLIF Capital Growth Alger American Growth BT Equity 500 Index Portfolio Fund Account Portfolio Fund Account Fund Account ----------------------------- ----------------------------- --------------------------- Six-month Period Ended Six-month Period Ended Six-month Period Ended Period Ended December 31, Period Ended December 31, Period Ended December 31, June 30, 1999 1998(a) June 30, 1999 1998(a) June 30, 1999 1998(a) -------------- ------------ -------------- ------------ ------------- ------------ At end of period: Accumulation units (000) 4 1 3 - 19 1 Accumulation unit value $ 27.048748 $ 24.448446 $ 30.980503 $ 26.806157 $ 12.271729 $ 11.003536 Net assets (000) $ 104 $ 3 $ 99 $ - $ 225 $ 3 Ratio of expenses to average net assets (b)(c) 1.25% 1.26% 1.54% 1.54% 1.05% 1.05% Ratio of expenses to average net assets, excluding reimbursements (c) N/A N/A N/A N/A 1.26% 1.94%
(a) Variable fund accounts commenced operations August 31, 1998 with the following initial unit values per unit: USAA Life Money Market Fund Account $ 1.162018 USAA Life Income Fund Account $13.766435 USAA Life Growth and Income Fund Account $16.937712 USAA Life World Growth Fund Account $14.981795 USAA Life Diversified Assets Fund Account $16.007256 USAA Life Aggressive Growth Fund Account $ 9.446371 USAA Life International Fund Account $ 9.285958 Scudder VLIF Capital Growth Portfolio Fund Account $18.614844 Alger American Growth Portfolio Fund Account $19.521151 BT Equity 500 Index Fund Account $ 8.561922 BT Small Cap Index Fund Account $ 7.048653 BT EAFE (Registered Trademark) Equity Index Fund Account $ 8.920584 (b) The information is based on actual expenses to the policyowner for the period, including the expenses of the underlying fund, after giving effect to reimbursement of fund expenses by USAA Life. (c) Annualized. The ratio is not necessarily indicative of 12 months of operations. A-10 Semiannual Report 1999 VARIABLE UNIVERSAL LIFE INSURANCE SEPARATE ACCOUNT OF USAA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- USAA Life USAA Life Diversified World Growth Fund Account Assets Fund Account - ---------------------------- ---------------------------- Six-month Period Ended Six-month Period Ended Period Ended December 31, Period Ended December 31, June 30, 1999 1998(a) June 30, 1999 1998(a) - ---------------------------- ---------------------------- 1 - 4 2 $19.659120 $17.860722 $19.797394 $17.974654 $ 24 $ - $ 70 $ 38 1.40% 1.40% 1.10% 1.10% 1.49% 1.41% 1.25% 1.20% USAA Life Aggressive USAA Life International Growth Fund Account Fund Account - ---------------------------- ---------------------------- Six-month Period Ended Six-month Period Ended Period Ended December 31, Period Ended December 31, June 30, 1999 1998(a) June 30, 1999 1998(a) - ---------------------------- ---------------------------- 6 - 1 - $17.644394 $13.993064 $11.012953 $10.417977 $ 104 $ - $ 5 $ - 1.45% 1.45% 1.85% 1.85% 1.75% 1.59% 2.07% 2.10% BT EAFE (Registered BT Small Cap Index Trademark) Equity Index Fund Account Fund Account - ---------------------------- ---------------------------- Six-month Period Ended Six-month Period Ended Period Ended December 31, Period Ended December 31, June 30, 1999 1998(a) June 30, 1999 1998(a) - ---------------------------- ---------------------------- 1 - 1 1 $ 9.483757 $ 8.825971 $10.774232 $10.386978 $ 9 $ - $ 3 $ 2 1.20% 1.20% 1.40% 1.40% 1.89% 2.33% 1.90% 2.41% 1999 Semiannual Report A-11 -----END PRIVACY-ENHANCED MESSAGE-----