[GCG TRUST LOGO]
ANNUAL REPORT
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THE GCG TRUST
(INCLUDING SEPARATE ACCOUNT B
FINANCIAL INFORMATION)
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DECEMBER 31, 1995
GoldenSelect products are issued by Golden American Life Insurance Company and
distributed by
Directed Services, Inc., both subsidiaries of Bankers Trust Company
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TABLE OF CONTENTS
THE GCG TRUST
SEPARATE ACCOUNT B
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Report of Independent Auditors.................................................................................... B-1
Statement of Assets and Liabilities............................................................................... B-2
Notes to Statement of Assets and Liabilities...................................................................... B-3
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Directed Services, Inc.
A SUBSIDIARY OF BANKERS TRUST COMPANY
1001 JEFFERSON STREET, SUITE 400, WILMINGTON, DE 19801 TEL: 302-576-3400
FAX: 302-576-3450
February 21, 1996
Dear Shareholder of The GCG Trust,
We are pleased to provide you with your 1995 Annual Report (the 'Report') for
The GCG Trust which includes reports from all GoldenSelect Portfolio Managers.
1995 was a strong year for the Trust with assets under management increasing
15.4% from $866.6 million to $1 billion.
Included with the Report is a condensed financial report for Separate Account B,
which supports GoldenSelect flexible premium variable life insurance policies.
In 1995 we continued our commitment to providing a broad array of investment
portfolios and experienced investment management to our shareholders. In keeping
with this commitment, we made the following enhancements:
o In January 1995, T. Rowe Price Associates, Inc. undertook management
responsibility for the GoldenSelect Fully Managed Series.
o In January 1995, we added the GoldenSelect Value Equity Series, a
portfolio of equities selected for financial soundness and high intrinsic
value and managed by Eagle Asset Management, Inc.
o Also in January 1995, E.I.I. Realty Securities, Inc. became manager of
the GoldenSelect Real Estate Series. This portfolio invests mainly in the
common stocks of companies in the real estate industry, including REITs.
o In October 1995, we added the GoldenSelect Strategic Equity Series,
managed by Zweig Advisors Inc. Dr. Martin E. Zweig is responsible for the
asset allocation of this portfolio as well as for the GoldenSelect
Multiple Allocation Series.
o And finally, in January 1996, we added the GoldenSelect Small Cap Series,
a small cap equity portfolio managed by Fred Alger Management, Inc.
The Annual Report contains comments from the Portfolio Managers of the Trust's
Series. The comments of the Portfolio Managers reflect their views as of the
date written, and are subject to change at any time. For more complete
information about these portfolios, The GCG Trust or any GoldenSelect products,
including charges and expenses, please consult your prospectus. Read it
carefully before investing or sending money.
Thank you for your continued support of GoldenSelect and The GCG Trust.
Sincerely,
/s/ Terry L. Kendall
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Terry L. Kendall
Chairman,
The GCG Trust
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Variable Annuity Contract Owners
Separate Account B
We have audited the accompanying statement of assets and liabilities of
Separate Account B (the 'Account') as of December 31, 1995. This statement of
assets and liabilities is the responsibility of the Account's management. Our
responsibility is to express an opinion on the statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of asssets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of assets and
liabilities presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Separate
Account B at December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 12, 1996
B-1
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STATEMENT OF ASSETS AND LIABILITIES
SEPARATE ACCOUNT B
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
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ASSETS
Investment in The GCG Trust, at Net Asset Value:
Liquid Asset Series, 36,511 shares (Cost -- $36,511)............................................................... $ 36,511
Limited Maturity Bond Series, 6,087 shares (Cost -- $64,804)....................................................... 67,870
Natural Resources Series, 1,796 shares (Cost -- $25,708)........................................................... 27,008
All-Growth Series, 6,678 shares (Cost -- $85,681).................................................................. 92,018
Real Estate Series, 2,758 shares (Cost -- $32,426)................................................................. 34,836
Fully Managed Series, 8,519 shares (Cost -- $109,183).............................................................. 117,394
Multiple Allocation Series, 24,417 shares (Cost -- $293,213)....................................................... 305,697
Capital Appreciation Series, 8,965 shares (Cost -- $107,313)....................................................... 121,118
Rising Dividends Series, 6,044 shares (Cost -- $64,959)............................................................ 80,391
Emerging Markets Series, 4,074 shares (Cost -- $45,132)............................................................ 36,913
Market Manager Series, 495 shares (Cost -- $5,008)................................................................. 5,951
Value Equity Series, 2,159 shares (Cost -- $26,592)................................................................ 28,462
Strategic Equity Series, 803 shares (Cost -- $8,008)............................................................... 8,035
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Total Invested Assets (Cost -- $904,538)........................................................................... 962,204
LIABILITIES
Payable to Golden American for Charges and Fees (Note 3).............................................................. 1,326
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Total Net Assets................................................................................................... $ 960,878
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NET ASSETS
For Variable Annuity Insurance Contracts.............................................................................. $ 924,596
Retained in Separate Account B by Golden American (Note 3)............................................................ 36,282
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Total Net Assets................................................................................................... $ 960,878
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See Accompanying Notes.
B-2
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NOTES TO STATEMENT OF ASSETS AND LIABILITIES
SEPARATE ACCOUNT B
DECEMBER 31, 1995
1. ORGANIZATION
Separate Account B (the 'Account') was established on June 14, 1988, by Golden
American Life Insurance Company ('Golden American'), under Minnesota insurance
law to support the operations of variable annuity contracts ('Contracts').
Effective September 30, 1992, Golden American became a wholly-owned subsidiary
of BT Variable, Inc. ('BTV'), an indirect wholly-owned subsidiary of Bankers
Trust Company ('Bankers Trust'). Previously, Golden American was owned by Mutual
Benefit Life Insurance Company in Rehabilitation ('Mutual Benefit'). In a
transaction that closed on September 30, 1992, Bankers Trust acquired from
Mutual Benefit, in accordance with the terms of an Exchange Agreement, all of
the issued and outstanding capital stock of Golden American and Directed
Services, Inc. ('DSI'), an affiliate of Golden American, and certain related
assets and contributed them to BTV. The transaction had no effect on the
accompanying Statement of Assets and Liabilities. Golden American is primarily
engaged in the issuance of variable insurance products and is licensed as a life
insurance company in the District of Columbia and all states except New York.
Effective December 30, 1993, Golden American was redomesticated from the State
of Minnesota to the State of Delaware.
Operations of the Account commenced on January 25, 1989. Golden American
provides for variable accumulation and benefits under the contracts by crediting
annuity considerations to one or more divisions within the Account or to the
Golden American Guaranteed Interest Division, the Golden American Fixed Interest
Division, the Fixed Separate Account, and the Managed Global Division of
Separate Account D, which are not part of the Account, as elected by the
Contractowners. The assets of the Account are owned by Golden American. The
portion of the Account's assets applicable to Contracts will not be chargeable
with liabilities arising out of any other business Golden American may conduct,
but obligations of the Account, including the promise to make benefit payments,
are obligations of Golden American.
The Account makes available, under Golden Select Contracts, thirteen investment
divisions: the Liquid Asset, the Limited Maturity Bond, the Natural Resources,
the All-Growth, the Real Estate, the Fully Managed, the Multiple Allocation, the
Capital Appreciation, the Rising Dividends (commenced operations October, 1995),
the Emerging Markets (commenced operations on October 4, 1993), the Market
Manager (commenced operations November, 1994) the Value Equity (commenced
operations December, 1995) and the Strategic Equity (commenced operations
September, 1995) Divisions ('Divisions'). The assets in each Division are
invested in shares of a designated series ('Series') of a mutual fund, The GCG
Trust (the 'Trust'). The Account also includes The Fund For Life Division, which
is not included in the accompanying financial statements, and which ceased to
accept new Contracts effective December 31, 1994.
The Account is a unit investment trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended.
The net assets maintained in the Account provide the basis for the periodic
determination of the amount of benefits under the Contracts. The net assets may
not be less than the amount required under state law to provide for death
benefits (without regard to the minimum death benefit guarantee) and other
Contract benefits. Additional assets are held in Golden American's general
account to cover the contingency that the guaranteed minimum death benefit might
exceed the death benefit which would have been payable in the absence of such
guarantee. Golden American has entered into a reinsurance agreement with an
unaffiliated reinsurer to cover substantially all the insurance risk under the
Contracts. Golden American remains liable to the extent that the reinsurer does
not meet its obligations under the reinsurance agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the
Account:
USE OF ESTIMATES: The preparation of the statement of assets and liabilities in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the statement
of assets and liabilities and accompanying notes. Actual results could differ
from those estimates.
INVESTMENTS: Investments are made in shares of a Series of the Trust and are
valued at the net asset value per share of the respective Series of the Trust.
Investment transactions in each Series of the Trust are recorded on the trade
date. Distributions of net investment income and capital gains of each Series of
the Trust are recognized on the ex-distribution date. Realized gains and losses
on redemptions of the shares of the Series of the Trust are determined on the
identified cost basis.
For the years ended December 31, 1995 and 1994 the cost of purchases of shares
of the Trust aggregated $228,738,000 and $352,605,000, respectively and the
proceeds from sales of shares of the Trust aggregated $226,848,000 and
$149,774,000, respectively.
B-3
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NOTES TO STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FEDERAL INCOME TAXES: Operations of the Account form a part of, and are taxed
with, the total operations of Golden American which is taxed as a life insurance
company under the Internal Revenue Code. Earnings and realized capital gains of
the Account attributable to the Contractowners are excluded in the determination
of the federal income tax liability of Golden American.
3. CHARGES AND FEES
Under the terms of the Contracts, certain charges are allocated to the Contracts
to cover Golden American's expenses in connection with the issuance and
administration of the Contracts. Following is a summary of these charges:
MORTALITY AND EXPENSE RISK CHARGES: Golden American assumes mortality and
expense risks related to the operations of the Account and, in accordance with
the terms of the Contracts, deducts a daily charge from the assets of the
Account at annual rates of .80%, .90%, 1.25%, 1.10%, 1.25% and 1.40% of the
assets attributable to the DVA 80, DVA 100, DVA Series 100, DVA Plus-Standard,
DVA Plus-Annual Ratchet, DVA Plus-7% Solution, respectively to cover these
risks.
ASSET BASED ADMINISTRATIVE CHARGE: A daily charge at an annual rate of .10% is
deducted from assets attributable to DVA 100 and DVA Series 100 Contracts. A
daily charge at an annual rate of .15% is deducted from the assets attributable
to DVA Plus Contracts.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE: For certain Contracts, a minimum death
benefit guarantee charge of up to $1.20 per $1,000 of guaranteed death benefit
per Contract year is deducted from the accumulation value of Deferred Annuity
Contracts on each Contract processing date.
PREMIUM TAXES: For certain contracts, premium taxes are deducted, where
applicable, from the accumulation value of each Contract. The amount and timing
of the deduction depend on the annuitant's state of residence and currently
ranges up to 3.5% of premiums.
OTHER CONTRACT CHARGES: An administrative charge of $40 per Contract year is
deducted from accumulation value of Deferred Annuity Contracts to cover ongoing
administrative expenses. The charge is deducted on the Contract processing date
at the end of the Contract processing period. This charge has been waived for
certain offerings of the Contract.
DEFERRED SALES LOAD: Under contracts offered prior to October 1995, a sales load
of up to 7 1/2% was applicable to each premium payment for sales-related
expenses as specified in the Contracts. For DVA Series 100 the sales load is
deducted in equal annual installments over the period the Contract is in force,
not to exceed 10 years. For other DVA 80 and DVA 100 Contracts, although the
sales load is chargeable to each premium when it is received by Golden American,
the amount of such charge is initially advanced by Golden American to
Contractowners and included in the accumulation value and then deducted in equal
installments on each Contract processing date over a period of six years. Upon
surrender of the Contract, the unamortized deferred sales load is deducted from
the accumulation value by Golden American. In addition, when partial withdrawal
limits are exceeded, a portion of the unamortized deferred sales load is
deducted.
CONTINGENT DEFERRED SALES CHARGE: Under DVA Plus Contracts issued subsequent to
September 1995, a contingent sales charge ('Surrender Charges') is imposed as a
percentage of each premium payment if the Contract is surrendered or an excess
partial withdrawal is taken during the seven year period from the date a premium
payment is received. The Surrender Charges are imposed at a rate of 7% during
the first two complete years after purchase declining to 6%, 5%, 4%, 3%, and 1%
after the second, third, fourth, fifth, and sixth years, respectively.
The net assets retained in the Account by Golden American in the accompanying
statement of assets and liabilities represent the unamortized deferred sales
load, surrender charges and premium taxes advanced by Golden American, noted
above.
B-4
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NOTES TO STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
3. CHARGES AND FEES--(CONTINUED)
Net assets retained in the Account by Golden American are as follows:
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YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
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(AMOUNTS IN THOUSANDS)
Balance at beginning of year.............................................. $ 44,008 $ 37,364
Sales load advanced and additions to surrender charges.................... 6,572 16,138
Premium tax advanced...................................................... 76 73
Net transfer (to) from Separate Account D, Fixed Account and Golden
American................................................................ (1,303) 666
Amortization of deferred sales load, surrender charges and premium tax.... (13,071) (10,233)
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Balance at end of year.................................................... $ 36,282 $ 44,008
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4. OTHER RELATED PARTY TRANSACTIONS
DSI, a registered broker/dealer, acts as the distributor and principal
underwriter (as defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) of the Contracts issued through the Account. For 1995
and 1994, fees paid by Golden American to DSI aggregated $7,621,000 and
$15,939,000 respectively.
B-5
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3. CHARGES AND FEES--(CONTINUED)
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NOTES TO STATEMENT OF ASSETS AND LIABILITIES
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES
Presented below is accumulation unit value information for units outstanding by
Contract type as of December 31, 1995
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TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
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(IN THOUSANDS)
Liquid Asset
DVA 80......................................................................... 398,563 $ 13.429 $ 5,352
DVA 100........................................................................ 2,096,044 13.243 27,757
DVA Series 100................................................................. 70,999 12.921 917
DVA Plus -- Standard........................................................... 37,887 13.029 494
DVA Plus -- Annual Ratchet..................................................... 62,084 12.895 801
DVA Plus -- 7% Solution........................................................ 93,239 12.762 1,190
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36,511
Limited Maturity Bond
DVA 80......................................................................... 206,399 15.307 3,160
DVA 100........................................................................ 4,103,020 15.095 61,935
DVA Series 100................................................................. 14,356 14.729 212
DVA Plus -- Standard........................................................... 26,976 14.865 401
DVA Plus -- Annual Ratchet..................................................... 11,834 14.711 174
DVA Plus -- 7% Solution........................................................ 136,553 14.559 1,988
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67,870
Natural Resources
DVA 80......................................................................... 249,344 15.578 3,884
DVA 100........................................................................ 1,433,795 15.362 22,026
DVA Series 100................................................................. 19,158 14.989 287
DVA Plus -- Standard........................................................... 24,828 15.114 375
DVA Plus -- Annual Ratchet..................................................... 2,847 14.958 42
DVA Plus -- 7% Solution........................................................ 26,605 14.803 394
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27,008
All-Growth
DVA 80......................................................................... 260,857 14.537 3,792
DVA 100........................................................................ 5,828,945 14.335 83,560
DVA Series 100................................................................. 46,215 13.987 647
DVA Plus -- Standard........................................................... 21,908 14.104 309
DVA Plus -- Annual Ratchet..................................................... 16,567 13.959 231
DVA Plus -- 7% Solution........................................................ 251,872 13.814 3,479
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92,018
Real Estate
DVA 80......................................................................... 105,134 16.428 1,727
DVA 100........................................................................ 1,965,015 16.201 31,835
DVA Series 100................................................................. 14,556 15.808 230
DVA Plus -- Standard........................................................... 2,716 15.940 43
DVA Plus -- Annual Ratchet..................................................... 2,910 15.775 46
DVA Plus -- 7% Solution........................................................ 61,143 15.612 955
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34,836
Fully Managed
DVA 80......................................................................... 258,587 15.694 4,058
DVA 100........................................................................ 7,054,994 15.476 109,184
DVA Series 100................................................................. 29,312 15.101 443
DVA Plus -- Standard........................................................... 49,153 15.227 748
DVA Plus -- Annual Ratchet..................................................... 13,988 15.070 211
DVA Plus -- 7% Solution........................................................ 184,364 14.914 2,750
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117,394
Multiple Allocation
DVA 80......................................................................... 1,217,849 17.235 20,989
DVA 100........................................................................ 16,134,381 16.996 274,218
DVA Series 100................................................................. 140,336 16.584 2,327
DVA Plus -- Standard........................................................... 104,463 16.722 1,747
DVA Plus -- Annual Ratchet..................................................... 21,073 16.550 348
DVA Plus -- 7% Solution........................................................ 370,515 16.378 6,068
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305,697
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B-6
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NOTES TO STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
SEPARATE ACCOUNT B
DECEMBER 31, 1995
5. UNIT VALUES--(CONTINUED)
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TOTAL UNIT
SERIES UNITS UNIT VALUE VALUE
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(IN THOUSANDS)
Capital Appreciation
DVA 80......................................................................... 154,271 $ 14.935 $ 2,304
DVA 100........................................................................ 7,627,317 14.825 113,076
DVA Series 100................................................................. 26,783 14.634 392
DVA Plus -- Standard........................................................... 24,117 14.707 355
DVA Plus -- Annual Ratchet..................................................... 16,369 14.627 239
DVA Plus -- 7% Solution........................................................ 326,610 14.548 4,752
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121,118
Rising Dividends
DVA 80......................................................................... 102,616 13.356 1,370
DVA 100........................................................................ 5,536,766 13.296 73,617
DVA Series 100................................................................. 50,637 13.191 668
DVA Plus -- Standard........................................................... 22,934 13.237 304
DVA Plus -- Annual Ratchet..................................................... 36,100 13.194 476
DVA Plus -- 7% Solution........................................................ 300,820 13.151 3,956
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80,391
Emerging Markets
DVA 80......................................................................... 227,757 9.317 2,122
DVA 100........................................................................ 3,533,661 9.275 32,775
DVA Series 100................................................................. 30,591 9.202 281
DVA Plus -- Standard........................................................... 15,670 9.234 145
DVA Plus -- Annual Ratchet..................................................... 12,465 9.204 115
DVA Plus -- 7% Solution........................................................ 160,820 9.174 1,475
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36,913
Market Manager
DVA 80......................................................................... 0 0 0
DVA 100........................................................................ 480,472 12.386 5,951
Value Equity
DVA 80......................................................................... 202,148 13.417 2,712
DVA 100........................................................................ 1,676,442 13.391 22,449
DVA Series 100................................................................. 10,226 13.345 136
DVA Plus -- Standard........................................................... 34,272 13.374 458
DVA Plus -- Annual Ratchet..................................................... 23,394 13.356 313
DVA Plus -- 7% Solution........................................................ 179,453 13.339 2,394
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28,462
Strategic Equity
DVA 80......................................................................... 137,215 10.013 1,374
DVA 100........................................................................ 362,606 10.009 3,629
DVA Series 100................................................................. 26,760 9.999 267
DVA Plus -- Standard........................................................... 76,095 10.014 762
DVA Plus -- Annual Ratchet..................................................... 47,478 10.011 475
DVA Plus -- 7% Solution........................................................ 152,633 10.009 1,528
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8,035
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Total........................................................................ $ 962,204
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