THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
FINANCIAL STATEMENTS
December 31, 1995
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
President's Report 1
Management's Discussion and Analysis 2
Report of Independent Auditors 4
Statement of Assets and Liabilities 5
Statement of Operations 6
Statement of Changes in Net Assets 7
Financial Highlights 8
Portfolio of Investments 9
Notes to Financial Statements 10
</TABLE>
<PAGE>
Dear Shareholder of The Fund For Life Series of GCG Trust,
We are pleased to provide you with your 1995 Annual Report (the "Report")
for The Fund For Life Series of The GCG Trust. This report contains the
financial statements of The Fund For Life Division of Separate Account B.
1995 was a strong year for U.S. equities as well as bonds, with equity
markets rising to record levels. The Fund For Life's performance reflected these
economic trends.
Assets in The Fund for Life declined throughout 1995. In an effort to
protect shareholders from rapidly increasing expense ratios, we offered all
shareholders the opportunity to exchange their existing contracts for our
GoldenSelect DVA contract, a deferred variable annuity with access to fourteen
different investment portfolios, plus a fixed interest division. Many
shareholders accepted that offer.
In order to protect remaining shareholders from these rapidly increasing
expense ratios, the Manager agreed to absorb a portion of the expenses while we
are considering various options to address this problem. There is no guarantee
the Manager will permanently absorb these charges.
If you have any questions or require any additional information, please
call out Customer Service area at 1-800-366-0066.
Sincerely,
Terry L. Kendall
Chairman
The Fund For Life Series of The GCG Trust
GoldenSelect Products are issued by
Golden American Life Insurance Company and distributed by
Directed Services, Inc., both Subsidiaries of Bankers Trust Company
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Trustees
The GCG Trust - The Fund For Life Series
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Fund For Life Series (one of the Series
comprising The GCG Trust) as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification by examination of securities
held by the custodian as of December 31, 1995 and confirmation of securities not
held by the custodian by correspondence with others. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Fund For Life Series at
December 31, 1995 and the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
New York, New York
February 9, 1996
<PAGE>
FUND FOR LIFE SERIES
OF THE GCG TRUST
The investment objective of The Fund For Life Series (the "Fund")
of The GCG Trust ("Fund") is high total investment return (capital
appreciation and current income) consistent with prudent investment risk and a
balanced investment approach. The Fund seeks to achieve its objective by
investing in shares of other mutual funds using an allocation strategy that
emphasizes mutual funds that invest primarily in domestic equity securities
(approximately 60%), while also allocating a portion of the Fund's assets to
mutual funds that invest in international equity securities (approximately 10%),
and to mutual funds that invest primarily in debt securities rated at least
investment grade (approximately 30%).
Strong performance in the equity and debt market contributed to the
performance of the Fund during 1995. For the year ended December 31, 1995, the
Fund had a total return of 18.79%, as compared to a blended return of 27.65% of
three indices, namely the S&P 500, Morgan Stanley/Capital International Pacific
and Lehman Aggregate Bond indices. This blend covers the same time period and is
computed using the same percentage allocation of investments held by the Fund.
As indicated on the graph, the following total return for each index for the
year ended December 1994 were: S&P 500 - 37.54%, Morgan Stanley/Capital
International Pacific - 2.97% and the Lehman Aggregate Bond Index - 18.47%.
<PAGE>
The following table replaces a graph showing growth of an initial investment of
$10,000, with reinvestment of dividends and distributions in The Fund For Life
Series of The GCG Trust, the Lehman Aggregate Bond Index, the Morgan
Stanley/Capital International Pacific Index ("MSCI Index"), the S & P 500 Index
and a blended index consisting of 60% S & P 500 Index, 30% Lehman Aggregate Bond
Index and 10% MSCI Index. The graph indicates the growth from March 1, 1993
(Inception date of The Fund For Life Series Of The GCG Trust) through December
31, 1995.
<TABLE>
<CAPTION>
60% S & P 500, 30% Morgan Stanley/
Lehman Aggregate Bond, Lehman Aggregate Capital International
10% MSCI Pacific Bond Index Index S & P 500 Fund For Life
---------------------- ---------------- --------------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
02/28/93 $10,000 $10,000 $10,000 $10,000 $10,000
11/30/93 12/31/93 $10,932 $10,583 $12,966 $10,768 $10,842
11/30/94 12/31/94 $11,091 $10,275 $14,629 $10,909 $10,607
11/30/95 12/31/95 $14,158 $12,173 $15,063 $15,004 $12,603
</TABLE>
Average Annual Total Return For The Period Ended December 31, 1995
One Year 18.79%
3/1/93 (Inception) 26.03%
Total Return for the Fund includes reinvestment of dividends and distributions.
It does not reflect charges for the variable annuity contracts thereunder whose
proceeds are invested in the Fund. Past performance is not predicative of future
performance.
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
ANNUAL FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS:
Investments, at value (Cost $274,641) (Notes 1 and 4) $311,704
Cash 26,729
Dividends Receivable 371
--------
Total Assets 338,804
--------
LIABILITIES:
Accrued Expenses 5,500
Payable for shares of beneficial interest redeemed 255
--------
Total Liabilities 5,755
--------
NET ASSETS: $333,049
========
NET ASSETS CONSISTS OF:
Paid-in Capital $218,540
Undistributed realized gains on investments transactions 77,446
Net unrealized appreciation of investments 37,063
--------
Total Net Assets $333,049
========
Shares of beneficial interest outstanding, $.001 par value 30,416
========
Net Asset Value, redemption price and offering
price per share of beneficial interest outstanding $ 10.95
========
See notes to financial statements.
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
INVESTMENT INCOME:
Dividends $ 16,069
---------
EXPENSES:
Management & administrative fees (Note 2) 2,490
Amortization of organization costs (Note 2) 20,805
Auditing fees 5,973
Fund accounting fees (Note 2) 2,071
Legal fees 3,567
Printing and mailing 2,868
Custody (Note 2) 2,704
Other operating expenses 410
---------
Total Expenses 40,888
Fees Waived and Expenses
Reimbursed By Manager (Note 2) (5,612)
---------
Net Expenses $ 35,276
---------
NET INVESTMENT LOSS (19,207)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions
and capital gain distributions 82,283
Net change in unrealized appreciation 105,511
---------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENT
TRANSACTIONS 187,794
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 168,587
=========
See notes to financial statements.
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investments income (loss) $ (19,207) 57,602
Net realized gain from investment transactions
and capital gain distributions 82,283 80,430
Change in unrealized appreciation (depreciation)
of investments 105,511 (178,204)
----------- -----------
Net increase (decrease) in net assets resulting from operations 168,587 (40,172)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income 614 57,602
Net realized gain on investment transactions -- 80,430
----------- -----------
Total distributions to shareholders 614 138,032
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from sale of shares 7,379 88,920
Dividends reinvested 614 138,032
Cost of shares redeemed (1,188,903) (2,969,759)
----------- -----------
Decrease in net assets derived from beneficial interest
transactions (1,180,910) (2,742,807)
----------- -----------
Net decrease in net assets (1,012,937) (2,921,011)
----------- -----------
NET ASSETS:
Beginning of year 1,345,986 4,266,997
----------- -----------
End of year $ 333,049 $ 1,345.986
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
THE FUND FOR LIFE SERIES
OF THE GCG TRUST
Financial Highlights
Selected Data For A Share of Beneficial Interest
Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Period
For the Year Ended For the Year Ended March 1, 1993* to
December 31, 1995 December 31, 1994 December 31, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 9.23 $ 10.51 $ 10.00
------- --------- -----------
Net investment income (loss)# (0.24) 0.44 0.33
Net gain on investments -- realized and
unrealized 1.98 (0.67) 0.51
------- --------- ---------
Total from investment operations 1.74 (0.23) 0.84
------- --------- ---------
Less Distributions:
Dividends from net investment income 0.02 0.44 0.33
Distributions from net realized capital
gains -- 0.61 --
------- --------- ---------
Total Distributions 0.02 1.05 0.33
------- --------- ---------
Net asset value, end of period $ 10.95 $ 9.23 $ 10.51
========== ============ ============
Total Return 18.79% (2.15%) 8.42%**
===== ===== ====
Rations and Supplemental Data
Total net assets, end of period (000's
omitted) $ 333 $ 1,346 $ 4,267
======= ========= =========
Ratio of expenses to average net assets 4.25% 1.84% 0.42%**
Decrease reflected in above expense
ratio due to expense limitations 0.68 -- 3.15%**
Ratio of net investment income (loss) to
average net assets (2.32%) 2.23% 4.89%**
Portfolio turnover rate 5.68% 13.06% 19.79%
</TABLE>
- -----------------
* Commencement of Operations
** Not Annualized
# Per share data numbers have been calculated using the average share
method
See notes to financial statements.
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
PORTFOLIO OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
Number
Investment in shares of open-end mutual funds of Shares Value (Note 1)
--------- --------------
<S> <C> <C>
AIM Constellation Fund 1,310 $29,489
AIM Weingarten Fund 1,662 29,461
The Burger One Hundred Fund Inc. 1,709 30,925
The Guardian Park Avenue Fund 913 31,017
Merrill Lynch Pacific Fund, Inc. Class A 1,450 32,130
The Davis Venture Fund Inc. 2,142 31,107
Scudder Income Fund 2,351 31,998
United Income Fund 1,071 31,026
Vanguard Investment Grade Corporate Bond Fund 3,462 32,824
Vanguard Fixed Income GNMA Fund 3,042 $31,727
--------
Total Investments (Cost $274,641) (Notes 1 and 4) 94% 311,704
Other Assets In Excess of Other Liabilities 6% 21,345
--- --------
Net Assets 100% $333,049
--- ========
See notes to financial statements.
</TABLE>
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The GCG Trust (the "Trust") is registered under the Investment Company
Act of 1940 (the "Act") as an open-end management company. The Trust was
organized as a Massachusetts business trust on August 3, 1988 with an unlimited
number of shares of beneficial interest with a par value of $0.001 each. At
December 31, 1995, the Trust had fourteen operational portfolios (the "Series"):
The Fund For Life Series (the "Fund"), Liquid Asset Series, Limited Maturity
Bond Series, Natural Resources Series, All-Growth Series, Real Estate Series,
Fully Managed Series, Multiple Allocation Series, Capital Appreciation Series,
Rising Dividends Series, Emerging Markets Series, Market Manager Series, Value
Equity Series and Strategic Equity Series. All of the Series, including the Fund
are diversified, except for Market Manager Series. The information presented in
this financial statements pertain only to the Fund. The financial information
for the other Series of the Trust is presented under separate cover.
The Fund serves as an investment medium for variable annuity contracts
offered by Golden American Life Insurance company ("Golden American"). Golden
American is a wholly-owned subsidiary of BT Variable, Inc. ("BTV"), an indirect
subsidiary of Bankers Trust Company ("Bankers Trust").
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
Federal income taxes: No provision for federal income taxes has been
made since the Fund has complied and intends to continue to comply with the
provisions of the Internal Revenue Code available to regulated investment
companies and to distribute its taxable income to shareholders sufficiently to
relieve it from substantially all federal income taxes. The Fund's net
investment loss of $19,207, less short term capital gain distributions from
investments in mutual funds and short term realized capital gains of $4,837,
was charged against paid-in-capital as the loss cannot be carried forward for
federal income tax purposes.
Organizational Expenses: Directed Services, Inc. ("DSI"), the Fund's
Manager and Administrator, paid organizational expenses of approximately
$114,000 on behalf of the Fund. The Fund reimburses DSI in equal monthly
installments over a sixty month period from the Fund's commencement of
operations. The unpaid balance as of December 31, 1995 was approximately
$50,200. It is DSI's intention to continue to receive these equal installments
but not to seek reimbursement of any unpaid balances, if any, should the Fund
cease operations. DSI is a wholly-owned subsidiary of BTV.
Valuation: Investments in open-end mutual funds are valued at their
respective net asset value at the end of each day. Net asset values for these
investments are supplied by market quotation services. The net asset values
supplied by these market quotation services are calculated in accordance with
the Act. Among other things, the Act requires that mutual funds value the
securities that they hold in their portfolios at their current market value
(generally the last reported sales price of the security).
Other investments of the Fund, if any, are valued at their current
market value as determined by market quotations. Securities having 60 days or
less remaining to maturity are valued at their amortized cost.
Other: Investment transactions are recorded on trade date. Dividend
income and distributions to the shareholders are recorded on the ex-dividend
date. Estimated expenses are accrued daily.
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Realized gains and losses from investment transactions are recorded on
an identified cost basis which is the same basis the Fund uses for federal
income tax purposes.
2. Management and Administrative Fees, and Other Transactions with Affiliates
DSI serves as Manager and Administrator to the Fund. In its capacity as
Manager and Administrator DSI provides investment advisory services and services
reasonably necessary for the operation of the Fund. Management and
administrative fees are paid to DSI at annual rates of 0.10% and 0.20%,
respectively, of the value of the average daily net assets of the Fund. For the
year ended December 31, 1995, the Fund paid $830 and $1,660 in compensation for
management and administrative services respectively. The Fund also reimburses
DSI for certain organizational expenses paid by DSI on behalf of the Fund. These
reimbursements are described in Note 1 to the financial statements.
DSI also provides accounting services to the Fund. For fund accounting
services, the Fund pays to DSI an annual fee of 0.25% of the value of the
average daily net assets of the Fund. For the year ended December 31, 1995 such
fees amounted to $2,071. Pursuant to a custodian agreement, Bankers Trust is the
custodian for the Fund. Fees paid to Bankers Trust in connection with custodian
services were $2,704 for the year ended December 31, 1995.
DSI voluntary reimbursed the Fund $5,612 of operating expenses during
the year ended December 31, 1995.
Investors in the Fund should recognize that an investment in the Fund
bears not only a proportionate share of the expenses of the Fund (including
operating costs and management fees) but also indirectly similar expenses of the
underlying mutual funds in which the Fund invests. Investors also bear their
proportionate share of any sales charges incurred by the Fund related to the
purchase of shares of the mutual fund investments. In addition, shareholders of
the Fund may indirectly bear expenses paid by a mutual fund in which the Fund
invests related to the distribution of the mutual fund's shares.
Certain officers and trustees of the Trust are also officers and/or
directors of DSI, BTV, Golden American and Bankers Trust.
3. Shares of Beneficial Interest
The Trust has an unlimited number of $.001 par value shares of
beneficial interest authorized. For the years ended December 31, 1995 and 1994,
the Fund had the following transactions in shares of beneficial interest. The
Trust no longer accepts investments in the fund from new investors.
<TABLE>
<CAPTION>
1995 1994
----------------------- ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold ............................ 719 $ 7,379 8,358 $ 88,920
Dividends and other distributions
reinvested .................... 56 614 14,955 138,032
Redeemed ........................ (116,153) (1,188,903) (283,623) (2,969,759)
-------- ---------- -------- -----------
Net (decrease) increase ......... (115,378) $(1,180,910) (260,310) $(2,742,807)
======== ========== ======== ===========
</TABLE>
As of December 31, 1995, Golden American has an investment in the fund
of 1,149 shares with a total net asset value of $12,582 representing 3.78% of
shares outstanding.
4. Investments
At December 31, 1995, and for the year. the cost of investments,
unrealized appreciation and depreciation, and purchases and sales of investments
were as follows:
Gross Unrealized Appreciation .................................. $ 37,063
Gross Unrealized Depreciation .................................. --
----------
Net Unrealized Appreciation ...................................... $ 37,063
==========
Cost of Investment Securities for Federal Income Tax Purposes... $ 274,641
==========
Purchases and Sales of Investments
Cost of Purchases .............................................. $ 43,252
==========
Proceeds from Sales ............................................ $1,254,199
==========
<PAGE>
