<PAGE>
SEMI-ANNUAL FINANCIAL STATEMENTS
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
JUNE 30, 1997
(Unaudited)
GOLDENSELECT/r/ products are issued by Golden American Life
Insurance Company and
distributed by Directed Services, Inc., member NASD
[GOLDENSELECT LOGO]
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
TABLE OF CONTENTS PAGE
President's Letter 3
Management's Discussion and Analysis 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
2
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Dear Shareholder of The Fund For Life Series of the GCG Trust,
We are pleased to provide you with your 1997 Semi-Annual Report
(the "Report") for The Fund For Life Series of The GCG Trust.
1997 continues to be a strong year for U.S. equity markets. The
Fund For Life performance reflected these economic trends as is
noted in the portfolio manager's report.
In order to protect remaining shareholders from high expense
ratios, Directed Services, Inc., the Manager, agreed to absorb a
portion of the expenses while we are considering various options
to address this problem. In addition, the Manager is no longer
taking a management fee.
If you have any questions or require any additional information,
please call our Customer Service area at
1-800-366-0066.
Sincerely,
/s/Terry L. Kendall
Terry L. Kendall
President
The Fund For Life Series of The GCG Trust
August 27, 1997
GOLDENSELECT/r/ products are issued by Golden American Life
Insurance Company and
distributed by Directed Services, Inc., member NASD
3
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
The investment objective of The Fund For Life Series (the "Fund")
of The GCG Trust 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 market and debt market
contributed to the performance of the Fund during the first half
of 1997. For the six months ended June 30, 1997, the Fund had a
total return of 10.25%, compared to a blended return of 14.01% of
three indices, namely the Standard & Poor's 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. The following total return of each index for the six
months ended June 30, 1997 was S&P 500 Index - 20.60%, Morgan
Stanley/Capital International Pacific Index - 7.18% and the
Lehman Aggregate Bond Index - 3.09%.
4
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
(Unaudited)
ASSETS
Investments, at value (Cost $155,649) $199,069
(Notes 1 and 4)
Cash 1,484
Deferred organization expenses (Note 1) 17,059
Dividends receivable 301
--------
Total Assets 217,913
--------
LIABILITIES
Accrued expenses 5,651
Payable for deferred organization expenses 17,059
--------
Total Liabilities 22,710
--------
NET ASSETS $195,203
========
NET ASSETS CONSIST OF
Paid-in Capital $115,250
Undistributed realized gains on 33,699
investment transactions
Net unrealized appreciation of 43,420
investment
Accumulated net investment income 2,834
--------
Net Assets $195,203
========
Shares of beneficial interest 23,259
outstanding, $.001 par value ========
Net Asset Value, redemption price and offering
price per share $ 8.39
========
See notes to financial statements.
5
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
(Unaudited)
INVESTMENT INCOME
Dividends $ 2,248
EXPENSES
Management & administrative fees (Note 2) 287
Amortization of organization costs (Note 2) 11,398
Auditing fees 1,000
Fund accounting fees (Note 2) 239
Printing and mailing 257
Custody (Note 2) 810
Trustees fees and expenses (Note 2) 20
Other operating expenses 357
--------
Total Expenses 14,368
Fees waived and expenses reimbursed by (11,948)
manager (Note 2) --------
NET EXPENSES 2,420
--------
NET INVESTMENT INCOME (172)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment 2,261
transactions and capital gain
distributions
Change in unrealized appreciation on 16,286
investments --------
NET REALIZED AND UNREALIZED GAIN FROM 18,547
INVESTMENTS --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $18,375
========
See notes to financial statements.
6
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1997
And the Year Ended December 31, 1996
1997
(Unaudited) 1996
--------- ----
FROM OPERATIONS
Net investment income (loss) $ (172) $ 262
Net realized gain from investment 2,261 32,582
transactions and capital gain
distributions
Change in unrealized appreciation 16,286 ( 9,929)
(depreciation) of investments --------- ---------
Net increase in net assets resulting 18,375 22,915
from operations --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income -- --
Net realized gains on investment
transactions and capital gain
distributions -- (77,446)
---------
-- (77,446)
FROM BENEFICIAL INTEREST TRANSACTIONS
Proceeds from sales of shares -- --
Distributions reinvested -- 77,446
Cost of shares redeemed (24,303) (154,833)
--------- ---------
Decrease in net assets derived from
beneficial interest transactions (24,303) (77,387)
--------- ---------
Net decrease in net assets (5,928) (131,918)
NET ASSETS
Beginning of Year 201,131 333,049
--------- ---------
End of Year $195,203 $201,131
========= =========
See notes to financial statements.
7
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
Financial Highlights
For a Share of Beneficial Interest Outstanding Throughout Each
Period
Six
Months For The For The For The
Ended Year Year Year Period
06/30/97 Ended Ended Ended Ended
(Unaudited) 12/31/96 12/31/95 12/31/94 12/31/93*
---------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period $ 7.61 $10.95 $ 9.23 $10.51 $10.00
------ ------ ------ ------ ------
Net investment income
(loss) # (.01) .01 (0.24) 0.44 0.33
Net gain on investments
- - realized and
unrealized 0.79 0.88 1.98 (0.67) 0.51
------ ------ ------ ------ ------
Total from investment
operations 0.78 0.89 1.74 (0.23) 0.84
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from net
investment income 0.00 0.00 0.02 0.44 0.33
Distributions from net
realized capital
gains 0.00 4.23 0.00 0.61 0.00
------ ------ ------ ------ ------
Total Distributions 0.00 4.23 0.02 1.05 0.33
------ ------ ------ ------ ------
Net asset value, end of
period $ 8.39 $ 7.61 $10.95 $ 9.23 $10.51
====== ====== ====== ====== ======
Total Return 10.25% 10.57% 18.79% (2.15%) 8.42%**
Ratios and
Supplemental Data
Total net assets, end
of period (000's
omitted) $195 $201 $333 $1,346 $4,267
Ratio of expenses to
average net assets 2.53% 2.56% 4.25% 1.84% 0.42%**
Decrease reflected in
above expense ratio
due to waivers and/
or reimbursements 12.49% 9.45% 0.68% --- 3.15%**
Ratio of net investment
income (loss) to
average net assets (0.18%) 0.10% (2.32%) 2.23% 4.89%**
Portfolio turnover rate 1.16% 6.87% 5.68% 13.06% 19.79%
* The Fund For Life Series commenced operations on March 1, 1993
** Not annualized
# Per share data numbers have been calculated using the average share method
See notes to financial statements.
8
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
(Unaudited)
Investment In Shares of Open-End Number of Value
Mutual Funds Shares (Note 1)
AIM Constellation Fund 762 $ 20,791
AIM Weingarten Fund 1,044 22,216
The Guardian Park Avenue Fund 535 23,608
Merrill Lynch Pacific Fund, Inc.,
Class A 908 23,187
Davis New York Venture Fund, Inc. 1,152 23,980
Scudder Income Fund 1,600 21,291
United Income Fund 603 23,762
Vanguard Investment Grade Corporate
Bond Fund 2,287 19,965
Vanguard Fixed Income GNMA Fund 1,979 20,269
----- --------
Total Investments (Cost $155,649*)
(Notes 1 and 4) 101% 199,069
Liabilities in Excess of Other
Assets (2)% (3,866)
------ --------
Net Assets 100% $195,203
====== ========
*Aggregate cost for Federal tax purposes
See notes to financial statements.
9
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=================================================================
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
The GCG Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, (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 June 30, 1997, the Trust had sixteen
operational portfolios (the "Series"): The Fund For Life
Series (the "Fund"), Liquid Asset Series, Limited Maturity Bond
Series, Hard Assets Series, Managed Global Series, All-Growth
Series, Real Estate Series, Fully Managed Series, Multiple
Allocation Series, Capital Appreciation Series, Rising
Dividends Series, Managed Global Series, Emerging Markets
Series, Market Manager Series, Value Equity Series, Strategic
Equity Series and Small Cap Series. All of the Series,
including the Fund, are diversified, except for Hard Assets
Series, Managed Global Series and Market Manager Series. The
information presented in these financial statements pertains
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"), a subsidiary of the Equitable of Iowa
Companies ("Equitable of Iowa").
The preparation of these financial statements in
accordance with generally accepted accounting principles
incorporates estimates made by management in determining the
reported amounts of assets, liabilities, revenues and expenses
of the Fund. Actual results could differ from these estimates.
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 shareholder sufficiently to
relieve it from substantially all federal income taxes.
Organizational Expenses: Directed Services, Inc.,
("DSI"), the Fund's Manager and Administrator, paid
organizational expenses of approximately $115,000 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 June 30,
1997 was approximately $17,000. 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.
10
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1. Summary of Significant Accounting Policies (continued)
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 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.
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
In its capacity as Manager and Administrator, DSI provides
investment advisory services and other 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 six months ended June 30, 1997,
the Fund waived $96 and $191 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 six months ended June 30, 1997 such fees amounted to
$239. Pursuant to a custodian agreement, Bankers Trust is
custodian for the Fund.
During the period ended June 30, 1997, DSI voluntarily
waived and/or reimbursed the Fund $11,948 in operating
expenses.
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.
11
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2. Management and Administrative Fees, and Other Transactions
with Affiliates (continued)
Certain officers and trustees of the Trust are also officers
and/or directors of DSI, Golden American and Equitable of Iowa.
3. Shares of Beneficial Interest
The Fund has an unlimited number of $0.001 par value
shares of beneficial interest authorized. For the periods
ended June 30, 1997 and December 31, 1996, the Fund had the
following transactions in shares of beneficial interest. The
Trust no longer accepts investments in the Fund from new
investors.
1997 1996
Shares Amount Shares Amount
------ ------ ------ ------
Sold 0 $ 0 0 $ 0
Distributions
Reinvested 0 0 10,817 77,446
Redeemed (3,166) (24,303) (14,807) (154,833)
------ ------- ------- ---------
Net decrease (3,166) (24,303) ( 3,990) $( 77,387)
====== ======= ======= =========
As of June 30, 1997, Golden American has an investment in
the fund of 1,831 shares with a total net asset value of
$15,362 representing 7.87% of the shares outstanding.
4. Investments
At June 30, 1997, the gross unrealized appreciation and
depreciation were as follows:
Gross Unrealized Appreciation $ 43,420
Gross Unrealized Depreciation --
--------
Net Unrealized Appreciation $ 43,420
========
Purchases and Sales of Investments Were As
Follows:
Cost of Purchases $ 2,252
Proceeds from Sales $19,151
12
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5. Plan of Substitution
During 1996, the Board of Trustees instructed management
to file with the Securities and Exchange Commission ("SEC"), an
application for an order ("Order") to accept the substitution
of shares of the Fund for shares of the Fully Managed Series,
one of the series of the Trust. The substitution will occur as
soon as practicable after the Order is issued by the SEC.
Within five days after the substitution, Golden American will
send to owners of contracts written notice of the substitution
stating that shares of the Fund have been eliminated and that
the shares of Fully Managed Series have been substituted.
6. Subsequent Event
On July 7, 1997, Equitable of Iowa and ING Groep, N.V.
("ING") entered into a definitive merger agreement providing
for Equitable of Iowa to become a wholly owned subsidiary of
ING in a transaction expected to occur in the fourth quarter of
this year.
13
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