<PAGE>
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SEMI-ANNUAL FINANCIAL STATEMENTS
_____________________________________________________
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
_____________________________________________________
JUNE 30, 1998
(Unaudited)
GOLDENSELECT/r/ products are issued by Golden American Life
Insurance Company and distributed by
Directed Services, Inc., member NASD
[Goldenselect logo appears here]
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
FINANCIAL STATEMENTS
JUNE 30, 1998
(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 Semi-Annual Report (the
"Report"), dated June 30, 1998, for The Fund For Life Series of
The GCG Trust.
The U.S. stock market continued to generate strong returns during
the first half of 1998. 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,
President
The Fund For Life Series of The GCG Trust
August 14, 1998
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 markets contributed to
the performance of the Fund during the first half of 1998. The
debt and international markets were not as strong. For the six
months ended June 30, 1998, the Fund had a total return of 7.03%,
compared to a blended return of 11.23% of three indices, namely
the Standard & Poor's 500 Index Monthly Reinvestment, 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, 1998 was S&P 500 Index: 17.72%, Morgan
Stanley/Capital International Pacific Index: (5.82%) and the
Lehman Aggregate Bond Index: 3.93%.
4
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
ASSETS
INVESTMENTS, AT VALUE (COST $166,739) (NOTES 1 AND 4) $215,784
CASH 5,389
DIVIDENDS RECEIVABLE 235
--------
TOTAL ASSETS 221,408
--------
LIABILITIES
ACCRUED EXPENSES 6,533
--------
TOTAL LIABILITIES 6,533
--------
NET ASSETS $214,875
========
NET ASSETS CONSIST OF
PAID-IN CAPITAL $147,620
UNDISTRIBUTED REALIZED GAINS ON INVESTMENT TRANSACTIONS 17,125
NET UNREALIZED APPRECIATION OF INVESTMENT 49,045
ACCUMULATED NET INVESTMENT INCOME 1,085
--------
NET ASSETS $214,875
========
SHARES OF BENEFICIAL INTEREST OUTSTANDING, $.001
PAR VALUE 27,697
========
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE
PER SHARE $ 7.76
========
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, 1998
(UNAUDITED)
INVESTMENT INCOME
DIVIDENDS $ 1,766
--------
EXPENSES
MANAGEMENT & ADMINISTRATIVE FEES (NOTE 2) 315
AMORTIZATION OF ORGANIZATION COSTS (NOTE 2) 5,700
AUDITING FEES 1,000
FUND ACCOUNTING FEES (NOTE 2) 263
CUSTODY (NOTE 2) 878
TRUSTEES FEES AND EXPENSES (NOTE 2) 20
OTHER OPERATING EXPENSES 579
--------
TOTAL EXPENSES 8,755
FEES WAIVED AND EXPENSES REIMBURSED BY MANAGER (NOTE 2) (5,474)
--------
NET EXPENSES 3,281
--------
NET INVESTMENT INCOME (1,515)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 15,563
--------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS 15,563
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 14,048
========
See notes to financial statements.
6
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1998
(UNAUDITED) 1997
FROM OPERATIONS
NET INVESTMENT INCOME (LOSS) $ (1,515) 800
NET REALIZED GAIN FROM INVESTMENT
TRANSACTIONS AND -- 18,925
CAPITAL GAIN DISTRIBUTIONS
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENTS 15,563 6,348
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 14,048 26,073
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME -- (3,006)
NET REALIZED GAINS ON INVESTMENT
TRANSACTIONS AND CAPITAL GAIN
CAPITAL GAIN DISTRIBUTIONS -- (31,438)
---------
-- (34,444)
---------
FROM BENEFICIAL INTEREST TRANSACTIONS
PROCEEDS FROM SALES OF SHARES -- --
DISTRIBUTIONS REINVESTED -- 34,444
COST OF SHARES REDEEMED (1,098) (25,279)
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM BENEFICIAL
INTEREST TRANSACTIONS (1,098) 9,165
---------
NET INCREASE (DECREASE) IN NET
ASSETS 12,950 794
NET ASSETS
BEGINNING OF YEAR 201,925 201,131
--------- ---------
END OF YEAR $ 214,875 $ 201,925
========= =========
UNDISTRIBUTED NET INVESTMENT INCOME $ 1,085 $ 2,600
========= =========
See notes to financial statements.
7
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS FOR THE FOR THE FOR THE FOR THE
ENDED YEAR YEAR YEAR YEAR PERIOD
06/30/98 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93*
PER SHARE OPERATING
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 7.25 $ 7.61 $ 10.95 $ 9.23 $ 10.51 $ 10.00
-------- -------- -------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) # (0.05) 0.03 0.01 (0.24) 0.44 0.33
NET GAIN ON INVESTMENTS -
REALIZED AND UNREALIZED 0.56 1.09 0.88 1.98 (0.67) 0.51
-------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 0.51 1.12 0.89 1.74 (0.23) 0.84
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
DISTRIBUTIONS FROM NET
INVESTMENT INCOME 0.00 0.13 0.00 0.02 0.44 0.33
DISTRIBUTIONS FROM NET
REALIZED CAPITAL GAINS 0.00 1.35 4.23 0.00 0.61 0.00
-------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS 0.00 1.48 4.23 0.02 1.05 0.33
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD 7.76 7.25 7.61 10.95 9.23 10.51
======== ======== ======== ======== ======== ========
TOTAL RETURN 7.03% 14.58% 10.57% 18.79% (2.15%) 8.42%*
RATIOS AND SUPPLEMENTAL DATA
TOTAL NET ASSETS, END OF PERIOD
(000'S OMITTED) $215 $202 $201 $333 $1,346 $4,267
RATIO OF EXPENSES TO AVERAGE
NET ASSETS 2.50% 2.50% 2.56% 4.25% 1.84% 0.42%*
DECREASE REFLECTED IN ABOVE
EXPENSE RATIO DUE TO WAIVERS
AND/OR REIMBURSEMENTS 4.17% 12.06% 9.45% 0.68% -- 3.15%**
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS (1.15%) 0.40% 0.10% (2.32%) 2.23% 4.89%**
PORTFOLIO TURNOVER RATE 0.00% 8.94% 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.
</TABLE>
See notes to financial statements.
8
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
NUMBER OF
INVESTMENT IN SHARES OF OPEN-END MUTUAL FUNDS SHARES VALUE (NOTE 1)
AIM CONSTELLATION FUND 824 $ 24,531
AIM WEINGARTEN FUND 1,224 28,832
THE GUARDIAN PARK AVENUE FUND 501 25,701
MERRILL LYNCH PACIFIC FUND, INC., CLASS A 1,082 18,221
DAVIS NEW YORK VENTURE FUND, INC. 1,023 25,244
SCUDDER INCOME FUND 1,695 22,878
UNITED INCOME FUND 2,916 26,042
VANGUARD INVESTMENT GRADE CORPORATE 2,471 22,371
BOND FUND
VANGUARD FIXED INCOME GNMA FUND 2,108 21,964
--------
TOTAL INVESTMENTS (COST $166,739*)
(NOTES 1 AND 4) 99% 215,784
LIABILITIES IN EXCESS OF OTHER ASSETS 1% (909)
------- --------
NET ASSETS 100% $214,875
======= ========
*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, 1998 the Trust had eighteen
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, Small Cap Series, Growth Opportunities Series
and Developing World 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
wholly owned subsidiary of the Equitable of Iowa Companies
("Equitable of Iowa"), a wholly owned subsidiary of ING Groep,
N.V.
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. All organization expenses have
been reimbursed as of June 30, 1998.
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, 1998,
the Fund waived $105 and $210 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, 1998 such fees amounted to
$263. Pursuant to a custodian agreement, Bankers Trust is
custodian for the Fund.
During the period ended June 30, 1998, DSI voluntarily
waived and/or reimbursed the Fund $5,474 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, 1998, and December 31, 1997, the Fund had the
following transactions in shares of beneficial interest. The
Trust no longer accepts investments in the Fund from new
investors.
1998 1997
SHARES AMOUNT SHARES AMOUNT
Sold 0 $ 0 0 $ 0
Distributions Reinvested 0 0 4,705 34,444
Redeemed (143) (1,098) (3,291) (25,279)
------ ------- ------ -------
Net decrease (143) $(1,098) 1,414 $ 9,165
====== ======= ====== =======
As of June 30, 1998, Golden American has an investment in
the fund of 1,831 shares with a total net asset value of
$17,090 representing 8.0% of the shares outstanding.
4. INVESTMENTS
At June 30, 1998, the gross unrealized appreciation and
depreciation were as follows:
Gross Unrealized Appreciation $ 53,180
Gross Unrealized Depreciation (4,135)
--------
Net Unrealized Appreciation $ 49,045
========
Purchases and Sales of Investments were as
follows:
Cost of Purchases $1,807
Proceeds from Sales $ 0
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.
13
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