<PAGE>
<PAGE>
SEMI-ANNUAL FINANCIAL STATEMENTS
------------------------------
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
------------------------------
JUNE 30, 1999
(Unaudited)
GOLDENSELECT/R/ products are issued by Golden American Life Insurance
Company and
distributed by Directed Services, Inc., member NASD.
[Graphic of GoldenSelect Logo]
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
FINANCIAL STATEMENTS
JUNE 30, 1999
(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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August 27, 1999
Dear Shareholders of The Fund For Life Series of the GCG Trust,
We are pleased to provide you with your 1999 Semi-Annual Report (the
"Report") for The Fund For Life Series of The GCG Trust.
The first half of 1999 was another strong period 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 relatively high
expense's, Directed Services, Inc., the Manager, has continued to absorb
a portion of the expenses while considering various options to address
the issue. 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/ R. Brock Armstrong
R. Brock Armstrong
Chairman
GOLDENSELECT/R/ products are issued by Golden American Life Insurance
Company and
distributed by Directed Services, Inc., member NASD
3
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<PAGE>
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 1999. For the six months ended June
30, 1999, the Fund had a total return of 6.85%, compared to a blended
return of 9.20% 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,
1999 was S&P 500 Index - 7.43%, Morgan Stanley/Capital International
Pacific Index - 2.18% and the Lehman Aggregate Bond Index - (0.41%).
4
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UAUDITED)
ASSETS
INVESTMENTS, AT VALUE (COST $181,377)(NOTES 1 AND 4) $242,806
CASH 4,584
DIVIDENDS RECEIVABLE 231
--------
TOTAL ASSETS 247,621
--------
LIABILITIES
ACCRUED EXPENSES 6,115
-----
TOTAL LIABILITIES 6,115
-----
NET ASSETS $241,506
========
NET ASSETS CONSIST OF
PAID-IN CAPITAL $165,110
UNDISTRIBUTED REALIZED GAINS ON INVESTMENT TRANSACTIONS 12,377
NET UNREALIZED APPRECIATION OF INVESTMENT 61,429
ACCUMULATED NET INVESTMENT INCOME 2,590
--------
NET ASSETS $241,506
========
SHARES OF BENEFICIAL INTEREST OUTSTANDING, $.001 PAR VALUE 30,330
========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 7.96
========
See notes to financial statements.
5
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
INVESTMENT INCOME
DIVIDENDS $ 2,508
-------
EXPENSES
MANAGEMENT & ADMINISTRATIVE FEES (NOTE 2) 344
AUDITING FEES 1,200
FUND ACCOUNTING FEES (NOTE 2) 287
CUSTODY (NOTE 2) 810
TRUSTEES FEES AND EXPENSES (NOTE 2) 20
OTHER OPERATING EXPENSES 579
-------
TOTAL EXPENSES 3,240
FEES WAIVED AND EXPENSES REIMBURSED BY MANAGER (NOTE 2) (1,266)
-------
NET EXPENSES 1,974
NET INVESTMENT INCOME 534
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
NET REALIZED GAIN FROM INVESTMENT TRANSACTIONS 2,590
CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 12,244
-------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS 14,834
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,368
=======
See notes to financial statements.
6
<PAGE>
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 & YEAR ENDED DECEMBER 31, 1998
1999 1998
---- ----
(Uaudited)
FROM OPERATIONS
NET INVESTMENT INCOME $ 534 $ 839
NET REALIZED GAIN FROM INVESTMENT TRANSACTIONS
AND CAPITAL GAIN DISTRIBUTIONS 2,590 11,004
NET INCREASE IN UNREALIZED APPRECIATION
OF INVESTMENTS 12,244 15,703
------ -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 15,368 27,546
------ -------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME ---- (2,600)
NET REALIZED GAINS ON INVESTMENT TRANSACTIONS
AND CAPITAL GAIN DISTRIBUTIONS (17,125)
-------
---- (19,725)
-------
FROM BENEFICIAL INTEREST TRANSACTIONS
PROCEEDS FROM SALES OF SHARES ---- ----
DISTRIBUTIONS REINVESTED ---- 19,725
COST OF SHARES REDEEMED (1,235) (2,098)
------ -------
INCREASE/(DECREASE) IN NET ASSETS DERIVED
FROM BENEFICIAL INTEREST TRANSACTIONS (1,235) 17,627
------ -------
NET INCREASE IN NET ASSETS 14,133 25,448
NET ASSETS
BEGINNING OF YEAR 227,373 201,925
------- -------
END OF YEAR $241,506 $227,373
======== ========
UNDISTRIBUTED NET INVESTMENT INCOME $2,590 $1,003
====== ======
7
<PAGE>
<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
|-------------------------------------------------------------------------------------------------|
| FOR THE FOR THE YEAR FOR THE FOR THE FOR THE FOR THE |
| SIX MONTHS ENDED YEAR YEAR YEAR YEAR |
| ENDED 12/31/98 ENDED ENDED ENDED ENDED |
| 06/30/99 12/31/97 12/31/96 12/31/95 12/31/94 |
| (UNAUDITED) |
| |
| <CAPTION> |
| <S> <C> <C> <C> <C> <C> <C> |
| PER SHARE OPERATING |
| PERFORMANCE |
| |
| NET ASSET VALUE, |
| BEGINNING OF PERIOD $7.45 $7.25 $7.61 $10.95 $9.23 $10.51 |
| ----- ----- ----- ------ ----- ------ |
| NET INVESTMENT INCOME |
| (LOSS) # 0.02 0.03 0.03 0.01 (0.24) 0.44 |
| NET GAIN (LOSS) ON |
| INVESTMENTS-REALIZED |
| AND UNREALIZED 0.49 0.88 1.09 0.88 1.98 (0.67) |
| ----- ----- ----- ------ ----- ------ |
| |
| TOTAL FROM INVESTMENT |
| OPERATIONS 0.51 0.91 1.12 0.89 1.74 (0.23) |
| ----- ----- ----- ------ ----- ------ |
| |
| LESS DISTRIBUTIONS: |
| DISTRIBUTIONS FROM |
| NET INVESTMENT |
| INCOME 0.00 0.09 0.13 0.00 0.02 0.44 |
| DISTRIBUTIONS FROM NET |
| REALIZED CAPITAL GAINS 0.00 0.62 1.35 4.23 0.00 0.61 |
| ----- ----- ----- ------ ----- ------ |
| |
| TOTAL DISTRIBUTIONS 0.00 0.71 1.48 4.23 0.02 1.05 |
| ----- ----- ----- ------ ----- ------ |
| |
| NET ASSET VALUE, END |
| OF PERIOD $7.96 $7.45 $7.25 $7.61 $10.95 $9.23 |
| ===== ====== ====== ====== ====== ====== |
| TOTAL RETURN 6.85% 13.67% 14.58% 10.57% 18.79% (2.15%) |
| ===== ====== ====== ====== ====== ====== |
| |
| |
| RATIOS AND |
| SUPPLEMENTAL DATA |
| TOTAL NET ASSETS, END |
| OF PERIOD (000'S OMITTED) $242 $227 $202 $201 $333 $1,346 |
| |
| |
| RATIO OF EXPENSES TO |
| AVERAGE NET ASSETS 1.72% 2.50% 2.50% 2.56% 4.25% 1.84% |
| DECREASE REFLECTED IN ABOVE |
| EXPENSE RATIO DUE TO |
| WAIVERS AND/OR |
| REIMBURSEMENTS 2.83% 3.27% 12.06% 9.45% 0.68% ---- |
| RATIO OF NET |
| INVESTMENT INCOME |
| (LOSS) TO AVERAGE |
| NET ASSETS 0.47% 0.40% 0.40% 0.10% (2.32%) 2.23% |
| |
| PORTFOLIO TURNOVER RATE 1.36% 0.00% 8.94% 6.87% 5.68% 13.06% |
| ------------------------------------------------------------------------------------------------|
</TABLE>
# Per share data numbers have been calculated using the average share method.
See notes to financial statements.
8
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<PAGE>
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
======================================================================
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
NUMBER OF
---------
INVESTMENT IN SHARES OF OPEN-END MUTUAL FUNDS SHARES VALUE(NOTE 1)
- --------------------------------------------- --------- -------------
AIM CONSTELLATION FUND 846 $ 28,086
AIM WEINGARTEN FUND 1,114 30,992
THE GUARDIAN PARK AVENUE FUND 553 30,295
MERRILL LYNCH PACIFIC FUND, INC., CLASS A 1,129 24,748
DAVIS NEW YORK VENTURE FUND, INC. 1,048 30,293
SCUDDER INCOME FUND 1,859 23,466
UNITED INCOME FUND 3,658 29,232
VANGUARD INVESTMENT GRADE CORPORATE
BOND FUND 2,695 22,904
VANGUARD FIXED INCOME GNMA FUND 2,263 22,790
TOTAL INVESTMENTS (COST $181,377*)
(NOTES 1 AND 4) 101% 242,806
LIABILITIES IN EXCESS OF OTHER
ASSETS (1)% (1,300)
------ --------
NET ASSETS 100% $241,506
====== ========
* 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
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, 1999, the Trust
had twenty-four operational portfolios (the "Series"): The Fund For
Life Series (the "Fund"), Liquid Asset Series, Limited Maturity Bond
Series, Hard Assets Series, All-Growth Series, Real Estate Series,
Fully Managed Series, Equity Income Series (formerly 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,
Developing World Series, Growth Opportunities Series, Research Series,
Total Return Series, Growth Series (formerly Value + Growth Series),
Mid-Cap Growth Series, Capital Growth Series (formerly Growth & Income
Series) and Global Fixed Income Series. All of the Series, including
the Fund, are diversified, except for Hard Assets Series, Managed
Global Series, Global Fixed Income Series, Mid-Cap Growth 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, Inc.
("Equitable of Iowa"), an indirect wholly owned subsidiary of ING Groep
N.V. ("ING").
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
shareholders sufficiently to relieve it from substantially all Federal
income taxes.
Organizational Expenses: Directed Services, Inc. ("DSI"), an
indirect wholly owned subsidiary of ING, is the Fund's Manager and
Administrator. DSI paid organizational expenses of approximately
$115,000 on behalf of the Fund. The Fund reimbursed DSI in equal
monthly installments over a sixty-month period from the Fund's
commencement of operations. All organization expenses were reimbursed
as of March 31, 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 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, 1999, DSI waived $115 and $229 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, 1999 such fees amounted to $287. For the six-month
period ended June 30, 1999, Bankers Trust Company served as custodian
for the Fund.
During the six months ended June 30, 1999, DSI voluntarily waived
its fees and reimbursed the Fund $1,266 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 other Equitable of Iowa
companies.
3. SHARES OF BENEFICIAL INTEREST
The Fund has an unlimited number of $0.001 par value shares of
beneficial interest authorized. For the six months ended June 30, 1999
and the year ended December 31, 1998, the Fund had the following
transactions in shares of beneficial interest. Except for reinvested
distributions, the Trust no longer accepts investments in the Fund from
new investors.
1999 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sold 0 $ 0 $ 0 0
Distributions 0 0 2,935 19,725
Reinvested
Redeemed (162) (1,235) (284) (2,098)
----- ------- ------- -------
Net increase/
(decrease) (162) (1,235) 2,615 $17,627
===== ======= ======= =======
As of June 30, 1999, Golden American has an investment in the fund
of 2,436 shares with a total net asset value of $19,391 representing
8.0% of the shares outstanding.
4. INVESTMENTS
At June 30, 1999, the gross unrealized appreciation and
depreciation for Federal income tax purposes were as follows:
Gross Unrealized Appreciation $ 62,409
Gross Unrealized Depreciation (980)
--------
Net Unrealized Appreciation $ 61,429
========
Purchases and Sales of Investments Were As
Follows:
Cost of Purchases $3,193
Cost of Sales $5,054
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 Trust plans to file the formal application in 1999. 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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