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ANNUAL FINANCIAL STATEMENTS
---------------------------------------------
THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
---------------------------------------------
DECEMBER 31, 1999
GOLDENSELECT/R/ products are issued by Golden American Life Insurance
Company and
distributed by Directed Services, Inc., member NASD.
[GoldenSelect Logo]
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=====================================================================
FINANCIAL STATEMENTS
DECEMBER 31, 1999
TABLE OF CONTENTS PAGE
- -----------------
President's Letter 3
Management's Discussion and Analysis 4
Report of Independent Auditors 6
Statement of Assets and Liabilities 7
Statement of Operations 8
Statement of Changes in Net Assets 9
Financial Highlights 10
Portfolio of Investments 11
Notes to Financial Statements 12
2
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February 22, 2000
Dear Shareholders of The Fund For Life Series of The GCG Trust,
We are pleased to provide you with your 1999 Annual Report (the
"Report") for The Fund For Life Series of The GCG Trust.
1999 was another 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/ Barnett Chernow
Barnett Chernow
President
GOLDENSELECT 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 1999. For the year ended
December 31, 1999, the Fund had a total return of 21.82%, compared to
a blended return of 18.14% 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 year
ended December 31, 1999 was S&P 500 Index - 21.03%, Morgan
Stanley/Capital International Pacific Index - 57.63% and the Lehman
Aggregate Bond Index - (0.82%).
4
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The Fund For Life Series
Plot Points For The Graph
For The Period Ended December 31, 1999
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, 1999.
60% S&P 500, Morgan
30% Lehman Lehman Stanley/
Aggregate Bond Aggregate Capital
10% MSCI Bond International S&P Fund For
Index Index Index 500 Life
- ---------------------------------------------------------------------
03/01/93 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/93 $10,932 $10,583 $12,966 $10,768 $10,842
12/31/94 $11,091 $10,275 $14,629 $10,909 $10,607
12/31/95 $14,158 $12,173 $15,036 $15,004 $12,603
12/31/96 $16,228 $12,615 $13,746 $18,447 $13,935
12/31/97 $19,936 $13,832 $10,263 $24,600 $15,966
12/31/98 $24,545 $15,034 $10,539 $31,635 $18,149
12/31/99 $29,107 $14,911 $16,612 $38,288 $22,109
--------------------------------------------
| Average Annual Total Return |
| For The Period Ended December 31, 1999 |
| |
| One Year 21.82% |
| Five Years 15.82% |
| 3/1/93 (Inception) 12.30% |
| |
--------------------------------------------
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.
5
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Report of Independent Auditors
To the Shareholders and 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 GCG Trust - The Fund
For Life Series (the "Fund") as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended. 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 auditing standards
generally accepted in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by
correspondence with the custodians and brokers. 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 and financial highlights
referred to above present fairly, in all material respects, the
financial position of The GCG Trust - The Fund For Life Series at
December 31, 1999, 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 its financial highlights for each of the five
years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/S/Ernst & Young LLP
Philadelphia, Pennsylvania
February 9, 2000
6
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=====================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
INVESTMENTS, AT VALUE (COST $196,204)
(NOTES 1 AND 4) $280,340
CASH 69
DIVIDENDS RECEIVABLE 251
--------
TOTAL ASSETS 280,660
--------
LIABILITIES
PAYABLE FOR SHARES OF BENEFICIAL INTEREST REDEEMED 7
ACCRUED EXPENSES 6,742
--------
TOTAL LIABILITIES 6,749
--------
NET ASSETS $273,911
NET ASSETS CONSIST OF
PAID-IN CAPITAL $176,592
ACCUMULATED NET REALIZED GAIN/(LOSS) ON SECURITIES 13,183
NET UNREALIZED APPRECIATION OF INVESTMENTS 84,136
--------
NET ASSETS $273,911
========
SHARES OF BENEFICIAL INTEREST OUTSTANDING,
$.001 PAR VALUE 33,531
========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 8.17
========
See notes to financial statements.
7
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=====================================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME
DIVIDENDS $ 4,979
-------
EXPENSES
MANAGEMENT & ADMINISTRATIVE FEES (NOTE 2) 714
AUDITING FEES 4,000
FUND ACCOUNTING FEES (NOTE 2) 595
CUSTODY (NOTE 2) 1,620
TRUSTEES FEES AND EXPENSES (NOTE 2) 40
OTHER OPERATING EXPENSES 313
-------
TOTAL EXPENSES 7,282
FEES WAIVED AND EXPENSES REIMBURSED BY MANAGER (NOTE 2) (1,331)
-------
NET EXPENSES 5,951
-------
NET INVESTMENT LOSS (972)
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
NET REALIZED GAIN ON INVESTMENTS 1,782
NET REALIZED GAIN FROM CAPITAL GAIN DISTRIBUTIONS 13,183
NET CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS 34,951
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 49,916
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $48,944
=======
See notes to financial statements.
8
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
=====================================================================
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 & DECEMBER 31, 1998
1999 1998
---- ----
FROM OPERATIONS
NET INVESTMENT INCOME (LOSS) $ (972) $ 839
NET REALIZED GAIN ON INVESTMENTS AND
CAPITAL GAIN DISTRIBUTIONS 14,965 11,004
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 34,951 15,703
-------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 48,944 27,546
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (1,003) (2,600)
RETURN OF CAPITAL ` (12,331) --
NET REALIZED GAIN ON INVESTMENT AND
CAPITAL GAIN DISTRIBUTIONS (12,622) (17,125)
-------- --------
(25,956) (19,725)
FROM BENEFICIAL INTEREST TRANSACTIONS
PROCEEDS FROM SALES OF SHARES -- --
DISTRIBUTIONS REINVESTED 25,951 19,725
COST OF SHARES REDEEMED (2,401) (2,098)
-------- --------
INCREASE IN NET ASSETS DERIVED FROM
BENEFICIAL INTEREST TRANSACTIONS 23,550 17,627
-------- --------
NET INCREASE IN NET ASSETS 46,538 25,448
NET ASSETS
BEGINNING OF YEAR 227,373 201,925
-------- --------
END OF YEAR $273,911 $227,373
======== ========
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $1,003
====== ======
See notes to financial statements.
9
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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
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- ------- -------- -------- --------
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.45 $ 7.25 $ 7.61 $ 10.95 $ 9.23
------- ------- ------- ------- -------
NET INVESTMENT INCOME
(LOSS) # 0.00 0.03 0.03 0.01 (0.24)
------- ------- ------- ------- -------
NET GAIN (LOSS) ON
INVESTMENTS -- REALIZED
AND UNREALIZED 1.56 0.88 1.09 0.88 1.98
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 1.56 0.91 1.12 0.89 1.74
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
DISTRIBUTIONS FROM
NET INVESTMENT
INCOME 0.03 0.09 0.13 0.00 0.02
RETURN OF CAPITAL 0.39 -- -- -- --
DISTRIBUTIONS FROM NET
REALIZED CAPITAL GAINS 0.42 0.62 1.35 4.23 0.00
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS 0.84 0.71 1.48 4.23 0.02
------- ------- ------- ------- -------
NET ASSET VALUE, END
OF PERIOD $ 8.17 $ 7.45 $ 7.25 $ 7.61 $ 10.95
======= ======= ======= ======= =======
TOTAL RETURN 21.82% 13.67% 14.58% 10.57% 18.79%
RATIOS AND
SUPPLEMENTAL DATA
TOTAL NET ASSETS, END
OF PERIOD (000'S
OMITTED) $274 $227 $202 $201 $333
RATIO OF EXPENSES TO
AVERAGE NET
ASSETS 2.50% 2.50% 2.50% 2.56% 4.25%
DECREASE REFLECTED IN
ABOVE EXPENSE
RATIO DUE TO
WAIVERS AND/OR
REIMBURSEMENTS 0.56% 3.27% 12.06% 9.45% 0.68%
RATIO OF NET
INVESTMENT INCOME
(LOSS) TO AVERAGE NET
ASSETS (0.41%) 0.40% 0.40% 0.10% (2.32%)
PORTFOLIO TURNOVER
RATE 2.08% 0.00% 8.94% 6.87% 5.68%
# Per share data numbers have been calculated using the average
share method.
See notes to financial statements.
10
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THE FUND FOR LIFE SERIES
OF
THE GCG TRUST
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PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
INVESTMENT IN SHARES OF OPEN-END NUMBER OF
- -------------------------------- ---------
MUTUAL FUNDS SHARES VALUE (NOTE 1)
- ------------ ------ --------------
AIM CONSTELLATION FUND 921 $ 37,300
AIM WEINGARTEN FUND 1,239 37,312
THE GUARDIAN PARK AVENUE FUND 614 36,497
MERRILL LYNCH PACIFIC FUND, INC.,
CLASS A 1,128 37,359
DAVIS NEW YORK VENTURE FUND, INC. 1,072 30,827
SCUDDER INCOME FUND 1,921 23,509
UNITED INCOME FUND 3,918 31,861
VANGUARD INVESTMENT GRADE CORPORATE
BOND FUND 2,786 22,598
VANGUARD FIXED INCOME GNMA FUND 2,340 23,077
--------
TOTAL INVESTMENTS (COST $196,204*)
(NOTES 1 AND 4) 102% 280,340
LIABILITIES IN EXCESS OF OTHER
ASSETS (2)% (6,429)
------ --------
NET ASSETS 100% $273,911
====== ========
*Aggregate cost for Federal tax purposes.
See notes to financial statements.
11
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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
December 31, 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, Mid-Cap
Growth Series, Research Series, Total Return Series, Growth Series
(formerly Value + 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, 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 accounting principles generally
accepted in the United States.
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.
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).
12
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 year ended December 31, 1999, the Fund waived
$238 and $476 in compensation for management and administrative
services, respectively.
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, 1999 such fees amounted to $595. Pursuant
to a custodian agreement, Bank of New York is custodian for the
Fund.
During the year ended December 31, 1999, DSI voluntarily
waived its fees and reimbursed the Fund $1,331 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.
Certain officers and trustees of the Trust are also officers
and/or directors of DSI, Golden American and other Equitable of
Iowa companies.
13
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3. SHARES OF BENEFICIAL INTEREST
The Fund has an unlimited number of $0.001 par value shares of
beneficial interest authorized. For the years ended December 31,
1999 and 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 -- $ -- -- $ --
Distributions
Reinvested 3,350 25,951 2,935 19,725
Redeemed (311) (2,401) (284) (2,098)
----- ------- ----- -------
Net increase/
(decrease) 3,039 $23,550 2,615 $(17,627)
===== ======= ===== ========
As of December 31, 1999, Golden American has an investment in
the fund of 2,706 shares with a total net asset value of $22,108
representing 8.0% of the shares outstanding.
4. INVESTMENTS
At December 31, 1999, the gross unrealized appreciation and
depreciation for Federal income tax purposes were as follows:
Gross Unrealized Appreciation $ 87,195
Gross Unrealized Depreciation (3,059)
--------
Net Unrealized Appreciation $ 84,136
========
Purchases and Sales of Investments Were As
Follows:
Cost of Purchases $ 18,019
Cost of Sales $ 5,054
14
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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 2000. 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.
15
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