UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
1. ANNUAL REPORT PURSUANT TO SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File Number 2-39957 and
(current number) Commission File Number 33-58028
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT C
(Exact Name of Registrant, as specified in its charter)
Iowa 42-0127290
- ------------------------------- ---------------------------------
(State or other jurisdiction of IRS Employer Identification No.
incorporation or organization) (Principal Mutual Life Insurance
Company)
The Principal Financial Group
Des Moines, Iowa 50392-0200
- ------------------------------- ---------------------------------
(Address) (Zip Code)
Registrant's telephone number, including area code (515) 248-3842
Securities registered pursuant to Section 12(g) of the Act:
Variable Contracts - Participating with Pooled Separate Account
Variable Benefits - HR-10 Plans
---------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ___X___ No _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The Registrant has no voting stock.
PART I
Item 1. Business
The Registrant is a separate account established under the Iowa
insurance laws and regulations as Principal Mutual Life Insurance
Company Separate Account C on April 12, 1971, pursuant to a resolution
of the Executive Committee of the Board of Directors of Principal Mutual
Life Insurance Company. Principal Mutual Life Insurance Company,
formerly known as Bankers Life Company, adopted its new name effective
July 1, 1986. The account was formed to receive payments under Principal
Mutual Life Insurance Company Contracts designed for use in connection
with pension or profit sharing plans which qualify under the
Self-Employed Individuals Tax Retirement Act of 1962, as amended
("HR-10"). Principal Mutual Life Insurance Company is a mutual life
insurance company, incorporated under the laws of Iowa, offering life,
disability, health and annuity contracts written on an individual and
group basis.
Pursuant to the Amendments enacted in 1970 to the Investment Company Act
of 1940, the Account is not an investment company for purposes of the
Act.
The objective of these Contracts is to provide for the accumulation of
retirement funds and to provide for payments, usually commencing at
retirement, which tend to reflect changes in the cost of living both
during the years prior to and the years following the commencement of
annuity payments. With Bankers Flexible Annuity Contracts (Registration
No. 2-39957), Principal Mutual Life Insurance Company, as a depositor
for the Account, seeks to accomplish this objective by investing the
payments made under the Contracts in shares of Principal Capital
Accumulation Fund, Inc. which invests principally in common stocks.
Similarly, with Pension Builder Contracts (Registration No. 33-58028),
it seeks to accomplish this objective by investing payments made under
the Contract in three Divisions. One is a "Common Stock Division" where
payments are invested in shares of Principal Capital Accumulation Fund,
Inc. Another is a "Money Market Division" where payments are invested in
Principal Money Market Fund, Inc. which invests in short-term money
market instruments. The third Division is a "Government Securities
Division" where payments are invested in Principal Government Securities
Fund, Inc., which invests in obligations issued or guaranteed by the
United States Government or its agencies. There may be a combination of
investments in the three Divisions, as directed by Participants.
Except for those Contracts described above with payments credited to the
Registrant (Principal Mutual Life Insurance Company Separate Account C)
and Variable Annuity Contracts and Variable Life Insurance Contracts
with payments credited to Principal Mutual Life Insurance Company
Separate Account B and Variable Life Separate Account, respectively, the
Company distributes its own products as permitted under the laws of the
various jurisdictions in which the Company is authorized to do business,
namely the fifty states of the United States, the District of Columbia,
the Commonwealth of Puerto Rico and the Canadian provinces of Alberta,
British Columbia, Manitoba, Ontario and Quebec. Such distribution is
through a field agency system of approximately 1,327 full-time agents, a
group insurance sales organization of approximately 254 individuals and
through a large number of independent insurance brokers.
The Contracts described above with payments credited to the Registrant
and other Variable Annuity Contracts and Variable Life Insurance
Contracts are distributed through Princor Financial Services
Corporation, an affiliated broker-dealer offering open-end management
investment company shares, variable annuities, variable life insurance,
interests in limited partnerships and general securities to the public.
Such Contracts are sold primarily by registered representatives of the
broker-dealer who are also insurance agents of or brokers for Principal
Mutual Life Insurance Company and authorized by applicable law to sell
life and other forms of personal insurance and who are similarly
authorized to sell variable annuities. Such Contracts may also be sold
through other selected broker-dealers.
The Registration Statement filed by the Registrant was made effective
September 13, 1971, and the first sale of Bankers Flexible Annuity
Contracts occurred on October 8, 1971. Effective January 4, 1989, sales
of Bankers Flexible Annuity Contracts were discontinued.
In 1982 the Registrant filed a Registration Statement in File No.
2-78747, to register a new class of securities (called "Pension
Builder") for the same HR-10 plan market utilizing the contingent
deferred sales charge concept. The registration for Pension Builder
contracts first became effective on May 5, 1983 and the first sale under
the Pension Builder Contract was made on September 19, 1983.
In 1989 the Registrant filed a new Registration Statement in File No.
33-27256 for the contracts in view of the fact that aggregate sales
under the prior registration statement approached the amount of
contracts registered thereunder. The contracts offered by the new
registration statement are identical to contracts previously registered
under the 1933 Act in File No. 2-78747.
In 1993 the Registrant filed a new Registration Statement in File No.
33-58028 for the contracts in view of the fact that aggregate sales
under the prior registration statement approached the amount of
contracts registered thereunder. The contracts offered by the new
registration statement are identical to contracts previously registered
under the 1933 Act in File No. 33-27256.
Item 2. Properties
The Registrant owns no physical properties. The principal properties of
the Depositor, Principal Mutual Life Insurance Company, are its home
office complex at The Principal Financial Group in Des Moines, Iowa.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
a. The Registrant does not issue common stock. The Contracts
described in Item 1. are distributed through Princor Financial
Services Corporation, an affiliated broker-dealer offering
open-end management investment company shares, variable annuities,
variable life insurance, interests in limited partnerships and
general securities to the public. Such Contracts are sold
primarily by registered representatives of the broker-dealer who
are also insurance agents of or brokers for Principal Mutual Life
Insurance Company and authorized by applicable law to sell life
and other forms of personal insurance and who are similarly
authorized to sell variable annuities. Such Contracts may also be
sold through other selected broker-dealers.
For Bankers Flexible Annuity Contracts (Registration No. 2-39957)
the high and low unit values for each quarterly period during 1996
and 1997 are:
Lowest Unit Value Highest Unit Value
First Quarter 1996 16.1566920 17.7276157
Second " 1996 17.2376898 18.4981914
Third " 1996 17.1298163 19.0972231
Fourth " 1996 19.0834302 20.9438753
First " 1997 20.4528637 21.9936217
Second " 1997 20.3003374 23.8234633
Third " 1997 23.6068661 25.2849532
Fourth " 1997 23.6518502 26.5671402
For Pension Builder Contracts (Registration No. 33-58028) units
were first valued at $1.00 on September 19, 1983 for the Common
Stock Division, September 22, 1983 for the Money Market Division
and March 30, 1987 for the Government Securities Division. Listed
below are the low and high unit values for each quarterly period
during 1996 and 1997.
Common Stock Money Market GovernmentSecurities
Division Division Division
------------------- ------------------- -------------------
Quarter Lowest Highest Lowest Highest Lowest Highest
------- --------- --------- --------- --------- --------- ---------
First Quarter 1996 3.2910145 3.6038869 1.7643456 1.7794169 1.7885686 1.8659123
Second " 1996 3.5027271 3.7531349 1.7795808 1.7944082 1.7579298 1.8082621
Third " 1996 3.4715323 3.8626355 1.7945771 1.8100784 1.7664483 1.8331690
Fourth " 1996 3.8592017 4.2249921 1.8102495 1.8260476 1.8293409 1.9038096
First " 1997 4.1255939 4.4281422 1.8262238 1.8416400 1.8452822 1.9047543
Second " 1997 4.0833413 4.7827225 1.8418203 1.8584075 1.8424106 1.9329582
Third " 1997 4.7380533 5.0609139 1.8585945 1.8745921 1.9286336 1.9921011
Fourth " 1997 4.7149497 5.2522151 1.8747794 1.8911113 1.9864637 2.0387303
b. The approximate number of holders of record of each group contract
and the number of the participants therein as of December 31,
1997, are as follows:
(1) (2)
Number of Group Number of
Contract Holders Participants
---------------- ------------
Bankers Flexible Annuity 18 18
Pension Builder 41 48
c. No dividends have been declared on units held by participants. Any
changes in net investment income, net realized gains and net
realized appreciation are included in the daily valuation of the
units of the Registrant.
Item 6. Selected Financial Data
The information contained in the "Statement of Net Assets, Statement of
Operations and Statements of Changes in Net Assets for Principal Mutual
Life Insurance Company Separate Account C", filed as Item 8. should be
read in conjunction with this item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
All payments made to the Registrant on behalf of a Participant under a
contract (less any authorized deductions) are used to purchase shares of
Principal Capital Accumulation Fund, Inc., Principal Money Market Fund,
Inc., or Principal Government Securities Fund, Inc., as appropriate, at
net asset value. In addition, any distributions made by the Fund with
respect to shares held by the Registrant are reinvested by the Fund at
net asset value. Values under the contract increase or decrease to
reflect the investment performance of the underlying investments.
Principal Capital Accumulation Fund, Inc. is an open-end diversified
management investment company, sponsored by Principal Mutual Life
Insurance Company. The principal objective of the Fund is long-term
capital appreciation and growth of future investment income. It is
intended that the assets of the Fund will consist primarily of a
portfolio of common stocks. The value of the investments held by the
Fund fluctuates daily. It is subject to the risks of changing economic
conditions as well as the risks inherent in the ability of the
management of the Fund to anticipate changes in such investments
necessary to meet changes in economic conditions.
Principal Money Market Fund, Inc. is an open-end diversified management
investment company, sponsored by Principal Mutual Life Insurance
Company. The principal objective of the Fund is to seek as high a level
of income available from short-term securities as is considered
consistent with preservation of principal and maintenance of liquidity
by investing all of its assets in a portfolio of money market
instruments.
Principal Government Securities Fund, Inc. is an open-end diversified
management investment company, sponsored by Principal Mutual Life
Insurance Company. The principal objective of the Fund is to seek a high
level of current income, liquidity and safety of principal through the
purchase of obligations issued or guaranteed by the United States
Government or its agencies, with emphasis on Government National
Mortgage Association Certificates ("GNMA Certificates").
<PAGE>
Item 8. Financial Statements and Supplementary Data
Principal Mutual Life Insurance
Company Separate Account C
Financial Statements
Year ended December 31, 1997
Contents
Report of Independent Auditors................................................1
Audited Financial Statements
Statement of Net Assets.......................................................2
Statement of Operations.......................................................3
Statements of Changes in Net Assets...........................................4
Notes to Financial Statements.................................................5
Ernst & Young LLP Suite 3400 Phone: 515 243 2727
801 Grand Avenue
Des Moines, Iowa 50309-2765
Report of Independent Auditors
Board of Directors and Participants
Principal Mutual Life Insurance Company
We have audited the accompanying statement of net assets of Principal Mutual
Life Insurance Company Separate Account C (comprising, respectively, the Capital
Accumulation [formerly Common Stock], Government Securities, and Money Market
Divisions) as of December 31, 1997, and the related statements of operations for
the year then ended, and changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 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
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agent. 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 Principal Mutual Life Insurance
Company Separate Account C at December 31, 1997, and the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 6, 1998
Ernst & Young LLP is a member of Ernst & Young Internationl, Ltd.
Principal Mutual Life Insurance
Company Separate Account C
Statement of Net Assets
December 31, 1997
Assets
Investments:
Capital Accumulation Division:
Principal Capital Accumulation Fund, Inc. - 79,070 shares at net
asset value of $34.61 per share (cost - $1,939,051) $2,736,606
Government Securities Division:
Principal Government Securities Fund, Inc. - 37,487 shares at net
asset value of $10.72 per share (cost - $385,839) 401,865
Money Market Division:
Principal Money Market Fund, Inc. - 278,051 shares at net asset
value (cost) of $1.00 per share 278,051
==========
Net assets $3,416,522
==========
Unit
Units Value
-------------------------
Net assets are represented by:
Capital Accumulation Division:
Currently payable annuity contracts:
Bankers Flexible Annuity 10,008 $26.57 $ 265,913
Pension Builder Plus 3,818 5.25 20,044
Contracts in accumulation period:
Bankers Flexible Annuity 55,100 26.57 1,463,872
Pension Builder Plus 187,845 5.25 986,777
----------
2,736,606
Government Securities Division:
Contracts in accumulation period - Pension
Builder Plus 197,135 2.04 401,865
Money Market Division:
Contracts in accumulation period - Pension
Builder Plus 147,215 1.89 278,051
----------
Net assets $3,416,522
==========
See accompanying notes.
<TABLE>
<CAPTION>
Principal Mutual Life Insurance
Company Separate Account C
Statement of Operations
Year ended December 31, 1997
Capital Government Money
Accumulation Securities Market
Combined Division Division Division
---------------------------------------------------------------
Investment income
Income:
<S> <C> <C> <C> <C>
Dividends $ 86,581 $ 49,517 $23,370 $13,694
Capital gains distributions 214,545 214,545 - -
---------------------------------------------------------------
---------------------------------------------------------------
301,126 264,062 23,370 13,694
Expenses:
Mortality and expense risks 31,807 21,983 5,799 4,025
Administration charges 4,549 2,929 782 838
---------------------------------------------------------------
36,356 24,912 6,581 4,863
---------------------------------------------------------------
---------------------------------------------------------------
Net investment income 264,770 239,150 16,789 8,831
Realized and unrealized gains on investments
Net realized gains on investments 127,878 126,977 901 -
Change in net unrealized appreciation of
investments 272,101 258,222 13,879 -
---------------------------------------------------------------
===============================================================
Net increase in net assets resulting from
operations $664,749 $624,349 $31,569 $ 8,831
===============================================================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Mutual Life Insurance
Company Separate Account C
Statements of Changes in Net Assets
Years ended December 31, 1997 and 1996
Capital Government Money
Accumulation Securities Market
Combined Division Division Division
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at January 1, 1996 $5,903,158 $4,074,988 $834,687 $993,483
Increase (decrease) in net assets
Operations:
Net investment income 359,715 337,159 9,595 12,961
Net realized gains on investments 375,271 370,021 5,250 -
Change in net unrealized appreciation of
investments (128,013) (104,624) (23,389) -
---------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 606,973 602,556 (8,544) 12,961
Changes from principal transactions:
Purchase payments, less sales charges, per
payment fees and applicable premium taxes - - - -
Contract terminations (1,445,557) (1,320,708) (135,139) (177,730)
Transfer payments to other contracts (1,757,595) (717,332) (299,188) (553,055)
Annuity payments (23,805) (23,805) - -
---------------------------------------------------------------
Decrease in net assets from principal (3,226,957) (2,061,845) (434,327) (730,785)
transactions
---------------------------------------------------------------
Total decrease (2,619,984) (1,459,289) (442,871) (717,824)
---------------------------------------------------------------
Net assets at December 31, 1996 3,283,174 2,615,699 391,816 275,659
Increase (decrease) in net assets
Operations:
Net investment income 264,770 239,150 16,789 8,831
Net realized gains on investments 127,878 126,977 901 -
Change in net unrealized appreciation of
investments 272,101 258,222 13,879 -
---------------------------------------------------------------
Net increase in net assets resulting from 664,749 624,349 31,569 8,831
operations
Changes from principal transactions:
Purchase payments, less sales charges, per
payment fees and applicable premium taxes 7,701 7,701 - -
Contract terminations (227,772) (223,037) (2,404) (2,331)
Transfer payments to other contracts (285,041) (261,817) (19,116) (4,108)
Annuity payments (26,289) (26,289) - -
---------------------------------------------------------------
Decrease in net assets from principal (531,401) (503,442) (21,520) (6,439)
transactions
---------------------------------------------------------------
Total increase 133,348 120,907 10,049 2,392
===============================================================
Net assets at December 31, 1997 $3,416,522 $2,736,606 $401,865 $278,051
===============================================================
See accompanying notes.
</TABLE>
Principal Mutual Life Insurance
Company Separate Account C
Notes to Financial Statements
December 31, 1997
1. Investment and Accounting Policies
Principal Mutual Life Insurance Company Separate Account C (Separate Account C)
was organized by Principal Mutual Life Insurance Company (Principal Mutual) in
accordance with the provisions of the Iowa Insurance Laws and is a part of the
total operations of Principal Mutual. The assets and liabilities of Separate
Account C are clearly identified and distinguished from the other assets and
liabilities of Principal Mutual, with the remaining aggregate value of units
registered with the Securities and Exchange Commission under the current
registration statement (but not the authorized number of units) limited to $10.6
million. As directed by eligible contractholders, Separate Account C invests
solely in shares of Principal Capital Accumulation Fund, Inc., Principal
Government Securities Fund, Inc. and Principal Money Market Fund, Inc.,
diversified open-end management investment companies organized by Principal
Mutual. Investments are stated at the closing net asset values per share on
December 31, 1997.
The average cost method is used to determine realized gains and losses on
investments. Dividends are taken into income on an accrual basis as of the
ex-dividend date.
Contributions to Separate Account C are no longer accepted.
Use of Estimates in the Preparation of Financial Statements
The preparation of Separate Account C's financial statements and accompanying
notes requires management to make estimates and assumptions that affect the
amounts reported and disclosed. These estimates and assumptions could change in
the future as more information becomes known, which could impact the amounts
reported and disclosed in the financial statements and accompanying notes.
Reclassifications
Certain amounts appearing in the 1996 Statement of Changes in Net Assets have
been reclassified to conform with the 1997 presentation.
2. Expenses
Principal Mutual is compensated for the following expenses:
Bankers Flexible Annuity Contracts - Mortality and expense risks assumed by
Principal Mutual are compensated for by a charge equivalent to an annual rate
of 0.48% of the asset value of each contract. An annual administration charge
of $7 for each participant's account is deducted as compensation for
administrative expenses. The mortality and expense risk and annual
administration charges amounted to $7,719 and $125, respectively, during the
year 1997.
Principal Mutual Life Insurance
Company Separate Account C
Notes to Financial Statements (continued)
2. Expenses (continued)
Pension Builder Plus Contracts - Mortality and expense risks assumed by
Principal Mutual are compensated for by a charge equivalent to an annual rate
of 1.4965% of the asset value of each contract. A contingent sales charge of
up to 7% may be deducted from withdrawals made during the first 10 years of a
contract, except for death or permanent disability. An annual administration
charge will be deducted ranging from a minimum of $25 to a maximum of $275
depending upon a participant's investment account values and the number of
participants under the retirement plan and their participant investment
account value. The charges for mortality and expense risks and annual
administration amounted to $24,088 and $4,424, respectively, during the year
1997. There were no contingent sales charges during 1997.
3. Federal Income Taxes
The operations of Separate Account C are a part of the operations of Principal
Mutual. Under current practice, no federal income taxes are allocated by
Principal Mutual to the operations of Separate Account C.
4. Purchases and Sales of Investment Securities
The aggregate units and cost of purchases and proceeds from sales of investments
were as follows:
For the year ended December 31, 1997
------------------------------------
Units Amount Units Amount
Purchased Purchased Redeemed Redeemed
-------------------------------------
Capital Accumulation Division:
Bankers Flexible Annuity 318 $173,073 10,411 $233,193
Pension Builder Plus - 98,690 66,102 302,862
-------------------------------------
318 271,763 76,513 536,055
Government Securities Division:
Pension Builder Plus - 23,370 11,882 28,101
Money Market Division:
Pension Builder Plus - 13,694 3,744 11,302
-------------------------------------
318 $308,827 92,139 $575,458
=====================================
Principal Mutual Life Insurance
Company Separate Account C
Notes to Financial Statements (continued)
4. Purchases and Sales of Investment Securities (continued)
For the year ended December 31, 1996
---------------------------------------
Units Amount Units Amount
Purchased Purchased Redeemed Redeemed
---------------------------------------
Capital Accumulation Division:
Bankers Flexible Annuity - $207,624 25,504 $ 469,156
Pension Builder Plus - 175,450 443,203 1,638,604
---------------------------------------
---------------------------------------
- 383,074 468,707 2,107,760
Government Securities Division:
Pension Builder Plus - 22,335 244,388 447,067
Money Market Division:
Pension Builder Plus - 21,212 412,690 739,036
---------------------------------------
- $426,621 1,125,785 $3,293,863
=======================================
Purchases include reinvested dividends and capital gains. Mortality adjustments
are included in purchases or redemptions, as applicable.
Money Market purchases include transactions where investment allocations are not
known at the time of the deposit. Redemptions reflect subsequent allocations to
directed investment divisions.
5. Net Assets
Net assets at December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
Net Unrealized
Accumulated Appreciation
Unit Net Investment of Investments
Combined Transactions Income
-------------------------------------------------------------------
-------------------------------------------------------------------
Capital Accumulation Division:
<S> <C> <C> <C> <C>
Bankers Flexible Annuity $1,729,785 $ 210,868 $ 943,998 $574,919
Pension Builder Plus 1,006,821 619,706 164,479 222,636
-------------------------------------------------------------------
-------------------------------------------------------------------
2,736,606 830,574 1,108,477 797,555
Government Securities Division:
Pension Builder Plus 401,865 332,171 53,668 16,026
Money Market Division:
Pension Builder Plus 278,051 253,781 24,270 -
-------------------------------------------------------------------
===================================================================
$3,416,522 $1,416,526 $1,186,415 $813,581
===================================================================
</TABLE>
Principal Mutual Life Insurance
Company Separate Account C
Notes to Financial Statements (continued)
6. Year 2000 Issues (Unaudited)
Like other investment funds, financial and business organizations and
individuals around the world, Separate Account C could be adversely affected if
the computer systems used by Principal Mutual and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. In 1996, Principal Mutual completed its assessment of the Year
2000 impact on its systems, procedures, customers and business processes. At
December 31, 1997, management estimates that approximately 95% of the identified
modifications have been completed for its Year 2000 project. System testing,
using an isolated test environment, will begin early in 1998. Ultimate project
completion is targeted for early 1999, which is prior to any anticipated impact
on Principal Mutual's operations.
The date on which Principal Mutual believes it will complete the Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events. Principal Mutual also
recognizes there are outside influences and dependencies relative to its Year
2000 effort, over which it has little or no control. However, Principal Mutual
is putting effort into ensuring these considerations will have minimal impact.
These would include the continued availability of certain resources, third-party
modification plans and many other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ from those
anticipated.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Inapplicable, the Registrant does not have any directors or executive
officers.
Item 11. Executive Compensation
Inapplicable, the Registrant does not have any directors or executive
officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person owns beneficially or of record the assets held by the
Depositor, Principal Mutual Life Insurance Company, in the Separate
Account. As contractholders of the variable contracts each
contractholder has one vote in the election of the Board of Directors
at annual meetings and upon other Principal Mutual Life Insurance
Company matters, if any, where a policyholder's vote is taken. The
contractholders have the same voting privilege as do all other
policyholders of Principal Mutual Life Insurance Company. An individual
participant (certificateholder) does not have a vote. There are no
policyholders that are entitled to cast more than 5% of the votes to be
cast.
Item 13. Certain Relationships and Related Transactions
Inapplicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
1. The following financial statements are submitted herewith:
Statement of Net Assets -- December 31, 1997
Statement of Operations -- Year ended December 31, 1997
Statements of Changes in Net Assets -- Years ended December 31,
1997 and 1996.
Notes to Financial Statements
2. Schedules - All other schedules for which provision is made in
the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
3. Exhibits:
(20) Subsidiaries of the Registrant
Subsidiaries of the Registrant
The Registrant is a separate account of Principal Mutual Life Insurance Company.
It has no subsidiary. Principal Mutual Life Insurance Company, as the Depositor
of the Account, owns or controls, as of December 31, 1997, subsidiaries as
follows:
I. Principal Holding Company
A. Organized in Iowa.
B. Depositor owns 100% of outstanding stock.
C. Subsidiaries of Principal Holding Company as of December 31,
1997, are as follows:
1. Patrician Associates, Inc. (a real estate development
company)
a. Organized in California.
b. Principal Holding Company owns 100% of outstanding
stock.
2. Petula Associates, Ltd. (a real estate development company)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Sudsidiary of Petula Associates, Ltd. as of December
31, 1997 is as follows:
(1) Magnus Properties, Inc. (owns real estate)
(a) Organized in Iowa.
(b) Petula Associates, Ltd. owns 100% of
outstanding stock.
3. Principal Development Associates, Inc. (a real estate
development company)
a. Organized in California.
b. Principal Holding Company owns 100% of outstanding
stock.
4. Principal Spectrum Associates, Inc. (a real estate
development company)
a. Organized in California.
b. Principal Holding Company owns 100% of outstanding
stock.
5. Principal Commercial Advisors, Inc. (purchasing, managing
and selling commercial real estate assets)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
6. Principal FC, Ltd. (limited purpose investment corporation)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
7. Equity FC, Ltd. (a general business corporation that engages
in investment transactions including limited partnership and
limited liability companies)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
8. Invista Capital Management, Inc. (a registered investment
advisor)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
9. Principal Residential Mortgage, Inc. (a residential mortgage
loan broker)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
10. Principal Asset Markets, Inc. (a residential mortgage loan
broker)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
11. Principal Portfolio Services, Inc. (a mortgage diligence
company)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
(12) The Admar Group, Inc. (a national managed care service
organization that developes and manages preferred provider
organizations (PPO's))
a. Organized in Florida.
b. Principal Health Care, Inc. owns 100% of outstanding
stock.
c. Subsidiaries of The Admar Group, Inc. as of December
31, 1997 are as follows:
(1) Admar Corporation (a managed care services
organization)
(a) Organized in California.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
(2) Admar Insurance Marketing, Inc. (a managed care
services organization)
(a) Organized in California.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
(3) Benefit Plan Administrators, Inc. (a managed care
services organization)
(a) Organized in Colorado.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
(4) SelectCare Management Co., Inc. (a managed care
services organization)
(a) Organized in California.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
(5) Image Financial & Insurance Services, Inc. (a
managed care services organization)
(a) Organized in California.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
(6) WM. G. Hofgard & Co., Inc. (a managed care
services organization)
(a) Organized in California.
(b) The Admar Group, Inc. owns 100% of
outstanding stock.
13. The Principal Financial Group, Inc. (general business
corporation established in connection with corporate
identity - not currently active)
a. Organized in Delaware.
b. Principal Holding Company owns 100% of outstanding
stock.
14. Principal Marketing Services, Inc. (a corporation formed to
serve as an interface between marketers and manufacturers
of financial services products)
a. Organized in Delaware.
b. Principal Holding Company owns 100% of outstanding
stock.
15. Principal Health Care, Inc. (a developer and administrator
of managed care systems)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Subsidiaries of Principal Health Care, Inc. as of
December 31, 1997 are as follows:
(1) Principal Health Care Management Corporation
(provide management services to health maintenance
organizations)
(a) Organized in Iowa.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(2) Principal Health Care of the Carolinas, Inc. (a
health maintenance organization operating in North
Carolina and South Carolina)
(a) Organized in North Carolina.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(3) Principal Health Care of Delaware, Inc. (a health
maintenance organization)
(a) Organized in Delaware.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(4) Principal Health Care of Florida, Inc. (a health
maintenance organization)
(a) Organized in Florida.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(5) Principal Health Care of Georgia, Inc.(a health
maintenance organization)
(a) Organized in Georgia.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(6) Principal Health Care of Illinois, Inc. (A health
maintenance organization)
(a) Organized in Illinois.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(7) Principal Health Care of Indiana, Inc.(a health
maintenance organization)
(a) Organized in Delaware.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(8) Principal Health Care of Iowa, Inc.(a health
maintenance organization)
(a) Organized in Iowa.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(9) Principal Health Care of Kansas City, Inc. (a
health maintenance organization)
(a) Organized in Missouri.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(10) Principal Health Care of Louisiana, Inc. (a health
maintenance organization)
(a) Organized in Louisiana.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(11) Principal Health Care of Nebraska, Inc. (a health
maintenance organization)
(a) Organized in Nebraska.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(12) Principal Health Care of Pennsylvania, Inc. (a
health maintenance organization operating in
Pennsylvania - not currently active)
(a) Organized in Pennsylvania.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(13) Principal Health Care of St. Louis, Inc. (a health
maintenance organization)
(a) Organized in Delaware.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(14) Principal Health Care of South Carolina, Inc. (a
health maintenance organization)
(a) Organized in South Carolina.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(15) Principal Health Care of Tennessee, Inc. (a health
maintenance organization)
(a) Organized in Tennessee.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(16) Principal Health Care of Texas, Inc.(a health
maintenance organization)
(a) Organized in Texas.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
(17) United Healthcare Services of Iowa, Inc.(a health
maintenance organization)
(a) Organized in Iowa.
(b) Principal Health Care, Inc. owns 100% of
outstanding stock.
16. Principal Financial Advisors, Inc. (a registered investment
advisor)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
17. Delaware Charter Guarantee & Trust Company (nondepository
trust company)
a. Organized in Delaware.
b. Principal Holding Company currently owns 100% of
outstanding stock.
c. Subsidiary of Delaware Charter Guarantee & Trust
Company as of December 31, 1997 is as follows:
(1) Trust Consultants, Inc. (consulting and
administration of employee benefit plans)
(a) Organized in California.
(b) Delaware Charger Guarantee & Trust Company
owns 100% of outstanding stock.
18. Princor Financial Services Corporation (a registered
broker-dealer)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Subsidiaries of Princor Financial Services Corporation
as of December 31, 1997 are as follows:
(1) Principal Management Corporation (a registered
investment adviser)
(a) Organized in Iowa.
(b) Princor Financial Services Corporation owns
100% of outstanding stock.
(2) Principal Investors Corporation (broker-dealer of
securities and registered investments
- not currently active)
(a) Organized in New Jersey.
(b) Princor Financial Services Corporation owns
100% of outstanding stock.
19. Principal International, Inc. (a company formed for the
purpose of international business development)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Subsidiaries of Principal International, Inc. as of
December 31, 1997 are as follows:
(1) Principal International Espana, S.A. de Seguros de
Vida (a Spain corporation) a life insurance
company (individual group), annuities and pension.
(a) Organized in Spain.
(b) Principal International, Inc. owns 99.9% of
outstanding stock and Principal Holding
Company owns .1% of outstanding stock.
(c) Subsidiary of Principal Internationl Espana,
S.A. de Seguros de Vida as of December 31,
1997 is as follows:
(1) Princor International Espana Sociedad
Anonima de Agencia de Seguros (a Spain
corporation) an insurance agency -
inactive
(a) Organized in Spain.
(b) Principal International Espana,
S.A. de Seguros de Vida owns 99.9%
of outstanding stock and Principal
International, Inc. owns .1% of
outstanding stock.
(2) Zao Principal International (a Russia corporation)
inactive
(a) Organized in Russia.
(b) Principal International, Inc. owns 99% of
outstanding stock and Principal Holding
Company owns 1% of outstanding stock.
(3) Principal International Argentina, S.A. (an
Argentina services corporation)
(a) Organized in Argentina.
(b) Principal International, Inc. owns 97.03% of
outstanding stock and Enrique S. Braun owns
2.97% of outstanding stock
(c) Subsidiaries of International Argentina, S.A.
as of December 31, 1997 are as follows:
(1) Ethika Administradora de Fondos de
Jubilaciones y Pensiones S.A. (an
Argentina pension company).
(a) Organized in Argentina.
(b) Principal International Argentina,
S.A. owns 68.12% of outstanding
stock.
(2) Princor Compania de Seguros de Retiro,
S.A. (an Argentina annuity/employee
benefit company) inactive
(a) Organized in Argentina.
(b) Principal International Argentina,
S.A. owns 99% of outstanding stock
and Principal International, Inc.
owns 1% of outstanding stock.
(3) Principal Life Compania de Seguros, S.A.
(an Argentina life insurance company)
(a) Organized in Argentina.
(b) Principal International Argentina,
S.A. owns 99.9963% of outstanding
stock and Principal International,
Inc. owns .0037% of outstanding
stock.
(4) Principal International Asia Limited (a Hong Kong
corporation) operating as a regional headquarters
for Asia
(a) Organized in Hong Kong.
(b) Principal International, Inc. owns 50% of
outstanding stock and Principal Holding
Company owns 50% of outstanding stock.
(5) Principal Asset Management (Hong Kong) a
corporation which manages pension funds.
(a) Organized in Hong Kong.
(b) Principal International, Inc. owns 50% of
outstanding stock and Principal Insurance
Company (Hong Kong) Limited owns 50% of
outstanding stock.
(6) Principal Insurance Company (Hong Kong) Limited
(for group life and group pension products)
(a) Organized in Hong Kong.
(b) Principal International, Inc. owns 99% of
outstanding stock and Principal International
Asia Limited owns 1% of outstanding stock.
(7) Principal Trust Company (Asia) Limited (Hong Kong)
an Asia trust company.
(a) Organized in Hong Kong.
(b) Principal Holding Company owns 20% of
outstanding stock, Principal Residential
Mortgage, Inc. owns 20% of outstanding stock,
Principal International Asia Limited owns 20%
of outstanding stock and Principal Insurance
Company (Hong Kong) Limited owns 20%
outstanding stock.
(8) Principal International de Chile, S.A. (a Chile
corporation) a holding company
(a) Organized in Chile.
(b) Principal International, Inc. owns 99%
outstanding stock and Principal Holding
Company owns 1% of outstanding stock.
(c) Subsidiary of Principal International de
Chile, S.A. as of December 31, 1997 is as
follows:
(1) BanRenta Compania de Seguros de Vida,
S.A. (a Chile corporation) for group
life and supplemental health, individual
annuities
(a) Organized in Chile.
(b) Principal International de Chile,
S.A. owns 87.5% of outstanding
stock BanMedica, S.A. 12.5%.
(9) Principal Mexico Compania de Seguros, S.A. de C.V.
(a Mexico corporation) a life insurance company
(individual group), personal accidents.
(a) Organized in Mexico.
(b) Principal International, Inc. owns 99% of
outstanding stock and Principal Holding
Company owns 1% of outstanding stock.
(10) Afore Confia-Principal, S.A. de C.V. (a Mexico
Corporation) pension.
(a) Organized in Mexico.
(b) Principal International, Inc. owns 49% of
outstanding stock and Confia owns 51% of
outstanding stock.
(c) Subsidiary of Afore Confia-Principal as of
December 31, 1997 is as follows:
(1) Siefore Confia-Principal, S.A. de C.V.
(a Mexico Corporation) an investment
fund company.
(a) Organized in Mexico.
(b) Confia-Principal owns 99% of
outstanding stock and Principal
International, Inc. owns 1%
outstanding stock.
II. PT Asuransi Jiwa Principal Egalita Indonesia (an Indonesia
corporation)
A. Organized in Indonsesia.
B. Depositor owns 75% of the outstanding stock.
C. Subsidiary of PT Asuransi Jiwa Principal Egalita Indonesia as of
December 31, 1997 is as follows:
1. Dana Pensiun Lembaga Keuangan Principal Egalita Indonesia
(an Indonesia company)
(a) Organized in Indonesia.
(b) Dana Pensiun Lembaga Keuangan Principal Egalita
Indonesia owns 100% of outstanding stock.
The Depositor's investment in its subsidiaries, which in turn includes the
subsidiary's investment in its subsidiaries, is included in the financial
statements of the Depositor.
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, Principal Mutual Life Insurance Company has duly caused this report
to be signed on behalf of Principal Mutual Life Insurance Company Separate
Account C by the undersigned thereto duly authorized
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT C
By PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
/s/ D. J. DRURY
By ---------------------------------------------------
D. J. Drury, Chairman and Chief Executive Officer
March 13, 1998
Date ---------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities with Principal Mutual Life Insurance Company and on
the dates indicated.
Signature Title Date
/s/ D. J. DRURY Chairman and March 13, 1998
- --------------------- Chief Executive Officer
D. J. Drury
/s/ D. C. CUNNINGHAM Vice President and March 13, 1998
- ---------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. GERSIE Senior Vice March 13, 1998
- ---------------------- President (Principal
M. H. Gersie Financial Officer)
(M. V. Andringa)* Director March 13, 1998
- ----------------------
M. V. Andringa
(R. M. Davis)* Director March 13, 1998
- ----------------------
R. M. Davis
(C. D. Gelatt)* Director March 13, 1998
- ----------------------
C. D. Gelatt
(G. D. Hurd)* Director March 13, 1998
- ----------------------
G. D. Hurd
(T. M. Hutchison)* Director March 13, 1998
- ----------------------
T. M. Hutchison
(C. S. Johnson)* Director March 13, 1998
- ----------------------
C. S. Johnson
(W. T. Kerr)* Director March 13, 1998
- ----------------------
W. T. Kerr
(L. Liu)* Director March 13, 1998
- ----------------------
L. Liu
(V. H. Loewenstein)* Director March 13, 1998
- ----------------------
V. H. Loewenstein
(R. D. Pearson)* Director March 13, 1998
- ----------------------
R. D. Pearson
(J. R. Price, Jr.)* Director March 13, 1998
- ----------------------
J. R. Price, Jr.
(D. M. Stewart)* Director March 13, 1998
- ----------------------
D. M. Stewart
(E. E. Tallett)* Director March 13, 1998
- ----------------------
E. E. Tallett
(D. D. Thornton)* Director March 13, 1998
- ----------------------
D. D. Thornton
(F. W. Weitz)* Director March 13, 1998
- ----------------------
F. W. Weitz
/s/ DAVID J. DRURY
*By -------------------------------------
David J. Drury
Chairman and Chief Executive Officer
Pursuant to Powers of Attorney
Previously Filed or Included Herein
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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