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, 1998 Commission File Number 2-39957 and
(current number) Commission File Number 33-58028
PRINCIPAL LIFE INSURANCE COMPANY
f/k/a 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 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 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 Life
Insurance Company. Principal Life Insurance Company was incorporated
under Iowa law as a mutual life insurance company named Bankers Life
Association. It changed its name to Bankers Life Company in 1911 and
then to Principal Mutual Life Insurance Company in 1986. The name change
to Principal LIfe Insurance Company and reorganization into a mutual
holding company structure took place in 1998. The account was formed to
receive payments under Principal 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 Life Insurance Company offers
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 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 Variable Contracts Fund,
Inc. - Capital Value Account (f/k/a 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 Variable Contracts Fund, Inc. - Capital
Value Account. Another is a "Money Market Division" where payments are
invested in Principal Variable Contracts Fund, Inc., - Money Market
Account (f/k/a 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 Variable
Contracts Fund, Inc. - Government Securities Account (f/k/a 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 Life Insurance Company Separate Account C) and
Variable Annuity Contracts and Variable Life Insurance Contracts with
payments credited to Principal 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 1366 full-time agents, a
group insurance sales organization of approximately 271 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
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 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 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 1997
and 1998 are:
Lowest Unit Value Highest Unit Value
First Quarter 1997 20.4528637 21.9936217
Second " 1997 20.3003374 23.8234633
Third " 1997 23.6068661 25.2849532
Fourth " 1997 23.6518502 26.5671402
First " 1998 25.7039901 29.7421641
Second " 1998 28.9133343 30.0327198
Third " 1998 25.5325451 30.3428328
Fourth " 1998 25.8281110 30.2336310
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 1997 and 1998.
Common Stock Money Market GovernmentSecurities
Division Division Division
------------------- ------------------- -------------------
Quarter Lowest Highest Lowest Highest Lowest Highest
------- --------- --------- --------- --------- --------- ---------
First Quarter 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
First " 1997 5.0801506 5.8665362 1.8917032 1.9085747 2.0459757 2.0739041
Second " 1997 5.6972242 5.9204981 1.9087654 1.9258325 2.0601982 2.1037409
Third " 1997 5.0137197 5.9666438 1.9260245 1.9426780 2.1044991 2.1807744
Fourth " 1997 5.0674580 5.9183008 1.9428674 1.9607951 2.1436487 2.1900032
b. The approximate number of holders of record of each group contract
and the number of the participants therein as of December 31,
1998, are as follows:
(1) (2)
Number of Group Number of
Contract Holders Participants
---------------- ------------
Bankers Flexible Annuity 17 17
Pension Builder 38 46
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 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 Variable Contracts Fund, Inc. - Capital Value Account, Money
Market Account, Inc., or Government Securities Account, 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 Variable Contracts Fund, Inc. is an open-end diversified
management investment company, sponsored by Principal Life Insurance
Company. The principal objective of the Capital Value Account 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 Account to anticipate changes in such investments
necessary to meet changes in economic conditions.
The principal objective of the Money Market Account 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.
The principal objective of the Government Securities Account 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").
Item 8. Financial Statements and Supplementary Data
Financial Statements
Principal Life Insurance Company
Separate Account C
Year ended December 31, 1998
with Report of Independent Auditors
Principal Life Insurance Company
Separate Account C
Financial Statements
Year ended December 31, 1998
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
Report of Independent Auditors
Board of Directors and Participants
Principal Life Insurance Company
We have audited the accompanying statement of net assets of Principal Life
Insurance Company Separate Account C (comprising, respectively, the Capital
Value [formerly Capital Accumulation], Government Securities, and Money Market
Divisions) as of December31, 1998, 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
Companys 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 December31, 1998, 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 Life Insurance
Company Separate Account C at December31, 1998, 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
January 29, 1999
Principal Life Insurance Company
Separate Account C
Statement of Net Assets
December 31, 1998
Assets
Investments:
Capital Value Division:
Capital Value Account - 78,257 shares at net asset value of $37.19
per share(cost $1,970,739) $2,910,395
Government Securities Division:
Government Securities Account - 37,851 shares at net asset value of
$11.01 per share (cost $393,105) 416,738
Money Market Division:
Money Market Account - 268,116 shares at net asset
of $1.00 per share (cost $268,116) 268,116
----------
Net assets $3,595,249
==========
Units
Unit Value
----------------
Net assets are represented by:
Capital Value Division:
Currently payable annuity contracts:
Bankers Flexible Annuity 9,562 $30.03 $ 287,147
Pension Builder Plus 3,418 5.88 20,098
Contracts in accumulation period:
Bankers Flexible Annuity 54,077 30.03 1,623,988
Pension Builder Plus 166,578 5.88 979,162
-----------
2,910,395
Government Securities Division:
Contracts in accumulation period - Pension
Builder Plus 191,650 2.17 416,738
Money Market Division:
Contracts in accumulation period - Pension
Builder Plus 136,969 1.96 268,116
-----------
Net assets $3,595,249
===========
See accompanying notes.
Principal Life Insurance Company
Separate Account C
Statement of Operations
Year ended December 31, 1998
Capital Government Money
Value Securities Market
Combined Division Division Division
--------------------------------------------------
Investment income
Income:
Dividends $ 89,395 $ 53,242 $22,043 $14,110
Capital gains distributions 102,689 102,689 - -
----------------------------------------------
192,084 155,931 22,043 14,110
Expenses:
Mortality and expense risks 34,644 24,169 6,327 4,148
Administration charges 4,116 2,786 453 877
----------------------------------------------
38,760 26,955 6,780 5,025
----------------------------------------------
Net investment income 153,324 128,976 15,263 9,085
Realized and unrealized gains
on investments
Net realized gains on
investments 71,237 67,143 4,094 -
Change in net unrealized
appreciation of investments 149,708 142,101 7,607 -
----------------------------------------------
Net increase in net assets
resulting from operations $374,269 $338,220 $26,964 $ 9,085
==============================================
See accompanying notes.
Principal Life Insurance Company
Separate Account C
Statements of Changes in Net Assets
Years ended December 31, 1998 and 1997
Capital Government Money
Value Securities Market
Combined Division Division Division
----------------------------------------------
Net assets at January 1, 1997 $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 operations 664,749 624,349 31,569 8,831
Changes from principal
transactions:
Purchase payments, less sales
charges, per payment fees and
applicable premium taxes 7,701 7,701 - -
Contract terminations (512,813) (484,854) (21,520) (6,439)
Annuity payments (26,289) (26,289) - -
----------------------------------------------
Decrease in net assets from
principal transactions (531,401) (503,442 (21,520) (6,439)
----------------------------------------------
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
Increase (decrease)in net assets
Operations:
Net investment income 153,324 128,976 15,263 9,085
Net realized gains on investments 71,237 67,143 4,094 -
Change in net unrealized
appreciation of investments 149,708 142,101 7,607 -
----------------------------------------------
Net increase in net assets
resulting from operations 374,269 338,220 26,964 9,085
Changes from principal transactions:
Purchase payments, less sales
charges, per payment fees and
applicable premium taxes 15,564 15,564 - -
Contract terminations (180,175) (149,064) (12,091) (19,020)
Annuity payments (30,931) (30,931) - -
----------------------------------------------
Decrease in net assets from
principal transactions (195,542) (164,431) (12,091) (19,020)
----------------------------------------------
Total increase (decrease) 178,727 173,789 14,873 (9,935
----------------------------------------------
Net assets at December 31, 1998 $3,595,249 $2,910,395 $416,738 $268,116
==============================================
See accompanying notes.
Principal Life Insurance Company
Separate Account C
Notes to Financial Statements
December 31, 19981
Investment and Accounting Policies
Principal Life Insurance Company Separate Account C (Separate Account C) was
organized by Principal Life Insurance Company (Principal Life, formerly
Principal Mutual Life Insurance Company) in accordance with the provisions of
the Iowa Insurance Laws and is a part of the total operations of Principal Life.
The assets and liabilities of Separate Account C are clearly identified and
distinguished from the other assets and liabilities of Principal Life, 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 representing
interests in a corresponding investment option. As of December 31, 1998, the
contractholder investment options consisted of the accounts of the following
diversified open-end management investment company, organized by Principal Life:
Principal Variable Contracts Fund, Inc. Capital Value Account, Government
Securities Account and Money Market Account. Investments are stated at the
closing net asset values per share on December31, 1998.
The Principal Variable Contracts Fund, Inc. (the Fund) was formed on January 1,
1998. Prior to that date, the accounts of the Fund were reported as separate
mutual funds. This reorganization resulted in changes to the names of the
following investment options:
Former Fund Name Name Subsequent to Reorganization
- ----------------------------------------- ------------------------------------
Principal Capital Accumulations Fund, Inc. Capital Value Account
Principal Government Securities Fund, Inc. Government Securities Account
Principal Money Market Fund, Inc. Money Market Account
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.
Effective July 1, 1998, Principal Mutual Life Insurance Company formed a mutual
insurance holding company and converted to a stock life insurance company. With
the conversion, the Companys name was changed to Principal Life Insurance
Company.
Use of Estimates in the Preparation of Financial Statements
The preparation of Separate Account Cs 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.
Principal Life Insurance Company
Separate Account C
Notes to Financial Statements (continued)
2. Expense
Principal Life is compensated for the following expenses:
Bankers Flexible Annuity Contracts Mortality and expense risks assumed by
Principal Life 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 participants account is deducted as compensation for administrative
expenses. The mortality and expense risk and annual administration charges
amounted to $8,859 and $231, respectively, during the year 1998.
Pension Builder Plus Contracts Mortality and expense risks assumed by Principal
Life 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
participants 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, contingent sales, and annual administration
amounted to $25,785 and $3,885, respectively, during the year 1998. There were
no contingent sales charges during 1998.
3.Federal Income Taxes
Operations of Separate Account C are a part of the operations of Principal Life.
Under current practice, no federal income taxes are allocated by Principal Life
to the operations of Separate Account C.
Principal Life Insurance Company
Separate Account C
Notes to Financial Statements (continued)
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, 1998
-------------------------------------
Units Amount Units Amount
Purchased Purchased Redeemed Redeemed
-------------------------------------
Capital Value Division:
Bankers Flexible Annuity 583 $118,506 2,052 $66,973
Pension Builder Plus - 52,986 21,667 139,974
-------------------------------------
583 171,492 23,719 206,947
Government Securities Division:
Pension Builder Plus - 22,045 5,485 18,873
Money Market Division:
Pension Builder Plus - 14,110 10,246 24,045
-------------------------------------
583 $207,647 39,450 $249,865
=====================================
For the year ended December 31, 1997
-------------------------------------
Units Amount Units Amount
Purchased Purchased Redeemed Redeemed
-------------------------------------
Capital Value 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 11,88 28,10
Money Market Division:
Pension Builder Plus - 13,694 3,744 11,302
-------------------------------------
318 $308,827 92,139 $575,458
=====================================
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.
Principal Life Insurance Company
Separate Account C
Notes to Financial Statements (continued)
5. Net Assets
Net assets at December31, 1998 consisted of the following:
Net
Accumulated Unrealized
Unit Net Investment Appreciation
Combined Transactions Income of Investments
----------------------------------------------------
Capital Value Division:
Bankers Flexible Annuity $1,911,135 $ 222,070 $1,009,115 $679,950
Pension Builder Plus 999,260 557,928 181,626 259,706
-----------------------------------------------------
2,910,395 779,998 1,190,741 939,656
Government Securities
Division:
Pension Builder Plus 416,738 325,549 67,556 23,633
Money Market Division:
Pension Builder Plus 268,116 236,970 31,146 -
-----------------------------------------------------
$3,595,249 $1,342,517 $1,289,443 $963,289
=====================================================
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 Life and other service providers do not
properly process and calculate date-related information and data from and after
January1, 2000. In 1995, Principal Life began investigating the potential impact
of the Year 2000 on its systems, procedures, customers and business processes.
The Year 2000 assessment that was completed in 1996 provided information used to
determine what system components must be changed or replaced to minimize the
impact of the calendar change from 1999 to 2000.
Principal Life will continue to use internal and external resources to modify,
replace and test its systems. Management estimates 100% of the identified
modifications to mission critical systems and 99% of the identified
modifications to other systems have been completed for its Year 2000 project.
The project completion is scheduled to occur prior to any anticipated impact on
Principal Lifes operations.
Principal Life and Separate Account C face the risk that one or more of its
critical suppliers or customers (external relationships) will not be able to
interact with them due to the third partys inability to resolve its own Year
2000 issues. Principal Life has completed its inventory of external
relationships and is attempting to determine the overall Year 2000 readiness of
its external relationships. Principal Life is engaged in discussions with the
third parties and is requesting information as to those parties Year 2000 plans
and state of readiness. Principal Life, however, does not have sufficient
information at the current time to predict whether all of its external
relationships will be Year 2000 ready.
Principal Life Insurance Company
Separate Account C
Notes to Financial Statements (continued)
6. Year 2000 Issues (Unaudited) (continued)
While Principal Life believes that it has addressed its Year 2000 concerns,
Principal Life has begun to develop contingency/recovery plans aimed at ensuring
the continuity of critical business functions before, on and after December31,
1999. Principal Life expects contingency/recovery planning to be substantially
complete by April 1, 1999. The Year 2000 contingency plans will be reviewed
periodically throughout 1999 and revised as needed. Principal Life believes its
Year 2000 contingency plans coupled with existing disaster recovery and business
resumption plans minimize the impact Year 2000 issues may have on the
organization.
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 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 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 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, 1998
Statement of Operations -- Year ended December 31, 1998
Statements of Changes in Net Assets -- Years ended December 31,
1998 and 1997.
Notes to Financial Statements -- December 31, 1998
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 Life Insurance Company. It has
no subsidiary. Principal Life Insurance Company, as the Depositor of the
Account, owns or controls, as of December 31, 1998, 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,
1998, 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, 1998 is as follows:
(1) Magnus Properties, Inc. (a corporation that 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 FC, Ltd. (a limited purpose investment
corporation)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
6. 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.
7. Invista Capital Management, LLC (an investment advisor)
a. Organized in Delaware.
b. Principal Holding Company owns 100% of outstanding
stock.
8. HealthRisk Resource Group, Inc. (a general business
corporation engaged in providing managed care expertise and
administrative services to provider organizations)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
9. Principal Residential Mortgage, Inc. (a full service
mortgage banking company)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Susidiaries of Principal Residential Mortgage, Inc. as
of December 31, 1998 are as follows:
(1) Principal Wholesale Mortgage, Inc. (a brokerage
and servicer of residential mortgages)
(a) Organized in Iowa.
(b) Principal Residential Mortgage, Inc. owns
100% of outstanding stock.
(2) Principal JMC, Inc. (a brokerage Company)
(a) Organized in Iowa.
(b) Principal Residential Mortgage, Inc. owns
100% of outstanding stock.
10. Principal Asset Markets, Inc. (a residential mortgage loan
broker - currently inactive)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
11. Principal Portfolio Services, Inc. (a corporation which
provides mortgage diligence services)
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 Holding Company owns 100% of outstanding
stock.
c. Subsidiaries of The Admar Group, Inc. as of December
31, 1998 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 - currently inactive)
(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.
13. The Principal Financial Group, Inc. (general business
corporation established in connection with corporate
identity - currently inactive)
a. Organized in Delaware.
b. Principal Holding Company owns 100% of outstanding
stock.
14. Principal Marketing Services, Inc. (an insurance broker)
a. Organized in Delaware.
b. Principal Holding Company owns 100% of outstanding
stock.
15. Principal Health Care, Inc. (a developer and administrator
of health maintenance organizations HMO's)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
16. Dental-Net, Inc. (a managed dental care services
organization)
a. Organizaed in Arizona.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Subsidiary of Dental-Net, Inc. as of December 31, 1998
is as follows:
(1) Employers Dental Services, Inc. (an prepaid dental
plan organization)
(a) Orgnized in Arizona.
(b) Dental-Net, Inc. owns 100% outstanding stock.
17. Principal Financial Advisors, Inc. (a registered investment
advisor)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
18. Delaware Charter Guarantee & Trust Company (a corporation
that administers individual and group retirement plans)
a. Organized in Delaware.
b. Principal Holding Company currently owns 100% of
outstanding stock.
19. Principal Investors Corporation (general business
corporation - not currently active)
a. Organized in New Jersey.
b. Principal Holding Company currently owns 100% of
outstanding stock.
20. Princor Financial Services Corporation (a registered
broker-dealer)
a. Organized in Iowa.
b. Principal Holding Company owns 100% of outstanding
stock.
c. Subsidiary of Princor Financial Services Corporation as
of December 31, 1998 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.
21. 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, 1998 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) Subsidiaries of Principal Internationl
Espana, S.A. de Seguros de Vida as of
December 31, 1998 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, 1998 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) Principal 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 Company (Asia)(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, 1998 is as
follows:
(1) Principal 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) Principal Afore, 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, 1998 is as follows:
(1) Siefore Confia-Principal, S.A. de C.V.
(a Mexico Corporation) an investment
fund company.
(a) Organized in Mexico.
(b) Principal Afore, S.A. de C.V. owns
99% of outstanding stock and
Principal International, Inc. owns
1% outstanding stock.
(11) Principal Consulting (India) Private Limited (an
India consulting company)
(a) Organized in India.
(b) Principal International, Inc. owns 51% of
outstanding stock and Sanjay Sachdev as
non-resident Indian owns 49%.
II. Principal Development Investors, LLC ( a limited liability company)
A. Organized in Delaware.
B. Depositor owns 100% of the outstanding stock.
III. Principal Capital Management, LLC (a limited liability company that
provides investment management services)
A. Organized in Delaware.
B. Depositor owns 100% of the outstanding stock.
C. Subsidiaries of Principal Capital Management, LLC as of December
31, 1998 are as follows:
1. Principal Enterprise Capital, LLC (a limited liability
company)
(a) Organized in Delaware.
(b) Principal Capital Management, LLC owns 100% outstanding
stock.
2. Principal Commercial Acceptance, LLC (a Delaware LLC)
(a) Organized in Delaware.
(b) Principal Capital Management, LLC owns 100% outstanding
stock.
3. Principal Real Estate Investors, LLC (a regsitered
investment advisor)
(a) Organized in Delaware.
(b) Principal Capital Management, LLC owns 100% outstanding
stock.
4. Principal Commercial Funding, LLC (a correspondent lender
and service provider for loans)
(a) Organized in Delaware.
(b) Principal Capital Management, LLC owns 100% outstanding
stock.
5 Principal Real Estate Services, LLC (a limited liablity
company)
(a) Organized in Delaware.
(b) Principal Capital Management, LLC owns 100% outstanding
stock.
IV. PT Asuransi Jiwa Principal Egalita Indonesia (an Indonesia
corporation)
A. Organized in Indonsesia.
B. Depositor owns 75% of the 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 Life Insurance Company has duly caused this report to be
signed on behalf of Principal Life Insurance Company Separate Account C by the
undersigned thereto duly authorized in the city of Des Moines and State of Iowa,
on the 15th day of February, 1999.
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT C
By PRINCIPAL LIFE INSURANCE COMPANY
/s/ D. J. DRURY
By ---------------------------------------------------
D. J. Drury, Chairman and Chief Executive Officer
Attest:
/s/ Joyce N. Hoffman
- ---------------------------------------
Joyce N. Hoffman
Vice President and Corporate Secretary
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 Life Insurance Company and on the
dates indicated.
Signature Title Date
/s/ D. J. DRURY Chairman and March 15, 1999
- --------------------- Chief Executive Officer
D. J. Drury
/s/ D. C. CUNNINGHAM Vice President and March 15, 1999
- ---------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. GERSIE Senior Vice March 15, 1999
- ---------------------- President (Principal
M. H. Gersie Financial Officer)
(B. J. Bernard)* Director March 15, 1999
- ----------------------
B. J. Bernard
(J. Carter-Miller)* Director March 15, 1999
- ----------------------
J. Carter-Miller
(R. M. Davis)* Director March 15, 1999
- ----------------------
R. M. Davis
(C. D. Gelatt)* Director March 15, 1999
- ----------------------
C. D. Gelatt
(J. B. Griswell)* Director March 15, 1999
- ----------------------
J. B. Griswell
(G. D. Hurd)* Director March 15, 1999
- ----------------------
G. D. Hurd
(C. S. Johnson)* Director March 15, 1999
- ----------------------
C. S. Johnson
(W. T. Kerr)* Director March 15, 1999
- ----------------------
W. T. Kerr
(L. Liu)* Director March 15, 1999
- ----------------------
L. Liu
(V. H. Loewenstein)* Director March 15, 1999
- ----------------------
V. H. Loewenstein
(R. D. Pearson)* Director March 15, 1999
- ----------------------
R. D. Pearson
(J. R. Price, Jr.)* Director March 15, 1999
- ----------------------
J. R. Price, Jr.
(D. M. Stewart)* Director March 15, 1999
- ----------------------
D. M. Stewart
(E. E. Tallett)* Director March 15, 1999
- ----------------------
E. E. Tallett
(D. D. Thornton)* Director March 15, 1999
- ----------------------
D. D. Thornton
(F. W. Weitz)* Director March 15, 1999
- ----------------------
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
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life
Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and
appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each
of them (with full power to each of them to act alone), the undersigned's true
and lawful attorney-in-fact and agent, with full power of substitution to each,
for and on behalf and in the name, place and stead of the undersigned, to
execute and file any of the documents referred to below relating to registration
under the Securities Act of 1933 with respect to variable annuity contracts,
with premiums received in connection with such contracts held in the Principal
Life Insurance Company Separate Account C on Form N-4 or other forms under the
Securities Act of 1933, and any and all amendments thereto and reports
thereunder with all exhibits and all instruments necessary or appropriate in
connection therewith, each of said attorneys-in-fact and agents and his or their
substitutes being empowered to act with or without the others or other, and to
have full power and authority to do or cause to be done in the name and on
behalf of the undersigned each and every act and thing requisite and necessary
or appropriate with respect thereto to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as the
undersigned might or could do in person; hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 15th
day of March, 1999.
/s/ B. J. Bernard
-------------------------------
B. J. Bernard
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life
Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and
appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each
of them (with full power to each of them to act alone), the undersigned's true
and lawful attorney-in-fact and agent, with full power of substitution to each,
for and on behalf and in the name, place and stead of the undersigned, to
execute and file any of the documents referred to below relating to registration
under the Securities Act of 1933 with respect to variable annuity contracts,
with premiums received in connection with such contracts held in the Principal
Life Insurance Company Separate Account C on Form N-4 or other forms under the
Securities Act of 1933, and any and all amendments thereto and reports
thereunder with all exhibits and all instruments necessary or appropriate in
connection therewith, each of said attorneys-in-fact and agents and his or their
substitutes being empowered to act with or without the others or other, and to
have full power and authority to do or cause to be done in the name and on
behalf of the undersigned each and every act and thing requisite and necessary
or appropriate with respect thereto to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as the
undersigned might or could do in person; hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 15th
day of March, 1999.
/s/ J. Carter-Miller
-------------------------------
J. Carter-Miller
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life
Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and
appoints D. J. Drury, G. R. Narber and J. N. Hoffman, and each of them (with
full power to each of them to act alone), the undersigned's true and lawful
attorney-in-fact and agent, with full power of substitution to each, for and on
behalf and in the name, place and stead of the undersigned, to execute and file
any of the documents referred to below relating to registration under the
Securities Act of 1933 with respect to variable annuity contracts, with premiums
received in connection with such contracts held in the Principal Life Insurance
Company Separate Account C on Form N-4 or other forms under the Securities Act
of 1933, and any and all amendments thereto and reports thereunder with all
exhibits and all instruments necessary or appropriate in connection therewith,
each of said attorneys-in-fact and agents and his or their substitutes being
empowered to act with or without the others or other, and to have full power and
authority to do or cause to be done in the name and on behalf of the undersigned
each and every act and thing requisite and necessary or appropriate with respect
thereto to be done in and about the premises in order to effectuate the same, as
fully to all intents and purposes as the undersigned might or could do in
person; hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 15th
day of March, 1999.
/s/ J. B. Griswell
-------------------------------
J. B. Griswell
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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