<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended March 31, 1998
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-20083
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
in respect of
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New Jersey 22-1211670
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
751 Broad Street, Newark, New Jersey 07102-2992
-----------------------------------------------
(Address of principal executive offices) (Zip Code)
(800) 445-4571
-----------------------------------------------
(Registrant's Telephone Number, including area code)
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
--- ---
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
(Registrant)
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
A. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
Statements of Net Assets - March 31, 1998 (Unaudited) and
December 31, 1997 3
Statements of Operations and Changes In Net Assets (Unaudited) -
Three Months Ended March 31, 1998 and 1997 3
Notes to the Financial Statements (Unaudited) 4
B. THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
Statements of Assets and Liabilities - March 31, 1998 (Unaudited)
and December 31, 1997 7
Statements of Operations (Unaudited) - Three Months Ended
March 31, 1998 and 1997 8
Statements of Changes in Net Assets - Three Months Ended
March 31, 1998 (Unaudited) and Year Ended December 31, 1997 9
Statements of Cash Flows (Unaudited) - Three Months Ended
March 31, 1998 and 1997 10
Schedule of Investments - March 31, 1998 (Unaudited) and
December 31, 1997 11
Notes to the Financial Statements (Unaudited) 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
2
<PAGE>
FINANCIAL STATEMENTS OF
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Investment in shares of The Prudential Variable Contract
Real Property Partnership (Note 3) $ 103,097,238 $ 101,268,264
------------- -------------
------------- -------------
NET ASSETS, representing:
Equity of Contract Owners (Note 4) $ 59,125,307 $ 59,242,776
Equity of Prudential Insurance Company of America 43,971,931 42,025,488
------------- -------------
$ 103,097,238 $ 101,268,264
------------- -------------
------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Net Investment Income from Partnership Operations $ 1,577,193 $ 1,786,861
EXPENSES:
Charges to Contract Owners for Assuming Mortality Risk and
Expense Risk and for Administration (Note 5) 119,823 115,993
------------- -------------
NET INVESTMENT INCOME 1,457,370 1,670,868
------------- -------------
Net Change in Unrealized Gain (Loss) on Investments in Partnership (53,219) 192,014
Net Realized Gain (Loss) on Sale of Investments in Partnership 0 (1,026)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,404,151 $ 1,861,856
------------- -------------
------------- -------------
CAPITAL TRANSACTIONS:
Net Withdrawals by Contract Owners (Note 6) (881,141) (600,627)
Net Contributions by Prudential Insurance Company of America 1,305,964 716,620
------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 424,823 115,993
------------- -------------
TOTAL INCREASE IN NET ASSETS $ 1,828,974 $ 1,977,849
NET ASSETS:
Beginning of period $ 101,268,264 $ 90,992,994
------------- -------------
End of period $ 103,097,238 $ 92,970,843
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 4 THROUGH 6.
3
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
FOR THE PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
NOTE 1: GENERAL
The Prudential Variable Contract Real Property Account (the "Real Property
Account") was established on November 20, 1986 by resolution of the Board of
Directors of The Prudential Insurance Company of America ("Prudential"), as a
separate investment account pursuant to New Jersey law. The assets of the Real
Property Account are segregated from Prudential's other assets. The Real
Property Account is used to fund benefits under certain variable life insurance
and variable annuity contracts issued by Prudential. These products are
Variable Appreciable Life Insurance ("PVAL60"/"PVAL90"), Discovery Plus
("PDISC+"), and Variable Investment Plan ("VIP").
The assets of the Real Property Account are invested in The Prudential Variable
Contract Real Property Partnership (the "Partnership"). The Partnership is
organized under New Jersey law and is registered under the Securities Act of
1933. The Partnership is the investment vehicle for assets allocated to the
real property option under certain variable life insurance and variable annuity
contracts. The Real Property Account, along with the Pruco Life Variable
Contract Real Property Account and Pruco Life of New Jersey Variable Contract
Real Property Account, are the sole investors in the Partnership.
The Partnership has a policy of investing at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Real Property Account
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q. Accordingly, they do not include all of the other information and
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the financial statements and
notes thereto for the year ended December 31, 1997 included in the Real
Property Account's Annual Report on Form 10-K for that year.
The accompanying financial statements have not been audited by independent
accountants in accordance with generally accepted auditing standards, but in
the opinion of management such financial statements include all adjustments,
consisting only of normal recurring accruals, necessary to summarize fairly
the Real Property Account's financial position and results of operations.
Interim results are not necessarily indicative of results for a full year.
B. INVESTMENT IN PARTNERSHIP INTEREST
The investment in the Partnership is based on the Real Property Account's
proportionate interest of the Partnership's market value. At March 31, 1998
Real Property Account's interest in the Partnership was 46.2% or 5,481,889
shares.
4
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP
As of March 31, 1998, the investment in the Partnership of $103,097,238 was
derived from the share value of $18.806914 and 5,481,889 shares outstanding.
The aggregate cost of investments in the Account was $63,790,895.
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding Contract owner units, unit values and total value of Contract owner
equity at March 31, 1998 were as follows:
PDISC+/VIP PVAL60 PVAL90 TOTAL
---------- ------ ------ -----
CONTRACT OWNER
UNITS OUTSTANDING: 5,477,799 13,824,651 19,128,921 38,431,371
UNIT VALUE: $ 1.50171 $ 1.56903 $ 1.52690
CONTRACT OWNER EQUITY: $8,226,066 $21,691,292 $29,207,949 $59,125,307
NOTE 5: CHARGES AND EXPENSES
A. MORTALITY RISK AND EXPENSE RISK CHARGES
Mortality risk and expense charges are determined daily using an effective
annual rate of 1.0%, 0.6%, 0.9%, and 1.2% for PDISC+, PVAL60, PVAL90, and VIP
respectively. Mortality risk is that life insurance contract owners may not
live as long as estimated or annuitants may live longer than estimated and
expense risk is that the cost of issuing and administering the policies may
exceed the estimated expenses. Of the $119,823 of charges to contract owners,
$117,642 represented mortality risk and expense risk charges.
NOTE 6: NET WITHDRAWALS BY CONTRACT OWNERS
Contract owner activity for the Prudential products for the period ended March
31, 1998 were as follows:
PDISC+/VIP PVAL60/PVAL90 TOTAL
---------- ------------- -----
CONTRACT OWNER NET PAYMENTS: $ 12,699 $1,955,782 $1,968,481
POLICY LOANS: 0 (478,852) (478,852)
POLICY LOAN REPAYMENTS
AND INTEREST: 0 280,843 280,843
SURRENDERS, WITHDRAWALS,
AND DEATH BENEFITS: (401,939) (773,725) (1,175,664)
ADMINISTRATIVE AND OTHER CHARGES: (501) (985,980) (986,481)
NET TRANSFERS FROM/TO OTHER
SUBACCOUNTS OR FIXED RATE OPTIONS: 48,865 (538,333) (489,468)
--------- ---------- ----------
NET WITHDRAWALS $(340,876) $ (540,265) $ (881,141)
--------- ---------- ----------
--------- ---------- ----------
5
<PAGE>
NOTE 7: UNIT ACTIVITY
Transactions in units for the period ended March 31, 1998 were as follows:
PDISC+/VIP PVAL60/PVAL90
---------- -------------
CONTRACT OWNER CONTRIBUTIONS: 337,670.816 6,933,479.372
CONTRACT OWNER REDEMPTIONS: (566,046.636) (8,658,259.658)
6
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) DECEMBER 31, 1997
-------------- -----------------
ASSETS
<S> <C> <C>
REAL ESTATE INVESTMENTS - At estimated market value:
Real estate and improvements
(cost: 3/31/98 -- $203,569,251; 12/31/97 -- $201,670,248) $183,828,425 $181,317,624
Real estate investment trust (cost: 3/31/98 -- $10,000,005;
12/31/97 -- $10,000,005) 11,800,492 12,523,805
----------- -----------
Total real estate investments 195,628,917 193,841,429
MARKETABLE SECURITIES - At estimated market value
(cost: 3/31/98 -- $8,150,000; 12/31/97 -- $13,939,000) $8,163,509 $13,971,421
CASH AND CASH EQUIVALENTS 20,487,195 12,880,560
DIVIDEND RECEIVABLE 0 146,999
ACCRUED INVESTMENT INCOME AND OTHER ASSETS
(net of allowance for uncollectible accounts: 3/31/98 --
$73,000; 12/31/97 -- $68,000) 1,852,470 1,904,726
----------- -----------
Total assets 226,132,091 222,745,135
----------- -----------
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 1,874,052 1,842,027
DUE TO AFFILIATES 836,648 832,922
OTHER LIABILITIES 592,268 538,413
----------- -----------
Total liabilities 3,302,968 3,213,362
----------- -----------
Partners' equity 222,829,123 219,531,773
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY 226,132,091 222,745,135
----------- -----------
----------- -----------
NUMBER OF SHARES OUTSTANDING AT END OF PERIOD 11,848,275 11,848,275
----------- -----------
----------- -----------
SHARE VALUE AT END OF PERIOD $18.81 $18.53
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
7
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
--------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Revenue from real estate and improvements $5,750,047 $5,530,131
Income from Interest in properties 0 182,633
Interest on short-term investments 279,071 591,791
--------- ---------
Total investment income 6,029,118 6,304,555
--------- ---------
EXPENSES:
Investment managment fee 683,479 625,218
Real estate taxes 613,734 552,577
Administrative expense 424,393 433,858
Operating expense 898,647 725,189
Interest expense 0 94,113
--------- ---------
Total investment expenses 2,620,253 2,430,955
--------- ---------
NET INVESTMENT INCOME 3,408,865 3,873,600
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net proceeds from real estate investments
sold 0 0
Less: Cost of real estate investments sold 0 2,225
Realization of prior periods' unrealized
gain on real estate investments sold 0 0
--------- ---------
Net (loss) realized on real estate
investments sold 0 (2,225)
--------- ---------
Change in unrealized (loss) gain on real estate
investments (111,515) 416,255
--------- ---------
NET REALIZED AND UNREALIZED (LOSS)
GAIN ON INVESTMENTS (111,515) 414,030
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,297,350 $4,287,630
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
8
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
--------------- ------------------
<S> <C> <C>
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income $3,408,865 $13,789,747
Net gain realized on real estate investments sold 0 306,040
Net unrealized (loss) gain from real estate investments (111,515) 8,179,192
----------- -----------
Net increase in net assets resulting from operations 3,297,350 22,274,979
----------- -----------
NET DECREASE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS:
Withdrawals by partners
(3/31/98 -- 0 shares; 12/31/97 -- 0 shares) 0 0
----------- -----------
Net decrease in net assets resulting from
capital transactions 0 0
----------- -----------
NET INCREASE IN NET ASSETS 3,297,350 22,274,979
NET ASSETS - Beginning of period 219,531,773 197,256,794
----------- -----------
NET ASSETS - End of period $222,829,123 $219,531,773
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
9
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $3,297,350 $4,287,630
Adjustments to reconcile net increase in net assets resulting
from operations to net cash flows from operating activities:
Net realized and unrealized loss (gain) on investments 111,515 (414,030)
Decrease (Increase) in:
Dividend Receivable 146,999 0
Accrued investment income and other assets 52,256 (492,694)
(Decrease) Increase in:
Obligation under capital lease 0 (282,337)
Accounts payable and accrued expenses 32,025 (136,182)
Due to affiliates 3,726 (3,876)
Other liabilities 53,855 (9,131)
---------- ----------
Net cash flows from operating activities 3,697,726 2,949,380
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements and additional costs on prior purchases:
Additions to real estate owned (1,899,003) (194,088)
Sale of marketable securities 5,807,912 4,479,421
---------- ----------
Net cash flows from investing activities 3,908,909 4,285,333
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Withdrawals by partners 0 0
---------- ----------
Net cash flows from financing activities 0 0
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,606,635 7,234,713
CASH AND CASH EQUIVALENTS - Beginning of period 12,880,560 20,738,204
---------- ----------
CASH AND CASH EQUIVALENTS - End of period $20,487,195 $27,972,917
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
10
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
MARCH 31,1998 (UNAUDITED) DECEMBER 31,1997
------------------------------ --------------------------
ESTIMATED ESTIMATED
MARKET MARKET
COST VALUE COST VALUE
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REAL ESTATE AND IMPROVEMENTS (PERCENT OF NET ASSETS) 82.5% 82.6%
Location Description
- --------------------------------------------------------------------------------------------------------------
Lisle, IL Office Building $19,396,600 $11,222,666 $17,916,983 $10,278,959
Atlanta, GA Garden Apartments 15,446,293 15,100,000 15,446,293 15,100,000
Pomona, CA Warehouse 23,637,049 19,504,613 23,637,049 19,504,612
Roswell, GA Retail Shopping Center 31,957,202 29,591,678 31,858,198 29,547,042
Morristown, NJ Office Building 18,931,914 11,400,000 18,931,914 10,805,918
Bolingbrook, IL Warehouse 8,948,028 7,100,000 8,948,028 7,100,000
Farmington Hills, MI Garden Apartments 13,652,821 14,810,850 13,641,971 14,805,258
Raleigh, NC Garden Apartments 15,808,129 16,503,269 15,804,860 16,525,751
Nashville, TN Office Building 8,624,450 9,610,622 8,613,828 9,611,329
Oakbrook Terrace, IL Office Complex 12,725,366 14,300,000 12,725,366 14,100,000
Beaverton, OR Office Complex 10,728,617 11,200,332 10,728,285 10,700,000
Salt Lake City, UT Industrial Building 5,388,134 5,350,000 5,388,134 5,350,000
Aurora, CO Industrial Building 8,782,938 8,631,439 8,540,585 8,400,000
Brentwood, TN Office Complex 9,541,711 9,502,956 9,488,755 9,488,755
--------------------------------------------------------
$203,569,251 $183,828,425 $201,670,248 $181,317,624
--------------------------------------------------------
--------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (PERCENT OF NET ASSETS) 5.3% 5.7%
- --------------------------------------------------------------------------------------------------------------
Meridian REIT Shares (506,894 shares) $10,000,005 $11,800,492 $10,000,005 $12,523,805
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
MARCH 31,1998 DECEMBER 31, 1997
-------------------------- -----------------------
ESTIMATED ESTIMATED
FACE MARKET FACE MARKET
AMOUNT VALUE AMOUNT VALUE
-----------------------------------------------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 3.7% 6.4%
(See pages 12 to 13 for details)
Description
- --------------------------------------------------------------------------------------------------------------
Marketable Securities $8,150,000 $8,163,509 $13,939,000 $13,971,421
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 9.2% 5.9%
(See pages 12 to 13 for details)
Description
- --------------------------------------------------------------------------------------------------------------
Commercial Paper and Cash $20,548,316 $20,487,195 $12,918,158 $12,880,560
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
11
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------
FACE ESTIMATED
AMOUNT MARKET VALUE
----------- -------------
<S> <C> <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 3.7%
Federal Home Loan Banks, 5.09%, May 11, 1998 $300,000 $299,743
Royal Bank of Canada, 5.91%, June 17, 1998 2,000,000 1,998,853
FCC National Bank, 5.55%, July 2, 1998 1,025,000 1,024,202
General Mills, Inc., 5.38%, July 8, 1998 250,000 249,238
Chrysler Financial Corp., 6.28%, July 17, 1998 500,000 501,075
Corestates Bank, N.A., 5.63%, October 16, 1998 1,000,000 1,000,000
Federal Home Loan Banks, 5.76%, December 29, 1998 150,000 150,104
American Express Credit Corp., 7.375%, February 1, 1999 325,000 329,342
Canadian Imperial Bank of Commerce, 5.55%, February 10, 1999 1,000,000 999,520
Federal National Mortgage Assoc., 5.33%, February 12, 1999 100,000 99,703
International Lease Finance Corp., 7.50%, March 1, 1999 500,000 508,250
General Motors Acceptance Corp., 6.04%, March 19, 1999 1,000,000 1,003,480
---------- ----------
TOTAL MARKETABLE SECURITIES $8,150,000 $8,163,509
---------- ----------
---------- ----------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 9.2%
Honeywell, Inc., 6.10%, April 1, 1998 $1,205,000 $1,204,796
Nike, Inc., 5.52%, April 3, 1998 1,235,000 1,230,834
Transamerica Finance Corp., 5.54%, April 6, 1998 887,000 882,632
Bellsouth Telecommunications, Inc., 5.59%, April 9, 1998 1,250,000 1,248,253
General Mills, Inc., 5.60%, April 9, 1998 1,000,000 998,600
Dillard Investment Co., Inc., 5.58%, April 14, 1998 1,250,000 1,247,288
Paccar Financial Corp., 5.52%, April 14, 1998 505,000 502,445
Ford Motor Credit Co., 5.53%, April 17, 1998 1,236,000 1,228,595
Paccar Financial Corp., 5.51%, April 17, 1998 725,000 721,893
Potomac Electric power Co., 5.52%, April 17, 1998 850,000 846,220
Bell Atlantic Network Funding Corp., 5.51%, April 21, 1998 1,250,000 1,243,878
Dresser Industries, Inc., 5.55%, April 21, 1998 1,000,000 994,450
Ciesco, L.P., 5.50%, April 24, 1998 1,235,000 1,226,887
General Electric Capital Corp., 5.60%, April 27, 1998 1,250,000 1,244,750
Merrill Lynch & Co., Inc., 5.57%, April 30, 1998 1,000,000 995,358
National Bank of Canada, 5.59%, June 3, 1998 1,000,000 1,000,000
---------- ----------
TOTAL CASH EQUIVALENTS 16,878,000 16,816,879
CASH 3,670,316 3,670,316
---------- ----------
TOTAL CASH AND CASH EQUIVALENTS $20,548,316 $20,487,195
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
12
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------
FACE ESTIMATED
AMOUNT MARKET VALUE
----------- -------------
<S> <C> <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 6.4%
International Lease Finance Corp., 5.92%, January 15, 1998 $500,000 $499,083
Smith Barney Holding Inc., 5.70%, January 28, 1998 1,304,000 1,285,475
Suntrust Banks, 8.875%, February 1, 1998 1,500,000 1,517,880
Chase Manhattan Bank, 5.75%, February 10, 1998 2,000,000 2,000,000
Beneficial Corp., 9.125%, February 15, 1998 700,000 705,948
Citicorp, 10.15%, February 15, 1998 200,000 207,324
General Motors Acceptance Corp., 5.9%, February 19, 1998 985,000 994,545
General Motors Acceptance Corp., 5.9875%, February 23, 1998 1,300,000 1,299,363
American General Finance Corp., 7.25%, March 1, 1998 500,000 507,880
Commercial Credit Co., 5.7%, March 1, 1998 375,000 375,199
Associates Corp. of North America, 7.3%, March 15, 1998 400,000 406,635
International Lease Finance Corp., 5.75%, March 15, 1998 400,000 399,940
Morgan Guaranty Trust Co., 5.85%, March 16, 1998 500,000 499,855
Royal Bank of Canada, 5.91%, June 17, 1998 2,000,000 1,998,853
FCC National Bank, 5.75281%, July 2, 1998 1,025,000 1,024,202
General Mills Inc., 5.38%, July 8, 1998 250,000 249,238
---------- ----------
TOTAL MARKETABLE SECURITIES $13,939,000 $13,971,421
---------- ----------
---------- ----------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 5.9%
Barnett Bank, Inc., 6.70%, January 2, 1998 $1,235,000 $1,234,540
American Greetings Corp., 6.26%, January 5, 1998 1,250,000 1,247,179
Xerox Capital, 5.85%, January 6, 1998 1,000,000 995,775
Nike Inc., 6.10%, January 8, 1998 1,215,000 1,213,353
Paccar Financial Corp., 5.85%, January 9, 1998 1,000,000 996,100
Pitney Bowes Credit Corp., 6.00%, January 13, 1998 750,000 747,375
Merrill Lynch & Co., Inc. 5.85%, January 15, 1998 1,000,000 994,313
Bank of Montreal, 5.90%, January 16, 1998 1,000,000 1,000,000
Countrywide Home Loan, Inc., 5.85%, January 22, 1998 1,000,000 993,175
General Electric Capital Corp., 5.74%, February 9, 1998 1,000,000 990,593
---------- ----------
TOTAL CASH EQUIVALENTS 10,450,000 10,412,402
CASH 2,468,158 2,468,158
---------- ----------
TOTAL CASH AND CASH EQUIVALENTS $12,918,158 $12,880,560
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 14 THROUGH 15
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
March 31,1998
(Unaudited)
Note 1: Summary Of Significant Accounting Policies
A: The financial statements included herein have been prepared in
accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three
months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1998. For further information, refer to the financial statements
and notes thereto included in each Partner's December 31, 1997
Annual Report on Form 10K.
B: Cash and Cash Equivalents - For purposes of the statement of cash
flows, all short-term investments with a maximum maturity of
three months and investments in money market funds with a maximum
weighted average maturity of three months are considered to be
cash equivalents.
Note 2: Commitment From Partner
On January 9, 1990, Prudential committed to fund up to $100 million to enable
the Partnership to take advantage of opportunities to acquire attractive real
property investments whose cost is greater than the Partnership's then available
cash. Contributions to the Partnership under this commitment are utilized for
property acquisitions and returned to Prudential on an ongoing basis from
Contract owners' net contributions. Also, the amount of the commitment is
reduced by $10 million for every $100 million in estimated market value net
assets of the Partnership. The amount available under this commitment for
property purchases as of March 31, 1998 is approximately $46 million.
Note 3: Related Party Transactions
Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee at an annual rate of 1.25% of the
average daily gross asset valuation of the Partnership. For the three months
ended March 31, 1998 and 1997 management fees incurred by the Partnership were
$683,479 and $625,218 respectively.
The Partnership also reimburses Prudential for certain administrative services
rendered by Prudential. The amounts incurred for the three months ended March
31, 1998, and 1997 were $29,032 and $28,970, respectively, and are classified as
administrative expenses in the statements of operations.
The Partnership owned a 50% interest in four warehouse/distribution buildings in
Jacksonville, Florida (the Unit warehouses). The remaining 50% interest was
owned by Prudential and one of its subsidiaries. In September 1997, the Unit
warehouses were sold as part of an industrial package for cash of $12,544,659.
The partnership's share of the proceeds was $6,272,329.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
MARCH 31,1998
(UNAUDITED)
The Partnership had contracted with PREMISYS Real Estate Services, Inc.
(PREMISYS), an affiliate of Prudential, to provide property management services
at the Unit warehouses. Prudential sold this affiliate in 1997. The property
management fee earned by PREMISYS, incurred by the Partnership and Prudential
for the three months ended March 31, 1997, was $9,141.
Note 4: Accrued Investment Income and Other Assets
Cash equivalents are carried at market value. Cash of $120,676 and $128,089 at
March 31, 1998 and December 31, 1997, respectively, was maintained by the
properties for tenant security deposits and is included in accrued Investment
Income and Other Assets on the Statements of Assets and Liabilities.
15
<PAGE>
PER SHARE INFORMATION (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO TO
3/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- --------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Rent from properties $0.4853 $1.8216 $1.9173 $1.6387 $1.2754 $1.1659
Income from interest in properties $0.0000 $0.0367 $0.0510 $0.0527 $0.1838 $0.2139
Interest on mortgage loans $0.0000 $0.0000 $0.0000 $0.0000 $0.0082 $0.0755
Dividend income from real estate investment trusts $0.0000 $0.0134 $0.0000 $0.0000 $0.0000 $0.0000
Interest from short-term investments $0.0236 $0.1946 $0.1795 $0.2199 $0.1226 $0.0549
------- ------- ------- ------- ------- -------
INVESTMENT INCOME $0.5089 $2.0663 $2.1478 $1.9113 $1.5900 $1.5102
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Investment management fee $0.0578 $0.2229 $0.2097 $0.1936 $0.1786 $0.1673
Real estate tax expense $0.0518 $0.1864 $0.1991 $0.1602 $0.1399 $0.1465
Administrative expenses $0.0358 $0.1963 $0.1569 $0.1484 $0.1103 $0.1187
Operating expenses $0.0758 $0.2782 $0.2442 $0.1546 $0.1332 $0.1209
Interest expense $0.0000 $0.0186 $0.0412 $0.0381 $0.0255 $0.0236
------- ------- ------- ------- ------- -------
EXPENSES $0.2212 $0.9024 $0.8511 $0.6949 $0.5875 $0.5770
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
NET INVESTMENT INCOME $0.2877 $1.1639 $1.2967 $1.2164 $1.0025 $ 0.9332
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Net realized loss on investments sold $0.0000 $0.0258 ($0.1323) $0.0000 $(0.0966) $(0.1816)
Net unrealized gain/(loss) on investments $(0.0094) $0.6903 ($0.2695) $0.0581 $0.2169 $0.0152
------- ------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS $(0.0094) $0.7162 ($0.4018) $0.0581 $0.1203 $(0.1664)
------- ------- ------- ------- ------- -------
Net increase/(decrease) in share value $0.2783 $1.8800 $0.8949 $1.2745 $1.1228 $0.7668
Share Value at beginning of period $18.5286 $16.6486 $15.7537 $14.4792 $13.3564 $12.5896
------- ------- ------- ------- ------- -------
Share Value at end of period $18.8069 $18.5286 $16.6486 $15.7537 $14.4792 $13.3564
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Ratio of expenses to average net assets 1.18% 5.16% 5.26% 4.62% 4.27% 4.44%
Ratio of net investment income to
average net assets 1.54% 6.66% 8.01% 8.08% 7.29% 7.17%
Number of shares outstanding at
end of period (000's) 11,848 11,848 11,848 12,037 12,241 13,031
</TABLE>
ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE
APPLICABLE.
PER SHARE INFORMATION PRESENTED HEREIN IS SHOWN ON A BASIS CONSISTENT WITH THE
FINANCIAL STATEMENTS AS DISCUSSED IN NOTE 1G .
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All of the assets of Prudential Variable Contract Real Property Account ("the
Account") are invested in the Prudential Variable Contract Real Property
Partnership ("the Partnership"). Correspondingly, the liquidity, capital
resources and results of operations for the Real Property Account are contingent
upon the Partnership. Therefore, all of management's discussion of these items
is at the Partnership level. The partners in the Partnership are The Prudential
Insurance Company of America, Pruco Life Insurance Company, and Pruco Life
Insurance Company of New Jersey (collectively, "the Partners").
(a) Liquidity and Capital Resources
As of March 31, 1998, the Partnership's liquid assets consisting of cash,
cash equivalents and marketable securities (excluding the Partnership's
shares in Meridian Industrial Trust REIT) were $28.7 million; an increase of
$1.8 million from $26.9 million as of December 31, 1997. This increase is
due primarily to cash received from the operations of the Partnership's
properties and interest income received from short term investments.
Prudential has committed to fund up to $100 million to enable the Partnership to
acquire real estate investments. Contributions to the Partnership under this
commitment are utilized for property acquisitions and returned to Prudential on
an ongoing basis from Contract owners' net contributions. The amount of the
commitment is reduced by $10 million for every $100 million in current value net
assets of the Partnership. The amount available for future investment is
approximately $45.9 million as of March 31, 1998.
The Partnership generally invests 10-15% of its assets in cash and short-term
obligations to maintain liquidity; however its investment policy allows up to
30% investments in cash and short term obligations. At March 31, 1998, 12.67%
of the Partnership's assets consisted of cash, cash equivalents and marketable
securities (excluding the REIT shares).
Withdrawals from cash may be made during the remainder of 1998 based upon the
needs of the Partnership including potential property acquisitions and
dispositions and capital expenditures. As of March 31, 1998, and currently, the
Partnership has adequate liquidity.
During the quarter ended March 31, 1998, capital expenditures were approximately
$1.9 million of which $1.4 million were for tenant alterations and leasing
commissions. The majority of capital expenditures were at the Warrenville, IL
office building, and the Aurora, CO industrial center which accounted for $1.5
million, and $0.2 million respectively.
(b.1) Results of Operations - Portfolio
The following is a brief comparison of the Partnership's results of operations
for the three months ended March 31, 1998 and 1997.
The Partnership's net investment income for the first three months of 1998 was
$3.4 million, a decrease of $0.5 million (12%) from $3.9 million for the
corresponding period of 1997. This was due largely to the loss of income of
approximately $0.5 million from the Lisle, IL office building, which was
substantially vacant for the first quarter of 1998.
The Partnership's income unrelated to specific properties for the period ended
March 31, 1998 resulted in a decrease of $0.4 million of income compared to the
corresponding period in 1997. Components of unrelated property activity were
$0.3 million in interest income from short-term investments, offset by $0.7
million in investment management fees.
17
<PAGE>
During the three months ended March 31, 1998 and 1997, the Partnership
experienced an unrealized loss of $0.1 million and an unrealized gain of $0.4
million, respectively on its real estate investments. For the quarter ended
March 31, 1998, the net unrealized loss was the result of market value decreases
in 6 properties held, totaling $0.7 million and the decrease in the value of
Meridian REIT shares of $0.7 million, offset by an increase in market value in 3
properties held, totaling $1.3 million. For the quarter ended March 31, 1997,
the net unrealized gain was the result of market value decreases in 6 properties
held, totaling $0.4 million, offset by an increase in market value in 4
properties held, totaling $0.8 million. The explanation for these changes are
detailed in the following paragraphs.
(b.2) Results of Operations - Property
The following is a brief comparison of the Partnership's property results of
operations and realized loss and net unrealized gains, by investment type, for
the three months ended March 31, 1998 and 1997.
OFFICE PROPERTIES
Income from property operations for the office buildings for the first three
months of 1998 increased 3.6%, over the corresponding period in 1997.
The office properties owned by the Partnership experienced a net unrealized gain
of $0.7 million and $0.8 million for the first three months of 1998 and 1997,
respectively. Office appreciation for 1998 can be explained as follows: the
office in Morristown, NJ had the largest unrealized gain of $0.6 million due to
the increase in market rents within the property's submarket. The Oakbrook, IL
building also had an increase of $0.2 million due to rent steps in each lease
which increase cash flow, and the Beaverton, Oregon building increased $0.5
million primarily due to an increase in market rent and lower estimated tenant
improvement costs. These unrealized gains were offset primarily by the Lisle,
IL building which decreased $0.5 million, due to capital expenditures completed
in the building, and the two buildings in Tennessee which in total decreased
$0.1 million.
APARTMENT COMPLEXES
Income from property operations from the apartment complexes for the first three
months of 1998 was $1.0 million, an increase of 9.8%, from $0.9 million for the
corresponding period in 1997. The Farmington Hill, MI, apartment complex had an
increase in net investment income of $0.1 million, while the other two apartment
complexes had immaterial income effects.
RETAIL PROPERTY
Net investment income for the Partnership's retail property for the first three
months of 1998 was $0.8 million, which remained unchanged from $0.8 million for
the corresponding period in 1997. The center was 98% occupied during the first
quarter of 1998, while it achieved a 96% rate in the prior year.
The retail center experienced an immaterial unrealized loss in both the first
three months of 1998 and 1997. There were no significant changes in occupancy,
market, or leasing activity at the center.
18
<PAGE>
REAL ESTATE INVESTMENT TRUSTS
The Partnership holds 506,894 shares of Meridian Industrial Trust. Meridian is
a self-administered and self-managed equity real estate investment trust (REIT)
engaged in owning, operating and leasing high quality, modern industrial
properties nationwide. For the three months ended March 31, 1998, these shares
experienced an unrealized loss of $0.7 million as a result of the general
decline in the market value of REIT stocks.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Contract owners participating in the Real Property Account have no
voting rights with respect to the Real Property Account.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
4.1 Revised Individual Variable Annuity Contract filed as Exhibit
A(4)(w) to Post-Effective Amendment No. 8 to Form N-4,
Registration Statement No. 2-80897, filed October 23, 1986, and
incorporated herein by reference.
4.2 The Discovery Plus Contract, filed as Exhibit (4)(a) to Form N-4,
Registration Statement No. 33-25434, filed November 8, 1988, and
incorporated herein by reference.
4.3 Custom VAL (previously named Adjustable Premium VAL) Life
Insurance Contracts, filed as Exhibit 1.A.(5) of Form S-6,
Registration Statement No. 33-25372, filed November 4, 1988, and
incorporated herein by reference.
4.4 Variable Appreciable Life Insurance Contracts, filed as Exhibit
1.A.(5) to Pre-Effective Amendment No. 1 to Form S-6,
Registration Statement No. 33-20000, filed June 15, 1988, and
incorporated herein by reference.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
in respect of
The Prudential Variable
Contract Real Property Account
------------------------------------------------------------
Date: May 14, 1998 By: /s/
--------------------- ------------------------------------
Esther H. Milnes
Vice President
Date: May 14, 1998 By: /s/
--------------------- ------------------------------------
James Schlomann
Vice President and Associate Comptroller
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
NET ASSETS STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 5,481,889
<SHARES-COMMON-PRIOR> 5,465,515
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> (103,097,238)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (119,823)
<NET-INVESTMENT-INCOME> 1,457,370
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (53,219)
<NET-CHANGE-FROM-OPS> 1,404,151
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,828,974)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF ASSETS AND LIABILITIES; STATEMENTS OF OPERATIONS; STATEMENTS OF CHANGES IN
NET ASSETS; STATEMENTS OF CASH FLOWS; PER SHARE TABLE; SCHEDULE OF INVESTMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 213,569,256
<INVESTMENTS-AT-VALUE> 195,628,917
<RECEIVABLES> 1,852,470
<ASSETS-OTHER> 8,163,509
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 226,132,091
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 3,302,968
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 11,848,275
<SHARES-COMMON-PRIOR> 11,848,275
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 226,132,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 279,071
<OTHER-INCOME> 5,750,047
<EXPENSES-NET> 2,620,253
<NET-INVESTMENT-INCOME> 3,408,865
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (111,515)
<NET-CHANGE-FROM-OPS> 3,297,350
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,297,350
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 683,479
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,620,253
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 18.529
<PER-SHARE-NII> 0.288
<PER-SHARE-GAIN-APPREC> (0.009)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.807
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
