N-Q 1 dnq.htm THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT -2 The Prudential Variable Contract Account -2

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-01612

The Prudential Variable Contract Account-2

Exact name of registrant as specified in charter:

Gateway Center 3,

100 Mulberry Street,

Newark, New Jersey 07102

Address of principal executive offices:

Deborah A. Docs

Gateway Center 3,

100 Mulberry Street,

Newark, New Jersey 07102

Name and address of agent for service:

Registrant’s telephone number, including area code: 973-367-7521

Date of fiscal year end: 12/31/2010

Date of reporting period: 3/31/2010

Item 1. Schedule of Investments

VCA-2

Schedule Of Investments

As of March 31, 2010 (Unaudited)

 

     Shares    Value

LONG-TERM INVESTMENTS - 98.3%

      

COMMON STOCKS - 98.3%

      

Aerospace & Defense - 1.2%

      

Precision Castparts Corp.

      29,100    $ 3,687,261
         

Auto Components - 3.3%

      

Goodyear Tire & Rubber Co. (The) (a)

      340,400      4,302,656

Lear Corp. (a)

      72,000      5,713,200
         
        10,015,856
         

Biotechnology - 2.4%

      

Celgene Corp. (a)

      48,400      2,998,864

Gilead Sciences, Inc. (a)

      88,700      4,034,076
         
        7,032,940
         

Capital Markets - 5.8%

      

Bank of New York Mellon Corp. (The)

      115,500      3,566,640

Goldman, Sachs Group, Inc. (The)

      28,100      4,794,703

Morgan Stanley

      174,200      5,102,318

TD Ameritrade Holding Corp. (a)

      205,200      3,911,112
         
        17,374,773
         

Chemicals - 1.5%

      

Dow Chemical Co. (The)

      151,100      4,468,027
         

Commercial Banks - 0.5%

      

Keycorp

      178,900      1,386,475
         

Commercial Services & Supplies - 1.7%

      

Waste Management, Inc.

      145,200      4,999,236
         

Communications Equipment - 1.7%

      

QUALCOMM, Inc.

      118,300      4,967,417
         

Computers & Peripherals - 1.2%

      

Apple, Inc. (a)

      15,900      3,735,387
         

Consumer Finance - 1.2%

      

SLM Corp. (a)

      294,500      3,687,140
         

Diversified Consumer Services - 3.0%

      

Career Education Corp. (a)

      120,300      3,806,292

H & R Block, Inc.

      296,600      5,279,480
         
        9,085,772
         

Diversified Financial Services - 3.9%

      

Bank of America Corp.

      269,800      4,815,930

JPMorgan Chase & Co.

      152,900      6,842,275
         
        11,658,205
         

Electric Utilities - 1.4%

      

Entergy Corp.

      50,600      4,116,310
         

Electronic Equipment & Instruments - 1.2%

      

Flextronics International, Ltd. (a)

      460,500      3,610,320
         

Energy Equipment & Services - 1.2%

      

Halliburton Co.

      122,700      3,696,951
         

Food & Staples Retailing - 2.8%

      

Kroger Co. (The)

      218,300      4,728,378

Wal-Mart Stores, Inc.

      67,000      3,725,200
         
        8,453,578
         

Food Products - 5.6%

      

Bunge, Ltd.

      75,700      4,665,391

ConAgra Foods, Inc.

      207,500      5,202,025

Kraft Foods, Inc.

      97,200      2,939,328

Tyson Foods, Inc. Cl. A

      205,600      3,937,240
         
        16,743,984
         

Health Care Equipment & Supplies - 1.4%

      

Alcon, Inc.

      26,600      4,297,496
         

Health Care Providers & Services - 3.2%

      

Medco Health Solutions, Inc. (a)

      77,300      4,990,488

Omnicare, Inc.

      166,000      4,696,140
         
        9,686,628
         

Hotels, Restaurants & Leisure - 1.5%

      

Yum Brands, Inc.

      117,600      4,507,608
         

Independent Power Producers & Energy Traders - 1.1%

      

NRG Energy, Inc. (a)

      163,500      3,417,150
         

Insurance - 2.3%

      

Arch Capital Group, Ltd. (a)

      7,700      587,125

Axis Capital Holdings, Ltd.

      104,600      3,269,796

Travelers Cos., Inc. (The)

      56,400      3,042,216
         
        6,899,137
         

Internet Software & Services - 3.8%

      

Google, Inc. Cl. A (a)

      10,900      6,180,409

IAC/InterActiveCorp. (a)

      230,300      5,237,022
         
        11,417,431
         

Media - 4.1%

      

Comcast Corp.

      282,500      5,316,650

Liberty Global, Inc. Ser. C (a)

      244,105      7,052,194
         
        12,368,844
         

Metals & Mining - 3.2%

      

Freeport-McMoRan Copper & Gold, Inc.

      59,900      5,004,046

Kinross Gold Corp.

      265,800      4,542,522
         
        9,546,568
         

Multi-Utilities - 1.8%

      

Sempra Energy

      108,200      5,399,180
         

Oil, Gas & Consumable Fuels - 17.6%

      

Anadarko Petroleum Corp.

      66,800      4,865,044

Apache Corp.

      53,600      5,440,400

Canadian Natural Resources, Ltd.

      64,800      4,797,792

EOG Resources, Inc.

      52,400      4,870,056

Hess Corp.

      47,200      2,952,360

Noble Energy, Inc.

      46,800      3,416,400

Occidental Petroleum Corp.

      92,200      7,794,588

Petroleo Brasileiro SA ADR (Brazil)

      124,900      5,556,801

Southern Union Co.

      89,600      2,273,152

Suncor Energy, Inc.

      149,800      4,874,492

Williams Cos, Inc.

      257,300      5,943,630
         
        52,784,715
         

Pharmaceuticals - 6.4%

      

Mylan, Inc. (a)

      163,600      3,715,356

Novartis AG ADR (Switzerland)

      55,400      2,997,140

Pfizer, Inc.

      228,600      3,920,490

Sanofi-Aventis SA ADR (France)

      111,200      4,154,432

Shire PLC ADR (Ireland)

      66,800      4,406,128
         
        19,193,546
         

Road & Rail - 1.4%

      

Union Pacific Corp.

      57,400      4,207,420
         

Semiconductors & Semiconductor Equipment - 2.2%

      

Advanced Micro Devices, Inc. (a)

      717,200      6,648,444
         

Software - 6.2%

      

Adobe Systems, Inc. (a)

      115,300      4,078,161

CA, Inc.

      254,100      5,963,727

Nuance Communications, Inc. (a)

      189,500      3,153,280

Symantec Corp. (a)

      311,800      5,275,656
         
        18,470,824
         

Thrifts & Mortgage Finance - 0.9%

      

People’s United Financial, Inc.

      176,360      2,758,270
         

Wireless Telecommunication Services - 1.6%

      

NII Holdings, Inc. (a)

      116,497      4,853,265
         

TOTAL COMMON STOCKS
(Cost: $228,722,923)

         295,176,158
         
     Principal
Amount
(000)		     

CORPORATE BOND

      

Oil, Gas & Consumable Fuels

      

Trident Resources Corp., Unsec’d Note, (Canada),

    CAD 5,783      —  
         

Private Placement, due 8/12/12 (a)(b)(c)(g)
(Cost: $5,783,450; purchased 8/20/07)

      
     Units     

WARRANT (d)

      

Oil, Gas & Consumable Fuels

      

Trident Resources Corp. (Canada),

      499,039      —  
         

Private Placement, expiring 1/01/15 (a)(b)(c)(g)
(Cost: $0; purchased 8/20/07)

      

TOTAL LONG-TERM INVESTMENTS
(Cost: $234,506,373)

       $ 295,176,158
         
     Shares     

SHORT-TERM INVESTMENT - 1.4%

      

AFFILIATED MONEY MARKET MUTUAL FUND

      

Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market
Fund (f)
(Cost: $4,103,665)

      4,103,665      4,103,665
         

TOTAL INVESTMENTS (e) - 99.7%
(Cost: $238,610,038)

       $ 299,279,823

OTHER ASSETS IN EXCESS OF LIABILITIES - 0.3%

         1,035,427
         

NET ASSETS - 100%

       $ 300,315,250
         

 

(a) Non-income producing security.
(b) Indicates an illiquid security.
(c) Indicates a security restricted to resale. The aggregate cost of such securities is $5,783,450. The aggregate value of $0 is approximately 0% of net assets.
(d) The amount represents fair value of derivative instruments subject to equity contracts risk exposure as of March 31, 2010.
(e) As of March 31, 2010, two securities valued at $0 and representing 0% of the total market value of the portfolio were fair valued in accordance with the policies adopted by the Committee Members.
(f) The Prudential Investments LLC, the Manager of the Account, also serves as Manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund.
(g) The issuer has filed for bankruptcy and has defaulted in the payment of interest on the debt security. The security has been fair valued at zero.

ADR American Depository Receipt

CAD Canadian Dollar

Various inputs are used in determining the value of the Account’s investments. These inputs are summarized in the three broad levels listed below.

Level 1 - quoted prices in active markets for identical securities

Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 - significant unobservable inputs (including the Account’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used as of March 31, 2010 in valuing the Account’s assets carried at fair value:

 

      Level 1    Level 2    Level 3

Investments in Securities

         

Common Stocks

    $ 295,176,158    $ —      $ —  

Corporate Bond

      —        —        —  

Warrant

      —        —        —  

Affiliated Mutual Funds

      4,103,665      —        —  
                    
     299,279,823      —        —  

Other Financial Instruments*

      —        —        —  
                    

Total

    $ 299,279,823    $ —      $ —  
                    

 

* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Account did not have significant transfers between Level 1 and Level 2 during the reporting period.

As of March 31, 2010 and December 31, 2009, the Account had two Level 3 securities with a fair value of $0.

Notes to Schedule of Investments (Unaudited)

Securities Valuation: Securities listed on a securities exchange (other than options on securities and indices) are valued at the last sale price on such exchange on the day of valuation or, if there was no sale on such day, at the mean between the last reported bid and asked prices, or at the last bid price on such day in the absence of an asked price. Securities traded via Nasdaq are valued at the Nasdaq official closing price (“NOCP”) on the day of valuation, or if there was no NOCP, at the last sale price. Securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by Prudential Investments LLC (“PI or Manager”), in consultation with the subadviser; to be over-the-counter, are valued at market value using prices provided by an independent pricing agent or principal market maker.

Securities for which market quotations are not readily available, or whose values have been affected by events occurring after the close of the security’s foreign market and before the funds’ normal pricing time, are valued at fair value in accordance with the Accounts’ Committee members approved fair valuation procedures. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values. When determining the fair valuation of securities some of the factors influencing the valuation include, the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates.

Investments in mutual funds are valued at the net asset value as of the close of the New York Stock Exchange on the date of valuation.

Short-term debt securities of sufficient credit quality, which mature in sixty days or less, are valued at amortized cost, which approximates fair value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. Short-term debt securities which mature in more than sixty days are valued at current market quotations.

The Account invests in the Prudential Core Taxable Money Market Fund (formerly known as Taxable Money Market Series) (the “Fund”), a portfolio of Prudential Investment Portfolios 2 (formerly known as Dryden Core Investment Fund). The Fund is a money market mutual fund registered under the Investment Company Act of 1940, as amended, and managed by PI.

Other information regarding the Account is available in the Account’s most recent Report of Shareholders. This information is available on the Securities and Exchange Commission’s website (www.sec.gov).

Item 2. Controls and Procedures

 

  (a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

 

  (b) There have been no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Item 3. Exhibits

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 – Attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) The Prudential Variable Contract Account-2

 

By (Signature and Title)*  

/S/    DEBORAH A. DOCS        

      
  Deborah A. Docs      
  Secretary of the Fund      

Date May 25, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*  

/S/    JUDY A. RICE        

      
  Judy A. Rice      
  President and Principal Executive Officer      

Date May 25, 2010

 

By (Signature and Title)*  

/S/    GRACE C. TORRES        

      
  Grace C. Torres      
  Treasurer and Principal Financial Officer      

Date May 25, 2010

 

* Print the name and title of each signing officer under his or her signature.