To make filling: Combine apricots and water in heavy saucepan and cook covered over medium heat for 10 minutes or until apricots are soft. Continue to cook UNCOVERED 5 to 10 minutes or until most of the water has been absorbed.
Mash apricots, stir in 2 tablespoons sugar and let filling cool. Set aside.
To make dough: Cream butter and cream cheese until fluffy; add 150g sugar and beat well. Add flour and mix well. Shape dough into ball and chill 1 hour.
Turn dough onto well-floured surface, working with only half the dough. Roll into .25cm thickness and cut into 5cm squares. Spoon 1/2 teaspoon of apricot filling into the centre of the square. Bring four corners to centre, pinching to seal.
Bake at 200 C for about 15 minutes. You may baste the kolache with butter halfway through baking period, if desired.