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SIGNATURE A S FILEAN
TITLE VICE PRES\SECRETARY
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 166346096
<INVESTMENTS-AT-VALUE> 224204235
<RECEIVABLES> 522801
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 224752948
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<OTHER-ITEMS-LIABILITIES> 123309
<TOTAL-LIABILITIES> 123309
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<SHARES-COMMON-STOCK> 6333224
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<ACCUMULATED-NII-CURRENT> 26884
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<OVERDISTRIBUTION-GAINS> 0
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<OTHER-INCOME> 0
<EXPENSES-NET> (1171372)
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<NET-CHANGE-FROM-OPS> 35560292
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-REDEEMED> (222142)
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NII> .24
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<PER-SHARE-DIVIDEND> (.23)
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</TABLE>
Report of Independent Auditors on Internal Control
The Board of Directors and Shareholders
Principal Emerging Growth Fund, Inc.
In planning and performing our audit of the financial statements of Principal
Emerging Growth Fund, Inc. for the year ended December 31, 1997, we considered
its internal control, including control activities for safeguarding securities,
in order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on internal control.
The management of Principal Emerging Growth Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs. Generally, controls that are relevant to an
audit pertain to the entity's objective of preparing financial statements for
external purposes that are fairly presented in conformity with generally
accepted accounting principles. These controls include the safeguarding of
assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of specific
internal control components does not reduce to a relatively low level the risk
that errors or irregularities in amounts that would be material in relation to
the financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving internal control, including
control activities for safeguarding securities, that we consider to be material
weaknesses as defined above as of December 31, 1997.
This report is intended solely for the information and use of management and the
Board of Directors of Principal Emerging Growth Fund, Inc. and the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 16, 1998
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL EMERGING GROWTH FUND, INC.
HELD SEPTEMBER 16, 1997
1. Election of the Board of Directors.
For Withheld
Davis 5,412,764 87,079
Ehrle 5,405,141 94,699
Ferguson 5,415,939 83,901
Gilbert 5,417,426 82,414
Griswell 5,417,863 81,977
Jones 5,420,913 78,927
Keller 5,417,884 81,956
Lukavsky 5,409,215 90,625
Peebler 5,412,828 87,012
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
5,339,041 38,545 122,254
3. Approval of change of fund structure. Name changed to Principal Variable
Contract Fund, Inc. MidCap Account effective 1/1/98.
In Favor Opposed Abstain
5,183,548 122,191 194,101
