Principal Funds Inc – ‘PRES14C’ for 5/15/02

On:  Friday, 4/5/02   ·   For:  5/15/02   ·   Accession #:  870786-2-71   ·   File #:  811-07572

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Preliminary Proxy Information Statement — Special Meeting   —   Schedule 14C
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRES14C     Pif-Cap Preservation Schedule 14C Information          4     25K 

PRES14C
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SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
   -------------
of 1934 
(Amendment No.     )

Check the appropriate box:                                                      

[X] Preliminary Information Statement                                           

[ ] Confidential, for Use of the Commission Only (as permitted by Rule          
                                                            ----
14c-5(d)(2))                                                                
-----------                                                                 

[ ] Definitive Information Statement                                            

Principal Investors Fund, Inc.
(Name of Registrant As Specified In Charter)

Payment of Filing Fee (Check the appropriate box):                              

[X] No fee required.                                                            

[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.       

1) Title of each class of securities to which transaction applies:              

2) Aggregate number of securities to which transaction applies:                 

3) Per unit price or other underlying value of transaction computed pursuant to 
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is     
calculated and state how it was determined):                                

4) Proposed maximum aggregate value of transaction:                             
--                                                                              

5) Total fee paid:                                                              

[   ] Fee paid previously with preliminary materials.                       

[   ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
---------------                                                         
paid previously. Identify the previous filing by registration statement 
number, or the Form or Schedule and the date of its filing.             

1) Amount Previously Paid:___________________________________________   

 2) Form, Schedule or Registration Statement No.:_________________________
                                                 -------------------------

3) Filing Party: _____________________________________________________  
               -----------------------------------------------------

4) Date Filed:______________________________________________________    
          ------------------------------------------------------

PRES14C
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PRINCIPAL INVESTORS FUND, INC.

Capital Preservation Fund ("Fund")

680-8th Street
Des Moines, Iowa 50392-0200 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 

This is the agenda for the Fund's shareholder meeting. It identifies the matter 
to be voted on and the time and place of the meeting.                           

To the shareholders of the Fund:                                                

A special meeting of shareholders will be held on May 15, 2002 at 680-8th       
Street, Des Moines, Iowa 50392-0200 at 10:00 a.m., C.T., to consider the        
approval of a change to the Fund's Articles of Incorporation to permit the      
Fund's directors to declare a reverse stock split from time to time, or take    
such other action as is necessary to maintain a stable per share net asset value
for the Fund, without obtaining prior shareholder approval.                     

Shareholders of record as of the close of business on April 19, 2002 are        
entitled to vote at the meeting and any related follow-up meetings.             

By Order of the Board of Directors                                              

/s/A. S. Filean                                                                 

Arthur S. Filean                                                                
Senior Vice President and Secretary                                             

Des Moines, Iowa                                                                
April 22, 2002                                                                  

PRES14C
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Principal Investors Fund, Inc.
Capital Preservation Fund ("Fund")

INFORMATION STATEMENT 

As a shareholder of the Fund, you are invited to attend a special meeting of    
shareholders. The Fund will hold a meeting on May 15, 2002, at 10:00 a.m. C.T.  
at 680-8th Street, Des Moines, Iowa 50392-0200. At the meeting, shareholders    
will vote on the proposal described below.                                      

The Notice of Special Meeting and Information Statement was first sent to       
shareholders on April 22, 2002.                                                 

You may vote by attending the Special Meeting of Shareholders and casting your  
vote. We are not asking you for a proxy and you are requested not to send us a  
proxy.                                                                          

The sponsor of the Fund is Principal Life Insurance Company ("Principal Life"), 
the investment adviser is Principal Management Corporation (the "Manager") and  
the principal underwriter is Princor Financial Services Corporation ("Princor").
Principal Life, an insurance company organized in 1879 under the laws of the    
state of Iowa, the Manager and Princor are indirect, wholly-owned subsidiaries  
of Principal Financial Group, Inc. Their address is the Principal Financial     
Group, Des Moines, Iowa 50392-0200.                                             

VOTING INFORMATION

VOTING RIGHTS. Only shareholders of record at the close of business on April    
19, 2002 (the "Record Date") are entitled to vote. You are entitled to one vote 
on the proposal submitted to the shareholders of the Fund for each share of each
class of the Fund which you hold. The proposal requires for approval the vote of
a "majority of the outstanding voting securities," which is a term defined in   
the Investment Company Act of 1940 (the "1940 Act") to mean the affirmative vote
of the lesser of (1) 67% or more of the voting securities of a Fund present at  
the meeting of that Fund, if the holders of more than 50% of the outstanding    
voting securities of the Fund are present in person or by proxy, or (2) more    
than 50% of the outstanding voting securities of the Fund.                      

QUORUM REQUIREMENTS. A quorum must be present at the meeting for the            
transaction of business. The presence in person of one-third of the shares of   
the Fund outstanding at the close of business on the Record Date constitutes a  
quorum for the meeting of the Fund. Abstentions are counted toward a quorum but 
do not represent votes cast for any issue.                                      

If a quorum is not present at the meeting of the Fund, the persons in attendance
at the meeting may agree to one or more adjournments of the meeting to permit   
greater attendance. Any adjournment will require the affirmative vote of a      
majority of the shares cast in person at the meeting.                           

EXPENSES OF THE MEETINGS. The Fund will pay the expenses of its meeting. The    
Fund will also reimburse brokers and other nominees for their reasonable        
expenses in communicating with shareholders for whom they hold shares of the    
Fund.                                                                           

SHAREHOLDER PROPOSALS.  If you would like to include a proposal on the agenda at
the  shareholders  meeting,  you  should  send the  proposal  to the Fund at the
Principal  Financial  Group,  Des Moines,  Iowa  50392-0200.  To  consider  your
proposal for  presentation  at the  shareholders  meeting,  we must receive it a
reasonable  time before the meeting.  Timely  submission  of a proposal does not
necessarily mean that such proposal will be included.                           

SHAREHOLDER REPORTS . The Fund will furnish without charge, a copy of the Fund's
annual report to you upon request. A request for an annual report can be made by
writing the Fund at 680 8/th/ Street, Des Moines, Iowa  50392-0200 or by calling
toll free 1-800-247-4123                                                        

PROPOSAL

Amendment to Articles of Incorporation

The Principal Capital Preservation Fund seeks to maintain a $10 per share stable
net asset value of its shares. As explained below, the Fund intends to          
periodically utilize a reverse stock split in connection with any capital gain  
distribution made by the Fund in order to maintain a stable net asset value for 
its shares. A reverse stock split would be declared to offset any such capital  
gain distribution. A reverse stock split is simply a transaction in which a     
corporation reduces the number of its outstanding shares.                       

The need for a reverse stock split results from the Internal Revenue Code       
requirement that, in order to qualify for pass-through tax treatment afforded   
investment companies and to avoid the imposition of an excise tax, a fund must  
distribute a sufficient percentage of its capital gains to its shareholders.    
When the Capital Preservation Fund makes this distribution, the amount          
distributed is reinvested in additional shares of the Fund. After the           
distribution is made and reinvested in additional fund shares, each shareholder 
owns more shares of the Fund, but the value of each share is less than the value
prior to the distribution. The dollar amount of each shareholder's investment in
fund shares does not change as a result of the distribution. With a stable value
fund, the objective is to provide the shareholders with fewer shares after the  
reverse stock split than they owned before the transaction so that the          
reinvestment of the distribution will not change the value of each share. The   
way to accomplish that objective is for the Fund to declare a reverse stock     
split contemporaneously with the declaration of a capital gain distribution to  
take back a sufficient number of shares to return the Fund's net asset value to 
$10 per share.                                                                  

For example, if the Fund declares a capital gain distribution of 10 cents per   
share when the price per share is $10.00, a shareholder holding one share       
receives 0.01 additional share as a result of the reinvested distribution. If   
there was no reverse stock split, the price per share would be approximately    
$9.90. The total value of shares held by the shareholder would be $10.00 (1.01  
shares x $9.90 per share). If a 1.01 for 1 reverse stock split was declared, the
shareholder's holding would be combined into one share with a price of $10.00   
per share. The reverse stock split does not affect the value of the total       
holdings of the shareholder.                                                    

Maryland law requires shareholder approval of a reverse stock split, unless the 
corporation's charter provides otherwise. The Fund's charter does not include a 
provision addressing reverse stock splits, so shareholder approval of each      
reverse stock split is currently required. It would be cumbersome and expensive 
to obtain shareholder approval of each reverse stock split. Therefore, the      
Fund's Board is proposing to amend the Articles of Incorporation for the Fund to
permit the Board to declare a reverse stock split for the Capital Preservation  
Fund or take such other action as may be reasonably necessary to maintain a     
constant net asset value of the shares of the fund (including the authority to  
redeem shares pro rata from each stockholder or cancel shares and treat them as 
a contribution to the capital of the corporation as alternative means to        
maintain a stable per share net asset value) without obtaining prior shareholder
approval. A copy of the proposed amendment is included as Appendix A to this    
Information Statement.                                                          

A potential  negative  consequence of a reverse stock split is the impact on the
relative voting rights on  "corporate-wide"  issues where one series completes a
reverse  stock split and other series of the fund do not complete an  equivalent
reverse  stock split.  Shareholders  of each series are entitled to one vote for
each share owned on "corporate-wide"  issues, e.g. electing directors. A reverse
stock split reduces the number of shares owned by the shareholder. A shareholder
of a series that does not complete a reverse stock split  contemporaneously with
its  income/gains  distribution  (which  will be  every  series  except  Capital
Preservation  Fund) and who reinvests  distributions in additional shares of the
series ends up owning more shares and thus having increased voting rights.  This
results in a dilution (or  lessening)  of the voting power held by  shareholders
invested  in the Capital  Preservation  Fund  relative  to that of  shareholders
invested in the other series of the fund.                                       

The Fund's Board believes this "dilution" of relative voting rights of          
shareholders invested in the Capital Preservation Fund on corporate-wide issues 
is an unavoidable consequence of attempting to maintain a stable net asset value
of only one series of a multiple series fund. Under the Investment Company Act  
of 1940, each series of a series fund has the right to cast its vote on certain 
critical issues independently from the vote cast by other series of the series  
fund. For example, each series has the right to vote independently of the other 
series in approving the investment advisory and sub-advisory contracts, approval
of 12b-1 plans, changing from a diversified to a non-diversified fund and       
changing fundamental investment policies. The reverse stock split will not      
affect the voting rights of shareholders of the Capital Preservation Fund on    
these issues because the transactions affect all Capital Preservation Fund      
shareholders equally.                                                           

The Fund's Board believes a reverse stock split will have no income tax         
consequence on shareholders based upon current tax law; a reverse stock split   
would be a tax-free recapitalization of the Fund.                               

The vote required to approve the amendment to the Articles of Incorporation for 
the Fund is a majority of the outstanding voting securities of the Fund (as     
defined in the 1940 Act).                                                       

The Fund had ____________ outstanding Advisors Preferred Class shares,          
____________ Preferred Class shares, ____________ Advisors Select Class         
shares,____________ Select Class shares, ____________ Class I shares,           
____________ and Class J shares as of Record Date. Principal Life Insurance     
Company owned _____% of the outstanding securities of all classes consisting of 
100% of the Advisors Preferred, Advisors Select, Preferred, Select and Class I  
shares and _____% of Class J shares.                                            

PRES14C
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APPENDIX A
----------

PRINCIPAL INVESTORS FUND, INC.

PROPOSED AMENDMENT
TO ARTICLES OF INCORPORATION
----------------------------

The Articles of Incorporation of Principal Investors Fund, Inc. (the    
"Corporation") are hereby amended by adding immediately following Article V,    
Section 6 thereof a new Section 6(a) which shall be and read in its entirety as 
follows:                                                                        

    Section 6(a). Maintenance of Stable Net Asset Value for Capital Preservation
Series. Notwithstanding any other provisions of this Article V and for purposes 
of maintaining a stable net asset value per share for the shares of the Capital 
Preservation Series (including any and all classes thereof) in conjunction with 
the declaration and payment of any capital gains distribution with respect to   
the shares of the Capital Preservation Series (including any and all classes    
thereof) or any other event which has the effect of reducing net asset value per
share of such shares (an "Adjustment Event"), the Board of Directors may,       
without a vote of the stockholders of the Capital Preservation Series (or the   
affected class or classes thereof), without changing the proportionate          
beneficial interests of such stockholders in the assets belonging to the Capital
Preservation Series (or the affected class or classes thereof), and without     
affecting the rights of any other series or classes of series of shares of the  
Corporation other than with respect to their relative voting power in connection
with any matter submitted to a vote of stockholders as to which shares of the   
Capital Preservation Series (or the affected class or classes thereof) are voted
in the aggregate with shares of one or more of the other series of shares of the
Corporation:                                                                    

  (i) cause the Corporation, in consideration of the interest of the Capital
Preservation Series (or any class or classes thereof) and the stockholders      
thereof in maintaining a stable net asset value per share and without any other 
consideration, to: (a) redeem pro rata from each stockholder of record of the   
Capital Preservation Series (or the affected class or classes thereof) such     
number of full and fractional shares of the Capital Preservation Series (or the 
affected class or classes thereof) as may be necessary in order that the shares 
outstanding immediately following the Adjustment Event shall have the same net  
asset value per share as the shares outstanding immediately prior to the        
Adjustment Event, or (b) cancel the same number of shares and treat them as a   
contribution to the capital of the Corporation by each such stockholder;        

    (ii) cause the Corporation to combine by a reverse stock split the number of
outstanding shares of the Capital Preservation Series (or the affected class or 
classes thereof) such that the shares outstanding immediately following the     
Adjustment Event shall have the same net asset value per share as the shares    
outstanding immediately prior to the Adjustment Event; or                       

    (iii) take or cause the Corporation to take such other actions as may now or
hereafter be permitted under the Maryland General Corporation Law and the       
Investment Company Act of 1940; and                                             

 (iv) in connection with the actions taken in accordance with (i), (ii) or
(iii) above, make such adjustments with respect to the par value per share of,  
and the stated capital of the Corporation attributable to, shares of the Capital
Preservation Series (or the affected class or classes thereof) as may be        
necessary or appropriate.                                                       

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRES14C’ Filing		Date		First		Last			Other Filings
For Period End:		5/15/02		2		3			DEF 14C
		4/22/02		2		3
		4/19/02		2		3
Filed on:		4/5/02
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