0012-0123485
Report of Independent Auditors
The Board of Directors and Shareholders
Principal Real Estate Fund, Inc.
In planning and performing our audit of the financial statements of Principal
Real Estate Fund, Inc. for the year ended October 31, 2000, we considered its
internal control, including control activities for safeguarding securities, 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, and
not to provide assurance on internal control.
The management of Principal Real Estate 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 of internal control. Generally, internal
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 accounting principles generally accepted in the United
States. Those internal controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, misstatements due to errors
or fraud may occur and not be detected. Also, projections of any evaluation of
internal control to future periods are subject to the risk that internal control
may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures 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 one or more
of the specific internal control components does not reduce to a relatively low
level the risk that errors or fraud 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, and its operation that
we consider to be material weaknesses as defined above as of October 31, 2000.
This report is intended solely for the information and use of the Board of
Directors and management of Principal Real Estate Fund, Inc. and the Securities
and Exchange Commission and is not intended to be and should not be used by
anyone other than these specified parties.
Des Moines, Iowa
November 22, 2000
