ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Principal Preservation Portfolios, Inc.:
We have examined management's assertion about Principal Preservation Portfolios,
Inc.'s (the "Funds"), which includes the Tax-Exempt Portfolio, Wisconsin Tax-
Exempt Portfolio, Government Portfolio, S&P 100 Plus Portfolio, Dividend
Achievers Portfolio, Select Value Portfolio, PSE Tech 100 Index Portfolio, and
Cash Reserve Portfolio, compliance with the requirements of subsection (b) and
(c) of Rule 17f-2 under the Investment Company Act of 1940 (the "Act") as of
December 31, 1997, included in the accompanying Management Statement Regarding
Compliance with Certain Provisions of the Investment Company Act of 1940.
Management is responsible for the Fund's compliance with those requirements.
Our responsibility is to express an opinion on management's assertion about the
Fund's compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Fund's compliance with those
requirements and performing such other procedures as we considered necessary in
the circumstances. Included among our procedures were the following tests
performed as of December 31, 1997 and for the period June 13, 1997, (the date of
last examination) through December 31, 1997, and with respect to agreement of
security purchases and sales, for the period from June 13, 1997 through December
31, 1997.
. Count and inspection of all securities located in the vault of B.C. Ziegler
and Company ("Ziegler") in West Bend, Wisconsin;
. Confirmation of all securities held by the Depository Trust Company and
other subcustodians in book entry form;
. Confirmation of mutual funds owned by the Funds with transfer agents;
. Confirmation of futures contracts with brokers;
. Confirmation of unsettled trades with brokers;
. Reconciliation of all such securities to the books and records of the Funds
and Ziegler;
We noted a difference of four units of S&P 500 March 1998 Futures in the
S&P Plus 100 Portfolio, between the records of the Funds and those of
Ziegler. Ziegler's records were incorrect due to a transaction that was
not posted properly. Ziegler's records were corrected on January 14, 1998.
We noted an offsetting difference of 36,000 shares of Microsoft in the S&P
100 Plus Portfolio and the Select Value Portfolio between the records of
the Funds and those of Ziegler. Ziegler's records were incorrect due to
these shares being incorrectly allocated between the Funds. Ziegler's
records were corrected on January 12, 1998.
We noted a difference of 100 shares of Peoplesoft, Inc. in the PSE Tech
Fund between the records of the Funds and those of Ziegler. Ziegler's
records were incorrect due to inaccurate customer records resulting in a
misallocated stock dividend. Ziegler's records were corrected on January
8, 1998.
. Confirmation of all repurchase agreements with brokers/banks and agreement
of underlying collateral with Ziegler's records; and
. Agreement of five security purchases and five security sales or maturities
since our last report from the books and records of the Funds to broker
confirmations.
We believe that our examination provides a reasonable basis for our opinion.
Our examination does not provide a legal determination on the Funds' compliance
with specified requirements.
In our opinion, management's assertion that Principal Preservation Portfolios,
Inc. was in compliance with the requirements of subsections (b) and (c) of Rule
17f-2 of the Investment Company Act of 1940 as of December 31, 1997 is fairly
stated, in all material respects.
This report is intended solely for the information and use of management of
Principal Preservation Portfolios, Inc. and the Securities and Exchange
Commission and should not be used for any other purpose.
/S/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 16, 1998.
(PRINCIPAL PRESERVATION LOGO)
1-800-826-4600
Fax 1-414-334-0388
215 N. Main Street
West Bend, WI 53095-3348
MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH
CERTAIN PROVISIONS OF THE INVESTMENT COMPANY ACT OF 1940
________________________________________________________
We, as members of management of Principal Preservation Portfolios, Inc.
(the "Company" ), are responsible for complying with the requirements of
subsection (b) and (c) of Rule 17f-2, "Custody of Investments by Registered
Management Investment Companies," and of the Investment Company Act of 1940. We
are also responsible for establishing and maintaining an effective internal
control structure over compliance with those requirements. We have performed an
evaluation of the Company's compliance with the requirements of subsection (b)
and (c) of Rule 17f-2 as of December 31, 1997.
Based on this evaluation, we assert that the Company was in compliance with
those provisions of Rule 17f-2 of the Investment Company Act of 1940 as of
December 31, 1997 with respect to securities and similar investments reflected
in the investment account of the Company.
By:
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President & Chief Executive Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-17f-2
Certificate of Accounting of Securities and Similar
Investments in the Custody of
Management Investment Companies
Pursuant to Rule 17f-2[17 CFR 270.17f-2]
1. Investment Company Act File Number:
Security Act of 1940
Date examination completed:
December 31, 1997
2. State identification Number:
3. Exact name of investment company as specified in registration statement:
Principal Preservation Portfolios, Inc.
4. Name under which business is conducted, if different from above:
Tax Exempt Portfolio
Government Portfolio
S&P 100 Plus Portfolio
Dividend Achievers Portfolio
Wisconsin Tax-Exempt Portfolio
Select Value Portfolio
PSE Tech 100 Index Portfolio
Cash Reserve Portfolio - Retail
Cash Reserve Institutional Portfolio
5. Address of principal place of business (number, street, city, state, zip
code):
215 North Main Street
West Bend, WI 53095
<TABLE>
<CAPTION>
PRINCIPAL
PRESERV.
STATE SELECT VALUE PSE TECH GOVERNMENT S&P 100 PLUS
- ----- ------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
AL NM149402384 NM149702613 702430 700017
AK 9700480 9603199 97-01796 97-01794
AZ S-0040834 S-0049814 S-AA17674 S-AB17674
AR 94-M0337-01 94-M0337-09 94-M0337-03 94-M0337-06
CA 504-5920 504-5920 504-5920 504-5920
CO IC-91-01-695 IC-91-01-695 IC-91-01-695 IC-91-01-695
CT SI31086 SI39192 SI22436 SI22434
DE PRIN PRES PRIN PRES PRIN PRES PRIN PRES
DC E E E E
FL 05/30/97 - PER LETTER FROM THE STATE OF FLORIDA - NO LONGER REQUIRE A FILING NOTICE AND FEE
GA 56852633 56852633 56852633 56852633
HI E E E E
ID 44982 46884 24148 42600
IL 9737809 9737809 9737809 9737809
IN 85-03871C 85-03871C 85-03871C 85-03871C
IA I-32319 I-36165 I-28149 I-28148
KS 92S0000024 96S0001314 92S0001592 92S0001594
KY M21636 M21636 M21636 M21636
LA 51221 51221 51221 51221
ME 97-10235 97-10236 97-10237 97-10238
MD SM941145 SM960671 SM911450 SM 911452
MA 96-1893 96-4078 96-1894 96-1895
MI 270370 274025 276315 222127
MN R26046 R26046 R26046 R26046
MS MF-94-07-043 MF-96-05-067 MF-89-11-018 MF-89-11-019
MO 183106 183106 183106 183106
MT 31740 34915 29020 29022
NE 16624 014352 87630 87631
NV E94-4190 EXEMPTION 9-0721-0 9-0722-0
NH * - * *
NJ E - E E
NM 971094 963875 971096 971097
NY - S27-49-34 23-59-37 -
NC 1349 1349 1349 1349
ND L091 P587 7547 7546
OH 96617 10106 96617 96617
OK I-371097 I-295597 I-388397 I-388397
OR 27488M 27488M 27488M 27488M
PA 87-10-125MF 87-10-125MF 87-10-125MF 87-10-125MF
RI BLUE CHIP BLUE CHIP BLUE CHIP BLUE CHIP
SC MF8506 MF9945 MF4077 MF4974
SD 4971 7622 12128 12129
TN RM97-2083 RM97-2083 RM97-2083 RM97-2083
TX C45678-000-03 C50211-000-01 C25488-004-12 C31939-000-11
UT B00015015 B00015015 B00015015 B00015015
VT 7/11/94-10 5/09/96-01 4/10/91-05 4/10/91-06
VA 1145 1145 1145 1145
WA C-38998 C-53409 C-23145 C-23131
WV I-19187 I-21000 I-9853 I-9853
WI 290022-03 316119-03 211439-04 211434-03
WY 18699-EXP 18699-EXP 18699-EXP 18699-EXP
PR N/A - N/A N/A
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND CASH RESERVE CASH RESERVE
STATE TAX EXEMPT ACHIEVERS RETAIL-CLASS X INSTIT-CLASS Y WISCONSIN T/E
- ------ ----------- ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
AL 702431 702433 NM149300915 - -
AK 97-01704 97-01795 9702531 - -
AZ S-AC17674 S-0017674 S-0032997 - -
AR 94-M0337-07 94-M0337-08 94-M0337-05 - -
CA 504-5920 504-5920 504-5920 504-5920 -
CO IC-91-01-695 IC-91-01-695 IC-91-01-695 - -
CT SI23323 SI23670 SI24401 - -
DE PRIN PRES PRIN PRES PRIN PRES - -
DC E E E - -
FL 05/3
GA 56852633 56852633 56852633 56852633 -
HI E E E - -
ID 22863 27311 43329 - -
IL 9737809 9737809 9737809 9737809 -
IN 85-03871C 85-03871C 85-03871C - -
IA I-28147 I-28151 I-29265 - -
KS 92S0001595 92S0001591 93S0001246 - -
KY M21636 M21636 M29150 - -
LA 51221 51221 49689 - -
ME 97-10239 97-10240 97-8598 - -
MD SM 911453 SM911449 SM930363 - -
MA 96-1896 96-1898 96-1900 - -
MI 275734 221824 275282 275283 -
MN R26046 R26046 R36519 - -
MS MF-95-06-028 MF-89-11-017 MF-93-03-050 - -
MO 183106 183106 183106 - -
MT 29023 29019 29018 - -
NE 013881 009597 012032 - -
NV 9-0719-0 9-0723-0 EXEMPTION - -
NH * * * - -
NJ E E E - -
NM 971098 971099 961559 - -
NY S24-48-67 S23-59-47 26-34-18 26-34-18 -
NC 1349 1349 1349 - -
ND 5159 9874 I535 - -
OH 96617 96617 10473 - -
OK I-388397 I-388397 I-205997 - -
OR 27488M 27488M 93-0321 - -
PA 87-10-125MF 87-10-125MF 87-10-125MF - -
RI BLUE CHIP BLUE CHIP BLUE CHIP - -
SC MF4973 MF4385 MF7418 - -
SD 12130 12131 3353 - -
TN RM97-2083 RM97-2083 RM97-2083 - -
TX C25190-006-12 31467-000-10 C42272-001-04 - -
UT B00015015 B00015015 A60295-43 - -
VT 9/03/85-06 4/10/91-07 3/10/93-05 - -
VA 1145 1145 1145 - -
WA C-19666 C-25976 C-35979 - -
WV I-9853 I-9853 I-9853 - -
WI 108474 222341-03 274199-03 274199-03 287551-03
WY 18699-EXP 18699-EXP 18699-EXP - -
PR N/A N/A N/A - -
E= Exempt from securities registration
*= State identifies Company by name
M= State identifies As "MOTHER" FUND FROM ORIGINAL REGIS.
</TABLE>
