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000 B000000 10/31/97
000 C000000 0000814574
000 D000000 N
000 E000000 NF
000 F000000 Y
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001 A000000 PRINCOR BOND FUND, INC.
001 B000000 811-05172
001 C000000 5152475476
002 A000000 THE PRINCIPAL FINANCIAL GROUP
002 B000000 DES MOINES
002 C000000 IA
002 D010000 50392
002 D020000 0200
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019 C000000 PRINCORGRP
022 A000001 ASSOCIATES CORPORATION OF NORTH AMERICA
022 B000001 74-1494554
022 C000001 429720
022 D000001 0
022 A000002 GENERAL ELECTRIC CAPITAL CORP.
022 B000002 13-1500700
022 C000002 34838
022 D000002 0
022 A000003 MERRILL LYNCH
022 B000003 13-5674085
022 C000003 6818
022 D000003 3274
022 A000004 MORGAN STANLEY & CO.
022 B000004 13-2655998
022 C000004 7379
022 D000004 0
022 A000005 PAINEWEBBER INC.
022 B000005 13-2638166
022 C000005 0
022 D000005 4353
022 A000006 MORGAN, J.P. SECURITIES
022 B000006 13-3224016
022 C000006 3920
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<PAGE> PAGE 2
022 A000007 SG WARBURG AND CO.
022 B000007 13-3340045
022 C000007 0
022 D000007 3262
022 A000008 LEHMAN BROTHERS
022 B000008 13-2501865
022 C000008 1477
022 D000008 1599
022 A000009 NATIONS BANC CAPITAL MARKETS, INC.
022 B000009 56-1684171
022 C000009 3039
022 D000009 0
022 A000010 GOLDMAN SACHS CO.
022 B000010 13-5108880
022 C000010 2895
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 6
SIGNATURE A. S. FILEAN
TITLE VICE PRES & SEC'Y
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 135,200,913
<INVESTMENTS-AT-VALUE> 142,875,265
<RECEIVABLES> 3,080,853
<ASSETS-OTHER> 3,437
<OTHER-ITEMS-ASSETS> 1,789
<TOTAL-ASSETS> 145,961,344
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155,342
<TOTAL-LIABILITIES> 155,342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,136,114
<SHARES-COMMON-STOCK> 11,054,664
<SHARES-COMMON-PRIOR> 10,151,468
<ACCUMULATED-NII-CURRENT> 68,563
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,027)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,674,352
<NET-ASSETS> 145,806,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,956,799
<OTHER-INCOME> 0
<EXPENSES-NET> (1,327,563)
<NET-INVESTMENT-INCOME> 8,629,236
<REALIZED-GAINS-CURRENT> 921,121
<APPREC-INCREASE-CURRENT> 3,176,634
<NET-CHANGE-FROM-OPS> 12,726,991
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,447,557)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,460,201
<NUMBER-OF-SHARES-REDEEMED> (2,091,860)
<SHARES-REINVESTED> 534,855
<NET-CHANGE-IN-ASSETS> 23,867,033
<ACCUMULATED-NII-PRIOR> 728,898
<ACCUMULATED-GAINS-PRIOR> (994,148)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 636,217
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,388,228
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.17
<PER-SHARE-NII> .75
<PER-SHARE-GAIN-APPREC> .33
<PER-SHARE-DIVIDEND> (.81)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.44
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>WITHOUT THE MANAGER'S VOLUNTARY WAIVER OF A PORTION OF CERTAIN EXPENSES
FOR THIS PERIOD, THIS FUND WOULD HAVE HAD PER SHARE NET INVESTMENT
INCOME OF $.74 AND A RATIO OF EXPENSES TO AVERAGE NET ASSETS OF .98%. THE
AMOUNT WAIVED WAS $41,256.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 135,200,913
<INVESTMENTS-AT-VALUE> 142,875,265
<RECEIVABLES> 3,080,853
<ASSETS-OTHER> 3,437
<OTHER-ITEMS-ASSETS> 1,789
<TOTAL-ASSETS> 145,961,344
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155,342
<TOTAL-LIABILITIES> 155,342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,136,114
<SHARES-COMMON-STOCK> 1,173,331
<SHARES-COMMON-PRIOR> 715,311
<ACCUMULATED-NII-CURRENT> 68,563
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,027)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,674,352
<NET-ASSETS> 145,806,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,956,799
<OTHER-INCOME> 0
<EXPENSES-NET> (1,327,563)
<NET-INVESTMENT-INCOME> 8,629,236
<REALIZED-GAINS-CURRENT> 921,121
<APPREC-INCREASE-CURRENT> 3,176,634
<NET-CHANGE-FROM-OPS> 12,726,991
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (648,042)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 581,347
<NUMBER-OF-SHARES-REDEEMED> (170,486)
<SHARES-REINVESTED> 47,159
<NET-CHANGE-IN-ASSETS> 23,867,033
<ACCUMULATED-NII-PRIOR> 728,898
<ACCUMULATED-GAINS-PRIOR> (994,148)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 636,217
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,388,228
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.15
<PER-SHARE-NII> .67
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.71)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.42
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>WITHOUT THE MANAGER'S VOLUNTARY WAIVER OF A PORTION OF CERTAIN EXPENSES
FOR THIS PERIOD, THIS FUND WOULD HAVE HAD PER SHARE NET INVESTMENT
INCOME OF $.66 AND A RATIO OF EXPENSES TO AVERAGE NET ASSETS OF 1.79%. THE
AMOUNT WAIVED WAS $8,982.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 135,200,913
<INVESTMENTS-AT-VALUE> 142,875,265
<RECEIVABLES> 3,080,853
<ASSETS-OTHER> 3,437
<OTHER-ITEMS-ASSETS> 1,789
<TOTAL-ASSETS> 145,961,344
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 155,342
<TOTAL-LIABILITIES> 155,342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,136,114
<SHARES-COMMON-STOCK> 522,900
<SHARES-COMMON-PRIOR> 47,094
<ACCUMULATED-NII-CURRENT> 68,563
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,027)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,674,352
<NET-ASSETS> 145,806,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,956,799
<OTHER-INCOME> 0
<EXPENSES-NET> (1,327,563)
<NET-INVESTMENT-INCOME> 8,629,236
<REALIZED-GAINS-CURRENT> 921,121
<APPREC-INCREASE-CURRENT> 3,176,634
<NET-CHANGE-FROM-OPS> 12,726,991
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (193,972)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 542,993
<NUMBER-OF-SHARES-REDEEMED> (84,604)
<SHARES-REINVESTED> 17,417
<NET-CHANGE-IN-ASSETS> 23,867,033
<ACCUMULATED-NII-PRIOR> 728,898
<ACCUMULATED-GAINS-PRIOR> (994,148)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 636,217
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,388,228
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.16
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> .30
<PER-SHARE-DIVIDEND> (.74)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.43
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>WITHOUT THE MANAGER'S VOLUNTARY WAIVER OF A PORTION OF CERTAIN EXPENSES
FOR THIS PERIOD, THIS FUND WOULD HAVE HAD PER SHARE NET INVESTMENT
INCOME OF $.69 AND A RATIO OF EXPENSES TO AVERAGE NET ASSETS OF 1.78%. THE
AMOUNT WAIVED WAS $10,427.
</FN>
</TABLE>
Report of Independent Auditors on Internal Control
The Board of Directors and Shareholders
Princor Bond Fund, Inc.
In planning and performing our audit of the financial statements of Princor Bond
Fund, Inc. for the year ended October 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 Princor Bond 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 for activities safeguarding securities, that we consider to be material
weaknesses as defined above as of October 31, 1997.
This report is intended solely for the information and use of management and the
Board of Directors of Princor Bond Fund, Inc. and the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
November 26, 1997
SPECIAL MEETING OF SHAREHOLDERS PRINCOR BOND FUND, INC. HELD SEPTEMBER 16, 1997
1.Election of the Board of Directors.
For Withheld
Davis 6,961,310 125,016
Ehrle 6,958,707 127,619
Ferguson 6,954,467 131,859
Gilbert 6,965,661 120,665
Griswell 6,962,143 124,183
Jones 6,963,809 122,517
Keller 6,956,414 129,912
Lukavsky 6,959,271 127,055
Peebler 6,956,062 130,265
2.Ratification of selection of Ernst & Young LLP as independent public auditors.
In Favor Opposed Abstain
6,881,664 40,443 164,220
3.Approval of name change to Principal Bond Fund, Inc.
In Favor Opposed Abstain
6,638,729 215,543 232,054
4.Approval of modification of management agreement
In Favor Opposed Abstain
6,520,272 294,590 271,464
