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001 A000000 PRINCOR BLUE CHIP FUND, INC.
001 B000000 811-06263
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002 A000000 THE PRINCIPAL FINANCIAL GROUP
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020 A000002 DILLON, READ & CO., INC.
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020 A000003 MESIROW FINANCIAL
020 B000003 36-3194849
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020 A000004 COWAN & CO.
020 B000004 13-5616116
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020 A000005 CHICAGO CORPORATION
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020 C000005 2
020 A000006 PAULSEN SECURITIES
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020 C000006 1
020 A000007 LEHMAN BROTHERS
020 B000007 13-2501865
020 C000007 1
020 A000008 EXECUTION SERVICES INCORPORATED
020 B000008 13-2862329
020 C000008 1
020 A000009 CHARLES SCHWAB & CO.
020 B000009 94-1727783
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<PAGE> PAGE 2
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022 A000001 ASSOCIATES CORPORATION OF NORTH AMERICA
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022 B000002 13-1500700
022 C000002 91831
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022 A000003 FORD MOTOR CREDIT COMPANY
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022 C000003 24149
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SIGNATURE ARTHUR S. FILEAN
TITLE V. PRES & SECRETARY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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</TABLE>
Report of Independent Auditors on Internal Control Structure
Board of Directors and Shareholders
Princor Blue Chip Fund, Inc.
In planning and performing our audit of the financial statements of Princor Blue
Chip Fund, Inc. for the year ended October 31, 1996, we considered its internal
control structure, including procedures 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 the internal control structure.
The management of Princor Blue Chip Fund, Inc. is responsible for establishing
and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure 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 the internal control structure would not necessarily
disclose all matters in the internal control structure 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 the specific internal control structure elements 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 the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
October 31, 1996.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
ERNST & YOUNG
Des Moines, Iowa
November 27, 1996
