<PAGE>
BOARD OF DIRECTORS
Kenneth V. Penland, Chairman
Robert J. Greenebaum, Director
Robert M. Inman, Director
Richard C. Schulte, Director
Roberta M. Wilson, Director
OFFICERS
Kenneth V. Penland, Chairman
Charles H. Anderson, President
John R. Cormey, Vice President
Varilyn K. Schock, Vice President
W. Bruce McConnel, III, Secretary
Steven G. Wine, Treasurer
INVESTMENT ADVISOR
Denver Investment Advisors, LLC
1225 17th Street, 26th Floor
Denver, CO 80202
(303) 312-5100
SHAREHOLDER RELATIONS
Margaret R. Jurado
(800) 624-4190 (303) 312-5100
CUSTODIAN
First Interstate Bank of Denver, N.A.
633 17th Street
Denver, CO 80202
FUND ADMINISTRATOR
American Data Services, Inc.
24 West Carver Street
Huntington, NY 11743
TRANSFER AGENT DIVIDEND REINVESTMENT PLAN AGENT (QUESTIONS REGARDING YOUR
ACCOUNT)
Chase Mellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
(800) 288-9541
NYSE Symbol--BLU
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
SEMI-ANNUAL
REPORT TO STOCKHOLDERS
JUNE 30, 1996
<PAGE>
Dear Fellow Stockholder,
The second quarter continued to provide good returns for equity investors.
Blue Chip Value Fund performed in line with the overall market, with the net
asset value rising 4.33% and the Fund's shares up 4.98%, compared to 4.48% for
the S&P 500. Midway into 1996, Blue Chip Value Fund's net asset value return
and stock appreciation including distributions have outperformed the S&P 500.
The Fund's net asset value and stock are up 12.09% and 11.88%, respectively,
leading the broad Index which increased 10.10%.
PERFORMANCE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD
TOTAL
12/31/95 6/30/96 DIVIDENDS RETURN(1)
<S> <C> <C> <C> <C>
Blue Chip
Value Fund $8.47 $9.46 $.03 +12.1%
(Net Asset Value)
S&P 500 $615.93 $670.63 $14.27 +10.1%
Blue Chip
Value Fund $7.625 $8.50 $.03 +11.9%
(Common Stock)
Market Price Premium/Discount to Net
Asset Value -10.0% -10.1%
</TABLE>
- -------------------------------------------------------------------------------
(1) Assumes reinvestment of dividends
Early in the quarter, Aetna Life and Casualty offered to buy U. S.
Healthcare, a health maintenance organization, and one of the Fund's holdings.
As a result, U.S. Healthcare shares increased 21% and became the Fund's best-
performing stock in the quarter.
U. S. Healthcare provides an interesting example of the Fund's valuation and
quantitatively-based methodologies, as well as the benefits of being a long-
term investor. The Fund originally purchased U. S. Healthcare four years ago
in May, 1992. The quantitative model ranked the stock among the most attrac-
tive within the Blue Chip universe of large company stocks based on a high
risk- adjusted expected return (a valuation measure) and rising Wall Street
earnings estimates. Importantly, risk-adjusted expected return is more than a
static measure of valuation--it equates the stock's price with expected growth
in dividends and earnings, and includes a penalty for a security's incremental
risk relative to the broad market. We use this measure of valuation as one way
to identify attractive stocks. The more widely-used measure of valuation,
price-to-earnings ratio, was 19x when we purchased the stock compared to 25x
for the S&P 500.
Since we purchased the stock in 1992 at $21, the price-to-earnings ratio in-
creased from 19x to 21x. The modest increase in valuation masks substantial
earnings improvement from $0.93 per share in 1991 to $2.42 per share last
year, an increase of 160%. The company also increased its dividend seven times
in four years. The earnings record was not spotless over the time frame, how-
ever, producing a substantial decline in the stock price in 1995. As value-
oriented investors, however, we decided to continue holding the stock based on
its undervaluation, and earnings improvement resumed.
The Fund's value-oriented approach resulted in excellent long term perfor-
mance. By this June, U. S. Healthcare's stock had increased to $55, an in-
crease of 162% without dividends, and double the return of the S&P 500 with
dividends. (The S&P 500's total return increased 80% between the end of May,
1992 and June 30, 1996.)
[PIE CHART APPEARS HERE]
PORTFOLIO'S ECONOMIC SECTOR EXPOSURE(1)
As of 6/30/95
<TABLE>
<CAPTION>
<S> <C>
Cash 5.0%
Consumer Cyclical 18.4%
Consumer Staples 25.7%
Capital Goods 8.3%
Intermediate
Goods & Services 15.9%
Credit Sensitive 26.7%
</TABLE>
/(1)/ (FOOTNOTE APPEARS HERE)
In general, the portfolio benefitted in the second quarter from holdings in
the retail and hotel/leisure industries, while holdings in the chemical and
computer hardware industries held back performance. In addition to U. S.
Healthcare, the Fund's top-performing stocks included Hilton Hotels, up 20%,
Dayton Hudson, up 18%, Gap Inc., up 16%, and Pepsico, up 13%.
As we write this letter, the stock market has given up some of the gains
achieved in the first half due to concerns about rising interest rates and
Federal Reserve action to slow a stronger-than-expected economy. It is always
difficult to tell at the time if a stock market pullback is necessary to
"cleanse" excess speculation, or the sign of a major turning point. While typ-
ically optimistic, we continue to view the equity market as attractive, and
market research and our experience indicate that a value-oriented strategy,
such as Blue Chip Value Fund's, can continue to provide good returns in rising
markets and unique defensive characteristics in declining markets.
On a final note, we enjoyed meeting shareholders who attended the Blue Chip
Value Fund presentation given last month to the New York Society of Security
Analysts. If you were unable to attend and would like to receive the materials
distributed at the meeting, please contact the Fund's Shareholder Relations
Representative, Margaret Jurado, at 1-800-624-4190.
Sincerely,
/s/ Varilyn K. Schock /s/ Kenneth V. Penland
------------------------ -------------------------
Varilyn K. Schock, C.F.A. Kenneth V. Penland, C.F.A.
Vice President and Chairman
Portfolio Manager
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund's Dividend Reinvestment and Cash Purchase Plan offers stockholders
the opportunity to reinvest dividends and capital gain distributions in addi-
tional shares of the Fund. A stockholder may also make additional cash invest-
ments under the Plan. There is no service charge for participation.
Dividends of a stockholder who joins the Plan are first applied, if possible,
to acquire shares of the Fund's Common Stock in the open market at a price
(plus commission) which is less than the net asset value per share most re-
cently published by the Fund. If no shares, or insufficient shares, are avail-
able at less than net asset value per share, any remaining balance will be
used to acquire shares from the Fund at net asset value.
Participating stockholders may also make additional cash investments (minimum
$50 and maximum $10,000 per month) by check or money order (or by wire for a
$10 fee) to acquire additional shares of the Fund. Please note, however, that
these additional shares will be purchased at market value (without regard to
net asset value) per share.
A stockholder may join the Plan by sending an Enrollment Form to the Plan
Agent at the address listed below.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be with-
held) on dividends or distributions, even though the stockholder does not re-
ceive the cash. Participants must maintain at least 50 shares in the Plan at
all times.
A stockholder may elect to withdraw from the Plan at any time on 15-days'
prior written notice, and receive future dividends and distributions in cash.
There is no penalty for withdrawal from the Plan and stockholders who have
withdrawn from the Plan may rejoin it in the future.
The Fund may amend the Plan at any time upon 30-days prior notice to partici-
pants.
Additional information about the Plan may be obtained from Blue Chip Value
Fund, 1225 17th Street, 26th Floor, Denver, CO 80202; telephone (800) 624-
4190.
July 1, 1996
TO THE STOCKHOLDERS OF
BLUE CHIP VALUE FUND, INC.:
Blue Chip Value Fund, Inc., has declared a quarterly distribution of $0.03
per share with a Record Date of July 12, 1996, and a Payable Date of July 26,
1996.
The distribution represents net investment income. All shareholders will re-
ceive written notification regarding the components and tax treatment of all
distributions for the calendar year in early 1997.
If you have elected to receive your distribution in cash, the enclosed check
is in payment of such distribution. If you have elected to reinvest your dis-
tribution, enclosed is your reinvestment confirmation.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in common stock at market value (identified cost--
$71,162,735).................................................... $ 98,825,718
Short-term investments........................................... 4,515,460
------------
TOTAL INVESTMENTS.............................................. 103,341,178
Receivable for investment securities sold........................ 2,390,342
Dividends and interest receivable................................ 77,663
Prepaid insurance................................................ 28,870
------------
TOTAL ASSETS................................................... 105,838,053
------------
LIABILITIES
Payable for investment securities purchased...................... 1,997,940
Accrued liabilities.............................................. 109,597
------------
TOTAL LIABILITIES.............................................. 2,107,537
------------
NET ASSETS (equivalent to $9.46 per share based on 10,960,829
shares of common stock outstanding) (Note 4).................... $103,730,516
============
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
</TABLE>
<TABLE>
<S> <C> <C>
Dividends............................................. $ 1,172,342
Interest.............................................. 103,489
-----------
TOTAL INVESTMENT INCOME.............................. $ 1,275,831
OPERATING EXPENSES:
Investment advisory fee (Note 3)...................... 319,768
Administrative services fee (Note 3).................. 47,227
Transfer agent fees................................... 44,761
Shareholder reporting................................. 34,198
Legal fees............................................ 35,579
Insurance and fidelity bond........................... 13,750
Directors' fees....................................... 15,927
Audit fees............................................ 13,463
Custodian fees (Note 3)............................... 4,786
Other................................................. 12,970
-----------
TOTAL OPERATING EXPENSES............................. 542,429
-----------
NET INVESTMENT INCOME................................ 733,402
===========
REALIZED GAIN AND UNREALIZED APPRECIATION ON
INVESTMENTS
Realized gain from securities transactions;
Sales from securities................................ $47,011,886
Cost of securities sold.............................. 38,124,051
-----------
NET REALIZED GAIN.................................... $8,887,835
Unrealized appreciation of investments:
Beginning of period.................................. 26,111,518
End of period........................................ 27,662,983
-----------
NET INCREASE IN UNREALIZED APPRECIATION.............. 1,551,465
NET GAIN ON INVESTMENTS.............................. 10,439,300
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... $11,172,702
===========
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Increase in net assets from operations:
Net investment income........................................... $ 733,402
Net realized gain from securities transactions.................. 8,887,835
Net change in unrealized appreciation of investments during the
period......................................................... 1,551,465
------------
Net increase in net assets resulting from operations............. 11,172,702
Distributions to shareholders:
Net investment income........................................... (328,825)
Realized gain................................................... 0
In excess of realized gains..................................... 0
Tax return of capital........................................... 0
------------
(328,825)
------------
Net Increase in net assets: 10,843,877
------------
Net assets:
Beginning of period............................................. 92,886,639
------------
End of period
($404,577 undistributed net investment income)................. $103,730,516
============
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
SIX MONTHS ENDED ---------------------------------
JUNE 30, 1996 1995 1994 1993 1992
---------------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Investment income........ $ .12 $ .22 $ .20 $ .30 $ .23
Expenses................. (.05) (.09) (.09) (.10) (.11)
------ ------ ------ ------ ------
Net investment income.... .07 .13 .11 .20 .12
Distributions from net
investment income....... (.03) (.13) (.11) (.20) (.12)
Net gain (loss) on
securities.............. .95 2.45 (.11) .72 (.08)
Distributions from
realized gains.......... 0 (.95) (.38) (.14) (.00)
Distributions in excess
of net realized gains... 0 (.00) (.00) (.41) (.48)
Tax return of capital.... 0 (.01) (.26) (.07) (.17)
------ ------ ------ ------ ------
Net increase (decrease)
in net asset value...... .99 1.49 (.75) .10 (.73)
Net asset value:
Beginning of period..... 8.47 6.98 7.73 7.63 8.36
------ ------ ------ ------ ------
End of period........... $ 9.46 $ 8.47 $ 6.98 $ 7.73 $ 7.63
====== ====== ====== ====== ======
Per share market value,
end of period........... $ 8.50 $7.625 $6.125 $7.875 $ 7.75
Total investment return.. 11.9% 41.6% (13.2)% 12.5% 12.4%
RATIOS:
Ratio of operating
expenses excluding
interest to average
net assets.............. 1.10%** 1.15% 1.22% 1.27% 1.27%
Ratio of operating
expenses to average net
assets.................. 1.10%** 1.15% 1.22% 1.28% 1.42%
Ratio of net investment
income to average net
assets.................. 1.49%** 1.55% 1.46% 2.55% 1.57%
Portfolio turnover
rate*................... 22.18% 50.84% 62.77% 56.11% 118.24%
Average commission rate
paid.................... $ 0.05
Number of shares
outstanding at end of
period (in thousands)... 10,961 10,961 10,961 10,895 9,488
</TABLE>
* A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term invest-
ments) for a period and dividing it by the monthly average of the market
value of the portfolio securities during the year.
**Annualized
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
COMMON SHARES COST VALUE
STOCKS: ------ ========= ---------
<S> <C> <C> <C>
CONSUMER STAPLES
BEVERAGES -- ALCOHOLIC --1.9%
Anheuser-Bush Cos, Inc. ................. 26,800 1,997,940 2,010,000
BEVERAGES -- SOFT DRINKS -- 2.6%
Pepsico, Inc. ........................... 77,300 1,829,466 2,734,488
DRUGS -- 4.3%
Pfizer, Inc. ............................ 30,600 1,083,086 2,184,075
Schering-Plough Corp. ................... 37,040 954,686 2,324,260
--------- ---------
2,037,772 4,508,335
RETAIL STORES -- DRUG STORES -- 2.0%
Rite Aid................................. 68,800 1,707,281 2,046,800
FOOD -- 6.3%
Dole Food Company........................ 52,760 1,544,093 2,268,680
IBP Inc. ................................ 81,800 1,149,522 2,259,725
Sara Lee Corp. .......................... 60,700 1,994,032 1,965,163
--------- ---------
4,687,647 6,493,568
HEALTH CARE -- DIVERSIFIED -- 2.2%
Bristol Myers Squibb..................... 25,820 1,629,190 2,323,800
HEALTH CARE (HMO'S) -- 2.2%
U.S. Healthcare, Inc. ................... 41,085 1,093,333 2,259,675
RETAIL STORES -- FOOD CHAINS -- 2.1%
Giant Food Inc. ......................... 60,860 1,965,223 2,183,353
TOBACCO -- 2.1%
UST Inc. ................................ 62,370 1,920,593 2,136,173
CONSUMER CYCLICAL
ENTERTAINMENT -- 2.1%
Carnival Corp. .......................... 77,110 1,812,478 2,226,551
HARDWARE & TOOLS -- 2.3%
Black & Decker Corp. .................... 62,560 1,359,085 2,416,380
HOTELS--MOTELS -- 2.4%
Hilton Hotels Corp. ..................... 22,500 1,649,273 2,531,250
RETAIL STORES -- GEN. MERCH CHAINS -- 7.1%
Dayton-Hudson............................ 25,000 2,202,484 2,578,125
Gap Inc. ................................ 82,800 1,862,503 2,659,950
Sears Roebuck & Co. ..................... 42,670 1,224,137 2,074,829
--------- ---------
5,289,124 7,312,904
</TABLE>
<TABLE>
<CAPTION>
COMMON SHARES COST VALUE
STOCKS: ------- ========== ----------
<S> <C> <C> <C>
RETAIL STORES -- SPECIALTY -- 2.4%
Melville Corp. ........................... 60,400 2,026,070 2,446,200
ELECTRIC COMPANIES -- 7.0%
Central & South West Corp. ............... 67,130 1,643,016 1,946,770
Edison International...................... 99,930 1,641,350 1,761,266
General Public Utilities.................. 56,870 1,507,737 2,004,668
Ohio Edison Company....................... 75,800 1,567,089 1,658,125
---------- ----------
6,359,193 7,370,829
INVESTMENT BANKING/BROKERAGE -- 2.3%
Traveler's Group, Inc. ................... 51,660 1,684,386 2,356,988
MAJOR REGIONAL BANKS -- 8.8%
Bank of Boston............................ 44,350 1,221,902 2,195,325
Bank of New York.......................... 45,500 1,441,588 2,331,875
First Union Corp. ........................ 38,230 2,014,793 2,327,251
NationsBank Corp. ........................ 29,100 2,204,129 2,404,388
---------- ----------
6,882,411 9,258,839
MONEY CENTER BANKS -- 2.3%
Chase Manhattan Corp. .................... 33,600 1,314,044 2,373,000
NATURAL GAS -- 2.1%
Coastal Corp. ............................ 51,760 1,738,498 2,160,980
PROPERTY & CASUALTY INS -- 2.0%
USF&G Corp. .............................. 124,130 1,694,274 2,032,629
TELECOMMUNICATIONS -- 2.2%
Sprint Corp. ............................. 53,300 1,573,360 2,238,600
INTERMEDIATE GOODS & SERVICES
CHEMICALS -- DIVERSIFIED -- 2.1%
PPG Industries, Inc. ..................... 43,630 1,555,878 2,126,963
CHEMICALS -- 3.6%
Hercules, Inc. ........................... 36,140 1,077,603 1,996,735
Eastman Chemical Co. ..................... 28,900 1,529,387 1,759,288
---------- ----------
2,606,989 3,756,023
</TABLE>
* Denotes a non-income producing security.
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHE DULE OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
COMMON SHARES COST VALUE
STOCKS: ------ ========= ---------
<S> <C> <C> <C>
OIL (INTEGRATED -- DOMESTIC) -- 2.1%
Tosco Corp. ...................................... 43,200 2,010,943 2,170,800
OIL (INTEGRATED -- INTERNATIONAL) -- 4.0%
Mobil Corp. ...................................... 17,860 1,333,973 2,002,553
Exxon Corp. ...................................... 24,840 1,848,011 2,157,975
--------- ---------
3,181,984 4,160,528
PHOTOGRAPHY/IMAGING -- 2.1%
Eastman Kodak Co. ................................ 28,300 1,515,271 2,200,325
MISCELLANEOUS -- 4.2%
Harris Corp. ..................................... 37,460 1,802,764 2,285,060
Loews Corp. ...................................... 26,560 1,658,795 2,094,920
--------- ---------
3,461,559 4,379,980
CAPITAL GOODS
AEROSPACE & DEFENSE -- 4.1%
McDonnell Douglas Corp. .......................... 40,180 683,694 1,948,730
United Technologies Corp. ........................ 19,830 1,562,604 2,280,450
--------- ---------
2,246,298 4,229,180
</TABLE>
<TABLE>
<CAPTION>
COMMON SHARES COST VALUE
STOCKS: ------ ========== -----------
<S> <C> <C> <C>
COMPUTER SOFTWARE & SERVICES -- 2.3%
Computer Assoc. Int'l Inc. ....................... 33,345 923,256 2,375,831
COMPUTER SYSTEMS -- 1.9%
International Business Machines Corp. ............ 20,250 1,409,916 2,004,750
TOTAL INVESTMENT IN COMMON STOCKS -- 95.2% 71,162,735 98,825,718
MONEY MARKET FUND -- 4.4% 4,515,460 4,515,460
TOTAL INVESTMENTS -- 99.6% 75,678,195 103,341,178
LIABILITIES, LESS CASH, RECEIVABLES, AND OTHER ASSETS -- 0.4% 389,339
NET ASSETS -- 100% 103,730,516
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BLUE CHIP VALUE FUND, INC.
June 30, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Blue Chip Value Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management in-
vestment company.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITIES VALUATIONS--Each investment security is valued at the latest sale
price at year end reported by the pricing service used by the Fund Administra-
tor. Short-term investments are valued at cost, which approximates market val-
ue.
FEDERAL INCOME TAXES--The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies
and to distribute all its taxable income to its shareholders. Therefore, no
provision has been made for federal income taxes.
INVESTMENT TRANSACTIONS--Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
first-in, first-out basis for both financial statement and federal income tax
purposes. Dividend income is recognized on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on
the ex-dividend date. Distributions are classified to conform with the tax re-
porting requirements of the Internal Revenue Code. Distributions attributable
to current period realized gains from securities transactions which are offset
by the existence of loss carryovers from prior years are taxable to the recip-
ient as ordinary income and reported as distributions in excess of realized
gains. Tax returns of capital represent distributions in excess of current and
accumulated earnings and profits and are nontaxable to the recipient.
2. PURCHASE AND SALE OF INVESTMENTS
The cost of investment securities purchased and proceeds from sales of securi-
ties, excluding short-term investments, aggregated $21,507,193 and
$35,530,570, respectively, for the year. At June 30, 1996, gross unrealized
depreciation of investments was $27,691,853 and gross unrealized appreciation
of investments was $28,870.
3. INVESTMENT ADVISORY, ADMINISTRATIVE, AND CUSTODIAL SERVICES
The Fund has an Investment Advisory Agreement with Denver Investment Advisors,
LLC (the "Advisor"), whereby a management fee is paid to the Advisor based on
an annual rate of .65% of the Fund's average weekly net assets up to
$100,000,000 and .50% of the Fund's average weekly net assets in excess of
$100,000,000. The management fee is paid monthly based on the average of the
net assets of the Fund computed as of the last business day the New York Stock
Exchange is open each week. Certain officers and directors of the Fund are
also officers and directors of the Advisor.
The Fund has an Administrative Agreement with American Data Services, Inc. The
administrative services fee is based on an annual rate of .10% of the Fund's
average weekly net assets up to $75,000,000, .05% of the Fund's average weekly
net assets between $75,000,000 and $125,000,000, and .03% of the Fund's aver-
age weekly net assets in excess of $125,000,000, with a $7,463 per month mini-
mum. The administrative services fee is paid monthly based on the average of
the net assets of the Fund computed as of the last business day the New York
Stock Exchange is open each week.
First Interstate Bank of Denver, N.A., serves as custodian for the Fund. Cus-
todian fees totaled $9,600 during 1995.
4. CAPITAL TRANSACTIONS
As of December 31, 1995, there were 100,000,000 shares of $.01 par value com-
mon stock authorized. Capital paid-in, net of the cost of shares repurchased,
aggregated $66,812,797.
The Fund invested in an affiliated company during 1994. The Advisor immedi-
ately sold the affiliated security upon the realization that the purchase was
not in accordance with the provisions of the Investment Company Act of 1940.
The Advisor reimbursed the Fund through a capital contribution of $85,717 for
the realized loss incurred from the transaction.
5. MEETINGS OF STOCKHOLDERS
The Annual Meeting of Stockholders of the Fund (the "Annual Meeting") was held
on May 1, 1996 pursuant to notice given to all stockholders of record at the
close of business on March 15, 1996. At the Annual Meeting stockholders were
asked to: elect two Class II directors, Robert M. Inman and Richard C.
Schulte, to serve until the 1999 Annual Meeting; and ratify the appointment by
the Board of Directors of Ernst & Young LLP as the Fund's independent auditors
for the fiscal year ending December 31, 1996. At the Annual Meeting, the num-
ber of shares voting for the election of Robert M. Inman was 9,337,338 and the
number of shares withholding authority was 114,816; the number of shares vot-
ing for the election of Richard C. Schulte was 9,334,409 and the number of
shares withholding authority was 117,745. The name of each other director
whose term of office continued after the Annual Meeting was: Kenneth V.
Penland; Robert J. Greenebaum and Roberta M. Wilson. Additionally, at the An-
nual Meeting, the number of shares voting for the ratification of the appoint-
ment of Ernst & Young LLP as independent auditors was 9,285,105, the number of
shares voting against ratification was 38,500 and the number of shares ab-
staining was 128,548.
