<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
Todger 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
e-mail: [email protected]
CUSTODIAN
Wells Fargo Bank
633 17th Street
Denver, CO 80202
FUND ADMINISTRATOR
American Data Services, Inc.
755 New York Avenue
Huntington, NY 11743
TRANSFER AGENT
DIVIDEND REINVESTMENT PLAN AGENT
(QUESTIONS REGARDING YOUR ACCOUNT)
ChaseMellon 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]
www.blu.com
- -------------------------------------------------------------------------------
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
SEMI-ANNUAL
REPORT TO STOCKHOLDERS
JUNE 30, 1997
<PAGE>
Dear Fellow Stockholders,
The first half of 1997 continued to be a favorable environment for investors
in blue chip stocks and the Blue Chip Value Fund.
PERFORMANCE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD
TOTAL
12/31/96 6/30/97 DIVIDENDS RETURN(1)
<S> <C> <C> <C> <C>
Blue Chip
Value Fund $8.94 $10.05 $.22 18.2%
(Net Asset Value)
S&P 500 $740.74 $885.14 $7.49 +20.6%
Blue Chip
Value Fund $9.25 $9.75 $.22 9.6%
(Common Stock)
Market Price Premium/Discount to Net
Asset Value +3.5% -3.1%
</TABLE>
- -------------------------------------------------------------------------------
(1) Assumes reinvestment of dividends and participation in the rights
offering.
- -------------------------------------------------------------------------------
Highlights in stock performance for the first half were within the Fund's
drug and finance sectors. Among our top-performing stocks were Pfizer, Bris-
tol-Myers Squibb and Schering-Plough which were each up between 40 and 50% in
the first six months driven by strong earnings and exciting announcements of
new drugs. Many of the Fund's finance stocks also performed well including
Student Loan Marketing, Travelers, H.F. Ahmanson and NationsBank, each up over
30%.
This good financial stock performance was driven by news that the economy was
slowing and, as a result, increased confidence that the Federal Reserve might
not raise short-term interest rates further. Much of the very strong perfor-
mance for the S&P 500 Index came from technology stocks which now comprise the
second largest sector in the Index and which also had the second highest re-
turn in the quarter among the S&P 500 sectors. Here, we were underweighted and
did not own the stocks that comprised the very narrow leadership of that sec-
tor.
The Blue Chip Value Fund seeks to buy undervalued stocks in the market by ap-
plying a disciplined strategy of owning stocks that sell at a low price rela-
tive to earnings, book value and dividends. While this may not be the best
performing style in every market environment much less in the recent surging
"bull" market in growth-oriented stocks, ample research shows that this is a
successful strategy for outperforming the broad market over the course of en-
tire market cycles.
Moreover, valuations of some of the largest stocks in the equity market, us-
ing the Dow Jones Industrial Average, are at substantial valuation premiums to
the broad market. History reveals that these valuation disparities do not con-
tinue forever. When this valuation disparity closes, the more risky stocks may
be those that are richly-priced; consequently we remain confident that our fo-
cus on owning undervalued stocks is the best strategy going forward.
As we write this letter, the Dow Jones Industrial Average has closed above
8000 for the first time in history. Given this historic high market level and
stock valuations at the high end of historic ranges, a meaningful stock market
correction would not be a surprise. Nonetheless, given very favorable funda-
mentals, we see no basis for predicting a near-term correction. As long as the
economy continues to show moderate non-inflationary growth and productivity-
led earnings growth, the environment for stocks will remain positive.
Two significant events for Blue Chip shareholders occurred during the first
half of 1997. First, the Fund completed a successful rights offering allowing
investors to acquire new shares at $8.31 per share. The Fund also resumed its
policy of paying quarterly distributions equal to 2.5% of N.A.V. and for the
first and second quarter declared distributions of $0.22 and $0.25, respec-
tively.
We appreciate your continued support and interest in the Fund.
Sincerely,
[SIGNATURE OF [SIGNATURE OF
VARILYN K. SCHOCK APPEARS HERE] KENNETH V. PENLAND APPEARS HERE]
Varilyn K. Schock, C.F.A. Kenneth V. Penland, C.F.A.
Portfolio Manager Chairman
<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.
BLUE CHIP ON-LINE
In 1996 we went on-line with Blue Chip Value Fund shareholders, Wall Street
analysts, and potential shareholders by introducing a Blue Chip Value Fund
website at WWW.BLU.COM. We hope that those of you who are using the internet
check it out and find it informative and helpful. Investors may also contact
our Investor Relations Department by sending e-mail to [email protected].
July 1, 1997
TO THE STOCKHOLDERS OF
BLUE CHIP VALUE FUND, INC.:
Blue Chip Value Fund, Inc. has declared a quarterly distribution of $.25 per
share with a Record Date of July 11, 1997 and a Payable Date of July 25, 1997.
Of the total distribution, $0.03 represents net investment income and the re-
maining portion is paid from capital surplus. If the Fund's total distribu-
tions for the year (exclusive of long-term capital gains dividends) exceed its
net investment income and short-term capital gains for such year, a portion of
such distributions may constitute a non-taxable return of capital. The actual
determination of the source of the distributions can be made only at year end.
All shareholders will receive written notification regarding the components
and tax treatment of all distributions for the 1997 calendar year in early
1998.
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, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in common stock at market value (identified cost--
$97,919,109)................................................... $135,330,612
Short-term investments.......................................... 14,104,244
------------
TOTAL INVESTMENTS............................................. 149,434,856
Dividends and interest receivable............................... 106,664
Other assets.................................................... 23,140
------------
TOTAL ASSETS.................................................. 149,564,660
------------
LIABILITIES
Payable for investment securities purchased..................... 7,255,620
Advisory fee payable............................................ 72,886
Administration fee payable...................................... 2,208
Accrued expenses and other liabilities.......................... 49,001
------------
TOTAL LIABILITIES............................................. 7,379,715
------------
NET ASSETS...................................................... $142,184,945
============
COMPOSITION OF NET ASSETS
Capital stock, at par........................................... $ 141,540
Paid-in capital................................................. 93,449,514
Undistributed net investment income............................. 448,244
Undistributed net capital gains................................. 13,580,496
Undesignated distributions (Note 4)............................. (2,846,352)
Net unrealized appreciation on investments...................... 37,411,503
------------
$142,184,945
============
SHARES OF COMMON STOCK OUTSTANDING (100,000,000 shares
authorized at $0.01 par value)................................. 14,154,037
============
Net asset value per share....................................... $ 10.05
============
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends............................................. $1,097,866
Interest.............................................. 194,150
----------
TOTAL INCOME.......................................... $ 1,292,016
Expenses
Investment advisory fee (Note 3)...................... 378,037
Administrative services fee (Note 3).................. 47,259
Transfer agent fees................................... 40,538
Shareholder reporting................................. 24,091
Legal fees............................................ 22,315
Insurance and fidelity bond........................... 18,080
Directors' fees....................................... 15,839
Audit fees............................................ 13,389
Custodian fees (Note 3)............................... 4,760
Other................................................. 13,979
----------
TOTAL EXPENSES........................................ 578,287
-----------
NET INVESTMENT INCOME............................... 713,729
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments....................... 13,645,309
Change in unrealized appreciation of investments for
the year.............................................. 6,167,458
-----------
NET GAIN ON INVESTMENTS............................. 19,812,767
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $20,526,496
===========
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997(1) 1996
------------ ------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income............................. $ 713,729 $ 1,426,959
Net realized gain from securities transactions.... 13,645,309 13,391,556
Net change in unrealized appreciation of
investments during the period.................... 6,167,458 5,132,527
------------ ------------
Net increase in net assets resulting from
operations........................................ 20,526,496 19,951,042
------------ ------------
Distributions to shareholders:
Net investment income............................. (267,537) (1,424,907)
Net realized gain on investments.................. -- (13,372,211)
Undesignated (Note 4)............................. (2,846,352) --
------------ ------------
(3,113,889) (14,797,118)
------------ ------------
Increase in net assets from common stock
transactions:
Proceeds from the sale of 2,843,750 shares, net of
offering expenses................................. 23,537,729 --
Net asset value of common stock issued to
shareholders from reinvestment of dividends
(349,458 shares issued for the six months ended
June 30, 1997).................................... 3,194,046 --
------------ ------------
26,731,775 --
------------ ------------
Net increase in net assets......................... 44,144,382 5,153,924
Net assets
Beginning of year................................. 98,040,563 92,886,639
------------ ------------
End of year ($448,244 and $2,052 undistributed net
investment income at June 30, 1997 and December
31, 1996, respectively).......................... $142,184,945 $ 98,040,563
============ ============
</TABLE>
(1)Unaudited
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, ----------------------------------
1997(1) 1996 1995 1994 1993
---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout each period)
Net asset value--beginning of
period....................... $ 8.94 $ 8.47 $ 6.98 $ 7.73 $ 7.63
INVESTMENT OPERATIONS
Net investment income......... .06 .13 .13 .11 .20
Net gain (loss) on
investments.................. 1.27 1.69 2.45 (.11) .72
-------- ------- ------- ------- -------
Total from investment
operations................... 1.33 1.82 2.58 .00 .92
-------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income.... (.02) (.13) (.13) (.11) (.20)
From net realized gains on
investments.................. .00 (1.22) (.95) (.38) (.14)
In excess of net realized
gains on investments......... .00 .00 .00 .00 (.41)
Tax return of capital......... .00 .00 (.01) (.26) (.07)
Undesignated
(Note 4)..................... (.20) .00 .00 .00 .00
-------- ------- ------- ------- -------
Total distributions........... (.22) (1.35) (1.09) (.75) (.82)
-------- ------- ------- ------- -------
Net asset value--end of
period...................... $ 10.05 $ 8.94 $ 8.47 $ 6.98 $ 7.73
======== ======= ======= ======= =======
Per share market value--end
of period................... $ 9.75 $ 9.25 $ 7.625 $ 6.125 $ 7.875
======== ======= ======= ======= =======
TOTAL INVESTMENT RETURN....... 9.57%*** 39.5% 41.6% (13.2)% 12.5%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses (excluding
interest) to average net
assets....................... .95%** 1.05% 1.15% 1.22% 1.27%
Ratio of expenses to average
net assets................... .95%** 1.05% 1.15% 1.22% 1.28%
Ratio of net investment income
to average net assets........ 1.17%** 1.39% 1.55% 1.46% 2.55%
Portfolio turnover rate*...... 37.88% 42.31% 50.84% 62.77% 56.11%
Average commission rate paid
to brokers per share of
common stock purchased/
sold......................... $ .05 $ .05 $ .05 $ .05 $ .05
Net assets--end of period (in
thousands)................... $142,185 $98,041 $92,887 $76,491 $84,168
</TABLE>
* A portfolio turnover rate is the percentage computed by taking the lesser
of purchases or sales of portfolio securities (excluding short-term in-
vestments) for a year and dividing it by the monthly average of the market
value of the portfolio securities during the year.
** Annualized
*** Assumes that shareholders fully participated in the rights offering.
(1) Unaudited
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
June 30, 1997
<TABLE>
<CAPTION>
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS -- 95.18%
CAPITAL GOODS -- 14.44%
AEROSPACE & DEFENSE -- 4.96%
McDonnell Douglas Corp. ..................... 46,180 $ 1,369,431 $ 3,163,330
United Technologies Corp. ................... 46,860 2,304,854 3,889,380
------------ ------------
3,674,285 7,052,710
COMPUTER SOFTWARE & SERVICES -- 2.25%
Computer Associates International Inc. ...... 57,417 1,392,106 3,197,409
ELECTRONICS -- SEMICONDUCTORS -- 2.62%
Harris Corp. ................................ 44,360 2,503,890 3,726,240
MACHINERY -- DIVERSIFIED -- 2.21%
Dover Corp. ................................. 51,000 2,650,202 3,136,500
MANUFACTURING -- SPECIALIZED -- 2.40%
Parker-Hannifin Corp. ....................... 56,300 2,875,966 3,416,706
------------ ------------
TOTAL CAPITAL GOODS.......................... 13,096,449 20,529,565
------------ ------------
CONSUMER CYCLICALS -- 11.83%
AUTO PARTS & EQUIPMENT -- 1.50%
ITT Industries............................... 82,500 2,080,909 2,124,375
ENTERTAINMENT -- 2.66%
Carnival Corp Class A........................ 91,710 2,494,657 3,783,038
HARDWARE & TOOLS -- 1.04%
Black & Decker Corp. ........................ 39,760 988,476 1,478,575
HOTELS -- MOTELS -- 2.00%
Hilton Hotels Corp. ......................... 107,100 2,188,472 2,844,844
RETAIL STORES -- GENERAL MERCH. CHAINS -- 4.63%
Dayton Hudson Corp. ......................... 89,100 2,986,296 4,739,006
K Mart Corp.*................................ 150,900 2,050,220 1,848,525
------------ ------------
5,036,516 6,587,531
------------ ------------
TOTAL CONSUMER CYCLICALS..................... 12,789,030 16,818,363
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
(Unaudited)
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
CONSUMER STAPLES -- 28.33%
BEVERAGES -- SOFT DRINKS -- 2.43%
PepsiCo Inc. ................................ 91,800 $ 2,416,289 $ 3,448,237
DISTRIBUTORS -- FOOD & HEALTH -- 1.65%
SuperValu, Inc. ............................. 67,900 2,124,509 2,342,550
DRUGS -- 5.61%
McKesson Corp. .............................. 27,900 2,089,292 2,162,250
Pfizer Inc. ................................. 25,100 1,456,969 2,999,450
Schering-Plough Corp. ....................... 58,680 1,380,249 2,809,305
------------ ------------
4,926,510 7,971,005
FOOD -- 3.14%
Dole Food Inc. .............................. 62,660 2,009,087 2,678,715
IBP Inc. .................................... 77,000 1,151,202 1,790,250
------------ ------------
3,160,289 4,468,965
HEALTHCARE -- DIVERSIFIED -- 1.97%
Bristol-Myers Squibb Co. .................... 34,640 1,647,512 2,805,840
HEALTHCARE SERVICES -- 2.64%
Shared Medical Systems Corp. ................ 39,100 2,110,661 2,111,400
United States Surgical Corp. ................ 44,200 1,447,060 1,646,450
------------ ------------
3,557,721 3,757,850
MEDICAL PRODUCTS & SUPPLIES -- 2.24%
Becton Dickinson & Co. ...................... 62,900 2,558,330 3,184,313
RETAIL STORES -- DRUG STORES -- 5.45%
CVS Corp. ................................... 71,700 2,430,538 3,674,625
Rite Aid Corp. .............................. 81,800 2,495,762 4,079,775
------------ ------------
4,926,300 7,754,400
RETAIL STORES -- FOOD CHAINS -- 1.35%
Great Atlantic & Pacific Tea................. 70,600 2,022,126 1,919,438
TOBACCO -- 1.85%
Phillip Morris Companies Inc. ............... 30,300 1,311,619 1,344,562
RJR Nabisco Holdings......................... 39,100 1,284,897 1,290,300
------------ ------------
2,596,516 2,634,862
------------ ------------
TOTAL CONSUMER STAPLES....................... 29,936,102 40,287,460
------------ ------------
</TABLE>
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
June 30, 1997
<TABLE>
<CAPTION>
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
CREDIT SENSITIVE -- 24.44%
ELECTRIC COMPANIES -- 4.11%
Edison International......................... 137,530 $ 2,561,630 $ 3,421,059
General Public Utilities..................... 67,570 1,937,316 2,424,074
------------ ------------
4,498,946 5,845,133
FINANCIAL -- MISCELLANEOUS -- 2.89%
Student Loan Marketing Ass'n. ............... 32,300 2,753,496 4,102,100
INVESTMENT BANKING/BROKERAGE -- 2.45%
Traveler's Group Inc. ....................... 55,280 2,005,513 3,486,095
MAJOR REGIONAL BANKING -- 4.29%
First Union Corp. ........................... 32,630 2,150,357 3,018,275
NationsBank Corp. ........................... 47,700 2,211,414 3,076,650
------------ ------------
4,361,771 6,094,925
MONEY CENTER BANKS -- 1.93%
Chase Manhattan Corp. ....................... 28,200 1,742,337 2,737,163
NATURAL GAS -- 1.94%
Coastal Corp. ............................... 51,960 1,870,608 2,763,622
PROPERTY & CASUALTY INSURANCE -- 2.36%
USF&G Corp. ................................. 139,930 2,191,043 3,358,320
SAVINGS & LOAN -- 2.20%
H.F. Ahmanson & Company...................... 72,800 2,621,216 3,130,400
TELECOMMUNICATIONS -- 2.27%
Sprint Corp. ................................ 61,300 2,035,121 3,225,912
------------ ------------
TOTAL CREDIT SENSITIVE....................... 24,080,051 34,743,670
------------ ------------
INTERMEDIATE GOODS & SERVICES -- 16.14%
CHEMICALS -- DIVERSIFIED -- 2.12%
PPG Industries............................... 51,830 2,142,100 3,012,619
OIL EXPLORATION & PRODUCTION -- 1.93%
Burlington Resources Inc. ................... 62,200 2,798,344 2,744,575
</TABLE>
<TABLE>
<CAPTION>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS (CONTINUED)
(Unaudited)
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
OIL -- INTEGRATED -- DOMESTIC -- 7.03%
Atlantic Richfield Co. .................... 38,700 $ 2,359,482 $ 2,728,350
Tosco Corp. ............................... 134,200 2,669,009 4,017,613
USX-Marathon Group......................... 112,600 2,583,029 3,251,325
------------ ------------
7,611,520 9,997,288
OIL -- INTEGRATED -- INTERNATIONAL -- 4.11%
Mobil Corp. ............................... 42,220 1,907,638 2,950,122
Texaco Inc. ............................... 26,600 2,409,130 2,892,750
------------ ------------
4,316,768 5,842,872
RAILROADS -- 0.95%
CSX Corp. ................................. 24,400 1,148,745 1,354,200
TOTAL INTERMEDIATE GOODS & SERVICES........ 18,017,477 22,951,554
------------ ------------
TOTAL COMMON STOCKS........................ 97,919,109 135,330,612
------------ ------------
SHORT-TERM INVESTMENTS -- 9.92%
United States Treasury Bills:
5.07%, 07/24/97........................... 498,396 498,396
5.02%, 08/21/97........................... 6,949,723 6,949,723
Provident Inst. Temp Fund.................. 6,656,125 6,656,125
------------ ------------
TOTAL SHORT-TERM INVESTMENTS............... 14,104,244 14,104,244
------------ ------------
TOTAL INVESTMENTS -- 105.10%............... 112,023,353 149,434,856
============
Liabilities, less receivables, and other
assets: (5.10)%............................... (7,249,911)
------------
NET ASSETS -- 100.00%......................... $142,184,945
============
</TABLE>
See accompanying notes
* Non-income producing securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BLUE CHIP VALUE FUND, INC.
For the Six Months Ended June 30, 1997 (Unaudited)
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 period end reported by the principal exchange on which the issue was
traded or, if no sale is reported, the latest bid price is used. Short-term
investments are valued at cost, which approximates market value.
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 of 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.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and disclosures made in the accompanying notes to the financial statements.
Actual results could differ from those estimates.
2. PURCHASE AND SALE OF INVESTMENTS
The cost of investment securities purchased and proceeds from sales of securi-
ties (excluding short-term investments) aggregated $51,981,312 and
$44,330,564, respectively, for the period. At June 30, 1997, gross unrealized
depreciation of investments was $358,152 and gross unrealized appreciation of
investments was $37,769,655.
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 a director of the Fund are
also officers and a director 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.
Wells Fargo (formerly First Interstate Bank of Denver, N.A.), serves as custo-
dian for the Fund. Custodian fees totaled $4,760 during the six month period
ending June 30, 1997.
4. DISTRIBUTIONS TO SHAREHOLDERS
In 1996, the Fund announced a change in its policy of distributions to its
shareholders. The Fund plans to distribute 2.5% of its net asset value quar-
terly to its shareholders. On April 1, 1997, the Directors of Blue Chip Value
Fund, Inc., declared a distribution of $0.22 per share to stockholders of rec-
ord on April 11, 1997. The ex-dividend date was April 9, 1997 and the payable
date was April 25, 1997. Of the total distribution, $0.02 represents net in-
vestment income and the remaining portion is paid from capital surplus. If the
Fund's total distributions for the year (exclusive of long-term capital gains
dividends) exceed its net investment income and short-term capital gains for
such year, a portion of such distributions may constitute a non-taxable return
of capital. The actual determination of the source of the distributions can be
made only at year end.
5. CAPITAL TRANSACTIONS
On January 6, 1997, the Fund announced a rights offering to existing share-
holders. The Fund issued one right to purchase an additional share of the Fund
for each five shares owned as of January 31, 1997. The subscription period be-
gan February 3, 1997 and extended through 5:00 p.m., Eastern Time, March 6,
1997. The price of the shares issued was $8.31 which represented 95% of the
closing price of the Fund's common stock of $8.75 on March 7, 1997, the pric-
ing date of the offering. The Fund's net asset value on March 7, 1997 was
$9.82. There were 2,843,750 shares issued in the rights offering for proceeds,
net of offering expenses, of $23,537,729.
6. MEETINGS OF STOCKHOLDERS
The Annual Meeting of Stockholders of the Fund (the "Annual Meeting") was held
on May 21, 1997 pursuant to notice given to all stockholders of record at the
close of business on March 26, 1997. At the Annual Meeting stockholders were
asked to elect two Class III directors, Roberta M. Wilson, C.F.A. and Kenneth
V. Penland, C.F.A., to serve until the 2000 Annual Meeting and ratify the ap-
pointment by the Board of Directors of Ernst & Young LLP as the Fund's inde-
pendent auditors for the fiscal year ending December 31, 1997. At the Annual
Meeting, the number of shares voting for the election of Kenneth V. Penland,
C.F.A. was 12,274,773 and the number of shares withholding authority was
133,001; the number of shares voting for the election of Roberta M. Wilson,
C.F.A. was 12,229,187 and the number of shares withholding authority was
178,587. The name of each other director whose term of office continued after
the Annual Meeting was Richard C. Schulte, Robert J. Greenebaum and Robert M.
Inman. Additionally, at the Annual Meeting, the number of shares voting for
the ratification of the appointment of Ernst & Young LLP as independent audi-
tors was 12,220,158, the number of shares voting against ratification was
69,075 and the number of shares abstaining was 118,541.
