<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)
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]
www.blu.com
- --------------------------------------------------------------------------------
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
ANNUAL
REPORT TO STOCKHOLDERS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
Dear Fellow Shareholder,
1996 REVIEW
Nineteen ninety-six was another banner year for the stock market with abso-
lute returns strong in virtually all categories. Blue Chip Value Fund shares
performed exceptionally well, up 39.5%, as a result of strong net asset value
growth and the stock moving from a double-digit discount from net asset value
to a premium. Blue Chip Value Fund's net asset value increased 21.3%, exceed-
ing the average Growth and Income fund's return of 20.8% (according to Lipper
Analytical Services), although behind the S&P 500 return of 23.0%.
- --------------------------------------------------------------------------------
PERFORMANCE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD
TOTAL
12/31/95 12/31/96 DIVIDENDS RETURN(1)
<S> <C> <C> <C> <C>
Blue Chip
Value Fund $8.47 $8.94 $1.35 +21.3%
(Net Asset Value)
S&P 500 $615.93 $740.74 $15.16 +23.0%
Blue Chip
Value Fund $7.625 $9.25 $1.35 +39.5%
(Common Stock)
Market Price Premium/Discount to Net
Asset Value -10.0% +3.5%
</TABLE>
- -------------------------------------------------------------------------------
(1) Assumes reinvestment of dividends
- -------------------------------------------------------------------------------
In the last two years equity investors have been richly rewarded--the overall
stock market as typified by the S&P 500 gained almost 70%. Blue Chip Value
Fund investors participated with a similar return--based on net asset value,
while the two-year return on BLU stock (including distributions) was 97.5%,
nearly double.
We are both pleased and cautious about these results. We are pleased (though
not completely satisfied) with recent returns, but know the markets well
enough to recognize the inevitable reality of potential low stock returns and
negative years as well. In a bull market it can become too easy for individual
and professional investors alike to forget that investing involves risk.
In Blue Chip Value Fund, we emphazise owning stocks that have high return po-
tential and we manage the portfolio to reduce risk. Emphasizing low valuations
is a well-documented strategy that can lead to accomplishing both objectives.
Likewise, owning a portfolio of stocks that is diversified among industries
reduces overall portfolio risk.
In the fourth quarter of 1996, management at Boeing concluded that McDonnell
Douglas was undervalued and pursued acquisition discussions. As a result, our
holding in McDonnell Douglas gained 25%. Energy stocks were also good perform-
ers and the Fund benefitted handsomely from owning Tosco, up 44% in the quar-
ter. In addition, financial stocks continued their good returns. In the fourth
quarter our holdings of Student Loan Marketing and Travelers were up 25% and
23%, respectively. For the calendar year, the Fund's underweighting in tech-
nology stocks held back performance.
DISTRIBUTION POLICY CHANGE
The Fund applied for and received an exemption from the Securities and Ex-
change Commission that would allow the Fund to distribute capital gains more
than once per year. This exemption will enable the Fund to return to its pol-
icy of paying approximately 2.5% of net asset value per quarter. Last year's
announcement of receipt of this exemption and of the Fund's intention to re-
turn to its previous policy appears to have contributed to narrowing the dis-
count to net asset value. The Fund plans to make the first of these distribu-
tions under the new policy in April 1997.
INVESTMENT POLICY MODIFICATIONS
While adhering to Blue Chip Value Fund's core philosophy, three modifications
to non-fundamental investment policies were recommended to improve the invest-
ment advisor's flexibility in managing the Fund. The Board of Directors ap-
proved these three items: 1) the number of stocks required in the Fund was
previously fixed at 50 stocks, which has been changed to approximately 50
stocks to allow for situations when acting quickly on investment decisions is
important; 2) a requirement that the market value of holdings in the Fund be
equal-weighted was removed as being overly constraining, while there is no
change to our approach of maintaining a well-diversified portfolio; 3) the
maximum portion of the portfolio dedicated to any industry was 2.5 times that
industry's weight in the S&P 500--this constraint was removed because an in-
crease in the number of industries as defined by Standard and Poors over time
caused it to become outdated and overly restrictive.
These modifications are minor and of a technical nature, but demonstrate that
we are always on the lookout for ways to improve executing the strategy as
well as the investment approach. The Fund's investment adviser, Denver Invest-
ment Advisors LLC, has increased its investment in human and computer re-
sources in the last two years as we continue to better serve our Blue Chip
Value Fund shareholders.
OUTLOOK
Our outlook for the future remains much the same as it has been for the last
two years. Again, expectations for inflation and its effect on interest rates
as well as continued corporate profit growth are key to sustaining the bull
market when valuation levels are at the high end of historical ranges. Possi-
ble concerns on the horizon are high consumer debt levels which could slow
consumer spending, continued strength in the dollar, or higher economic growth
that causes the Federal Reserve to raise interest rates. Today, however, while
all of these possibilities and others cause the financial markets to ebb and
flow, the items that could dampen a bull market continue to be outweighed by
relatively low interest rates and moderate economic growth that typically pro-
duce attractive returns.
We appreciate your continued interest in the Fund.
Sincerely,
/s/ Varilyn K. Schock /s/ Kenneth V. Penland
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].
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Blue Chip Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Blue
Chip Value Fund, Inc. (the "Fund"), including the schedule of investments, as
of December 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the selected per share data and ratios for each
of the five years in the period then ended. These financial statements and se-
lected per share data and ratios are the responsibility of the Fund's manage-
ment. Our responsibility is to express an opinion on these financial state-
ments and selected per share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected per
share data and ratios are free of material misstatement. An audit includes ex-
amining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and selected per share data and ra-
tios referred to above present fairly, in all material respects, the financial
position of Blue Chip Value Fund, Inc. as of December 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the selected per share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
January 10, 1997
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in common stock at market value (identified cost--
$76,621,633).................................................... $107,865,678
Short-term investments........................................... 3,956,368
------------
TOTAL INVESTMENTS.............................................. 111,822,046
Dividends and interest receivable................................ 140,318
Other assets..................................................... 10,491
------------
TOTAL ASSETS................................................... 111,972,855
------------
LIABILITIES
Distributions payable............................................ 13,810,645
Advisory fee payable............................................. 61,773
Administration fee payable....................................... 11,709
Accrued expenses and other liabilities........................... 48,165
------------
TOTAL LIABILITIES.............................................. 13,932,292
------------
NET ASSETS....................................................... $ 98,040,563
============
COMPOSITION OF NET ASSETS
Capital stock, at par............................................ $ 109,608
Paid-in capital.................................................. 66,665,513
Undistributed net investment income.............................. 2,052
Undistributed net capital gains.................................. 19,345
Net unrealized appreciation on investments....................... 31,244,045
------------
$ 98,040,563
============
SHARES OF COMMON STOCK OUTSTANDING (100,000,000 shares authorized
at $0.01 par value)............................................. 10,960,829
============
Net asset value per share........................................ $ 8.94
============
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends............................................. $2,303,197
Interest.............................................. 200,182
----------
TOTAL INCOME.......................................... $ 2,503,379
Expenses
Investment advisory fee (Note 3)...................... 661,385
Administrative services fee (Note 3).................. 94,643
Transfer agent fees................................... 80,096
Shareholder reporting................................. 61,500
Legal fees............................................ 50,878
Insurance and fidelity bond........................... 32,130
Directors' fees....................................... 32,029
Audit fees............................................ 27,073
Custodian fees (Note 3)............................... 9,626
Other................................................. 27,060
----------
TOTAL EXPENSES........................................ 1,076,420
-----------
NET INVESTMENT INCOME................................. 1,426,959
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments....................... 13,391,556
Change in unrealized appreciation of investments for
the year.............................................. 5,132,527
-----------
NET GAIN ON INVESTMENTS............................... 18,524,083
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $19,951,042
===========
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Increase in net assets from operations
Net investment income............................. $ 1,426,959 $ 1,392,409
Net realized gain from securities transactions.... 13,391,556 10,375,111
Net change in unrealized appreciation of
investments during the year...................... 5,132,527 16,465,643
------------ ------------
Net increase in net assets resulting from
operations........................................ 19,951,042 28,233,163
------------ ------------
Distributions to shareholders from:
Net investment income............................. (1,424,907) (1,392,409)
Net realized gain on investments.................. (13,372,211) (10,375,111)
Tax return of capital............................. -- (70,177)
------------ ------------
(14,797,118) (11,837,697)
------------ ------------
Net increase in net assets......................... 5,153,924 16,395,466
Net assets
Beginning of year................................. 92,886,639 76,491,173
------------ ------------
End of year ($2,052 and $0 undistributed net
investment income at December 31, 1996 and
1995)............................................ $ 98,040,563 $ 92,886,639
============ ============
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout each period)
Net asset value--
beginning of period.............. $ 8.47 $ 6.98 $ 7.73 $ 7.63 $ 8.36
INVESTMENT OPERATIONS
Net investment income............. .13 .13 .11 .20 .12
Net gain (loss) on investments.... 1.69 2.45 (.11) .72 (.08)
------- ------- ------- ------- -------
Total from investment operations.. 1.82 2.58 .00 .92 .04
------- ------- ------- ------- -------
DISTRIBUTIONS
From net investment income........ (.13) (.13) (.11) (.20) (.12)
From net realized gains on
investments...................... (1.22) (.95) (.38) (.14) .00
In excess of net realized gains on
investments...................... .00 .00 .00 (.41) (.48)
Tax return of capital............. .00 (.01) (.26) (.07) (.17)
------- ------- ------- ------- -------
Total distributions............... (1.35) (1.09) (.75) (.82) (.77)
------- ------- ------- ------- -------
Net asset value--end of period... $ 8.94 $ 8.47 $ 6.98 $ 7.73 $ 7.63
======= ======= ======= ======= =======
Per share market value--end of
period.......................... $ 9.25 $ 7.625 $ 6.125 $ 7.875 $ 7.75
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN........... 39.5% 41.6% (13.2)% 12.5% 12.4%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses (excluding
interest) to average net assets.. 1.05% 1.15% 1.22% 1.27% 1.27%
Ratio of expenses to average net
assets........................... 1.05% 1.15% 1.22% 1.28% 1.42%
Ratio of net investment income to
average net assets............... 1.39% 1.55% 1.46% 2.55% 1.57%
Portfolio turnover rate*.......... 42.31% 50.84% 62.77% 56.11% 118.24%
Ratio of distributions to average
net assets....................... 14.42% 13.22% 9.88% 10.33% 9.94%
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)....................... $98,041 $92,887 $76,491 $84,168 $72,149
</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 year and dividing it by the monthly average of the market value
of the portfolio securities during the year.
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
COMMON SHARES COST VALUE
STOCKS: ------ ----------- ------------
<S> <C> <C> <C>
CONSUMER STAPLES -- 28.1%
BEVERAGES -- ALCOHOLIC -- 2.2%
Anheuser Busch Cos. ........................... 53,600 $ 1,997,940 $ 2,144,000
BEVERAGES -- SOFT DRINKS -- 2.3%
PepsiCo, Inc. ................................. 77,300 1,829,463 2,261,021
DRUGS -- 5.0%
Pfizer, Inc. .................................. 30,600 1,083,086 2,535,975
Schering-Plough Corp. ......................... 37,040 954,686 2,398,340
----------- ------------
2,037,772 4,934,315
RETAIL STORES -- DRUG STORES -- 2.8%
Rite Aid Corp. ................................ 68,800 1,707,281 2,734,800
FOOD -- 6.2%
Dole Food Co. Inc. ............................ 52,760 1,544,093 1,787,245
IBP, Inc. ..................................... 81,800 1,149,522 1,983,650
Sara Lee Corp. ................................ 60,700 1,994,032 2,261,075
----------- ------------
4,687,647 6,031,970
HEALTH CARE DIVERSIFIED -- 2.9%
Bristol Myers Squibb........................... 25,820 1,629,190 2,807,925
MEDICAL PRODUCTS & SUPPLIES -- 2.3%
Becton Dickinson & Co. ........................ 53,000 1,991,181 2,298,875
RETAIL STORES -- FOOD CHAINS -- 4.4%
Giant Food
Inc. -- Cl A.................................. 60,860 1,965,223 2,099,670
Great Atlantic &
Pac. Tea Co. ................................. 70,400 2,011,596 2,244,000
----------- ------------
3,976,819 4,343,670
CONSUMER CYCLICAL -- 19.3%
ENTERTAINMENT -- 2.6%
Carnival Corp. --Cl A.......................... 77,110 1,812,478 2,544,630
HARDWARE & TOOLS -- 1.9%
Black & Decker Corp. .......................... 62,560 1,359,085 1,884,620
PHOTOGRAPHY/IMAGING -- 2.3%
Eastman Kodak Co. ............................. 28,300 1,515,271 2,271,075
HOTELS -- MOTELS -- 2.4%
Hilton Hotels Corp. ........................... 90,000 1,649,273 2,351,250
</TABLE>
<TABLE>
<CAPTION>
MARKET
COMMON SHARES COST VALUE
STOCKS: ------- ----------- ------------
<S> <C> <C> <C>
RETAIL STORES -- GENERAL MERCH. CHAINS -- 7.6%
Gap Inc. ..................................... 82,800 $ 1,862,503 $ 2,494,350
Sears Roebuck & Co. .......................... 42,670 1,224,137 1,968,154
Dayton Hudson Corp. .......................... 75,000 2,202,484 2,943,750
----------- ------------
5,289,124 7,406,254
RETAIL STORES -- SPECIALTY -- 2.5%
CVS Corp. .................................... 60,400 1,750,116 2,499,050
CREDIT SENSITIVE -- 30.0%
ELECTRIC COMPANIES -- 5.7%
Central & South West Corp. ................... 67,130 1,643,016 1,720,206
General Public Utilities...................... 56,870 1,507,737 1,912,254
Edison International.......................... 99,930 1,641,350 1,986,109
----------- ------------
4,792,103 5,618,569
INVESTMENT BANKING/BROKERAGE -- 3.2%
Travelers Group............................... 68,880 1,684,386 3,125,430
FINANCIAL -- MISCELLANEOUS -- 2.6%
Student Loan Marketing Assn. ................. 27,300 2,057,046 2,542,313
MAJOR REGIONAL BANKS -- 5.8%
First Union Corp. ............................ 38,230 2,014,793 2,829,020
NationsBank Corp. ............................ 29,100 2,204,129 2,844,525
----------- ------------
4,218,922 5,673,545
MONEY CENTER BANKS -- 3.1%
Chase Manhattan Corp. ........................ 33,600 1,314,044 2,998,800
SAVINGS & LOANS -- 2.2%
Ahmanson HF & Co. ............................ 65,500 2,238,790 2,128,750
NATURAL GAS -- 2.6%
Coastal Corp. ................................ 51,760 1,738,498 2,529,770
PROPERTY & CASUALTY INSURANCE -- 2.6%
USF&G Corp. .................................. 124,130 1,694,274 2,591,214
TELECOMMUNICATIONS -- 2.2%
Sprint Corp. ................................. 53,300 1,573,360 2,125,338
</TABLE>
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHE DULE OF INVESTMENTS (CONTINUED)
December 31, 1996
<TABLE>
<CAPTION>
MARKET
COMMON SHARES COST VALUE
STOCKS: ------ ----------- ------------
<S> <C> <C> <C>
INTERMEDIATE GOODS & SERVICES -- 23.7%
CHEMICALS -- DIVERSIFIED -- 2.5%
PPG Industries, Inc. ........................... 43,630 $ 1,555,878 $ 2,448,734
OIL EXPLORATION & PRODUCTION -- 1.6%
Burlington Resources Inc. ...................... 31,800 1,489,935 1,601,925
OIL (INTEGRATED -- DOMESTIC) -- 8.0%
Tosco Corp. .................................... 43,200 2,010,943 3,418,200
Atlantic Richfield Co. ......................... 16,500 1,966,911 2,186,250
USX-Marathon Group.............................. 94,500 2,009,354 2,256,188
----------- ------------
5,987,208 7,860,638
OIL (INTEGRATED -- INTERNATIONAL) -- 4.5%
Mobil Corp. .................................... 17,860 1,333,973 2,183,385
Texaco Inc. .................................... 22,700 1,959,010 2,227,438
----------- ------------
3,292,983 4,410,823
MISCELLANEOUS -- 5.2%
Harris Corp. ................................... 37,460 1,802,764 2,570,693
Loews Corp. .................................... 26,560 1,658,795 2,503,280
----------- ------------
3,461,559 5,073,973
RAILROADS -- 1.9%
CSX Corp ....................................... 43,300 2,010,203 1,829,425
CAPITAL GOODS -- 8.9%
AEROSPACE & DEFENSE -- 5.3%
McDonnell Douglas Corp. ........................ 40,180 683,694 2,571,520
United Technologies Corp. ...................... 39,660 1,562,604 2,617,560
----------- ------------
2,246,298 5,189,080
</TABLE>
<TABLE>
<CAPTION>
MARKET
COMMON SHARES COST VALUE
STOCKS: ------ ----------- ------------
<S> <C> <C> <C>
COMPUTER SOFTWARE & SERVICE -- 2.5%
Computer Associates International Inc. ...... 50,017 $ 923,256 $ 2,488,346
MACHINERY-DIVERSIFIED -- 1.1%
Dover Corp. ................................. 22,200 1,110,250 1,115,550
----------- ------------
TOTAL INVESTMENT IN COMMON STOCKS --
110.0%.................................... 76,621,633 107,865,678
SHORT-TERM INVESTMENTS
United States Treasury Bill-- Matures
1/23/97--2.0%............................... 1,994,356 1,994,356
Money Market Fund-- 2.0%..................... 1,962,012 1,962,012
----------- ------------
TOTAL INVESTMENTS-- 114.0%................. 80,578,001 111,822,046
===========
Liabilities, less receivables, and other
assets: (14.0%)............................. (13,781,483)
------------
NET ASSETS --100%.......................... $ 98,040,563
============
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BLUE CHIP VALUE FUND, INC.
December 31, 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.
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 $42,354,297 and
$55,422,674, respectively, for the year. At December 31, 1996, gross
unrealized depreciation of investments was $290,818 and gross unrealized ap-
preciation of investments was $31,534,863.
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 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 $9,626 during 1996.
4. CAPITAL TRANSACTIONS
In 1996, the Fund announced a change in its policy of distributions to its
shareholders. Beginning in April 1997, the Fund plans to distribute 2.5% of
its net asset value quarterly to its shareholders.
In 1997, the Fund announced plans to proceed with a rights offering to exist-
ing stockholders. The Fund plans to issue one right to purchase an additional
share of the Fund for each five shares owned at a price of 95% of the lesser
of net asset value, or market price. The rights will not be transferable.
Stockholders will also have the option to subscribe for additional shares dur-
ing the offering.
The rights will be issued to stockholders of record as of January 31, 1997,
the subscription period will begin February 3, 1997, and extend through 5:00
p.m., New York time, March 6, 1997. The price of shares to be issued will be
determined as of March 7, 1997.
