<PAGE>
As filed with the Securities and Exchange Commission on April 14, 1998
1940 Act File No.811-5003
1933 Act File No. _________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___
Post-Effective Amendment No. ___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. ___
BLUE CHIP VALUE FUND, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1225 Seventeenth Street, 26th Floor, Denver, CO 80202
-----------------------------------------------------
(Address of Principal Executive Offices)
(303) 312-5100
--------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Kenneth V. Penland, Chairman of the Board
1225 Seventeenth Street
26th Floor
Denver, CO 80202
-------------------------------------
(Name and Address of Agent for Service)
___________
With Copies to:
Henry S. Hilles, Jr.
Drinker Biddle & Reath LLP
PNB Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box. [_]
It is proposed that this filing will become effective (check appropriate box)
[X] when declared effective pursuant to section 8(c)
If appropriate, check the following boxes:
[_] this [post-effective] amendment designates a new effective date
for a previously filed [post-effective amendment] [registration
statement].
[_] this form is filed to register an additional securities for an
offering pursuant to Rule 462(b) under the Securities Act and
the Securities Act registration statement number of the earlier
effective registration statement for the same offering is
______________.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ----------------------------------------------------------------------------------
Proposed Proposed
Title of Amount Maximum Maximum
Securities Being Being Offering Price Aggregate Amount of
Registered Registered Per Unit/1/ Offering Price Registration Fee
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common 2,282,021 $11.5625 $26,385,868 $7,783.83
Stock (par value
$0.01 per share)
</TABLE>
______________________
1. As calculated pursuant to Rule 457(c) under the Securities Act of
1933. Based on the average high and low sale prices reported on the
New York Stock Exchange on April 8, 1998.
<PAGE>
BLUE CHIP VALUE FUND, INC.
CROSS REFERENCE SHEET
---------------------
ITEM NUMBER AND HEADING
- -----------------------
PART A CAPTION IN PROSPECTUS
- ------ ---------------------
1. Outside Front Cover Cover Page
2. Inside Front and Outside Back Cover
Page Cover Page
3. Fee Table and Synopsis Fee Table
4. Financial Highlights Financial Highlights
5. Plan of Distribution The Offer
6. Selling Shareholders *
7. Use of Proceeds Use of Proceeds
8. General Description of the Registrant The Fund
9. Management Management of the Fund
10. Capital Stock, Long-Term Debt, and
Other Securities Capital Stock
11. Defaults and Arrears on Senior
Securities *
12. Legal Proceedings *
13. Table of Contents of the Statement
of Additional Information Statement of Additional Information
PART B CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
- ------ ----------------------------------------------
14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information and History *
17. Investment Objective and Policies Investment Objective and Policies
18. Management Management
19. Control Persons and Principal Holders Control Persons and Principal
of Securities Holders of Securities
20. Investment Advisory and Other Services Investment Advisory and Other
Services
21. Brokerage Allocation and Brokerage Allocation
Other Practices and Other Practices
22. Tax Status Tax Status
23. Financial Statements Financial Statements
* Not applicable
<PAGE>
PROSPECTUS
- ----------
1,825,617 SHARES
OF
COMMON STOCK ISSUABLE UPON EXERCISE OF
RIGHTS TO SUBSCRIBE FOR SUCH SHARES OF COMMON STOCK
BLUE CHIP VALUE FUND, INC.
Blue Chip Value Fund, Inc. (the "Fund") is offering to its stockholders of
record as of the close of business on April __, 1998 rights ("Rights"),
entitling the holders thereof to subscribe for an aggregate of 1,825,617 shares
of the Fund's Common Stock (the "Offer") at the rate of one share of Common
Stock for each eight (8) Rights held. Stockholders who fully exercise their
Rights will have, subject to certain limitations and subject to allotment, an
over-subscription privilege (the "Over-Subscription Privilege"). The Rights are
non-transferable and will not be admitted for trading on the New York Stock
Exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE WILL BE THE LESSER
OF 95% OF THE LAST REPORTED SALE PRICE ON THE NEW YORK STOCK EXCHANGE OR 95% OF
NET ASSET VALUE ON JUNE __, 1998 (THE "PRICING DATE") OF A SHARE OF THE FUND'S
COMMON STOCK.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON JUNE __, 1998 (THE
"EXPIRATION DATE"), THE ____ DAY AFTER THE DATE OF THIS PROSPECTUS. SINCE THE
CLOSE OF THE OFFERING ON THE EXPIRATION DATE IS PRIOR TO THE PRICING DATE,
HOLDERS WHO CHOOSE TO EXERCISE THEIR RIGHTS WILL NOT KNOW THE SUBSCRIPTION PRICE
PER SHARE AT THE TIME THEY EXERCISE SUCH RIGHTS.
The Fund is a closed-end diversified management investment company. Its
investment objective is to seek a high level of total return through capital
appreciation and current income consistent with investment primarily in a
diversified portfolio of common stocks. Denver Investment Advisors LLC (the
"Advisor") serves as the investment advisor to the Fund. The Fund will
generally be fully invested in approximately 50 common stocks, as well as other
equity securities believed by the Advisor to represent the best values among
those issued by large companies with headquarters in the United States, such as
those included in, or similar in size to those included in, Standard & Poors 500
Composite Stock Price Index. The address of the Fund is 1225 Seventeenth
Street, 26th Floor, Denver, Colorado 80202 and its telephone number is (800)
624-4190. The Fund's Common Stock is listed on the New York Stock Exchange
under the symbol "BLU."
The Fund announced the proposed Offer on April __, 1998. The net asset
values per share of Common Stock at the close of business on April __, 1998 and
May __, 1998 were $____ and $____, respectively, and the last reported sale
prices of a share of the Fund's Common Stock on such Exchange on those dates
were $____ and $_____, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
======================================================
PRICE (1) SALES LOAD PROCEEDS TO
FUND (1)(2)
- ------------------------------------------------------
Per Share $ ____ None $ ____
- ------------------------------------------------------
Total $__________ None $__________
======================================================
(1) Estimated based on an assumed Price per Share of 95% of the net asset value
of a share of the Fund's Common Stock on May __, 1998. Pursuant to the
Over-Subscription Privilege, the Fund may increase the number of shares
subject to subscription by up to 25% of the shares offered hereby. If the
Fund increases the number of shares subject to subscription by 25%, the
Total Price will be $__________ and the Total Proceeds will be $__________.
(2) Before deduction of expenses payable by the Fund, estimated at $110,500.
_____________________________
As a result of the terms of this offer, stockholders who do not exercise
their Rights will, upon the completion of the Offer, own a smaller proportional
interest in the Fund. In addition, because the Subscription Price per share
will be less than the current net asset value per share, the Offer will result
in a reduction of net asset value, which will dilute the holdings of
stockholders who do not exercise their Rights.
_______________________________
This Prospectus sets forth concisely the information that stockholders
should consider before exercising their Rights. Stockholders should retain this
Prospectus for future reference. Additional information about the Fund,
contained in a Statement of Additional Information, has been filed with the
Securities and Exchange Commission and is available upon request without charge
by contacting the Fund at its telephone number or address shown above. The
Statement of Additional Information bears the same date as, and is incorporated
by reference in its entirety into, this Prospectus. The table of contents of the
Statement of Additional Information appears at the end of this Prospectus.
_______________________________
MAY __, 1998
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load None
Dividend Reinvestment and Cash
Purchase Plan Fees None
ANNUAL EXPENSES (as a percentage of net assets)
Management Fees 0.61%
Other Expenses 0.33%
-----
Total Annual Expenses 0.94%
- -------------------------------------------------------------
Example 1 year 3 years 5 years 10 years
- -------------------------------------------------------------
You would pay
the following
expenses on a
$1,000
investment,
assuming a 5%
annual return $ 10 $ 30 $ 52 $ 116
- -------------------------------------------------------------
The purpose of the Fee Table is to assist stockholders in understanding the
various costs and expenses that stockholders bear directly or indirectly. For a
more complete description of these costs and expenses, see "MANAGEMENT OF THE
FUND--Expenses of the Fund."
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. THE ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN.
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth selected data for a share of Common Stock
outstanding throughout each period presented. The per share operating
performance and ratios for each of the five years in the period ended December
31, 1997 have been audited by Ernst & Young LLP, the Fund's independent
auditors, whose reports thereon were unqualified. The following information
should be read in conjunction with the Financial Statements and Notes thereto,
which are incorporated by reference into the Statement of Additional
Information. Further information about the performance of the Fund is
available in the annual report to stockholders. The Statement of Additional
Information and the annual report to stockholders may be obtained from the Fund
free of charge by calling 1-800-624-4190.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.94 $ 8.47 $ 6.98 $ 7.73 $ 7.63 $ 8.36 $ 6.97 $ 7.83 $ 7.13 $ 6.68
Net Investment Income 0.10 0.13 0.13 0.11 0.20 0.12 0.13 0.14 0.25 0.20
Net Gains or (Losses) on Securities
(both realized and unrealized) 2.56 1.69 2.45 (0.11) 0.76* (0.08) 2.22 (0.25) 1.23 0.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations 2.66 1.82 2.58 0.00 0.96* 0.04 2.35 (0.11) 1.48 0.64
Less Distributions:
Dividends (from net investment
income) 0.10 0.13 0.13 0.11 0.20 0.12 0.13 0.14 0.30 0.19
Distributions (from capital gains) 1.47 1.22 0.95 0.38 0.14 0.00 0.00 0.00 0.00 0.00
Distributions in Excess of Realized
Gains/1/ 0.00 0.00 0.00 0.00 0.41 0.48 0.78 0.00 0.48 0.00
Tax Return of Capital/1/ 0.00 0.00 0.01 0.26 0.07 0.17 0.05 0.61 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions 1.57 1.35 1.09 0.75 0.82 0.77 0.96 0.75 0.78 0.19
Dilutive Effect of Rights Offering 0.26 -- -- -- 0.03* -- -- -- -- --
Offering Costs Charged to Paid-in
Capital 0.01 -- -- -- 0.01* -- -- -- -- --
Total Capital Share Transactions 0.27 -- -- -- 0.04* -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $ 9.76 $ 8.94 $ 8.47 $ 6.98 $ 7.73 $ 7.63 $ 8.36 $ 6.97 $ 7.83 $ 7.13
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Market Value,
End of Period $10.9375 $ 9.25 $ 7.625 $ 6.125 $ 7.875 $ 7.75 $ 7.625 $ 6.00
Total Investment Return 40.5% 39.5% 41.6% (13.2)% 13.7%* 12.4% 44.9% (4.0)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period $138,905,406 $98,040,563 $92,886,640 $76,491,173 $84,168,306 $72,418,811 $78,221,238 $65,299,686
Ratio of Expenses to Average
Net Assets 0.94% 1.05% 1.15% 1.22% 1.28% 1.42% 1.63% 1.96%
Ratio of Net Investment
Income to Average Net Assets 1.01% 1.39% 1.55% 1.46% 2.55% 1.57% 1.66% 1.96%
Portfolio Turnover Rate 55% 42% 51% 63% 56% 118% 119% 104%
Average Commission Rate Paid/2/ $0.05 $0.05 N/A N/A N/A N/A N/A N/A
1988 1989
------ ------
Per Share Market Value,
End of Period $ 7.00 $ 6.00
Total Investment Return 30.4% 12.6%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period $73,316,564 $66,786,925
Ratio of Expenses to Average
Net Assets 1.98% 2.22%
Ratio of Net Investment
Income to Average Net Assets 3.25% 2.82%
Portfolio Turnover Rate 165% 135%
Average Commission Rate Paid/2/ N/A N/A
</TABLE>
______________________
/1/ From 1989 through 1993, the Fund distributed to stockholders quarterly an
amount equal to 2.5% (10% on an annual basis) of the Fund's net asset value
per share, without regard to net investment income and net capital gains.
These distributions were previously reported as returns of capital in the
Fund's annual reports to stockholders. Under new accounting guidelines, the
distributions have been reclassified into two categories: (i) distributions
in excess of realized gains, which are distributions attributable to
realized gains in the current year offset by loss carryovers from prior
years--which are taxable to the recipient as ordinary income, and (ii) tax
return of capital, which are distributions that are in excess of current
and accumulated earnings and profits--which are not taxable to
stockholders.
/2/ Required for fiscal years beginning on or after September 1, 1995.
* Restated.
-3-
<PAGE>
SENIOR SECURITIES
At the time of its organization and public offering in 1987, the Fund
borrowed a total of $7,375,500 in the form of 8-1/2% Senior Installment Notes
(the "Notes"). Pursuant to the Notes, the Fund made monthly payments of
principal and interest, the last of which was paid in May 1993. The Fund has
had no Senior Securities outstanding since May 1993. The following table sets
forth the principal amount of the Notes outstanding at the end of each of the
past ten years, together with the asset coverage for each $1,000 of
indebtedness.
ASSET COVERAGE PER
DECEMBER TOTAL AMOUNT $1,000 OF
31 OUTSTANDING INDEBTEDNESS
---------- ------------ ------------------
1997 $ 0 $ N/A
1996 0 N/A
1995 0 N/A
1994 0 N/A
1993 0 N/A
1992 643,172 113,596
1991 2,097,368 38,295
1990 3,433,466 20,019
1989 4,661,055 16,730
1988 5,788,949 12,537
THE OFFER
TERMS OF THE OFFER
The Fund hereby offers to the holders of its Common Stock of record as of
the close of business on April __, 1998 (the "Record Date") the right to
subscribe for an aggregate of 1,825,617 shares of Common Stock (the "Shares") of
the Fund. Each such stockholder is being issued one (1) Right for each share of
Common Stock owned on the Record Date. The Rights entitle a stockholder to
acquire in the Primary Subscription at the Subscription Price one (1) Share for
each eight (8) Rights held. Rights may be exercised at any time during the
Subscription Period, which commences on the date of this Prospectus and ends as
of 5:00 p.m. New York time, on June __, 1998 (the "Expiration Date"). A
stockholder's right to acquire one (1) Share for each eight (8) Rights held is
hereinafter referred to as the "Primary Subscription."
-4-
<PAGE>
In addition, any stockholder who fully exercises all Rights issued to him
is entitled to subscribe for Shares which were not otherwise subscribed for in
the Primary Subscription. For purposes of determining the maximum number of
Shares a holder may acquire pursuant to the Offer, broker-dealers whose Shares
are held of record on the Record Date by Cede & Co. or by any other depository
or nominee will be deemed to be the holder of the Rights that are issued to Cede
& Co. or such other depository or nominee. Shares acquired pursuant to the
Over-Subscription Privilege are subject to allotment or increase, which is more
fully discussed below under "Over-Subscription Privilege."
The Rights are non-transferable. Therefore, only the underlying Shares,
and not the Rights, will be admitted for trading on the New York Stock Exchange.
Since fractional shares will not be issued, stockholders who receive, or who are
left with, fewer than eight (8) Rights will be unable to exercise such Rights
and will not be entitled to receive any cash in lieu of fractional shares.
IMPORTANT DATES TO REMEMBER
EVENT DATE
----- ----
Record date April __, 1998
Subscription period May __, 1998 through June __, 1998
Expiration of the offer June __, 1998
Pricing Date June __, 1998
Confirmation to participants June __, 1998
Final payment for shares June __, 1998
PURPOSES OF THE OFFER
The Board of Directors of the Fund has determined that it would be in the
best interests of the Fund and its stockholders to increase the assets of the
Fund available for investment. In addition, the Offer seeks to reward the long-
term stockholder by giving existing stockholders the right to purchase
additional Shares at a price below market value and net asset value without
brokerage commissions. Increasing the size of the Fund also might result in
lowering the Fund's expenses as a percentage of average net assets.
The purpose of setting the determination of the Subscription Price
subsequent to the Expiration Date is to insure that the Offer will attract the
maximum participation of stockholders with the minimum dilution to non-
participating stockholders.
The Advisor may benefit from the Offer because its fee is based on the net
assets of the Fund. It is not possible to state precisely the amount of
additional compensation the Advisor might receive as a result of the Offer
because it is not known how many Shares will be subscribed for and because the
proceeds of the Offer will be invested in additional portfolio securities which
will presumably fluctuate in value. Two of the Fund's directors,
-5-
<PAGE>
one of whom voted to authorize the Offer, are affiliated with the Advisor and,
therefore, could benefit indirectly from the Offer. The other four directors
are not "interested persons" of the Fund within the meaning of the Investment
Company Act of 1940 (the "1940 Act").
The Fund may, in the future and at its discretion, from time to time,
choose to make additional rights offerings, for a number of shares and on terms
which may or may not be similar to this Offer.
OVER-SUBSCRIPTION PRIVILEGE
If some stockholders do not exercise all of their Rights, the remaining
unsubscribed Shares will be offered, by means of the Over-Subscription
Privilege, to holders of Rights who wish to acquire more than the number to
which their Rights entitle them. Holders of Rights who exercise their Rights
will be asked to indicate on the Exercise Form how many Shares they are willing
to acquire pursuant to this Over-Subscription Privilege. If there remain
sufficient Shares, all over-subscriptions will be honored in full. If there are
not sufficient Shares to honor all over-subscriptions, the Fund may, at its
discretion, issue up to an additional 25% of the Shares available pursuant to
the Offer in order to honor such over-subscriptions. To the extent the Fund
determines not to issue additional Shares to honor all over-subscriptions, the
available Shares will be allocated among those who oversubscribe based solely on
the number of shares of Common Stock held of record on the Record Date. The
percentage of remaining Shares each oversubscribing holder may acquire may be
rounded up or down to result in delivery of whole Shares. The allocation
process may involve a series of allocations in order to assure that the total
number of Shares available for oversubscriptions are distributed on a pro-rata
basis.
The Fund will not offer or sell any shares which are not subscribed for
pursuant to the Primary Subscription or the Over-Subscription Privilege.
THE SUBSCRIPTION PRICE
The Subscription Price for the Shares to be issued on the exercise of the
Rights will be the lesser of 95% of the last reported sale price on the New York
Stock Exchange or 95% of net asset value on June __, 1998 (the "Pricing Date")
of a share of the Fund's Common Stock.
The Fund announced the proposed Offer on April __, 1998. The net asset
values per share of the Fund's Common Stock at the close of business on April
__, 1998 and May __, 1998 were $____ and $____, respectively, and the last
reported sale prices of a share of the Fund's Common Stock on such Exchange on
those dates were $____ and $_____, respectively. As an example, the
Subscription Price would have been $____ or $_____ had the Subscription Price
been determined on those respective dates. The actual Subscription Price will
not be determined until the Pricing Date.
-6-
<PAGE>
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 p.m., New York time, on June __, 1998, the
____ day after the date of this Prospectus (the "Expiration Date"). Rights will
expire on the Expiration Date and thereafter may not be exercised. Inasmuch as
the close of the offering on the Expiration Date is prior to the time of pricing
the Offering, stockholders who decide to acquire Shares in the Primary
Subscription or pursuant to the Over-Subscription Privilege will not know the
Subscription Price per share when they make their decisions.
SUBSCRIPTION AGENT
The Subscription Agent for the Offer is ChaseMellon Shareholder Services,
L.L.C., 85 Challenger Road, Overpeck Centre, Ridgefield Park, NJ 07660, which
will receive a fee in the amount of $46,000 (estimated) and reimbursement for
all out-of-pocket expenses related to the Offer. Stockholders who acquire
shares pursuant to the Offer will not receive interest on funds held by the
Subscription Agent. The Subscription Agent will hold such funds in a
segregated, depository account, and will pay interest thereon to the Fund. The
Subscription Agent is also the Fund's Transfer Agent. Stockholder inquiries
relating to the Offer should be directed to the Fund by calling 1-800-624-4190.
METHOD OF EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the enclosed Exercise
Form and mailing it in the envelope provided, or delivering the completed and
signed Exercise Form to the Subscription Agent, together with payment for the
shares as described below under "Payment for Shares." Fractional shares will
not be issued, and stockholders who receive, or who are left with, fewer than
eight (8) Rights will not be able to exercise such Rights. Exercise Forms must
be received by the Subscription Agent prior to 5:00 p.m., New York time, on the
Expiration Date (unless payment is effected by means of a notice of guaranteed
delivery (see "Payment for Shares") at the offices of the Subscription Agent.
Rights may also be exercised through a holder's broker.
PAYMENT FOR SHARES
Stockholders who acquire Shares in the Primary Subscription or pursuant to
the Over-Subscription Privilege may choose between the following methods of
payment:
(1) If, prior to 5:00 p.m., New York time, on the Expiration Date,
the Subscription Agent shall have received a notice of guaranteed delivery
by telegram or otherwise, from a bank or trust company or a New York Stock
Exchange member firm, together with payment of the full Subscription Price
for the Shares subscribed for in the Primary Subscription and any
additional Shares subscribed for pursuant to the Over-Subscription
Privilege, guaranteeing delivery of a properly completed and executed
Exercise Form, the subscription will be accepted by the Subscription Agent.
-7-
<PAGE>
The Subscription Agent will not honor a notice of guaranteed delivery if a
properly completed and executed Exercise Form is not received by the
Subscription Agent prior to 5:00 p.m., New York time, on the fifth (5th)
business day after the Expiration Date.
(2) Alternatively, a stockholder can, together with the Exercise
Form, send payment for the Shares acquired in the Primary Subscription and
any additional Shares subscribed for pursuant to the Over-Subscription
Privilege, to the Subscription Agent based on an assumed purchase price of
$____ per Share. To be accepted, such payment, together with the Exercise
Form, must be received by the Subscription Agent prior to 5:00 p.m., New
York time, on the Expiration Date.
A PAYMENT BY CHECK, PURSUANT TO THE SECOND METHOD DESCRIBED ABOVE, MUST
ACCOMPANY ANY EXERCISE FORM FOR SUCH EXERCISE FORM TO BE ACCEPTED.
Within three (3) business days following the Pricing Date, a confirmation
will be sent by the Subscription Agent to each stockholder (or, if the Fund's
shares on the Record Date are held by Cede & Co. or any other depository or
nominee, to Cede & Co. or such other depository or nominee). The date of the
confirmation is referred to as the "Confirmation Date." The confirmation will
show (i) the number of Shares acquired pursuant to the Primary Subscription;
(ii) the number of Shares, if any, acquired pursuant to the Over-Subscription
Privilege; (iii) the per Share and total purchase price for the Shares; and (iv)
any additional amount payable by such stockholder to the Fund or any excess to
be refunded by the Fund to such stockholder, in each case based on the
Subscription Price as determined on the Pricing Date. In the case of any such
stockholder who exercises his right to acquire Shares pursuant to the Over-
Subscription Privilege, any such excess payment which would otherwise be
refunded to him will be applied by the Fund toward payment for Shares acquired
pursuant to exercise of the Over-Subscription Privilege. Any additional payment
required from a stockholder must be received by the Subscription Agent prior to
5:00 p.m., New York time, on the tenth (10th) business day after the
Confirmation Date, and any excess payment to be refunded by the Fund to such
stockholder will be mailed by the Subscription Agent within ten (10) business
days after the Confirmation Date. All payments by a stockholder must be made in
United States dollars by money order or check drawn on a bank located in the
United States of America and payable to ChaseMellon Shareholder Services, L.L.C.
Whichever of the above two methods is used, issuance and delivery of
certificates for the Shares subscribed for are subject to collection of checks
and actual payment pursuant to any notice of guaranteed delivery.
If a stockholder who acquires Shares pursuant to the Primary Subscription
or Over-Subscription Privilege does not make payment of any additional amounts
due, the Fund reserves the right to (i) find other purchasers for such
subscribed and unpaid shares; (ii)
-8-
<PAGE>
apply any payment actually received by it toward the purchase of the largest
number of whole Shares which could be acquired by such stockholder with such
payment upon exercise of the Primary Subscription and/or Over-Subscription
Privilege; and/or (iii) exercise the right to set-off against payments actually
received by it with respect to such subscribed Shares.
POSSIBLE SUSPENSION OR WITHDRAWAL OF THE OFFER
The Fund has, as required by the Securities and Exchange Commission's
registration form, undertaken to suspend the Offer until it amends this
Prospectus if, subsequent to May __, 1998, the effective date of the Fund's
Registration Statement, the Fund's net asset value declines more than 10% from
its net asset value as of May __, 1998. Accordingly, the Fund will notify
stockholders of any such decline and thereby permit them to cancel their
exercise of Rights.
PURCHASE AND SALE OF RIGHTS
The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be admitted to trading on the New York Stock
Exchange. However, the Shares to be issued pursuant to the Rights will be
listed and admitted to trading on the New York Stock Exchange.
DELIVERY OF STOCK CERTIFICATES
Stock certificates for all Shares acquired pursuant to the Primary
Subscription and the Over-Subscription Privilege will be mailed within fifteen
(15) business days after the Confirmation Date and after full payment of the
Shares subscribed for has cleared.
TAX CONSEQUENCES
For Federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to holders of Common Stock, and no loss
will be realized if the Rights expire without being exercised (unless the
stockholder elects to allocate to the Rights a portion of the basis of the
existing Common Stock in proportion to the relative values of the Rights and the
Common Stock).
A stockholder's holding period for a Share acquired upon exercise of a
Right begins with the date of exercise. In the absence of an election by the
stockholder to allocate basis to the Rights, the stockholder's basis for
determining gain or loss upon the sale of a Share acquired upon exercise of a
Right will be equal to the per Share Subscription price. A stockholder's gain
or loss recognized upon a sale of that Share will be capital gain or loss if the
Share was held as a capital asset at the time of sale and will be long-term
capital gain or loss if it was held, at the time of sale, for more than one (1)
year but 18 months or less (28% rate), or for more than 18 months (20% rate).
-9-
<PAGE>
The foregoing does not cover the state or local tax consequences of
receiving or exercising a Right, as to which stockholders should consult their
own tax advisers.
SPECIAL RISK CONSIDERATIONS
As a result of the terms of the Offer, stockholders who do not exercise
their Rights will, at the completion of the Offer, own a smaller proportional
interest in the Fund. In addition, because the Subscription Price for each
Share will be less than the then current net asset value per share of the Fund's
Common Stock, the Offer will result in a reduction of net asset value which will
dilute the holdings of stockholders who do not exercise their Rights. For
example, assuming that all Shares offered hereby are purchased in the Offer and
the Fund increases the number of Shares subject to subscription by 25% in order
to satisfy the over-subscription, and that the Subscription Price is 95% of the
Fund's net asset value of $____ per share on May __, 1998, the Fund's net asset
value per share would be reduced by approximately $____ per share as of that
date, and assuming that only one-half of the Shares offered hereby are purchased
in the Offer, the Fund's net asset value per share would be reduced by
approximately $____ per share as of that date.
USE OF PROCEEDS
Assuming all Shares offered hereby are sold at the estimated Subscription
Price of $_____ per Share, the net proceeds of the offer are estimated to be
$__________, after deducting expenses payable by the Fund estimated at
approximately $110,500. If the Fund in its sole discretion increases the number
of Shares subject to the Offer by 25% in order to satisfy over-subscriptions,
the additional net proceeds will be approximately $__________. It is
anticipated that investment of such proceeds in accordance with the Fund's
investment objective and policies will occur promptly, and in any event within
ten business days, after they are available to the Fund.
THE FUND
Blue Chip Value Fund, Inc. is a Maryland corporation that was organized on
February 4, 1987. The Fund is a closed-end diversified management investment
company registered under the 1940 Act.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek a high level of total return
through capital appreciation and current income consistent with investment
primarily in a diversified portfolio of common stocks. There can be no
assurance that the Fund will achieve its investment objective.
The Fund has a fundamental policy that during normal conditions it will at
all times have at least 75% of its total assets invested in equity securities of
large companies with
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<PAGE>
headquarters in the United States, such as those included in, or similar in size
to those included in, Standard & Poors' 500 Composite Stock Price Index. The
Fund calculates this requirement by adding the market values of common stocks,
securities convertible into common stocks and rights and warrants to acquire
common stocks to the net option premiums on individual common stocks and the
notional principal of net futures positions, and subtracting from that total the
market values of securities sold short. The Fund's fundamental policies, like
its investment objective, cannot be changed without the approval of the holders
of the lesser of (i) 67% or more of the shares at a meeting, if the holders of a
majority of the shares are represented at the meeting, or (ii) more than 50% of
the outstanding shares.
Pursuant to its non-fundamental policies, the Fund's investment philosophy
is to identify and own securities that the Advisor believes are undervalued or
mispriced. The Fund remains fully invested during normal market conditions in
approximately 50 common stocks, as well as other equity securities believed by
the Advisor to represent the best values among the investment opportunities
described above. The Advisor executes the investment philosophy by combining
quantitative research and portfolio management experience to select the equity
securities believed to be most attractive.
Quantitative research uses various valuations and financial characteristics
of companies and securities to identify measures that the Advisor believes are
associated with superior performance. It is also used to estimate the relative
importance of those measures. The result is a research-based process that
produces for further evaluation a list of securities that the Advisor believes
have superior return potential. Quantitative research is also used to establish
investment disciplines and to monitor risk. Portfolio management and analytical
experience are then applied to evaluate additional information that affects
securities prices but may not be appropriate for evaluation with quantitative
techniques. Some of these "qualitative" factors include the impact of
regulatory change, a company's competitive environment, product developments,
and review and analysis of information provided in company financial reports,
regulatory filings and news releases.
OTHER INVESTMENT POLICIES
Subject to the Fund's investment objective and policies described above,
the Fund may make certain other investments and use certain investment practices
as described below. These policies are non-fundamental, and may be changed in
the future by the Board of Directors without the vote of stockholders.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may
retain assets in cash and may invest without limit in short-term debt securities
and instruments, which may include obligations of the United States Government,
its agencies or instrumentalities; commercial paper having, at the time of
purchase, a rating within the highest rating category by an unaffiliated
nationally recognized statistical rating organization (a "NRSRO"), or if not
rated, issued by companies having an outstanding unsecured debt
-11-
<PAGE>
issue currently rated within one of the two highest rating categories by a
NRSRO; certificates of deposit or bankers' acceptances of domestic branches of
U.S. Banks with total assets at the time of purchase of $1 billion or more;
repurchase agreements with respect to such obligations; or securities issued by
other investment companies which invest in high quality, short-term debt
securities and which seek to maintain a $1.00 net asset value per share. The
Fund may also acquire short-term debt securities and instruments in the course
of managing its daily cash position. During normal market conditions, however,
the Fund will not invest more than 10% of its total assets in such securities.
If securities issued by other investment companies are acquired, it will be done
within the limits prescribed by the 1940 Act. As a shareholder of another
investment company, the Fund would bear, along with all other shareholders, its
pro rata portion of the other investment company's expenses.
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may purchase or
write call and put options on any securities in which it may invest or on any
securities index composed of securities in which it may invest. The purchase
and writing of options involves some investment analysis and risks that are
different from those associated with securities transactions in common stocks.
Options can seek to enhance return through price appreciation of the option,
increase income, hedge to reduce overall portfolio risk, and/or hedge to reduce
individual security risk. Purchasing options to seek to increase return through
their price appreciation involves the risk of loss of option premium if the
Advisor is incorrect in its expectation of the direction or magnitude of the
change in securities prices. Writing options to seek to increase income in the
Fund involves the risk of net loss (after receiving the option premium) if the
Advisor is incorrect in its expectation of the direction or magnitude of the
change in securities prices. The successful use of options for hedging purposes
also depends in part on the degree of correlation between the option and a
security or index of securities. If the Advisor is incorrect in its expectation
of changes in securities prices or its estimation of the correlation between the
option and a security index, the investment performance of the Fund will be less
favorable than it would have been in the absence of such options transactions.
The use of options may increase the Fund's portfolio turnover rate and,
therefore, associated brokerage commissions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may purchase
and sell various kinds of financial futures contracts as well as purchase and
write options on any such futures contracts to hedge to reduce risk of loss,
hedge against changes in securities prices of a securities index, reduce trading
costs, or to seek to increase total return. The Fund may also enter into
closing purchase and sale transactions with respect to any such contracts and
options. The futures contracts may be based on various securities indices. The
Fund may engage in futures and related options transactions for bona fide
hedging purposes as defined in regulations of the Commodity Futures Trading
Commission or to seek to increase total return to the extent permitted by such
regulations. These transactions involve brokerage costs, require margin
deposits and, in the case of contracts and options obligating a Fund to purchase
securities, require the Fund to segregate cash or liquid assets with a value
equal to the amount of the Fund's obligations under the associated contracts.
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<PAGE>
Futures contracts are typically used to reduce risk in a portfolio by
hedging, which involves selecting futures contracts to offset a position in the
portfolio that may experience adverse price movement such that the net effect of
the combined position on investment performance is neutral. The successful use
of futures contracts or options on futures for hedging depends in part on the
degree of correlation between a futures position and the portfolio position.
Because perfect correlation between a futures position and the portfolio
position it was intended to protect is seldom achieved, full protection may not
be obtained and the Fund may still be exposed to risk of some loss. The
profitability of the Fund's trading in futures to seek to increase total return
depends upon the ability of the Advisor to correctly anticipate the securities
markets and the futures markets.
While the Fund may benefit from the use of futures and options on futures,
unanticipated changes in securities prices may result in less favorable
investment performance for the Fund than would have been the case in the
absence of such transactions. The risk of loss involved in entering into
futures contracts and in writing call options on futures to seek to increase
total return is potentially unlimited and a loss may exceed the amount of the
premium received. Financial futures markets typically have more trading
liquidity than equity markets making futures contracts easier to enter and exit
than common stocks. The use of futures to hedge is a risk-reducing strategy
that in most circumstances would decrease the volatility of the Fund's net asset
value. The use of futures to increase return may increase the volatility of the
Fund's net asset value. Due to the low margin deposits required in futures
trading, it is possible that a relatively small price movement in futures
contracts used to enhance return may result in substantial losses for the Fund.
LIMITATION ON USE OF OPTIONS AND FUTURES CONTRACTS. The use of options and
futures will be limited so that:
1) with respect to options and futures used for the purpose of hedging,
the sum of (i) premiums paid on outstanding options held by the Fund
and (ii) margin deposits on futures will at no time exceed 20% of the
value of the Fund's total assets; and
2) with respect to options and futures used for the purpose of enhancing
return, (i) the sum of premiums paid by the Fund for outstanding
options will at no time exceed 15% of the value of the Fund's total
assets, (ii) the sum of premiums received by the Fund from writing
outstanding options when the Fund does not own the securities to which
the option relates will at no time exceed 7% of the value of the
Fund's total assets, (iii) the sum of the net equity exposures
pertaining to each common stock underlying the outstanding options
written or held by the Fund when the Fund does not own the securities
to which the option relates will at no time exceed 7% of the value of
the Fund's total assets, and (iv) the notional principal on
outstanding futures positions will at no time exceed 7% of the value
of the Fund's total assets.
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<PAGE>
There is no limit on writing options if the Fund owns the securities to
which the option relates.
SHORT SALES. The Fund may make short sales of securities for purposes of
hedging securities held or to seek to enhance the performance of the Fund. In a
short sale transaction, the Fund borrows a security from a broker and sells it
with the expectation that it will replace the security borrowed from the broker
by repurchasing the same security at a lower price. These transactions may
result in gains if a security's price declines, but may result in losses if a
security's price does not decline in price. When the Fund engages in short
sales, unless the short sale is otherwise "covered" in accordance with the
policies of the SEC, the Fund will be required to maintain in a segregated
account an amount of liquid assets equal to the difference between: (a) the
market value of the security sold short as calculated on a daily basis and (b)
any cash or United States Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the
borrowed security, the Fund will maintain the segregated account on a daily
basis at such a level that the amount deposited in the account plus the amount
deposited with the broker as collateral will equal the current market value of
the security sold short. Short sale transactions will be conducted so that not
more than 10% of the value of the Fund's total assets at the time of entering
into the short sale (exclusive of proceeds from short sales) will be, when added
together, (a) in deposits collateralizing the obligation to replace securities
borrowed to effect short sales, and (b) allocated to the segregated account in
connection with short sales.
BORROWING. In order to respond to changing market conditions and to raise
additional cash for investment, the Fund is authorized to issued senior
securities or borrow money from banks or other lenders in an amount not
exceeding 15% of the value of its total assets when the Advisor believes that
the return from securities purchased with borrowed funds will be greater than
the cost of the borrowing. Such borrowings will be unsecured. The Fund will
maintain continuous asset coverage of not less than 300% with respect to such
borrowings. If such asset coverage should decline to less than 300%, the Fund
may be required to sell some of its portfolio securities within three days in
order to reduce the Fund's debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. Any investment gains made on securities purchased with borrowed
monies in excess of interest paid on the borrowed monies will cause the net
asset value of the Fund's shares to rise faster than otherwise would be the
case. On the other hand, if the investment performance of the additional
securities purchased fails to cover their cost (including interest incurred on
the monies borrowed) to the Fund, the net asset value of the Fund will decrease
faster than otherwise would be the case. This is the speculative factor known
as "leverage."
Except as provided above, the Fund will not issue senior securities or
borrow money except for (i) temporary bank borrowings (not in excess of 5% of
the value of its total assets), (ii) short-term credits (not in excess of 5% of
the value of its total assets) as are necessary for the clearance of securities
transactions, and (iii) borrowings from banks or other lenders to finance the
repurchase of its shares.
-14-
<PAGE>
FUNDAMENTAL INVESTMENT POLICIES
The policies set forth below are fundamental policies of the Fund. The
Fund may not:
1. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of securities
transactions, and may make margin payments in connection with futures contracts
and related options.
2. Underwrite the securities of other issuers or invest in restricted
securities.
3. Invest more than 20% of its total assets in any one industry.
4. Purchase or sell real estate or real estate mortgage loans, or invest
in the securities of real estate companies unless such securities are publicly
traded.
5. Purchase or sell commodities, commodity contracts, or futures, except
futures on financial instruments.
6. Lend its portfolio securities in excess of 25% of its total assets,
taken at market value.
7. Make loans to other persons (except as provided in 5 above), provided
that for the purposes of this restriction the acquisition of short-term debt
securities and instruments and repurchase agreements in which the Fund may
invest shall not be deemed to be the making of a loan.
8. Invest in companies for the purpose of exercising control or
management.
9. Invest in the securities of any one issuer (other than the United
States or an agency or instrumentality of the United States) if, at the time of
acquisition, the Fund would own more than 10% of the voting securities of such
issuer or, as to 75% of the Fund's total assets, more than 5% of such assets
would be invested in the securities of such issuer.
10. Invest more than 5% of its total assets in repurchase agreements.
11. Invest more than 5% of its total assets, taken at market value, in
securities of issuers (other than the United States or an agency or
instrumentality of the United States) having a record, together with
predecessors, of less than three years of continuous operation.
12. Invest in securities of foreign issuers whose securities are not
traded on the New York or American Stock Exchanges or the NASDAQ-National Market
System.
13. Issue senior securities or borrow money except to the extent permitted
under the 1940 Act.
14. Purchase portfolio securities from or sell such securities directly to
any of its officers, directors, employees or investment advisor as principal for
their own account.
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<PAGE>
In its last fiscal year, the Fund did not invest in repurchase agreements
referred to in restriction 10 above, or acquire securities described in
restriction 11 above, and it has no plans to invest in such agreements or
acquire such securities in the current year.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the foregoing restrictions.
INVESTMENT AND MARKET RISKS
As an investment company that holds common stocks, the Fund's portfolio is
subject to the possibility that common stock prices will decline over short or
even extended periods. The Fund will remain fully invested during periods when
stock prices generally rise and also during periods when they generally decline.
Risks are inherent in equity investing, and investors should be able to tolerate
significant fluctuations in the value of their investments. The Fund is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term stock market movements.
Investors should not consider the Fund a complete investment program. In
addition, shares of closed-end investment companies such as the Fund are not
redeemable and frequently trade at a discount from the Fund's per-share net
asset value.
YEAR 2000 RISKS
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Advisor and the Fund's other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." The
Advisor is taking steps to address the Year 2000 Problem with respect to the
computer systems that it uses and to obtain assurance that comparable steps are
being taken by the Fund's other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund as a result of the Year 2000 Problem.
SHARE PRICE DATA
The Fund's Common Stock is publicly held and is listed and traded on the
New York Stock Exchange. The following table sets forth for the periods
indicated the high and low closing sales prices for the shares on the New York
Stock Exchange, the net asset values per
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<PAGE>
share that immediately preceded the high and low closing sales prices, and the
discount or premium that each sales price represented as a percentage of the
preceding net asset value:
<TABLE>
<CAPTION>
PRECEDING NET
ASSET VALUES DISCOUNT (-) OR
HIGH SALES LOW SALES PER SHARE/2/ PREMIUM (+)/3/
QUARTER OR OTHER PRICE PRICE -------------- -----------------
PERIOD ENDED PER SHARE/1/ PER SHARE/1/ HIGH LOW HIGH LOW
- ------------------ ------------ ------------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1996 $ 8.875 $ 7.75 $ 9.19 $ 8.41 -8.87% - 7.85%
June 30, 1996 8.50 8.125 9.41 9.07 -9.67% -10.42%
September 30, 1996 9.25 8.25 9.54 9.41 -3.04% -12.33%
December 31, 1996 10.25 9.125 10.29 10.33 -0.39% -11.67%
March 31, 1997 10.00 8.375 9.38 9.34 -6.61% -10.33%
June 30, 1997 9.75 8.125 10.25 9.06 -5.26% -10.32%
September 30, 1997 10.9375 9.50 10.68 10.39 2.41% - 8.75%
December 31, 1997 11.50 9.875 10.76 10.42 6.88% - 5.23%
</TABLE>
__________________________________
1. As reported on the New York Stock Exchange. During periods in which the
Fund's shares traded at the high or low price for more than one day, the
information is provided with respect to the trading day on which the
discount or premium was greatest.
2. The net asset value per share calculated by the Fund as of the Friday
preceding the date of each high sales price in the first column and each
low sales price in the second column. Thus, this column does not
necessarily show the highest or the lowest net asset value per share during
the period.
3. This column shows the discount or premium that the high and low sales
prices in the first two columns bore to the respective, preceding net asset
values in the third column. It does not necessarily show the highest or
lowest discount or premium during the period.
The Fund was organized in April 1987. Its Common Stock generally traded at
a discount from net asset value per share until the third quarter of 1992. From
the third quarter of 1992 through the first quarter of 1994 the Fund's Common
Stock traded at a slight premium above net asset value per share. After
modifying the Fund's distribution policy, as described below, the Fund's Common
Stock traded at a discount from net asset value per share until August of 1996.
Since the announcement of a revised distribution policy in August 1996
(described in the next paragraph), the discount has been reduced, and since mid-
January 1997 the Common Stock has on occasion traded at a premium above net
asset value per share.
Beginning in 1989 and until April 1994 the Fund attempted to reduce the
discount by distributing to stockholders quarterly an amount equal to 2.5% (10%
on an annual basis) of the Fund's net asset value per share, without regard to
net investment income and net capital gains. The Fund believes that this policy
tended to reduce the discount. In fact, from the third quarter of 1992 through
the first quarter of 1994, the Fund's Common Stock traded at a slight premium to
net asset value. In order to comply with a regulation of the Securities and
Exchange Commission, in April 1994 the Fund modified its distribution policy
from four quarterly distributions of 2.5% of net asset value to three quarterly
distributions of net investment income, followed by a fourth distribution of an
amount equal to the greater of 10% of net asset value less the prior three
distributions, or the sum of the Fund's net investment income and net capital
gains. The result was an aggregate annual distribution of substantially the
same amount, but it was paid in non-level quarterly distributions. Although the
Fund does not know what actual effect the distribution policy has on the market
price,
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<PAGE>
after the Fund modified its distribution policy in April of 1994, its Common
Stock traded at a discount from its net asset value per share. In 1996 the Fund
received an exemptive order from the Securities and Exchange Commission allowing
the Fund to make up to four distributions of long-term capital gains in a
taxable year as long as it maintains a policy of distributing a fixed percentage
of net asset value quarterly. This exemptive order permitted the Fund to return
to its previous distribution policy. In August of 1996 the Fund announced a
return to the Fund's prior policy of distributing 2.5% of the net asset value
quarterly to its stockholders. The first distribution under this policy was in
April of 1997. Since the announcement of a return to the Fund's previous
distribution policy, the Fund has on occasion traded at a premium.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Board of Directors of the Fund is responsible for the overall
management and operations of the Fund. The Statement of Additional Information
contains information concerning the directors.
INVESTMENT ADVISOR
Denver Investment Advisors LLC serves as the investment advisor to the
Fund. The Advisor's address is 1225 17th Street, 26th Floor, Denver, Colorado
80202. The Advisor is a limited liability company owned and operated by the
principal officers and employees of Denver Investment Advisors, Inc., which
served as the Fund's investment advisor from its inception until March 31, 1995.
As of December 31, 1997, the Advisor had approximately $11.1 billion under
management (including approximately $959 million for 8 investment company
portfolios).
Subject to the general supervision of the Board of Directors, the Advisor
manages the Fund's portfolio, makes decisions with respect to and places orders
for all purchases and sales of the Fund's securities, and maintains records
relating to such purchases and sales. The Fund pays the Advisor a monthly fee
at the 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 over $100,000,000.
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<PAGE>
PORTFOLIO MANAGER
Varilyn K. Schock, C.F.A., has been primarily responsible for the day-to-
day management of the Fund's portfolio since October, 1991. She has been a
Vice-President of the Fund and a Vice-President and Member of the Advisor since
1995, and prior thereto was a Vice President and Director of Quantitative
Strategies of Denver Investment Advisors, Inc. since 1991.
ADMINISTRATOR
American Data Services, Inc. (the "Administrator") furnishes the Fund with
clerical, accounting, bookkeeping and related services, and computes the net
asset value and net income of the Fund. The Administrator assists in the
preparation of annual and semi-annual reports to the Securities and Exchange
Commission, prepares federal and state tax returns, maintains the Fund's
financial accounts and records (except stockholders' records) and generally
assists in all aspects of the Fund's operations. The Fund pays the Administrator
a monthly fee at 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 average weekly net assets
in excess of $125,000,000, with a $7,463 per month minimum.
CUSTODIAN AND TRANSFER AGENT
The Bank of New York, 48 Wall Street, New York, New York 10286, serves as
the Fund's custodian.
ChaseMellon Shareholder Services, L.L.C., 85 Challenger Road, Overpeck
Centre, Ridgefield Park, NJ 07660, serves as the Fund's Transfer Agent, Dividend
Reinvestment and Cash Purchase Plan Agent, and Subscription Agent for the Offer.
EXPENSES OF THE FUND
The Fund pays all of its expenses other than those expressly assumed by the
Advisor. The expenses payable by the Fund include: expenses of the Offer,
advisory fees payable to the Advisor and administrative fees payable to the
Administrator; audits by independent public accountants; transfer agent and
registrar, custodian and portfolio record keeping services; dividend disbursing
agent and stockholder record keeping services; taxes and the preparation of the
Fund's tax returns; brokerage fees and commissions; cost of director
and stockholder meetings; printing and mailing reports to stockholders; fees for
filing reports with regulatory bodies and the maintenance of the Fund's
existence; membership dues for investment company industry trade associations;
legal fees; stock exchange listing fees and expenses; fees and expenses of
directors who are not officers, employees or members of the Advisor; insurance
and fidelity bond premiums; and any extraordinary expenses.
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<PAGE>
DISTRIBUTIONS AND TAXES
From 1989 until April 1994 the Fund distributed quarterly to stockholders
an amount equal to 2.5% (10% on an annual basis) of the Fund's net asset value
per share, without regard to net investment income and net capital gains. From
April 1994 until December 1996 quarterly distributions were limited to net
investment income, and once a year the Fund supplemented the quarterly
distributions with an annual distribution that brought distributions for the
year to the greater of 10% of the Fund's net asset value per share, or the sum
of its net investment income and net capital gains. Beginning in April 1997, the
Fund returned to its previous distribution policy so that quarterly
distributions again equaled 2.5% (10% on an annual basis) of the Fund's net
asset value per share. See "THE FUND--Share Price Data." To the extent that the
Fund's distributions exceed its net investment income and net capital gains, the
Fund liquidates a portion of its portfolio to fund these distributions, which
represent a return of capital to stockholders and therefore may be deemed to be
a reduction of their principal.
The Fund qualified during its last taxable year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code") and
intends to continue to so qualify. This qualification relieves the Fund of
liability for federal income taxes to the extent the Fund's earnings are
distributed in accordance with the Code. Qualification as a regulated
investment company under the Code for a taxable year requires, among other
things, that the Fund distribute to its stockholders an amount equal to at least
90% of its investment company taxable income for such taxable year. In general,
the Fund's investment company taxable income will be its taxable income,
including dividends, interest and the excess, if any, of net short-term capital
gain over net long-term capital loss, subject to certain adjustments, and
excluding the excess, if any, of net long-term capital gain for the taxable year
over net short-term capital loss. The dividends received deduction for
corporations which own shares in the Fund will apply to ordinary income
distributions from the Fund to the extent of such stockholders' ratable share of
the total qualifying dividends received by the Fund from domestic corporations
for the taxable year. It is not expected that the alternative minimum tax will
apply to stockholder dividends and distributions.
Distributions by the Fund are taxable to the stockholders to the extent
paid out of the Fund's current or accumulated earnings and profits, regardless
of whether such distributions are received in cash or reinvested in additional
shares of Common Stock. Such distributions constitute ordinary income to the
stockholders except to the extent they are designated as capital gain dividends,
as discussed below. Any distributions by the Fund in excess of its current and
accumulated earnings and profits constitute a nontaxable return of capital to
stockholders to the extent of each stockholder's tax basis in his or her shares
(causing a reduction of such basis), and thereafter, to the extent of any excess
over such basis, capital gain.
The Fund intends to designate as capital gain dividends any distributions
by the Fund of the excess of net long-term capital gain over net short-term
capital loss. Such capital gain
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<PAGE>
dividends will be taxable to stockholders as long-term capital gain (20% or 28%
rate, as the case may be), regardless of how long the stockholder has held the
Shares and whether such distributions are received in cash or reinvested in
additional shares of Common Stock. Such distributions are not eligible for the
dividends received deduction for corporations.
To the extent that the Fund distributes amounts in a given year that exceed
the Fund's investment company taxable income and excess of net long-term capital
gain over net short-term capital loss (after taking into account capital loss
carryovers), such excess distributions may nonetheless cause stockholders to
recognize taxable income under the federal income tax principles described
above.
Stockholders will be advised at least annually as to the federal income tax
consequences of distributions made each year. Dividends declared in October,
November or December of any year payable to stockholders of record as of a
specified date in such months will be deemed to have been received by
stockholders and paid by the Fund on December 31 of such year if such dividends
are actually paid during January of the following year.
Prior to purchasing shares, the impact of distributions which are expected
to be declared or have been declared, but have not been paid, should be
carefully considered. Any such distributions, although in effect a return of
capital, are subject to tax as discussed above.
A taxable gain or loss may be recognized by a stockholder upon his or her
sale of shares of the Fund depending upon the tax basis and their price at the
time of sale. Generally, a stockholder may include brokerage costs incurred
upon the purchase and/or sale of Fund shares in his or her tax basis for such
shares for the purpose of determining gain or loss on a sale of such shares.
The foregoing discussion summarizes some of the important federal tax
considerations generally affecting the Fund and its stockholders who are U.S.
citizens or residents or domestic corporations, and is not intended as a
substitute for careful tax planning. Accordingly, investors in the Fund should
consult their tax advisors with specific reference to their own tax situations.
Stockholders are also advised to consult their tax advisors concerning state and
local taxes, which may differ from the federal income taxes described above.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
All distributions to stockholders whose shares are registered in their own
names may be reinvested pursuant to the Dividend Reinvestment and Cash Purchase
Plan (the "Plan") in additional shares of the Fund. Stockholders who choose to
hold their shares in the name of a
-21-
<PAGE>
broker or nominee should contact such broker or nominee to determine whether or
how they may participate in the Plan. There is no service charge for
participation in the Plan.
A stockholder may elect to withdraw from the Plan at any time and thereby
elect to receive future dividends in cash in lieu of shares of the Fund. There
will be no penalty for withdrawal from the Plan and stockholders who have
previously withdrawn from the Plan may rejoin it at any time. Changes in
elections must be in writing and should include the stockholder's name and
address as they appear on the share certificate. They should be sent to the
Transfer Agent (referred to in this Section as the "Agent"). An election to
withdraw from the Plan will, until such election is changed, be deemed to be an
election by a stockholder to take all subsequent distributions in cash.
Elections will only be effective for subsequent distributions with a record date
of at least five (5) business days after such elections are received by the
Agent.
Funds credited to a participant's account will be used to purchase shares
of the Fund's Common Stock (the "Purchase"). With respect to funds derived from
distributions, if the price plus commission is greater than the net asset value
per share (the "Net Asset Value") on the record date, the Fund will issue to the
Agent shares of the Fund's Common Stock, valued at the Net Asset Value on the
record date, in the aggregate amount of the distribution. If the price plus
commission is less than the Net Asset Value on the record date, the Agent will
attempt, commencing on the first trading day and ending on the tenth trading day
following the record date, to acquire shares in the open market at a price, plus
commission, which is less than the Net Asset Value most recently published by
the Fund prior to any purchase. If and to the extent that the Agent is unable
to acquire sufficient shares of the Fund's Common Stock at a price plus
commission less than the Net Asset Value, the Fund will issue to the Agent
shares of the Fund's Common Stock, valued at the Net Asset Value, in the
aggregate amount of the remaining value of the distribution.
The reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends or distributions. See "DISTRIBUTIONS AND TAXES."
Stockholders participating in the Plan may receive benefits not available
to stockholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at net asset value, which is less than
they could otherwise purchase them in the open market and will have shares with
a market value greater than the value of any cash distribution they would have
received. There can be no assurance that the market price of the Fund's shares
of common stock will exceed their net asset value.
The Fund will increase the price at which its shares may be issued to the
Plan if the net asset value of the shares is less than 95% of the fair market
value of such shares on the payment date of any distribution of net investment
income or net capital gain, unless the Fund receives a legal opinion from
independent counsel that the issuance of shares at net
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<PAGE>
asset value under these circumstances will not have a material effect upon the
federal income tax liability of the Fund.
A participant may from time to time make voluntary cash contributions to
his or her account by sending to the Agent a check or money order payable to the
Agent in an amount not less than $50 and not in excess of $10,000 per month to
acquire additional shares of the Fund. In the case of any voluntary cash
contribution which exceeds $10,000 per month, the excess will be returned to the
participant by the Agent. All cash contributions to a participant's account
made pursuant to this paragraph will be invested in shares of the Fund's Common
Stock purchased in the open market (irrespective of net asset value). The Agent
will invest all voluntary cash contributions on or about the last business day
of the month, provided it receives the contributions at least two business days
before the last business day of the month (the "Cut-off date"). Because
interest is not paid on voluntary cash contributions, participants should make
such contributions shortly before the Cut-off Date, allowing sufficient time for
mail delivery. Voluntary cash contributions received after the Cut-off Date
will be used to acquire additional shares of the Fund on or about the last
business day of the following month. Following any monthly investment of
voluntary cash contributions, the Agent will send each investing participant a
confirmation of such investment. Voluntary cash contributions will be returned
to the participant upon written request, provided that such request is received
more than two days before the Cut-off Date.
The Fund reserves the right to amend the Plan.
Additional information about the Plan may be obtained from the Agent. See
"MANAGEMENT OF THE FUND--Custodian and Transfer Agent."
CAPITAL STOCK
DIVIDENDS, VOTING AND LIQUIDATION RIGHTS
The Fund has one class of shares of Common Stock, par value $.01 per share,
of which 100,000,000 shares are authorized. When issued, shares of Common Stock
are fully paid and non-assessable. The Fund's shares have no pre-emptive,
conversion, exchange or redemption rights. Each share of the Fund's Common
Stock has one vote and shares equally in dividends and distributions when and if
declared by the Fund and in the Fund's net assets upon liquidation. All voting
rights for the election of directors are non-cumulative. Consequently, the
holders of more than 50% of the shares can elect 100% of the directors then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares will not be able to elect any directors.
-23-
<PAGE>
ANTI-TAKEOVER PROVISIONS IN THE ARTICLES OF INCORPORATION
The Fund's Articles of Incorporation and By-Laws include provisions that
are intended to have the effect of limiting the ability of other entities or
persons to acquire control of the Fund or to change the composition of its Board
of Directors and could have the effect of depriving stockholders of an
opportunity to sell their shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Fund. The
Board of Directors is divided into three classes, each having a term of three
years. The term of one class expires at each annual meeting of stockholders.
This provision could delay for up to two years the replacement of a majority of
the Board of Directors. The votes of the holders of a majority of the
outstanding shares is required to elect a director. A director may be removed
from office only by vote of the holders of at least 75% of the shares of the
Fund entitled to be voted on the matter.
The Articles of Incorporation also require the favorable vote of the
holders of at least 75% of the shares of the Fund then entitled to be voted to
approve, adopt or authorize the following:
(i) a merger or consolidation of the Fund with another corporation,
(ii) a sale or transfer of all or substantially all of the Fund's assets
(other than in the regular course of the Fund's investment activities),
(iii) a liquidation or dissolution of the Fund, or
(iv) a change in the nature of the Fund's business so as to cease to be
an investment company,
unless such action has been approved, adopted or authorized by the affirmative
vote of 75% of the total number of directors fixed in accordance with the
bylaws, in which case the affirmative vote of a majority of the outstanding
shares is required.
In addition, the Articles of Incorporation provide that these anti-takeover
provisions may only be changed by the favorable votes of the holders of at least
75% of the shares of the Fund then entitled to be voted. The Board of Directors
has determined that the 75% voting requirements, which are greater than the
minimum requirements under Maryland law or the 1940 Act, are in the best
interests of stockholders generally.
-24-
<PAGE>
OUTSTANDING SECURITIES
Set forth below is information with respect to the Fund's outstanding
securities as of April 9, 1998:
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Title of Class Amount Authorized Amount Held by Amount Outstanding
Registrant or for Exclusive of Amount
its Account Shown Under (3)
- --------------------------------------------------------------------------------
Common Stock, 100,000,000 0 14,519,942
par value
$0.01 per share
-25-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Fund is contained in a Statement of
Additional Information, which is available upon request without charge by
contacting the Fund. Set forth below is the Table of Contents of the Statement
of Additional Information:
TABLE OF CONTENTS
-----------------
Investment Objectives and Policies
Management
Control Persons and Principal Holders of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Tax Status
Financial Statements
-26-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE ADVISOR. THE
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
____________________________________
TABLE OF CONTENTS
Fee Table..................................................
Financial Highlights.......................................
The Offer..................................................
Use of Proceeds............................................
The Fund...................................................
Management of the Fund.....................................
Distributions and Taxes....................................
Dividend Reinvestment......................................
and Cash Purchase Plan...................................
Statement of Additional....................................
Information..............................................
1,825,617 SHARES OF
COMMON STOCK ISSUABLE UPON
EXERCISE OF RIGHTS TO
SUBSCRIBE FOR SUCH SHARES
OF COMMON STOCK
BLUE CHIP VALUE FUND, INC.
_________________________
PROSPECTUS
_________________________
MAY __, 1998
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<PAGE>
BLUE CHIP VALUE FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
MAY __, 1998
TABLE OF CONTENTS PAGE
----------------- ----
Investment Objectives and Policies.........................................
Management.................................................................
Control Persons and Principal Holders of Securities........................
Investment Advisory and Other Services.....................................
Brokerage Allocation and Other Practices...................................
Tax Status.................................................................
Financial Statements.......................................................
This Statement of Additional Information applies to the Blue Chip Value
Fund, Inc. (the "Fund"). This Statement of Additional Information is not a
prospectus, and is meant to be read in conjunction with the Prospectus dated May
__, 1998 (the "Prospectus"), which describes the Fund. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by calling the Fund, at
(800) 624-4190. Capitalized terms used but not defined herein have the same
meaning as in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Prospectus for the Fund describes the investment objectives and
policies of the Fund. The following policies supplement the non-fundamental
investment policies set forth in the Prospectus.
SECURITIES LENDING
Although it has not done so, the Fund is permitted, from time to time, to
lend its portfolio securities with an aggregate value not in excess of 25% of
total net assets to brokers, dealers, and financial institutions such as banks
and trust companies, for which it will receive collateral in cash or United
States Government securities that will be maintained on a daily basis in an
amount equal to at least 100% of the current market value of the loaned
securities. The Fund would not pay administrative, finders, or other fees in
connection therewith. The Fund would continue to receive dividends on the
securities loaned. Cash collateral would be invested in short-term debt
securities, which would increase the current income of the Fund. Although
voting rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans may be called at any time and will be called so that the
securities may be voted if a material event affecting the investment occurs.
During the fiscal year ended December 1997 the Fund did not lend any portfolio
securities. The Fund does not currently intend to engage in securities lending
so as to put more than 5% of its net assets at risk.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and sell futures contracts on securi ties indices and
may also purchase and write options on such futures contracts. All futures
contracts entered into by the Fund are traded on U.S. exchanges or boards of
trade that are licensed and regulated by the Commodity Futures Trading
Commission ("CFTC").
FUTURES CONTRACTS. A futures contract relating to a financial index may
generally be described as an agreement to buy or sell that index contract at the
initial transaction price, with the transaction amount to be transferred at a
specified future delivery date and offset by the final settlement price which
may result in a profit or a loss. A clearing corporation associated with the
exchange on which futures are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.
HEDGING STRATEGIES. If, in the opinion of the Advisor, there is a
sufficient degree of correlation between price trends
-2-
<PAGE>
for the Fund's portfolio securities and futures contracts based on financial
indices, the Fund may enter into such futures contracts as a hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Advisor
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any such differential by having the Fund
enter into a greater or lesser number of futures contracts or by attempting to
achieve only a partial hedge against price changes affecting the Fund's
securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of the Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing such
futures contracts. This would be done, for example, when the Advisor
anticipates the subsequent purchase of particular securities when the Fund
obtains the necessary cash, but expects the prices then available to be less
favorable than prices that are currently available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on
futures contracts will give the Fund the right (but not the obligation), for a
specified price, to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, the Fund obtains the benefit of the futures position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.
Writing covered options on futures is typically a strategy to reduce risk;
the benefit is that writing an option generates premium income, while the
drawback is that the strategy precludes the Fund from the opportunity to profit
above the exercise price. By writing a call option, the Fund becomes obligated,
in exchange for the premium, to sell a futures contract if the option is
exercised, and the futures contract may have a value higher than the exercise
price. Conversely, the writing of a put option on a futures contract generates
a premium, which may partially offset an increase in the price of a futures
contract that the Fund intends to purchase. However, the Fund becomes obligated
to purchase a futures contract if the option is exercised, and the futures
contract may have a value lower than the exercise price. The loss incurred by
the Fund in writing options on futures is potentially unlimited and may exceed
the amount of the premium received. The Fund will incur transaction costs in
connection with purchasing or writing of options on futures.
-3-
<PAGE>
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same financial
instrument. There is no guarantee that such closing transactions can be
effected. The Fund's ability to establish and close out positions on such
options will be subject to the existence of a liquid market.
OTHER CONSIDERATIONS. The Fund will engage in futures transactions and
will engage in related options transaction only for bona fide hedging as defined
in the regulations of the CFTC or to seek to increase total return to the extent
permitted by such regulations. The Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes--
i.e., futures contracts will be sold to protect against a decline in the price
- ----
of securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities it intends to
purchase. As evidence of this hedging intent, the Fund generally expects that
when it takes a long futures or option position (involving the purchase of
futures contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities in the cash market at the
time when the futures or options position is closed out. However, in particular
cases, when it is economically advantageous for the Fund to do so, a long
futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits the Fund to elect to comply with a
different test. Under this test the aggregate initial margin and premiums
required to establish positions in futures contracts and options on futures to
seek to increase total return may not exceed 5% of the net asset value of the
Fund's portfolio, after taking into account unrealized profits and losses on any
such positions and excluding the amount by which such options were in-the-money
at the time of purchase. The Fund will engage in transactions in futures
contracts and related options transactions only to the extent such transactions
are consistent with the requirements of the Internal Revenue Code of 1986 for
maintaining its qualification as a regulated investment company for federal
income tax purposes.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to segregate cash
or liquid assets
-4-
<PAGE>
in an amount equal to the underlying value of such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
unanticipated changes in securities prices may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. In the event of an imperfect correlation between a
futures position and a portfolio position which is intended to be protected, the
desired protection may not be obtained and the Fund may be exposed to risk or
loss.
Perfect correlation between the Fund's futures positions and portfolio
positions will be difficult to achieve because no futures contracts based on
individual equity securities are currently available.
OPTIONS ON SECURITIES AND SECURITIES INDICES
PURCHASING OPTIONS. The Fund may purchase put and call options on any
securities in which it may invest or options on any securities index composed of
securities in which it may invest. The Fund would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it had purchased.
The Fund would normally purchase call options in anticipation of an
increase in the market value of securities of the type in which it may invest.
The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain if, during the option period,
the value of such securities exceeded the sum of the exercise price, the premium
paid and transaction costs; otherwise the Fund would realize either no gain or a
loss on the purchase of the call option.
The Fund would normally purchase put options in anticipation of a decline
in the market value of securities in its portfolio or in securities in which it
may invest. The purchase of a put option would entitle the Fund, in exchange
for the premium paid, to sell specified securities at a specified price during
the option period. The purchase of puts is designed to offset or hedge against
a decline in the market value of the Fund's securities. Put options may also be
purchased by the Fund for the purpose of affirmatively benefitting from a
decline in the price of securities which it does not own. The Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to more
than cover the premium and transaction costs; otherwise the Fund would realize
either no gain or a loss
-5-
<PAGE>
on the purchase of the put option. Gains and losses on the purchase of put
options would tend to be offset by countervailing changes in the value of the
underlying portfolio securities.
The Fund would purchase put and call options on securities indices for the
same purposes as it would purchase options on individual securities.
WRITING COVERED OPTIONS. The Fund may write covered call and put options
on any securities in which it may invest. A call option written by the Fund
would obligate the Fund to sell specified securities to the holder of the option
at a specified price if the option is exercised at any time before the expira
tion date. All call options written by the Fund would be covered, which means
that the Fund will own the securities subject to the option as long as the
option is outstanding or the Fund will use the other methods described below.
The Fund's purpose in writing covered call options is to realize greater income
than would be realized on portfolio securities transactions alone. However, the
Fund foregoes the opportunity to profit from an increase in the market price of
the underlying security that exceeds the exercise price of the call option.
A put option written by the Fund would obligate the Fund to purchase
specified securities from the option holder at a specified price if the option
is exercised at any time before the expiration date. All put options written by
the Fund would be covered, which means that the Fund would have segregated cash
or liquid assets with a value at least equal to the exercise price of the put
option. The purpose of writing such options is to generate additional income
for the Fund. However, in return for the option premium, the Fund accepts the
risk that it may be required to purchase the underlying securities at a price in
excess of the securities' market value at the time of purchase.
Call and put options written by the Fund will also be considered to be
covered to the extent that the Fund's liabilities under such options are wholly
or partially offset by its rights under call and put options purchased by the
Fund.
In addition, a written call option or put option may be covered by
segregating cash or liquid assets, by entering into an offsetting forward
contract and/or by purchasing an offsetting option which, by virtue of its
exercise price or otherwise, reduces the Fund's net exposure on its written
option position.
The Fund may also write covered call and put options on any securities
index composed of securities in which it may invest. Options on securities
indices are similar to options on securities, except that the exercise of
securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
-6-
<PAGE>
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security.
The Fund may cover call options on a securities index by owning securities
whose price changes are expected to be similar to those of the underlying index,
or by having an absolute and immediate right to acquire such securities without
additional cash consideration (or for additional cash consideration segregated
by the Fund) upon conversion or exchange of other securities in its portfolio.
The Fund may cover call and put options on a securities index by segregating
cash or liquid assets with a value equal to the exercise price.
The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a
liquid secondary market on an options exchange will exist for any particular
exchange-traded option or option traded over-the-counter at any particular time.
If the Fund is unable to effect a closing purchase transaction with respect to
covered options it has written, the Fund will not be able to sell the underlying
securities or dispose of segregated assets until the options expire or are
exercised. Similarly, if the Fund is unable to effect a closing sale
transaction with respect to options it has purchased, it will have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of the underlying securities.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or (v) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options on that
exchange that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
-7-
<PAGE>
The Fund may purchase and sell both options that are traded on U.S.
exchanges and options traded over-the-counter with broker-dealers who make
markets in these options. The ability to terminate over-the-counter options is
more limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. Until such time as the staff of the Securities and Exchange
Commission changes its position, the Fund will treat purchased over-the-counter
options and all assets used to cover written over-the-counter options as
illiquid securities.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transac tions. The successful use of purchasing
puts for hedging pur poses depends in part on the Advisor's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets.
WARRANTS AND STOCK PURCHASE RIGHTS
The Fund may invest up to 10% of its net assets, calculated at the time of
purchase, in warrants or rights (excluding those acquired in units or attached
to other securities) which entitle the holder to buy equity securities at a
specific price for a specific period of time. The Fund will invest in warrants
and rights only if such equity securities are deemed appropriate by the Advisor
for investment by the Fund. Warrants and rights have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the year by the monthly average
value of the portfolio securities. The calculation excludes all securities
whose maturities at the time of acquisition were one year or less. Portfolio
turnover may vary greatly from year to year as well as within a particular year,
and may also be affected by requirements which enable the Fund to receive
certain favorable tax treatment. Portfolio turnover will not be a limiting
factor in making portfolio decisions. For the fiscal years ended December 31,
1995, 1996 and 1997, the Fund's portfolio turnover rates were 50.84%, 42.31% and
55.15%, respectively.
-8-
<PAGE>
MANAGEMENT
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5 YEARS
- ---------------------- ---- ------------------- -------------------------
*Kenneth V. Penland, 55 Chairman of the Chairman and Executive
C.F.A. Board and Director Manager, Denver
1225 Seventeenth Street Investment Advisors LLC
26th Floor (since 1995); prior
Denver, Colorado 80202 thereto Chairman of the
Board and Director of
Research, Denver
Investment Advisors,
Inc.; President,
Westcore Funds.
Robert J. Greenebaum 80 Director Independent Consultant;
Room 957 former Chairman of the
111 W. Washington Street Board and Director,
Chicago, Illinois 60602 Selected American
Shares, Inc. and
Selected Special Shares,
Inc., Santa Fe, New
Mexico; Director, United
Asset Management Corp.,
Boston, Massachusetts;
former Chairman of the
Board and Trustee,
Selected Capital
Preservation Trust,
Santa Fe, New Mexico.
Consultant, Denver
Investment Advisors LLC,
and its predecessor,
Denver Investment
Advisors, Inc.
Robert M. Inman 57 Director Real Estate Investment
1450 South Clayton Street Advisor and Consultant
Denver, Colorado 80210 (since 1988) (real
estate development and
construction); former
Director, First National
Bank of Parker, N.A.,
Parker, Colorado.
-9-
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5 YEARS
- ---------------------- ---- ------------------- -------------------------
Richard C. Schulte 53 Director Private Investor; prior
34507 Squaw Pass Road thereto President,
Evergreen, Colorado 80439 Transportation Service
Systems, Inc. (since
1993); Employee,
Southern Pacific Lines,
Denver, Colorado (since
1993); prior thereto,
Employee, Rio Grande
Industries, Denver,
Colorado (holding
company) (since 1991)
Vice President Finance
and Treasurer, Rio
Grande Holdings, Inc.,
Denver, Colorado (since
1990); and Vice
President, Denver & Rio
Grande Western Railroad
Company, Denver,
Colorado.
Roberta M. Wilson, 54 Director Director of Finance,
C.F.A. Denver Board of Water
1600 W. Twelfth Avenue Commissioners, Denver,
Denver, Colorado 80254 Colorado.
*Todger Anderson, 53 President and President and Executive
C.F.A. Director Manager, Denver
1225 Seventeenth Street Investment Advisors LLC
26th Floor (since 1995); prior
Denver, Colorado 80202 thereto President and
Director of Portfolio
Management, Denver
Investment Advisors,
Inc.; Portfolio Manager,
Westcore MIDCO Growth
Fund (since 1986).
Varilyn K. Schock, 36 Vice President Vice President and
C.F.A. Member, Denver
1225 Seventeenth Street Investment Advisors LLC
26th Floor (since 1995); prior
Denver, Colorado 80202 thereto Vice President
and Director of
Quantitative Strategies,
Denver Investment
Advisors, Inc. (since
1991); Portfolio
Manager, Westcore Blue
Chip Fund (since 1991)
and Westcore Small-Cap
Opportunity Fund (since
1993).
-10-
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH THE FUND DURING PAST 5 YEARS
- ---------------------- ---- ------------------- -------------------------
W. Bruce McConnel, III 55 Secretary Partner of the law firm
Philadelphia National of Drinker Biddle &
Bank Building Reath LLP, Philadelphia,
1345 Chestnut Street PA
Philadelphia, PA 19107
Jasper R. Frontz 29 Treasurer Director of Mutual Fund
1225 Seventeenth Street Administration, Denver
26th Floor Investment Advisors LLC
Denver, Colorado 80202 (since 1997); prior
thereto Fund Controller,
ALPS Mutual Fund
Services, Inc. (1995-
1997); Senior
Accountant, Deloitte &
Touche LLP (1991-1995);
Treasurer, Westcore
Funds (since 1997).
_____________________________
* Messrs. Penland and Anderson are considered by the Fund to be "interested
persons" of the Fund (as defined in the Investment Company Act of 1940).
No director or officer of the Fund who is also a director, officer, or
employee of the investment advisor or any of its parents, received any
remuneration from the Fund during 1997. The other directors taken as a group
were either paid or had accrued directors' fees for 1997 from the Fund in the
aggregate amount of $40,000. Drinker Biddle & Reath LLP, of which W. Bruce
McConnel, III, Secretary of the Fund, is a partner, receives fees from the Fund
for services rendered as its legal counsel.
On or about May 21, 1997, the occasion of the Fund's tenth anniversary, on
behalf of the Fund, the investment advisor purchased for each of the Fund's
disinterested directors 1,000 Shares of Common Stock of the Fund. The cost to
the investment advisor was $9,175 for each disinterested director, or a total of
$36,700. Although these Shares might be deemed to represent additional
compensation to the disinterested directors of the Fund, the Fund did not bear
the cost of acquiring the Shares.
For the period January 1, 1997 through June 30, 1997, the directors
received an annual retainer of $4,000 for serving as directors, plus a meeting
fee of $1,000 for each regular Board meeting attended. Effective July 1, 1997,
the basis of the directors' compensation was amended so that directors received
an annual retainer of $6,000 for serving as directors, plus a meeting fee of
$1,500 for each regular Board meeting attended. The adjustment to the annual
retainer was made on a pro rata yearly
-11-
<PAGE>
basis. The Fund expects the basis of such compensation during 1998 will be an
annual retainer of $6,000 for serving as directors, plus a meeting fee of $1,500
for each regular Board meeting attended.
The following table provides information concerning the compensation of
each of the Fund's directors for services rendered during the Fund's fiscal year
ended December 31, 1997:
COMPENSATION TABLE
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM FUND
NAME OF PERSON FROM FUND PAID TO DIRECTORS
-------------- ------------ -----------------
Robert J. Greenebaum $10,000 $10,000
Robert M. Inman $10,000 $10,000
Kenneth V. Penland $ -0- $ -0-
Richard C. Schulte $10,000 $10,000
Roberta M. Wilson $10,000 $10,000
The Fund has a standing Audit Committee of the Board composed of Messrs.
Inman, Greenebaum and Schulte, and Ms. Wilson. The functions of the Audit
Committee are to meet with the Fund's independent auditors to review the scope
and findings of the annual audit, discuss the Fund's accounting policies,
discuss any recommendation of the independent auditors with respect to the
Fund's management practices, review the impact of changes in accounting
standards upon the Fund's financial statements, recommend to the Board of
Directors the selection of independent auditors, and perform such other duties
as may be assigned to the Committee by the Board of Directors.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of the date of this Statement of Additional Information, there were no
"Control Persons" as that term is defined in the Investment Company Act of 1940
(the "1940 Act").
As of April 8, 1998, Cede & Co. (as nominee for the Depository Trust
Company), 55 Water Street, New York, New York 10041, held of record 10,910,800
shares of the outstanding securities of the Fund.
As of the date of this Statement of Additional Information, the directors
and officers as a group owned 1.6% of the common stock of the Fund.
-12-
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
Denver Investment Advisors LLC (the "Advisor") serves as investment advisor
for the Fund and is located at 1225 Seventeenth Street, 26th Floor, Denver,
Colorado 80202. Until March 31, 1995, Denver Investment Advisors, Inc. ("DIA,
Inc.") served as investment advisor for the Fund. On March 31, 1995, the
Advisor purchased certain of the assets and assumed certain of the liabilities
and obligations of DIA, Inc., and the principal officers and all of the
employees of DIA, Inc. became employed by the Advisor. This transaction caused
the Fund's previous investment advisory agreement with DIA, Inc. to terminate
automatically under the 1940 Act. The current investment advisory agreement was
approved by the stockholders at a special meeting held on February 8, 1995. The
current investment advisory agreement is substantially the same as the Fund's
previous investment advisory agreement.
Kenneth V. Penland, Chairman and a director of the Fund, is an officer and
executive manager of the Advisor. Todger Anderson, President and a director
of the Fund, is an officer and executive manager of the Advisor. Varilyn K.
Schock, Vice President of the Fund, is a Vice President and member of the
Advisor. Jasper R. Frontz, Treasurer of the Fund, is an employee of the
Advisor.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Fund paid
the Advisor (and its predecessor DIA, Inc.) $825,556, $661,385 and $587,436,
respectively, for investment advisory services.
The Investment Advisory Agreement dated April 1, 1995 between the Fund and
the Advisor (the "Agreement") provides that the advisory fee shall be reduced as
required by expense limitations imposed upon the Fund by any state in which
shares of the Fund are sold. The Fund is not presently subject to any such
expense limitations.
In the Agreement, the Advisor agrees, subject to the supervision of the
Fund's Board of Directors, to provide a continuous investment program and
strategy for the Fund, including investment research and management with respect
to all of its securities, other investments, and cash equivalents and to make
decisions with respect to and place orders for all purchases and sales of
portfolio securities. The Agreement also requires the Advisor to prepare or
supervise the preparation of reports to the Securities and Exchange Commission
or any other governmental
-13-
<PAGE>
authority; provide personnel to act as officers of the Fund and pay the salaries
of such officers; assist to the extent requested by the Fund with the Fund's
preparation of its annual and semiannual reports to stockholders; transmit
information concerning purchases and sales of the Fund's portfolio securities to
the custodian for proper settlement; supply the Fund and its Board of Directors
with reports and statistical data as requested; and prepare a quarterly
brokerage allocation summary.
The Agreement provides that the Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor in the performance of its duties or from reckless disregard
of its obligations and duties under the Agreement.
ADMINISTRATOR
For the fiscal years ended December 31, 1997, 1996 and 1995, the Fund paid
American Data Services, Inc., the Fund's Administrator $103,945, $94,643 and
$94,708, respectively, for administrative services.
CUSTODIAN
The custodian of the Fund's portfolio securities is The Bank of New York
("BONY"). Pursuant to the Custody Agreement between the Fund and BONY, BONY
provides the following services: (i) maintains a separate account or accounts
in the name of the Fund; (ii) holds and disburses portfolio securities on
account of the Fund; (iii) collects and makes disbursements of money on behalf
of the Registrant; (iv) collects and receives all income and other payments and
distributions on account of the Fund's portfolio; (v) furnishes monthly to the
Fund a detailed statement of property held for the Fund under the Custody
agreement; (vi) maintains appropriate books and records for the Fund with
respect to its duties under the Custody Agreement and (vii) makes periodic
reports to the Fund concerning the Registrant's operations.
INDEPENDENT AUDITORS
Ernst & Young LLP, 370 Seventeenth Street, Suite 4300, Denver, Colorado
80202, serves as the Fund's independent auditors, providing audit services
including (1) audit of the annual financial statements, (2) assistance and
consultation in connection with SEC filings, and (3) review of the income tax
returns filed on behalf of the Fund.
-14-
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokers are selected by the Advisor on the basis of best price and
execution for the Fund. In assessing best price and execution available to the
Fund, the Advisor will consider all factors it deems relevant, including the
breadth, of the market in the security, the price of the security, the financial
condition and execution capability of the broker/dealer, and the reasonableness
of the commission, if any, for the specific transaction and on a continuing
basis. In selecting brokers or dealers to execute particular transactions and
in evaluating best net price and execution available, the Advisor is authorized
to consider "brokerage and research services" (as defined in section 28(e) of
the Securities Exchange Act of 1934), statistical quotations, including the
quotations necessary to determine the Fund's net asset value, and other
information provided to the Fund and/or the Advisor or its affiliates. The
Advisor is authorized to cause the Fund to pay to brokers or dealers who provide
such brokerage and research services brokerage commissions which may be in
excess of the amount that another broker or dealer would have charged for
effecting the same transactions if the Advisor determines in good faith that
such amount of commissions is reasonable in relation to the value of brokerage
and research services provided by such brokers or dealers, viewed in terms of
the particular transaction or in terms of all of the accounts over which the
Advisor exercises investment discretion.
Research material furnished by brokers without cost to the Advisor, if any,
may tend to benefit Fund and other clients of the Advisor by improving the
quality of advice given; not all such research material furnished may be used by
the Advisor in connection with the Fund.
During the fiscal years ended December 31, 1997, 1996 and 1995, the Fund
paid brokerage commissions of $162,683, $105,430 and $76,627, respectively.
TAX STATUS
FEDERAL
The Fund will be treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to qualify as a
"regulated investment company." By following this policy, the Fund expects to
eliminate or reduce to a nominal amount the federal income taxes to which it may
be subject. If for any taxable year the Fund does not qualify for
-15-
<PAGE>
the special federal tax treatment afforded regulated investment companies, all
of the Fund's taxable income would be subject to tax at regular corporate rates
(without any deduction for distributions to stockholders). In such event, the
Fund's dividend distributions to stockholders would be taxable as ordinary
income to the extent of the current and accumulated earnings and profits of the
Fund and would be eligible for the dividends received deduction in the case of
corporate stockholders.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its stockholders an amount equal
to at least the sum of 90% of its investment company taxable income (if any) and
90% of its tax-exempt income (if any), net of certain deductions for each
taxable year. In general, the Fund's investment company taxable income will be
its taxable income, including dividends, interest, and short-term capital gains
(the excess of net short-term capital gain over net long-term capital loss),
subject to certain adjustments and excluding the excess of net long-term capital
gain, if any, for the taxable year over the net short-term capital loss (if
any), for such year. The Fund will be taxed on its undistributed investment
company taxable income, if any. As stated, the Fund intends to distribute at
least 90% of its investment company taxable income (if any) for each taxable
year. To the extent such income is distributed by the Fund (whether in cash or
additional shares), it will be taxable to stockholders as ordinary income.
Any distribution of the excess of net long-term capital gains over net
short-term capital losses is taxable to stockholders as long-term capital gain,
regardless of how long the stockholder has held Fund shares and whether such
gains are received in cash or additional Fund shares. The Fund will designate
such a distribution as a capital gain dividend in a written notice mailed to
stockholders after the close of the Fund's taxable year. It should be noted
that, upon the sale of Fund shares, if the stockholder has not held such shares
for more than six months, any loss on the sale of those shares will be treated
as long-term capital loss to the extent of the capital gain dividends received
with respect to the shares.
Ordinary income of individuals is taxable at a maximum marginal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. An individual's long-term capital gains are
taxable at a maximum nominal rate of 28% (for the sale of capital assets held
more than 12 months but not more than 18 months) or 20% (for the sale of capital
assets held more than 18 months). For corporations, long-term capital
gains and ordinary income are both taxable at a maximum nominal rate of 35%.
-16-
<PAGE>
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specific percentages of their ordinary taxable
income and capital gain net income (excess of capital gains over capital
losses). The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
prior to the end of each calendar year to avoid liability for this excise tax.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or 31% of gross sale proceeds
upon sale paid to stockholders (i) who have failed to provide a correct tax
identification number in the manner required, (ii) who are subject to
withholding by the Internal Revenue Service for failure to properly include on
their return payments of taxable interest or dividends or (iii) who have failed
to certify to the Fund either that they are subject to backup withholding when
required to do so or that they are "exempt recipients."
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Specific rules govern the federal income tax treatment of certain
financial instruments that may be held by the Fund. These rules may have a
particular impact on the amount of income or gain that the Fund must distribute
to its stockholders.
FUTURES CONTRACTS AND OPTIONS OF FUTURES CONTRACTS. Generally, futures
contracts and options on futures contracts held by the Fund (collectively, the
"Instruments") at the close of its taxable year are treated for federal income
tax purposes as sold for their fair market value on the last business day of
such year, a process known as "marking-to-market." Forty percent of any gain or
loss resulting from such constructive sales will be treated as short-term
capital gain or loss and 60% of such gain or loss will be treated as long-term
capital gain or loss without regard to the period the Fund has held the
Instruments (the "40-60 rule"). The amount of any capital gain or loss actually
realized by the Fund in a subsequent sale or other disposition of those
Instruments is adjusted to reflect any capital gain or loss taken into account
by the Fund in a prior year as a result of the constructive sale of the
Instruments. With respect to certain Instruments, deductions for interest and
carrying charges may not be allowed. With respect to futures contracts to sell
which are properly identified as such, the Fund may make an election which will
exempt (in whole or in part) those identified futures contracts from being
treated for federal income tax purposes as sold on the last business day of the
Fund's taxable year, but gains and losses will be subject to such short sales,
wash sales, loss deferral rules and the requirement to capitalize interest and
carrying charges. Under temporary regulations, the Fund would be allowed (in
lieu of the foregoing) to elect to either (1) offset gains or losses from
positions which are part of a mixed straddle to which such treatment applies, or
(2) establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, the 40-60 rule will apply to the net gain or loss attributable to the
futures contracts, but in the case of a mixed straddle account election, not
more than 50% of any net gain may be treated as long-term and no more than 40%
of any net loss may be treated as short-term. Options on futures contracts
generally receive federal tax treatment similar to that described above.
OPTIONS. When the Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included as a
deferred credit in the liability section of the Fund's statement of assets and
liabilities. The amount of the deferred credit will be subsequently marked-to-
market to reflect the current value of the option written. The current value of
the traded option is the last sale price or, in the
-17-
<PAGE>
absence of a sale price, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold), and the deferred credit related to such option will be eliminated. If an
option is exercised, the Fund may deliver the underlying security from its
portfolio and purchase the underlying security in the open market. In either
event, the proceeds of the sale will be increased by the net premium originally
received, and the Fund will realize a gain or loss. Premiums from expired call
options written by the Fund and net gains from closing purchase transactions are
treated as short-term capital gains for federal income tax purposes, and losses
on closing purchase transactions are treated as short-term capital losses.
STATE
Depending upon the extent of activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, the Fund
may be subject to the tax laws of such states or localities.
Income distributions may be taxable to stockholders under state or local
law as dividend income even though all or a portion of such distributions may be
derived from interest on U.S. government obligations which, if realized
directly, would be exempt from such income taxes. Stockholders are advised to
consult their tax advisers concerning the application of state and local taxes.
FINANCIAL STATEMENTS
Stockholders receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements together with the report
of the independent auditors of the Fund. The audited financial statements and
notes thereto for the Fund contained in its Annual Report to Stockholders dated
December 31, 1997, are incorporated by reference into this Statement of
Additional Information. The financial statements and related notes thereto for
the Fund which appear in the Fund's Annual Report to Stockholders have been
audited by Ernst & Young LLP, whose report thereon also appears in such Annual
Report and is also incorporated herein by reference. No other parts of the
Annual Report are incorporated by reference herein. Such audited financial
statements and notes thereto have been incorporated herein in reliance upon such
report of Ernst & Young LLP, independent auditors, given upon the authority of
said firm as experts in accounting and auditing. Additional copies of the
-18-
<PAGE>
Annual Report may be obtained at no charge by telephoning the Fund at (800) 624-
4190.
-19-
<PAGE>
FORM N-2
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
1. Financial Statements
(a) Included in Part A hereof:
Financial Highlights.
(b) Included in Part B hereof:
The audited financial statements and related notes thereto
as well as the auditor's report thereon for the fiscal year
ended December 31, 1997 are incorporated herein by reference
to the Annual Report to Stockholders as filed with the
Securities and Exchange Commission on February 24, 1998
pursuant to Rule 30b2-1 of the Investment Company Act of
1940 Act (No. 811-5003).
2. Exhibits:
(a) (1) Articles of Incorporation.
(2) Articles of Amendment to the Articles of Incorporation
dated April 2, 1987.
(3) Articles of Amendment to the Articles of Incorporation
dated July 13, 1989.
(b) Amended and Restated By-Laws dated March 1, 1990.
(c) Inapplicable.
(d) (1) See Article VI and Sections 9.1, 9.2 and 9.3 of Article
IX of the Articles of Incorporation which are included
herein as Exhibit 2(a)(1) and Article Fourth of the
Articles Supplementary dated April 12, 1987 which are
included herein as Exhibit 2(a)(2).
(2) Form of Subscription Certificate.
(e) Dividend Reinvestment and Cash Purchase Plan.
<PAGE>
(f) Inapplicable.
(g) (1) Investment Advisory Agreement dated April 1, 1995
between Registrant and Denver Investment Advisors LLC
is incorporated herein by reference to Exhibit 2(g)(1)
of Registrant's Registration Statement on Form N-2
(Nos. 333-19609/811-5003) filed on December 19, 1996.
(2) Administrative Services Agreement dated January 1, 1989
between Registrant and American Data Services, Inc.
(h) Inapplicable.
(i) Inapplicable.
(j) Custody Agreement between the Registrant and The Bank of New
York will be filed by amendment.
(k) (1) Service Agreement dated March 1, 1990 between the
Registrant and ChaseMellon Shareholder Services, L.L.C.
(formerly known as Mellon Securities Trust Company) as
Transfer Agent, Registrar and Dividend Disbursing Agent
for the Registrant.
(2) Form of Subscription Agent Agreement between the
Registrant and Chase Mellon Shareholder Services,
L.L.C.
(l) Opinion and Consent of Counsel.
(m) Inapplicable.
(n) Consent of Ernst & Young LLP.
(o) Inapplicable.
(p) Inapplicable.
(q) Inapplicable.
(r) Financial Data Schedule.
-2-
<PAGE>
ITEM 25. MARKETING ARRANGEMENTS
----------------------
Inapplicable.
ITEM 26 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
-------------------------------------------
Inapplicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
Inapplicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
-------------------------------
As of March 31, 1998:
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
Common Stock 4,179
par value $.01
ITEM 29. INDEMNIFICATION
---------------
Section 2-418 of the General Corporation Law of Maryland authorizes
the indemnification of directors and officers of Maryland corporations
under specified circumstances.
Article VII, Section 7.4, of the Articles of Incorporation, included
as Exhibit (1)(b) hereto, provides that the Registrant shall indemnify
its directors and officers to the extent permitted by the Maryland
General Corporation Law. In no event will registrant indemnify its
directors or officers against any liability to the Corporation or its
security holders to which such person would otherwise by subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office.
Section 6.2 of the By-Laws, included as Exhibit (2) hereto, provides
that the Registrant shall indemnify its directors and officers to the
full extent permissible under applicable state corporation law, the
Securities Act of 1933, or the Investment Company Act of 1940,
provided that such indemnification shall not protect any such person
against any liability to the Corporation or any stockholder thereof to
which such person would otherwise by subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
-3-
<PAGE>
disregard of the duties involved in the conduct of his office.
Indemnification of the Registrant's Advisor is provided for in Section
8 of the Investment Advisory Agreement, incorporated herein by
reference as Exhibit (g)(1).
Registrant has obtained from Gulf Insurance Company, a directors' and
officers' liability policy covering certain types of errors and
omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Registrant's directors,
officers, and controlling persons pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
----------------------------------------------------
Denver Investment Advisors LLC (the "Advisor") performs investment
advisory services for the Registrant and certain other investment
advisory customers. A description of the Advisor is included in Parts
A and B of this Registration Statement. For information regarding the
business, profession, vocation, or employment of a substantial nature
that each director, executive officer, partner or member of the
Advisor has been engaged in for his or her own account or in the
capacity of director, officer, employee, partner, trustee or member,
reference is made to the Form ADV (File #801-47933) filed by the
Advisor under the Investment Advisers Act of 1940.
-4-
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
(a) Denver Investment Advisors LLC, 1225 17th Street, Denver,
Colorado 80202 (records relating to its functions as investment
advisor).
(b) The Bank of New York, 48 Wall Street, New York, New York 10286
(records relating to its function as custodian).
(c) ChaseMellon Shareholder Services, L.L.C., 85 Challenger Road,
Overpeck Centre, Ridgefield Park, NJ 07660 (records relating to
its function as transfer agent, dividend disbursing agent,
dividend and cash purchase plan agent, and subscription agent).
(d) American Data Services, Inc., Hauppauge Corporate Center, 150
Motor Parkway, Suite 109, Hauppauge, New York 11788 (records
relating to its function as administrator and accounting agent).
(e) Drinker Biddle & Reath LLP, PNB Building, 1345 Chestnut Street,
Philadelphia, PA 19107 (Registrant's Articles of Incorporation,
By-Laws, and Minute Books).
ITEM 32. MANAGEMENT SERVICES
-------------------
Inapplicable.
ITEM 33. UNDERTAKINGS
------------
Registrant undertakes to suspend the offering of shares until the
Prospectus is amended if (1) subsequent to the effective date of its
Registration Statement, the net asset declines more than ten percent
from its net asset value as of the effective date of the Registration
Statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the Prospectus.
Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days
of receipt of a written or oral request, a Statement of Additional
Information.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, and State of Colorado, on the 13th day of
April, 1998.
BLUE CHIP VALUE FUND, INC.
By: /s/ Kenneth V. Penland
------------------------
Kenneth V. Penland
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of Blue Chip Value Fund, Inc. has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Kenneth V. Penland Chairman of the Board
- ---------------------- and Director (Principal April 13, 1998
Kenneth V. Penland Executive Officer)
/s/ Todger Anderson President April 13, 1998
- ----------------------
Todger Anderson
Robert M. Inman* Director April 13, 1998
Roberta M. Wilson* Director April 13, 1998
Richard C. Schulte* Director April 13, 1998
Robert J. Greenebaum* Director April 13, 1998
/s/ Jasper R. Frontz Treasurer (Principal April 13, 1998
- ---------------------- Accounting Officer and
Jasper R. Frontz Principal Financial
Officer)
*By: /s/ Kenneth V. Penland
-----------------------
Kenneth V. Penland
Attorney-in-fact
-6-
<PAGE>
BLUE CHIP VALUE FUND, INC.
Power of Attorney
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on November 17, 1996.
/s/ Robert M. Inman
-------------------
Robert M. Inman
-7-
<PAGE>
BLUE CHIP VALUE FUND, INC.
Power of Attorney
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 15, 1996.
/s/ Roberta M. Wilson
---------------------
Roberta M. Wilson
-8-
<PAGE>
BLUE CHIP VALUE FUND, INC.
Power of Attorney
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 14, 1996.
/s/ Richard C. Schulte
----------------------
Richard C. Schulte
-9-
<PAGE>
BLUE CHIP VALUE FUND, INC.
Power of Attorney
I hereby appoint Kenneth V. Penland or Steven G. Wine attorney for me and
in my name and on my behalf to sign any Registration Statement or Amendment
thereto of BLUE CHIP VALUE FUND, INC. to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on October 15, 1996.
/s/ Robert J. Greenebaum
------------------------
Robert J. Greenebaum
-10-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO.
- ----------
2(a)(1) - Articles of Incorporation.
2(a)(2) - Articles of Amendment to the Articles of Incorporation dated April
2, 1987.
2(a)(3) - Articles of Amendment to the Articles of Incorporation dated July
13, 1989.
2(b) - Amended and Restated By-Laws dated March 1, 1990.
2(d)(2) - Form of Subscription Certificate.
2(e) - Dividend Reinvestment and Cash Purchase Plan.
2(g)(2) - Administrative Services Agreement dated January 1, 1989 between
Registrant and American Data Services, Inc.
2(k)(1) - Service Agreement dated March 1, 1990 between the Registrant and
ChaseMellon Shareholder Services, L.L.C. (formerly known as Mellon
Securities Trust Company) as Transfer Agent, Registrar and Dividend
Disbursing Agent for the Registrant.
2(k)(2) - Form of Subscription Agent Agreement.
2(1) - Opinion and Consent of Counsel.
2(n) - Consent of Ernst & Young LLP.
2(r) - Financial Data Schedule.
<PAGE>
EXHIBIT 2(a)(1)
ARTICLES OF INCORPORATION
BLUE CHIP VALUE FUND, INC.
(A Maryland Corporation)
ARTICLE I
SECTION 1.1. THE UNDERSIGNED, Mary Beth M. Wong, whose address is
1100 Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107,
being at least eighteen years of age, does hereby act as an incorporator, under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.
ARTICLE II
SECTION 2.1. The name of the Corporation is:
BLUE CHIP VALUE FUND, INC.
ARTICLE III
SECTION 3.1. The purpose for which the Corporation is formed is to
act as management investment company under the Investment Company Act of 1940.
ARTICLE IV
SECTION 4.1. The Corporation is expressly empowered to invest,
reinvest, own, hold or trade its assets in securities and other investments or
to hold part or all of its assets in cash. The Corporation shall be authorized
to exercise and enjoy all of the powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of the State of Maryland now or
hereafter in force, and the enumeration of the foregoing shall not be deemed to
exclude any powers, rights or privileges so granted or conferred.
ARTICLE V
SECTION 5.1. The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation in this State is The Corporation Trust Incorporated,
<PAGE>
a corporation of this State, and the post office address of the resident agent
is 32 South Street, Baltimore, Maryland 21202.
ARTICLE VI
SECTION 6.1. The total number of shares of capital stock which the
Corporation shall have authority to issue is one hundred million (100,000,000)
shares of common stock, of the par value of one cent ($0.01) per share and of
the aggregate par value of one million dollars ($1,000,000.00).
SECTION 6.2. The Corporation may issue fractional shares. Any
fractional share shall carry proportionately all the rights of a whole share,
excepting any right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the right to receive
dividends.
SECTION 6.3. Upon the occurrence of both of the following conditions,
stockholders will have the option to require the Fund to redeem their shares at
net asset value, such redemption to occur on June 30, 1993, or as soon
thereafter as is practicable:
(a) Shares of the Corporation's common stock have traded on the New
York Stock Exchange, or the principal exchange or trading market for the common
stock, at an average discount from net asset value of more than 5% based on the
discount as of the end of the last trading day in each week during the last
twelve weeks in 1992; and
(b) If the condition in Section 6.3(i) occurs, the Corporation will
submit to the stockholders at the 1993 Annual Meeting of Stockholders a
resolution which, if approved by the holders of a majority of the outstanding
shares of common stock, would allow each holder thereof to require the
Corporation to redeem, at net asset value, all or part of the shares of common
stock owned by such holder, such redemption to occur on June 30, 1993 or as soon
thereafter as practicable, to the extent consistent with the Investment Company
Act of 1940, upon written notice delivered to the Corporation's transfer agent
not less than thirty days prior thereto.
SECTION 6.4. No holder of any stock or other security of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any stock or other security of the Corporation other than such
right, if any, as the Board of Directors, in its discretion, may determine.
2
<PAGE>
ARTICLE VII
SECTION 7.1. The number of initial directors of the Corporation shall
be one provided that: (a) The number of directors of the Corporation may be
increased or decreased pursuant to the By-Laws of the Corporation but shall
never be less than three, except as provided in this Article VII; (b) if there
is no capital stock of the Corporation outstanding the number of directors may
be less than three but not less than one; and (c) if there is capital stock of
the Corporation outstanding and so long as there are less than three
stockholders of the Corporation, the number of directors may be less than three
but not less than the number of stockholders. The name of the director who
shall act until the first annual meeting of stockholders or until his successor
is duly elected and qualified is:
Kenneth V. Penland
SECTION 7.2. Beginning with the first annual meeting of stockholders
held after the initial public offering of the shares of the Corporation ("the
initial annual meeting"), the Board of Directors shall be divided into three
classes: class I, class II, and class III. The terms of office of the classes
of directors elected at the initial annual meeting shall expire at the times of
the annual meetings of the stockholders as follows-- class I in 1989, class II
in 1990, and class III in 1991 -- or thereafter in each case when their
respective successors are elected and qualified. At each subsequent annual
election, the directors chosen to succeed those whose terms are expiring shall
be identified as being of the same class as the directors whom they succeed, and
shall be elected for a term expiring at the time of the third succeeding annual
meeting of stockholders, or thereafter in each case when their respective
successors are elected and qualified. The number of directorships shall be
apportioned among the classes so as to maintain the classes as nearly equal in
number as possible.
SECTION 7.3. A director may be removed with or without cause, but
only by action of the shareholders taken by the holders of at least two-thirds
of the shares then entitled to vote in an election of directors.
SECTION 7.4. Each person who is or was a director or officer of the
Corporation, and each person who serves or served at the request of the
Corporation as a director or officer of another enterprise, shall be indemnified
by the Corporation in accordance with, and to the fullest extent authorized by,
the General Corporation Law of the State of Maryland as it may be in effect from
time to time, provided that this section shall not protect any director or
officer of the Corporation or any other
3
<PAGE>
person against any liability to the Corporation or to its stockholders to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office; and provided further that this Article shall not apply as to any action,
suit or proceeding brought by or on behalf of a director or officer without
prior approval of the Board of Directors.
ARTICLE VIII
SECTION 8.1. Notwithstanding any other provisions of the Charter, the
Maryland General Corporation Law or any other provision of Maryland law, a
favorable vote of the holders of at least two-thirds of the shares of the
Corporation then entitled to be voted on the matter shall be required to
approve, adopt or authorize:
(a) a merger or consolidation of the Corporation with any
corporation other than a corporation ninety percent or more of which is owned by
the Corporation,
(b) a transfer of all or substantially all of the assets of the
Corporation (other than in the regular course of its investment activities), or
(c) a liquidation or dissolution of the Corporation unless such
action has previously been approved, adopted or authorized by the affirmative
vote of two-thirds of the total number of directors fixed in accordance with the
By-Laws, in which case the affirmative vote of a majority of the shares entitled
to vote thereon shall be required.
ARTICLE IX
SECTION 9.1. The Corporation reserves the right from time to time to
make any amendments to its Charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its Charter, of any of its outstanding stock, but no such
amendment which changes such terms or contract rights of any of its outstanding
stock shall be valid unless such amendment shall have been authorized by not
less than a majority of the aggregate number of the votes entitled to be cast
thereon by a vote at a meeting.
SECTION 9.2. Notwithstanding any other provision of the Charter or
the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, the Charter or the By-Laws of the
Corporation),
4
<PAGE>
the amendment or repeal of Article VII, Section 8.1, Section 9.3 or this Section
9.2 of the Articles of Incorporation shall require the affirmative vote of the
holders of at least two-thirds of the shares then entitled to be voted on the
matter.
SECTION 9.3. Notwithstanding any provision of the Maryland General
Corporation Law requiring any action to be take or authorized by the affirmative
vote of the holders of a proportion of the votes of stock of the Corporation
greater than a majority, such action shall be effective and valid if taken or
authorized by the affirmative vote of the holders of a majority of the total
number of shares outstanding and entitled to vote thereon, except as otherwise
required by applicable law or otherwise provided herein.
SECTION 9.4. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors is
expressly authorized:
(a) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940, as amended.
(b) Without the assent or vote of the stockholders, to authorize
the issuance and sale from time to time of shares of the stock of the
Corporation, whether now or hereafter authorized, for such consideration as the
Board of Directors may deem advisable.
IN WITNESS WHEREOF, the undersigned incorporator of BLUE CHIP VALUE
FUND, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be her act.
Dated as of the fourth day of February, 1987.
/s/ Mary Beth M. Wong
--------------------------------
Mary Beth M. Wong
5
<PAGE>
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
I hereby certify that on the 4th day of February, 1987, before me, a
Notary Public of the State of Pennsylvania, personally appeared MARY BETH M.
WONG, who acknowledged the foregoing Articles of Incorporation to be her act.
WITNESS my hand and Notarial Seal.
/s/ Maria Shandruk
--------------------------------
MARIA SHANDRUK
6
<PAGE>
EXHIBIT 2(a)(2)
BLUE CHIP VALUE FUND, INC.
ARTICLES OF AMENDMENT
Blue Chip Value Fund, Inc., a Maryland corporation having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The charter of the Corporation is hereby amended by striking out
Section 6.3(b) of Article VI and inserting in lieu thereof the following:
(b) If the condition in Section 6.3(a) occurs, the Corporation
will submit to the stockholders at the 1993 Annual Meeting of Stockholders
a resolution which, if approved by the holders of a majority of the
outstanding shares of common stock, would allow each holder thereof to
require the Corporation to redeem, at net asset value, all or part of the
shares of common stock owned by such holder, such redemption to occur on
June 30, 1993 or as soon thereafter as practicable, to the extent
consistent with the Investment Company Act of 1940, upon written notice
delivered to the Corporation's transfer agent not less than thirty days
prior thereto.
SECOND: The charter of the Corporation is hereby amended by striking out
Section 7.3 of Article VII and inserting in lieu thereof the following:
SECTION 7.3. A director may be removed with or without cause, but
only by action of the shareholders taken by the holders of at least three-
fourths of the shares then entitled to vote in an election of directors.
THIRD: The charter of the Corporation is hereby amended by striking out
Article VIII and inserting in lieu thereof the following:
ARTICLE VIII
SECTION 8.1. Notwithstanding any other provisions of the Charter, the
Maryland General Corporation Law or any other provision of Maryland law, a
favorable vote of the holders of at least three-fourths of the shares of
the Corporation then entitled to be voted on the matter shall be required
to approve, adopt or authorize:
(a) a merger or consolidation of the Corporation with any corporation
other than a corporation ninety percent or more of which is owned by the
Corporation,
<PAGE>
(b) a transfer of all or substantially all of the assets of the
Corporation (other than in the regular course of its investment
activities),
(c) a liquidation or dissolution of the Corporation, or
(d) a change in the nature of the Corporation's business which would
cause it to cease to be an investment company unless such action has
previously been approved, adopted or authorized by the affirmative vote of
three-fourths of the total number of directors fixed in accordance with the
By-Laws, in which case the affirmative vote of a majority of the shares
entitled to vote thereon shall be required.
FOURTH: The charter of the Corporation is hereby amended by striking out
Section 9.2 of Article IX and inserting in lieu thereof the following:
SECTION 9.2 Notwithstanding any other provision of the Charter or the
By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, the Charter or the By-Laws of the
Corporation), the amendment or repeal of Article VII, Section 8.1, Section
9.3 or this Section 9.2 of the Articles of Incorporation shall require the
affirmative vote of the holders of at least three-fourths of the shares
then entitled to be voted on the matter.
FIFTH: The amendment of the charter of the Corporation as hereinabove set
forth has been duly advised by the board of directors and there is no stock
entitled to vote on the matter either outstanding or subscribed for at the time
of approval.
IN WITNESS WHEREOF: BLUE CHIP VALUE FUND, INC., has caused these presents
to be signed in its name and on its behalf by its Chairman, President or Vice-
President and attested by its Secretary or one of its Assistant Secretaries on
March 27, 1987.
ATTEST: BLUE CHIP VALUE FUND, INC.
/s/ Todger Anderson /s/ Kenneth V. Penland
- -------------------------- ---------------------------
Charles H. Anderson, Kenneth V. Penland,
Assistant Secretary Chairman
THE UNDERSIGNED, Chairman of BLUE CHIP VALUE FUND, INC., who executed oh
behalf of said Corporation, the foregoing Articles of
2
<PAGE>
Amendment, of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said Corporation, the foregoing Articles of Amendment to
be the corporate act of said corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/ Kenneth V. Penland
--------------------------
Kenneth V. Penland,
Chairman
3
<PAGE>
EXHIBIT 2(a)(3)
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
BLUE CHIP VALUE FUND, INC.
Blue Chip Value Fund, Inc., a Maryland corporation, having its principal
office in the City of Baltimore, Maryland (the "Corporation"), hereby certifies
to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation's Articles of Incorporation are hereby amended
by amending and restating in its entirety Section 7.4 of Article VII to
read as follows:
(a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have
any liability to the Corporation or its stockholders for damages.
This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the Corporation whether or
not such person is a director or officer at the time of any proceeding
in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses
to its officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of Directors may
by By-Law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General Corporation Law.
(c) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against
any liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office.
(d) References to the Maryland General Corporation Law in this Article
are to the law as from time to time amended. No further amendment to
the Articles of Incorporation of the Corporation shall affect any
right
<PAGE>
of any person under this Article based on any event, omission or
proceeding prior to such amendment.
SECOND: The foregoing amendment to the Articles of Incorporation has
been duly advised by the Board of Directors on February 13, 1989 and
approved by the Stockholders of the Corporation on May 11, 1989.
IN WITNESS WHEREOF, BLUE CHIP VALUE FUND, INC. has caused these presents to
be signed in its name and on its behalf by its President and its corporate seal
to be hereunto affixed and attested by its Secretary on this 12th day of July,
1989.
BLUE CHIP VALUE FUND, INC.
[SEAL]
By:/s/ Charles H. Anderson
-----------------------------
Charles H. Anderson
President
ATTEST:
/s/ W. Bruce McConnel, III
- --------------------------
W. Bruce McConnel, III
Secretary
-2-
<PAGE>
CERTIFICATE
-----------
THE UNDERSIGNED, President of Blue Chip Value Fund, Inc., who executed
on behalf of said Corporation the foregoing Articles of Amendment, of which this
Certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles of Amendment to be the corporate act of
said Corporation and certifies that, to the best of his knowledge, information
and belief, the matters and facts set forth therein with respect to
authorization and approval are true in all material respects, under the
penalties of perjury.
/s/ Charles H. Anderson
------------------------------
Charles H. Anderson
President
-3-
<PAGE>
EXHIBIT 2(b)
March 1, 1990
AMENDED AND RESTATED BY-LAWS
OF
BLUE CHIP VALUE FUND, INC.
ARTICLE I
---------
STOCKHOLDERS
------------
SECTION 1.1 Annual Meetings. The annual meeting of the stockholders
---------------
of the Corporation shall be held on such date within the month of May and at
such place, within or without the State of Maryland, as may be determined by the
Board of Directors and as shall be designated in the notice of said meeting, for
the purpose of electing directors and for the transaction of such other business
as may properly be brought before the meeting.
SECTION 1.2 Special Meetings. Special meetings of the stockholders
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by the
Charter, may be held at any place, within or without the State of Maryland, and
may be called at any time by the Board of Directors or by the President, and
shall be called at the request in writing of stockholders entitled to cast at
least twenty-five (25) percent of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of the proposed
meeting and the matters proposed to be acted on at it; provided, however, that
-----------------
unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding twelve (12)
months. The Secretary shall inform such stockholders of the reasonably
estimated costs of preparing and mailing the notice of the meeting and on
payment of these costs to the Corporation shall notify each stockholder entitled
to notice of the meeting.
SECTION 1.3 Notice of Meetings. Written or printed notice of the
------------------
time and place of every meeting, and of the purpose of any special meeting, of
the stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting and each other stockholder
entitled to notice of the meeting, by placing such notice in the mail at least
ten (10) days, but not more than ninety (90) days, and in any event within the
period prescribed by law, prior to the date named for the meeting addressed to
each stockholder at his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purposes of notice. The notice
<PAGE>
of every meeting of stockholders may be accompanied by a form of proxy approved
by the Board of Directors in favor of such actions or persons as the Board of
Directors may select.
SECTION 1.4 Record Date. The Board of Directors may fix a date not
-----------
more than ninety (90) days preceding the date of any meeting of stockholders, or
the date fixed for the payment of any dividend, or the date of the allotment of
rights, as a record date for the determination of stockholders entitled to
notice of, or to vote at, any such meeting (or any adjournment thereof) or
entitled to receive payment of any dividend, or to receive such allotment of
rights. In such case, only stockholders of record at the time so fixed shall be
entitled to vote, to receive notice, or receive dividends or rights,
notwithstanding any subsequent transfer on the books of the Corporation. The
Board of Directors shall not close the books of the Corporation against
transfers of shares during the whole or any part of such period. In the case of
a meeting of stockholders, the record date shall be fixed not less than ten (10)
days prior to the date of the meeting.
SECTION 1.5 Quorum and Shareholder Action. Except as otherwise
-----------------------------
provided by statute or by the Charter, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least a majority of all the
votes entitled to be cast at the meeting shall constitute a quorum and a
majority of all the votes cast at a meeting at which a quorum is present shall
be sufficient to approve any matter which properly comes before the meeting;
provided, however, that a majority of all the votes entitled to be cast at the
- -------- -------
meeting shall be required to elect a director. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without notice
other than by announcement at the meeting, may adjourn the meeting from time to
time as provided in Section 1.7 of this Article I until a quorum shall attend.
SECTION 1.6 Organization. At every meeting of the stockholders, the
------------
Chairman of the Board, if one has been selected and is present or, if not, the
President, or in the absence of the Chairman of the Board and the President, a
Vice-President, or in the absence of the Chairman of the Board, the President
and all the Vice-Presidents, a chairman chosen by the Board of Directors of the
Corporation or, in the absence of the Chairman, the President, all the Vice-
Presidents and a chairman chosen by the Board of Directors, a Chairman chosen by
the stockholders, shall act as chairman; and the Secretary, or in his absence,
an Assistant Secretary, or in the absence of the Secretary and all the Assistant
Secretaries, a person appointed by the chairman, shall act as secretary of the
meeting.
SECTION 1.7 Adjournment. Any meeting of the stock holders may be
-----------
adjourned from time to time, without notice other
-2-
<PAGE>
than by announcement at the meeting at which such adjournment is taken, and at
any such adjourned meeting at which a quorum shall be present any action may be
taken that could have been taken at the meeting originally called; provided,
--------
that the meeting may not be adjourned to a date more than the number of days
after the original record date for the meeting permitted by law, and if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
SECTION 1.8 Beneficial Owners. The Board of Directors may adopt by
-----------------
resolution a procedure by which a stockholder of the Corporation may certify in
writing to the Corporation that any shares of stock registered in the name of
the stockholder are held for the account of a specified person other than the
stockholder.
SECTION 1.9. Notice of Matters to be Raised at Meeting. (a)
-----------------------------------------
Qualification of Nominees for Director. Before a person to be nominated for
- --------------------------------------
election to the Board of Directors may be duly nominated at any annual or
special meeting of the stockholders, the person must notify the Corporation in
writing at least 60 days before the meeting and must provide such information to
the Corporation in writing not later than 30 days prior to such meeting as the
Secretary may reasonably require, including, but not limited to, such
information as may be required to be disclosed under the Securities Exchange Act
of 1934 and the Investment Company Act of 1940 to stockholders in connection
with the solicitation of proxies to be voted for the election of such proposed
nominee.
(b) Other Matters. Before any stockholder may propose any
-------------
business for consideration at any annual or special meeting of the stockholders,
other than any matter included in the Corporation's proxy statement, such
stockholder must notify the Corporation in writing at least 60 days before the
meeting and must provide such information to the Corporation in writing not
later than 30 days prior to such meeting as the Secretary may reasonably
require.
(c) General. If the notice provided to stockholders pursuant to
-------
Section 1.3 of this Article I is mailed less than 60 days before any annual or
special meeting of the stockholders, the notice required to be sent to the
Corporation for purposes of subsections (a) or (b) of this Section 1.9 must be
received by the 10th day following the day on which notice of the date of the
meeting is mailed or otherwise publicly disclosed.
-3-
<PAGE>
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 2.1 Election and Powers. The number of directors shall be
-------------------
fixed from time to time by resolution adopted by a majority of the entire Board
of Directors; provided, however, that the number of directors shall in no event
-------- -------
be less than three (3) unless there are fewer than three shareholders nor more
than fifteen (15). The business, affairs and property of the Corporation shall
be managed by or under the direction of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, the Charter or these By-Laws required to be
exercised or done by the stockholders. Beginning with the first annual meeting
of stockholders held after the initial public offering of the shares of the
Corporation ("the initial annual meeting"), the Board of Directors shall be
divided into three classes: class I, class II and class III. The terms of
office of the classes of directors elected at the initial annual meeting shall
expire at the times of the annual meetings of the stockholders as follows --
class I in 1989, class II in 1990 and class III in 1991 -- or thereafter in each
case when their respective successors are elected and qualified. At each
subsequent annual election, the directors chosen to succeed those whose terms
are expiring shall be identified as being of the same class as the directors
whom they succeed, and shall be elected for a term expiring at the time of the
third succeeding annual meeting of stockholders, or thereafter in each case when
their respective successors are elected and qualified. The number of
directorships shall be apportioned among the classes so as to maintain the
classes as nearly equal in number as possible.
SECTION 2.2 Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice on such dates as the Board may from time to
time determine.
SECTION 2.3 Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever called by the Chairman of the Board, the
President or by a majority of the directors either in writing or by vote at a
meeting.
SECTION 2.4 Notice of Special Meetings. Notice of the place, day and
--------------------------
hour of every special meeting shall be delivered personally to each director or
telegraphed or cabled at least one (1) day before the meeting or mailed at least
two (2) days before the meeting to his address on the books of the Corporation.
It shall not be requisite to the validity of any meeting of the Board of
Directors that notice thereof shall have been given to any director who is
present thereat, or, if absent, waives notice thereof in writing filed with the
records of the meeting either before or after the holding thereof.
-4-
<PAGE>
SECTION 2.5 Place of Meetings. The Board of Directors may hold its
-----------------
regular and special meetings at such place or places within or without the State
of Maryland as the Board may from time to time determine.
SECTION 2.6 Quorum and Board Action. Except as otherwise provided by
-----------------------
statute or by the Charter: (a) one third (1/3) of the entire Board of Directors,
but in no case less than two (2) directors, unless there is only one (1)
director, shall be necessary to constitute a quorum for the transaction of
business at each meeting of the Board; (b) the action of a majority of the
directors present at a meeting at which a quorum is present shall be the action
of the Board; and (c) if at any meeting there be less than a quorum present, a
majority of those directors present may adjourn the meeting from time to time,
but not for a period greater than thirty (30) days at any one time, without
notice other than by announcement at the meeting until a quorum shall attend.
At any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting as originally
scheduled.
SECTION 2.7 Action without Meeting. Except with respect to the
----------------------
approval of any investment advisory agreement, any action required or permitted
to be taken at a meeting of the Board of Directors or a committee of the Board
may be taken without a meeting if an unanimous consent which sets forth the
action is signed by each member of the Board or committee and is filed with the
minutes of proceedings of the Board or committee.
SECTION 2.8 Organization. At every meeting of the Board of
------------
Directors, the Chairman of the Board, if one has been selected and is present,
and, if not, or in the absence of the Chairman of the Board, a chairman chosen
by a majority of the directors present, shall preside; and the Secretary, or in
his absence, an Assistant Secretary, or in the absence of the Secretary and all
the Assistant Secretaries, a person appointed by the chairman, shall act as
secretary.
SECTION 2.9 Vacancies. Any vacancy on the Board of Directors
---------
occurring by reason of any increase in the number of directors may be filled by
a majority of the entire Board of Directors. Any vacancy on the Board of
Directors occurring for any other cause may be filled by a majority of the
remaining members of the Board of Directors, whether or not these members
constitute a quorum under Section 2.6 of this Article II. Any director so
chosen to fill a vacancy shall hold office until the next annual meeting of
stockholders and until his successor shall have been duly elected and qualified.
SECTION 2.10 Resignations. Any director may resign at any time by
------------
giving written notice to the Board of Directors, the
-5-
<PAGE>
President or the Secretary. Any such resignation shall take effect at the time
of the receipt of such notice or at any later time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 2.11 Committees. The Board of Directors may appoint from
----------
among its members an executive and other committees of the Board composed of two
(2) or more directors. To the extent permitted by law, the Board of Directors
may delegate to any such committee or committees any of the powers of the Board
of Directors in the management of the business, affairs and property of the
Corporation. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.
SECTION 2.12 Telephone Conference. Except with respect to the
--------------------
approval of any investment advisory agreement, members of the Board of Directors
or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
at the same time and participation by such means shall constitute presence in
person at the meeting.
SECTION 2.13 Compensation of Directors. Any director, whether or not
-------------------------
he is a salaried officer, employee, or agent of the Corporation, may be
compensated for his services as director or as a member of a committee, or as
Chairman of the Board or chairman of a committee, and in addition may be
reimbursed for transportation and other expenses, all in such manner and amounts
as the directors may from time to time determine.
ARTICLE III
-----------
OFFICERS
--------
SECTION 3.1 Number. The officers of the Corporation shall be a
------
President, a Secretary, and a Treasurer, and may include a Chairman of the
Board, one or more Vice-Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as the Board of Directors may
from time to time determine. Any officer may hold more than one office in the
Corporation, except that an officer may not serve concurrently as both the
President and a Vice-President.
SECTION 3.2 Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected by the Board of Directors
-6-
<PAGE>
and, subject to earlier termination of office, each officer shall hold office
for one year and until his successor shall have been elected and qualified.
SECTION 3.3 Resignations. Any officer may resign at any time by
------------
giving written notice to the Board of Directors or to the President, or the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3.4 Removal. If the Board of Directors in its judgment finds
-------
that the best interests of the Corporation will be served, the Board may remove
any officer of the Corporation at any time.
SECTION 3.5 Chairman of the Board. The Chairman of the Board, if one
---------------------
is elected, shall have the responsibility for the implementation of the policies
determined by the Board of Directors and for the administration of the business
affairs of the Corporation. He shall preside over the meetings of the Board and
of the stockholders at which he is present. The Chairman of the Board shall
also be the chief executive officer of the Corporation and shall have general
supervision over the business and operations of the Corporation, subject,
however, to the control of the Board of Directors. He, or such persons as he
shall designate, shall sign, execute, acknowledge, verify, deliver and accept,
in the name of the Corporation, deeds, mortgages, bonds, contracts and other
instruments authorized by the Board of Directors, except in the case where the
signing, execution, acknowledgement, verification, delivery or acceptance
thereof shall be delegated by the Board to some other officer or agent of the
Corporation; and, in general, he shall have general executive powers as well as
other powers and duties as from time to time may be conferred upon or assigned
to him by the Board.
SECTION 3.6 President. The President shall have such powers and
---------
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors or the Chairman of the Board.
SECTION 3.7 The Vice-Presidents. In the absence or disability of the
-------------------
President, or when so directed by the President, any Vice-President designated
by the Board of Directors may perform any or all of the duties of the President,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President; provided, however, that no Vice-President
-------- --------
shall act as a member of or as chairman of any committee of which the President
is a member or chairman by designation of ex-officio, except when designated by
the Board. Each Vice-President shall perform such other duties as from time
-7-
<PAGE>
to time may be conferred upon or assigned to him by the Board or the President.
SECTION 3.8 The Secretary. The Secretary shall record all the votes
-------------
of the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; he shall see that notices of meetings of the stockholders and the
Board of Directors are given and that all records and reports are properly kept
and filed by the Corporation as required by law; he shall be the custodian of
the seal of the Corporation and shall see that it is affixed to all documents to
be executed on behalf of the Corporation under its seal, provided that in lieu
--------
of affixing the corporate seal to any document, it shall be sufficient to meet
the requirements of any law, rule or regulation relating to a corporate seal to
affix the word ("SEAL") adjacent to the signature of the authorized officer of
the Corporation; and, in general, he shall perform all duties incident to the
office of Secretary, and such other duties as from time to time may be conferred
upon or assigned to him by the Board or the President.
SECTION 3.9 Assistant Secretaries. In the absence or disability of
---------------------
the Secretary, or when so directed by the Secretary, any Assistant Secretary may
perform any or all of the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
Each Assistant Secretary shall perform such other duties as from time to time
may be conferred upon or assigned to him by the Board of Directors, the
President or the Secretary.
SECTION 3.10 The Treasurer. Subject to the provisions of any
-------------
contract which may be entered into with any custodian pursuant to authority
granted by the Board of Directors, the Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of its funds and securities; he shall have full authority to receive and
give receipts for all money due and payable to the Corporation, and to endorse
checks, drafts and warrants, in its name and on its behalf, and to give full
discharge for the same; he shall deposit all funds of the Corporation, except
such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as from time to time may be conferred upon or assigned to him
by the Board or the President.
SECTION 3.11 Assistant Treasurers. In the absence or disability of
--------------------
the Treasurer, or when so directed by the Treasurer, any Assistant Treasurer may
perform any or all of the duties of the Treasurer and, when so acting, shall
have all the
-8-
<PAGE>
powers of, and be subject to all the restrictions upon, the Treasurer. Each
Assistant Treasurer shall perform all such other duties as from time to time may
be conferred upon or assigned to him by the Board of Directors, the President or
the Treasurer.
SECTION 3.12 Compensation of Officers. The compensation of all
------------------------
officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded, from receiving such compensation by reason of the fact that he is
also a director of the Corporation.
ARTICLE IV
----------
STOCK
-----
SECTION 4.1 Certificates. The Board of Directors may authorize the
------------
issuance of stock either in certificated or in uncertificated form. If shares
are issued in uncertificated form, each stockholder of,a certificated security
shall be entitled upon written request to a stock certificate or certificates,
representing and certifying the number and kind of full shares held by him,
signed by the President, a Vice President or the Chairman of the Board and
countersigned by the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer, which signatures may be either manual or facsimile
signatures, and sealed with the seal of the Corporation, which seal may be
either facsimile or any other form of seal. Stock certificates shall be in such
form not inconsistent with law or with the Charter, as shall be approved by the
Board of Directors.
SECTION 4.2 Transfer of Shares. Transfers of shares shall be made on
------------------
the books of the Corporation at the direction of the person named on the
Corporation's books or named in the certificate or certificates for such shares
(if issued), or by his attorney lawfully constituted in writing, upon surrender
of such certificate or certificates (if issued) properly endorsed, to the
Corporation's Transfer Agent, with such evidence of the authenticity of such
transfer, authorization and such other matters as the Corporation or its agents
may reasonably require, and subject to such other reasonable terms and
conditions as may be required by the Corporation or its agents; or, if the Board
of Directors shall by resolution so provide, transfer of shares may be made in
any other manner provided by law.
SECTION 4.3 Transfer Agents and Registrars. The Corporation may have
------------------------------
one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall be valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent, or until registered
-9-
<PAGE>
by a Registrar, if the Corporation shall have a Registrar. The duties of
Transfer Agent and Registrar may be combined.
SECTION 4.4 Mutilated, Lost, Stolen or Destroyed Certificates. The
-------------------------------------------------
Board of Directors, by standing resolution or by resolutions with respect to
particular cases, may authorize the issuance of a new stock certificate in lieu
of any stock certificate lost, stolen, destroyed or mutilated, upon such terms
and conditions as the Board may direct. The Board may in its discretion refuse
to issue such a new certificate, unless ordered to do so by a court of competent
jurisdiction.
SECTION 4.5 Stock Ledgers. The Corporation shall not be required to
-------------
keep original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the Transfer Agent of the Corporation's capital stock.
SECTION 4.6 Location of Corporate Books. So long as permitted by
---------------------------
Maryland law, the books of the Corporation may be kept outside the State of
Maryland at such place or places as may be designated from time to time by the
Board of Directors.
ARTICLE V
---------
SEAL
----
SECTION 5.1 Seal. The seal of the Corporation shall be in such form
----
as the Board of Directors shall prescribe.
ARTICLE VI
----------
SUNDRY PROVISIONS
-----------------
SECTION 6.1 Amendments. (a) By Stockholders. By-Laws may be
---------- ---------------
adopted, altered, amended or repealed in the manner provided in Section 1.5 of
Article I hereof at any annual or special meeting of the stockholders.
(b) By Directors. By-Laws may be adopted, altered, amended or
------------
repealed in the manner provided in Sections 2.6 or 2.7 of Article II hereof by
the Board of Directors at any regular or special meeting of the Board.
SECTION 6.2 Indemnification of Directors and Officers. (a)
-----------------------------------------
Indemnification. Subject to Section 6.2(b) of this Article, any person who was
- ---------------
or is a party or is threatened to be made a party in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation, at
-10-
<PAGE>
the request of the Corporation, as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust, enterprise or employee benefit plan, shall be indemnified by the
Corporation against judgments, penalties, fines, excise taxes, settlements and
reasonable expenses (including attorney's fees) actually incurred by such person
in connection with such action, suit or proceeding to the full extent
permissible under applicable state corporation law, the Securities Act of 1933
and the Investment Company Act of 1940, as such statutes are now or hereafter in
force, provided, that such indemnification shall not protect any such person
--------
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
(b) Determination. Unless a court orders otherwise, any
-------------
indemnification made pursuant to Section 6.2(a) of this Article shall be made by
the Corporation only as authorized in the specific case (i) after a final
decision on the merits is made by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
disabling conduct, or (ii) upon a determination, based on a review of the facts,
that the person to be indemnified was not liable by reason of disabling conduct,
which determination shall be made by (A) the vote of a majority of a quorum of
directors who are neither "interested persons" as defined under the Investment
Company Act of 1940 nor parties to the proceeding ("disinterested non-party
directors"), or (B) independent legal counsel in a written opinion.
(c) Advances. Any current or former director or officer of the
--------
Corporation claiming indemnification within the scope of this Section 6.2 shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the proceedings to which he is a
party in the manner and to the full extent permissible under applicable state
corporation law, the Securities Act of 1933 and the Investment Company Act of
1940, as such statutes are now or hereafter in force, provided, that (i) he
--------
undertakes to repay the advance unless it is ultimately determined that he is
entitled to indemnification, and (ii) (A) he provides a security for his
undertaking, (B) the Corporation is insured against losses arising from a
failure to repay if required pursuant to clause (i), or (C) a majority of a
quorum of disinterested, non-party directors or independent legal counsel in a
written opinion, determine, based on a review of readily available facts, that
there is reason to believe that the person to be indemnified ultimately will be
found entitled to indemnification.
-11-
<PAGE>
EXHIBIT 2(d)(2)
SUBSCRIPTION CERTIFICATE NUMBER NUMBER OF RIGHTS: CUSIP NO.
SUBSCRIPTION CERTIFICATE
The registered owner of this Subscription Certificate is entitled to
subscribe for one share (a "Share") of the Common Stock of Blue Chip Value Fund,
Inc. for every 8 rights ("Rights") held, one of which has been issued for each
share of Common Stock owned of record on April __, 1998 (the "Record Date"). If
such registered owner subscribes for the maximum number of Shares to which he or
she is entitled through the Basic Subscription Privilege, he or she is entitled
to subscribe for an unlimited number of additional Shares not otherwise
subscribed for pursuant to the Oversubscription Privilege, subject to proration
as described in the Prospectus dated May __, 1998, if there are sufficient
available Shares. For purposes of determining the number of Shares a holder may
acquire, shareholders whose shares are held of record on the Record Date by a
depository or nominee will be deemed to be holders of the Rights that are issued
to such depository or nominee. All subscriptions are subject to terms and
conditions set forth herein and in the Prospectus.
By: ChaseMellon Shareholder Services, L.L.C.
as Subscription Agent
THIS RIGHTS OFFERING EXPIRES AT 5:00 P.M., NEW YORK TIME, ON
JUNE __, 1998 AND THIS SUBSCRIPTION CERTIFICATE IS VOID
THEREAFTER.
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE
EXEMPT FROM QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE
UNITED STATES AND THE LAWS OF THE STATES IN THE UNITED STATES.
RESIDENTS OF OTHER JURISDICTIONS MAY NOT PURCHASE THE SHARES OF
COMMON STOCK OFFERED HEREBY UNLESS THEY CERTIFY THAT THEIR
PURCHASES OF SUCH SHARES ARE EFFECTED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF SUCH JURISDICTIONS.
<PAGE>
SUBSCRIPTION TO PURCHASE SHARES OF COMMON STOCK
RETURN TO: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
Midtown Station 85 Challenger Road 120 Broadway, 13th Floor
P.O. Box _________ Overpeck Centre New York, NY 10271
New York, NY 10138-0814 Ridgefield Park, NJ 07660
Attention: Reorganization
</TABLE>
1. Number of Shares subscribed for 2. Number of Shares subscribed for
through the Basic Subscription through the Oversubscription
Privilege (not to exceed one Privilege (No limit, except Basic
Share for each 8 Rights Subscription must be fully
held): ________________ exercised): _________________
Shares Shares
4. Method of Payment (Check (A), 3. Total Subscription Price
(B) or (C): (sum of lines 1 and 2 multiplied
by $______):$_______
[_](A) Certified, Cashier's or personal check payable to
ChaseMellon Shareholder Services, L.L.C.
or
[_](B) Wire Transfer Directed to
Mellon Bank, Pittsburgh, PA
or
[_](C) Notice of Guaranteed Delivery
_____________________________
AGREEMENT AND SIGNATURE
I hereby irrevocably subscribe for the number of Shares indicated above
upon the terms and conditions specified in the Prospectus relating thereto.
Receipt of the Prospectus is hereby acknowledged.
DATED: _______________, 1998
____________________________
____________________________
(Please date and sign exactly as your name appears on the reverse side of this
Subscription Certificate. Joint owners should each sign. If signing as executor,
administrator, attorney, trustee or guardian, give title as such. If a
corporation, sign in full corporate name by authorized officer. If a
partnership, sign in the name of authorized person).
<PAGE>
TO BE EXECUTED ONLY BY NON-UNITED STATES RESIDENTS:
I hereby certify that the foregoing purchase of Shares has been effected in
accordance with the applicable laws of the jurisdiction in which I reside.
DATED: _______________, 1998
____________________________
____________________________
<PAGE>
EXHIBIT 2(e)
BLUE CHIP VALUE FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
1. PARTICIPATION. Any Shareholder of record of the Fund is eligible to
participate in the Plan provided that (i) such Shareholder fulfills the
prerequisites for participation described below under "Enrollment Procedures"
and (ii) in the case of citizens or residents of a country other than the United
States, its territories, and possessions, participation would not violate local
laws applicable to the Fund or the participant. PARTICIPANTS IN THE FUND'S
PREVIOUS DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN WILL CONTINUE IN THE NEW
PLAN WITHOUT SENDING IN THE NEW ENROLLMENT FORM.
ENROLLMENT PROCEDURES. Shareholders of record may join the Plan by
completing and signing an Enrollment Form and returning it to ChaseMellon
Shareholder Services, L.L.C. (the "Agent"). Shareholders should be sure to sign
their names on the Enrollment Form exactly as they appear on their certificates.
Common Stock held in a Securities Depository: Any beneficial owner of
Common Stock registered in the name of someone other than such beneficial owner
(for example, a broker or bank nominee) may participate in the dividend
reinvestment portion of the Plan by making arrangements with his or her broker
or bank to participate on his or her behalf through the
-1-
<PAGE>
Depository Trust Company Dividend Reinvestment Service. Brokers and nominees
owning Common Stock held at Depository Trust Company may participate in the Plan
through such service.
Enrollment Forms will be processed as promptly as practicable.
Participation in the Plan will begin after the properly completed Enrollment
Form has been reviewed and accepted by the Agent.
2. DIVIDEND INVESTMENT ACCOUNT. The Agent will establish a Dividend
Investment Account (the "Account") for each share holder participating in the
Plan. The Agent will credit the Account of each participant with funds it
receives from the following sources: (a) cash dividends paid on shares of the
Common Stock of the Fund registered in the participant's name on the books of
the Fund; (b) cash dividends paid on shares of Common Stock registered in the
name of the Agent but credited to the participant's Account; and (c) voluntary
cash contributions made pursuant to paragraph 4 hereof. Sources described in
clauses (a) and (b) of the preceding sentence are hereinafter called
"Distributions."
3. INVESTMENT OF FUNDS HELD IN EACH ACCOUNT. Funds credited to a
participant's Account will be used to purchase shares of the Fund's Common Stock
(the "Purchase"). With respect to funds derived from Distributions, on the
record date, if the
-2-
<PAGE>
price plus commission is greater than the net asset value per share most
recently published by the Fund prior to any purchase (the "Net Asset Value"),
the Fund will issue to the Agent shares of the Fund's Common Stock, valued at
the Net Asset Value on the record date. If the price plus commission is less
than the Net Asset Value on the record date, the Agent will attempt, commencing
on the first trading and ending on the tenth trading day following the record
date, to acquire shares in the open market at a price, plus commission which is
less than the Net Asset Value per share most recently published by the Fund
prior to any purchase. If and to the extent that the Agent is unable to acquire
sufficient shares of the Fund's Common Stock to satisfy the Distribution at a
price plus commission less than the Net Asset Value, the Fund will issue to the
Agent shares of the Fund's Common Stock, valued at the Net Asset Value, in the
aggregate amount of the remaining value of the Distribution. All cash
contributions to a participant's Account made pursuant to paragraph 4 hereof
will be invested in shares of the Fund's Common Stock purchased in the open
market (irrespective of Net Asset Value).
4. VOLUNTARY CASH CONTRIBUTIONS. A Participant may from time to time make
voluntary cash contributions to his or her Account in an amount not less than
$50 and not in excess of $10,000 per month to acquire additional shares of
Common Stock of the Fund. In the case of any voluntary cash contribution which
-3-
<PAGE>
exceeds $10,000 in a month, the cash contribution will be returned to the
participant by the Agent. The Agent will invest all voluntary cash
contributions on or about the last business day of the month (the "Investment
Date") provided it receives the contributions at least two business days before
the last business day of the month (the "Cut-off Date"). Because interest is
not paid on voluntary cash contributions, participants should make such
contributions shortly before the Cut-off Date, allowing sufficient time for mail
delivery. Voluntary cash contributions received after the Cut-off Date will be
used to acquire addi tional shares of the Fund on the Investment Date of the
following month. Following any monthly investment of voluntary cash
contributions, the Agent will send each investing participant a confirmation of
such investment. Voluntary cash contributions will be returned to the
participant upon written request, provided that such request is received more
than two days before the Cut-off Date.
Additional investments may be made in the following ways:
CHECK INVESTMENT. Additional cash investments and initial investments may
be made by personal check or money order payable in U.S. dollars to CMSS/Blue
Chip. Optional cash investments must be mailed to the Agent together with the
detachable portion of the Statement of Account sent to participants.
-4-
<PAGE>
WIRE INVESTMENT. Optional cash investments may be made by wire transfer to
the Agent. Participants who wish to make a wire transfer should contact the
Agent for instructions. Participants making wire investments may be charged
fees by the commercial bank initiating the transfer and will be charged a fee of
$10.00 by the Plan Agent to process the transfer of funds.
Wires should be initiated so that funds will be received at least two
business days before the last business day of the month (the "Cut-Off" Date).
AUTOMATIC INVESTMENT FROM A BANK ACCOUNT. Participants may make automatic
monthly investments of a specified amount (not less than $50 and not in excess
of $10,000 per month) by electronic funds transfer from a pre-designated U.S.
bank account.
To initiate automatic monthly investments, the participant must complete
and sign an Automatic Investment Form and return it to the Agent together with a
voided blank check for the account from which funds are to be drawn. Automatic
Investment Forms may be obtained from the Agent. Forms will be processed and
will become effective as promptly as practicable.
Once automatic monthly investments are initiated, funds will be drawn from
the participant's designated bank account approximately three business days
preceding the Investment Date
-5-
<PAGE>
of each month, and will be invested in Common Stock on that Investment Date.
Participants may change or terminate automatic monthly investments by
completing and submitting to the Agent a new Automatic Investment Form.
5. ADJUSTMENT OF PURCHASE PRICE. The Fund will increase the price at
which its shares may be issued to the Plan if the Net Asset Value is less than
95% of the fair market value of such shares on any Distribution payment date
unless the Fund receives a legal opinion from independent counsel that the
issuance of shares at Net Asset Value under the circumstances will not have a
material adverse effect upon the federal income tax liability of the Fund.
6. DETERMINATION OF PURCHASE PRICE. The cost of shares and fractional
shares acquired for each participant's Account in connection with a Purchase
shall be determined by the average cost per share, including brokerage
commission, of the shares acquired by the Agent in connection with that
Purchase. Stockholders will receive a confirmation, showing the average cost
and number of shares acquired as soon as practicable after the Agent has
received or purchased shares. The Agent may mingle the cash in a participant's
account with similar funds of other
-6-
<PAGE>
participants of the Fund for whom it acts as Agent under the Plan.
7. SERVICE CHARGES. There is no service charge by the Agent to
stockholders who participate in the Plan. However, the Fund reserves the right
to amend the Plan in the future to include a service charge.
8. SHARES HELD BY AGENT. The Agent will maintain the participant's
Account and hold the shares acquired through the Plan in safekeeping. Upon
request to the Agent, a certificate for any or all full shares in a
participant's Account will be sent within two weeks of such request to the
participant.
9. MINIMUM SHARE BALANCE. Participants must own of record at least fifty
shares in order to enroll in the Plan and must maintain a balance of at least
fifty Shares in the Plan at all times after enrollment in order to continue to
participate in the Plan.
10. GIFT/TRANSFER OF SHARES. Shareholders may transfer all or any number
of shares of Common Stock held under the Plan to a Plan account for another
person, whether by gift, private sale or otherwise, by mailing to the Agent a
properly completed Share Transfer Form, with signature guaranteed by an eligible
guarantor institution. Such institutions generally include banks, brokers,
-7-
<PAGE>
dealers, credit unions, savings associations and other entities which are
members in good standing of the Agent's Medallion Program. The transferee will
automatically be enrolled in the Plan provided that the minimum 50 Shares
Balance requirement has been met and will receive a statement showing the number
of shares transferred to and held in the transferee's Plan account. Share
Transfer Forms are available upon request from the Agent.
11. STOCK CERTIFICATES IN YOUR POSSESSION. As a participant in the Plan
you may deposit any certificates of Blue Chip Value Fund, Inc. Common Stock
registered in your name with the Plan Agent for consolidation into your Plan
account. There is no charge for this service. It is recommended that any
certificates being sent to the Plan Agent not be endorsed but be sent by
registered mail, return receipt requested and appropriately insured.
12. INDIVIDUAL RETIREMENT ACCOUNTS. Shareholders may use the Plan to
establish an Individual Retirement Account ("IRA") including a Roth IRA which
invests in the Fund's Common Stock. The required forms and disclosure
statements for the IRA are available from First Trust Corporation, which will
administer the IRA and charge an annual maintenance fee. Please contact First
Trust Corporation directly at 1-800-525-8188, extension 5109, to order the IRA
information or to ask additional questions.
-8-
<PAGE>
13. REPORTS TO PARTICIPANTS. Each participant will receive a statement
after any transaction in her or his Plan account showing the amount invested,
the purchase price, the number of shares purchased, deposited, sold, transferred
or withdrawn, the total number of Shares accumulated, and other information.
The statement will consolidate all shares held for the Plan account or
registered in the participant's name. Participants should retain these
statements so as to be able to establish the cost basis of shares purchased
under the Plan for income tax and other purposes.
Since all notices, statements and reports from the Agent will be addressed
to the latest address of record, participants must promptly notify the Agent of
any change of address.
14. ODD-LOT SALES. If you are not a participant in the Plan and hold
fewer than 50 shares, you may sell all (but not less than all) of such shares at
any time and pay no brokerage fees or commissions. To sell shares, complete and
return to the Agent, by registered, insured mail, the share certificates along
with a written letter of instruction, signed by all registered holders, to
proceed with the sale of shares through the Odd Lot Program. If you cannot
locate the required share certificates you should call the Agent for the
appropriate forms.
-9-
<PAGE>
15. WITHDRAWAL FROM PLAN. You may discontinue your participation at any
time by giving written notice to the Agent. Upon receipt of termination, a
certificate for full shares will be issued in your name, and fractional shares
at the time of termination will be converted to cash at the then current market
price and a check will be sent to you. If you prefer, the Agent can sell your
full shares as well as the fractional shares and send you a check for the entire
amount. A notice will not be effective as to subsequent Distributions unless it
is received at least five business days before the record date for the
Distribution.
16. AMENDMENTS. Experience under the Plan may indicate that changes are
desirable. Accordingly, the Fund reserves the right to amend or terminate the
Plan, or change the Agent, as applied to any Distribution paid subsequent to
notice thereof sent to participants in the Plan at least thirty days before the
record date for such Distribution.
-10-
<PAGE>
EXHIBIT 2(g)(2)
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
AGREEMENT dated as of January 1, 1989, by and between BLUE CHIP VALUE
FUND, INC., a Maryland corporation (the "Fund"), and AMERICAN DATA SERVICES,
INC., a New York corporation (the "Administrator").
Background
----------
1. The Fund is a diversified closed-end management investment company
registered with the United States Securities and Exchange Commission.
2. The Administrator performs certain services appropriate to the
operation of the Fund pursuant to an Amended and Restated Administrative
Services Agreement dated as of September 1, 1988.
3. The Fund and the Administrator desire to enter into a new
Administrative Services Agreement in order to increase the fees payable by the
Fund to the Administrator.
Terms
-----
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the Fund and the Administrator hereby agree as follows:
1. Duties of the Administrator. The Administrator will perform the
---------------------------
following services for the Fund:
(a) journalize the Fund's investment, capital share and income and
expense activities;
(b) maintain individual ledgers for investment securities;
(c) maintain historical tax lots for each security;
(d) calculate the Fund's net asset value and communicate such
value to the Fund and to such publications as the Fund shall designate from time
to time;
(e) determine the Fund's net investment income and amount of
quarterly dividends, to be reviewed by the Fund's independent public
accountants;
(f) calculate capital gains and losses and the amount per share
available for distribution on an annualized
<PAGE>
basis, to be reviewed by the Fund's independent public accountants;
(g) prepare quarterly broker security transaction summaries and
monthly security transaction listings with respect to the Fund;
(h) supply various Fund statistical data as reasonably requested;
(i) compute the Fund's yields, total return, expense ratios and
portfolio turnover rate;
(j) maintain such books and records of the Fund as may be required
under the Investment Company Act of 1940 to fulfill its duties hereunder;
(k) prepare the Fund's federal, state and local income tax
returns;
(l) prepare the financial information for the Fund's proxy
statements and semi-annual and annual reports to shareholders;
(m) prepare the Fund's Form N-SAR reports in conjunction with the
Fund's appointed legal counsel;
(n) refer to the Fund's officers or transfer agent shareholder
inquiries relating to the Fund (with the exception of requests for literature
and price quotations which shall be responded to by the Administrator);
(o) calculate various contractual expenses (e.g. advisory and
custody fees);
(p) monitor expense accruals and notify Fund management of any
proposed adjustments;
(q) review and approve all invoices for the Fund's account and
submit to a Fund officer for authorization of payment;
(r) provide office space to the Fund, including facilities for an
independent or Securities and Exchange Commission audit as may be required;
(s) monitor the Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended; and
-2-
<PAGE>
(t) monitor compliance with the Fund's policies and limitations as
set forth in the Prospectus, Articles of Incorporation and Bylaws of the Fund.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
2. Compensation of the Administrator.
---------------------------------
(a) Administrative Fee. For the services rendered and expenses
------------------
assumed by the-Administrator, the Fund shall pay to the Administrator, within
ten days after receipt of an invoice from the Administrator at the beginning of
each month, a monthly fee that is the greater of: (i) 1/12 of 0.10% of the
first $75 million of the Fund's average weekly net assets; 1/12 of 0.05% of the
excess over $75 million, but less than $125 million; and 1/12 of 0.03% of the
excess over $125 million; or (ii) $6,900.
(b) Expenses. The Fund shall reimburse the Administrator for any
--------
out-of-pocket expenses advanced by the Administrator in connection with, but not
limited to, the printing or filing of documents for the Fund, travel at the
request of the Fund, telephone, facsimile, stationery, postage, telex and
courier charges, incurred in connection with the performance of its duties
hereunder. The Administrator shall provide the Fund with reports of and receipts
for such expenses and the Fund shall reimburse the Administrator therefor within
ten days after receipt thereof.
3. Responsibility and Indemnification.
----------------------------------
(a) The Administrator shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement, but shall be without
liability to the Fund for any action taken or omitted by it in good faith
without negli gence, bad faith, willful misconduct or reckless disregard of its
duties hereunder. It shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice
provided that such action is not in violation of applicable federal or state
laws or regulations, and provided further that such action is taken without
negligence, bad faith, willful misconduct or reckless disregard of its duties.
(b) The Fund shall indemnify and hold harmless the Administrator
from all loss, cost, damage and expense, including reasonable expenses for
counsel, incurred by the
-3-
<PAGE>
Administrator as a result of any claim, demand, action or suit arising out of
the inaccuracy of information furnished in writing to the Administrator by the
Fund, provided that this indemnification shall not apply to actions or omissions
of the Administrator in case of its own negligence, bad faith or willful
misconduct or that of its employees or agents. In order that indemnification
under this Section 3(b) shall be available in any case in which the Fund may be
asked to indemnify or hold harmless the Administrator, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation presenting
or appearing likely to present the probability of such a claim for
indemnification. The Fund shall have the option to defend the Administrator
against any claim that may be the subject of this indemnification, and if the
Fund so elects, it will so notify the Administrator, and thereupon the Fund
shall take over complete defense of the claim, and the Administrator shall incur
no further legal or other expenses for which it shall seek indemnification. The
Administrator shall in no case confess any claim or make any compromise in which
the Fund will be asked to indemnify the Administrator except with the Fund's
prior written consent.
(c) The Administrator shall indemnify and hold harmless the Fund
from all loss, cost, damage and expense, including reasonable expenses for
counsel, incurred by the Fund as a result of any claim, demand, action or suit
arising out of the Administrator's failure to comply with the terms of this
Agreement or applicable federal or state laws or regulations, or which arise out
of the Administrator's negligence, bad faith or willful misconduct, or reckless
disregard of its duties, provided that this indemnification shall not apply to
actions or omissions of the Fund in case of its own negligence, bad faith or
willful misconduct or that of its employees or agents. In order that
indemnification under this Section 3(c) shall be available in any case in which
the Administrator may be asked to indemnify or hold harmless the Fund, the Fund
shall fully and promptly advise the Administrator of all pertinent facts
concerning the situation presenting or appearing likely to present the
probability of such a claim for indemnification against the Administrator. The
Administrator shall have the option to defend the Fund against any claim that
may be the subject of this indemnification, and if the Administrator so elects
it will so notify the Fund, and thereupon the Administrator shall take over
complete defense of the claim, and the Fund shall incur no further legal or
other expenses for which it shall seek indemnification. The Fund shall, in no
case, confess any claim or make any compromise in any case in which the
Administrator will be asked to indemnify the Fund except with the
Administrator's prior written consent.
-4-
<PAGE>
4. Reports.
-------
(a) The Fund shall provide to the Administrator on a quarterly
basis a report of a duly authorized officer of the Fund representing that all
information furnished to the Administrator during the preceding quarter was
true, complete and correct. The Administrator shall not be responsible for the
accuracy of any information furnished to it by the Fund, and the Fund shall hold
the Administrator harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) The Administrator shall provide to the Board of Directors of
the Fund on a quarterly basis a report, in such form as the Administrator and
the Fund shall from time to time agree, representing that, to its knowledge, the
Fund was in compliance with all requirements of applicable federal and state
law, including without limitation, the rules and regulations of the Securities
and Exchange Commission and the Internal Revenue Service, or specifying any
instances in which the Fund was not so in compliance. Whenever, in the course of
performing its duties under this Agreement, the Administrator determines, on the
basis of information supplied to the Administrator by the Fund, that a violation
of applicable law has occurred or that, to its knowledge, a possible violation
of applicable law may have occurred or, with the passage of time, would occur,
the Administrator shall promptly notify the Fund and its counsel of such
violation.
5. Activities of the Administrator. The Administrator shall be free
-------------------------------
to render similar services to others so long as its services hereunder are not
impaired thereby.
6. Duration and Termination of this Agreement. This Agreement shall
------------------------------------------
become effective as of the date hereof and shall remain in force until
terminated as provided herein. This Agreement may be terminated at any time,
without the payment of any penalty, by the Fund on not less than 90 days' prior
written notice to the Administrator, or by the Administrator on not less than 90
days' prior written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment.
7. Amendments of this Agreement. This Agreement may be amended by
----------------------------
the parties hereto only if such amendment is in writing.
8. Governing Law. The provisions of this Agreement shall be construe
-------------
and interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the Investment Company Act of
1940. To the extent that the applicable law of the State of New York, or any of
the
-5-
<PAGE>
provisions herein, conflict with the applicable provisions of the Investment
Company Act of 1940, the latter shall control.
9. Notices. All notices and other communications hereunder shall be
-------
in writing, shall be deemed to have been given when received or when sent by
telex, and shall be given to the following addresses (or such other addresses as
to which notice is given):
To the Fund:
Donald T. Brockell, Treasurer
Blue Chip Value Fund, Inc.
633 Seventeenth Street
Denver, Colorado 80202
To the Administrator:
Michael Miola, President
American Data Services, Inc.
755 New York Avenue
Huntington, New York 11743
10. Miscellaneous. This Agreement embodies the entire agreement and
-------------
understanding between the Fund and the Administrator, and supersedes all prior
agreements and understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BLUE CHIP VALUE FUND, INC.
By:/s/ Kenneth V. Penland
----------------------------
Kenneth V. Penland, Chairman
AMERICAN DATA SERVICES, INC.
By: Michael Miola
------------------------
Michael Miola, President
-6-
<PAGE>
EXHIBIT 2(k)(1)
SERVICE AGREEMENT
THIS AGREEMENT made as of the 1st day of March, 1990, between Blue Chip
Value Fund, Inc., a corporation organized under the laws of the State of
Maryland (hereinafter called "COMPANY") and Mellon Securities Trust Company, a
New York Trust Company with its principal office at 120 Broadway, New York, New
York (hereinafter called "MELLON, TRUST COMPANY, REGISTRAR, OR TRANSFER AGENT").
WITNESSETH:
NOW THEREFORE, in consideration of the mutual covenants herein set forth,
the company and Mellon agree as follows:
1. Mellon will be named as Transfer Agent, Registrar, and Dividend
Disbursement Agent for the Company.
2. Attached to this Agreement and designated as "Exhibit A" is a listing
of certain services which Mellon agrees to provide to the Company and a Fee
Schedule setting forth the compensation the Company will pay to Mellon for its
services to the Company pursuant to this Agreement. Should there be a
termination of the transfer agency after the initial one year period, there will
be a charge of $1.00 per account upon termination.
3. Attached to this Agreement and designated as "Exhibit B" is a
statement of Procedures and Requirements For The Transfer and Registration of
Stock and the Disbursement of Dividends. Exhibit B is revised as attached.
4. It is agreed between Mellon and the Company that the term of this
Agreement shall be for a period of not less than one year commencing on March 1,
1990.
5. It is understood that Mellon's fee will not be increased during the
initial (12) month period of this Agreement. In the event there is an increase
in the cost of performance of the services due to changes in applicable
regulations of any regulatory agencies, the amount of such cost shall be paid by
the Company. It is further provided that Mellon shall comply with all
applicable laws and regulations relating to pricing which may then be in effect.
6. These fees do not include out-of-pocket expenses such as (a)
stationary, the issuance of stock certificates or other services related to
special work, such as stock dividends, mergers, tenders, acquisitions or other
services not presently being performed by Mellon, (b) proxies issued and
tabulated for
<PAGE>
special meetings, (c) supplies, magnetic tapes, overtime charges, folding, bulk
mailing, manual and machine insertion, (d) expenses connected with special
reporting for year-end fees, commissions and State Information Returns. Mellon
shall be reimbursed for the cost of any and all forms, including blank checks,
and proxies, used by it in communicating with shareholders of the Company, or
especially prepared for use in connection with its actions hereunder, as well as
the cost of postage, telephone and telegraph used in communicating with
Shareholders of the Company, provided that Mellon, prior to ordering any forms
--------
in such supply as it estimates will be adequate for more than two years' use,
shall obtain written consent of the Company. All forms for which Mellon has
received reimbursement from the Company shall be and remain the property of the
Company until used. Mellon shall also receive from the Company reimbursement
for reasonable counsel fees incurred by Mellon in connection with the
performance of its duties under this Agreement, unless such fees are incurred on
a matter involving Mellon's willful misconduct or negligence provided that the
--------
Company's prior written approval of the use of counsel shall be obtained.
Mellon shall assess service charges against shareholders of the Company with the
written consent of the Company.
7. This Agreement may not be terminated prior to the expiration for any
reason except for unacceptable service performance by Mellon, or the non-payment
by the Company of Mellon's monthly bills within a period of the time deemed
reasonable by Mellon. Unacceptable service performance shall mean noncompliance
with the then current generally accepted service standards of the securities
transfer industry.
8. For Services performed under this Agreement, Mellon will send monthly
invoices to the Company, and payment of said invoices is due within 30 days of
receipt.
9. This Agreement may not be amended or modified in any manner except by
a written agreement by both Mellon and the Company with the same formality as
this Agreement.
10. During the last ninety days of this Agreement, either Mellon or the
Company may by thirty days written notice to the other request that the terms
herein be renegotiated or the Agreement terminated. In the absence of such
written notification by either party to the other during such ninety day period,
this Agreement will automatically continue for an additional one year period and
subsequent one year periods thereafter under the same conditions.
11. Indemnification
(a) The Company shall indemnify and hold harmless Mellon against claims and
liabilities (including reasonable expenses and
-2-
<PAGE>
reasonable attorneys' fees) incurred arising out of (i) the transactions which
occurred prior to the date on which Mellon assumed duties under the Agreement;
(ii) errors in the COMPANY'S records and out-of-proof records which were present
as of such date; (iii) any act done or suffered by Mellon in good faith in
connection with such duties in reliance upon any instructions, order, stock
certificate, assignment, affidavit, certificate, or other instrument reasonably
believed by it to be genuine and to bear the genuine signature of any person or
persons authorized to sign, countersign, or execute the same; (iv) any act done
or suffered by Mellon in good faith in reliance upon any instructions received
from any officer of the Company or advice or counsel for the Company or for
Mellon as long as the instructions or advice are writing; and (v) any other act
done or suffered by Mellon in good faith and without negligence in connection
with such duties.
UNDER NO CIRCUMSTANCES SHALL MELLON BE RESPONSIBLE FOR SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING FROM THE PERFORMANCE OF DUTIES UNDER THIS AGREEMENT.
(b) Mellon may subcontract or delegate duties under this Agreement to
affiliate corporations, provided, however, no such delegation or subcontracting
shall relieve Mellon of its liabilities and responsibilities to the Company
under this Agreement. In the event that Mellon desires to subcontract any of
its duties under this Agreement to a third party, Mellon may do so, provided
that it provides prior notice to the Company and provided further that such
subcontracting does not relieve Mellon of its liabilities and responsibilities
to the Company under this Agreement.
12. This Agreement shall be governed by and construed, and interpreted in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the day and year first above written.
BLUE CHIP VALUE FUND, INC.
BY: /s/ Steven G. Wine
MELLON SECURITIES TRUST COMPANY
BY: /s/ Charlie Purcer
-3-
<PAGE>
BLUE CHIP VALUE FUND
TRANSFER AGENT FEE SCHEDULE AND SERVICES
EXHIBIT A
The minimum annual account maintenance fee is $46,000 based on 7,500 shareowner
accounts and 6,600 Dividend Reinvestment accounts. Voluntary cash investments
will be charged the applicable rates outlined below. If the above-mentioned
shareowner and dividend reinvestment base account numbers are exceeded, the
following fee schedule will apply:
Annual Account Maintenance Fee, per account $3.50
Certificate Issuance, per certificate 1.50
Certificates Cancelled, each .20
Dividend Reinvestment, each .75
Voluntary Cash Investments:
voluntary Cash, per account 2.00
Voluntary Cash Acknowledgement Letter, each 1.00
The above account charges include the services described, except as otherwise
specifically provided.
Maintenance of Accounts
- -----------------------
Update records daily - posting for debit/credit transactions. Answer shareowner
correspondence.
Change addresses.
open and close accounts.
Maintenance of stop transfer - including placing and removing.
The rate for accounts maintained will be applied to the number of accounts
existing at the end of the billing period, plus all new accounts opened during
the billing period.
Stock Transfer
- --------------
Receive, examine, record, mail or deliver.
Process window and mail items and legal transfers.
Cancel and issue certificates.
Process Indemnity Bonds and replace lost certificates.
Forward transfer reports daily.
<PAGE>
Dividend Disbursement
- ---------------------
Purchase shares on market to meet requirements of the Dividend Reinvestment
Plan.
Reinvest dividends, prepare statements, or issue dividend checks.
Solicit certified TIN numbers.
File 1099 Forms with IRS.
Special Lists
- -------------
Statistical Summary Report to show geographic, share range, and class code.
Annual Meeting
- --------------
Issue and mail proxies first class with proxy statements, return envelopes, and
Annual Reports.
Mail Broker Search Notices.
Receive, examine, and tabulate proxies.
Report vote.
Act as Inspectors of Election. If attendance is required, travel expenses will
be reimbursed to Mellon.
Tax Returns
- -----------
Mellon shall prepare, file with the Internal Revenue Service and with the
appropriate state agencies and, if required, mail to shareholders such returns
for reporting, dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules, and regulations.
Books and Records
- -----------------
Mellon shall maintain records showing for each shareholder's account the
following:
A. Names, addresses, and tax identifying numbers;
B. Number of shares held;
C. Historical information regarding the account of each shareholder,
including dividends paid, voluntary cash investments and date and
price for all transactions;
-2-
<PAGE>
D. Any stop or restraining order placed against the account;
E. Information with respect to withholdings in the case of a foreign
account;
F. Any dividend reinvestment order, plan application, dividend address
and correspondence relating to the current maintenance of the account;
G. Certificate numbers and denominations for any shareholder holding
certificates;
H. Any information required in order for Mellon to perform the
calculations contemplated or required by this Agreement.
Any such records required to be maintained by Rule 31a-1 of the
General Rules and Regulations under the Investment Company Act of 1940
shall be preserved for the periods prescribed in Rule 31a-2 of said
rules as specifically noted below. Such record retention shall be at
the expense of the Company and records may be inspected by the Company
at reasonable times. Mellon may, at its option at any time, and shall
forthwith upon the Company's demand, turn over to the Company and
cease to retain in Mellon's files, records and documents created and
maintained by Mellon pursuant to this Agreement, which are no longer
needed by Mellon in performance of its services or for its protection.
If not so turned over to the Company, such records and documents will
be retained by Mellon for six years from the year of creation, during
the first two of which such documents will be in readily accessible
form. At the end of the six-year period, such records and documents
will either be turned over to the Company, or destroyed in accordance
with the Company's authorization.
Information
- -----------
Mellon shall furnish to the Company such information, including shareholder
lists, and statistical information as may be agreed upon from time to time.
-3-
<PAGE>
EXHIBIT B
MELLON SECURITIES TRUST COMPANY
PROCEDURES AND REQUIREMENTS
FOR THE TRANSFER AND REGISTRATION OF STOCK
AND THE DISBURSEMENT OF DIVIDENDS
IN GENERAL
1. Documents to be filed at time of Appointment.
When Mellon Securities Trust Company (hereinafter called "the Trust
Company") is appointed Transfer Agent or registrar of stock, the following
documents shall be furnished to the Trust Company:
(a) A copy of resolutions adopted by the Board of Directors of the
Corporation appointing the Trust Company as Transfer Agent and/or
Registrar, as the case may be, duly certified by the Secretary of the
Corporation under the corporate seal.
(b) A copy of the By-Laws of the Corporation as amended to date, duly
certified by the Secretary of the Corporation under the corporate
seal.
(c) A copy of the certificate of incorporation of the Corporation, and all
amendments thereto, certified by the Secretary of State of the state
of incorporation.
(d) Specimen stock certificates (both those currently in use and those
formerly in use, if any such be outstanding) of the class or classes
of stock for which the Trust Company is appointed, certified by the
Secretary of the Corporation to be specimens of the duly authorized
stock certificates of the Corporation.
(e) A certificate, in duplicate, executed by the Secretary of the
Corporation under the corporate seal, certifying as to the names,
offices and specimen signatures of the officers of the Corporation
who are authorized to sign stock certificates or who are authorized
to sign notices, requests, orders, instructions and other
communications to the Trust Company, and as to the names of the other
transfer agents and registrars, if applicable, for the stock with
respect to which the Trust Company is being appointed as Transfer
Agent and/or Registrar.
<PAGE>
(f) List of certificate number and the registered holder thereof, against
which stop transfers have been placed and advice of any transfer
restrictions against outstanding certificates.
(g) Opinion of counsel for the Corporation to the effect that (i) the
Corporation is duly organized and existing under the laws of its
state of incorporation, (ii) all shares of stock of the Corporation
covered by the appointment have been duly registered under the
Securities Act of 1933 and the Securities Exchange Act of 1934, as
amended.
2. Limit of Authority - Changes in Capital Structure
The authority of the Trust Company as Transfer Agent or Registrar shall,
unless expressly limited by the resolution of appointment or subsequently by
corporate action, extend to all of the shares (of the class or classes which the
Trust Company is appointed) authorized to be issued at the time of such
appointment and subsequent thereto.
Should there be an increase of the number of shares authorized, or a
capitalization or other event requiring a change in the form of stock
certificate, the Trust Company will thereafter issue or register such new or
additional certificates, effect such exchanges and perform such other duties as
may be required in connection therewith upon receiving:
(a) A certified copy of the amendments to the certificate of incorporation
of the Corporation, certified by the Secretary of State of the state
of incorporation.
(b) A certified copy of the resolution of adopted by the Board of
Directors extending the authority of the Trust Company, if the
existing resolution of authority is limited.
(c) Specimens of any new stock certificates certified by the Secretary of
the Corporation to be specimens of the duly authorized stock
certificates of the Corporation.
(d) Opinion of counsel for the Corporation to the effect that all shares
have been duly registered under the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended.
-2-
<PAGE>
3. Future Amendments of Charter and By-Laws
The corporation will promptly file with the Trust Company appropriately
certified copies of all amendments to its certificate of incorporation and by-
laws subsequent to the date of certification of such documents previously filed.
4. Death, Resignation or Removal of officers of the Corporation
The Trust Company shall not be charged with notice of any change in the
officers of the Corporation until notice of such change shall be made in writing
by the Corporation to the Trust Company. In case any officer of the Corporation
who shall have signed blank stock certificates (or whose facsimile shall have
been used) shall die, resign or be removed prior to the issuance of such
certificates, the Trust Company, as Transfer Agent or Registrar, may issue or
register such stock certificates, as the stock certificates of the Corporation,
not withstanding such death, resignation or removal, until specifically directed
to the contrary by the Corporation in writing.
5. Resignation or Removal
The Trust Company may resign at any time, subject to any separate agreement
on this point which the Trust Company may have with the Corporation, by mailing,
postage prepaid, written notice of such resignation to the Corporation at its
last known address, and thereupon its duties as Transfer Agent or as Registrar
shall cease. The Trust Company may at any time, by a resolution of the Board of
Directors of the Corporation, be removed as Transfer Agent or as Registrar,
subject to any separate agreement on this point which the Trust Company may have
with the Corporation, such removal to become effective upon receipt by the Trust
Company of a certified copy of such resolution and upon the payment of all
amounts due the Trust Company in connection with such agency.
AS TRANSFER AGENT
6. Original Issue of Stock Certificates
The Trust Company as Transfer Agent will make original issues of stock
certificates upon the written instructions of any officer of the Corporation.
-3-
<PAGE>
7. Stock Certificates
The Corporation shall furnish the Transfer Agent with a sufficient supply
of blank stock certificates and from time to time will renew such supply upon
the request of the Trust Company. Such blank stock certificates shall be signed
manually or by facsimile signatures of officers of the Corporation authorized by
law or by the by-laws to sign stock certificates, and, if required, shall bear
the corporate seal or facsimile thereof.
8. Transfer of Stock
Shares of stock will be transferred or exchanged and new certificates
issued in lieu thereof upon the surrender of certificates properly endorsed (or
unendorsed if an endorsement is not necessary) accompanied by such requirements
as the Corporation and the Trust Company may deem necessary to evidence the
authority of the person making the transfer and accompanied by any required
stock transfer stamps. The Trust Company reserves the right to refuse to
transfer shares until it is satisfied that the endorsement on the certificates
is valid and genuine, and for that purpose it may require an acceptable guaranty
of signature. The Trust Company also reserves the right to withhold transfer of
the shares until it is satisfied that the requested transfer is properly
authorized, and it shall incur no liability for the refusal in good faith to
make transfers for which, in its judgment, there has been submitted insufficient
proof of the propriety of the transfer.
9. Delivery of Stock Certificates by Mail
When mail is.used for delivery of stock certificates, the Trust Company
will forward stock certificates in non-negotiable form by first class mail and
stock certificates in negotiable form by registered mail, all such mail
deliveries to be covered while in transit to the addressees by insurance
arranged for by the Trust Company.
10. Lost Stock Certificates
The Trust Company may issue replacement certificates for certificates
represented to have been lost, stolen or destroyed upon the fulfillment of such
requirements as shall be deemed appropriate by the Corporation, the Transfer
Agent and the Registrar subject at all times to provisions of law or of the by
laws of the Corporation governing such matters. The Trust Company may issue new
certificates in exchange for and upon the cancellation of mutilated
certificates.
-4-
<PAGE>
11. Stockholder Information
The Trust Company will supply lists of stockholders and will address and
mail notices to stockholders upon receiving instructions for the particular
service from an officer of the Corporation.
12. Disposition of Cancelled Certificates
The Trust Company shall, from time to time, be entitled to send to the
Corporation stock certificates which have been cancelled in transfer or in
exchange, upon the understanding that such certificates shall not be destroyed
by the Corporation without the concurrence of the Trust Company but will be
safely stored for possible future reference. If the Corporation desires,
however, it may avail itself of the Trust Company's destruction procedure.
13. Inspection of Stock Books
In case of any request or demand for the inspection of the stock books of
the Corporation or any other books in the possession of the Trust Company, the
Trust Company will endeavor to notify the Corporation and to secure instructions
as to permitting or refusing such inspection. The Trust Company reserves the
right, however, to exhibit the stock books or other books to any person if it is
advised in writing by its counsel that it is legally obligated to exhibit the
stock books or other books to such person.
14. Shareholder Accounts
(a) The Trust Company shall also maintain, as agent for each Dividend
Reinvestment participant of the Corporation, an account in which the
Trust Company will record the number of whole and fractional shares
registered in the name of such shareholder except such whole shares
for which the shareholder requests and is issued stock certificates.
The Trust Company shall, upon written instructions from any
shareholder in a form acceptable to the Corporation, or a member firm
of the New York Stock Exchange, record transfers of whole shares each
time shares are credited to or withdrawn from his account, and the
Trust Company shall send a statement to the shareholder informing him
of the transaction. Transactions directly between buyer and seller
involving fractional shares shall be similarly processed. In
transactions involving
-5-
<PAGE>
brokers, dealers, or other third parties, fractional shares will not
be transferred; fractional shares shall remain in the selling
shareholder's account except where the selling shareholder transfers
all of his whole shares, in which case the fractions shall be disposed
of in accordance with Section 14(c).
(b) The Trust Company shall countersign share certificates representing
whole shares for issuance and delivery to any shareholder upon
receiving a written request for the issuance of share certificates.
Shareholders who hold share certificates may surrender such
certificates to the Trust Company, which may cancel the certificates
and credit such shares to the shareholder's account. In all cases the
Corporation authorizes the Trust Company to process transactions
involving non-certified shares by appropriate entries in its stock
transfer records.
(c) Upon any termination of a shareholder's account, the Trust Company
shall send to the shareholder or his transferee a stock certificate or
certificates for the whole shares remaining in the account, and shall
pay to the shareholder an amount equal to the value of a fractional
interest in the account based on the closing price of the
Corporation's shares on the New York Stock Exchange an the effective
date of termination.
(d) In order to provide the liquidation of fractional shares as provided
in Section 14(c) and to facilitate any other appropriate adjustments
in shareholder accounts, the Corporation shall establish and maintain
a special account with the Trust Company entitled the "Share Account."
In that connection:
(1) the Trust Company shall utilize the Share Account as follows:
(i) The Trust Company shall transfer into the Share Account
fractional shares purchased from shareholders in connection with
liquidations; such nominal shares or fractions as it removes from
shareholder accounts in account adjustments; and any excess fractional
shares resulting from its receipt of shares from the Corporation in
connection with a distribution or its purchase of shares in the open market
in connection with a dividend or distribution.
(ii) The Trust Company shall transfer out of the Share Account
fractional shares due shareholders in connection with a dividend or
distribution and such nominal
-6-
<PAGE>
shares or fractions as may be required for account adjustment.
(iii) Share transactions in the Share Account shall be based on
the net asset value last computed by the Corporation in the case of
adjustments resulting from a distribution of Corporation shares at net
asset value, or the most recent closing price of the Corporation's shares
on the New York Stock Exchange in other cases. Share balances in the Share
Account shall be computed to three decimal places.
(iv) The Trust Company shall make an appropriate entry in the
cash portion of the Share Account for each share transaction in the Share
Account. The Trust Company and the Corporation may from time to time adopt
such mutually agreeable procedures concerning the Share Account
transactions as they deem appropriate.
(2) The Trust Company shall sell shares held in the Share Account and
credit the proceeds to the Share Account from time to time upon the
written instruction of the Corporation.
(3) The Corporation shall, upon written notice supplied by the Trust
Company that the cash balance of the Share Account has fallen below
the sum of $250, or the share balance is inadequate for necessary
transactions or adjustments, deposit forthwith the sum necessary to
raise such cash balance to the sum of $500, or sufficient shares to
increase the share balance to an adequate level.
(4) The Trust Company shall, upon written request of the Corporation at
any time the cash balance of the Share Account exceeds $ 750, pay to
the Corporation an amount sufficient to reduce said cash balance to
$500.
AS REGISTRAR
15. Registration of Original Issue of Stock Certificates
The Trust Company, as Registrar, will register original issues of stock
certificates upon the presentation to it for that purpose by the Transfer Agent
of signed and countersigned stock certificates. The Trust Company shall record
issues of shares of the stock of the Corporation, and shall notify the
Corporation in case any proposed issue of shares by the Corporation would result
in an over-issue as defined by Section 8-104(2) of the Uniform Commercial Code
and in such event, shall refuse to credit such
-7-
<PAGE>
shares and shall not countersign and issue certificates for such shares.
16. Registration in Transfer
Certificates of stock will be registered in transfer upon the presentation
to the Trust Company by the Transfer Agent of cancelled certificates theretofore
issued for a like amount of stock and not previously discharged from registry.
The Trust Company as Registrar will not be responsible for the validity of the
transfer of stock, the genuineness of the endorsement, the authority of the
transferor or the payment of taxes.
17. Lost Stock Certificates
The Trust Company may register replacement certificates for certificates
represented to have been lost, stolen or destroyed upon the fulfillment of such
requirements as shall be deemed appropriate by the Corporation, the Transfer
Agent and the Registrar subject at all times to provisions of law or of the by
laws of the Corporation governing such matters. The Company may register new
certificates in exchange for and upon the cancellation of mutilated
certificates.
AS DIVIDEND DISBURSING AGENT
18. Appointment
A copy of the resolution adopted by the Board of Directors of the
Corporation appointing the Trust Company Dividend Disbursing Agent, certified by
the Secretary of the Corporation under Corporate seal, shall be furnished to the
Trust Company.
19. Distributions
The Trust Company shall act as Dividend Disbursing Agent and Dividend
Reinvestment Agent under the Corporation's Automatic Dividend Reinvestment Plan
for the Corporation and as such, in accordance with the provisions of the
Corporation's Articles of Incorporation shall prepare and mail or credit income
and capital gain payments to shareholders. As the Dividend Disbursing Agent, it
shall, on or before the payment date of any such dividend or distribution,
notify the Custodian of the estimated amount required to pay any portion of said
dividend or distribution which is payable in cash, and the Corporation agrees
that on or before the payment date of such distribution, it shall instruct the
Custodian to make available to the Dividend Disbursing Agent sufficient funds
for the cash amount to be paid out. If a
-8-
<PAGE>
shareholder is entitled to receive additional shares by virtue of any
distribution or dividend, appropriate credits will be made to his account and/or
certificates delivered where requested, all in accordance with the Corporation's
Automatic Dividend Reinvestment Plan and Distribution Investment Plan.
-9-
<PAGE>
EXHIBIT 2(k)(2)
This SUBSCRIPTION AGENT AGREEMENT (this "Agreement"), dated as of
by and between Blue Chip Value Fund, Inc. (the
- -------------------------
"Company"), and ChaseMellon Shareholder Services, L.L.C. (the "Subscription
Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and declared a
distribution (the "Rights Offering") of one right (a "Right") for each share of
Common Stock, $ .01 par value, held of record by shareholders of the Company
(the "Shareholders") on May 12, 1998 (the "Record Date");
WHEREAS, the Company has filed a registration statement with the Securities
and Exchange Commission on on Form N-2, which became effective on
------------
, and has also filed with the Commission a prospectus
- ---------------------
(the "Prospectus") dated , each of which relates to
-----------------------
the Rights Offering;
WHEREAS, each Shareholder is entitled to subscribe for and purchase at a
subscription price ("Subscription Price") as described in the Prospectus one
share of Common Stock of the Company (a "Share" and collectively, the "Shares")
for each eight (8) Rights held, and under certain circumstances, shares not
acquired by exercise of primary subscription rights, upon the terms and subject
to the conditions hereinafter set forth; and
WHEREAS, the Company desires the Subscription Agent to act on behalf of the
Company, and the Subscription Agent is willing so to act, in connection with the
issuance and exercise of Rights and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Subscription Agent. The Company hereby appoints
---------------------------------
the Subscription Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in the Agreement, and the Subscription Agent
hereby accepts such appointment.
SECTION 2. Duties of Subscription Agent
----------------------------
(a) The Subscription Agent shall, from a list of Shareholders as of the
Record Date to be prepared by the Subscription Agent in its capacity as transfer
agent of the Company prepare and record subscription rights ("Subscription
Rights") in the
<PAGE>
names of the Shareholders, setting forth the number of Rights to subscribe to
the Shares calculated on the basis of one Right for each Share recorded on the
Company books in the name of each shareholder as of the Record Date.
(b) Each Subscription Right shall be non-transferable and shall, if exercised
by the holder thereof in the manner set forth in the Prospectus, become
irrevocable upon the expiration of the Rights Offering. The Subscription Agent
shall, in its capacity as transfer agent for the Company, maintain a register of
Subscription Rights and the holders of record thereof (each of whom shall be
deemed a "Shareholder" hereunder for purposes of determining the rights of
holders of Subscription Rights). Each Subscription Right shall, subject to the
provisions thereof, entitle the Shareholder in whose name it is recorded to the
following:
(1) The right (the "Basic Subscription Right") to purchase a number of
Shares equal to one Share for every eight (8) Subscription Rights; provided,
however, that no Rights Certificates which evidence fractional rights and no
fractional Shares shall be issued; and
(2) The right (the "Oversubscription Right") to purchase from the Company
additional Shares, subject to the availability of such shares and to allotment
of such shares as may be available among Shareholders who exercise
Oversubscription Rights on the basis specified in the Prospectus; provided,
however, that a Shareholder who has not exercised his Basic Subscription Rights
with respect to the full number of shares that such Shareholder is entitled to
purchase by virtue of his Basic Subscription Rights as of the Expiration Date,
if any, shall not be entitled to any Oversubscription Rights.
(c) A Shareholder may exercise his Basic Subscription Rights and
Oversubscription Rights by delivery to the Subscription Agent at its corporate
office specified in the Prospectus of (i) the Subscription Right with respect
thereto, duly executed by such Shareholder in accordance with and as provided by
the terms and conditions of the Subscription Right, together with (ii) the
assumed purchase price for each share of Common Stock subscribed for by exercise
of such Rights, in United States dollars by money order or check drawn on a bank
located in the continental United States and in each case payable to the order
of ChaseMellon Shareholder Services, L.L.C.
(d) Rights may be exercised at any time after the date of issuance of the
Subscription Rights with respect thereto but no later than 5:00 p.m. Eastern
Daylight Time on such date as the Company shall designate to the Subscription
Agent in writing (the "Expiration Date"). For the purpose of determining the
time of the exercise of any Rights, delivery of any material to the Subscription
Agent shall be deemed to occur
<PAGE>
when such materials are received at the corporate office of the Subscription
Agent specified in the Prospectus.
(e) Notwithstanding the provisions of Section 2(c) and 2(d) regarding
delivery of an executed Subscription Right to the Agent prior to 5:00 p.m.
Eastern Daylight Time on the Expiration Date, if prior to such time the Agent
receives notice of guaranteed delivery by mail or otherwise from a bank, trust
company or a New York Stock Exchange member guaranteeing delivery of (i) full
payment for shares purchased and subscribed for by virtue of a Shareholder's
Rights, and (ii) a properly completed and executed Exercise Form, then such
exercise of Basic Subscription Rights and Oversubscription Rights shall be
regarded as timely, subject, however, to receipt of the duly executed Exercise
Form by the Agent within five business days after the Expiration Date.
(f) Within five business days following the Pricing Date as defined in the
Prospectus (the "Confirmation Date"), the Agent shall send a confirmation to
each Shareholder (or, for Shares on the Record Date held by Cede & Co. or any
other depository or nominee, to Cede & Co. or such other depository or nominee),
showing (i) the number of Shares acquired pursuant to the Basic Subscription
Rights, (ii) the number of Shares, if any, acquired pursuant to the
Oversubscription Rights, (iii) the per Share total purchase price for the
Shares, (iv) any amount payable to the Shareholder pursuant to Section 2(i), and
(v) any additional amount payable by such Shareholder to the Company or any
excess to be refunded by the Company to such Shareholder, in each case based on
the Subscription Price as determined on the Pricing Date. Any additional
payment acquired from a Shareholder must be received by the Subscription Agent
within ten business days after the Confirmation Date. Any excess payment to be
refunded by the Company to a Shareholder shall be mailed by the Subscription
Agent to the Shareholder within fifteen business days after the Confirmation
Date, as provided in Section 2(i) below.
(g) If, after allocation of Shares to persons exercising Basic Subscription
Rights, there remain unexercised Rights, then the Subscription Agent shall allot
the shares issuable upon exercise of such unexercised Rights (the "Remaining
Shares") to persons exercising Oversubscription Rights, in the amounts of such
oversubscriptions. If the number of shares for which Oversubscription Rights
have been exercised is greater than the Remaining Shares, the Subscription Agent
shall allot the Remaining Shares to the persons exercising Oversubscription
Rights pro rata based solely on the number of Shares held on the Record Date.
(h) All proceeds from the exercise of Rights shall be held by the
Subscription Agent in a segregated, interest-bearing account in the name of the
<PAGE>
Company. The Subscription Agent shall advise the Company immediately upon the
completion of the allocation set forth above as to the total number of Shares
subscribed and distributable.
(i) (1) The Subscription Agent shall mail to the Shareholders within fifteen
business days after the Confirmation Date and after full payment for subscribed
Shares has cleared: (i) certificates representing those shares purchased
pursuant to exercise of Basic Subscription Rights and those shares purchased
pursuant to the exercise of Oversubscription Rights; and (ii) in the case of
each Shareholder who subscribed and paid for the Shares at an assumed purchase
price greater than the actual per share purchase price, a refund in the amount
of the difference between the assumed purchase price and the actual purchase
price.
(2) The Subscription Agent shall deliver the proceeds of the exercise of
Rights to the Company as promptly as practicable, but in no event later than
fifteen business days after the Confirmation Date.
(j) The Subscription Agent shall account promptly to the Company with respect
to Rights exercised and concurrently account for all monies received and
returned by the Subscription Agent with respect to the purchase of Shares upon
the exercise of Rights.
(k) In the event the Subscription Agent does not receive, within ten business
days after the Confirmation Date, any amount due from a Shareholder as specified
in Section 2(f), then it shall take such action with respect to such
Shareholder's Subscription Rights as may be instructed in writing by the
Company, including, without limitation, (i) applying any payment actually
received by it toward the purchase of the greatest whole number of Shares which
could be acquired with such payment, (ii) allocating the shares subject to such
Subscription Rights to one or more other Shareholders, and (iii) selling all or
a portion of the Shares deliverable upon exercise of such Subscription Rights on
the open market, and applying the proceeds thereof to the amount owed.
(l) No Subscription Right shall entitle a Shareholder to vote or receive
dividends or be deemed the holder of Shares for any purpose, nor shall anything
contained in any Subscription Right be construed to confer upon any Shareholder
any of the rights of a shareholder of the Company or any right to vote, given or
withhold consent to any action by the Company (whether upon any
recapitalization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other action
affecting shareholders or receive dividends or otherwise, until the Rights
evidenced thereby shall have been exercised and the Shares
<PAGE>
purchasable upon the exercise thereof shall have become deliverable as provided
in this Agreement and in the Prospectus.
SECTION 3. Issuance of Securities. The Company has authorized, and will hold
-----------------------
in reserve, a number of Shares sufficient to provide for the exercise of the
Rights.
SECTION 4. Form of Rights Certificates. The Rights Certificates (and the
----------------------------
subscription forms to purchase Shares) shall be substantially in the form
attached as Exhibit A hereto. Each Rights Certificate shall be dated as of the
date of issuance thereof by the Subscription Agent, and on its face shall
entitle the holder to subscribe and purchase one Share for each eight (8) Rights
at the Subscription Price.
SECTION 5. Validation of Rights Certificates
---------------------------------
(a) The Rights Certificates shall be printed with the name of the Company and
the Subscription Agent as shown on Exhibit A, which printed names shall be valid
without further signature or countersignatures.
(b) The Subscription Agent shall maintain at its offices books and records
showing the holders of the Rights Certificates, the number of Rights held and
the disposition of those Rights, whether through exercise, expiration or
otherwise.
SECTION 6. Mutilated, Destroyed, Lost or Stolen Rights Certificates. Upon
---------------------------------------------------------
receipt by the Company and the Subscription Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, the Subscription Agent will make and deliver a new Rights
Certificate of like tenor to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated; or it shall issue those
Shares being purchased by a shareholder by the exercise of Rights if the
conditions to such issuance are otherwise met, e.g., payment, without
-----
replacement of a Rights Certificate. If the Company requires an indemnity bond,
such indemnity bond shall be in such form as shall be sufficient in the
Company's judgment to protect the Company from any loss which it may suffer if a
Rights Certificate is replaced.
SECTION 7. Subsequent Issuance of Rights Certificates. Subsequent to their
-------------------------------------------
original issuance, no Rights Certificates shall be issued except for split up or
exchange of Rights Certificates held by securities depositories, brokers or
other nominees or those issued in replacement of mutilated, destroyed, lost or
stolen Rights Certificates.
<PAGE>
SECTION 8. Exercise of Rights. Only the registered holder of any Rights
-------------------
Certificate may exercise the Rights evidenced thereby in accordance with
instructions of the Rights Certificate and in the Prospectus.
SECTION 9. Reports. The Subscription Agent shall notify both the Company and
--------
its designated representatives by telephone as requested during the period
commencing with the mailing of the Rights Certificates and ending on the
Expiration Date, which notices shall thereafter be confirmed in writing, of (i)
the number of Rights exercised on the day requested, (ii) the number of Rights
for which defective exercises have been received on such day, and (iii) the
cumulative total of the information set forth in clauses (i) and (ii) above. The
Subscription Agent shall also maintain and update a listing of holders who have
fully or partially exercised their Rights, and holders who have not exercised
their Rights. The Subscription Agent shall provide the Company or its designated
representatives, upon their request, with the information compiled pursuant to
the Prospectus. The Subscription Agent will also make available when reasonably
requested by the Company, various other data including data showing demographics
of Shareholders who exercise Rights, and those who participate in the
oversubscription and, conversely, those who did not exercise Rights or
participate in the oversubscription.
SECTION 10. Future Instructions and Interpretations
---------------------------------------
(a) All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose determination
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the Company
determines in its sole discretion. Neither the Company nor the Subscription
Agent will be under any duty to give notification of any defect or irregularity
in connection with the submission of Subscription Certificates or incur any
liability for failure to give such notification, although the Subscription Agent
will give such notices at the Company's request in certain instances.
(b) The Subscription Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, President or Treasurer of the Company, and to apply to
any such officer for advice and instructions in connection with its duties, and
the Subscription Agent shall not be liable for any actions taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
<PAGE>
SECTION 11. Payment of Taxes. The Company covenants and agrees that it will
-----------------
pay when due and payable all documentary stamp and other taxes, if any, which
may be payable in respect of the issuance and delivery of any Rights
Certificates or of the Shares purchasable upon the exercise of the Rights;
provided, however, that the Company shall not be liable for any tax liability
(i) arising out of any transaction which it results in, or is deemed to be, an
exchange of Rights or Shares or a constructive dividend with respect to Rights
or Shares or (ii) based on taxes on income.
SECTION 12. Cancellation and Destruction of Rights Certificates. All Rights
----------------------------------------------------
Certificates surrendered for the purpose of exercise shall, if surrendered to
the Company or to any of its agents, be delivered to the Subscription Agent for
cancellation or in cancelled form or, if surrendered to the Subscription Agent,
shall be cancelled by it, and no Rights Certificates shall be issued in lieu
thereof, except as expressly permitted by provisions of this Agreement. The
Subscription Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such cancelled
Rights Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 13. Record Date. Each person in whose name a Share is issued in
------------
accordance with the terms hereof shall for all purposes be deemed to have become
the holder of record of such securities represented thereby on, and such
certificates shall be dated, the date the certificates are issued by the
Subscription Agent.
SECTION 14. Rights and Obligations of Subscription Agent under the
------------------------------------------------------
Prospectus.
- -----------
(a) Notwithstanding anything contained in this Agreement to the contrary, and
in addition to and not in lieu of any of the rights and obligations of the
Subscription Agent under this Agreement, the Subscription Agent shall be bound
by, and act in accordance with, the terms of the Prospectus with respect to the
Rights offering.
(b) The Subscription Agent shall provide services in a reasonable and prudent
manner so that it can efficiently handle the Rights Offering, including, for
example, issuing notices of deficiencies, refunds or collections, communications
with Shareholders or their representatives, and allocating Shares requested and
paid for by subscribing Shareholders in accordance with the terms in the
Prospectus.
<PAGE>
SECTION 15. Concerning the Subscription Agent
---------------------------------
(a) The Company agrees to pay to the Subscription Agent reasonable
compensation for all services rendered by it hereunder as in a one page fee
schedule signed by the Company attached hereto, and, from time to time, on
demand of the Subscription Agent, its reasonable expenses and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder.
(b) The Subscription Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered, or omitted by it in connection
with its duties under this Agreement in reliance upon any Rights Certificate,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and where necessary, guaranteed, verified or
acknowledged, by the proper person or persons.
SECTION 16. Merger or Consolidation or Change of Name of Subscription Agent
---------------------------------------------------------------
(a) Any corporation into which the Subscription Agent or any successor
Subscription Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Subscription
Agent or any successor Subscription Agent shall be a party, or any corporation
succeeding to the business of the Subscription Agent or any successor
Subscription Agent, shall be the successor to the Subscription Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In the agency created by this Agreement any
of the Rights Certificates which shall have been printed with the name of the
Subscription Agent but not delivered, any such successor Subscription Agent may
adopt the name of the predecessor Subscription Agent and deliver such Rights
Certificates either in the name of the predecessor Subscription Agent or in the
name of the successor Subscription Agent; and, in all such cases, such Rights
Certificates shall have the full force and effect provided in the Rights
Certificates.
SECTION 17. Duties of Subscription Agent. The Subscription Agent undertakes
-----------------------------
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company by its acceptance hereof shall be
bound:
<PAGE>
(a) The Subscription Agent may consult with legal counsel (who may be, but it
is not required to be, legal counsel for the Company), and the written opinion
of such counsel shall be full and complete authorization and protection to the
Subscription Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Subscription Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any two of the following: The Chairman of
the Board, the President and the Treasurer of the Company and delivered to the
Subscription Agent; Subscription Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Subscription Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith.
(d) The Subscription Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same, but all such statements and
recitals (except the willingness of the Subscription Agent to act as such) are
and shall be deemed to have been made by the Company only.
(e) The Subscription Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Subscription Agent) or in respect of the
validity or execution of any Rights Certificate; nor shall it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in Rights Certificate; nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any Shares to be issued or as to whether any Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be required by the
Subscription Agent for the carrying out or performing by the Subscription Agent
of the provisions of this Agreement.
<PAGE>
(g) The Subscription Agent and any shareholder, director, officer or employee
of the Subscription Agent may buy, sell or deal in any other securities of the
Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to or otherwise act as fully
and freely as thought it were not Subscription Agent under this Agreement.
Nothing herein shall preclude the Subscription Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 18. Notices to the Company and Subscription Agent. All notices and
----------------------------------------------
other communications provided for or permitted hereunder shall be made by hand
delivery, overnight courier, telex, or facsimile transmission:
(a) if to the Company, to:
Blue Chip Value Fund, Inc.
1225 17th Street - 26th Floor
Denver, Colorado 80202
Attn: Jasper Frontz
(b) if to the Subscription Agent, to:
ChaseMellon Shareholder Services, L.L.C.
Attn: Lee Tinto, Assistant Vice President
111 Founders Plaza - 11th Floor
East Hartford, CT 06108
All such notices and communications shall be deemed to have been duly given,
when delivered by hand, if personally delivered; the next day after being sent
by overnight delivery, if sent as aforesaid with guaranteed next day delivery;
when answered back, if telexed; and when receipt acknowledged, if facsimile
transmission is used.
SECTION 19. Supplements and Amendments. The Company and the Subscription
---------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Subscription Agent may deem necessary or desirable.
<PAGE>
SECTION 20. Successors. All the covenants and provisions of this Agreement
-----------
by or for the benefit of the Company or the Subscription Agent shall bind and
insure to the benefit of their respective successors and assigns hereunder.
SECTION 21. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
SECTION 22. Benefits of this Agreement. Nothing in this Agreement shall be
---------------------------
construed to give to any person or corporation other than the Company and the
Subscription Agent any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for sole and exclusive benefit of the
Company and the Subscription Agent.
SECTION 23. Counterparts. This Agreement may be executed in any number of
-------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 24. Description Headings. Descriptive headings of the several
---------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 25. Entire Agreement. This Agreement is intended by the parties as a
-----------------
final expression of their agreement and is intended to be a complete and
exclusive statement of this agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 26. Force Majeure. If by reason of war or armed hostilities or other
--------------
calamity, act of God or act of any court, government or governmental,
administrative or regulatory authority or agency or similar power beyond the
Company's reasonable control, the Company is prevented or restrained from
completing the transactions contemplated hereby, then the Company and the
Subscription Agent shall have no responsibility for, or obligations with respect
thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized, as of the day
and year first above written.
BLUE CHIP VALUE FUND, INC.
By:
------------------------------------
Name:
Title:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT
CONFIDENTIAL: REORGANIZATION FEE SCHEDULE APPROVAL FORM
ATTN: Steve Wine APPROVED:
FUND: BLUE CHIP VALUE FUND, INC.
Description: Rights Subscription Offering
4,300 Accounts (approximated)
BASICS:
1. "Good Order" Processing $8.00 per L/T
(includes issuance of one (1) certificate)
2. Defect/Reject $5.00 per L/T
3. Legal $5.00 per L/T
4. Protect $15.00 per L/T
5. Partial/Transfers/Splits $00.50 per L/T
6. Withdrawal N/A per
7. Return/Late Items $2.00 per L/T
8. Excess Debit $00.50 per certificate
PARTICULARS
10. Calculation and Issuance of
Rights Certificate $1.50 per certificate
11. Step-up Privilege $ per L/T
12. Proration (Straight/equally applied)* $3.00 per account
13. Oversubscription $3.00 per account
<PAGE>
SPECIALS
14. Expiration (applicable on a per basis
which includes each extension)
A. Normal - up to 5:00 p.m. EST $ 600.00
B. Special - 5:00 p.m. to 12:00 p.m. EST $1,200.00
15. Production (in addition to regular production, e.g. Extended List, etc.)
A. Lists negotiable depending upon requirements.
B. Tapes negotiable depending upon requirements.
C. Copies negotiable depending upon requirements.
*Other than a "straight" proration is subject to negotiation.
16. MINIMUM (exclusive of out-of-pocket expenses
and expiration costs) $10,000.00
If applicable, the above mentioned is a minimum for the
first month and subjected to renegotiation thereafter.
-----
Administrator: Lee Tinto, Assistant Vice President
CMSS - Hartford, CT
(860) 282-3512
<PAGE>
EXHIBIT A
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Schedule of Fees as Subscription Agent
I. Set Up and Administrative Fee $ 2,500.00
II. Processing Basic Subscriptions, each $ 10.00
III. Split-ups, reissuing new rights cards $ 7.50
IV. Issuing subscription cards to record date holders, each $ 3.00
and follow-up mailings
V. Processing oversubscriptions, including proration and $ 3.00
refunds, each
VI. Subscriptions requiring additional handling (Window items,
defective presentations, correspondence items, legal items,
and items not providing a taxpayer identification number),
each $ 10.00
VII. Processing Guarantee of Delivery items, each $ 10.00
VIII. Special Services By Appraisal
IX. Out of pocket expenses (including but not limited to
postage, stationary, telephones, overnight couriers,
messengers, overtime, dinners, transportation, shipping
and trucking) Additional
X. Minimum Fee $25,000.00
<PAGE>
EXHIBIT B
[Company Letterhead]
Name Position Specimen Signatures
---- -------- -------------------
<PAGE>
EXHIBIT 2(l)
DRINKER BIDDLE & REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Fax: (215) 988-2757
April 13, 1998
Blue Chip Value Fund, Inc.
1225 Seventeenth Street
26th Floor
Denver, CO 80202
RE: REGISTRATION STATEMENT ON FORM N-2
----------------------------------
Ladies and Gentlemen:
As counsel for Blue Chip Value Fund, Inc., a Maryland corporation (the
"Company"), we have reviewed documents relating to the registration of 2,282,021
shares of Common Stock, par value of $.01 per share (the "Shares"). We have
reviewed the resolutions adopted by its Board of Directors and stockholders and
such other legal and factual matters as we have deemed appropriate for purposes
of this opinion.
This opinion is based exclusively on the General Corporation Law of
the State of Maryland and the federal law of the United States of America.
Based upon the foregoing, we are of the opinion that the Shares will
be, when issued for payment as described in the Company's prospectus, validly
issued, fully paid and non-assessable by the Company.
We note that W. Bruce McConnel, III, a partner of this firm, is the
Secretary of the Company.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as part of the Company's registration statement relating
to the Shares. However, this action does not constitute a consent under Section
7 of the Securities Act of 1933, because we have not otherwise come within the
categories of persons whose consent is required under Section 7 or under the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE>
EXHIBIT 2(n)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Financial Highlights"
in the Prospectus and under the captions "Financial Statements" and "Investment
Advisory and Other Services -- Independent Auditors" in the Statement of
Additional Information in the Registration Statement (Form N-2 Investment
Company Act of 1940 No. 811-5003) and related Prospectus of Blue Chip Value
Fund, Inc. to be filed with the Securities and Exchange Commission on April 14,
1998.
We also consent to the incorporation by reference therein of our report dated
January 14, 1998, with respect to the financial statements of Blue Chip Value
Fund, Inc., included in its Annual Report to Stockholders filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Denver, Colorado
April 10, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810439
<NAME> BLUE CHIP VALUE FUND, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 106,221,271
<INVESTMENTS-AT-VALUE> 150,209,220
<RECEIVABLES> 641,148
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9,000
<TOTAL-ASSETS> 150,859,368
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<OTHER-ITEMS-LIABILITIES> 11,953,962
<TOTAL-LIABILITIES> 11,953,962
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<PAID-IN-CAPITAL-COMMON> 94,291,724
<SHARES-COMMON-STOCK> 14,231,858
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<NET-ASSETS> 138,905,406
<DIVIDEND-INCOME> 2,356,751
<INTEREST-INCOME> 283,344
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<EXPENSES-NET> 1,273,608
<NET-INVESTMENT-INCOME> 1,366,487
<REALIZED-GAINS-CURRENT> 21,526,339
<APPREC-INCREASE-CURRENT> 12,743,904
<NET-CHANGE-FROM-OPS> 35,634,730
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,368,539
<DISTRIBUTIONS-OF-GAINS> 20,917,951
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,843,750
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 427,279
<NET-CHANGE-IN-ASSETS> 40,864,843
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (18,311)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 825,556
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,273,608
<AVERAGE-NET-ASSETS> 135,237,770
<PER-SHARE-NAV-BEGIN> 8.94
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 2.29
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (1.47)
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<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
