<PAGE>
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
SEMI-ANNUAL
REPORT TO STOCKHOLDERS
JUNE 30, 1998
<PAGE>
Dear Fellow Stockholders,
The first half of 1998 produced outstanding performance for large-company
stocks in particular and the broad equity market in general. Blue Chip Value
Fund's net asset value increased 16.08%, and the S&P 500 Index increased
17.71%.
PERFORMANCE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD
TOTAL
12/31/97 6/30/98 DIVIDENDS RETURN
<S> <C> <C> <C> <C>
Blue Chip
Value Fund $9.76 $11.06 $.27 16.08%
(Net Asset Value)
Blue Chip
Value Fund $10.9375 $11.3125 $.27 5.94%
(Common Stock)
S&P 500 17.71%
Market Price Premium to Net Asset Value 12.1% 2.3%
</TABLE>
PORTFOLIO CHARACTERISTICS AND HIGHLIGHTS
Drug manufacturers and distributors provided strong returns for the Fund.
Becton Dickinson & Co., Schering-Plough Corp. and McKesson Corp. all increased
around 50%. Dayton Hudson Corp. and Carnival Corp. increased 44% due to ex-
panding profits as a result of strong consumer spending. Lehman Brothers Hold-
ings, Inc., a brokerage firm, is up 50% for the year largely as a result of
being an overlooked, significantly mispriced stock in spite of an attractive
environment for the brokerage industry. The stock price of Unisys Corp., a
company being revitalized by new management and a greater emphasis on the com-
puter services business, doubled.
Blue Chip Value Fund continues to execute on its value approach. The weighted
average price-to-earnings ratio of stocks in the Fund is 19.5x and the price-
to-book value ratio is 3.5x, lower than comparable valuations for the S&P 500
of 26.3x and 4.5x, respectively. At the same time, the profit growth of Blue
Chip Value Fund's portfolio is slightly higher than the S&P 500 Index at 14.4%
compared to 13.8%.
Over the past 12 months, the Fund's holdings in consumer staples were reduced
due to high valuations. Holdings in financials and consumer cyclicals were in-
creased based on low valuations and the profit-enhancing environment of low
interest rates, as well as an improving environment for retailers. The Fund
also reduced the weighting in intermediate goods and services due to an uncer-
tain environment for cyclical stocks as a result of the economic problems in
Asia and their impact on U.S. exports and world growth.
GROWTH STOCKS VS. VALUE STOCKS
In the current market environment, large "growth" stocks have continued to
outperform large "value" stocks. Growth stocks are viewed as having more sta-
ble, higher profit growth and are priced at higher valuations, while value
stocks have less expensive valuations as a result of companies being over-
looked by the marketplace, undergoing change, or simply those with cyclical
businesses. As prices of growth stocks rise, the weighting of these stocks' in
the S&P 500 Index also increases. The result is that the recent outperformance
of growth stocks has increasingly driven the performance of the S&P 500 Index.
Few periods have historically witnessed such a dramatic difference between
growth and value stocks' performance in such a short time--as has been the
case so far this year. Value stocks, represented by the S&P/Barra Value Index,
increased 12.1% for the first six months, while growth stocks, comprising the
S&P/Barra Growth Index, almost doubled that result, at 23.1%. Blue Chip Value
Fund's higher return than the value stocks in the S&P 500 Index demonstrates
the benefits of a value strategy that also focuses on finding stocks with im-
proving businesses.
CRACKS IN THE GROWTH STOCK STORY
Why not only own large growth stocks? As we wrote at year-end, large growth
stocks have outperformed large value stocks on a cumulative basis since 1994.
However, the world economic environment may prove to be less benign in the fu-
ture toward large growth stocks. Large growth stocks are now priced as if
their growth rates will continue at strong double digit rates essentially for-
ever. Many of these stocks currently trade at all-time high valuations. Howev-
er, the recent rise in the U.S. dollar produces lower repatriated earnings
from foreign branches of U.S. companies, thus slowing the company's profit
growth. Economic problems in Asia can also produce the same result. Over the
last year, earnings disappointments have begun to trickle out from large
growth stocks causing their prices to decline. The strong bull market lately
has masked this earnings weakness. When stock market participants fully focus
on these companies' slower growth going forward, valuations will likely be
ratcheted downward. Consequently, over the next several years, investing only
in large growth stocks, or passive indexes that are typically biased toward
growth stocks is likely to be a more risky proposition. Meanwhile, according
to continual Wall Street and academic research, investing in large value
stocks produces competitive returns in the short run, higher returns over the
long run, and potentially less risk.
OUTLOOK
Overall, we continue to be constructively optimistic about the equity envi-
ronment going forward. It is a pleasant reality that we have said much the
same for many years now and the U.S. equity market has certainly come through.
As in the recent past, interest rates and inflation continue to be favorable.
The economies of the Western World are generally growing and healthy. Some
slowing of the U.S. economy promulgated by Asian economic difficulties has ac-
tually been beneficial, reducing concerns that the economy could grow too
quickly. Yet, the Asian situation in general is likely to continue to have
ripple effects on the U.S. economy, and the impact of a declining Japanese
economy, in particular, is a concern. At the same time, further crumbling of
the Soviet economy could be destabilizing, if only psychologically at first,
before the Western World's response is determined. Nevertheless, in
<PAGE>
spite of an uneven international backdrop, Americans continue to enjoy strong
real income growth which is enabling consumer spending to sustain a healthy
domestic economy.
We believe that the Fund's investment approach of investing in a well-diver-
sified portfolio of value stocks of companies with improving businesses will
continue to provide attractive results.
Sincerely,
/s/ Varilyn K. Schock /s/ Kenneth V. Penland
- ---------------------------------- ----------------------------------
Varilyn K. Schock, CFA Kenneth V. Penland, CFA
Vice President & Portfolio Manager Chairman of the Board
RIGHTS OFFERING UPDATE
Blue Chip Value Fund announced plans to proceed with a rights offering to
existing stockholders. The Fund plans to issue rights to purchase an additional
share of the Fund for each eight shares owned at a price of 95% of the lesser
of net asset value, or market price. The rights will not be transferable.
Stockholders will also have the option to subscribe for additional shares
during the offering.
It is expected that the rights will be issued to stockholders of record as of
August 14, 1998, the subscription period will begin August 19, 1998, and extend
through 5:00 p.m., New York time, September 17, 1998. The price of shares to be
issued will be determined as of September 18, 1998.
The proposed offering will provide stockholders with 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 Fund reserves the right to cancel, modify or postpone the offering. The
offering will be made only by means of a prospectus.
2ND QUARTER 1998 DISTRIBUTION INFORMATION
Blue Chip Value Fund, Inc. has declared a quarterly distribution of $.27 per
share with a Record Date of July 17, 1998 and a Payable Date of July 31, 1998.
Of the total distribution, $0.0156 represents net investment income and the
remaining portion is paid from capital surplus. If the Fund's total
distributions for the year (exclusive of long-term capital gains dividends)
exceed its net investment income and short-term capital gains for such year, a
portion of such distributions may constitute a non-taxable return of capital.
The actual determination of the source of the distributions can be made only at
year end. All shareholders will receive written notification regarding the
components and tax treatment of all distributions for the 1998 calendar year in
early 1999.
If you have elected to receive your distribution in cash, the enclosed check
is in payment of such distribution. If you have elected to reinvest your
distribution, enclosed is your reinvestment confirmation.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in common stock at market value (identified cost--
$105,377,988).................................................. $160,672,495
Short-term investments.......................................... 830,501
------------
TOTAL INVESTMENTS............................................. 161,502,996
Dividends receivable............................................ 138,652
Other assets.................................................... 74,133
------------
TOTAL ASSETS.................................................. 161,715,781
------------
LIABILITIES
Advisory fee payable............................................ 77,207
Administration fee payable...................................... 9,023
Accrued expenses and other liabilities.......................... 25,004
------------
TOTAL LIABILITIES............................................. 111,234
------------
NET ASSETS...................................................... $161,604,547
============
COMPOSITION OF NET ASSETS
Capital stock, at par........................................... $ 146,070
Paid-in capital................................................. 97,900,277
Undistributed net investment income ............................ 227,572
Undistributed net capital gains................................. 11,127,495
Undesignated distributions (Note 1)............................. (3,091,374)
Net unrealized appreciation on investments...................... 55,294,507
------------
$161,604,547
============
SHARES OF COMMON STOCK OUTSTANDING (100,000,000 shares
authorized at $0.01 par value)................................. 14,606,991
============
Net asset value per share....................................... $ 11.06
============
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
NET INVESTMENT INCOME
INCOME
Dividends............................................. $1,102,066
Interest.............................................. 63,306
----------
TOTAL INCOME.......................................... $ 1,165,372
EXPENSES
Investment advisory fee (Note 3)...................... 451,963
Administrative services fee (Note 3).................. 57,168
Shareholder reporting................................. 50,395
Transfer agent fees................................... 50,092
Legal fees............................................ 50,117
Directors' fees....................................... 26,097
Insurance and fidelity bond........................... 17,263
Audit fees............................................ 11,897
Custodian fees........................................ 4,902
Other................................................. 14,627
----------
TOTAL EXPENSES........................................ 734,521
-----------
NET INVESTMENT INCOME................................. 430,851
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments....................... 11,127,495
Change in unrealized appreciation of investments....... 11,306,558
-----------
NET GAIN ON INVESTMENTS............................... 22,434,053
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $22,864,904
===========
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 (1) 1997
------------ ------------
<S> <C> <C>
Increase in net assets from operations:
Net investment income............................. $ 430,851 $ 1,366,487
Net realized gain from securities transactions.... 11,127,495 21,524,339
Net change in unrealized appreciation of
investments ..................................... 11,306,558 12,743,904
------------ ------------
Net increase in net assets resulting from
operations........................................ 22,864,904 35,634,730
------------ ------------
Distributions to stockholders from:................
Net investment income............................. (203,279) (1,368,539)
Net realized gain on investments.................. (625,733) (20,917,951)
Undesignated (Note 1) ............................ (3,091,374) --
------------ ------------
(3,920,386) (22,286,490)
------------ ------------
Increase in net assets from common stock
transactions:
Proceeds from the sale of 2,843,750 shares, net of
offering expenses................................. 0 23,537,729
Net asset value of common stock issued to
stockholders from reinvestment of dividends
(375,133 shares issued for the six months ended
June 30, 1998, 427,279 shares issued for the year
ended December 31, 1997) 3,754,623 3,978,874
------------ ------------
3,754,623 27,516,603
------------ ------------
Net increase in net assets......................... 22,699,141 40,864,843
Net assets
Beginning of period............................... 138,905,406 98,040,563
------------ ------------
End of period ($227,572 and $0 undistributed net
investment income at June 30, 1998 and December
31, 1997, respectively).......................... $161,604,547 $138,905,406
============ ============
</TABLE>
(1) Unaudited
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31
JUNE 30, -----------------------------------
1998 (1) 1997 1996 1995 1994
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share
outstanding throughout each period)
Net asset value-beginning
of period............... $ 9.76 $ 8.94 $ 8.47 $ 6.98 $ 7.73
INVESTMENT OPERATIONS
Net investment income.... 0.03 0.10 0.13 0.13 0.11
Net gain (loss) on
investments............. 1.54 2.56 1.69 2.45 (0.11)
-------- -------- ------- ------- -------
Total from investment
operations.............. 1.57 2.66 1.82 2.58 0.00
-------- -------- ------- ------- -------
DISTRIBUTIONS
From net investment
income.................. (0.01) (0.10) (0.13) (0.13) (0.11)
From net realized gains
on investments.......... (0.04) (1.47) (1.22) (0.95) (0.38)
Undesignated (Note 1).... (0.22) -- -- -- --
Tax return of capital.... -- -- -- (0.01) (0.26)
-------- -------- ------- ------- -------
Total distributions...... (0.27) (1.57) (1.35) (1.09) (0.75)
-------- -------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights
offering................ -- (0.26) -- -- --
Offering costs charged to
paid in capital......... -- (0.01) -- -- --
-------- -------- ------- ------- -------
Total capital share
transactions............ -- (0.27) -- -- --
-------- -------- ------- ------- -------
Net asset value end of
period................. $ 11.06 $ 9.76 $ 8.94 $ 8.47 $ 6.98
======== ======== ======= ======= =======
Per share market value,
end of period.......... $11.3125 $10.9375 $ 9.25 $ 7.625 $ 6.125
======== ======== ======= ======= =======
Total investment return based on: (a)
Market Value............. 5.9% 40.5% 39.5% 41.6% (13.2%)
Net Asset Value.......... 16.1% 31.2% 21.3% 38.1% 0.8%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets...... 0.97%* 0.94% 1.05% 1.15% 1.22%
Ratio of net investment
income to average net
assets.................. 0.57%* 1.01% 1.39% 1.55% 1.46%
Ratio of distributions to
average net assets...... 5.19%* 16.48% 14.42% 13.22% 9.88%
Portfolio turnover rate
(b)..................... 22.40% 55.15% 42.31% 50.84% 62.77%
Average commission rate
paid to brokers per
share of common stock
purchased/sold.......... $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05
Net assets-end of period
(in thousands).......... $161,605 $138,905 $98,041 $92,887 $76,491
</TABLE>
* Annualized.
(1) Unaudited.
(a) Total investment return is cal- (b) A portfolio turnover rate is the
culated assuming a purchase of percentage computed by taking
common stock on the opening of the lesser of purchases or sales
the first day and a sale on the of portfolio securities (exclud-
closing of the last day of each ing short-term investments) for
period reported. Dividends and a year and dividing it by the
distributions, if any, are as- monthly average of the market
sumed for purposes of this cal- value of the portfolio securi-
culation to be reinvested at ties during the year.
prices obtained under the Fund's
dividend reinvestment plan.
Rights offerings, if any, are
assumed for purposes of this
calculation to be fully sub-
scribed under the terms of the
rights offering. Generally, to-
tal investment return based on
net asset value will be higher
than total investment return
based on market value in periods
where there is an increase in
the discount or a decrease in
the premium of the market value
to the net asset value from the
beginning to the end of such pe-
riods. Conversely, total invest-
ment return based on the net as-
set value will be lower than to-
tal investment return based on
market value in periods where
there is a decrease in the dis-
count or an increase in the pre-
mium of the market value to the
net asset value from the begin-
ning to the end of such periods.
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS -- 99.43%
CAPITAL GOODS -- 15.66%
AEROSPACE & DEFENSE -- 2.61%
United Technologies Corp........ 45,660 $ 2,257,574 $ 4,223,550
COMPUTER SOFTWARE & SERVICES -- 5.23%
Computer Associates
International, Inc. ........... 62,425 1,100,456 3,468,489
Unisys Corp.*................... 176,100 2,723,641 4,974,825
------------ ------------
3,824,097 8,443,314
ELECTRONICS -- SEMICONDUCTORS -- 1.81%
Harris Corp. ................... 65,420 1,960,408 2,923,456
MACHINERY -- DIVERSIFIED -- 4.06%
Dover Corp. .................... 99,600 2,590,880 3,411,300
Ingersoll-Rand Co. ............. 71,600 3,084,916 3,154,875
------------ ------------
5,675,796 6,566,175
MANUFACTURING -- SPECIALIZED -- 1.95%
Parker-Hannifin Corp. .......... 82,450 2,810,012 3,143,406
------------ ------------
TOTAL CAPITAL GOODS............. 16,527,887 25,299,901
------------ ------------
CONSUMER CYCLICAL -- 15.43%
AUTO PARTS & EQUIPMENT -- 6.31%
ITT Industries, Inc. ........... 80,500 2,030,809 3,008,688
Eaton Corp. .................... 29,400 2,651,183 2,285,850
Goodyear Tire & Rubber Co. ..... 33,000 2,289,840 2,126,437
PACCAR, Inc. ................... 53,300 2,738,559 2,784,925
------------ ------------
9,710,391 10,205,900
ENTERTAINMENT -- 3.32%
Carnival Corp. ................. 135,220 1,932,346 5,358,093
RETAIL STORES -- GENERAL MERCHANDISE CHAINS -- 5.80%
Dayton Hudson Corp. ............ 121,200 2,156,359 5,878,200
Kmart Corp.*.................... 181,300 2,638,440 3,490,025
------------ ------------
4,794,799 9,368,225
TOTAL CONSUMER CYCLICAL......... 16,437,536 24,932,218
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
CONSUMER STAPLES -- 24.09%
DISTRIBUTORS -- FOOD & HEALTH -- 1.82%
SUPERVALU, Inc .............................. 66,200 $ 2,073,045 $ 2,937,625
DRUGS -- 6.00%
McKesson Corp. .............................. 54,800 2,051,972 4,452,500
Schering-Plough Corp. ....................... 57,280 1,364,481 5,248,280
------------ ------------
3,416,453 9,700,780
FOOD -- 1.81%
Sara Lee Corp. .............................. 52,200 3,256,732 2,919,937
HEALTHCARE DIVERSIFIED -- 2.41%
Bristol-Myers Squibb Co. .................... 33,940 1,627,173 3,900,979
HEALTHCARE SERVICES -- 1.73%
Shared Medical Systems Corp. ................ 38,100 2,056,681 2,797,969
MEDICAL PRODUCTS & SUPPLIES -- 2.95%
Becton Dickinson & Co. ...................... 61,300 2,498,219 4,758,412
RETAIL STORES -- DRUG STORES -- 5.88%
CVS Corp. ................................... 107,200 1,906,082 4,174,100
Rite Aid Corp. .............................. 142,000 2,244,645 5,333,875
------------ ------------
4,150,727 9,507,975
RETAIL STORES -- FOOD -- 1.49%
Food Lion, Inc.
Cl A........................................ 226,500 2,061,704 2,406,562
------------ ------------
TOTAL CONSUMER STAPLES....................... 21,140,734 38,930,239
------------ ------------
CREDIT SENSITIVE -- 31.28%
ELECTRIC COMPANIES -- 5.12%
DTE Energy Co. .............................. 81,900 3,290,234 3,306,713
Edison International......................... 83,730 1,677,965 2,475,268
GPU, Inc. ................................... 65,770 1,889,595 2,486,928
------------ ------------
6,857,794 8,268,909
FINANCIAL -- MISC. -- 2.70%
SLM Holding Corp. ........................... 89,250 2,241,753 4,373,250
</TABLE>
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
INSURANCE -- 2.90%
Equitable Companies, Inc. ................... 62,500 $ 4,062,894 $ 4,683,594
INVESTMENT BANKING/BROKERAGE -- 7.43%
Bear Stearns Companies, Inc. ................ 69,000 3,082,534 3,924,375
Lehman Brothers Holdings, Inc. .............. 41,000 2,198,711 3,180,063
Travelers Group, Inc. ....................... 80,820 1,972,115 4,899,712
------------ ------------
7,253,360 12,004,150
MAJOR REGIONAL BANKING -- 6.40%
Comerica, Inc. .............................. 46,400 3,229,356 3,074,000
First Union Corp. ........................... 63,560 2,106,221 3,702,370
NationsBank Corp. ........................... 46,600 2,169,965 3,564,900
------------ ------------
7,505,542 10,341,270
MONEY CENTER BANKS -- 2.57%
Chase Manhattan Corp. ....................... 55,000 1,716,941 4,152,500
SAVINGS & LOAN -- 2.21%
Golden West Financial Corp. ................. 33,600 2,911,445 3,572,100
TELECOMMUNICATIONS -- 1.95%
Sprint Corp. ................................ 44,700 1,570,422 3,151,350
------------ ------------
TOTAL CREDIT SENSITIVE....................... 34,120,151 50,547,123
------------ ------------
INTERMEDIATE GOODS & SERVICES -- 12.97%
AIRLINES -- 4.49%
AMR Corp.*................................... 45,400 2,879,345 3,779,550
US Airways Group, Inc.*...................... 43,900 2,782,593 3,479,075
------------ ------------
5,661,938 7,258,625
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------- ------------ ------------
<S> <C> <C> <C>
CHEMICALS -- 1.03%
ARCO Chemical Co. .......................... 29,000 $ 1,530,875 $ 1,663,875
OIL (INTEGRATED -- DOMESTIC) -- 1.57%
Tosco Corp. ................................ 86,500 1,928,870 2,540,938
OIL (INTEGRATED -- INTERNATIONAL) -- 3.87%
Mobil Corp. ................................ 41,220 1,872,363 3,158,483
Texaco, Inc. ............................... 51,900 2,353,035 3,097,781
------------ ------------
4,225,398 6,256,264
STEEL/MANUFACTURING -- 2.01%
Timken Co. ................................. 41,000 1,544,393 1,263,312
USX -- US Steel Group, Inc. ................ 60,000 2,260,206 1,980,000
------------ ------------
3,804,599 3,243,312
------------ ------------
TOTAL INTERMEDIATE GOODS & SERVICES......... 17,151,680 20,963,014
------------ ------------
TOTAL COMMON STOCKS......................... 105,377,988 160,672,495
------------ ------------
SHORT-TERM INVESTMENTS -- .51%
Dreyfus Cash Management Fund................ 830,501 830,501
------------ ------------
TOTAL INVESTMENTS........................... $106,208,489 161,502,996
============ ============
Receivables and other assets less
liabilities -- .06%........................ 101,551
------------
NET ASSETS -- 100.00%....................... $161,604,547
============
</TABLE>
See accompanying notes
* Denotes non-income producing security.
<PAGE>
BLUE CHIP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Blue Chip Value Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management in-
vestment company.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITIES VALUATIONS--Each investment security is valued at the last sale
price at period end reported by the principal exchange on which the issue was
traded or, if no sale is reported, the last bid price is used. Short-term in-
vestments are valued at cost, which approximates market value.
FEDERAL INCOME TAXES--The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies
and to distribute all of its taxable income to its stockholders. Therefore, no
provision has been made for federal income taxes.
INVESTMENT TRANSACTIONS--Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
first-in, first-out basis for both financial statement and federal income tax
purposes. Dividend income is recognized on the ex-dividend date.
DISTRIBUTIONS TO STOCKHOLDERS--Distributions to stockholders are recorded on
the ex-dividend date. Distributions are classified to conform with the tax re-
porting requirements of the Internal Revenue Code. Distributions attributable
to current period realized gains from securities transactions which are offset
by the existence of loss carryovers from prior years are taxable to the recip-
ient as ordinary income and reported as distributions in excess of realized
gains. Tax returns of capital represent distributions in excess of current
and accumulated earnings and profits and are nontaxable to the recipient.
The Fund distributes at least 2.5% of its net asset value quarterly to its
stockholders.
On April 1, 1998, the Directors of Blue Chip Value Fund, Inc., declared a dis-
tribution of $0.27 per share to stockholders of record on April 9, 1998. The
ex-dividend date was April 7, 1998 and the payable date was April 24, 1998. Of
the total distribution, $0.014 represents net investment income, $0.0431 rep-
resents long-term capital gains taxable at the 20% rate, and the remaining
portion is paid from capital surplus. If the Fund's total distributions for
the year (exclusive of long-term capital gains dividends) exceed its net in-
vestment income and short-term capital gains for such year, a portion of such
distributions may constitute a non-taxable return of capital. The actual de-
termination of the source of the distributions can be made only at year end.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and disclosures made in the accompanying notes to the financial statements.
Actual results could differ from those estimates.
2. PURCHASE AND SALE OF INVESTMENTS
The cost of investment securities purchased and proceeds from sales of securi-
ties (excluding short-term investments) aggregated $34,025,944 and
$43,322,251, respectively, for the six months ended June 30, 1998. At June 30,
1998, gross unrealized appreciation of investments was $56,721,325 and gross
unrealized depreciation of investments was $1,426,818.
3. INVESTMENT ADVISORY AND ADMINISTRATION SERVICES
The Fund has an Investment Advisory Agreement with Denver Investment Advisors
LLC (the "Advisor"), whereby a management fee is paid to the Advisor based on
an annual rate of .65% of the Fund's average weekly net assets up to
$100,000,000 and .50% of the Fund's average weekly net assets in excess of
$100,000,000. The management fee is paid monthly based on the average of the
net assets of the Fund computed as of the last business day of the New York
Stock Exchange is open each week. Certain officers and a director of the Fund
are also officers of the Advisor.
The Fund has an Administrative Agreement with American Data Services, Inc. The
administrative services fee is based on an annual rate of .10% of the Fund's
average weekly net assets up to $75,000,000, .05% of the Fund's average weekly
net assets between $75,000,000 and $125,000,000, and .03% of the Fund's aver-
age weekly net assets in excess of $125,000,000, with a $7,463 per month mini-
mum. The administrative services fee is paid monthly based on the average of
the net assets of the Fund computed as of the last business day the New York
Stock Exchange is open each week.
4.PROPOSED RIGHTS OFFERING
The Fund announced plans to proceed with a rights offering to existing stock-
holders. The Fund plans to issue rights to purchase an additional share of the
Fund for each eight shares owned at a price of 95% of the lesser of net asset
value, or market price. The rights will not be transferable. Stockholders will
also have the option to subscribe for additional shares during the offering.
It is expected that the rights will be issued to stockholders of record as of
August 14, 1998, the subscription period will begin August 19, 1998, and ex-
tend through 5:00p.m., New York time, September 17, 1998. The price of the
shares to be issued will be determined as of September 18, 1998.
The fund reserves the right to cancel, modify or postpone the offering. The
offering will be made only by means of a prospectus.
5. ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of the Fund (the "Annual Meeting") was held
on May 12, 1998 pursuant to notice given to all stockholders of record at the
close of business on March 10, 1998. At the Annual Meeting, stockholders were
asked to approve the following:
PROPOSAL 1.
To elect two Class I directors, Todger Anderson and Robert J. Greenebaum, to
serve until the Annual Meeting in the year 2001. The number of shares voting
for the election of Todger Anderson was 9,373,424 and the number shares with-
holding authority was 177,925. The number of shares voting for the election of
Robert J. Greenebaum was 9,337,944 and the number of shares withholding au-
thority was 213,405.
The name of each other director whose term of office continued after the An-
nual Meeting was Robert M. Inman, Richard C. Schulte, Kenneth V. Penland and
Roberta M. Wilson.
<PAGE>
BLUE CHIP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. ANNUAL MEETING OF STOCKHOLDERS (CONTINUED)
PROPOSAL 2.
To ratify the appointment by the Board of Directors of Ernst & Young LLP as
the Fund's independent auditors for the fiscal year ended December 31, 1998.
The number of shares voting for the ratification of the appointment of Ernst &
Young LLP as independent auditors was 9,117,409, the number of shares voting
against ratification was 294,384 and the number of shares abstaining was
139,556.
PROPOSAL 3.
To approve a change to the Fund's fundamental investment policies and limita-
tions regarding investment of 75% of its total assets in equity securities of
large domestic companies. The number of shares voting for the proposal was
7,228,879, the number of shares voting against the proposal was 751,722, the
number of shares abstaining was 283,070 and the number of broker non-votes was
1,287,678.
PROPOSAL 4.
To approve a change to the Fund's fundamental policy which prohibits the pur-
chase of securities on margin to permit the Fund to engage in such transac-
tions in certain limited circumstances. The number of shares voting for the
proposal was 6,582,155, the number of shares voting against the proposal was
1,340,327, the number of shares abstaining was 341,185 and the number of bro-
ker non-votes was 1,287,682.
PROPOSAL 5.
To approve the termination of the Fund's fundamental policy which prohibits
short sales of securities and to adopt a non-fundamental policy to permit the
Fund to engage in such transactions in certain circumstances. The number of
shares voting for the proposal was 6,496,459, the number of shares voting
against the proposal was 1,385,590, the number of shares abstaining was
381,598 and the number of broker non-votes was 1,287,702.
PROPOSAL 6.
To approve the termination of the Fund's fundamental policies which prohibit
the purchase of warrants, rights, options or indices, and the approval of an
amendment to a fundamental policy to permit the purchase of financial futures.
The number of shares voting for the proposal was 6,510,347, the number of
shares voting against the proposal was 1,327,531, the number of shares ab-
staining was 425,789 and the number of broker non-votes was 1,287,682.
PROPOSAL 7.
To approve a change to the Fund's fundamental policy prohibiting borrowing in
most circumstances to permit borrowing to the extent permitted under the In-
vestment Company Act of 1940, and the adoption of a non-fundamental policy to
permit leverage of up to 15% of the Fund's total assets and certain other
borrowings. The number of shares voting for the proposal was 6,403,460, the
number of shares voting against the proposal was 1,433,319, the number of
shares abstaining was 426,890 and the number of broker non-votes was
1,287,680.
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<PAGE>
BOARD OF DIRECTORS
Kenneth V. Penland, Chairman
Todger Anderson, Director
Robert J. Greenebaum, Director
Robert M. Inman, Director
Richard C. Schulte, Director
Roberta M. Wilson, Director
OFFICERS
Kenneth V. Penland, Chairman
Todger Anderson, President
Varilyn K. Schock, Vice President
W. Bruce McConnel, III, Secretary
Jasper R. Frontz, Treasurer
INVESTMENT ADVISOR
Denver Investment Advisors LLC
1225 17th Street, 26th Floor
Denver, CO 80202
(303) 312-5100
SHAREHOLDER RELATIONS
Margaret R. Jurado
(800) 624-4190 (303) 312-5100
e-mail: [email protected]
CUSTODIAN
Bank of New York
48 Wall Street
New York, NY 10286
FUND ADMINISTRATOR
American Data Services, Inc.
Hauppauge Corporate Center
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
TRANSFER AGENT DIVIDEND REINVESTMENT PLAN AGENT (QUESTIONS REGARDING YOUR
ACCOUNT)
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
www.chasemellon.com
NYSE Symbol--BLU
[LOGO OF BLUE CHIP VALUE FUND APPEARS HERE]
www.blu.com
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