<PAGE>
[Blue Chip Value Fund Logo appears here]
Annual
Report to Stockholders
December 31, 1998
<PAGE>
Dear Fellow Stockholders,
Investors experienced strong investment returns again in 1998, particularly
for large U. S. stocks. Blue Chip Value Fund's net asset value increased
17.64%. The stock price moved from a premium to net asset value to a discount
at year end but, as of this writing, the discount has narrowed again to the
more typical levels of a slight discount.
We have written in the past about the performance difference between stocks
typically classified as "value" and those classified as "growth."* We have
also discussed the reality that the S&P 500 Index is constructed in such a way
that growth stocks are more heavily weighted in calculating the performance of
the Index. At the same time, new stocks chosen for additions to the Index have
taken on a decidedly more growth flavor while more value stocks have been re-
moved. The result is that large growth stocks primarily drive the Index's re-
turn--up and down. In 1998, large growth stocks had a remarkable year. These
stocks led the market's advance, pushing the S&P 500 Index to a 28.5% gain.
Based on the S&P/Barra Value and Growth indices, large growth stocks in the
Index outperformed large value stocks for the fifth straight year--both the
longest time period and by the widest margin on record. The S&P/Barra Growth
index was up 42.2%, outpacing the Value index at 14.7% by 27.5 percentage
points.
We are pleased that Blue Chip Value Fund's net asset value outperformed the
value stocks in the S&P 500 last year. We have also been thoughtful about ad-
hering to our discipline of owning undervalued stocks, while allowing for mar-
ket environment changes. The investment policy changes adopted by the Fund in
1998 strengthened its investment capabilities today and for the future. These
changes have produced a stronger approach for dealing with the differences in
value and growth stock performance, which is already bearing fruit.
Last year we broadened the universe of potential stock investments to include
stocks that do not pay dividends, as well as including all of the stocks in
the S&P 500 Index. Companies that do not pay dividends typically are faster-
growing companies that are reinvesting their resources to grow the business.
Consequently, many non-dividend-paying companies are often also viewed as
growth stocks. While the Fund's investment approach continues to identify un-
dervalued stocks with solid or improving businesses, broadening the universe
allows the Fund to buy stocks that may be viewed longer term as growth stocks,
but are temporarily selling at cheap prices.
For example, the Fund purchased Tellabs Inc., a telecommunications equipment
supplier that does not pay a dividend, last fall. The stock typically trades
at price-to-earnings valuation ratios of between 35-50x the company's earn-
ings, and profits have been growing consistently at 35-50% per quarter com-
pared to the prior year's same quarter. When a planned acquisition of Ciena
Corp., another telecommunications equipment company, was shelved, market par-
ticipants overreacted and the stock declined from a high of $90. Our valuation
work identified the stock when the P/E multiple was 25x earnings, an unusually
low valuation for the stock, and we purchased shares at $45. Tellabs' stock
price closed the year at $68 9/16 and is higher yet as of this writing.
Given this broader capability, the Fund added attractively valued stocks that
happened to be non-dividend-paying in the latter half of the year. Since many
of these stocks are technology stocks, the Fund has an increased ownership in
technology stocks and a reduced weighting in basic industry stocks compared to
last year, which has contributed favorably to the Fund's performance.
Consistent with our ongoing focus on valuation, the Fund continues to have a
lower price-to-earnings multiple of 21.2x than the S&P 500 Index at 23.8x. The
Fund's price-to-book value ratio is also lower at 4.2x vs. 4.7x for the Index.
Stocks in the Fund produce a dividend yield that is similar to the Index, 1.1%
vs. 1.3%.
Top-performing stocks for the year were in a broad array of industries:
Unisys Corp. (another non-dividend paying stock), a technology company that is
turning around its overall business and increasingly benefiting from its rap-
idly growing services division, gained 152%; Sprint Corp. was up 64%; drug re-
tailers Rite Aid Corp. and CVS Corp. were up 69% and 76%, respectively, on
more efficient operations and better margins from higher drug prices; Dayton
Hudson Corp. continued to generate impressive comparable store sales and prof-
its which lifted the stock 63%, and Schering-Plough Corp. gained 82%.
Rights Offering Follow-Up and Investment Outlook
We enter 1999 with continued optimism about ongoing low inflation and inter-
est rates and adequate levels of corporate profitability, which translates
into reasonable expectations for continued attractive equity performance. Fur-
ther, we appreciate investors' approval of investment policy changes that, as
we've discussed, strengthen the Fund's investment capability and flexibility
to take advantage of opportunities and adapt to market developments going for-
ward. At the same time, we appreciate investors' additional investment through
the rights offering, where approximately 2 million shares were issued at a
subscription price of $8.31 per share. The rights offering added $16.8 million
after offering expenses to the asset base of the Fund.
Ongoing realignments or adjustments in foreign economies and the potential
for negative corporate earnings surprises, as revenue increases are hard to
come by in a low inflation environment, suggest the likelihood of a bumpy
stock market in the coming year. However, the favorable economic backdrop in
the U.S. continues to suggest that market declines offer good opportunities
for increasing ownership in U.S. equities. Thank you for continuing to use
Blue Chip Value Fund as a vehicle for your equity ownership, as we continue to
pursue capital growth and income.
Sincerely,
/s/Varilyn K. Schock /s/Kenneth V. Penland
Varilyn K. Schock, CFA Kenneth V. Penland, CFA
Portfolio Manager & Vice President Chairman of the Board
*Value stocks are cheaply or attractively priced in relation to the underlying
companies' current profits and the market's expectation for future profit
growth. Growth stocks are typically richly priced based on the underlying com-
panies' history of and the market's expectation for fast-growing profits in
the future.
<PAGE>
Year 2000 Update
The Year 2000 Issue consists of a shortcoming of many electronic data
processing systems that make them unable to process year and date information
accurately beyond the year 1999. If this problem were not corrected, on Janu-
ary 1, 2000, a computer system would recognize the date as January 1, 1900.
Blue Chip Value Fund, Inc. ("Blue Chip") and its third-party service provid-
ers continue to move ahead in their preparations for the turn of the century.
Denver Investment Advisors LLC ("Denver Investment Advisors"), Blue Chip's in-
vestment adviser, is primarily responsible for obtaining and summarizing in-
formation about the activities of Blue Chip's third-party service providers
for consideration by Blue Chip's Board of Directors on a quarterly basis.
Denver Investment Advisors provides a continuous investment program, includ-
ing investment research and management, which culminates in placing orders for
all purchases and sales of Blue Chip's portfolio securities.
Denver Investment Advisors uses many hardware and software vendors for its
Information Technology infrastructure as well as many other entities to proc-
ess securities and other financial transactions promptly and accurately.
Therefore, its ability to continue managing assets through the Year 2000 de-
pends on the ability of a large number of third-party vendors and service
providers to deliver Year 2000 compliant products and services. Denver Invest-
ment Advisors has identified all of its high and medium importance systems and
corresponding vendors. If information or certification provided by vendors is
not satisfactory, Denver Investment Advisors will consider conducting an al-
ternative vendor review regarding their specific operations function in early
1999. The objective will be to identify and select a Year 2000 compliant ven-
dor in all "critical" functions prior to mid-1999. In addition to the evalua-
tion of the written correspondence provided by external vendors, and other
sources, Denver Investment Advisors, is also planning to test "critical" sys-
tems and services with the assistance of vendors and service providers to
eliminate any unforeseen difficulties specifically between the organizations.
The target date for completion of testing is June 30, 1999.
Denver Investment Advisors' efforts to effectively prepare for the Year 2000
do not simply stop at the systems and operations of day to day business. In
order to be fully prepared for the turn of the century, the portfolio manager
and analysts include Year 2000 compliance issues among the many factors used
in evaluating investments for Blue Chip's portfolio.
Each of the other key third-party service providers, including Blue Chip's
fund accounting agent, transfer agent (shareholder recordkeeper) and custodi-
an, has prepared summaries of their Year 2000 compliance projects and the pro-
gress achieved. These summaries indicate that their projects are currently in
progress and expected to be completed by June 30, 1999. The information about
Year 2000 readiness of third parties summarized above was provided to Denver
Investment Advisors by these third parties and has not been independently ver-
ified.
Blue Chip and its service providers are committed to achieving Year 2000 com-
pliance on a timely basis. Each service provider is currently demonstrating
reasonable efforts to ensure that their business systems and services continue
to operate through the turn of the century without significant business dis-
ruption. However, it is important to emphasize that given the host of various
interconnections and interdependencies, some well beyond the range of control
of a single entity, the efforts described above do not guarantee complete Year
2000 compliance across all systems and operations.
This information constitutes Year 2000 readiness disclosure as defined in the
Year 2000 Information and Readiness Disclosure Act.
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund's Dividend Reinvestment and Cash Purchase Plan offers stockholders
the opportunity to reinvest dividends and capital gain distributions in addi-
tional shares of the Fund. A stockholder may also make additional cash invest-
ments under the Plan. There is no service charge for participation.
If the Fund is trading at a premium to the Fund's net asset value on the rec-
ord date of a distribution, then the Fund will issue sufficient shares at net
asset value to satisfy the Plan. If the Fund is trading at a discount to the
Fund's net asset value on the record date of a distribution, then the Fund
will attempt to acquire shares of the Fund's Common Stock in the open market
at a price (plus commission) which is less than the net asset value per share
most recently published by the Fund. If no shares, or insufficient shares, are
available at less than net asset value per share, any remaining balance will
be used to acquire shares from the Fund at net asset value.
Participating stockholders may also make additional cash investments (minimum
$50 and maximum $10,000 per month) by check or money order (or by wire for a
$10 fee) to acquire additional shares of the Fund. Please note, however, that
these additional shares will be purchased at market value (without regard to
net asset value) per share.
A stockholder may join the Plan by sending an Enrollment Form to the Plan
Agent at ChaseMellon Shareholder Services, LLC, Overpeck Centre, 85 Challenger
Road, Ridgefield Park, NJ, 07660.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be with-
held) on dividends or distributions, even though the stockholder does not re-
ceive the cash. Participants must own at least 50 shares at all times.
A stockholder may elect to withdraw from the Plan at any time on 15-days'
prior written notice, and receive future dividends and distributions in cash.
There is no penalty for withdrawal from the Plan and stockholders who have
withdrawn from the Plan may rejoin it in the future.
The Fund may amend the Plan at any time upon 30-days prior notice to partici-
pants.
Additional information about the Plan may be obtained from Blue Chip Value
Fund, Inc. 1225 17th Street, 26th Floor, Denver, CO 80202; telephone (800)
624-4190 or by visiting us at www.blu.com.
If your shares are registered with a broker, you can most likely still par-
ticipate in the Dividend Reinvestment Plan. Please talk to your broker about
how to participate and if there are any fees which may be charged by the bro-
ker to your account.
The Power of Compounding
By participating in the Dividend Reinvestment and Cash Purchase Plan, you can
let the power of compounding work for you.
By reinvesting your dividends, you will continue to add shares to your ac-
count. As future dividends are paid, you will collect the dividend on your
original investment plus the additional shares acquired through the Plan.
Blue Chip On-Line
In 1998, we continued to make improvements to our Internet site at
www.blu.com including a redesign of the site and some new features including:
. Home page -- offers daily figures and snapshot info with links to more in-
formation
. Fund Facts -- contains distribution information and updated Frequently
Asked Questions
. Current News -- gives recent press releases as well as current annual and
semi-annual reports.
. Shareholder Services -- offers Investor Relations info and Shareholder
Service info with links to our transfer agent's (ChaseMellon Shareholder
Services) Internet site.
. Contact Us -- a convenient way to request information or send a comment or
question via email.
We hope that those of you who use the Internet find these improvements to be
informative and helpful.
Stockholder Distribution Information
Certain tax information regarding Blue Chip Value Fund, Inc. is required to
be provided to stockholders based upon the Fund's income and distributions
taxable to the stockholders for the calendar year ended December 31, 1998.
The Board of Directors of Blue Chip Value Fund, Inc. voted to pay to stock-
holders of record at the opening of business on record date, the following
distributions derived from capital gains realized from sales of portfolio se-
curities and dividends derived from net investment income:
<TABLE>
<CAPTION>
Record Date Pay Date Dividends Capital Gains
- ----------- -------- --------- -------------
<S> <C> <C> <C>
4/9/98 4/24/98 $0.0140 $0.2560
7/17/98 7/31/98 $0.0156 $0.2544
10/16/98 10/30/98 $0.0096 $0.2104
12/31/98 1/15/99 $0.0149 $0.3551
$0.0541 $1.0759
</TABLE>
The Fund notified stockholders at the end of January 1999 of amounts for use
in preparing 1998 income tax returns.
Attention Corporate Stockholders:
To determine the amount that qualifies for the dividends-received deduction
for corporations, multiply the amount that appears in column 1 of Form 1099-
Div by 100%.
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors Blue Chip Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Blue
Chip Value Fund, Inc. (the "Fund"), including the schedule of investments, as
of December 31, 1998, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial high-
lights are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. Our proce-
dures included confirmation of securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit also includes assess-
ing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Blue
Chip Value Fund, Inc. as of December 31, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted ac-
counting principles.
/s/Ernst & Young LLP
January 8, 1999
Denver, CO
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment in common stock at market value (identified cost
$126,056,070)................................................... $175,385,843
Short-term investments........................................... 6,561,024
------------
TOTAL INVESTMENTS.............................................. 181,946,867
Receivable for securities sold................................... 9,932,220
Dividends receivable............................................. 167,501
Interest receivable.............................................. 16,845
Other assets..................................................... 23,374
------------
TOTAL ASSETS................................................... 192,086,807
------------
LIABILITIES
Payable for securities purchased................................. 14,192,345
Distributions payable............................................ 6,189,296
Advisory fee payable............................................. 83,781
Administration fee payable....................................... 9,934
Accrued expenses and other liabilities........................... 99,599
------------
TOTAL LIABILITIES.............................................. 20,574,955
------------
NET ASSETS....................................................... $171,511,852
============
COMPOSITION OF NET ASSETS
Capital stock, at par............................................ $ 167,278
Paid-in capital.................................................. 115,604,161
Undistributed net capital gains.................................. 6,397,727
Undistributed net investment income.............................. 12,913
Net unrealized appreciation on investments....................... 49,329,773
------------
$171,511,852
============
SHARES OF COMMON STOCK OUTSTANDING (100,000,000 shares authorized
at $0.01 par value)............................................. 16,727,827
============
Net asset value per share........................................ $ 10.25
============
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C> <C>
NET INVESTMENT INCOME
INCOME
Dividends............................................... $ 2,090,380
Interest................................................ 206,305
-----------
TOTAL INCOME........................................... $ 2,296,685
EXPENSES
Investment advisory fee
(Note 3)............................................... 913,384
Administrative services fee (Note 3).................... 113,653
Shareholder reporting................................... 101,808
Transfer agent fees..................................... 95,822
Legal fees.............................................. 70,204
Directors' fees......................................... 48,000
Insurance and fidelity bond............................. 30,388
Audit fees.............................................. 26,999
Custodian fees.......................................... 9,741
Other................................................... 32,552
-----------
TOTAL EXPENSES......................................... 1,442,551
-----------
NET INVESTMENT INCOME.................................. 854,134
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
Net realized gain on investments........................ 22,664,465
Change in unrealized appreciation of investments........ 5,341,824
-----------
NET GAIN ON INVESTMENTS................................ 28,006,289
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $28,860,423
===========
</TABLE>
See accompanying notes.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year
Ended December 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Increase in net assets from operations:
Net investment income............................. $ 854,134 $ 1,366,487
Net realized gain from securities transactions.... 22,664,465 21,524,339
Net change in unrealized appreciation of
investments...................................... 5,341,824 12,743,904
------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS......... 28,860,423 35,634,730
------------ ------------
Distributions to shareholders from:
Net investment income............................. (841,221) (1,368,539)
Net realized gain on investments.................. (16,892,471) (20,917,951)
------------ ------------
(17,733,692) (22,286,490)
Increase in net assets from common stock
transactions:
Proceeds from the sale of 2,035,723 and 2,843,750
shares respectively, net of offering expenses.... 16,774,380 23,537,729
Net asset value of common stock issued to
shareholders from reinvestment of dividends
(460,246 shares issued for the year ended
December 31, 1998, 427,279 shares issued for the
year ended December 31, 1997).................... 4,705,335 3,978,874
------------ ------------
21,479,715 27,516,603
------------ ------------
NET INCREASE IN NET ASSETS......................... 32,606,446 40,864,843
NET ASSETS
Beginning of period............................... 138,905,406 98,040,563
------------ ------------
End of period ($12,913 and $0 undistributed net
investment income at December 31, 1998 and
December 31, 1997, respectively)................. $171,511,852 $138,905,406
============ ============
</TABLE>
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------
1998 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......... 0.05 0.10 0.13 0.13 0.11
Net gain (loss) on
investments.................. 1.62 2.56 1.69 2.45 (0.11)
-------- -------- ------- ------- -------
Total from investment
operations................... 1.67 2.66 1.82 2.58 0.00
-------- -------- ------- ------- -------
Distributions
From net investment income.... (0.05) (0.10) (0.13) (0.13) (0.11)
From net realized gains on
investments.................. (1.08) (1.47) (1.22) (0.95) (0.38)
Tax return of capital......... -- -- -- (0.01) (0.26)
-------- -------- ------- ------- -------
Total distributions........... (1.13) (1.57) (1.35) (1.09) (0.75)
-------- -------- ------- ------- -------
Capital Share Transactions
Dilutive effect of rights
offering..................... (0.04) (0.26) -- -- --
Offering costs charged to paid
in capital................... (0.01) (0.01) -- -- --
-------- -------- ------- ------- -------
Total capital share
transactions................. (0.05) (0.27) -- -- --
-------- -------- ------- ------- -------
Net asset value, end of
period...................... $ 10.25 $ 9.76 $ 8.94 $ 8.47 $ 6.98
======== ======== ======= ======= =======
Per share market value, end
of period................... $ 9.7500 $10.9375 $ 9.25 $ 7.625 $ 6.125
======== ======== ======= ======= =======
Total investment return based
on: (a)
Market Value................. 1.3% 40.5% 39.5% 41.6% (13.2%)
Net Asset Value.............. 17.6% 31.2% 21.3% 38.1% 0.8%
Ratios/Supplemental data:
Ratio of expenses to average
net assets................... 0.94% 0.94% 1.05% 1.15% 1.22%
Ratio of net investment income
to average net assets........ 0.56% 1.01% 1.39% 1.55% 1.46%
Ratio of distributions to
average net assets........... 11.62% 16.48% 14.42% 13.22% 9.88%
Portfolio turnover rate (b)... 76.02% 55.15% 42.31% 50.84% 62.77%
Net assets-end of period (in
thousands)................... $171,512 $138,905 $98,041 $92,887 $76,491
</TABLE>
(a) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Rights offerings, if any, are assumed for
purposes of this calculation to be fully subscribed under the terms of the
rights offering. Generally, total 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 periods. Conversely, total investment return based on the net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the
premium of the market value to the net asset value from the beginning to
the end of such periods.
(b) A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term
investments) for a year and dividing it by the monthly average of the market
value of the portfolio securities during the year.
See accompanying notes.
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Market
COMMON Shares Cost Value
STOCKS: ------- ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS -- 102.26%
CAPITAL GOODS -- 29.87%
Aerospace & Defense -- 3.25%
General Dynamics Corp. ....................... 43,900 $ 2,239,723 $ 2,573,637
United Technologies Corp. .................... 27,560 1,789,529 2,997,150
------------ ------------
4,029,252 5,570,787
Communication Equipment -- 5.44%
Motorola Inc.................................. 57,000 3,467,270 3,480,562
Tellabs Inc.*................................. 85,200 3,837,324 5,841,525
------------ ------------
7,304,594 9,322,087
Computers (Hardware) -- 5.87%
Apple Computer Inc.*.......................... 50,600 1,921,085 2,071,438
Compaq Computer Corp. ........................ 86,500 2,745,150 3,627,594
IBM Corp. .................................... 23,600 3,147,720 4,360,100
------------ ------------
7,813,955 10,059,132
Computer Software & Services -- 8.09%
Adobe Systems Inc............................. 37,600 1,753,578 1,757,800
NOVELL Inc.*.................................. 193,400 2,682,679 3,505,375
3Com Corp.*................................... 37,200 1,783,621 1,667,025
Unisys Corp.*................................. 201,900 3,246,629 6,952,931
------------ ------------
9,466,507 13,883,131
Computers (Peripherals) -- 1.43%
Seagate Technology Inc.*...................... 81,200 2,197,817 2,456,300
Electronics -- Semiconductors -- .81%
Advanced Micro Devices Inc.*.................. 48,000 1,416,542 1,389,000
Machinery -- Diversified -- 2.24%
Ingersoll--Rand Co............................ 82,000 3,458,861 3,848,875
Manufacturing -- Diversified -- 2.74%
Tyco International Ltd........................ 62,300 3,640,902 4,699,756
------------ ------------
TOTAL CAPITAL GOODS......................... 39,328,430 51,229,068
------------ ------------
CONSUMER CYCLICAL -- 10.80%
Entertainment -- 3.50%
Carnival Corp................................. 124,920 2,456,738 5,996,160
</TABLE>
<TABLE>
<CAPTION>
Market
COMMON Shares Cost Value
STOCKS: ------- ------------ ------------
<S> <C> <C> <C>
Leisure -- 1.85%
Harley-Davidson Inc. ......................... 67,000 $ 2,287,530 $ 3,174,125
Retail Stores -- General Merchandise
Chains -- 5.45%
Dayton Hudson Corp. .......................... 111,300 2,367,495 6,038,025
Kmart Corp.*.................................. 215,900 3,061,389 3,305,969
------------ ------------
5,428,884 9,343,994
TOTAL CONSUMER CYCLICAL..................... 10,173,152 18,514,279
------------ ------------
CONSUMER STAPLES -- 25.17%
Distributors (Food & Health) -- 2.48%
SUPERVALU Inc. ............................... 151,800 2,546,789 4,250,400
Drugs -- Major Pharmaceuticals -- 5.89%
McKesson Corp. ............................... 62,900 2,732,085 4,973,031
Schering-Plough Corp. ........................ 92,760 1,701,501 5,124,990
------------ ------------
4,433,586 10,098,021
Healthcare Diversified -- 4.59%
Allergan Inc.................................. 17,200 863,579 1,113,700
Bristol-Myers Squibb Co....................... 38,740 2,098,931 5,183,896
Mylan Laboratories Inc........................ 49,800 1,395,137 1,568,700
------------ ------------
4,357,647 7,866,296
Medical Products & Supplies -- 2.77%
Becton Dickinson & Co......................... 111,500 2,406,903 4,759,656
Retail Stores -- Drug Stores -- 5.57%
CVS Corp...................................... 63,800 1,604,376 3,509,000
Longs Drug Stores Corp. ...................... 25,300 872,732 948,750
Rite Aid Corp................................. 102,800 2,161,142 5,095,025
------------ ------------
4,638,250 9,552,775
Retail Stores -- Food -- 3.87%
Food Lion Inc.--Class A....................... 259,700 2,363,926 2,759,313
Kroger Co.*................................... 64,100 3,215,828 3,878,050
------------ ------------
5,579,754 6,637,363
TOTAL CONSUMER STAPLES...................... 23,962,929 43,164,511
------------ ------------
</TABLE>
<PAGE>
BLUE CHIP VALUE FUND, INC. SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Market
COMMON Shares Cost Value
STOCKS: ------ ------------ ------------
<S> <C> <C> <C>
CREDIT SENSITIVE -- 28.72%
Electric Companies -- 5.84%
DTE Energy Co.................................. 93,800 $ 3,860,817 $ 4,021,675
Edison International........................... 95,930 2,026,375 2,674,049
GPU Inc........................................ 75,270 2,327,841 3,325,993
------------ ------------
8,215,033 10,021,717
Finance -- 1.82%
CIT Group Inc.--Class A........................ 42,900 1,348,373 1,364,756
Household International Inc. .................. 44,300 1,767,171 1,755,387
------------ ------------
3,115,544 3,120,143
Financial Diversified -- 2.10%
Equitable Companies Inc. ...................... 62,100 4,036,891 3,594,038
Major Regional Banking -- 4.99%
Comerica Inc................................... 60,500 4,040,991 4,125,344
First Union Corp............................... 72,860 2,534,053 4,430,799
------------ ------------
6,575,044 8,556,143
Savings & Loan -- 2.06%
Golden West Financial Corp. ................... 38,500 3,305,145 3,529,969
Telecommunications -- 4.52%
AT&T Corp. .................................... 45,800 3,376,862 3,446,450
Sprint Corp. .................................. 51,200 1,848,962 4,307,200
------------ ------------
5,225,824 7,753,650
Telephone -- 7.39%
ALLTEL Corp. .................................. 90,600 4,139,415 5,419,013
Bellsouth Corp................................. 92,800 3,293,281 4,628,400
US West Inc. .................................. 40,800 2,202,975 2,636,700
------------ ------------
9,635,671 12,684,113
TOTAL CREDIT SENSITIVE....................... 40,109,152 49,259,773
------------ ------------
INTERMEDIATE GOODS &
SERVICES -- 7.70%
Containers -- Metal/Glass -- .79%
Ball Corp...................................... 29,700 1,348,832 1,358,775
Oil (Integrated -- Domestic) -- 1.01%
Tosco Corp..................................... 66,900 1,770,870 1,731,037
Oil (Integrated -- International) -- 1.82%
Texaco, Inc. .................................. 59,100 2,799,106 3,124,912
<CAPTION>
Market
COMMON Shares Cost Value
STOCKS: ------ ------------ ------------
<S> <C> <C> <C>
Service (Comm'l & Consumer) -- 2.40%
Dun & Bradstreet Corp......................... 43,000 $ 1,306,959 $ 1,357,188
Hertz Corp.--Class A.......................... 60,600 2,402,074 2,764,875
------------ ------------
3,709,033 4,122,063
Waste Management -- 1.68%
Waste Management Inc. ........................ 61,800 2,854,566 2,881,425
------------ ------------
TOTAL INTERMEDIATE GOODS AND SERVICES....... 12,482,407 13,218,212
------------ ------------
TOTAL COMMON STOCKS......................... 126,056,070 175,385,843
------------ ------------
SHORT-TERM INVESTMENTS -- 3.82%
Dreyfus Cash Management Fund.................. 6,561,024 6,561,024
------------ ------------
TOTAL INVESTMENTS --106.08%................. $132,617,094 181,946,867
============
Liabilities in excess of Cash and Other
Assets -- (6.08%)............................ (10,435,015)
------------
NET ASSETS --100.00%........................ $171,511,852
============
</TABLE>
* Denotes non-income producing security.
<PAGE>
BLUE CHIP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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.
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 $114,153,344 and
$114,310,476, respectively, for the period. At December 31, 1998, gross
unrealized appreciation of investments was $49,968,381 and gross unrealized
depreciation of investments was $638,608.
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 directors 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. CAPITAL TRANSACTIONS
In 1998, the Fund announced a rights offering to existing stockholders. The
Fund issued one right to purchase an additional share of the Fund for each
eight shares owned as of August 14, 1998. The subscription period began August
19, 1998 and extended through 5:00 p.m., Eastern Time, October 1, 1998. The
price of the shares issued was $8.31, which represented 95% of the closing
price of the Fund's common stock of $8.75 on October 2, 1998, the pricing date
of the offering. The Fund's net asset value on October 2, 1998 was $8.93.
There were 2,035,723 shares issued in the rights offering for proceeds, net of
offering expenses, of $16,774,380.
<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 Adviser
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, LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
www.chasemellon.com
NYSE Symbol--BLU
[Blue Chip Value Fund Logo appears here]
www.blu.com
