Prepared by E-Services - www.edgar2.com

 

 

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-5003

 

 

Blue Chip Value Fund, Inc.

 (Exact name of registrant as specified in charter)

 

 

1225 17th Street, 26th Floor, Denver, Colorado 80202

 (Address of principal executive offices) (Zip code)

 

 

Michael P. Malloy
Drinker Biddle & Reath LLP

One Logan Square

Suite 2000

Philadelphia, Pennsylvania 19103-6996

 (Name and address of agent for service)

 

 

Registrant’s Telephone Number, including Area Code: (800) 624-4190

 

 

Date of fiscal year end: December 31

 

 

Date of reporting period: June 30, 2010

 

 

 

 


 


 

 

 

 

 

 

Item 1. Reports to Stockholders.

 

The following is a copy of the report to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).

 

 

 

 

 

 

 

 


 


 

 

 

 

 

 

 

 

Semi- Annual Report

to Stockholders

 

 

 

 

June 30, 2010

 

 

 


 


TABLE OF CONTENTS
     
Investment Adviser’s Commentary 2  
Sector Diversification Chart 4  
Average Annual Total Returns 4  
Change in Investment of $10,000 5  
Performance History 6  
Historical Sources of Distributions 7  
Dividend Reinvestment and Cash Purchase Plan 8  
Board Considerations Relating to the Advisory Contract Renewal 9  
Other Important Information 11  
Statement of Investments 12  
Country Breakdown 15  
Statement of Assets and Liabilities 16  
Statement of Operations 17  
Statements of Changes in Net Assets 18  
Statement of Cash Flows 19  
Financial Highlights 20  
Notes to Financial Statements 22  

 

 

1-800-624-4190 • www.blu.com

1

 


 


INVESTMENT ADVISER’S COMMENTARY

Dear Fellow Stockholders:

August 4, 2010

     The first half of 2010 proved to be challenging with most equity indexes suffering declines. Blue Chip Value Fund’s net asset value decline was a disappointing –11.44%, compared to its benchmark, the S&P 500 Index which declined –6.65%.

     Previously, we have written about the length of the low-quality, low share-price “junk” rally that began in March 2009 and the fact that it was getting “long in the tooth” by historical standards. The duration of such rallies has typically been 10 months. During the second quarter, this rally came to an end and the market began to reward companies with better fundamentals. Early in that process the Fund’s performance relative to the benchmark began to improve. However, as economic indicators peaked and the recovery appeared to be slowing, the Fund’s significant exposure to economically sensitive companies led it to underperform. As a result, we shifted the portfolio towards less economically sensitive companies during the second quarter.

     We believe that there will be slow economic recovery and modest job growth through 2011, most likely due to uncertainties in Europe, risks from state and local budget deficits and strained consumer confidence. With these uncertainties in mind, management reduced the Fund’s borrowing under its line of credit by 10% during the first quarter and a further reduction of 20% was made during the second quarter. The entire borrowing was repaid shortly after quarter-end as a part of management’s risk reduction efforts. The line of credit remains open and the Fund may borrow pursuant to the line in the future in accordance with its investment objective and policies.

     Fund holding Qualcomm Inc. a designer, manufacturer and marketer of digital wireless telecommunications in the communications sector, continued to struggle in the first half of 2010. A large amount of Qualcomm’s cash flow comes from royalty payments that are calculated as a percentage of a phone’s realized price. This company has not grown as fast as projected this year as a result of phone providers selling phones for lower than expected prices to end users. We believe that the diffusion of 3G technology around the globe, which drives higher priced smart phone usage, together with an improving economy over time, should help Qualcomm’s business.

     Symantec, a security software company in the technology sector, underperformed during the semi-annual period. Symantec is a company that, we believe, investors are currently undervaluing, even though management is focusing on creating shareholder value through measured growth, a strong focus on profits and cash flow, and a share repurchase plan at attractive prices.

     Symantec and Qualcomm were among the stocks that contributed to the technology and communications sectors being the Fund’s worst performing sectors relative to the Fund’s benchmark, the S&P 500 Index during the semi-annual period.

 

2

Semi-Annual Report June 30, 2010

     


 


 

       SunTrust Banks was among the best performing stocks in the portfolio during the semi-annual period. Evidence of economic and property value stability in the first quarter allowed SunTrust to finish up nearly 15% for the first half of 2010. We believe SunTrust has an excellent banking franchise in the southeast that should become increasingly profitable as property values stabilize. However, with conflicting evidence regarding the economic recovery, the position was sold subsequent to quarter end and was replaced with securities we believe are less sensitive to property price volatility.

     Campbell Soup Co. was also up for the semi-annual period, helping consumer staples to outperform the index on a relative basis. Merchandising improvements and increasing demand given the economic environment, continued to drive improving results at the company.

     As noted above, investors have become increasingly skeptical of the U.S./global recovery as a number of economic indicators have flashed caution signals. Challenges remain, among them: car and housing sales have contracted after government stimulus programs expired; job creation remains anemic; and persistently high unemployment rates continue to point to a consumer that cannot be expected to be the engine driving strong GDP growth. While we believe recent slowdown concerns may prove to be a typical correction from both a market and economic standpoint, we are monitoring the situation closely. We continue to believe that over the next year, companies with strong fundamentals should be rewarded by investors.

     As always, we want to thank our shareholders for their continued support in these volatile market conditions.

Sincerely,
Todger Anderson, CFA
President, Blue Chip Value Fund, Inc.
Chairman, Denver Investment Advisors LLC

 

     

      The Investment Adviser’s Commentary included in this report contains certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

 

 

1-800-624-4190 • www.blu.com

3

 


 


Sector Diversification in Comparison to
S&P 500 as of June 30, 2010*

 

Fund

S&P 500

Basic Materials

6.6%

2.9%

Capital Goods

4.5%

7.5%

Commercial Services

4.8%

2.4%

Communications

8.2%

7.2%

Consumer Cyclical

12.9%

13.0%

Consumer Staples

7.0%

10.5%

Energy

10.6%

9.9%

Interest Rate Sensitive

12.6%

15.5%

Medical/Healthcare

10.7%

11.4%

REITs

0.0%

1.3%

Technology

15.1%

12.9%

Transportation

3.7%

1.8%

Utilities

3.1%

3.7%

Short-Term Investments

0.2%

0.0%

*Sector diversification percentages are based on the Fund’s total investments at market value. Sector diversification is subject to change and may not be representative of future investments.

 

 

      Average Annual Total Returns
         as of June 30, 2010

Return

6 Mos.

1-Year

3-Year

5-Year

10-Year

Blue Chip Value Fund – NAV

 (11.44%)

8.12%

(11.44%)

(2.11%)

0.29%

Blue Chip Value Fund –
     Market Price

(9.84%)

13.15%

(16.84%)

 (7.57%)

 (1.33%)

S&P 500 Index

(6.65%)

14.43%

 (9.81%)

 (0.79%)

(1.59%)


Past performance is no guarantee of future results. Share prices will fluctuate, so that a share may be worth more or less than its original cost when sold. 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 fullysubscribed under the terms of the rights offering. Please note that the Fund’s total return shown above does not reflect the deduction of taxes that a stockholder would pay on Fund distributions or the cost of sale of Fund shares. Current performance may be higher or lower than the total return shown above. Please visit our website at www.blu.com to obtain the most recent month end returns. 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. The Fund’s annualized gross expense ratio for the six months ended June 30, 2010 was 1.26%.

 

4

Semi-Annual Report June 30, 2010

 


 


 

 

Comparison of Change in Value of $10,000 Investment in
Blue Chip Value Fund versus the S&P 500 Index

     This chart compares the change in market price and net asset value of an investment of $10,000 in the Fund since January 1, 2000, compared to the S&P 500 Index. The comparison assumes the reinvestment of all distributions and full participation in any “rights offerings” during the period.

Please Note: Performance calculations are as of the end of December each year and the current period end. Past performance is not indicative of future results. This chart assumes an investment of $10,000 on 1/1/2000. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. It is an unmanaged index.

Please see Average Annual Total Return information and disclosures on page 4.

 

 

1-800-624-4190 • www.blu.com

5

 


 


 

History of Market Price and Net Asset Value
January 1, 2000 through June 30, 2010


     This chart shows the change in the Fund’s market price and net asset value on a per share basis since January 1, 2000, along with the annual distribution totals.

Please Note: line graph points are as of the end of each calendar quarter.

Past performance is no guarantee of future results. Share prices will fluctuate, so that a share may be worth more or less than its original cost when sold.

1Reflects the actual market price of one share as it has traded on the NYSE.

2Reflects the actual NAV of one share.

3The graph above includes the distribution totals on a book basis since January 1, 2000, which equal $5.48 per share. The NAV per share is reduced by the amount of the distribution on the ex-dividend date. The sources of these distributions are depicted in the chart on the next page.

 

 

 

 

6

Semi-Annual Report June 30, 2010

 


 


 

 

Historical Sources of Distributions
January 1, 2000 through June 30, 2010
 

         

Total        

Total       

 
   

Net        

   

Amount of    

Amount of   

 
   

Investment  

Capital     

Return of    

Distribution  

Distribution 

 
 

   Year

Income    

Gains       

Capital      

(Tax Basis)  

(Book Basis)

 
 

2000

$0.053000

$0.837000

$0.000000

 

$0.89

 

$0.89

 
 

2001

$0.041200

$0.362500

$0.336300

 

$0.74

 

$0.74

 
 

2002

$0.035100

$0.000000

$0.524900

 

$0.56

 

$0.56

 
 

2003

$0.013600

$0.000000

$0.496400

 

$0.51

 

$0.51

 
 

2004

$0.028300

$0.531700

$0.000000

 

$0.56

 

$0.56

 
 

2005

$0.015000

$0.112800

$0.442200

 

$0.57

 

$0.57

 
 

2006

$0.018200

$0.126000

$0.435800

 

$0.58

 

$0.58

 
 

2007

$0.014600

$0.211800

$0.213600

 

$0.44

 

$0.58

 
 

2008

$0.018000

$0.007300

$0.464700

 

$0.49

 

$0.42

 
 

2009

$0.016294

$0.000000

$0.123706

 

$0.14

 

$0.07

 
 

Totals

$0.253294

$2.189100

$3.037606

 

$5.48

 

$5.48

 
                   
 

% of Total

               
 

Distribution

4.62%

39.95%

55.43%

100%

     

 

1-800-624-4190 • www.blu.com

7

 


 


 

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

     The Blue Chip Value Fund Inc.’s (the “Fund”) Dividend Reinvestment and Cash Purchase Plan (the “Plan”) offers stockholders the opportunity to reinvest the Fund’s dividends and distributions in additional shares of the Fund. A stockholder may also make additional cash investments under the Plan.

     Participating stockholders will receive additional shares issued at a price equal to the net asset value per share as of the close of the New York Stock Exchange on the record date (“Net Asset Value”), unless at such time the Net Asset Value is higher than the market price of the Fund’s common stock plus brokerage commission. In this case the Fund, through BNY Mellon Shareowner Services, (the “Plan Administrator”) will attempt, generally over the next 10 business days (the “Trading Period”), to acquire shares of the Fund’s common stock in the open market at a price plus brokerage commission which is less than the Net Asset Value. In the event that prior to the time such acquisition is completed, the market price of such common stock plus commission equals or exceeds the Net Asset Value, or in the event that such market purchases are unable to be completed by the end of the Trading Period, then the balance of the distribution shall be completed by issuing additional shares at Net Asset Value. The reinvestment price is then determined by the weighted average price per share, including trading fees, of the shares issued by the Fund and/or acquired by the Plan Administrator in connection with that transaction.

     Participating stockholders may also make additional cash investments (minimum $50 and maximum $10,000 per month) to acquire additional shares of the Fund. Please note, however, that these additional shares will be purchased at market value plus brokerage commission (without regard to net asset value) per share. The transaction price of shares and fractional shares acquired on the open market for each participant’s account in connection with the Plan shall be determined by the weighted average price per share, including trading fees, of the shares acquired by the Plan Administrator in connection with that transaction.

     A registered stockholder may join the Plan by completing an Enrollment Form from the Plan Administrator. The Plan Administrator will hold the shares acquired through the Plan in book-entry form, unless you request share certificates. If your shares are registered with a broker, you may still be able to participate in the Fund’s Dividend Reinvestment and Cash Purchase Plan. Please contact your broker about how to reregister your shares through the Direct Registration System and to inquire if there are any fees which may be charged by the broker to your account.

     The automatic 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, even though the stockholder does not receive the cash.

 

8

Semi-Annual Report June 30, 2010

 


 


 

     A stockholder may elect to withdraw from the Plan at any time on 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 in the future. In addition, you may request the Plan Administrator to sell all or a portion of your shares. When your shares are sold, you will receive the proceeds less a service charge of $15.00 and trading fees of $0.02 per share. The Plan Administrator will generally sell your shares on the day your request is received in good order, however the Plan Administrator reserves the right to take up to 5 business days to sell your shares. Shares will be aggregated by the Plan Administrator with the shares of other participants selling their shares that day and sold on the open market. A participant will receive the weighted average price minus trading fees and service charges of all liquidated shares sold by the Plan Administrator on the transaction date.

     The Fund may amend the Plan at any time upon 30-days prior notice to participants.

     Additional information about the Plan may be obtained from the Plan Administrator by writing to BNY Mellon Shareowner Services, 480 Washington Blvd., Jersey City, NJ 07310, by telephone at (800) 624-4190 (option #1) or by visiting the Plan Administrator at www.bnymellon.com/shareowner.

BLUE CHIP VALUE FUND BOARD CONSIDERATIONS RELATING TO THE ADVISORY CONTRACT RENEWAL

     The Board of Directors of the Fund decided on February 10, 2010 whether to renew the Advisory Agreement with Denver Investments (the “Agreement”). Prior to making its determination, the Board received detailed information from Denver Investments, including, among other things, information provided by an independent rating and ranking organization and Denver Investments comparing the performance, advisory fee and other expenses of the Fund to that of relevant peer groups identified by the organization and the Fund’s benchmark and information responsive to requests by the Fund’s independent counsel for certain information to assist the Board in its considerations, including Denver Investments’ Form ADV. In addition, the Board reviewed a memorandum from its independent counsel detailing the Board’s duties and responsibilities in considering renewal of the Agreement.

     In reaching its decision to renew the Agreement, the Board, including a majority of the Directors who are not interested persons under the Investment Company Act of 1940 (the “Independent Directors”), considered, among other things: (i) the nature, extent and quality of Denver Investments’ services provided to the Fund, Denver Investments’ compliance culture and resources committed to its compliance program; (ii) the experience and qualifications of the portfolio management team; (iii) Denver Investments’ investment philosophy and process; (iv) Denver Investments’ assets under management and client descriptions; (v) Denver Investments’ brokerage and

 

1-800-624-4190 • www.blu.com

9

 


 


 

 

soft dollar commission reports; (vi) current advisory fee arrangement with the Fund and Denver Investments’ other similarly managed mutual fund client, noting that Denver Investments did not provide advisory fee information on its other separate account clients, because those clients are not managed similarly to the Fund’s large cap value style; (vii) independent rating and ranking organization information comparing the Fund’s performance, advisory fee and other expenses to those of comparable funds; (viii) information provided by Denver Investments on the Fund’s performance in relation to its benchmark index and Denver Investments’ other similarly managed mutual fund client and composite large-cap core performance; (ix) Denver Investments’ financial statements, Form ADV, profitability analysis related to providing advisory and administrative services to the Fund; (x) the level of Denver Investments’ insurance coverage; (xi) compensation and possible benefits to Denver Investments and its affiliates arising from their advisory, administrative and other relationships with the Fund; and (xii) the extent to which economies of scale are relevant to the Fund.

     During the course of its deliberations, the Board, including a majority of Independent Directors, reached the following conclusions, among others, regarding Denver Investments and the Agreement: that Denver Investments had the capabilities, resources and personnel necessary to manage the Fund; that the performance of the Fund as of December 31, 2009 over the previous 1, 3, 5 and 10 year periods was competitive with that of its peer groups, benchmark index and Denver Investments’ other similarly managed mutual fund client and composite large-cap core performance; the advisory fee is competitive with that of its peer groups, consistent with Denver Investments’ other similarly managed mutual fund client and is fair and reasonable; that the combined advisory and co-administration fee payable to Denver Investments is also competitive with that of its peer group; the Fund’s expense ratio, without interest expense from the line of credit, is favorable compared to the peer group averages. The Board determined that it was reasonable to factor out the interest expense on the Fund’s expenses and performance to those of the peer group because none of these funds incur interest expense. The Board also concluded that the expected profit to Denver Investments for advisory and administrative services seemed reasonable based on the data Denver Investments provided; that the benefits derived by Denver Investments from managing the Fund, including how Denver Investments uses soft-dollars, and the ways in which it conducts portfolio transactions for the Fund and selects brokers are reasonable; and that the breakpoints in the advisory and administrative fees payable to Denver Investments allow shareholders to benefit from economies of scale as the Fund’s asset level increases.

     Based on the factors considered, the Board, including a majority of the Independent Directors, concluded that it was appropriate to renew the Agreement.

 

 

10

Semi-Annual Report June 30, 2010

 


 


 

OTHER IMPORTANT INFORMATION

     Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock on the open market.

How to Obtain a Copy of the Fund’s Proxy Voting Policies and Records

     A description of the policies and procedures that are used by the Fund’s investment adviser to vote proxies relating to the Fund’s portfolio securities is available (1) without charge, upon request, by calling (800) 624-4190; (2) on the Fund’s website at www.blu.com and (3) on the Fund’s Form N-CSR which is available on the U.S. Securities and Exchange Commission (“SEC”) website at www.sec.gov.

     Information regarding how the Fund’s investment adviser voted proxies relating to the Fund’s portfolio securities during the most recent 12-month period ended June 30 is available, (1) without charge, upon request by calling (800) 624-4190; (2) on the Fund’s website at www.blu.com and (3) on the SEC website at www.sec.gov.

Quarterly Portfolio Holdings

     The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, the Fund’s complete schedule of portfolio holdings for the first and third quarters of each fiscal year is available on the Fund’s website at www.blu.com.

Send Us Your E-mail Address

     If you would like to receive monthly portfolio composition and characteristic updates, press releases and financial reports electronically as soon as they are available, please send an e-mail to blu@denvest.com and include your name and e-mail address. You will still receive paper copies of any required communications and reports in the mail. This service is completely voluntary and you can cancel at any time by contacting us via e-mail at blu@denvest.com or toll-free at 1-800-624-4190.

 

1-800-624-4190 • www.blu.com

11

 


 


 

BLUE CHIP VALUE FUND, INC.

               
                 

STATEMENT OF INVESTMENTS

             

June 30, 2010 (Unaudited)

               
         

Market

 
 

Shares

 

Cost

 

Value

 

COMMON STOCKS – 108.45%

               

BASIC MATERIALS – 6.26%

               

Chemicals – 1.08%

               

Ecolab Inc.

22,900

 

$

1,039,252

 

$

1,028,439

 
                 

Forestry & Paper – 5.18%

               

Ball Corp.

41,940

   

2,200,539

   

2,215,690

 

International Paper Co.

118,900

   

2,791,000

   

2,690,707

 
       

4,991,539

   

4,906,397

 

TOTAL BASIC MATERIALS

     

6,030,791

   

5,934,836

 
                 

CAPITAL GOODS – 5.10%

               

Aerospace & Defense – 2.95%

               

General Dynamics Corp.

22,100

   

1,444,761

   

1,294,176

 

Raytheon Co.

31,000

   

1,465,509

   

1,500,090

 
       

2,910,270

   

2,794,266

 

Industrial Products – 2.15%

               

ITT Corp.

45,500

   

2,500,494

   

2,043,860

 

TOTAL CAPITAL GOODS

     

5,410,764

   

4,838,126

 
                 

COMMERCIAL SERVICES – 5.22%

               

Business Products & Services – 2.46%

               

Quanta Services Inc.**

113,000

   

3,475,189

   

2,333,450

 

IT Services – 1.48%

               

Computer Sciences Corp.

31,050

   

1,630,333

   

1,405,012

 

Transaction Processing – 1.28%

               

The Western Union Co.

81,000

   

1,341,107

   

1,207,710

 

TOTAL COMMERCIAL SERVICES

     

6,446,629

   

4,946,172

 
                 

COMMUNICATIONS – 6.36%

               

Networking – 2.04%

               

Cisco Systems Inc.**

90,600

   

2,171,026

   

1,930,686

 

Telecomm Equipment & Solutions – 4.32%

             

QUALCOMM Inc.

71,800

   

3,242,660

   

2,357,912

 

Research In Motion Ltd.**

35,300

   

2,171,448

   

1,738,878

 
       

5,414,108

   

4,096,790

 

TOTAL COMMUNICATIONS

     

7,585,134

   

6,027,476

 
                 

CONSUMER CYCLICAL – 11.66%

               

Apparel & Footwear Manufacturers – 3.83%

             

Nike Inc. – Class B

31,150

   

1,956,597

   

2,104,183

 

VF Corp.

21,500

   

1,644,371

   

1,530,370

 
       

3,600,968

   

3,634,553

 

 

12

Semi-Annual Report June 30, 2010

 


 


 

 

STATEMENT OF INVESTMENTS (cont’d.)

         
         

Market

 
 

Shares

 

Cost

 

Value

 

Department Stores – 2.53%

               

Macy’s Inc.

133,700

 

$

2,378,598

 

$

2,393,230

 

Other Consumer Services – 1.67%

               

Expedia Inc.

84,100

   

2,127,898

   

1,579,398

 

Restaurants – 1.18%

               

Darden Restaurants Inc.

28,840

   

904,420

   

1,120,434

 

Specialty Retail – 2.45%

               

Best Buy Co. Inc.

68,600

   

2,706,816

   

2,322,796

 

TOTAL CONSUMER CYCLICAL

     

11,718,700

   

11,050,411

 
                 

CONSUMER STAPLES – 8.26%

               

Consumer Products – 3.02%

               

Colgate Palmolive Co.

36,400

   

2,894,135

   

2,866,864

 

Food & Agricultural Products – 5.24%

               

Campbell Soup Co.

67,900

   

2,476,554

   

2,432,857

 

Unilever N.V. (Netherlands)

92,700

   

3,284,852

   

2,532,564

 
       

5,761,406

   

4,965,421

 

TOTAL CONSUMER STAPLES

     

8,655,541

   

7,832,285

 
                 

ENERGY – 10.52%

               

Exploration & Production – 3.76%

               

Occidental Petroleum Corp.

46,180

   

3,199,115

   

3,562,787

 

Integrated Oils – 4.65%

               

Exxon Mobil Corp.

25,500

   

1,852,956

   

1,455,285

 

Marathon Oil Corp.

94,800

   

3,366,930

   

2,947,332

 
       

5,219,886

   

4,402,617

 

Oil Services – 2.11%

               

Ensco PLC

26,200

   

1,238,471

   

1,029,136

 

Noble Corp.**

31,500

   

1,244,622

   

973,665

 
       

2,483,093

   

2,002,801

 

TOTAL ENERGY

     

10,902,094

   

9,968,205

 
               

INTEREST RATE SENSITIVE – 14.62%

             

Money Center Banks – 5.57%

               

Bank of America Corp.

221,900

   

3,660,624

   

3,188,703

 

JPMorgan Chase & Co.

57,200

   

2,479,199

   

2,094,092

 
       

6,139,823

   

5,282,795

 

Property Casualty Insurance – 3.50%

               

ACE Ltd. (Switzerland)

38,700

   

2,109,636

   

1,992,276

 

The Travelers Cos. Inc.

26,900

   

1,295,715

   

1,324,825

 
       

3,405,351

   

3,317,101

 

 

1-800-624-4190 • www.blu.com

13

 


 


 

STATEMENT OF INVESTMENTS (cont’d.)

         
         

Market

 
 

Shares

 

Cost

 

Value

 

Regional Banks – 2.31%

               

Comerica Inc.

32,200

 

$

1,138,099

 

$

1,185,926

 

SunTrust Banks Inc.

42,900

   

895,276

   

999,570

 
       

2,033,375

   

2,185,496

 

Securities & Asset Management – 3.24%

               

The Bank of New York Mellon Corp.

71,400

   

2,205,946

   

1,762,866

 

The Goldman Sachs Group Inc.

10,000

   

1,376,179

   

1,312,700

 
       

3,582,125

   

3,075,566

 

TOTAL INTEREST RATE SENSITIVE

     

15,160,674

   

13,860,958

 
                 

MEDICAL & HEALTHCARE – 13.08%

               

Medical Technology – 2.79%

               

Zimmer Holdings Inc.**

49,000

   

3,345,140

   

2,648,450

 

Pharmaceuticals – 10.29%

               

Abbott Laboratories

53,000

   

2,802,905

   

2,479,340

 

Amgen Inc.**

54,500

   

3,254,315

   

2,866,700

 

Forest Laboratories Inc.**

80,000

   

2,176,616

   

2,194,400

 

Pfizer Inc.

154,868

   

2,774,241

   

2,208,418

 
       

11,008,077

   

9,748,858

 

TOTAL MEDICAL & HEALTHCARE

     

14,353,217

   

12,397,308

 
                 

TECHNOLOGY – 15.83%

               

Computer Software – 5.95%

               

Microsoft Corp.

134,200

   

3,626,075

   

3,087,942

 

Symantec Corp.**

184,200

   

3,261,616

   

2,556,696

 
       

6,887,691

   

5,644,638

 

PC’s & Servers – 6.63%

               

Dell Inc.**

190,500

   

2,801,439

   

2,297,430

 

International Business Machines Corp.

32,300

   

3,849,141

   

3,988,404

 
       

6,650,580

   

6,285,834

 

Semiconductors – 3.25%

               

Altera Corp.

61,900

   

1,229,760

   

1,535,739

 

Intel Corp.

79,200

   

1,488,976

   

1,540,440

 
       

2,718,736

   

3,076,179

 

TOTAL TECHNOLOGY

     

16,257,007

   

15,006,651

 
                 

TRANSPORTATION – 4.77%

               

Railroads – 4.77%

               

Norfolk Southern Corp.

49,800

   

2,622,314

   

2,641,890

 

Union Pacific Corp.

27,100

   

1,672,102

   

1,883,721

 
       

4,294,416

   

4,525,611

 

TOTAL TRANSPORTATION

     

4,294,416

   

4,525,611

 

 

14

Semi-Annual Report June 30, 2010

 


 


 

STATEMENT OF INVESTMENTS (cont’d.)

       
       

Market

 

Shares

   

Cost

 

Value

UTILITIES – 6.77%

       

     

   

Independent Power – 2.40%

             

Exelon Corp.

28,200 

 

$

1,077,082

 

$

1,070,754 

Public Service Enterprise Group Inc.

38,500 

   

1,244,282

   

1,206,205 

       

2,321,364

   

2,276,959 

Integrated Gas & Electric – 1.10%

             

Dominion Resources Inc.

27,000 

   

1,090,643

   

1,045,980 

Regulated Electric – 3.27%

             

Edison International

64,200 

   

2,046,266

   

2,036,424 

Entergy Corp.

14,800 

   

1,085,108

   

1,059,976 

       

3,131,374

   

3,096,400 

TOTAL UTILITIES

     

6,543,381

   

6,419,339 

TOTAL COMMON STOCKS

     

113,358,348

   

102,807,378 

               

SHORT TERM INVESTMENTS – 0.13%

             

Fidelity Institutional Money Market

             

      Government Portfolio - Class I(1)

             

      (7 Day Yield 0.04%)

126,416 

   

126,416

   

126,416 

TOTAL SHORT TERM INVESTMENTS

     

126,416

   

126,416 

               

TOTAL INVESTMENTS

108.58 

%

$

113,484,764

 

$

102,933,794 

Liabilities in Excess of Other Assets

(8.58)

%

       

(8,138,965)

NET ASSETS

100.00 

%

     

$

94,794,829 

**Non-dividend paying stock

             

(1)Investments in other funds are calculated at their respective net asset values or determined by those funds, in accordance with the Investment Company Act of 1940.

Sector and industry classifications presented herein are based on the sector and industry categorization methodology of the Investment Adviser to the Fund.

               

COUNTRY BREAKDOWN

             

As of June 30, 2010 (Unaudited)

             
     

Market

     

Country

   

Value

   

%

United States

 

$

98,408,954 

   

103.81% 

Netherlands

   

2,532,564 

   

2.67% 

Switzerland

   

1,992,276 

   

2.10% 

Total Investments

 

$

102,933,794 

   

108.58% 

Liabilities in Excess of Other Assets

   

(8,138,965)

   

(8.58%)

Net Assets

 

$

94,794,829 

   

100.00% 

               

Please note the country classification is based on the company headquarters. All of the Fund’s investments are traded on U.S. exchanges.

See accompanying notes to financial statements.

             

 

1-800-624-4190 • www.blu.com

15

 


 


 

BLUE CHIP VALUE FUND, INC.

   
     

STATEMENT OF ASSETS AND LIABILITIES

   

June 30, 2010 (Unaudited)

   
     

ASSETS

   

Investments at market value (cost $113,484,764)

$

102,933,794 

Receivable for securities sold

 

2,193,643 

Dividends and interest receivable

 

88,754 

Other assets

 

21,654 

   TOTAL ASSETS

 

105,237,845 

     

LIABILITIES

   

Loan payable to bank (Note 5)

 

8,210,000 

Interest due on loan payable to bank

 

10,468 

Payable for investment securities purchased

 

2,116,334 

Advisory fee payable

 

53,474 

Administration fee payable

 

7,651 

Accrued Compliance Officer fees

 

3,019 

Accrued expenses and other liabilities

 

42,070 

   TOTAL LIABILITIES

 

10,443,016 

NET ASSETS

$

94,794,829 

     

COMPOSITION OF NET ASSETS

   

Capital stock, at par

$

284,639 

Paid-in-capital

 

108,493,226 

Undistributed net investment income

 

216,402 

Accumulated net realized loss

 

(3,648,468)

Net unrealized depreciation on investments

 

(10,550,970)

NET ASSETS

$

94,794,829 

     

SHARES OF COMMON STOCK OUTSTANDING

   

   (100,000,000 shares authorized at $0.01 par value)

 

28,463,912 

     

Net asset value per share

$

3.33 

     
See accompanying notes to financial statements.    

 

16

Semi-Annual Report June 30, 2010

 


 


BLUE CHIP VALUE FUND, INC.

   
     

STATEMENT OF OPERATIONS

   

For the Six Months Ended June 30, 2010 (Unaudited)

   
     

INCOME

   

   Dividends (net of foreign withholding taxes of $16,825)

$

882,626

     

   Interest

 

82

     

      TOTAL INCOME

   

       

$

882,708 

           

EXPENSES

         

   Investment advisory fee (Note 4)

 

337,691

     

   Administrative services fee (Note 4)

 

47,759

     

   Interest on outstanding loan payable to bank

 

72,882

     

   Directors’ fees

 

42,997

     

   Legal fees

 

42,586

     

   Stockholder reporting

 

33,527

     

   Transfer agent fees

 

32,068

     

   Audit and tax fees

 

14,837

     

   NYSE listing fees

 

13,378

     

   Chief Compliance Officer fees

 

10,675

     

   Insurance and fidelity bond

 

10,601

     

   Custodian fees

 

4,760

     

   Other

 

2,545

     

      TOTAL EXPENSES

       

666,306 

      NET INVESTMENT INCOME

       

216,402 

REALIZED AND UNREALIZED LOSS

         

   ON INVESTMENTS

         

   Net realized loss on investments

       

(3,394,312)

   Change in net unrealized appreciation or

         

      depreciation of investments

       

(8,917,075)

      NET REALIZED AND UNREALIZED LOSS

         

         ON INVESTMENTS

       

(12,311,387)

      NET DECREASE IN NET ASSETS

         

         RESULTING FROM OPERATIONS

     

$

(12,094,985)

           
See accompanying notes to financial statements.          

 

1-800-624-4190 • www.blu.com

17

 


 


 

BLUE CHIP VALUE FUND, INC.

       
         

STATEMENTS OF CHANGES IN NET ASSETS

     
 

For the

 

For the

 
 

Six Months Ended

 

Year Ended

 
 

June 30, 2010

 

December 31,

 
 

(Unaudited)

 

2009

 

Increase/(decrease) in net assets

           

from operations:

   

    

     

Net investment income

$

216,402 

 

$

463,872 

 

Net realized gain/(loss) on investments

 

(3,394,312)

   

1,301,120 

 

Change in net unrealized appreciation

           

or depreciation of investments

 

(8,917,075)

   

24,839,041 

 
   

(12,094,985)

   

26,604,033 

 
             

Decrease in net assets from distributions

           

to stockholders from:

           

Net investment income

 

   

(463,872)

 

Tax return of capital

 

   

(1,529,359

 
   

   

(1,993,231)

 
             

NET INCREASE/(DECREASE) IN NET ASSETS

 

(12,094,985)

   

24,610,802 

 
             

NET ASSETS

           

Beginning of year

 

106,889,814 

   

82,279,012 

 

End of year (including undistributed net investment

           

income of $216,402 and $0, respectively)

$

94,794,829 

 

$

106,889,814 

 
             

See accompanying notes to financial statements.

           

 

18

Semi-Annual Report June 30, 2010

 


 


 

BLUE CHIP VALUE FUND, INC.

     
       

STATEMENT OF CASH FLOWS

     

For the Six Months Ended June 30, 2010 (Unaudited)

     

 

     

Cash Flows from Operating Activities

     

Net decrease in net assets from operations

$

(12,094,985)

 

Adjustments to reconcile net increase in net

     

   assets from operations to net cash provided

     

   by operating activities:

     

   Purchase of investment securities

 

(24,145,145)

 

   Proceeds from disposition of investment securities

 

27,039,748 

 

   Net sale of short-term investment securities

 

121,022 

 

   Proceeds from class-action litigation settlements

 

47,291 

 

   Net realized loss from securities investments

 

3,394,312 

 

   Net change in unrealized depreciation

     

      on investments

 

8,917,075 

 

   Increase in receivable for securities sold

 

(2,193,643)

 

   Decrease in dividends and interest receivable

 

77,919 

 

   Increase in other assets

 

(2,967)

 

   Increase in payable for securities purchased

 

2,116,334 

 

   Decrease in advisory fee payable

 

(4,403)

 

   Decrease in interest due on loan payable to bank

 

(1,815)

 

   Decrease in administrative fee payable

 

(531)

 

   Decrease in accrued Compliance Officer fees

 

(1,662)

 

   Decrease in other accrued expenses and payables

 

(13,550)

 

Net cash provided by operating activities

 

3,255,000 

 

 

     

Cash Flows from Financing Activities

     

Repayment of bank borrowing

 

(3,255,000)

 

Net cash used in financing activities

 

(3,255,000)

 

 

     

Net increase in cash

 

0

 

Cash, beginning balance

 

0

 

Cash, ending balance

 

0

 

 

     

Supplemental disclosure of cash flow information:

     

Cash paid during the period for interest from bank borrowing: $74,697.

     

 

     
See accompanying notes to financial statements.      

 

 

1-800-624-4190 • www.blu.com

19

 


 


 

BLUE CHIP VALUE FUND, INC.

 
   

FINANCIAL HIGHLIGHTS

 
 

Six Months

 

Ended

Per Share Data

June 30,

(for a share outstanding throughout each period)

2010 (Unaudited)

Net asset value – beginning of year

$

3.76 

 

Investment operations(1)

     

Net investment income

 

0.01 

 

Net gain/(loss) on investments

 

(0.44)

 

Total from investment operations

 

(0.43)

 

Distributions

     

From net investment income

 

 

From net realized gains on investments

 

 

Tax return of capital

 

 

Total distributions

 

 

      Net asset value, end of period

$

3.33 

 
       

      Per share market value, end of period

$

2.84 

 

Total investment return(2) based on:

     

      Market Value

 

(9.84

%)

      Net Asset Value

 

(11.44

%)

Ratios/Supplemental data:

     

Ratio of total expenses to average net assets(3)

 

1.26

%(4)

Ratio of net investment income to average net assets

 

0.41

%(4)

Ratio of total distributions to average net assets

 

0.00

%

Portfolio turnover rate(5)

 

21

%

Net assets – end of period (in thousands)

$

94,795

 

See accompanying notes to financial statements.
 

     

(1)Per share amounts calculated based on average shares outstanding during the period.
 

(2)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. Please note that the Fund’s total investment return does not reflect the deduction of taxes that a stockholder would pay on Fund distributions or the sale of Fund shares. 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.

 

20

Semi-Annual Report June 30, 2010

 


 


   

For the year ended December 31,

   
 

2009

   

2008

   

2007

   

2006

   

2005

 

$

2.89 

 

$

5.35 

 

$

5.73 

 

$

5.62 

 

$

5.76 

 
                             
 

0.02 

   

0.02 

   

0.01 

   

0.02 

   

0.01 

 
 

0.92 

   

(2.06)

   

0.19 

   

0.67 

   

0.42 

 
 

0.94 

   

(2.04)

   

0.20 

   

0.69 

   

0.43 

 
                             
 

(0.02)

   

(0.02)

   

(0.02)

   

(0.02)

   

(0.02)

 
 

   

(0.01)

   

(0.21)

   

(0.13)

   

(0.11)

 
 

(0.05)

   

(0.39)

   

(0.35)

   

(0.43)

   

(0.44)

 
 

(0.07)

   

(0.42)

   

(0.58)

   

(0.58)

   

(0.57)

 

$

3.76 

 

$

2.89 

 

$

5.35 

 

$

5.73 

   

5.62 

 

$

3.15 

 

$

2.35 

 

$

5.21 

 

$

5.96 

   

6.31 

 
                             
 

37.97

%

 

(49.27

%)

 

(3.3

%)

 

4.6

%

 

3.7

%

 

33.92

%

 

(39.25

%)

 

3.3

%

 

12.9

%

 

7.1

%

                             
 

1.37

%

 

1.38

%

 

1.34

%

 

1.36

%

 

1.33

%

 

0.51

%

 

0.41

%

 

0.25

%

 

0.32

%

 

0.21

%

 

2.21

%

 

9.51

%

 

10.04

%

 

10.25

%

 

10.13

%

 

86

%

 

51

%

 

40

%

 

37

%

 

41

%

$

106,890

 

$

82,279

 

$

152,091

 

$

160,663

 

$

155,208

 
                             
                             
   

(3)

For the six months ended June 30, 2010 and the years ended December 31, 2009, 2008, 2007, 2006, and 2005, the ratio of total expenses to average net assets excluding interest expense was 1.13%, 1.22%, 1.09%, 0.93%, 0.92% and 0.97%, respectively.
 

(4)

Annualized.
 

(5)

A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities (excluding short-term investments) for the year and dividing it by the monthly average of the market value of the portfolio securities during the year. Purchases and sales of investment securities (excluding short-term securities) for the six months ended June 30, 2010 were $24,145,145 and $27,039,748, respectively.

 

 

1-800-624-4190 • www.blu.com

21

 


 


BLUE CHIP VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS

June 30, 2010 (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 investment company.

     The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.

Security Valuation – All securities of the Fund are valued as of the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4:00 p.m. (Eastern Time), on each day that the NYSE is open. Listed securities are generally valued at the last sales price as of the close of regular trading on the NYSE. Securities traded on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) are generally valued at the NASDAQ Official Closing Price (“NOCP”). In the absence of sales and NOCP, such securities are valued at the mean of the bid and asked prices.

     Securities having a remaining maturity of 60 days or less are valued at amortized cost which approximates market value.

     When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued at fair value determined in good faith by or under the direction of the Board of Directors. Factors which may be considered when determining the fair value of a security include (a) the fundamental data relating to the investment; (b) an evaluation of the forces which influence the market in which the security is sold, including the liquidity and depth of the market; (c) the market value at date of purchase; (d) information as to any transactions or offers with respect to the security or comparable securities; and (e) any other relevant matters.

Investment Transactions – Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Realized gains and losses from investment transactions and unrealized appreciation and depreciation of investments are determined on the “specific identification” basis for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date. Interest income, which includes interest earned on money market funds, is accrued and recorded daily.

 

 

22

Semi-Annual Report June 30, 2010

 


 


 

Federal Income Taxes – No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code applicable to regulated investment companies.

     The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.

     Management of the Fund analyzes all open tax years, as defined by the Statute of Limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the fiscal year ended December 31, 2009, the Fund did not have a liability for any unrecognized tax benefits. The Fund files income tax returns in the U.S. federal jurisdiction and Colorado. For the years ended December 31, 2006 through December 31, 2009 for the federal jurisdiction and for the years ended December 31, 2005 through December 31, 2009, for Colorado, the Fund’s returns are still open to examination by the appropriate taxing authority.

Classification of Distributions to Shareholders – Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.

      The tax character of the distributions paid was as follows:

 

Six Months Ended

 

Year Ended

 

June 30,

 

December 31,

 

2010

 

2009

Distributions paid from:

         

Ordinary income

$

 

$

463,872

Long-term capital gain

 

   

Tax return of capital

 

 

$

3,521,833

Total

$

 

$

3,985,705

 

 

1-800-624-4190 • www.blu.com

23

 


 


 

     As of June 30, 2010, the components of distributable earnings on a tax basis were as follows:

Undistributed net investment income

$

216,402 

Accumulated net realized loss

 

(3,648,468)

Net unrealized depreciation

 

(10,550,970)

Total

$

(13,983,036)

     The difference, if any, between book basis and tax basis is typically attributable to the tax deferral of losses on wash sales, corporate actions and post October losses.

Distributions to Stockholders – Distributions to stockholders are recorded on the ex-dividend date.

     Prior to May 1, 2009, the Fund maintained a “managed distribution policy” (the “Policy”) which distributed at least 2.5% of its net asset value quarterly to its stockholders. The distributions were not related to the amount of the Fund’s net investment income or net realized capital gains or losses. If the Fund’s total distributions for a year exceeded the Fund’s “current and accumulated earnings and profits,” the excess was treated as non-taxable return of capital, reducing the stockholder’s adjusted basis in their shares.

     The Fund’s Policy was suspended, as approved by the Board of Directors, at the regular meeting held May 1, 2009. The Board took this action after considering a number of factors including, but not limited to, the outlook for the overall economy, an assessment of investment opportunities, the asset size and expense ratio of the Fund and the negative impact that the policy may have on the asset level and expense ratio. The Fund will continue to pay out any net investment income and net realized capital gains on an annual basis.

     The Board will continue to evaluate the Fund’s Policy and may reinstate the Policy at its discretion.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

 

24

Semi-Annual Report June 30, 2010

 


 


 

2. FAIR VALUE MEASUREMENTS

     A three-tier hierarchy has been established for fair value measurement based on the extent of use of “observable inputs” as compared to “unobservable inputs” for disclosure purposes and requires additional disclosures about these valuations measurements. Inputs refer broadly to the assumptions that market participants would use in pricing a security. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the security developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the security developed based on the best information available in the circumstances.

    The three-tier hierarchy is summarized as follows:

Level 1 – quoted and unadjusted prices in active markets for identical investments.

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

     The following is a summary of the inputs used as of June 30, 2010 in valuing the Fund’s assets:

Assets:

 

Level 2 –

   
     

Other

Level 3 –

   
   

Level 1 –

Significant

Significant

   

Investments in

 

Quoted

Observable

Unobservable

   

Securities at Value*

 

Prices

Inputs

Inputs

 

Total

Common Stocks

$

102,807,378

     $

     $

     $

102,807,378

Short Term Investments

 

126,416

 

 

 

126,416

Total

$

102,933,794

$

$

$

102,933,794

                 

*For detailed Industry descriptions, see the accompanying Statement of Investments.

     All securities of the Fund were valued using Level 1 inputs during the six months ended June 30, 2010. Thus a reconciliation of assets in which significant unobservable inputs (Level 3) were used is not applicable.

     The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

     In April 2009, the Financial Accounting Standards Board (“FASB”) issued “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value in accordance with Fair Value Measurements when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying

 

 

1-800-624-4190 • www.blu.com

25

 


 


 

circumstances that indicate a transaction is not orderly. Additionally, it amends the Fair Value Measurement Standard by expanding disclosure requirements for reporting entities surrounding the major categories of assets and liabilities carried at fair value. The required disclosures have been incorporated into the summary of inputs table above. Management expects the Fund’s investments to typically be classified as Level 1 and therefore applying this guidance did not have a material impact on the Fund’s financial statements.

3. UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS (TAX BASIS)

As of June 30, 2010:

   

Gross appreciation (excess of value over tax cost)

$

2,044,554 

Gross depreciation (excess of tax cost over value)

 

(12,595,524)

Net unrealized depreciation

$

(10,550,970)

Cost of investments for income tax purposes

$

113,484,764 

4. INVESTMENT ADVISORY AND ADMINISTRATION SERVICES

     The Fund has an Investment Advisory Agreement with Denver Investment Advisors LLC, also doing business as Denver Investments (“Denver Investments”), whereby an investment advisory fee is paid to Denver Investments based on an annual rate of 0.65% of the Fund’s average weekly net assets up to $100,000,000 and 0.50% of the Fund’s average weekly net assets in excess of $100,000,000. The management fee is paid monthly based on the average of the net assets of the Fund computed as of the last business day the New York Stock Exchange is open each week. Certain officers and a director of the Fund are also officers of Denver Investments.

     ALPS Fund Services, Inc. (“ALPS”) and Denver Investments serve as the Fund’s co-administrators. The Administrative Agreement includes the Fund’s administrative and fund accounting services. The administrative services fee is based on the current annual rate for ALPS and Denver Investments, respectively, of 0.0955% and 0.01% of the Fund’s average daily net assets up to $75,000,000, 0.05%, and 0.005% of the Fund’s average daily net assets between $75,000,000 and $125,000,000, and 0.03% and 0.005% of the Fund’s average daily net assets in excess of $125,000,000 plus certain out-of-pocket expenses. The administrative service fee is paid monthly.

     The Directors have appointed a Chief Compliance Officer who is also Treasurer of the Fund and an employee of Denver Investments. The Directors agreed that the Fund would reimburse Denver Investments a portion of his compensation for his services as the Fund’s Chief Compliance Officer.

 

26

Semi-Annual Report June 30, 2010

 


 


 

5. LOAN OUTSTANDING

     The Fund has a line of credit with The Bank of New York Mellon (“BONY”) in which the Fund may borrow up to the lesser of 15% of the Fund’s total assets, $15,000,000 or the maximum amount the Fund is permitted to borrow under the Investment Company Act of 1940. For the period January 1, 2010 through February 28, 2010 the interest rate reset daily at overnight Federal Funds Rate plus 1.00%. Effective March 1, 2010, the interest rate changed to overnight Federal Funds Rate plus 1.25% and the Fund pays an annual loan facility fee of 0.03%. The borrowings under the BONY loan are secured by a perfected security interest on all of the Fund’s assets.

      Details of the loan outstanding are as follows:

     

Average for the

 

As of

 

Six Months Ended

 

June 30,

 

June 30,

 

2010

 

2009

Loan outstanding

$

8,210,000

 

$

10,525,663

 

Interest rate

 

1.40%

*

 

1.28%

 

% of Fund’s total assets

 

7.80%

   

10.00%

 

Amount of debt per share outstanding

$

0.29

 

$

0.37

 

Number of shares outstanding (in thousands)

 

28,464

   

28,464

**

             

**Annualized

           

**Weighted average

           

6. NEW ACCOUNTING PRONOUNCEMENT

     In January 2010, FASB issued Accounting Standards Updated No. 2010-06, “Improving Disclosures About Fair Value Measurements” (“ASU”). The ASU requires enhanced disclosures about (1) transfers into and out of Levels 1 and 2 and (2) purchases, sales, issuances, and settlements on a gross basis relating to Level 3 measurements. The first disclosure is effective for the first reporting period (including interim periods) beginning after December 15, 2009, and the second disclosure will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The implementation of the first disclosure required by the ASU did not have a material effect on the Company’s financial disclosures contained in this Report. Management is currently evaluating the impact the adoption of the second disclosure of this ASU will have on the Fund’s financial statement disclosures.

7. RESULTS OF ANNUAL MEETING OF STOCKHOLDERS

     The Annual Meeting of Stockholders of the Fund (the “Annual Meeting”) was held May 4, 2010 pursuant to notice given to all stockholders of record at the close of business on Februray 26, 2010. At the Annual Meeting, stockholders were asked to approve the following:

 

 

1-800-624-4190 • www.blu.com

27

 


 


 

 

Proposal 1.

     To elect Todger Anderson as the Class I director to serve until the Annual Meeting in the year 2013. The number of shares voting for the election of Mr. Anderson was 18,942,920 and 1,969,898 votes were withheld.

Proposal 2.

     To ratify the appointment by the Board of Directors of Deloitte & Touche LLP as the Fund’s independent registered public accounting firm for its fiscal year ending December 31, 2010. The number of shares voting for Proposal 2 was 19,372,854, the number voting against was 1,403,192 and the number abstaining was 136,772.

8. SUBSEQUENT EVENT

     Subsequent to period end, the Fund repaid the outstanding balance of the loan described in Note 5. The line of credit remains open and the Fund may borrow pursuant to the line in the future in accordance with its investment objective and policies.

 

 

 

 

 

 

 

 

 

 

28

Semi-Annual Report June 30, 2010

     


 


 

BOARD OF DIRECTORS

Kenneth V. Penland, Chairman
Todger Anderson, Director
Lee W. Mather, Jr, Director
Richard C. Schulte, Director
Roberta M. Wilson, Director

OFFICERS

Kenneth V. Penland, Chairman
Todger Anderson, President
Mark M. Adelmann, Vice President
Nancy P. O’Hara, Secretary
Jasper R. Frontz,
Treasurer, Chief Compliance Officer

Investment Adviser/Co-Administrator
Denver Investments
1225 17th Street, 26th Floor
Denver, CO 80202

Stockholder Relations
(800) 624-4190 (option #2)
e-mail : blu@denvest.com

Custodian
The Bank of New York Mellon
One Wall Street
New York, NY 10286

Co-Administrator
ALPS Fund Services, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203

Transfer Agent Dividend Reinvestment Plan Agent
(Questions regarding your Account)

BNY Mellon Shareowner Services
480 Washington Blvd.
Jersey City, NJ 07310
 (800) 624-4190 (option #1)
www.melloninvestor.com

 


 


Item 2. Code of Ethics.

            Not Applicable to Semi-Annual Report.  
 

Item 3. Audit Committee Financial Expert.

            Not Applicable to Semi-Annual Report.  
 

Item 4. Principal Accountant Fees and Services.

Not applicable to Semi-Annual Report. 
 

Item 5. Audit Committee of Listed Registrants.

 

            Not applicable to Semi-Annual Report.

 

Item 6. Investments.

 

(a)  Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the Reports to Stockholders filed under Item 1 of this form.

(b)  Not applicable.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

            Not applicable to Semi-Annual Report.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies

 

(a) Not applicable to Semi-Annual Report.

(b) There have been no changes in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recent annual report on Form N-CSR.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable.

 

Item 10. Submission of Matters to Vote of Security Holders.

 

            There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K or this Item. 

 

 

 


 


 

 

 

 

 

Item 11. Controls and Procedures.

 

(a)       The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

 

(b)       There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12. Exhibits.

 

(a)(1)   Not applicable.

 

(a)(2)   Separate certifications for the registrant's Principal Executive Officer and Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto as Ex99.CERT.

 

(a)(3)   Not applicable.

 

(b)        A certification for the registrant's Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached hereto as Ex99.906CERT.  The certification furnished pursuant to this paragraph is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.

 

 

 

 

 

 


 


 

 

 

 

 

 

 

SIGNATURES

 

            Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Blue Chip Value Fund, Inc.

 

 

By:       /s/ Todger Anderson

            Todger Anderson

            President and Chief Executive Officer

 

Date:    September 3, 2010

 

            Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

           

By:       /s/ Todger Anderson

            Todger Anderson

            President and Chief Executive Officer

 

Date:    September 3, 2010

 

By:       /s/ Jasper R. Frontz

            Jasper R. Frontz

            Treasurer and Chief Financial Officer

 

Date:    September 3, 2010