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)
Registrants 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
|
1-800-624-4190 www.blu.com |
1 |
INVESTMENT ADVISERS 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 Funds 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 Funds performance relative to the benchmark began to improve. However, as economic indicators peaked and the recovery appeared to be slowing, the Funds 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 Funds 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 managements 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 Qualcomms cash flow comes from royalty payments that are calculated as a percentage of a phones 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 Qualcomms 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 Funds worst performing sectors relative to the Funds 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 Advisers 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 managements 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 |
||
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 Funds total investments at market value. Sector diversification is subject to change and may not be representative of future investments.
|
Average Annual Total Returns |
|||||
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 |
(9.84%) |
13.15% |
(16.84%) |
(7.57%) |
(1.33%) |
S&P 500 Index |
(6.65%) |
14.43% |
(9.81%) |
(0.79%) |
(1.59%) |
|
4 |
Semi-Annual Report June 30, 2010 |
Comparison of Change in Value of $10,000 Investment in
|
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
|
This chart shows the change in the Funds 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 |
|||||||||
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 Funds 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 Funds 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 Funds 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 participants 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 Funds 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 Funds benchmark and information responsive to requests by the Funds 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 Boards 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 Funds large cap value style; (vii) independent rating and ranking organization information comparing the Funds performance, advisory fee and other expenses to those of comparable funds; (viii) information provided by Denver Investments on the Funds 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 Funds 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 Funds 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 Funds 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 |
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 Funds Proxy Voting Policies and Records
A description of the policies and procedures that are used by the Funds investment adviser to vote proxies relating to the Funds portfolio securities is available (1) without charge, upon request, by calling (800) 624-4190; (2) on the Funds website at www.blu.com and (3) on the Funds Form N-CSR which is available on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
Information regarding how the Funds investment adviser voted proxies relating to the Funds 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 Funds 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 Funds Forms N-Q are available on the SECs website at www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. Information on the operation of the SECs Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, the Funds complete schedule of portfolio holdings for the first and third quarters of each fiscal year is available on the Funds 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. |
||||||||
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 (contd.) |
||||||||
Market |
||||||||
Shares |
Cost |
Value |
||||||
Department Stores 2.53% |
||||||||
Macys 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 (contd.) |
||||||||
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 |
|||||||
PCs & 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 (contd.) |
|||||||
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. |
|||||||
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 Funds 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. |
|||||
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. |
|||
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. |
|||
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 Funds 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 Funds 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 Funds 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 Funds 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 Funds net investment income or net realized capital gains or losses. If the Funds total distributions for a year exceeded the Funds current and accumulated earnings and profits, the excess was treated as non-taxable return of capital, reducing the stockholders adjusted basis in their shares.
The Funds 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 Funds 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 entitys 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 Funds 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 Funds 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 Funds investments to typically be classified as Level 1 and therefore applying this guidance did not have a material impact on the Funds 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 Funds average weekly net assets up to $100,000,000 and 0.50% of the Funds 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 Funds co-administrators. The Administrative Agreement includes the Funds 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 Funds average daily net assets up to $75,000,000, 0.05%, and 0.005% of the Funds average daily net assets between $75,000,000 and $125,000,000, and 0.03% and 0.005% of the Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Companys 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 Funds 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 Funds 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 OFFICERS
Kenneth V. Penland,
Chairman
Investment Adviser/Co-Administrator
Stockholder Relations
Custodian
Co-Administrator
Transfer Agent Dividend Reinvestment Plan Agent
|
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 registrants 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 registrants 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 registrants principal executive officer and principal financial officer have concluded that the registrants 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 registrants 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 registrants 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 |