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[LOGO] Blue Chip
BlueChip Value Fund
Quarterly Report
to Stockholders
September 30, 2003
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INVESTMENT ADVISER'S COMMENTARY
Dear Fellow Stockholders:
Blue Chip Value Fund's net asset value was up 4.4% for the third
quarter, outperforming the S&P 500 by 1.7%. However, year to date we are behind
the S&P 500 by 1.9%.
In the third quarter, performance was driven by stock selection in
technology, healthcare and commercial services. Our holding in National
Semiconductor Corp. was up more than 60% during the period, as the market
recognized the recovery in technology spending. Mylan Laboratories Inc., an
exciting generic drug company with a strong pipeline of potential new
opportunities, performed well during the quarter. Accenture Ltd., a worldwide
leader in business consulting and outsourcing, was up more than 23% during the
quarter as the market began to discount improvement in the company's cash flow.
Radian Group Inc., a leading mortgage insurer, was up more than 21% during the
quarter as gross margins expanded from better cost control. Starwood Hotels &
Resorts Inc. was up more than 21% as investors forecasted better hotel occupancy
and firmer pricing.
Investment performance from our energy and capital goods holdings was
disappointing. We continue to believe that energy companies are undervalued.
However, concerns about the return of Iraqi oil production led the market to a
different conclusion. In capital goods, our holding of Raytheon Co.
underperformed because of concerns that the government deficit would slow the
growth in defense spending.
Year to date, the healthcare sector has provided our best performance,
and Omnicare Inc., a contract provider of prescription drugs to long-term care
patients, is our best performing stock. Our most disappointing performance has
come from financial services provider, Freddie Mac, a major player in the home
loan secondary market which, as you know from the newspaper accounts, has been
involved in accounting irregularities materially understating their earnings.
We remain confident that the economic recovery is on track and that the
stock market will provide a positive return in the year ahead. We continue to
own quality companies purchased at what we believe is a discount to their
intrinsic value based on the free cash flow we believe they will generate.
2
Subsequent to the end of the third quarter, agreements were finalized
to leverage the portfolio by borrowing on a secured basis. We continue to
closely monitor the markets, and anticipate the possibility that before year
end, we may borrow a portion of the available credit in order to enhance your
portfolio's return.
Over the three years ended September 30, 2003, the Fund's NAV
outperformed the S&P 500 by 5.7% annually. This noteworthy performance has come
with contributions from our investment professionals using an intensive research
process. In recognition of this, the investment adviser has chosen, effective
December 1, 2003, to recognize the Fund as being managed by a team rather than
citing one individual. This does not represent a change in personnel, but rather
an evolution of the management team supporting the Fund. They are Mark Adelmann,
Kris Herrick, Troy Dayton and Derek Anguilm.
Thank you for your continued investment in the Blue Chip Value Fund.
Sincerely,
/s/ Todger Anderson
Todger Anderson, CFA
President
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.
3
BLUE CHIP VALUE FUND RECOGNIZES
PORTFOLIO MANAGEMENT TEAM
Effective December 1, 2003, Mark Adelmann, Portfolio Manager since June
3, 2002, Troy Dayton, Kris Herrick and Derek Anguilm are recognized as the
portfolio management team of Blue Chip Value Fund Inc. The Team meets regularly
to review portfolio holdings and discuss purchase and sale activity.
Mark Adelmann, CFA, CPA, Vice President and Portfolio Manager/Research
Analyst, joined Denver Investment Advisors LLC in 1995. He has 23 years total
investment experience.
Troy Dayton, CFA, Vice President and Portfolio Manager/ Research
Analyst, joined Denver Investment Advisors LLC in 2002. Prior to joining the
firm, he was an Equity Research Analyst with Jurika and Voyles (since 2001) and
Dresdner RCM Global Investors (since 1998). He has 7 years total investment
experience.
Kris Herrick, CFA, Vice President and Portfolio Manager/ Research
Analyst, joined Denver Investment Advisors LLC in 2000. Prior to joining the
firm, he was an Equity Research Analyst with Jurika and Voyles (since 1997). He
has 6 years total investment experience.
Derek Anguilm, Vice President and Research Analyst, joined Denver
Investment Advisors LLC in 2000. Prior to joining the firm he was with EVEREN
Securities (since 1999). He has 4 years total investment experience.
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@denveria.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@denveria.com or toll-free at 1-800-624-4190.
4
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Sector Diversification in Comparison to
S&P 500 as of September 30, 2003*
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Fund S&P 500
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Basic Materials 2.8% 2.6%
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Capital Goods 5.9% 4.9%
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Commercial Services 2.0% 2.2%
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Communications 3.9% 6.2%
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Consumer Cyclical 12.0% 12.6%
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Consumer Staples 6.7% 8.7%
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Energy 7.1% 5.7%
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Financials 21.4% 23.4%
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Medical/Healthcare 18.3% 13.4%
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REITs 0.0% 0.4%
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Technology 14.3% 15.5%
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Transportation 1.8% 1.6%
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Utilities 1.1% 2.9%
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Short-Term Investments and
Net Other Assets/Liabilities 2.7% --
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* Sector diversification is subject to change and may not be representative of
future investments.
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Average Annual Total Returns
as of September 30, 2003
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Return 9 Mos. 1-Year 3-Year 5-Year 10-Year
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Blue Chip
Value Fund NAV 12.81% 24.04% (4.35%) 2.13% 9.24%
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Blue Chip Market
Value Fund Price 32.21% 33.00% (1.09%) 4.25% 9.98%
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S&P 500
Index 14.72% 24.39% (10.13%) 1.00% 10.05%
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Past performance is no guarantee of future results. Share prices will fluctuate,
so that shares 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 fully subscribed under the terms of the rights
offering. Generally, total investment return based on net asset value will be
higher than total investment return based on market value in periods where there
is an increase in the discount or a decrease in the premium of the market value
to the net asset value from the beginning to the end of such periods.
Conversely, total investment return based on the net asset value will be lower
than total investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value to
the net asset value from the beginning to the end of such periods.
--------------------------------------------------------------------------------
5
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Market Price Performance History Since
Inception (04/15/87) through September 30, 2003
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[The following table was depicted as a Line Graph in the Printed Material]
Annual Distr.
Qtr Ends Adj. Mkt Price Act. Mkt Price Totals
-------- -------------- -------------- ------
04/01/1987(Inception) $ 10.00 $ 10.00
06/87 $ 9.50 $ 9.50
09/87 $ 7.80 $ 7.75
12/87 $ 5.58 $ 5.50 0.11
3/88 $ 5.87 $ 5.75
6/88 $ 6.31 $ 6.13
9/88 $ 6.10 $ 5.88
12/88 $ 6.28 $ 6.00 0.19
3/89 $ 6.73 $ 6.25
6/89 $ 7.62 $ 6.88
9/89 $ 8.54 $ 7.50
12/89 $ 8.20 $ 7.00 0.78
3/90 $ 8.13 $ 6.75
6/90 $ 8.21 $ 6.63
9/90 $ 6.86 $ 5.38
12/90 $ 7.86 $ 6.00 0.75
3/91 $ 9.28 $ 6.88
6/91 $ 9.88 $ 7.13
9/91 $ 10.49 $ 7.38
12/91 $ 11.40 $ 7.63 0.96
3/92 $ 11.77 $ 7.88
6/92 $ 12.07 $ 7.88
9/92 $ 12.18 $ 7.75
12/92 $ 12.81 $ 7.75 0.77
03/93 $ 13.64 $ 8.25
06/93 $ 13.78 $ 8.13
09/93 (Rights Offering) $ 14.51 $ 8.25
12/93 $ 14.57 $ 7.88 0.80
03/94 $ 14.10 $ 7.63
06/94 $ 12.54 $ 6.75
09/94 $ 12.83 $ 6.88
12/94 $ 12.65 $ 6.13 0.75
03/95 $ 13.68 $ 6.63
06/95 $ 14.78 $ 7.13
09/95 $ 15.88 $ 7.63
12/95 $ 17.91 $ 7.63 1.08
03/96 $ 19.09 $ 8.13
06/96 $ 20.04 $ 8.50
Sep-96 $ 21.89 $ 9.25
Dec-96 $ 24.98 $ 9.25 1.35
3/1/1997 (Rights Offering) $ 22.92 $ 8.38
Jun-97 $ 27.37 $ 9.75
Sep-97 $ 31.13 $ 10.81
Dec-97 $ 35.11 $ 10.94 1.57
Mar-98 $ 38.12 $ 11.88
Jun-98 $ 37.19 $ 11.31
Sep-98 $ 30.52 $ 9.06
Dec-98 $ 35.58 $ 9.75 1.13
Mar-99 $ 35.12 $ 9.63
Jun-99 $ 37.90 $ 10.13
Sep-99 $ 35.79 $ 9.31
Dec-99 $ 37.95 $ 8.69 1.68
Mar-00 $ 36.04 $ 8.25
Jun-00 $ 37.62 $ 8.38
Sep-00 $ 38.84 $ 8.44
Dec-00 $ 36.75 $ 7.55 0.89
Mar-01 $ 34.06 $ 6.79
Jun-01 $ 41.48 $ 8.05
Sep-01 $ 37.75 $ 7.14
Dec-01 $ 41.92 $ 7.56 0.74
03/31/2002 - Rights Offering $ 39.16 $ 7.02
Jun-02 $ 34.89 $ 6.10
Sep-02 $ 28.26 $ 4.80
Dec-02 $ 28.43 $ 4.59 0.56
Mar-03 $ 27.31 $ 4.41
Jun-03 $ 36.60 $ 5.77
Sep-03 $ 37.59 $ 5.79 0.24
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 shares may be worth more or less than its original cost when sold.
(1) Reflects the cumulative total return of an investment made by a
stockholder who purchased one share at inception ($10.00 IPO) and then
reinvested all annual distributions as indicated, and fully
participated in primary subscriptions of rights offerings.
(2) Reflects the actual market price of one share as it has traded on the
NYSE.
(3) Annual distribution totals represent actual amounts. Please note the
distribution total for 2003 is for nine months ended September 30,
2003. The Fund currently pays 2.5% of its net asset value quarterly;
however this policy may be changed at the discretion of the Fund's
Board of Directors.
6
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2003 (Unaudited)
ASSETS
Investments at market value $ 139,827,801
(identified cost $134,440,313)
Dividends receivable 138,393
Interest receivable 2,617
Other assets 38,768
-------------
TOTAL ASSETS 140,007,579
-------------
LIABILITIES
Payable for securities purchased 17,935
Advisory fee payable 71,236
Administration fee payable 7,671
Accrued expenses and other liabilities 43,386
-------------
TOTAL LIABILITIES 140,228
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NET ASSETS $ 139,867,351
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 267,721
Paid-in-capital 158,852,707
Undistributed net investment income 67,701
Accumulated net realized loss (18,500,665)
Net unrealized appreciation on 5,387,488
investments
Undesignated distributions (6,207,601)
-------------
$ 139,867,351
=============
SHARES OF COMMON STOCK
OUTSTANDING (100,000,000 shares
authorized at $0.01 par value) 26,772,138
=============
Net asset value per share $ 5.22
=============
See accompanying notes to financial statements.
7
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2003 (Unaudited)
INCOME
Dividends $ 1,297,669
Interest 38,728
------------
TOTAL INCOME $ 1,336,397
------------
EXPENSES
Investment advisory fee
(Note 3) 606,477
Administrative services fee
(Note 3) 68,542
Legal fees 121,250
Stockholder reporting 105,750
Transfer agent fees 55,552
Directors' fees 53,866
NYSE listing fees 29,652
Audit and tax preparation fees 18,331
Insurance and fidelity bond 8,243
Custodian fees 7,218
Other 6,428
------------
TOTAL EXPENSES 1,081,309
------------
NET INVESTMENT INCOME 255,088
------------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net realized loss on investments (2,110,682)
Change in net unrealized appreciation
or depreciation of investments 18,138,759
------------
NET GAIN ON INVESTMENTS 16,028,077
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 16,283,165
============
See accompanying notes to financial statements.
8
BLUE CHIP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Nine For the
Months Ended Year Ended
September 30, December 31,
2003(1) 2002
------------- -------------
Increase/(decrease) in net
assets from operations:
Net investment income $ 255,088 $ 930,340
Net realized loss from
securities transactions (2,110,682) (16,214,221)
Change in net unrealized
appreciation or depreciation
of investments 18,138,759 (21,320,777)
------------- -------------
16,283,165 (36,604,658)
------------- -------------
Decrease in net assets
from distributions to
stockholders from:
Net investment income (187,387) (930,340)
Return of capital 0 (13,857,137)
Undesignated (Note 1) (6,207,601) 0
------------- -------------
(6,394,988) (14,787,477)
------------- -------------
Increase in net assets from
common stock transactions:
Proceeds from the sale of
0 and 5,262,771 shares
respectively, net of offering
expenses (Note 4) 0 32,797,247
Net asset value of common
stock issued to stockholders
from reinvestment of
dividends (251,588 and
295,323 shares issued,
respectively) 1,266,264 1,790,086
------------- -------------
1,266,264 34,587,333
------------- -------------
NET INCREASE/(DECREASE)
IN NET ASSETS 11,154,441 (16,804,802)
NET ASSETS
Beginning of period 128,712,910 145,517,712
------------- -------------
End of period (including
$67,701 and $0 of
undistributed net
investment income,
respectively) $ 139,867,351 $ 128,712,910
============= =============
See accompanying notes to financial statements.
(1) Unaudited.
9
BLUE CHIP VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
For the Nine
Months Ended
Per Share Data September 30,
(for a share outstanding throughout each period) 2003(1)
-----------
Net asset value - beginning of period $ 4.85
Investment operations
Net investment income 0.01
Net gain (loss) on investments 0.60
-----------
Total from investment operations 0.61
-----------
Distributions
From net investment income (0.01)
From net realized gains on investments --
Return of capital --
Undesignated (0.23)
-----------
Total distributions (0.24)
-----------
Capital Share Transactions
Dilutive effects of rights offerings --
Offering costs charged to paid in capital --
-----------
Total capital share transactions --
-----------
Net asset value, end of period $ 5.22
===========
Per share market value, end of period $ 5.79
===========
Total investment return(2) based on:
Net Asset Value 12.8%
Market Value 32.2%
Ratios/Supplemental data:
Ratios of expenses to average net assets 1.10%*
Ratio of net investment income to average net assets 0.26%*
Ratio of total distributions to average net assets 4.84%
Portfolio turnover rate(3) 34.70%
Net assets - end of period (in thousands) $ 139,867
See accompanying notes to financial statements.
* Annualized.
(1) Unaudited.
(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. 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
10
For the year ended December 31,
-------------------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
$ 6.94 $ 8.17 $ 9.09 $ 10.25 $ 9.76
0.04 0.04 0.05 0.03 0.05
(1.40) (0.29) (0.08) 0.49 1.62
----------- ----------- ----------- ----------- -----------
(1.36) (0.25) (0.03) 0.52 1.67
----------- ----------- ----------- ----------- -----------
(0.04) (0.04) (0.05) (0.03) (0.05)
-- (0.36) (0.84) (1.65) (1.08)
(0.52) (0.34) -- -- --
-- -- -- -- --
----------- ----------- ----------- ----------- -----------
(0.56) (0.74) (0.89) (1.68) (1.13)
----------- ----------- ----------- ----------- -----------
(0.16) (0.23) -- -- (0.04)
(0.01) (0.01) -- -- (0.01)
----------- ----------- ----------- ----------- -----------
(0.17) (0.24) -- -- (0.05)
----------- ----------- ----------- ----------- -----------
$ 4.85 $ 6.94 $ 8.17 $ 9.09 $ 10.25
=========== =========== =========== =========== ===========
$ 4.59 $ 7.56 $ 7.55 $ 8.69 $ 9.75
=========== =========== =========== =========== ===========
(20.6%) (3.0%) 0.2% 6.2% 17.6%
(32.2%) 14.1% (3.2%) 6.7% 1.3%
0.93% 0.91% 0.88% 0.85% 0.94%
0.64% 0.56% 0.63% 0.32% 0.56%
10.15% 10.21% 10.46% 16.86% 11.62%
65.86% 73.30% 127.55% 54.24% 76.02%
$ 128,713 $ 145,517 $ 140,863 $ 153,002 $ 171,512
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.
(3) A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term
investments) for a year and dividing it by the monthly average of the market
value of the portfolio securities during the year. Purchases and sales of
investment securities (excluding short-term securities) for the nine months
ended September 30, 2003 were $44,123,272 and $49,863,395, respectively.
11
BLUE CHIP VALUE FUND, INC.
STATEMENT OF INVESTMENTS
September 30, 2003 (Unaudited)
Market
Shares Cost Value
--------- --------- ---------
COMMON STOCKS - 97.23%
BASIC MATERIALS - 2.81%
Forestry & Paper - 2.81%
Bowater Inc. 93,500 $ 4,423,466 $ 3,932,610
TOTAL BASIC MATERIALS 4,423,466 3,932,610
------------------------------------------------------------------------------
CAPITAL GOODS - 5.86%
Aerospace & Defense - 2.83%
General Dynamics Corp. 27,300 2,114,555 2,131,038
Raytheon Co. 65,100 2,261,445 1,822,800
------------ ------------
4,376,000 3,953,838
Electrical Equipment - 3.03%
Parker Hannifin Corp. 94,800 4,519,195 4,237,560
TOTAL CAPITAL GOODS 8,895,195 8,191,398
------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.95%
Business Products & Services - 1.95%
Accenture Ltd.* 122,200 2,485,833 2,729,948
TOTAL COMMERCIAL
SERVICES 2,485,833 2,729,948
------------------------------------------------------------------------------
COMMUNICATIONS - 3.88%
Telecomm Service Providers - 3.88%
ALLTEL Corp. 66,100 3,347,105 3,063,074
BellSouth Corp. 99,800 3,723,366 2,363,264
------------ ------------
7,070,471 5,426,338
TOTAL COMMUNICATIONS 7,070,471 5,426,338
------------------------------------------------------------------------------
CONSUMER CYCLICAL - 12.01%
Clothing & Accessories - 2.38%
TJX Companies Inc. 171,300 2,590,532 3,326,646
General Merchandise - 2.51%
Target Corp. 93,300 3,209,526 3,510,879
Hotels & Gaming - 2.89%
Starwood Hotels &
Resorts Inc. 116,300 3,572,776 4,047,240
Publishing & Media - 4.23%
Dow Jones &
Company Inc. 49,000 2,633,334 2,320,150
Viacom Inc. - Class B 58,800 2,889,801 2,252,040
Walt Disney Co. 66,800 1,393,508 1,347,356
------------ ------------
6,916,643 5,919,546
TOTAL CONSUMER CYCLICAL 16,289,477 16,804,311
------------------------------------------------------------------------------
12
Market
Shares Cost Value
--------- --------- ---------
CONSUMER STAPLES - 6.66%
Food & Agricultural Products - 6.66%
Bunge Ltd. 123,800 $ 2,963,252 $ 3,404,500
Kraft Foods Inc. 83,500 2,627,196 2,463,250
Tyson Foods Inc. 244,200 2,850,205 3,450,546
------------ ------------
8,440,653 9,318,296
TOTAL CONSUMER STAPLES 8,440,653 9,318,296
------------------------------------------------------------------------------
ENERGY - 7.09%
Exploration & Production - 2.31%
Devon Energy Corp. 67,112 3,235,880 3,234,147
Integrated Oils - 2.72%
ConocoPhillips 69,519 3,961,319 3,806,165
Oil Services - 2.06%
Transocean Inc.* 144,100 3,157,137 2,882,000
TOTAL ENERGY 10,354,336 9,922,312
------------------------------------------------------------------------------
FINANCIALS - 21.39%
Insurance & Real Estate Brokers - 2.16%
Willis Group
Holdings Ltd. 98,200 2,818,448 3,019,650
Integrated Financial Services - 2.85%
Citigroup Inc. 87,500 3,751,033 3,982,125
Money Center Banks - 0.98%
Bank of America Corp. 17,600 1,191,759 1,373,504
Property Casualty Insurance - 10.18%
Allstate Corp. 68,300 2,455,296 2,494,999
AMBAC Financial
Group Inc. 46,200 2,518,371 2,956,800
American
International Group 45,600 2,943,285 2,631,120
Radian Group Inc. 76,400 2,671,676 3,392,160
Travelers Property and
Casualty Corp. 173,800 2,512,932 2,759,944
------------ ------------
13,101,560 14,235,023
Regional Banks - 1.02%
SouthTrust Corp. 48,500 1,134,258 1,425,415
Securities & Asset Management - 2.00%
Goldman Sachs Group Inc. 13,600 919,330 1,141,040
Lehman Brothers
Holdings Inc. 24,000 1,379,233 1,657,920
------------ ------------
2,298,563 2,798,960
Specialty Finance - 2.20%
Freddie Mac 58,900 3,619,267 3,083,415
TOTAL FINANCIALS 27,914,888 29,918,092
------------------------------------------------------------------------------
13
Market
Shares Cost Value
--------- --------- ---------
MEDICAL - HEALTHCARE - 18.31%
Healthcare Services - 6.76%
Aetna Inc. 74,300 $ 3,500,712 $ 4,534,529
Caremark RX Inc.* 60,100 1,393,635 1,358,260
Omnicare Inc. 98,819 2,408,500 3,563,413
------------ ------------
7,302,847 9,456,202
Pharmaceuticals - 11.55%
Bristol-Myers Squibb Co. 86,380 3,495,709 2,216,511
King
Pharmaceuticals Inc.* 183,300 2,314,437 2,776,995
Mylan Laboratories Inc. 93,600 2,713,945 3,617,640
Pfizer Inc. 154,560 4,311,411 4,695,533
Wyeth 61,600 2,181,344 2,839,760
------------ ------------
15,016,846 16,146,439
TOTAL MEDICAL -
HEALTHCARE 22,319,693 25,602,641
------------------------------------------------------------------------------
TECHNOLOGY - 14.32%
Computer Software - 3.26%
Microsoft Corp. 164,200 5,018,589 4,563,118
Electronic Equipment - 0.95%
American Power
Conversion 77,200 985,354 1,323,208
IT Services - 1.90%
Computer
Sciences Corp.* 70,800 2,914,653 2,659,956
Semiconductors - 5.91%
Intel Corp. 138,700 3,415,270 3,815,637
National
Semiconductor Corp.* 67,500 1,278,794 2,179,575
Xilinx Inc.* 79,500 2,117,355 2,266,545
------------ ------------
6,811,419 8,261,757
Technology Resellers - Distributors - 2.30%
Tech Data Corp.* 104,200 2,822,347 3,214,570
TOTAL TECHNOLOGY 18,552,362 20,022,609
------------------------------------------------------------------------------
TRANSPORTATION - 1.83%
Railroads - 1.83%
Union Pacific Corp. 44,000 2,552,640 2,559,480
TOTAL TRANSPORTATION 2,552,640 2,559,480
------------------------------------------------------------------------------
14
Market
Shares Cost Value
--------- --------- ---------
UTILITIES - 1.12%
Electric - Gas Utilities - 1.12%
Exelon Corp. 24,600 $ 1,303,633 $ 1,562,100
TOTAL UTILITIES 1,303,633 1,562,100
------------------------------------------------------------------------------
TOTAL COMMON STOCKS 130,602,647 135,990,135
------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.74%
Goldman Sachs Financial
Square Prime Obligations
Fund - FST Shares 3,837,666 3,837,666
TOTAL SHORT-TERM
INVESTMENTS 3,837,666 3,837,666
------------------------------------------------------------------------------
TOTAL
INVESTMENTS 99.97% 134,440,313 139,827,801
Other Assets in
Excess of Liabilities 0.03% 39,550
------ ------------
NET ASSETS 100.00% $139,867,351
====== ============
* Denotes non-income producing security.
15
BLUE CHIP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2003 (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"), currently 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.
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 first-in, first-out 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.
Federal Income Taxes - The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income to its stockholders. Therefore, no
provision has been made for federal income taxes.
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The Fund had available for federal income tax purposes unused capital
loss carryovers of approximately $15,485,000, which will expire in 2010.
The Fund intends to elect to defer to its fiscal year ending December
31, 2003, approximately $468,000 of losses recognized during the period November
1, 2002 to December 31, 2002, which will expire in 2011 if unutilized.
The tax character of the distributions paid was as follows:
Nine Months Ended Year Ended
September 30, December 31,
2003 2002
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Distributions paid from:
Ordinary income $ 187,387 $ 930,340
Long-term capital gain 0 0
Undesignated 6,207,601 0
Return of capital 0 13,857,137
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Total $ 6,394,988 $14,787,477
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As of September 30, 2003, the components of distributable earnings on a
tax basis were as follows:
Undistributed net investment income $ 67,701
Accumulated net realized loss (18,063,111)
Net unrealized appreciation 4,949,934
Undesignated distributions (6,207,601)
------------
Total $(19,253,077)
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The difference between book basis and tax basis is attributable to the
tax deferral of losses on wash sales.
Distributions to Stockholders - Distributions to stockholders are recorded on
the ex-dividend date. Distributions are classified to conform to the tax
reporting requirements of the Internal Revenue Code. If the Fund's total
distributions for the year (exclusive of long-term capital gains dividends)
exceed its net investment income and short-term capital gains for such year, all
or a portion of such undesignated distributions may constitute a non-taxable
return of capital. Management currently believes it is likely that all of the
undesignated portion will be a non-taxable return of capital, however the actual
determination of the source of the undesignated distributions can be made only
at year-end.
The Fund distributes at least 2.5% of its net asset value quarterly to
its stockholders.
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Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United Stated 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.
2. UNREALIZED APPRECIATION AND
DEPRECIATION OF INVESTMENTS
(TAX BASIS)
As of September 30, 2003:
Gross appreciation (excess of value over tax cost) $ 13,759,923
Gross depreciation (excess of tax cost over value) (8,809,989)
-------------
Net unrealized appreciation $ 4,949,934
-------------
Cost of investments for income tax purposes $ 134,877,867
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3. INVESTMENT ADVISORY AND
ADMINISTRATION SERVICES
The Fund has an Investment Advisory Agreement with Denver Investment
Advisors LLC ("DIA"), whereby a management fee is paid to DIA 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 directors of the Fund are also officers of DIA.
Effective September 1, 1999, ALPS Mutual Funds Services, Inc. ("ALPS")
and DIA entered into an Administrative Agreement to 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 an annual rate for ALPS and DIA, respectively, of 0.08% and 0.01% of
the Fund's average daily net assets up to $75,000,000, 0.04% and 0.005% of the
Fund's average daily net assets between $75,000,000 and $125,000,000, and 0.02%
and 0.005% of the Fund's average daily net assets in excess of $125,000,000. The
administrative services fee is paid monthly.
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4. SUBSEQUENT EVENTS
The Fund declared a distribution of $0.13 per share on October 1, 2003.
The distribution was payable October 24, 2003, to stockholders of record on
October 10, 2003. Of the total distribution, approximately $0.0025 represents
net investment income and the remaining portion is currently undesignated until
the actual determination of the source can be made at year-end.
The Fund entered into a $15 million secured credit line with Custodial
Trust Company, a banking unit of Bear Stearns, on November 20, 2003. The
interest rate on the line of credit, which will be reset every 30 days, will be
30-day LIBOR plus 100 basis points. The Fund may repay the loan at any time
without prepayment penalties, and the lender may call the loan at its
discretion.
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BOARD OF DIRECTORS
Kenneth V. Penland, Chairman
Todger Anderson, Director
Robert J. Greenebaum, Director
Lee W. Mather, Jr, Director
Gary P. McDaniel, Director
Richard C. Schulte, Director
Roberta M. Wilson, Director
OFFICERS
Kenneth V. Penland, Chairman
Todger Anderson, President
Mark M. Adelmann, Vice President
W. Bruce McConnel, Secretary
Jasper R. Frontz, Treasurer
Investment Adviser/Co-Administrator
Denver Investment Advisors LLC
1225 17th Street, 26th Floor
Denver, CO 80202
(303) 312-5100
Stockholder Relations
Margaret R. Jurado
(800) 624-4190 (303) 312-5100
e-mail: blu@denveria.com
Custodian
Bank of New York
One Wall Street
New York, NY 10286
Co-Administrator
ALPS Mutual Funds Services, Inc.
1625 Broadway, Suite 2200
Denver, CO 80202
Transfer Agent
Dividend Reinvestment Plan Agent
(Questions regarding your Account)
Mellon Investor Services, LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541
www.melloninvestor.com
NYSE Symbol--BLU
[LOGO] Blue Chip
BlueChip Value Fund
www.blu.com
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