UNITED STATES SECURITIES AND EXCHANGE COMMISSSION 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 Seventeenth Street, 26th Floor, Denver, Colorado 80202 ----------------------------------------------------------- (Address of principal executive offices) (Zip code) W. Bruce McConnel Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103-6996 ------------------------------------- (Name and address of agent for service) Registrant's Telephone Number, including Area Code: (303) 623-2577 Date of fiscal year end: December 31 Date of reporting period: June 30, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss.3507. Item 1. Reports to Shareholders 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). -------------------------------------------------------------------------------- [LOGO] Blue Chip BlueChip Value Fund Semi-Annual Report to Stockholders June 30, 2003 -------------------------------------------------------------------------------- PORTFOLIO MANAGER COMMENTARY Dear Fellow Stockholders: Patience was finally rewarded during the first half of our fiscal year as a dismal winter slump gave way to an extended springtime rally. Although war fears, decaying business fundamentals and economic uncertainties initially took their toll, it appears to us that the market later shrugged them off in anticipation of better times ahead. What fueled this optimism, in our opinion, was a positive outcome in Iraq coupled with surprisingly strong first-quarter earnings and nascent signs of economic stability. With hopes raised that business conditions might soon improve, investor confidence surged. Against this backdrop, the Blue Chip Value Fund realized an 8.11% gain in net asset value (NAV) for the six-month period ended June 30, 2003, compared to an 11.76% advance for its benchmark, the S&P 500 Index. The Fund's market price entered the year trading at a discount to NAV of more than 5%, and ended the period trading at a premium of nearly 13%. While our relative NAV performance was disappointing, we are optimistic about the prospects of our relative returns going forward. Let us explain. In the early stages of a market recovery, it appears to us that some participants are tempted to "bet" on beaten-down or lower-quality companies whose share prices reflect significant risks, such as excessive debt or weakening business fundamentals. Another group of investors may choose to "capture the rally" by "betting" on high volatility or high-beta stocks. Recent studies support this notion, as the market assumed heightened risk levels during the first half of 2003, with the lowest-quality companies seemingly outpacing their higher-quality counterparts. One report in particular, authored by Merrill Lynch Chief U.S. Strategist Richard Bernstein, calculated that speculative companies rose 35.5% while stable ones gained only 8.9%. Furthermore, he noted that valuation spreads between the highest beta stocks and the lowest beta stocks widened considerably, approaching the peak levels of late 1999 (Source: U.S. Strategy, Merrill Lynch, July 2003). Despite these higher risk premiums, the Fund's absolute performance, a product of our disciplined investment process, held its own during the period. This process evaluates the cash generation abilities of prospective holdings, the market's valuation of those free cash flows, and the risks inherent in a company's business outlook and balance sheet. 2 Given these strict criteria, the Fund generally attempts to screen out lower-quality and more highly speculative companies. In our view, chasing this theme would neither be prudent nor desired by our stockholders. With that in mind, our higher-quality technology holdings failed to keep pace with the benchmark during the period. Nevertheless, we continue to be vigilant with respect to valuation and believe our investments have intrinsic value that is greater than the current market value. Within the financial sector, our position in home financing giant Freddie Mac came under severe pressure as the company faced allegations of accounting irregularities and management turmoil. Although we underestimated the magnitude of its forthcoming earnings restatement, we still believe that the value of the franchise is greater than where the stock currently trades. Elsewhere, our holdings in aerospace and defense contractor General Dynamics Corp. struggled when its business jet unit experienced revenue and profit difficulties. Likewise, industrial equipment supplier Parker Hannifin Corp. fell short of expectations as the prolonged global economic slowdown contributed to softness across all of its markets. Performance in our healthcare-related holdings proved to be a source of strength. Generic and specialty pharmaceutical names such as Watson Pharmaceuticals Inc. and Mylan Laboratories Inc. added nicely to the Fund's returns, while exposure to large-cap drug giants Wyeth, Bristol-Myers Squibb Co. and Pharmacia Corp. as well as managed health-care leader Aetna Inc. also contributed to significant outperformance relative to our benchmark. We remained underrepresented in consumer staples believing that lofty valuations would cause the sector to trail the market--a decision that added value. At the same time, we capitalized on a modest overweight in the energy sector as integrated energy firm ConocoPhillips realized significant cost savings and operational efficiencies from its August 2002 merger. Strong stock picking in select exploration and production companies emphasizing North American natural gas also worked in our favor. Looking ahead, we remain optimistic that an economic recovery is underway, and that existing monetary and fiscal stimulus will serve to support that recovery. Although we are conscious of the need to own stocks that will benefit from a rebounding economy, we plan to continue to invest in a portfolio of companies we believe are selling at a discount to their 3 estimated cash flows, even assuming the economic recovery is subdued. Despite periodic near-term pressures from the investing "crowd", we remain driven by the belief that investing is a long-term endeavor because we believe fundamentals prevail in the end. Sincerely, /s/ Mark M. Adelmann Mark M. Adelmann, CFA, CPA Portfolio Manager and Vice President The Portfolio Manager 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. 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 -------------------------------------------------------------------------------- Sector Diversification in Comparison to S&P 500 as of June 30, 2003* -------------------------------------------------------------------------------- Fund S&P 500 -------------------------------------------------------------------------------- Basic Materials 2.6% 2.5% -------------------------------------------------------------------------------- Capital Goods 7.1% 4.7% -------------------------------------------------------------------------------- Commercial Services 2.5% 2.2% -------------------------------------------------------------------------------- Communications 4.3% 6.6% -------------------------------------------------------------------------------- Consumer Cyclical 12.8% 12.4% -------------------------------------------------------------------------------- Consumer Staples 5.5% 8.9% -------------------------------------------------------------------------------- Energy 6.3% 5.8% -------------------------------------------------------------------------------- Financials 21.3% 23.2% -------------------------------------------------------------------------------- Medical/Healthcare 19.6% 14.6% -------------------------------------------------------------------------------- REITs 0.0% 0.3% -------------------------------------------------------------------------------- Technology 13.0% 14.3% -------------------------------------------------------------------------------- Transportation 1.9% 1.6% -------------------------------------------------------------------------------- Utilities 1.1% 2.9% -------------------------------------------------------------------------------- Short-Term Investments and Net Other Assets/Liabilities 2.0% -- -------------------------------------------------------------------------------- *Sector diversification is subject to change and may not be representative of future investments. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Average Annual Total Returns as of June 30, 2003 -------------------------------------------------------------------------------- Return 6 Mos. 1-Year 3-Year 5-Year 10-Year -------------------------------------------------------------------------------- Blue Chip Value Fund NAV 8.11% (5.21%) (4.67%) (2.14%) 9.19% -------------------------------------------------------------------------------- Blue Chip Market Value Fund Price 28.73% 4.90% (0.91%) (0.32%) 10.26% -------------------------------------------------------------------------------- S&P 500 Index 11.75% 0.25% (11.19%) (1.61%) 10.04% -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Market Price Performance History Since Inception (04/15/87) through June 30, 2003 -------------------------------------------------------------------------------- [The following table was depicted as a Line Graph in the Printed Material] Adjusted Market Price(1) Actual Market Price(2) 10 10 9.5 9.5 7.8 7.75 5.58 5.5 5.87 5.75 6.31 6.13 6.1 5.88 6.28 6 6.73 6.25 7.62 6.88 8.54 7.5 8.2 7 8.13 6.75 8.21 6.63 6.86 5.38 7.86 6 9.28 6.88 9.88 7.13 10.49 7.38 11.4 7.63 11.77 7.88 12.07 7.88 12.18 7.75 12.81 7.75 13.64 8.25 13.78 8.13 14.51 8.25 14.57 7.88 14.1 7.63 12.54 6.75 12.83 6.88 12.65 6.13 13.68 6.63 14.78 7.13 15.88 7.63 17.91 7.63 19.09 8.13 20.04 8.5 21.89 9.25 24.98 9.25 22.92 8.38 27.37 9.75 31.13 10.81 35.11 10.94 38.12 11.88 37.19 11.31 30.52 9.06 35.58 9.75 35.12 9.63 37.9 10.13 35.79 9.31 37.95 8.69 36.04 8.25 37.62 8.38 38.84 8.44 36.75 7.55 34.06 6.79 41.48 8.05 37.75 7.14 41.92 7.56 39.16 7.02 34.89 6.1 28.26 4.8 28.43 4.59 27.31 4.41 36.6 5.77 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 six months ended June 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 June 30, 2003 (Unaudited) ASSETS Investments at market value $ 137,428,001 (identified cost $138,011,160) Dividends receivable 119,873 Interest receivable 3,139 Other assets 41,101 ------------- TOTAL ASSETS 137,592,114 ------------- LIABILITIES Payable for securities purchased 817,305 Advisory fee payable 69,424 Administration fee payable 7,945 Accrued expenses and other liabilities 36,010 ------------- TOTAL LIABILITIES 930,684 ------------- NET ASSETS $ 136,661,430 ============= COMPOSITION OF NET ASSETS Capital stock, at par $ 266,779 Paid-in-capital 158,331,918 Undistributed net investment income 61,083 Accumulated net realized loss (18,614,638) Net unrealized depreciation on investments (583,159) Undesignated distributions (2,800,553) ------------- $ 136,661,430 ============= SHARES OF COMMON STOCK OUTSTANDING (100,000,000 shares authorized at $0.01 par value) 26,677,937 ============= Net asset value per share $ 5.12 ============= See accompanying notes to financial statements. 7 BLUE CHIP VALUE FUND, INC. STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2003 (Unaudited) INCOME Dividends $ 851,411 Interest 30,155 ---------- TOTAL INCOME $ 881,566 -------------- EXPENSES Investment advisory fee (Note 3) 392,958 Administrative services fee (Note 3) 44,949 Stockholder reporting 70,500 Legal fees 67,500 Transfer agent fees 36,382 Directors' fees 35,734 NYSE listing fees 19,338 Audit and tax preparation fees 12,165 Insurance and fidelity bond 5,510 Custodian fees 4,786 Other 4,357 ---------- TOTAL EXPENSES 694,179 -------------- NET INVESTMENT INCOME 187,387 -------------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized loss on investments (2,224,655) Change in net unrealized appreciation or depreciation of investments 12,168,112 -------------- NET GAIN ON INVESTMENTS 9,943,457 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,130,844 ============== See accompanying notes to financial statements. 8 BLUE CHIP VALUE FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS For the Six For the Months Ended Year Ended June 30, December 31, 2003(1) 2002 ------------- ------------- Increase/(decrease) in net assets from operations: Net investment income $ 187,387 $ 930,340 Net realized loss from securities transactions (2,224,655) (16,214,221) Change in net unrealized appreciation or depreciation of investments 12,168,112 (21,320,777) ------------- ------------- 10,130,844 (36,604,658) ------------- ------------- Decrease in net assets from distributions to stockholders from: Net investment income (126,304) (930,340) Return of capital 0 (13,857,137) Undesignated (Note 1) (2,800,553) 0 ------------- ------------- (2,926,857) (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 (157,387 and 295,323 shares issued, respectively) 744,533 1,790,086 ------------- ------------- 744,533 34,587,333 ------------- ------------- NET INCREASE/(DECREASE) IN NET ASSETS 7,948,520 (16,804,802) NET ASSETS Beginning of period 128,712,910 145,517,712 ------------- ------------- End of period (including $61,083 and $0 of undistributed net investment income, respectively) $ 136,661,430 $ 128,712,910 ============= ============= See accompanying notes to financial statements. (1) Unaudited. 9 BLUE CHIP VALUE FUND, INC. FINANCIAL HIGHLIGHTS For the Six Months Ended Per Share Data June 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 0.37 ----------- Total from investment operations 0.38 ----------- Distributions From net investment income (0.01) From net realized gains on investments -- Return of capital -- Undesignated (0.10) ----------- Total distributions (0.11) ----------- 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 $ 5.12 =========== Per share market value, end of period $ 5.77 =========== Total investment return(2) based on: Net Asset Value 8.1% Market Value 28.7% Ratios/Supplemental data: Ratios of expenses to average net assets 1.09%* Ratio of net investment income to average net assets 0.29%* Ratio of total distributions to average net assets 2.28% Portfolio turnover rate(3) 26.95% Net assets - end of period (in thousands) $ 136,661 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 six months ended June 30, 2003 were $33,283,577 and $35,028,346, respectively. 11 BLUE CHIP VALUE FUND, INC. STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited) Market Shares Cost Value --------- --------- --------- COMMON STOCKS - 97.98% BASIC MATERIALS - 2.56% Forestry & Paper - 2.56% Bowater Inc. 93,500 $ 4,423,466 $ 3,501,575 TOTAL BASIC MATERIALS 4,423,466 3,501,575 ------------------------------------------------------------------------------ CAPITAL GOODS - 7.15% Aerospace & Defense - 4.24% General Dynamics Corp. 34,800 2,461,195 2,523,000 Raytheon Co. 99,500 3,429,852 3,267,580 ----------- ----------- 5,891,047 5,790,580 Electrical Equipment - 2.91% Parker Hannifin Corp. 94,800 4,519,195 3,980,652 TOTAL CAPITAL GOODS 10,410,242 9,771,232 ------------------------------------------------------------------------------ COMMERCIAL SERVICES - 2.51% Business Products & Services - 2.51% Accenture Ltd.* 189,600 4,227,692 3,429,864 TOTAL COMMERCIAL SERVICES 4,227,692 3,429,864 ------------------------------------------------------------------------------ COMMUNICATIONS - 4.28% Telecomm Service Providers - 4.28% ALLTEL Corp. 66,100 3,347,105 3,187,342 BellSouth Corp. 99,800 3,723,365 2,657,674 ----------- ----------- 7,070,470 5,845,016 TOTAL COMMUNICATIONS 7,070,470 5,845,016 ------------------------------------------------------------------------------ CONSUMER CYCLICAL - 12.81% Clothing & Accessories - 2.36% TJX Companies Inc. 171,300 2,590,532 3,227,292 General Merchandise - 2.58% Target Corp. 93,300 3,209,526 3,530,472 Hotels & Gaming - 3.05% Starwood Hotels & Resorts Inc. 145,600 4,472,957 4,162,704 Publishing & Media - 4.82% Dow Jones & Company Inc. 62,800 3,396,231 2,702,284 Viacom Inc. - Class B* 58,800 2,889,801 2,567,208 Walt Disney Co. 66,800 1,393,508 1,319,300 ----------- ----------- 7,679,540 6,588,792 TOTAL CONSUMER CYCLICAL 17,952,555 17,509,260 ------------------------------------------------------------------------------ 12 Market Shares Cost Value --------- --------- --------- CONSUMER STAPLES - 5.51% Food & Agricultural Products - 5.51% Bunge Ltd. 123,800 $ 2,963,252 $ 3,540,680 Kraft Foods Inc. 83,500 2,627,196 2,717,925 Sara Lee Corp. 67,400 1,321,225 1,267,794 ----------- ----------- 6,911,673 7,526,399 TOTAL CONSUMER STAPLES 6,911,673 7,526,399 ------------------------------------------------------------------------------ ENERGY - 6.35% Exploration & Production - 2.05% Devon Energy Corp. 52,412 2,528,822 2,798,822 Integrated Oils - 2.79% ConocoPhillips 69,519 3,961,318 3,809,641 Oil Services - 1.51% Transocean Inc.* 94,300 2,171,769 2,071,771 TOTAL ENERGY 8,661,909 8,680,234 ------------------------------------------------------------------------------ FINANCIALS - 21.35% Integrated Financial Services - 2.74% Citigroup Inc. 87,500 3,751,033 3,745,000 Life & Health Insurance - 2.00% Nationwide Financial Services - Class A 42,200 1,747,900 1,371,500 Principal Financial Group 42,500 1,149,789 1,370,625 ----------- ----------- 2,897,689 2,742,125 Money Center Banks - 1.02% Bank of America Corp. 17,600 1,191,759 1,390,928 Property Casualty Insurance - 10.49% Allstate Corp. 68,300 2,455,295 2,434,895 AMBAC Financial Group Inc. 46,200 2,518,371 3,060,750 American International Group 45,600 2,943,285 2,516,208 Radian Group Inc. 97,300 3,402,595 3,566,045 Travelers Property and Casualty Corp. 173,800 2,512,932 2,763,420 ----------- ----------- 13,832,478 14,341,318 Regional Banks - 1.44% SouthTrust Corp. 72,200 1,649,525 1,963,840 Securities & Asset Management - 2.00% Goldman Sachs Group Inc. 13,600 919,330 1,139,000 Lehman Brothers Holdings Inc. 24,000 1,379,233 1,595,520 ----------- ----------- 2,298,563 2,734,520 Specialty Finance - 1.66% Freddie Mac 44,600 2,825,903 2,264,342 TOTAL FINANCIALS 28,446,950 29,182,073 ------------------------------------------------------------------------------ 13 Market Shares Cost Value --------- --------- --------- MEDICAL - HEALTHCARE - 19.55% Healthcare Services - 6.25% Aetna Inc. 60,900 $ 2,675,986 $ 3,666,180 Caremark RX Inc.* 60,100 1,393,635 1,543,368 Omnicare Inc. 98,819 2,408,501 3,339,094 ----------- ----------- 6,478,122 8,548,642 Pharmaceuticals - 13.30% Bristol-Myers Squibb Co. 86,380 3,495,709 2,345,217 King Pharmaceuticals Inc.* 183,300 2,314,437 2,705,508 Mylan Laboratories Inc. 93,600 2,713,945 3,254,472 Pfizer Inc. 154,560 4,311,411 5,278,224 Watson Pharmaceuticals Inc.* 44,200 1,269,685 1,784,354 Wyeth 61,600 2,181,344 2,805,880 ----------- ----------- 16,286,531 18,173,655 TOTAL MEDICAL - HEALTHCARE 22,764,653 26,722,297 ------------------------------------------------------------------------------ TECHNOLOGY - 12.96% Computer Software - 3.08% Microsoft Corp. 164,200 5,018,589 4,205,162 Electronic Equipment - 1.88% American Power Conversion* 164,600 2,291,097 2,566,114 IT Services - 0.96% Computer Sciences Corp.* 34,500 1,431,602 1,315,140 Semiconductors - 5.00% Intel Corp. 168,200 4,798,360 3,495,869 National Semiconductor Corp.* 67,500 1,278,794 1,331,100 Xilinx Inc.* 79,500 2,117,355 2,012,145 ----------- ----------- 8,194,509 6,839,114 Technology Resellers - Distributors - 2.04% Tech Data Corp.* 104,200 2,822,347 2,783,182 TOTAL TECHNOLOGY 19,758,144 17,708,712 ------------------------------------------------------------------------------ TRANSPORTATION - 1.87% Railroads - 1.87% Union Pacific Corp. 44,000 2,552,640 2,552,880 TOTAL TRANSPORTATION 2,552,640 2,552,880 ------------------------------------------------------------------------------ 14 Market Shares Cost Value --------- --------- --------- UTILITIES - 1.08% Electric - Gas Utilities - 1.08% Exelon Corp. 24,600 $ 1,303,633 $ 1,471,326 TOTAL UTILITIES 1,303,633 1,471,326 ------------------------------------------------------------------------------ TOTAL COMMON STOCKS 134,484,027 133,900,868 ------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS - 2.58% Goldman Sachs Financial Square Prime Obligations Fund - FST Shares 3,527,133 3,527,133 TOTAL SHORT-TERM INVESTMENTS 3,527,133 3,527,133 ------------------------------------------------------------------------------ TOTAL INVESTMENTS 100.56% 138,011,160 137,428,001 Liabilities in Excess of Other Assets (0.56%) (766,571) ------ ------------ NET ASSETS 100.00% $136,661,430 ====== ============ * Denotes non-income producing security. 15 BLUE CHIP VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS June 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. 16 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: Six Months Ended Year Ended June 30, December 31, 2003 2002 -------------------------------------------------------------------------------- Distributions paid from: Ordinary income $ 126,304 $ 930,340 Long-term capital gain 0 0 Undesignated 2,800,553 0 Return of capital 0 13,857,137 ----------- ------------ Total $ 2,926,857 $ 14,787,477 =========== ============ As of June 30, 2003, the components of distributable earnings on a tax basis was as follows: Undistributed net investment income $ 61,083 Accumulated net realized loss (18,177,084) Net unrealized depreciation (1,020,713) Undesignated distributions (2,800,553) ------------ Total $(21,937,267) ============ 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. 17 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 June 30, 2003: Gross appreciation (excess of value over tax cost) $ 10,858,668 Gross depreciation (excess of tax cost over value) (11,879,381) ------------- Net unrealized appreciation $ (1,020,713) ------------- Cost of investments for income tax purposes $ 138,448,714 ============= 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. 4. ANNUAL MEETING OF STOCKHOLDERS The Annual Meeting of Stockholders of the Fund (the "Annual Meeting") was held May 20, 2003 pursuant to notice 18 given to all stockholders of record at the close of business on March 14, 2003. At the Annual Meeting, stockholders were asked to approve the following: Proposal 1. To elect two Class III directors, Kenneth V. Penland and Roberta M. Wilson, to serve until the Annual Meeting in the year 2006. The number of shares voting for the election of Mr. Penland was 14,632,422 and the number of shares withholding authority was 1,178,300. The number of shares voting for the election of Ms. Wilson was 14,615,164 and the number of shares withholding authority was 1,195,558. The name of each other director whose term of office continued after the Annual Meeting was Todger Anderson, Gary P. McDaniel, Robert J. Greenebaum, Lee W. Mather, Jr. and Richard C. Schulte. Proposal 2. To approve an amendment to the Fund's Articles of Incorporation to permit the Fund to issue additional classes of stock, including preferred stock. The number of shares voting for the proposal was 11,660,910, the number of shares voting against the proposal was 3,585,886 and the number of shares abstaining on the proposal was 505,290. The number of shares needed to approve the proposal was 13,303,894 so the proposal was not approved. Proposal 3. To approve the elimination of the Fund's fundamental policy that restricts its ability to purchase securities on margin. The number of shares voting for the proposal was 10,764,964, the number of shares voting against the proposal was 4,372,860 and the number of shares abstaining on the proposal was 614,262. The number of shares needed to approve the proposal was 10,553,898 so the proposal was approved. Proposal 4. To approve an amendment to the Fund's investment advisory agreement between the Fund and Denver Investment Advisors LLC to increase the advisory fee payable to Denver Investment Advisors LLC by authorizing it to be compensated on the assets of the Fund related to debt. The number of shares voting for the proposal was 9,993,905, the number of shares voting against the proposal was 4,831,328 and the number of shares abstaining on the proposal was 926,853. The number of shares needed to approve the proposal was 10,553,898 so the proposal was not approved. 19 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Item 2. Code of Ethics Form N-CSR disclosure requirement not yet effective with respect to the registrant. Item 3. Audit Committee Financial Expert Form N-CSR disclosure requirement not yet effective with respect to the registrant. Item 4. Principal Accountant Fees and Services Form N-CSR disclosure requirement not yet effective with respect to the registrant. Item 5. Audit Committee of Listed Registrants. Not Applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies To be provided with the registrant's filing of its annual report on Form N-CSR. Item 8. [Reserved] Item 9. Controls and Procedures (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits (a)(1) Form N-CSR disclosure requirement not yet effective with respect to the registrant. (a)(2) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX- 99.CERT. (b) Attached hereto as Exhibit 99.906CERT are the certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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/Chief Executive Officer Date: August 29, 2003 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/Chief Executive Officer Date: August 29, 2003 By: /s/Jasper Frontz --------------------------------- Jasper Frontz Treasurer/Chief Financial Officer Date: August 29, 2003