-------------------------------------------------------------------------------- [LOGO] Blue Chip BlueChip Value Fund Quarterly Report to Stockholders September 30, 2003 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Sector Diversification in Comparison to S&P 500 as of September 30, 2003* -------------------------------------------------------------------------------- Fund S&P 500 -------------------------------------------------------------------------------- Basic Materials 2.8% 2.6% -------------------------------------------------------------------------------- Capital Goods 5.9% 4.9% -------------------------------------------------------------------------------- Commercial Services 2.0% 2.2% -------------------------------------------------------------------------------- Communications 3.9% 6.2% -------------------------------------------------------------------------------- Consumer Cyclical 12.0% 12.6% -------------------------------------------------------------------------------- Consumer Staples 6.7% 8.7% -------------------------------------------------------------------------------- Energy 7.1% 5.7% -------------------------------------------------------------------------------- Financials 21.4% 23.4% -------------------------------------------------------------------------------- Medical/Healthcare 18.3% 13.4% -------------------------------------------------------------------------------- REITs 0.0% 0.4% -------------------------------------------------------------------------------- Technology 14.3% 15.5% -------------------------------------------------------------------------------- Transportation 1.8% 1.6% -------------------------------------------------------------------------------- Utilities 1.1% 2.9% -------------------------------------------------------------------------------- Short-Term Investments and Net Other Assets/Liabilities 2.7% -- -------------------------------------------------------------------------------- * Sector diversification is subject to change and may not be representative of future investments. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Average Annual Total Returns as of September 30, 2003 -------------------------------------------------------------------------------- Return 9 Mos. 1-Year 3-Year 5-Year 10-Year -------------------------------------------------------------------------------- Blue Chip Value Fund NAV 12.81% 24.04% (4.35%) 2.13% 9.24% -------------------------------------------------------------------------------- Blue Chip Market Value Fund Price 32.21% 33.00% (1.09%) 4.25% 9.98% -------------------------------------------------------------------------------- S&P 500 Index 14.72% 24.39% (10.13%) 1.00% 10.05% -------------------------------------------------------------------------------- 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 September 30, 2003 -------------------------------------------------------------------------------- [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 ------------- 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. 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: Nine Months Ended Year Ended September 30, December 31, 2003 2002 ----------- ----------- 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 ----------- ----------- Total $ 6,394,988 $14,787,477 =========== =========== 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) ============ 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 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 ============= 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. 18 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. 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 --------------------------------------------------------------------------------