[LOGO] BLUECHIP
VALUEFUND
ANNUAL REPORT
TO STOCKHOLDERS
DECEMBER 31, 2001
PORTFOLIO MANAGER COMMENTARY
Dear Fellow Stockholders:
2001 turned out to be a year that most of us would rather forget, an annus
horribilis so to speak. However, there was a bright spot for us. In 2001, the
Blue Chip Value Fund performed very well on a relative basis. The Fund's Net
Asset Value (NAV) was down 2.97%, while its benchmark, the S&P 500, was down
11.88%. The Fund started the year trading at a discount to its NAV and ended the
year at a premium, so the market performance for the Fund was up 14.07%. In a
bear market year, we were very pleased with these results.
In 2001, the best performing sector for the Fund, on both an absolute basis
and relative to its benchmark, was the consumer cyclical sector. Consumer
spending held up remarkably well all year given the economic environment and a
variety of stocks performed well for the Fund. TJX Companies Inc., the parent
company for TJMaxx and Marshalls, did well as consumers were attracted to its
discount format and as the company was able to exploit some excellent buying
opportunities from overstocked retailers. Tricon Global Restaurants Inc. is the
company that owns Taco Bell, KFC and Pizza Hut. It had suffered through poor
sales and a revamping of menus and we finally began to see improved results from
the company late in the year. Cendant Corp., the franchisor of hotels, rental
cars, and real estate offices, continued its turnaround and the stock performed
well, even given the environment post September 11. Finally, the Fund's media
and publishing stocks performed exceptionally well with the best returns coming
from USA Networks Inc. and Westwood One Inc.
Another positive for the portfolio was the technology sector where we
managed to have double digit positive returns versus the benchmark's double
digit negative returns. We did this partly by avoiding some of the largest
technology stocks that we simply saw as too expensive and partly by finding
stocks with valuations that already reflected the weak operating environment.
The Fund had very solid returns from Microsoft Corp., IBM Corp., Sun
Microsystems Inc., Avnet Inc. and American Power Conversion.
The healthcare sector was also positive for performance. This was due
primarily to the Fund's healthcare services stocks, Tenet Healthcare Corp. and
Omnicare Inc. Pricing and utilization trends have improved in the healthcare
industry for providers and it appears to us that the stocks moved up in 2001 in
recognition of these trends. We also had strong performance from Millipore
Corp., a company that makes purification
products for biopharmaceutical production and research and for microelectronics.
The company announced that it would split into two separate companies, which in
our opinion will unlock the value in the biopharmaceutical business.
Both the energy and utility sectors were disappointing for us in 2001. In
energy, we simply underestimated how much weaker demand would hurt oil and gas
prices. Thus, the Fund's investments in oil and gas service providers did not
pay off. In the utility sector, the Fund owns mostly companies that we believe
should benefit from deregulation of the industry, such as Dynegy Inc., Mirant
Corp. and Reliant Resources Inc. In light of the pricing problems in California
and the demise of energy trading powerhouse Enron Corp. (which the Fund did not
own), these stocks did not perform well. However, we have maintained our
commitment to this area because we do not believe the trend towards deregulation
will be reversed and the stocks are trading at what we believe are terrific
valuations.
We're pleased with the Fund's relative performance in 2001. Our value style
of investing was a clear advantage relative to the S&P 500, but the Fund also
outperformed the S&P 500 Value Index by almost 9% in 2001. In our opinion, there
is still plenty of uncertainty for investors to worry about, but on the margin
we believe there is less uncertainty than there was immediately after the events
of September 11. The monetary and fiscal stimulus the government is providing
appears to be very positive for the economy. We are hopeful the bear market has
run its course.
Sincerely,
/s/ Charlotte T. Petersen
Charlotte T. Petersen, CFA
Portfolio Manager and
Vice President
SECTOR DIVERSIFICATION
IN COMPARISON TO S&P 500
AS OF DECEMBER 31, 2001*
FUND S&P 500
---- -------
Basic Materials 2.0% 2.6%
Capital Goods 3.7% 4.7%
Commercial Services 1.7% 2.2%
Communications 5.7% 8.5%
Consumer Cyclical 13.6% 11.7%
Consumer Staples 5.7% 8.3%
Energy 6.3% 6.6%
Financials 23.9% 21.4%
Medical/Healthcare 12.0% 14.1%
REITs 0.0% 0.2%
Technology 12.8% 16.1%
Transportation 3.7% 0.8%
Utilities 5.7% 2.9%
* SECTOR DIVERSIFICATION IS SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF FUTURE INVESTMENTS.
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 2001
FUND NAME RETURN 1-YEAR 5-YEAR 10-YEAR
--------- ------ ------ ------ -------
Blue Chip Value Fund NAV (2.97%) 9.75% 11.85%
Blue Chip Value Fund Market
Price 14.07% 10.90% 13.90%
S&P 500 Index (11.88%) 10.70% 12.94%
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.
DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Blue Chip Value Fund, Inc.'s (the "Fund") Dividend Reinvestment and Cash
Purchase Plan offers stockholders the opportunity to reinvest dividends and
capital gain distributions in additional shares of the Fund. A stockholder may
also make additional cash investments under the Plan. There is no service charge
for participation.
Participating stockholders will receive additional shares issued at a price
equal to the net asset value per share as of the close of the New York Stock
Exchange on the record date ("Net Asset Value"), unless at such time the Net
Asset Value is higher than the market price of the Fund's common stock, plus
brokerage commission. In this case, the Fund will attempt, generally over the
next 10 business days (the "Trading Period"), to acquire shares of the Fund's
common stock in the open market at a price plus brokerage commission which is
less than the Net Asset Value. In the event that prior to the time such
acquisition is completed, the market price of such common stock plus commission
equals or exceeds the Net Asset Value, or in the event that such market
purchases are unable to be completed by the end of the Trading Period, then the
balance of the distribution shall be completed by issuing additional shares at
Net Asset Value.
Participating stockholders may also make additional cash investments
(minimum $50 and maximum $10,000 per month) by check or money order (or by wire
for a $10 fee) to acquire additional shares of the Fund. Please note, however,
that these additional shares will be purchased at market value plus brokerage
commission (without regard to net asset value) per share.
A stockholder owning a minimum of 50 shares may join the Plan by sending an
Enrollment Form to the Plan Agent at Mellon Investor Services, LLC, Overpeck
Centre, 85 Challenger Road, Ridgefield Park, NJ, 07660.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends or distributions, even though the stockholder does not
receive the cash. Participants must own at least 50 shares at all times.
A stockholder may elect to withdraw from the Plan at any time on 15-days'
prior written notice, and receive future dividends and distributions in cash.
There is no penalty for withdrawal from the Plan and stockholders who have
withdrawn from the Plan may rejoin in the future.
The Fund may amend the Plan at any time upon 30-days prior notice to
participants.
Additional information about the Plan may be obtained from Blue Chip Value
Fund, Inc. by writing to 1225 17th Street, 26th Floor, Denver, CO 80202, by
telephone at (800) 624-4190 or by visiting us at www.blu.com.
If your shares are registered with a broker, you most likely can still
participate in the Dividend Reinvestment Plan. Please contact your broker about
how to participate and to inquire if there are any fees which may be charged by
the broker to your account.
CHANGE IN FUNDAMENTAL
INVESTMENT POLICY
Recently enacted SEC regulations require a fund to invest at least 80% of
its net assets in the type of investment suggested by the fund's name.
Accordingly, on February 5, 2002, the Board of Directors approved a change to
the Fund's fundamental policy such that the Fund will invest at least 80%
(formerly 75% of its total assets) of its net assets (including the amount of
any borrowings for investment purposes) in equity securities of large companies
with headquarters in the United States, such as those included in, or similar in
size to those included in, the S&P 500 Index.
CHANGE IN PORTFOLIO MANAGER
Charlotte T. Petersen, the Fund's portfolio manager, has notified Denver
Investment Advisors LLC ("DIA") that she will be resigning from DIA's staff on a
date to be agreed upon (but not later than July 12, 2002). DIA expects to
appoint a successor portfolio manager from investment personnel now assigned to
the Fund and is confident that its staff and other resources will continue to
provide the Fund effective portfolio management in accordance with its
investment objective and policies.
STOCKHOLDER DISTRIBUTION INFORMATION
Certain tax information regarding Blue Chip Value Fund, Inc. is required to
be provided to stockholders based upon the Fund's income and distributions to
the stockholders for the calendar year ended December 31, 2001.
The Board of Directors of Blue Chip Value Fund, Inc. voted to pay to
stockholders of record at the opening of business on the record date, the
following distributions derived from capital gains realized from sales of
portfolio securities and dividends derived from net investment income as well as
a return of capital:
RECORD PAY CAPITAL RETURN OF
DATE DATE DIVIDENDS GAINS CAPITAL
--------------------------------------------------------------------------------
4/12/2001 4/27/2001 $0.0108 $0.1892 $0.0000
7/13/2001 7/27/2001 $0.0141 $0.1733 $0.0126
10/12/2001 10/26/2001 $0.0078 $0.0000 $0.1622
12/31/2001 1/15/2002 $0.0085 $0.0000 $0.1615
$0.0412 $0.3625 $0.3363
The Fund notified stockholders at the end of January 2002 of amounts for
use in preparing 2001 income tax returns. Please note the return of capital is
non-taxable.
ATTENTION CORPORATE STOCKHOLDERS:
To determine the amount that qualifies for the dividends-received deduction
for corporations, multiply the amount that appears in column 1 of Form 1099-Div
by 100%.
INFORMATION ON THE DIRECTORS AND OFFICERS OF THE FUND
The list below provides certain information about the identity and business
experience of the directors and officers of the Fund. The Fund's Statement of
Additional Information includes additional information about the Fund's
directors, and may be obtained from the Fund free of charge by calling
1-800-624-4190.
INTERESTED DIRECTORS*
TODGER ANDERSON, CFA(1)
Age: 57
POSITION(S) HELD WITH THE FUND:
PRESIDENT AND DIRECTOR
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
President since 1987. Director from 1988 to 1995 and since 1998. Term as
Director expires in 2004.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
President and Executive Manager, Denver Investment Advisors LLC (since 1995);
prior thereto President and Director of Portfolio Management, Denver Investment
Advisors, Inc.; Portfolio Manager, Westcore MIDCO Growth Fund (since 1986);
Portfolio Co-Manager, Westcore Select Fund (since 2001).
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
OVERSEEN BY DIRECTOR: ONE
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: NONE
KENNETH V. PENLAND, CFA(1)
Age: 59
POSITION(S) HELD WITH THE FUND:
CHAIRMAN OF THE BOARD AND DIRECTOR
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Chairman of the Board and Director since 1987. Term as Director expires in 2003.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Retired; from 1995 until December 2001; Chairman and Executive Manager, Denver
Investment Advisors LLC; prior thereto Chairman of the Board and Director of
Research, Denver Investment Advisors, Inc.; President and Trustee, Westcore
Funds.
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
OVERSEEN BY DIRECTOR: Thirteen
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: NONE
INDEPENDENT DIRECTORS
ROBERT J. GREENEBAUM(1)
Age: 84
POSITION(S) HELD WITH THE FUND:
Director
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Director since 1988. Term expires in 2004.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Independent Consultant; former Director, United Asset Management Corp., Boston,
Massachusetts (February 1982 - May 2000); former Chairman of the Board and
Director, Selected American Shares, Inc. and Selected Special Shares, Inc.,
Santa Fe, New Mexico (January 1970 - December 1997); former Chairman of the
Board and Trustee, Selected Capital Preservation Trust, Santa Fe, New Mexico
(September 1985 - December 1997). Consultant, Denver Investment Advisors LLC,
and its predecessor, Denver Investment Advisors, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
Overseen by Director: One
Other Directorships(4) Held by Director: None
RICHARD C. SCHULTE(1)
Age: 57
POSITION(S) HELD WITH THE FUND:
Director
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Director since 1987. Term expires in 2002.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Private Investor; from 1993 until 1996, President, Transportation Service
Systems, Inc.; Employee, Southern Pacific Lines, Denver, Colorado (since 1993);
prior thereto, Employee, Rio Grande Industries, Denver, Colorado (holding
company) (since 1991); Vice President Finance and Treasurer, Rio Grande
Holdings, Inc., Denver, Colorado (since 1990); and Vice President, Denver & Rio
Grande Western Railroad Company, Denver, Colorado (since 1990).
NUMBER OF PORTFOLIOS IN FUND COMPLEX3
OVERSEEN BY DIRECTOR: ONE
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: NONE
ROBERTA M. WILSON, CFA(1)
Age: 58
POSITION(S) HELD WITH THE FUND:
Director
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Director since 1987. Term expires in 2003.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Retired; from 1985 until July 1998, Director of Finance, Denver Board of Water
Commissioners, Denver, Colorado.
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
Overseen by Director: One
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: NONE
LEE W. MATHER, JR.(1)
Age: 58
POSITION(S) HELD WITH THE FUND:
Director
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Director since 2001. Term expires in 2002.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Director, American Rivers (conservation organization) (since June 2000); former
investment banker, Merrill Lynch & Co. (January 1977 - April 2000).
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
OVERSEEN BY DIRECTOR: One
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: None
GARY P. MCDANIEL(1)
Age: 56
POSITION(S) HELD WITH THE FUND:
Director
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Director since 2001. Term expires in 2004.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Chief Executive Officer, Chateau Communities, Inc. (REIT/
manufactured housing) (since 1997); prior thereto, Chief
Executive Officer ROC Communities, Inc. (1980-1997).
NUMBER OF PORTFOLIOS IN FUND COMPLEX(3)
OVERSEEN BY DIRECTOR: One
OTHER DIRECTORSHIPS(4) HELD BY DIRECTOR: None
OFFICERS
CHARLOTTE PETERSEN, CFA
Age: 41
1225 Seventeenth St.
26th Floor
Denver, Colorado 80202
POSITION(S) HELD WITH THE FUND:
Vice President
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Vice President since 2000.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Vice President, Denver Investment Advisors LLC (since 1995); prior thereto Vice
President, Denver Investment Advisors, Inc. (since 1993); Portfolio Manager,
Westcore Blue Chip Fund (since January 2000).
W. BRUCE MCCONNEL(5)
Age: 58
One Logan Square
18th and Cherry Sts.
Philadelphia, PA 19103
POSITION(S) HELD WITH THE FUND:
Secretary
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Secretary since 1987.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Partner of the law firm of Drinker Biddle & Reath LLP, Philadelphia, PA.
JASPER R. FRONTZ(5)
Age: 33
1225 Seventeenth St.
26th Floor
Denver, Colorado 80202
POSITION(S) HELD WITH THE FUND:
Treasurer
TERM OF OFFICE(2) AND LENGTH OF TIME SERVED:
Treasurer since 1997.
PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS:
Vice President, Denver Investment Advisors LLC (since 2000); Director of Mutual
Fund Administration, Denver Investment Advisors LLC (since 1997); prior thereto,
Fund Controller, ALPS Mutual Fund Services, Inc. (1995-1997); Senior Accountant,
Deloitte & Touche LLP (1991-1995); Registered Representative, ALPS Distributors,
Inc. (since 1995).
NOTES
* These directors each may be deemed to be an "interested director" of the
Fund within the meaning of the Investment Company Act of 1940 by virtue of
their affiliations with the Fund's investment adviser and their positions
as officers of the Fund.
1. Each director may be contacted by writing to the director, c/o Blue Chip
Value Fund, Inc., 1225 Seventeenth Street, 26th Floor, Denver, Colorado
80202, Attn: Jasper Frontz.
2. The Fund's By-Laws provide that the Board of Directors shall consist of
three classes of members. Directors are chosen for a term of three years,
and the term of one class of directors expires each year. The officers of
the Fund are elected by the Board of Directors and, subject to earlier
termination of office, each officer holds office for one year and until his
or her successor is elected and qualified.
3. Fund complex is comprised of the Fund, consisting of one portfolio and
Westcore Funds, of which there are twelve portfolios.
4. Includes only directorships of companies required to report to the
Securities and Exchange Commission under the Securities Exchange Act of
1934 (i.e., "public companies") or other investment companies registered
under the Investment Company Act of 1940.
5. Mr. McConnel and Mr. Frontz also serve as Secretary and Treasurer,
respectively, of Westcore Funds.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Blue Chip Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Blue Chip Value Fund, Inc. (the "Fund"), including the schedule of investments,
as of December 31, 2001, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the two years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the period from January 1, 1997 to December
31, 1999 were audited by other auditors whose report, dated January 14, 2000,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2001, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blue Chip Value Fund, Inc. as of December 31, 2001, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the two years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
January 18, 2002
BLUE CHIP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2001
ASSETS
Investments at market value $ 149,040,322
(identified cost $140,470,816)
Dividends receivable 169,540
Interest receivable 14,528
Other assets 7,583
-------------
TOTAL ASSETS 149,231,973
-------------
LIABILITIES
Distributions payable 3,563,618
Advisory fee payable 75,056
Administration fee payable 8,481
Accrued expenses and other liabilities 67,106
-------------
TOTAL LIABILITIES 3,714,261
-------------
NET ASSETS $ 145,517,712
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 209,625
Paid-in-capital 136,914,343
Accumulated net realized loss (175,762)
Net unrealized appreciation on investments 8,569,506
-------------
$ 145,517,712
=============
SHARES OF COMMON STOCK
OUTSTANDING (100,000,000 shares
authorized at $0.01 par value) 20,962,456
-------------
Net asset value per share $ 6.94
=============
See accompanying notes to financial statements.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2001
NET INVESTMENT INCOME
INCOME
Dividends $ 1,916,216
Interest 316,917
Foreign taxes withheld (11,856)
------------
TOTAL INCOME $ 2,221,277
------------
EXPENSES
Investment advisory fee
(Note 3) 909,447
Administrative services fee
(Note 3) 97,003
Transfer agent fees 84,000
Stockholder reporting 58,000
Legal fees 76,001
Directors' fees 60,000
Insurance and fidelity bond 10,843
Audit fees 19,201
Custodian fees 9,649
NYSE listing fees 36,701
Other 8,402
------------
TOTAL EXPENSES 1,369,247
------------
NET INVESTMENT INCOME 852,030
------------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments 8,769,357
Change in net unrealized appreciation
or depreciation of investments (13,542,885)
------------
NET LOSS ON INVESTMENTS (4,773,528)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (3,921,498)
============
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR
ENDED DECEMBER 31,
2001 2000
------------- -------------
DECREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 852,030 $ 915,053
Net realized gain on
investments 8,769,357 12,759,012
Change in net unrealized
appreciation or depreciation
of investments (13,542,885) (13,986,744)
------------- -------------
(3,921,498) (312,679)
------------- -------------
DECREASE IN NET ASSETS
FROM DISTRIBUTIONS TO
STOCKHOLDERS FROM:
Net investment income (857,755) (909,328)
Net realized gain on
investments (7,529,781) (14,364,186)
Return of capital (7,032,144) 0
------------- -------------
(15,419,680) (15,273,514)
------------- -------------
INCREASE IN NET ASSETS FROM
COMMON STOCK TRANSACTIONS:
Proceeds from the sale of
3,522,591 and 0 shares
respectively, net of offering
expenses (Note 4) 22,551,862 0
Net asset value of common
stock issued to stockholders
from reinvestment of
dividends (197,107 and
409,851 shares issued,
respectively) 1,444,420 3,446,723
------------- -------------
23,996,282 3,446,723
------------- -------------
NET INCREASE/(DECREASE)
IN NET ASSETS 4,655,104 (12,139,470)
NET ASSETS
Beginning of period 140,862,608 153,002,078
------------- -------------
End of period (including
$0 and $5,725 of
undistributed net
investment income,
respectively) $ 145,517,712 $ 140,862,608
============= =============
See accompanying notes to financial statements.
BLUE CHIP VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
PER SHARE DATA (for a share outstanding
throughout each period) 2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
Net asset value - beginning of period $ 8.17 $ 9.09 $ 10.25 $ 9.76 $ 8.94
INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.03 0.05 0.10
Net gain (loss) on investments (0.29) (0.08) 0.49 1.62 2.56
--------- --------- --------- --------- ---------
Total from investment operations (0.25) (0.03) 0.52 1.67 2.66
--------- --------- --------- --------- ---------
DISTRIBUTIONS
From net investment income (0.04) (0.05) (0.03) (0.05) (0.10)
From net realized gains on investments (0.36) (0.84) (1.65) (1.08) (1.47)
Return of capital (0.34) (0.00) (0.00) (0.00) (0.00)
--------- --------- --------- --------- ---------
Total distributions (0.74) (0.89) (1.68) (1.13) (1.57)
--------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS
Dilutive effects of rights offerings (0.23) -- -- (0.04) (0.26)
Offering costs charged to paid in capital (0.01) -- -- (0.01) (0.01)
--------- --------- --------- --------- ---------
Total capital share transactions (0.24) -- -- (0.05) (0.27)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 6.94 $ 8.17 $ 9.09 $ 10.25 $ 9.76
========= ========= ========= ========= =========
Per share market value, end of period $ 7.56 $ 7.55 $ 8.6875 $ 9.75 $ 10.9375
========= ========= ========= ========= =========
Total investment return(1) based on:
Market Value 14.1% (3.2%) 6.7% 1.3% 40.5%
Net Asset Value (3.0%) 0.2% 6.2% 17.6% 31.2%
RATIOS/SUPPLEMENTAL DATA:
Ratios of expenses to average net assets 0.91% 0.88% 0.85% 0.94% 0.94%
Ratio of net investment income to average net assets 0.56% 0.63% 0.32% 0.56% 1.01%
Ratio of total distributions to average net assets 10.21% 10.46% 16.86% 11.62% 16.48%
Portfolio turnover rate(2) 73.30% 127.55% 54.24% 76.02% 55.15%
Net assets - end of period (in thousands) $ 145,517 $ 140,863 $ 153,002 $ 171,512 $ 138,905
See accompanying notes to financial statements.
* Annualized.
(1) 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.
(2) 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
year ended December 31, 2001 were $116,270,477 and $105,432,037,
respectively.
BLUE CHIP VALUE FUND, INC.
STATEMENT OF INVESTMENTS
December 31, 2001
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS - 96.74%
BASIC MATERIALS - 2.02%
Forestry and Paper - 2.02%
Bowater Inc. 61,600 $2,846,653 $2,938,320
TOTAL BASIC MATERIALS 2,846,653 2,938,320
--------------------------------------------------------------------------------
CAPITAL GOODS - 3.71%
Aerospace & Defense - 3.71%
General Dynamics Corp. 29,600 1,509,724 2,357,344
Raytheon Co. 93,500 3,039,038 3,035,945
------------ ------------
4,548,762 5,393,289
TOTAL CAPITAL GOODS 4,548,762 5,393,289
--------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.68%
Business Products & Services - 1.68%
Omnicom Group Inc. 27,400 2,020,260 2,448,190
TOTAL COMMERCIAL SERVICES 2,020,260 2,448,190
--------------------------------------------------------------------------------
COMMUNICATIONS - 5.71%
Telecommunications - Service Providers - 5.71%
ALLTEL Corp. 45,800 2,289,836 2,827,234
BellSouth Corp. 74,100 2,935,163 2,826,915
Telephone & Data Systems Inc. 29,600 2,952,671 2,656,600
------------ ------------
8,177,670 8,310,749
TOTAL COMMUNICATIONS 8,177,670 8,310,749
--------------------------------------------------------------------------------
CONSUMER CYCLICAL - 13.60%
Clothing & Accessories - 2.43%
TJX Companies Inc. 88,600 1,980,385 3,531,596
General Merchandise - 1.88%
Target Corp. 66,800 1,982,032 2,742,140
Other Consumer Services - 1.12%
Cendant Corp.* 82,800 1,070,657 1,623,708
Publishing & Media - 6.32%
Charter Communications Inc. - Class A* 156,400 3,175,770 2,569,652
Dow Jones & Company Inc. 60,400 3,359,833 3,305,692
Viacom Inc. - Class B* 75,500 3,622,275 3,333,325
------------ ------------
10,157,878 9,208,669
Restaurants - 1.85%
Tricon Global Restaurants Inc.* 54,700 2,012,383 2,691,240
TOTAL CONSUMER CYCLICAL 17,203,335 19,797,353
--------------------------------------------------------------------------------
CONSUMER STAPLES - 5.67%
Food and Agricultural Products - 1.91%
Kraft Foods Inc. - Class A 81,500 $ 2,529,090 $ 2,773,445
Grocery & Convenience - 2.00%
Safeway Inc.* 69,800 3,194,104 2,914,150
Tobacco - 1.76%
Phillip Morris Companies Inc. 55,900 2,008,479 2,563,015
TOTAL CONSUMER STAPLES 7,731,673 8,250,610
--------------------------------------------------------------------------------
ENERGY - 6.28%
Exploration & Production - 2.35%
Apache Corp. 33,440 1,855,109 1,667,987
Ocean Energy Inc. 91,500 1,760,432 1,756,800
------------ ------------
3,615,541 3,424,787
Integrated Oils - 3.93%
Conoco Inc. 105,800 2,880,010 2,994,140
Royal Dutch Petroleum Co. - ADR 55,500 3,496,714 2,720,610
------------ ------------
6,376,724 5,714,750
TOTAL ENERGY 9,992,265 9,139,537
--------------------------------------------------------------------------------
FINANCIALS - 23.89%
Insurance Brokerage - 1.63%
AON Corp. 66,800 2,209,536 2,372,736
Integrated Financial Services - 6.00%
Citigroup Inc. 108,800 4,895,748 5,492,224
JP Morgan Chase & Co. 89,000 3,780,392 3,235,150
------------ ------------
8,676,140 8,727,374
Life & Health Insurance - 3.59%
Nationwide Financial Services Inc. -
Class A 73,600 3,194,427 3,051,456
Principal Financial Group Inc.* 90,500 1,692,894 2,172,000
------------ ------------
4,887,321 5,223,456
Property Casualty Insurance - 7.65%
ACE Ltd. 76,200 2,736,742 3,059,430
Allstate Corp. 58,600 2,022,286 1,974,820
Hartford Financial Services Group Inc. 64,400 3,984,693 4,046,252
XL Capital Ltd. - Class A 22,800 1,645,884 2,083,008
------------ ------------
10,389,605 11,163,510
Securities & Asset Management - 0.97%
Lehman Brothers Holdings Inc. 21,100 1,409,864 1,409,480
Specialty Finance - 2.31%
Federal Home Loan Mortgage Corp. 51,300 2,761,464 3,355,020
Market
Shares Cost Value
------ ---- -----
Thrifts - 1.74%
Washington Mutual Inc. 77,400 $2,190,788 $ 2,530,980
TOTAL FINANCIALS 32,524,718 34,782,556
--------------------------------------------------------------------------------
MEDICAL/HEALTHCARE - 12.00%
Healthcare Services - 4.09%
Omnicare Inc. 129,219 2,267,979 3,214,969
Tenet Healthcare Corp.* 46,700 1,556,073 2,742,224
------------ ------------
3,824,052 5,957,193
Medical Technology - 1.32%
Millipore Corp. 31,300 1,438,491 1,899,910
Pharmaceuticals - 6.59%
Abbott Laboratories 68,700 2,669,351 3,830,025
Bristol - Myers Squibb Co. 57,680 2,554,823 2,941,680
Schering - Plough Corp. 78,760 2,652,315 2,820,396
------------ ------------
7,876,489 9,592,101
TOTAL MEDICAL/HEALTHCARE 13,139,032 17,449,204
--------------------------------------------------------------------------------
TECHNOLOGY - 12.79%
Computer Software - 2.47%
Microsoft Corp.* 54,200 3,470,766 3,591,834
Electronic Equipment - 3.48%
American Power Conversion * 222,800 3,115,145 3,221,688
Sanmina - SCI Corp.* 92,300 2,470,805 1,836,770
------------ ------------
5,585,950 5,058,458
PCs and Servers - 2.97%
International Business
Machines Corp. 25,100 2,405,769 3,036,096
Sun Microsystems Inc.* 104,100 986,223 1,284,594
------------ ------------
3,391,992 4,320,690
Semiconductors - 1.34%
Intel Corp. 61,900 2,565,843 1,946,755
Technology Resellers/Distributors - 2.53%
Avnet Inc. 144,800 3,371,860 3,688,056
TOTAL TECHNOLOGY 18,386,411 18,605,793
--------------------------------------------------------------------------------
TRANSPORTATION - 3.65%
Railroads - 1.87%
Union Pacific Corp. 47,700 2,681,060 2,718,900
Trucking & Shipping - 1.78%
FedEx Corp.* 49,900 2,001,483 2,588,812
TOTAL TRANSPORTATION 4,682,543 5,307,712
--------------------------------------------------------------------------------
UTILITIES - 5.74%
Electric/Gas Utilities - 5.74%
Dynegy Inc. - Class A 90,554 $ 2,509,673 $ 2,309,127
FPL Group Inc. 44,200 2,535,922 2,492,880
Mirant Corp.* 114,300 3,029,563 1,831,086
Reliant Resources Inc.* 103,900 2,873,809 1,715,389
------------ ------------
10,948,967 8,348,482
TOTAL UTILITIES 10,948,967 8,348,482
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS 132,202,289 140,771,795
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.68%
Fidelity Institutional US Treasury,
Class III 1,500,000 1,500,000
Goldman Sachs Financial
Square Prime Obligations
Fund - FST Shares 6,768,527 6,768,527
------------ ------------
TOTAL SHORT-TERM INVESTMENTS 8,268,527 8,268,527
--------------------------------------------------------------------------------
TOTAL INVESTMENTS 102.42% $140,470,816 $149,040,322
Liabilities in Excess of Other Assets (2.42%) (3,522,610)
------ ------------
NET ASSETS 100.00% $145,517,712
====== ============
*Denotes non-income producing security
BLUE CHIP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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 - Each investment security is generally valued at the
last sale price at period end reported by the principal exchange on which the
issue was traded or, if no sale is reported, at a value based on the average
closing bid and asked price. 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. Securities for which market quotations are
not readily available are valued in good faith by or under the direction of the
Board of Directors. Short-term securities having a remaining maturity of 60 days
or less are valued at amortized cost which approximates market value.
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.
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.
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, a
portion of such distributions may constitute a non-taxable return of capital.
The Fund distributes at least 2.5% of its net asset value quarterly to its
stockholders.
CLASSIFICATION OF DISTRIBUTIONS TO STOCKHOLDERS - The Fund adjusts the
classification of distributions to stockholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. No such adjustments were made during the current
year.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and disclosures made in the accompanying
notes to the financial statements. Actual results could differ from those
estimates.
2. UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS (TAX BASIS)
AS OF DECEMBER 31, 2001:
Gross appreciation (excess of value over tax cost) $ 17,239,752
Gross depreciation (excess of tax cost over value) (8,680,014)
------------
Net unrealized appreciation $ 8,559,738
------------
Cost of investments for income tax purposes $140,480,584
============
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 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. CAPITAL TRANSACTIONS
In 2001, the Fund completed a rights offering to existing stockholders. The
Fund issued rights to purchase an additional share of the Fund for each five
shares owned as of February 28, 2001. The subscription period began March 2,
2001 and extended through 5:00 p.m., Eastern Time, March 29, 2001. The price of
the shares issued was $6.45, which represented 95% of the closing price of the
Fund's common stock of $6.79 on March 30, 2001, the pricing date of the
offering. The Fund's net asset value on March 30, 2001 was $7.88. There were
3,522,591 shares issued in the rights offering for proceeds, net of offering
expenses, of $22,551,862.
5. CHANGE OF INDEPENDENT AUDITORS
On February 8, 2000, Ernst & Young LLP ("Ernst & Young") resigned as the
Fund's independent auditors. During the Fund's fiscal years ended December 31,
1999 and 1998, Ernst & Young's reports on the Fund's financial statements
contained no adverse opinion or disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope, or accounting principles. During the
Fund's fiscal years ended December 31, 1999 and 1998, there were no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young, would have
caused it to make reference to the subject matter of the disagreement in
connection with its report on the financial statements for such years. During
the Fund's fiscal years ended December 31, 1999 and 1998, there were no events
of the kind described in Item 304(a)(1)(v) of Regulation S-K under the
Securities Exchange Act of 1934.
On February 8, 2000, after recommendation by the Board's Audit Committee,
the Fund, by action of its Board of Directors, including a majority of the
members of the Board of Directors who are not "interested persons" of the Fund
(as that term is defined in the 1940 Act), selected Deloitte & Touche LLP
("Deloitte & Touche") as the independent auditors to audit the Fund's financial
statements for the fiscal year ended December 31, 2000. During the Fund's fiscal
years ended December 31, 1999 and 1998, neither the Fund nor anyone on its
behalf has consulted Deloitte & Touche on items which (i) concerned the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements, or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable
events (as described in paragraph (a)(1)(v) of said Item 304).
6. SENIOR SECURITIES
At the time of its organization and public offering in 1987, the Fund
borrowed a total of $7,375,500 in the form of 8 1/2% Senior Installment Notes
(the "Notes"). Pursuant to the Notes, the Fund made monthly payments of
principal and interest, the last of which was paid in May 1993. The Fund has had
no Senior Securities outstanding since May 1993. The following table sets forth
the principal amount of the Notes outstanding at the end of each of the past ten
years, together with the asset coverage for each $1,000 of indebtedness.
Asset Coverage
Total Amount Per $1,000 of
December 31 Outstanding Indebtedness
-----------------------------------------------------------
2001 0 N/A
2000 0 N/A
1999 0 N/A
1998 0 N/A
1997 0 N/A
1996 0 N/A
1995 0 N/A
1994 0 N/A
1993 0 N/A
1992 $643,172 $113,596
-----------------------------------------------------------
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
Charlotte T. Petersen, 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.
370 17th Street, Suite 3100
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] BLUECHIP
VALUE FUND
www.blu.com