MANAGED INCOME SECURITIES PLUS FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
LETTER TO SHAREHOLDERS
January 25, 1998
Dear Shareholders:
We are pleased to present the first annual report for the Managed
Income Securities Plus Fund, Inc. (the "Fund"). Enclosed you will find audited
financial statements for the Fund, including a complete summary of portfolio
investments, for the period ended December 31, 1997.
The Fund commenced investment operations on February 5, 1997. The
initial net asset value ("NAV") of the Fund's common shares was $10,000.00 per
share. At December 31, 1997 the NAV of the Fund's common shares was $10,185.75
per share, representing an increase in total return, based on NAV, of 2.78%, for
the period February 5, 1997 through December 31, 1997, assuming reinvestment of
dividends and distributions. Additional performance data can be found in the
"Financial Highlights" section of this report.
We appreciate your interest in the Fund, and would be pleased to respond
to any questions or comments. If you have any questions, please feel free to
call the Fund at 212-272-9027.
Sincerely,
/s/ Eli Wachtel
Eli Wachtel
President
Managed Income Securities Plus Fund, Inc.
1
<PAGE>
<TABLE>
<CAPTION>
MANAGED INCOME SECURITIES PLUS FUND, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(OOO's)+ (NOTE A)
DESCRIPTION
- --------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 41.28%
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 40.60%
U.S. TREASURY BOND - 0.20%
U.S. Treasury Bond, 6.375%, 08/15/27 (cost $1,049,375) ....... 1,000 $ 1,055,870
-------------
U.S. TREASURY NOTES - 40.40%
U.S. Treasury Notes, 5.625%, 12/31/99 ........................ 2,000 1,999,531
U.S. Treasury Notes, 5.625%, 12/31/02 ........................ 1,000 996,340
U.S. Treasury Notes, 7.250%, 08/15/04 ........................ 194,000 209,814,861
U.S. Treasury Notes, 6.625%, 05/15/07 ........................ 600 635,339
Total U.S. Treasury Notes (cost $207,689,494) ................ 213,446,071
-------------
Total U.S. Government Obligations (cost $208,738,869) ........ 214,501,941
-------------
FOREIGN DEBT OBLIGATIONS - 0.68%
CANADA - 0.10%
Canada Government Debentures, 6.500%, 06/01/04 (cost $549,783) CND 750 551,607
-------------
GERMANY - 0.58%
Deutschland Republic Bond, 6.750%, 07/15/04 (cost $3,033,859) DEM 5,000 3,031,276
-------------
Total Foreign Debt Obligations (cost $3,583,642) ............. 3,582,883
-------------
Total Long-term Investments (cost $212,322,511) .............. 218,084,824
-------------
SHORT-TERM INVESTMENTS - 58.72%
COMMERCIAL PAPER - 41.59%
Barton Capital Corp., 5.80%, 01/20/98 ........................ 10,000 9,969,389
Delaware Funding Corp., 5.81%, 01/06/98 ...................... 25,000 24,979,826
Ford Motor Credit Corp., 5.77%, 01/09/98 ..................... 25,000 24,967,944
General Electric Capital Corp., 5.77%, 01/16/98 .............. 25,000 24,939,896
Greenwich Funding Corp., 5.83%, 01/09/98 ..................... 25,160 25,127,404
IBM Corp., 5.77%, 01/14/98 ................................... 25,000 24,947,910
Merrill Lynch & Co., Inc., 5.80%, 01/16/98 ................... 25,000 24,939,583
Standard Credit Card Trust, 5.80%, 01/13/98 .................. 25,000 24,951,667
Twin Towers Inc., 5.80%, 01/13/98 ............................ 25,000 24,951,667
Windmill Funding Corp., 5.95%, 01/15/98 ...................... 10,000 9,976,861
-------------
Total Commercial Paper (cost $219,752,148) ................... 219,752,147
-------------
2
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
(OOO's)+ (NOTE A)
DESCRIPTION
- --------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 16.98%
Federal Home Loan Mortgage Corporation
5.68%*, 01/23/98 ......................................... 55,000 $ 54,809,089
5.68%*,01/23/98 .......................................... 35,000 34,878,511
-------------
Total U.S. Government Agency Discount Notes (cost $89,687,600) 89,687,600
-------------
INVESTMENT COMPANIES - 0.15% SHARES
- ---------------------------- ------
The Milestone Funds Treasury Obligations Portfolio, Institutional Shares **
( cost - $815,217)............................................ 815,217 815,217
-------------
Total Short-Term Investments (cost - $310,254,964)............ 310,254,964
-------------
Total Investments (cost - $522,577,476) - 100.00%............. $ 528,339,788
=============
<FN>
+ Denominated in United States dollars unless otherwise indicated.
* Effective yield on date of purchase.
** Money Market Fund.
CND Canadian Dollar.
DEM German Deutschemark.
</FN>
</TABLE>
3
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
ASSETS
Investments, at value (cost $522,577,476)(Notes A,C).......... $528,339,788
Interest receivable .......................................... 5,479,590
Receivable for investments sold .............................. 1,106,019
Deferred organization expenses (Note A) ...................... 27,189
Prepaid Insurance ............................................ 3,141
------------
Total assets ...................................... 534,955,727
------------
LIABILITIES
Payable for investments purchased ............................. 8,385,770
Notes payable (Note A) ........................................ 50,000
Advisory fee payable (Note B) ................................. 33,445
Payable for open forward foreign currency exchange
contracts (Notes A,D) ...................................... 16,743
Accounting and administration fees payable (Note B) ........... 6,795
Accrued expenses .............................................. 144,019
------------
Total liabilities ................................. 8,636,772
------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL SHARES ............. $526,318,955
============
NET ASSETS CONSIST OF:
Preferred shares (Note E) .................................... $200,000,000
Common shares:
Par value ($0.01, 32,036.8 shares issued and outstanding,
97,000 shares authorized) .............................. 320
Paid-in capital (Note E) .................................. 320,573,066
Net unrealized appreciation in value of investments
and translation of other assets and liabilities
denominated in foreign currencies ...................... 5,745,569
------------
Net assets applicable to outstanding capital shares $526,318,955
============
Net assets applicable to outstanding common shares $326,318,955
============
NET ASSET VALUE PER COMMON SHARE:
($326,318,955 / 32,036.8)............ $ 10,185.75
============
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
MANAGED INCOME SECURITIES PLUS FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 5, 1997* THROUGH DECEMBER 31, 1997
INVESTMENT INCOME
<S> <C>
Interest (Note A).............................................. $27,356,683
-----------
EXPENSES
Advisory fees (Note B) ....................................... 350,762
Accounting and administration fees (Note B) .................. 72,329
Preferred stock credit rating fee ............................ 70,000
Legal and auditing fees ...................................... 54,474
Custodian fees and expenses (Note B) ......................... 51,607
Transfer agent fees and expenses ............................. 27,723
Directors' fees and expenses ................................. 20,701
Amortization of organizational costs (Note A) ................ 6,002
Interest and other (Note A)................................... 21,013
-----------
Total expenses .......................................... 674,611
-----------
Net investment income ........................................ 26,682,072
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS
Net realized gain from investments ........................... 47,834
Net change in unrealized appreciation in value of
investments and translation of other assets and liabilities
denominated in foreign currencies ......................... 5,745,569
-----------
Net realized and unrealized gain on investments and foreign
currency related transactions ............................. 5,793,403
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $32,475,475
===========
<FN>
- ----------
* Commencement of investment operations.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FEBRUARY 5, 1997* THROUGH DECEMBER 31, 1997
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income ....................................... $ 26,682,072
Net realized gain from investments .......................... 47,834
Net change in unrealized appreciation in value of
investments and translation of other assets and liabilities
denominated in foreign currencies ......................... 5,745,569
-------------
Net increase in net assets resulting from operations ........ 32,475,475
-------------
Dividends to preferred shareholders from
Net investment income ....................................... (23,811,909)
Dividends and distributions to common shareholders from
Net investment income ....................................... (2,885,777)
Net realized gain from investments .......................... (47,834)
-------------
Total dividends and distributions to shareholders ........... (26,745,520)
-------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from the sale of common and preferred shares.... 520,589,000
-------------
Total increase in net assets ................................ 526,318,955
-------------
NET ASSETS
Beginning of period ......................................... --
-------------
End of period ............................................... $ 526,318,955
=============
- ----------
* Commencement of investment operations.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FEBRUARY 5, 1997* THROUGH DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for the period indicated. This information has been
derived from information provided in the financial statements.
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period ...................... $ 10,000.00
--------------
Net investment income ..................................... 836.13
Net realized and unrealized gain on investments and
foreign currency related transactions(1) ............... 187.38
--------------
Net increase in net assets resulting from operations ...... 1,023.51
--------------
Dividends to preferred shareholders from
Net investment income ................................. (746.19)
Dividends and distributions to common shareholders from
Net investment income ................................. (90.08)
Net realized gains from investments ................... (1.49)
--------------
Total dividends and distributions to shareholders ......... (837.76)
--------------
Net asset value, end of period ............................ $ 10,185.75
==============
Total investment return(2) ................................ 2.78%
==============
RATIOS/SUPPLEMENTAL DATA
Net assets applicable to outstanding capital shares
at end of period (000's omitted) ...................... $ 526,319
Ratio of expenses to average net assets(3) ................ 0.14%
Ratio of net investment income to average net assets(3).... 5.71%
Portfolio turnover rate ................................. 25.79%
Value of preferred shares outstanding (000's omitted)...... $ 200,000
Net asset coverage per share of preferred shares,
end of period ......................................... $ 263,159
Liquidation value per share of preferred shares(4)(Note E). $ 100,000
- ----------
* Commencement of investment operations.
** Calculated based on average shares outstanding.
(1) The amount shown for a common share outstanding is not in accordance with
the change in the aggregate gains and losses in investments during the
period due to the timing of sales of Fund shares in connection with the
Fund's offerings and fluctuating net asset values.
(2) Total investment return is calculated assuming a purchase of common
shares at the net asset value on the first day and a sale of common
shares on the last day of the period. Total investment return includes
reinvestment of dividends and distributions, if any. Underwriting
discounts and commissions, if any, are not reflected in total investment
return. Total investment return is not annualized.
(3) Annualized.
(4) Excluding accumulated but unpaid dividends, if any.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Managed Income Securities Plus Fund, Inc. (the "Fund"), is a non-diversified,
closed-end management investment company registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"). The Fund was incorporated under the laws of the
State of Delaware on January 27, 1997.
ORGANIZATIONAL MATTERS - Prior to commencing investment operations on February
5, 1997, the Fund did not have any transactions other than those relating to
organizational matters. Costs of $33,191 incurred by the Fund in connection with
the organization, registration with the Commission and initial offering of its
shares, have been deferred and are being amortized using the straight-line
method over the period of benefit not exceeding sixty months, beginning with the
commencement of investment operations of the Fund. In the event that the Fund is
liquidated prior to the end of the sixty-month period, The Bear Stearns
Companies Inc. ("Bear Stearns") shall bear the unamortized deferred organization
expenses.
MANAGEMENT ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
PORTFOLIO VALUATION - Investments are stated at fair value in the accompanying
financial statements. Investments (including short-term investments) are valued
by one or more independent pricing services (the "Service") approved by the
Fund's Board of Directors. Securities valued by the Service for which quoted bid
prices in the judgment of the Service are readily available and are
representative of the bid side of the market, are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such securities)
and asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Securities which mature in 60 days or less are
valued at amortized cost, which approximates market value, unless this method
does not represent fair value. Expenses and fees, including the investment
advisory and administration fees, are accrued daily and taken into account for
the purpose of determining the net asset value of the Fund's shares. The net
asset value of the Fund is calculated at the end of each month and at any other
times determined by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from securities, if any, are calculated on
the identified cost basis. Interest income is recorded on an accrual basis.
Discounts are treated as adjustments to interest income and identified costs of
investments over the lives of respective investments.
8
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - A forward foreign currency
exchange contract is an obligation to purchase or sell a specific currency for
an agreed-upon price at a future date. During the period the contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. When the contract is closed, or
the delivery of the currency is made or taken, the Fund records a realized gain
or loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract.
U.S. FEDERAL TAX STATUS - The Fund intends to distribute substantially all of
its taxable income and to comply with the other requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, the Fund intends not to be subject to
a U.S.
federal excise tax.
FOREIGN CURRENCY TRANSLATIONS - The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for U.S. federal income tax purposes.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation in the value of investments and translation
of other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange gains represent foreign exchange gains and losses
from transactions in foreign currencies and forward foreign currency contracts,
exchange gains or losses realized between the trade date and settlement dates on
security transactions, and the difference between the amounts of interest and
dividends recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received.
DIVIDENDS AND DISTRIBUTIONS - The Fund distributes, at least annually to
shareholders of the common shares, substantially all of its net investment
income and net realized short-term capital gains, if any after the required
distributions on the preferred shares are met. The Fund determines annually
whether to distribute any net realized long-term capital gains in excess of net
realized short-term capital losses to shareholders of the common shares, if any.
An additional distribution may be made to the extent necessary to avoid the
payment of a 4% U.S. federal excise tax. Dividends and distributions to common
and preferred shareholders are recorded by the Fund on the respective shares'
ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
9
<PAGE>
Dividends on the outstanding preferred shares of the Fund are cumulative from
their respective settlement dates, and payable quarterly in arrears on March 30,
June 30, September 30, and December 30 of each year (or the next succeeding
business day), at a rate representing an annual dividend yield of 13.270% until
and including December 30, 2006, and thereafter at a rate representing an annual
dividend yield of 1.00%. At December 31, 1997, the Fund reclassified $15,614
from distributions in excess of net investment income and net realized
short-term capital gains to paid-in capital.
OTHER - The Fund has outstanding $50,000 aggregate principal amounts of Floating
Rate Notes (the "Notes") paying interest quarterly at a floating rate equal to
the three month LIBOR plus 2.50% per annum over the yield of the one-year
constant maturity Treasury Security. The Notes are redeemable at face value at
any time by the Fund and are due upon the earlier of December 30, 2017 or the
dissolution of the Fund.
NOTE B - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At December 31, 1997, Bear Stearns Asset Management Inc. ("BSAM" or the
"Adviser"), a wholly-owned subsidiary of Bear Stearns, served as the Fund's
investment adviser pursuant to an Investment Advisory Agreement with the Fund.
Under the terms of the Investment Advisory Agreement, the Fund has agreed to pay
the Adviser a monthly fee equal to an annual rate of 0.075% of the Fund's
average monthly net assets.
As of December 4, 1997, the Bear Stearns Funds Management Inc. ("BSFM") changed
its name to Bear Stearns Asset Management Inc. BSAM has delegated certain
administrative services to a separate administrator, Bear Stearns Funds
Management Inc. ("BSFMI"), a newly created wholly-owned subsidiary of Bear
Stearns. BSFMI and BSAM are commonly owned and staffed by the same personnel and
perform the same services called for by the Investment Advisory Agreement with
BSFM. On February 4, 1998, at a regular meeting of the Fund's Board of
Directors, the Board approved the investment advisory agreement with BSAM and
the related delegation of duties to BSFMI.
Under the terms of an Administrative Services Agreement with the Fund, PFPC Inc.
("PFPC") provides certain fund accounting and administrative services to the
Fund. For providing these services, the Fund has agreed to pay PFPC an annual
fee of $80,000, plus out of pocket expenses, payable monthly.
PFPC also serves as the Fund's transfer agent, dividend disbursing agent and the
registrar for the common shares, preferred shares and notes.
Custodial Trust Company ("CTC"), a wholly-owned subsidiary of Bear Stearns and
an affiliate of the Adviser, serves as custodian to the Fund. For providing
these services, the Fund has agreed to pay CTC a monthly fee equal to an annual
rate of 0.01% of the Fund's average net assets, subject to a minimum annual fee
of $6,000, plus transaction charges.
NOTE C - INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1997 was $522,577,476. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$5,762,313 was composed entirely of gross appreciation representing an excess of
value over the cost of the Fund's investments.
10
<PAGE>
For the period ended December 31, 1997, purchases and sales of securities, other
than short-term investments, were $263,970,561 and $50,727,953, respectively.
NOTE D - OPEN FORWARD FOREIGN CURRENCY CONTRACTS
The following forward foreign currency contracts were held by the Fund at
December 31, 1997:
<TABLE>
<CAPTION>
DELIVERY
VALUE
(LOCAL SETTLEMENT MARKET NET UNREALIZED
CURRENCY CURRENCY) DATE COST VALUE GAIN/(LOSS)
-------- --------- ---- ---- ----- -----------
PURCHASES:
- ----------
<S> <C> <C> <C> <C> <C>
Australian dollars 229,340 04/06/98 $ 150,000 $ 149,720 $ (280)
Canadian dollars 791,558 01/06/98 554,032 553,143 (889)
Canadian dollars 714,300 04/06/98 500,000 501,166 1,166
Denmark krone 1,532,250 04/06/98 225,000 224,784 (216)
German deutschemarks 5,615,312 01/06/98 3,122,810 3,123,019 209
German deutschemarks 8,965,500 02/05/98 5,000,000 4,997,046 (2,954)
German deutschemarks 600,000 03/06/98 337,162 334,952 (2,210)
Great Britain pounds 607,478 02/06/98 1,000,000 996,149 (3,851)
Japanese yen 259,000,000 02/06/98 2,000,000 1,994,972 (5,028)
Japanese yen 103,560,000 02/09/98 800,000 798,006 (1,994)
Swedish krona 1,975,750 04/06/98 250,000 249,788 (212)
SALES:
Canadian dollars 791,558 04/06/98 555,479 555,588 109
German deutschemarks 5,615,312 02/05/98 3,128,308 3,126,843 (1,465)
Swiss francs 486,120 03/06/98 337,162 338,034 872
---------
Net Unrealized Loss: $ (16,743)
---------
</TABLE>
NOTE E - CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 97,000 shares of $0.01 par value common
stock. The Fund currently has 32,036.8 shares of common stock outstanding, all
of which are beneficially owned by Bear Stearns. The common stock has not been
and will not be registered under the Securities Act of 1933, as amended, and as
a consequence the common shares may be offered or transferred only in a private
transaction.
During the period ended December 31, 1997, the Fund had no transactions in its
common shares, other than the sale of 32,036.8 shares to Bear Stearns for
$320,589,000.
The Fund is authorized to issue up to 3,000 shares of $0.01 par value preferred
stock. The Fund currently has 2,000 shares of preferred stock outstanding. The
preferred stock has not been and will not be registered under the Securities Act
of 1933, as amended, and as a consequence the preferred stock may be offered or
transferred only in a private transaction. As of December 31, 1997 the preferred
stock was rated "aaa" by Moody's Investors Service.
During the period ended December 31, 1997, the Fund had no transactions in its
preferred shares, other than the sale of 2,000 shares for $200,000,000.
No dividends shall be declared or paid or set apart for payment on any series of
capital stock of the Fund ranking, as to dividends, on a parity with or junior
to the preferred shares for any period, unless full cumulative dividends have
been or contemporaneously are declared and paid, or declared and a sum
sufficient for the payment thereof is set apart for such payments, on the
preferred shares for all past dividend periods and the then-current dividend
period.
11
<PAGE>
Additionally, under the 1940 Act, the Fund may not declare dividends or make
other distributions on common shares or purchase any such shares if, at the time
of the declaration, distribution or purchase, asset coverage with respect to the
outstanding preferred stock is less than 200%.In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Fund, the holders of
the preferred stock at the time outstanding will be entitled to receive out of
the assets of the Fund available for distribution to stockholders, before any
distribution of assets is made to holders of common stock or any other class of
stock ranking junior to the preferred stock upon liquidation, liquidating
distributions equal to $100,000 per share.
The preferred shares are not redeemable, except upon the occurrence of a Tax
Event (as defined under "Description of Preferred Stock - Rights Upon
Liquidation" caption in the Fund's Offering Memorandum). In the event that a Tax
Event has occurred, the Fund may, at its option, redeem, in whole, but not in
part, the preferred shares at a redemption price equal to the Tax Event
Redemption Price. The Tax Redemption Price will be (i) the sum of the present
values of all future dividend payments due on the preferred shares (rounded to
the nearest whole cent per share), discounted on a quarterly basis at the
"Redemption Discount Rate" (as defined in the Fund's Offering Memorandum) to the
dividend payment date immediately preceding the redemption date, plus (ii) any
accrued but unpaid dividends up to and including the redemption date.
The holders of preferred shares have voting rights equal to the holders of
common shares (one vote per share) and will vote together with holders of common
shares as a single class. However, holders of preferred shares are also entitled
to elect two of the Fund's directors. In addition, the 1940 Act requires that
along with approval by shareholders that might otherwise be required, the
approval of the holders of a majority of any outstanding preferred shares,
voting separately as a class would be required to (a) adopt any plan of
reorganization that would adversely affect the preferred shares, and (b) take
any action requiring a vote of security holders pursuant to Section 13(a) of the
1940 Act, including, among other things, changes in the Fund's subclassification
as a closed-end investment company or changes in their fundamental investment
restrictions.
12
<PAGE>
MANAGED INCOME SECURITIES PLUS FUND, INC.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
Managed Income Securities Plus Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Managed Income Securities Plus Fund, Inc. (the
"Fund"), as of December 31, 1997, and the related statements of operations,
changes in net assets and the financial highlights for the period February 5,
1997 (commencement of investment operations) through December 31, 1997. 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 the financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 investments owned as of December 31, 1997 by
correspondence with the custodian, brokers and issuers. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of Managed Income
Securities Plus Fund, Inc. at December 31, 1997, the results of its operations,
the changes in its net assets and the financial highlights for the period
presented, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
February 18, 1998
13
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BEAR STEARNS
MANAGED INCOME SECURITIES PLUS FUND, INC.
245 Park Avenue
New York, NY 10167
1-212-272-9027
DIRECTORS AND
CORPORATE OFFICERS
William J. Montgoris Chairman of the Board
Eli Wachtel President and Director
Peter M. Bren Director
John R. McKernan,Jr. Director
M.B. Oglesby,Jr. Director
Frank J. Maresca Vice President and Treasurer
Ellen T. Arthur Secretary
Vincent L. Pereira Vice President, Assistant Treasurer and
Assistant Secretary
INVESTMENT ADVISER
Bear Stearns Asset
Management Inc.
245 Park Avenue
New York, NY 10167
CO-ADMINISTRATOR,
ACCOUNTING AND
CUSTODIAN TRANSFER AGENT
Custodial Trust Company PFPC Inc.
101 Carnegie Center 400 Bellevue Parkway
Princeton, NJ 08540 Wilmington, DE 19809
LEGAL COUNSEL INDEPENDENT AUDITORS
Skadden, Arps, Slate Deloitte & Touche LLP
Meagher & Flom LLP Two World Financial Center
919 Third Avenue New York, NY 10281
New York, NY 10022
This report, including the financial statements herein, is submitted for the
general information of shareholders of the Fund. It is not a prospectus,
circular or representation intended for use in the purchase or sale of the Fund
or of any securities menitoned in this report. Total investment return is based
on historical results and is not intended to indicate future performance. The
investment return and principal value of an investment in the Fund will
flcutuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
