Managed Securities Plus Fund, Inc.
Annual Report
December 31, 1999
<PAGE>
MANAGED SECURITIES PLUS FUND, INC.
LETTER TO SHAREHOLDER
February 4, 2000
Dear Shareholder:
We are pleased to present the annual report for the Managed Securities
Plus Fund, Inc. (the "Fund"). Enclosed you will find the audited financial
statements for the Fund for the year ended December 31, 1999.
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, 1999, the NAV of the Fund's common share was $1,641.00,
representing a decrease in total return, based on NAV, of 17.83%, for the period
February 5, 1997 through December 31, 1999 and 22.98% for the year ended
December 31, 1999, assuming reinvestment of dividends and distributions, if any.
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 Securities Plus Fund, Inc.
1
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MANAGED SECURITIES PLUS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash..........................................................$38,336
Interest receivable............................................14,150
-------
Total assets .............................................52,486
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LIABILITIES
Accounting and administration fees payable (Note B).............7,280
Advisory fee payable (Note B)...................................4,211
Custodian fee payable (Note B)................................. 554
Accrued expenses...............................................38,800
-------
Total liabilities.........................................50,845
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NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL SHARE.....................$ 1,641
=======
NET ASSETS CONSIST OF:
Common shares:
Paid-in capital (Notes A,D)...................................1,641
-------
Net assets applicable to outstanding capital share ...$ 1,641
=======
NET ASSET VALUE PER COMMON SHARE:
($1,641 / 1)..................................................$ 1,641
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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MANAGED SECURITIES PLUS FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest (Note A).......................................... $22,713,025
-----------
EXPENSES
Advisory fees (Note B)..................................... 329,223
Accounting and administration fees (Note B)................ 82,302
Legal and auditing fees.................................... 67,760
Custodian fees and expenses (Note B)....................... 49,101
Transfer agent fees and expenses........................... 27,863
Directors' fees and expenses............................... 25,460
Amortization of organizational costs (Note A).............. 21,117
Interest and other (Note A)................................ 20,524
-----------
Total expenses..................................... 623,350
-----------
Net investment income...................................... 22,089,675
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NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from:
Investments........................................ (2,018,403)
Net change in unrealized appreciation in value of
investments........................................ (6,842,744)
-----------
Net realized and unrealized loss on investments ........... (8,861,147)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $13,228,528
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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MANAGED SECURITIES PLUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
Net investment income......................................$ 22,089,675 $29,107,927
Net realized gain/(loss) on investments and
foreign currency related transactions.............. (2,018,403) 9,019,519
Net change in unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated
in foreign currencies ............................. (6,842,744) 1,097,175
------------ -------------
Net increase in net assets resulting
from operations.................................... 13,228,528 39,224,621
------------ -------------
DIVIDENDS TO PREFERRED SHAREHOLDERS:
Net investment income...................................... (24,696,944) (26,540,000)
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income...................................... -- (2,344,262)
Net realized gain from investments......................... (3,180,479) (5,734,238)
Return of capital..........................................(107,346,540) --
------------ -------------
Total dividends and distributions to shareholders..........(135,223,963) (34,618,500)
------------ -------------
CAPITAL SHARE TRANSACTIONS
Redemption of common and preferred shares (Note D) ........(408,928,000) --
------------ -------------
Total increase/(decrease) in net assets....................(530,923,435 4,606,121
------------ -------------
NET ASSETS
Beginning of year.......................................... 530,925,076 526,318,955
------------ -------------
End of year (including undistributed net
investment income of $180,410 for
the year ended December 31, 1998) $ 1,641 $ 530,925,076
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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MANAGED SECURITIES PLUS FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
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 each period indicated. This information has been
derived from information provided in the financial statements.
================================================================================
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED FEBRUARY 5, 1997*
DECEMBER 31, DECEMBER 31, THROUGH
1999 1998 DECEMBER 31, 1997
-------------------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period .......................... $ 10,329.52 $ 10,185.75 $ 10,000.00
----------- ----------- ------------
Net investment income ......................................... 742.39 908.58 836.13
Net realized and unrealized gain on investments and
foreign currency related transactions ......................... 1,370.95(1) 315.78 187.38(1)
----------- ----------- ------------
Net increase in net assets resulting from
operations .............................................. 2,113.34 1,224.36 1,023.51
----------- ----------- ------------
Dividends to preferred shareholders:
Net investment income ......................................... (830.02) (828.42) (746.19)
Dividends and distributions to common shareholders:
Net investment income ......................................... -- (73.17) (90.08)
Net realized gain from investments ............................ (99.28) (179.00) (1.49)
Return of capital ............................................. (3,350.72) -- --
----------- ----------- ------------
Total dividends and distributions to shareholders ............. (4,280.02) (1,080.59) (837.76)
----------- ----------- ------------
Capital Share Transactions:
Redemption of common shares (Note D) .......................... (6,521.84) -- --
----------- ----------- ------------
Net asset value, end of period ................................ $ 1,641.00 $ 10,329.52 $ 10,185.75
=========== =========== ============
Total investment return (2) ................................... -22.98% 3.79% 2.78%
=========== =========== ============
Ratios/Supplemental Data
Net assets applicable to outstanding capital shares
at end of period (000's omitted) .............................. $ 2 $ 530,925 $ 526,319
Ratio of expenses to average net assets ....................... 0.13% 0.13% 0.14%(3)
Ratio of net investment income to average net assets .......... 4.72% 5.47% 5.71%(3)
Portfolio turnover rate ....................................... 52.76% 66.76% 25.79%
Value of preferred shares outstanding (000's omitted) ......... -- $ 200,000 $ 200,000
Net asset coverage per share of preferred shares,
end of period ................................................. -- $ 265,463 $ 263,159
Liquidation value per share of preferred shares,
if any (4)(Note D) -- $ 100,000 $ 100,000
<FN>
- ----------------
* 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 each 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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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MANAGED SECURITIES PLUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Managed Securities Plus Fund, Inc. (the "Fund"), formerly known as Managed
Income Securities Plus Fund, Inc., 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, were deferred and was amortized using the straight-line method over the
expected period of benefit not exceeding sixty months, beginning with the
commencement of investment operations of the Fund. At January 1, 1999 (start of
the Fund's new fiscal year) all unamortized organizational costs, were charged
to expense at that date in accordance with the American Institute of Certified
Public Accountants' Statement of Position 98-5 - Reporting on the Costs of
Start-up Activities.
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, if any, 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 for which
quoted bid prices in the judgment of the Service are representative and readily
available, 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 accreted over the lives of the related investments into interest
income with adjustments to the cost of such investments.
6
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U.S. FEDERAL TAX STATUS - The Fund has distributed substantially all of its
taxable income in compliance with the 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 is not subject to a U.S. federal excise tax.
At December 31, 1999, the Fund had capital loss carryforwards of $2,018,403
available as a reduction to the extent provided in regulations of any future net
capital gains realized before the end of 2007. This amount has been included
within the reclassification to Paid-in capital. To the extent that the capital
loss carryforward is used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders.
DIVIDENDS AND DISTRIBUTIONS - The Fund distributes, at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, 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 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.
RECLASSIFICATION OF CAPITAL ACCOUNTS - As of December 31, 1999, the Fund
reclassified $111,659,359 of distributions in excess of net investment income
and realized capital gains to Paid-in capital.
The Fund reclassified $11,000 (originally charged to Paid-in capital at the
Fund's inception in anticipation of incurring various expenses in connection
with the Fund's common and preferred share offerings) to Paid-in capital.
OTHER - Prior to December 6, 1999 the Fund had outstanding $50,000 aggregate
principal amounts of Floating Rate Notes (the "Notes") paying interest quarterly
at a floating rate equal to the three month London Interbank Offered Rate
("LIBOR") plus 2.50% per annum. The Notes were redeemable at face value at any
time by the Fund. On December 6, 1999, the Fund redeemed the Notes at face
value.
NOTE B - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
At December 31, 1999, Bear Stearns Asset Management Inc. (the "Adviser"), a
wholly-owned subsidiary of The Bear Stearns Companies Inc. ("Bear Stearns"),
served as the Fund's investment adviser pursuant to an Investment Advisory
Agreement whereby 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.
Under the terms of an Administrative Services Agreement among the Fund, Bear
Stearns and PFPC Inc. ("PFPC"), PFPC provided certain fund accounting and
administrative services to the Fund for the year ended December 31, 1999. For
providing these services, the Fund has agreed to pay PFPC an annual fee of
$80,000, plus out of pocket expenses, if any, payable monthly.
For the year ended December 31, 1999, PFPC also served as the Fund's transfer
agent, dividend disbursing agent and the registrar for the common shares,
preferred shares and Notes.
7
<PAGE>
For the year ended December 31, 1999, Custodial Trust Company ("CTC"), a
wholly-owned subsidiary of Bear Stearns and an affiliate of the Adviser, served
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
monthly net assets, subject to a minimum annual fee of $6,000, plus transaction
charges.
NOTE C - INVESTMENTS IN SECURITIES
At December 31, 1999, the Fund had no investments in securities.
For the year ended December 31, 1999, purchases and sales of securities, other
than short-term investments, were $30,571,797 and $282,148,422, respectively.
NOTE D - 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 one share of common stock outstanding, which is
beneficially owned by Bear Stearns. The common shares have 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 year ended December 31, 1999, the Fund redeemed 32,035.8 of its
32,036.8 shares of common stock issued and outstanding for $208,939,000. During
the year ended December 31, 1998, the Fund had no transactions in its common
shares.
The Fund is authorized to issue up to 3,000 shares of $0.01 par value preferred
stock. The Fund currently has no shares of preferred stock outstanding as a
result of the redemption of all 2,000 issued and outstanding shares for
$200,000,000 during the year ended December 31, 1999. During the year ended
December 31, 1998, the Fund had no transactions in its preferred shares.
8
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MANAGED SECURITIES PLUS FUND, INC.
REPORT OF INDEPENDENT AUDITORS
To the Shareholder and Board of Directors,
Managed Securities Plus Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Managed
Securities Plus Fund, Inc. (the "Fund") as of December 31, 1999, and the related
statement of operations for the year then ended and 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 and the period
February 5, 1997 (commencement of investment operations) to 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 financial highlights based on our audits.
We conducted our audits 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. 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 the
Fund as of December 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the above stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
February 18, 2000
9
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MANAGED SECURITIES PLUS FUND, INC.
SHAREHOLDER TAX INFORMATION - (UNAUDITED)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's fiscal year end
(December 31, 1999) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such fiscal
year. Of the $110,527,019 distribution paid to common shareholders in respect of
such fiscal year, $3,180,479 was derived from net realized long-term capital
gains.
There were no dividends which would qualify for the dividend received deduction
available to corporate shareholders.
The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1999.
Notification for calendar year 1999 was mailed in January 2000. The notification
reflected the amount to be used by calendar year taxpayers on their U.S. federal
income tax returns along with Form 1099-DIV.
In general, dividends and distributions received by tax-exempt recipients (e.g.,
IRAs and Keoghs) need not be reported as taxable income for U.S. federal income
tax purposes. However, some retirement trusts (e.g., corporate, Keoghs and
403(b)(7) plans) may need this information for their annual information
reporting.
Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Fund.
10
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[LOGO]
[GRAPHIC OMITTED]
MANAGED SECURITIES PLUS FUND, INC.
245 Park Avenue
New York, NY 10167
1.212.272.9027
DIRECTORS AND CORPORATE OFFICERS
Samuel L. Molinaro, Jr. 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
Stephen A. Bornstein Secretary
Vincent L. Pereira Vice President, Assistant Treasurer
and Assistant Secretary
INVESTMENT ADVISER
Bear Stearns Asset
Management Inc.
575 Lexington Avenue
New York, NY 10022
CUSTODIAN CO-ADMINISTRATOR, ACCOUNTING AND
Custodial Trust Company TRANSFER AGENT
101 Carnegie Center PFPC Inc.
Princeton, NJ 08540 400 Bellevue Parkway
Wilmington, DE 19809
LEGAL COUNSEL INDEPENDENT AUDITORS
Skadden, Arps, Slate, Meagher Deloitte & Touche LLP
& Flom LLP Two World Financial Center
Four Times Square New York, NY 10281
New York, NY 10036
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 shares of
the Fund or of any securities mentioned in this report. Total investment return
is based on historical results and is not intended to indicate future
performance. The total investment return and principal value of an investment in
the Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than the original cost.
