<PAGE>
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COUNSELLORS
TANDEM SECURITIES
FUND, INC.
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Semiannual Report to Shareholders
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DIRECTORS OFFICERS
Lionel J. Pincus John L. Furth
Chairman of the Board Chief Executive Officer
Richard N. Cooper Anthony G. Orphanos
President
Donald J. Donahue
Reuben S. Leibowitz
Jack W. Fritz Vice President and
Chief Financial Officer
John L. Furth
Arnold M. Reichman
Thomas A. Melfe Executive Vice President
Alexander B. Trowbridge Stephen Distler
Treasurer and
Chief Accounting Officer
Eugene P. Grace
Vice President and Secretary
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INVESTMENT ADVISER ADMINISTRATOR
Warburg, Pincus Counsellors, Inc. PFPC Inc.
466 Lexington Avenue 103 Bellevue Parkway
New York, New York 10017-3147 Wilmington, Delaware 19809
TRANSFER AGENT
PNC Bank, N.A.
c/o PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19899
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Counsellors Tandem Securities Fund, Inc.
August 22, 1995
Dear Fellow Shareholder:
The net asset value of Counsellors Tandem Securities Fund, Inc. (the "Fund")
at the close of the six-month period ended June 30, 1995 was $16.93 per
Common Share, vs. a year-end 1994 net asset value per share of $14.37. This
represents a 17.8% rate of return for the year's first six months, compared
with same-period gains of 20.2% for the S&P 500 Index and 13.2% for the Value
Line Composite Index.
The rise in the Fund's net asset value during the period is attributable to
several factors. First, utilities stocks, which comprise a considerable
portion of the portfolio, saw their share prices rise over the six-month
period as interest rates fell. As investors in the Fund know, we must remain
invested in these high-yielding stocks in order to earn the income necessary
to pay the dividends on the Fund's Preferred Shares.
The Fund also benefited from its increased emphasis on financial stocks,
which accounted for nearly 12% of the portfolio's equity investments at the
end of the reporting period. These stocks, as a group, were among the
market's leaders in the year's first six months, beneficiaries of the decline
in interest rates and broad-based merger activity within the banking
industry. Strong performers for the Fund during the January to June span
included BankAmerica, First Interstate and Norwest among the banks, and
Allstate, Travelers and Federal Home Loan Mortgage Corporation within the
broader financial-services category.
Also contributing positively to the Fund's performance were its industrial
cyclical stocks, which included U.S. Steel, Inco and Freeport-McMoRan Copper,
and precious-metals holdings Newmont Mining and Placer Dome. Other strong
performers included communications & media holdings Comcast and
Tele-Communications, which rose in anticipation of Congressionsl passage of a
new telecommunications bill, and "special situations" stocks Acclaim
Entertainment, CBI Industries and Stone & Webster. Finally, the Fund's use of
leverage during the six- month period worked to its advantage, as the market
rose and interest rates fell.
We appreciate your support of the Fund and will continue to strive to provide
a high-quality investment.
Sincerely,
/s/ John L. Furth
---------------------------
John L. Furth
Chief Executive Officer
/s/ Anthony G. Orphanos
----------------------------
Anthony G. Orphanos
President
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Counsellors Tandem Securities Fund, Inc.
Statement of Net Assets
June 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCK (82.7%)
Utilities-Electric (24.8%)
Baltimore Gas & Electric Co. 50,000 $ 1,250,000
Central & South West Corp. 100,000 2,625,000
Eastern Utilities Associates 80,000 1,810,000
Houston Industries, Inc. 70,000 2,948,750
Minnesota Power & Light Co. 70,000 1,907,500
Montana Power Co. 65,000 1,495,000
NIPSCO Industries, Inc. 55,000 1,870,000
PECO Energy Co. 100,000 2,762,500
Public Service Co. of Colorado 70,000 2,275,000
-------------
18,943,750
-------------
Utilities-Gas (4.9%)
Equitable Resources, Inc. 37,500 1,082,813
KN Energy, Inc. 60,000 1,522,500
National Fuel Gas Co. 40,000 1,145,000
-------------
3,750,313
-------------
Utilities-Telecommunications (13.7%)
AT&T Corp. 30,000 1,593,750
Bell Atlantic Corp. 38,000 2,128,000
Citizens Utilities Co. Series A 109,086 1,295,398
SBC Communications, Inc. 70,000 3,333,750
US West, Inc. 50,000 2,081,250
-------------
10,432,148
-------------
Other (39.3%)
Acclaim Entertainment, Inc. + 60,000 1,106,250
Allegheny Ludlum Corp. 80,000 1,580,000
Allstate Corp. 22,000 651,750
BankAmerica Corp. 25,000 1,315,625
CBI Industries, Inc. 38,000 954,750
Comcast Corp. Class A Special 83,000 1,540,688
Corning, Inc. 40,000 1,310,000
Federal Home Loan Mortgage Corp. 20,000 1,375,000
Freeport McMoran, Inc. 55,000 969,375
Fund American Enterprises Holdings, Inc. + 30,000 2,141,250
General Electric Co. 60,000 3,382,500
Halliburton Co. 15,000 536,250
H & R Block, Inc. 50,000 2,056,250
Inco Ltd. 40,000 1,130,000
Manpower PLC Sponsored ADR 45,000 1,147,500
</TABLE>
See Accompanying Notes to Financial Statements.
1
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Counsellors Tandem Securities Fund, Inc.
Statement of Net Assets (cont'd)
June 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
Shares Value
------------- -------------
<S> <C> <C>
COMMON STOCK (cont'd)
Other (cont'd)
Newmont Mining Corp. 34,000 $ 1,423,750
Noble Affiliates, Inc. 50,000 1,275,000
Norwest Corp. 70,000 2,012,500
Placer Dome Inc. 38,000 992,750
Stone & Webster, Inc. 38,000 1,121,000
Tele-Communications, Inc. Class A + 60,000 1,406,250
USX-US Steel Group Inc. + 15,000 515,624
-------------
29,944,062
-------------
TOTAL COMMON STOCK (Cost $45,842,961) 63,070,273
-------------
Par
-------------
SHORT-TERM INVESTMENTS (18.0%)
Repurchase agreement with State Street Bank & Trust Co. dated
06/30/95 at 5.85% to be repurchased at $13,693,672 on 07/03/95.
(Collateralized by $13,625,000 U.S. Treasury Note 6.25%, due
08/31/96, with a market value of $13,965,625.) (Cost
$13,687,000) $13,687,000 13,687,000
-------------
TOTAL INVESTMENTS AT VALUE (100.7%)
(Cost $59,529,961*) 76,757,273
LIABILITIES IN EXCESS OF OTHER ASSETS (0.7%) (546,918)
-------------
NET ASSETS (100.0%) 76,210,355
Net Assets applicable to 600,000 shares of preferred stock
outstanding at $50.00 per share 30,000,000
-------------
NET ASSETS APPLICABLE TO COMMON STOCK $46,210,355
=============
NET ASSET VALUE PER SHARE OF COMMON STOCK ($46,210,355 /
2,729,862 common shares) $16.93
=============
</TABLE>
+ Non-income producing security.
* Cost for Federal income tax purposes is $59,546,615.
See Accompanying Notes to Financial Statements.
2
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Counsellors Tandem Securities Fund, Inc.
Statement of Operations
For the Six Months Ended June 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Dividends $1,171,498
Interest 373,338
------------
Total investment income 1,544,836
------------
Expenses:
Investment advisory fee 272,712
Administration fee 49,191
Legal fees 47,183
Custodian and transfer agent fees 29,863
Directors fees 19,836
Amortization of organizational costs 18,596
Audit fee 11,377
Printing 9,511
Insurance 3,472
Other 22,197
------------
Total expenses 483,938
------------
Net investment income 1,060,898
------------
Net Realized and Unrealized Gain from Investments:
Net realized gain from security transactions 619,127
Net increase in unrealized appreciation from investments 6,100,983
------------
Net realized and unrealized gain from investments 6,720,110
------------
Net increase in net assets resulting from operations $7,781,008
============
</TABLE>
See Accompanying Notes to Financial Statements.
3
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Counsellors Tandem Securities Fund, Inc.
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the Six
Months Ended For the
June 30, 1995 Year Ended
(Unaudited) December 31, 1994
--------------------- -----------------------
<S> <C> <C>
From Operations:
Net investment income $ 1,060,898 $ 1,956,437
Net realized gain from security
transactions 619,127 2,590,004
Federal income tax 0 (906,501)
Net increase (decrease) in unrealized
appreciation from investments 6,100,983 (11,112,568)
--------------------- -----------------------
Net increase (decrease) in net assets resulting from
operations 7,781,008 (7,472,628)
--------------------- -----------------------
From Dividends:
Dividends from net investment income:
Preferred shares (806,295) (1,829,507)
--------------------- -----------------------
From Capital Share Transactions:
Cost of common shares repurchased (144,820) (645,046)
Costs associated with tender offer 0 285,798
Proceeds from sale of 600,000 preferred shares (net of
$310,250 placement fees) 0 29,689,750
Cost of 576,958 preferred shares repurchased 0 (28,847,900)
--------------------- -----------------------
Net increase (decrease) in net assets from capital
share transactions (144,820) 482,602
--------------------- -----------------------
Net increase (decrease) in net assets 6,829,893 (8,819,533)
Net Assets:
Beginning of period 69,380,462 78,199,995
--------------------- -----------------------
End of period $76,210,355 $ 69,380,462
===================== =======================
</TABLE>
See Accompanying Notes to Financial Statements.
4
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Counsellors Tandem Securities Fund, Inc.
Financial Highlights
(For a Common Share of the Fund Outstanding Throughout Each Period)
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<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended December 31,
June 30, 1995 --------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990
-------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.37 $ 17.69 $16.54 $16.88 $12.67 $13.29
-------------- ---------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment income .39 .71 .92 .79 .83 .73
Net Gain (Loss) on Securities
(both realized and unrealized) 2.46 (3.07) 1.01 (.33) 4.28 (.50)
Federal income tax .00 (.33) (.01) (.13) (.04) (.23)
-------------- ---------- --------- --------- --------- ---------
Total from Investment
Operations 2.85 (2.69) 1.92 .33 5.07 .00
-------------- ---------- --------- --------- --------- ---------
Less Distributions from Net
Investment Income:
Common stock equivalent of
dividends paid to preferred
shareholders (.30) (.66) (.75) (.75) (.73) (.73)
Dividends to common shareholders .00 .00 .00 .00 (.12) (.12)
-------------- ---------- --------- --------- --------- ---------
Total Distributions (.30) (.66) (.75) (.75) (.85) (.85)
-------------- ---------- --------- --------- --------- ---------
Gain (loss) on common shares sold
(repurchased), net .01 .03 (.02) .08 (.01) .23
-------------- ---------- --------- --------- --------- ---------
Net Asset Value, End of Period $16.93 $ 14.37 $17.69 $16.54 $16.88 $12.67
============== ========== ========= ========= ========= =========
Market Value, End of Period $14.88 $ 12.88 $15.25 $14.13 $14.13 $10.38
============== ========== ========= ========= ========= =========
Total Return
Based on net asset value per share 39.18%* (18.77)% 6.95% (2.01)% 34.41% (3.96)%
Based on market price per share 33.79%* (15.54)% 7.93% .00% 37.58% (8.70)%
Ratios/Supplemental Data:
Net Assets, End of Period (000s) $76,210 $69,380 $78,200 $75,212 $76,879 $64,974
Ratios to average daily net assets:
Operating expenses 1.33%* 1.30% 1.27% 1.27% 1.35% 2.33%
Net investment income 2.92%* 2.60% 3.24% 2.97% 3.45% 3.10%
Portfolio Turnover Rate 28%* 53% 33% 27% 26% 41%
</TABLE>
* Annualized
See Accompanying Notes to Financial Statements.
5
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Counsellors Tandem Securities Fund, Inc.
Notes to Financial Statements
June 30, 1995 (Unaudited)
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1. Significant Accounting Policies
Counsellors Tandem Securities Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's investment objectives are long-term
capital appreciation consistent with the preservation of capital, and
stability and dependability of income, including, so long as preferred shares
are outstanding, earning sufficient current income to pay Regular and
Additional Dividends on the preferred shares.
The net asset values of the preferred and common shares will be determined
as of the close of regular trading on the last business day of the New York
Stock Exchange each week. Net asset value of the preferred shares will be the
lower of (a) the initial public offering price per share ($50.00) plus
accumulated and unpaid dividends, if any, less reductions for Special
Dividends ("Redemption Value"), or (b) the total net assets of the Fund
divided by the number of the preferred shares outstanding. Net asset value of
the common shares will be the total net assets of the Fund less the total net
asset value of the preferred shares, divided by the number of common shares
outstanding.
Securities listed on a securities exchange for which market quotations are
available are valued at the last quoted sale price of the day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Listed securities not traded on the valuation
date and unlisted securities are valued at the most recently quoted bid
price. The value of securities for which no quotations are readily available
are determined in good faith at fair value using methods determined by the
Board of Directors. There were no securities held at June 30, 1995 for which
market quotations were not readily available.
Security transactions are recorded on trade date. Interest income is
recorded on an accrual basis. Dividend income is recorded on ex-dividend
date. The cost of investments sold is determined by use of the specific
identification method for both financial reporting and income tax purposes.
The Fund intends to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies.
Accordingly, the Fund will not be subject to Federal income tax on any net
investment income and capital gains that it distributes to shareholders.
However, the Fund does not intend to distribute long-term capital gains, but
expects instead to retain such long-term capital gains, if any, and to pay
tax on such gains at the rate then applicable to net long-term capital gains
of corporations. Common shareholders will be entitled to a credit for their
pro rata share of such tax payments, and their basis for the common shares
will be increased by the amount of the undistributed gains less the tax paid
by the Fund.
Costs incurred by the Fund in connection with its organization have been
deferred and are being amortized over a period of ten years from the date the
Fund commenced its operations.
The Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund acquires an underlying security
subject to an obligation of the seller to repurchase the security. The value
of the underlying security collateral will be maintained at an amount at
least equal to the total amount of the purchase obligation, including
interest. The collateral is in the Fund's possession.
6
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Counsellors Tandem Securities Fund, Inc.
Notes to Financial Statements (cont'd)
June 30, 1995 (Unaudited)
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2. Investment Adviser
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ("Counsellors G.P."), serves
as the Fund's investment adviser. The Fund pays Counsellors an investment
advisory fee calculated at an annual rate of .75% of the Fund's average daily
net assets. For the six months ended June 30, 1995, Counsellors earned
$272,712 in investment advisory fees.
3. Investments in Securities
Purchases and sales of investment securities for the six months ended June
30, 1995 (excluding short-term investments) were $8,485,075 and $11,774,160,
respectively.
At June 30, 1995, the net unrealized appreciation from investments of
$17,210,658 was comprised of appreciation of $17,361,514 for those
investments having an excess of value over cost, and depreciation of $150,856
for those investments having an excess of cost over value (based on cost for
Federal income tax purposes).
A significant portion of the Fund's investments are in securities of
utilities involved in the generation, transmission or distribution of
electricity, gas, water or telecommunications. As a result of the Fund's
concentration of its investments, it is subject to fluctuation in value and
market risks associated with holding securities related to the utility
industry. At June 30, 1995, the Fund had 43% of its net assets invested in
such securities.
4. Common Shares
The Fund intends to repurchase its outstanding common shares in the open
market from time to time when such shares trade at a discount of 10% or more
from their net asset value. For the six months ended June 30, 1995 and the
year ended December 31, 1994, the Fund repurchased 10,400 and 49,000 common
shares, respectively.
Subject to the requirement to maintain total assets of at least two times
the Redemption Value of the outstanding preferred shares, common shareholders
will be entitled to receive distributions from the net investment income and
net short-term capital gains remaining after payment of dividends (including
Additional and Special Dividends) on preferred shares. After redemption of
the preferred shares, the common shareholders will be entitled to all
distributions that may be declared or approved by the Board of Directors.
5. Preferred Shares
Preferred shareholders are entitled to receive cumulative dividends,
payable quarterly, at the rate of 5.375% of the initial public offering price
($50.00) of the preferred shares ("Regular Dividends"), plus cumulative
Additional Dividends, if any, payable annually, and may receive Special
Dividends. Such dividends will be payable when, as and if declared by the
Board of Directors out of net investment income and net short-term capital
gains legally available therefor. Additional Dividends will be paid if, for
any taxable year, Regular Dividends do not qualify for the dividends received
deduction. The amount of Additional Dividends will be such that the after tax
return of the holders of preferred shares would be the same as if the Regular
Dividends qualified for the dividends received deduction. Special Dividends
may be paid when the Fund is unable to pay dividends to holders of common
shares, as described in Note 4.
7
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Counsellors Tandem Securities Fund, Inc.
Notes to Financial Statements (cont'd)
June 30, 1995 (Unaudited)
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Preferred shares are subject, at the option of the Fund, to redemption at
the then current redemption price. The redemption price is currently $50.00
per share. On October 30, 1996, the Fund will either redeem the preferred
shares or be liquidated. The redemption price is increased for any
accumulated and unpaid dividends and reduced as a result of Special
Dividends.
On January 19, 1994 the Fund received $30,000,000 from the issuance of
600,000 shares of preferred stock with a rate of 5.375% the proceeds of which
were used in the redemption of the Fund's previously outstanding 7.25% $50.00
par value preferred stock plus accumulated dividends on February 22, 1994.
6. Dividends
Regular dividends to 5.375% preferred shareholders for the six months
ended June 30, 1995 amounted to $1.34 per share.
Income distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
7. Net Assets
At June 30, 1995, 6,000,000 preferred shares and 30,000,000 common shares
were authorized; both have a par value of $.01 per share.
Net assets at June 30, 1995 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Paid in capital, net $57,399,867
Undistributed net investment income 964,049
Accumulated net realized gain from security
transactions 619,127
Net unrealized appreciation from investments 17,227,312
-------------
$76,210,355
=============
</TABLE>
8. Selected Quarterly Financial Data for a Common Share
<TABLE>
<CAPTION>
Net Increase
Net Realized (Decrease)
Total Net and Unrealized in Net Assets
Investment Per Investment Per Gain (Loss) on Per Resulting From Per
1995 Income Share Income Share Investments* Share* Operations Share
---------------- ------------ ---- ------------ ---- -------------- ----- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $ 805,654 $ .30 $ 568,272 $.21 $ 3,954,567 $ 1.45 $ 4,522,839 $ 1.66
June 30, 1995 739,182 .27 492,626 .18 2,765,543 1.01 3,258,169 1.19
------------ ---- ------------ ---- -------------- ----- -------------- ---------
$1,544,836 $ .57 $1,060,898 $.39 $ 6,720,110 $ 2.46 $ 7,781,008 $ 2.85
============ ==== ============ ==== ============== ===== ============== =========
1994
----------------
March 31, 1994 $ 812,721 $ .29 $ 531,412 $.19 $(6,707,070) $(2.41) $(6,175,658) $(2.22)
June 30, 1994 619,685 .23 370,780 .13 (1,572,032) (.57) (1,201,252) (.44)
September 30, 1994 703,885 .26 463,742 .17 1,994,439 .73 2,458,181 .90
December 31, 1994 795,191 .29 590,503 .22 (3,144,402) (1.15) (2,553,899) (.93)
------------ ---- ------------ ---- -------------- ----- -------------- ---------
$2,931,482 $1.07 $1,956,437 $.71 $(9,429,065) $(3.40) $(7,472,628) $(2.69)
============ ==== ============ ==== ============== ===== ============== =========
</TABLE>
8
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Counsellors Tandem Securities Fund, Inc.
Notes to Financial Statements (cont'd)
June 30, 1995 (Unaudited)
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9. Annual Shareholders' Meeting
The annual meeting of shareholders of the Fund was held on April 5, 1995
at the offices of the Fund, 466 Lexington Avenue, 10th Floor, New York, New
York. The two matters voted upon by shareholders and the resulting votes for
each matter were as follows:
(a) To elect the following seven directors to hold office, unless earlier
removed, until the next annual meeting of shareholders and until their
respective successors shall have been elected and qualified.
Preferred Share Vote
<TABLE>
<CAPTION>
Director For Against Withheld
-------------------------- ------------------- -------------- --------------
<S> <C> <C> <C>
Richard N. Cooper 363,000.000 0 0
Donald J. Donahue 363,000.000 0 0
Jack W. Fritz 363,000.000 0 0
John L. Furth 363,000.000 0 0
Thomas A. Melfe 363,000.000 0 0
Lionel I. Pincus 363,000.000 0 0
Alexander B. Trowbridge 363,000.000 0 0
Common Share Vote
Director For Against Withheld
-------------------------- ------------------- -------------- --------------
Donald J. Donahue 2,333,000.886 0 45,229.646
John L. Furth 2,333,150.886 0 45,149.646
Lionel I. Pincus 2,332,350.886 0 45,949.646
</TABLE>
(b) To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors for the fiscal year ending December 31, 1995.
<TABLE>
<CAPTION>
For Against Abstained
------------------- -------------- --------------
<S> <C> <C> <C>
Preferred Share Vote 340,000.000 23,000.000 0
Common Share Vote 2,365,331.843 4,173.170 8,795.519
</TABLE>
9
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<PAGE>
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COUNSELLORS
TANDEM SECURITIES
FUND, INC.
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
800-888-6878
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