-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q1ecgfvyX8pm3qrL+9ft+uF2JWdBw4cBd2JU5AtBJ2ZVYc2XEzs8uALaGXYavF9+ f8Tj0LPq2tbdvTZc41/fgA== 0000950116-96-000904.txt : 19960829 0000950116-96-000904.hdr.sgml : 19960829 ACCESSION NUMBER: 0000950116-96-000904 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960828 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNSELLORS TANDEM SECURITIES FUND INC CENTRAL INDEX KEY: 0000798311 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133367531 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04784 FILM NUMBER: 96622001 BUSINESS ADDRESS: STREET 1: 103 BELLEVUE PRKY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 MAIL ADDRESS: STREET 1: 103 BELLEVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 N-30D 1 COUNSELLORS TANDEM SECURITIES FUND, INC. June 30, 1996 =============================================================================== COUNSELLORS TANDEM SECURITIES FUND, INC. - ------------------------------------------------------------------------------- Semiannual Report to Shareholders - ------------------------------------------------------------------------------- =============================================================================== DIRECTORS OFFICERS Lionel I. 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 Janna Manes Assistant Secretary - ------------------------------------------------------------------------------- INVESTMENT ADVISER ADMINISTRATOR Warburg, Pincus Counsellors, Inc. PFPC Inc. 466 Lexington Avenue 400 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 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. August 8, 1996 Dear Fellow Shareholder: For the six months ended June 30, 1996, Counsellors Tandem Securities Fund, Inc. (the "Fund") had a 6.54% total return (i.e., change in stock-market price plus dividends), vs. same-period gains of 10.10% for the S&P 500 Index and 7.94% for the Value Line Composite Index. The Fund's net asset value rose 3.03% over the six months (from $18.83 on December 31, 1995 to $19.40 on June 30, 1996). The Fund saw mixed performance from its holdings during the period. Utility stocks, which are heavily represented in the portfolio (combined, electric, gas and telecommunications issues accounted for 46.8% of the Fund's net assets as of June 30), in general posted weak returns, victims of a fairly steep rise in interest rates. As the Fund's investors 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's metals & mining stocks also posted disappointing results, despite a brief surge in the price of gold in January to $415 an ounce, its highest level in several years. Gold-related shares initially rallied on the metal's advance, but subsequently fell as the price of gold retreated to under $400 an ounce, and lagged the broader market for the full six months. The Fund's industrial-cyclical exposure also proved disappointing, despite evidence of renewed strength in the economy. Historically, expectations of stronger economic growth have led to improved performance of cyclical stocks, but over the first six months of 1996 that relationship failed to hold. Areas of strength for the Fund during the period included its energy and oil-services stocks, beneficiaries of a favorable supply-vs.-demand outlook. The Fund's banking and financial-services stocks also performed well, despite the rise in interest rates. We believe that the prospects for many of these financial stocks remain, in general, favorable, and we increased the Fund's weighting in these issues as the reporting period progressed (to 15.9% of the portfolio as of June 30). Banks, in particular, stand to benefit from several forces, including their ongoing restructuring efforts and share-buyback programs, as well as the potential for a more-benign interest-rate environment in the months ahead. Banking stocks added to the portfolio during the period include Bank of New York, Chase Manhattan, Greenpoint Financial and PNC Bank Corp. Shareholders should note that the Fund will redeem its Preferred Shares (in the principal amount of $30 million) on October 30, 1996. The redemption will be carried forth as provided in the Fund's Prospectus and Articles of Incorporation. After the Preferred Shares have been redeemed, the Fund's Board of Directors will determine whether to liquidate the Fund or to call a shareholder meeting to consider a proposal to convert the Fund to an open-end investment company. Sincerely, /s/ JOHN L. FURTH -------------------------- John L. Furth Chief Executive Officer /s/ ANTHONY G. ORPHANOS -------------------------- Anthony G. Orphanos President The views of the Fund's Management are as of the date of this letter and Portfolio Holdings described in this semiannual report are as of June 30, 1996; these views and positions may have changed subsequent to these dates. - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Statement of Net Assets June 30, 1996 (Unaudited) ===============================================================================
Number of Shares Value ----------- ------------ COMMON STOCK (92.8%) Banks & Savings & Loans (10.3%) BankAmerica Corp. 15,000 $1,136,250 Bank of New York Co., Inc. 25,000 1,281,250 Chase Manhattan Corp. 15,000 1,059,375 Greenpoint Financial Corp. 38,000 1,073,500 Mercantile Bancorporation 25,000 1,112,500 Norwest Corp. 50,000 1,743,750 PNC Bank Corp. 38,000 1,130,500 ---------- 8,537,125 ---------- Business Services (4.1%) H & R Block, Inc. 50,000 1,631,250 Manpower, Inc. 45,000 1,766,250 ---------- 3,397,500 ---------- Communications & Media (0.8%) Grupo Televisa SA Sponsor GDR + 21,000 645,750 ---------- Computers (1.4%) Honeywell, Inc. 21,000 1,144,500 ---------- Conglomerates (6.3%) General Electric Co. 60,000 5,190,000 ---------- Energy (2.3%) Noble Affiliates, Inc. 50,000 1,887,500 ---------- Engineering & Construction (1.6%) Stone & Webster, Inc. 38,000 1,296,750 ---------- Financial Services (5.6%) Aetna Life & Casualty Co. 21,000 1,501,500 Fund American Enterprises Holdings, Inc. 30,000 2,430,000 Student Loan Marketing Association 10,000 740,000 ---------- 4,671,500 ---------- Industrial Manufacturing & Processing (2.9%) Corning, Inc. 30,000 1,151,250 Inco, Ltd. 40,000 1,290,000 ---------- 2,441,250 ---------- Metals & Mining (8.6%) Allegheny Ludlum Corp. 80,000 1,510,000 Freeport-McMoRan Copper & Gold Inc. Class B 38,595 1,230,216 Homestake Mining Co. 76,000 1,301,500 Newmont Mining Corp. 34,000 1,678,750 Placer Dome Inc. 60,000 1,432,500 ---------- 7,152,966 ---------- Oil Services (1.4%) Baker Hughes Inc. 35,000 1,150,625 ---------- Paper & Forest Products (0.7%) Westvaco Corp. 21,000 627,375 ---------- Utilities-Electric (24.3%) Baltimore Gas & Electric Co. 50,000 1,418,750 Central & South West Corp. 100,000 2,900,000 Eastern Utilities Associates 80,000 1,570,000
See Accompanying Notes to Financial Statements. 1 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Statement of Net Assets (cont'd) June 30, 1996 (Unaudited) ===============================================================================
Number of Shares Value ----------- ------------ COMMON STOCK (cont'd) Utilities-Electric (cont'd) Houston Industries, Inc. 140,000 $ 3,447,500 Minnesota Power & Light Co. 70,000 2,030,000 Montana Power Co. 65,000 1,446,250 NIPSCO Industries, Inc. 55,000 2,213,750 PECO Energy Co. 100,000 2,600,000 Public Service Co. of Colorado 70,000 2,572,500 ----------- 20,198,750 ----------- Utilities-Gas (5.4%) Equitable Resources, Inc. 37,500 1,059,375 KN Energy, Inc. 60,000 2,010,000 National Fuel Gas Co. 40,000 1,440,000 ----------- 4,509,375 ----------- Utilities-Telecommunications (17.1%) Airtouch Communications, Inc. + 44,000 1,243,000 AT&T Corp. 30,000 1,860,000 Bell Atlantic Corp. 38,000 2,422,500 Citizens Utilities Co. Series A + 116,235 1,336,708 Frontier Corp. 25,000 765,625 Lucent Technologies, Inc. 15,000 568,125 SBC Communications, Inc. 70,000 3,447,500 US West Communications Group 50,000 912,500 US West Media Group + 50,000 1,593,750 ----------- 14,149,708 ----------- TOTAL COMMON STOCK (Cost $52,669,857) 77,000,674 -----------
Par ----------- SHORT-TERM INVESTMENTS (7.1%) Repurchase agreement with Goldman Sachs & Co. dated 06/28/96 at 5.25% to be repurchased at $5,889,576 on 07/01/96. (Collateralized by $6,010,000 U.S. Treasury Note 5.125%, due 02/28/98, with a market value of $6,010,000.)(Cost $5,887,000) $ 5,887,000 5,887,000 ----------- TOTAL INVESTMENTS AT VALUE (99.9%) (Cost $58,556,857*) 82,887,674 OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%) 76,420 ----------- NET ASSETS (100.0%) 82,964,094 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 $52,964,094 =========== NET ASSET VALUE PER SHARE OF COMMON STOCK ($52,964,094 / 2,729,862 common shares) $19.40 ======
INVESTMENT ABBREVIATIONS GDR = Global Depository Receipt + Non-income producing security. * Cost for Federal income tax purposes is $58,557,147. See Accompanying Notes to Financial Statements. 2 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Statement of Operations For the Six Months Ended June 30, 1996 (Unaudited) ===============================================================================
Investment Income: Dividends $1,190,095 Interest 243,328 ------------ Total investment income 1,433,423 ------------ Expenses: Investment advisory fee 307,797 Administration fee 50,000 Custodian and transfer agent fees 32,507 Legal fees 25,938 Directors fees 19,891 Amortization of organizational costs 12,871 Audit fee 11,542 Printing 8,701 Insurance 2,486 Other 37,371 ------------ Total expenses 509,104 ------------ Net investment income 924,319 ------------ Net Realized and Unrealized Gain from Investments: Net realized loss from security transactions (2,026) Net increase in unrealized appreciation from investments 1,443,262 ------------ Net realized and unrealized gain from investments 1,441,236 ------------ Net increase in net assets resulting from operations $2,365,555 ============
See Accompanying Notes to Financial Statements. 3 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Statement of Changes in Net Assets ===============================================================================
For the Six Months Ended For the June 30, 1996 Year Ended (Unaudited) December 31, 1995 --------------- ----------------- From Operations: Net investment income $ 924,319 $ 2,151,102 Net realized gain (loss) from security transactions (2,026) 1,944,661 Federal income tax 0 (177,983) Net increase in unrealized appreciation from investments 1,443,262 11,761,226 ------------ ------------ Net increase in net assets resulting from operations 2,365,555 15,679,006 ------------ ------------ From Dividends: Dividends from net investment income: Common shares 0 (477,886) Preferred shares (805,952) (1,612,500) Distributions from short-term capital gains: Common shares 0 (1,419,772) ------------ ------------ Net decrease from distributions (805,952) (3,510,158) ------------ ------------ From Capital Share Transactions: Cost of common shares repurchased 0 (144,819) ------------ ------------ Net increase in net assets 1,559,603 12,024,029 Net Assets: Beginning of period 81,404,491 69,380,462 ------------ ------------ End of period $ 82,964,094 $ 81,404,491 ============ ============
See Accompanying Notes to Financial Statements. 4 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Financial Highlights (For a Common Share of the Fund Outstanding Throughout Each Period) ===============================================================================
For the Six Months Ended For the Year Ended December 31, June 30, 1996 --------------------------------------------------------- (Unaudited) 1995 1994 1993 1992 1991 -------------- -------- --------- --------- --------- -------- Net Asset Value, Beginning of Period $18.83 $14.37 $17.69 $16.54 $16.88 $12.67 ------ ------ ------ ------ ------ ------ Income from Investment Operations: Net Investment Income .34 .79 .71 .91 .79 .83 Net Gain (Loss) on Securities (both realized and unrealized) .53 5.01 (3.07) 1.02 (.33) 4.28 Federal income tax .00 .(.07) (.33) (.01) (.13) (.04) ------ ------ ------ ------ ------ ------ Total from Investment Operations .87 5.73 (2.69) 1.92 .33 5.07 ------ ------ ------ ------ ------ ------ Less Distributions: Common stock equivalent of dividends paid to preferred shareholders (.30) (.59) (.66) (.75) (.75) (.73) Dividends from Net Investment Income .00 (.17) .00 .00 .00 (.12) Distributions from Short-Term Capital Gains .00 (.52) .00 .00 .00 .00 ------ ------ ------ ------ ------ ------ Total Distributions (.30) (1.28) (.66) (.75) (.75) (.85) ------ ------ ------ ------ ------ ------ Gain (loss) on common shares repurchased .00 .01 .03 (.02) .08 (.01) ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period $19.40 $18.83 $14.37 $17.69 $16.54 $16.88 ====== ====== ====== ====== ====== ====== Market Value, End of Period $18.25 $17.13 $12.88 $15.25 $14.13 $14.13 ====== ====== ====== ====== ====== ====== Total Return Based on net asset value per share 3.03%+ 35.91% (18.77)% 6.95% (2.01)% 34.41% Based on market price per share 6.54%+ 38.43% (15.54)% 7.93% .00% 37.58% Ratios/Supplemental Data: Net Assets, End of Period (000s) $82,964 $81,404 $69,380 $78,200 $75,212 $76,879 Ratios to average daily net assets: Operating expenses 1.24%* 1.29% 1.30% 1.27% 1.27% 1.35% Net investment income 2.85%* 2.81% 2.60% 3.24% 2.97% 3.45% Portfolio Turnover Rate 15.07%+ 32% 53% 33% 27% 26% Average Commission Rate # $.0617 -- -- -- -- --
+ Non-annualized * Annualized # Computed by dividing the total amount of commissions paid by the total number of shares purchased or sold during the period for which there was a commission charged. See Accompanying Notes to Financial Statements. 5 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Notes to Financial Statements June 30, 1996 (Unaudited) =============================================================================== 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. The Fund's investments are valued at market value, which is currently determined using the last reported sales price. If no sales are reported, investments are generally valued at the last reported mean price. In the absence of market quotations, investments are generally valued at fair value as determined by or under the direction of the Fund's governing Board. Short-term investments that mature in 60 days or less are valued on the basis of amortized cost, which approximates market value. Security transactions are accounted for on a trade date basis. Interest income is recorded on an accrual basis. Dividends are 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. 6 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Notes to Financial Statements (cont'd) June 30, 1996 (Unaudited) =============================================================================== 2. INVESTMENT ADVISER Warburg, Pincus Counsellors, Inc. ("Warburg"), a wholly owned subsidiary of Warburg, Pincus Counsellors G.P. ("Counsellors G.P."), serves as the Fund's investment adviser. The Fund pays Warburg 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, 1996, Warburg earned $307,797 in investment advisory fees. 3. INVESTMENTS IN SECURITIES Purchases and sales of investment securities for the six months ended June 30, 1996 (excluding short-term investments) were $13,207,986 and $11,043,166, respectively. At June 30, 1996, the net unrealized appreciation from investments of $24,330,527 was comprised of appreciation of $24,627,931 for those investments having an excess of value over cost, and depreciation of $297,404 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, 1996, the Fund had approximately 47% 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 year ended December 31, 1995, the Fund repurchased 10,400 common shares. For the period ended June 30, 1996, the Fund did not repurchase common shares. 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 7 - ------------------------------------------------------------------------------- =============================================================================== Counsellors Tandem Securities Fund, Inc. Notes to Financial Statements (cont'd) June 30, 1996 (Unaudited) =============================================================================== 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. The Fund will redeem its Preferred Shares in full (in the principal amount of $30 million) on October 30, 1996. The redemption will be effected as provided in the Fund's Prospectus and Articles of Incorporation. After the Preferred Shares have been redeemed, the Fund's Board of Directors will then meet to determine whether to liquidate the Fund or to call a shareholder meeting to consider a proposal to convert the Fund to an open- end investment company. 6. DIVIDENDS Regular dividends to 5.375% preferred shareholders for the six months ended June 30, 1996 amounted to $1.34 per preferred 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, 1996, 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, 1996 consisted of the following:
Paid in capital, net $57,727,599 Undistributed net investment income 907,704 Accumulated net loss from security transactions (2,026) Net unrealized appreciation from investments 24,330,817 ------------- $82,964,094 =============
8 - ------------------------------------------------------------------------------- [THIS PAGE INTENTIONALLY LEFT BLANK] =============================================================================== COUNSELLORS TANDEM SECURITIES FUND, INC. Warburg, Pincus Counsellors, Inc. 466 Lexington Avenue New York, New York 10017-3147 212 878-0600 - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----