I am currently doing final year project on a subject which I did not have a very good grade(I took three courses in this subject with grade A-, A and B+, only top 5-10% can earn a grade of A and A+). I am quite interested in it and plan to continue in this subject in graduate school. Will this grade have bad effect for my application? Can I indicate my interest clearly in my PS given that my grade is not perfect?
I don't believe there is a serious stigma associated with an undergraduate getting a B+ in a graduate-level course. It is generally understood that undergraduates taking true graduate-level work (with graduate-level course numbers, etc.) are taking exceptionally advanced subjects, relative to their own preparation. Therefore, it is entirely understandable that you might have an A-, B+, or even a B in a graduate-level subject without it having a strong impact on your chances for graduate-school admissions. Exceptionally weak performance (corresponding to "failing" grades—usually C+ or lower) would be an exception to this, but I see no reason here why you should worry too much.
One solution to this would be to ask the instructor of the course to write one of your letters of recommendation. If you were indeed performing at a graduate-level while still an undergrad, then he or she should note this in his/her letter.