<PAGE>
KEYCO BOND FUND, INC.
27777 Franklin Road - Suite 1850
Southfield, Michigan 48034
(810) 353-0790
November 17, 1995
To Our Shareholders:
It is with sadness that we send you this Annual Report of Keyco Bond
Fund, Inc. for the year ended September 30, 1995. On October 16, 1995,
Beatrice Keywell, my mother and the Fund's President, passed away after
having become ill several months ago. This was a great loss for the
members of the Keywell family as well as for the shareholders, and we
shall all miss her. Your Board of Directors has endeavored to maintain
normal activities of the Fund during this difficult time, and therefore
we have prepared this report in the required timely manner.
At the beginning of our fiscal year, market interest rates for tax-exempt
municipal securities continued their rapid rise before beginning to
decrease in December 1994. During 1995, interest rates continued to
decline, ending on September 30, 1995 at a level below that of September
30, 1994. For the Fund's bond portfolio, the result was an unrealized
gain of 2.4% or $608,961 for the year.
Especially at the beginning of the fiscal year before interest rates
began to decrease, we continued to upgrade our portfolio by extending
maturities and/or improving quality. During the entire twelve month
period, five bonds were sold or called for total proceeds of $2,477,561
and a realized loss of $31,097, which can be used to offset future
realized gains. The cash from these dispositions was reinvested in bonds
maturing in nine to eighteen years. While portfolio turnover was a
relatively high 9.4%, it was lower than the previous two years.
Net investment income for the year was $1,582,127 or $1.25 per share
compared with $1,584,367 or $1.25 per share last year. The $2,240
decrease was the net effect of $784 higher interest income and $3,024
higher expenses, primarily due to an increase in accounting fees required
for securities law compliance.
The net asset value of the Fund was $21.18 per share on September 30,
1995, which was an increase of $.45 per share from the prior year. The
weighted average annual yield on the bonds in the Fund as of September
30, 1995 was 6.6% based on cost, and 6.2% based on market value, and the
weighted average maturity was 10.4 years.
The Board of Directors, on October 26, 1995, declared monthly dividends
which total $1.24 per share for the year ending September 30, 1996. For
administrative efficiency, the Board also voted to continue the policy of
paying dividends on a monthly basis to shareholders whose monthly payment
is at least $500. Shareholders with accrued but unpaid dividends
exceeding $500 on April 1 and October 1 will be paid semi-annually in
those months. The remaining shareholders will continue to receive only
one dividend payment, which will be made in October 1996.
The Annual Meeting of Shareholders of Keyco Bond Fund, Inc. will be held
at 27777 Franklin Road, Suite 1850, Southfield, Michigan, on Thursday,
December 21, 1995, at 9:00 a.m. for the purpose of electing Directors and
ratifying the selection of Coopers & Lybrand as our auditors.
Joel D. Tauber has agreed to become President of the Fund, and his
appointment was unanimously ratified by the Board at its October 26
meeting. Mark Schlussel and David Page continue to serve as independent
outside Directors, and their remuneration is $1,000 each per meeting. In
addition, the fund pays $25,000 annually for certain administrative
services and office space.
If you have any questions concerning the Fund or the enclosed
information, please call me or Joel Tauber.
On behalf of the Board of Directors,
/S/ GAIL A. DISHELL
Gail A. Dishell
Vice President
<PAGE>
<PAGE>
KEYCO BOND FUND, INC.
27777 Franklin Road - Suite 1850
Southfield, Michigan 48034
(810) 353-0790
IMPORTANT 1995 TAX INFORMATION
November 22, 1995
Dear Shareholder:
All of the dividends that you have received or will receive in calendar
year 1995 from the Keyco Bond Fund are attributable to interest received
from municipal bonds and are "exempt interest dividends" not subject to
Federal Income Tax.
Following are certain state percentages of such interest received from
municipal bonds of certain states in 1995. These percentages may be
used, depending upon applicable law, in determining state income taxes.
You are urged to consult your tax advisor in this regard.
Michigan 57.1407%
New York 8.3217%
District of Columbia 0.0004%
If you are a resident of a state other than Michigan or New York, or if
you have any other questions, please contact George Forrest at (810) 353-
0793.
KEYCO BOND FUND, INC.
<PAGE>
<PAGE>
KEYCO BOND FUND, INC.
PROJECTED STATEMENT OF OPERATIONS
Projection Actual Variance Projection
for the for the Favorable for the
Year Ended Year Ended (Unfavorable) Year Ending
09/30/95 09/30/95 09/30/95 09/30/96
---------- ---------- ------------- -----------
Interest income 1,637,000 1,635,126 (1,874) 1,630,000
---------- ---------- ------- ---------
Expenses:
Legal and accounting 39,500 38,766 734 37,500
Comerica custodian fee 12,000 10,356 1,644 12,000
Directors' fees 2,000 2,000 0 2,000
Miscellaneous expenses:
Insurance 1,481 1,481 0 1,481
SEC filing fees and
other 519 396 123 519
---------- ----------- ------- ---------
Total expenses 55,500 52,999 2,501 53,500
---------- ----------- ------- ---------
Net investment income 1,581,500 1,582,127 627 1,576,500
========== =========== ======= =========
<PAGE>
<PAGE>
KEYCO BOND FUND, INC.
Projected Statement of Legal and Accounting Expenses
Actual Projection
Projection for the for the
for the Year Year
Year Ended Ended Ending
Purpose 09/30/95 09/30/95 09/30/96
------- ---------- -------- --------
Dykema Gossett Legal, SEC
and tax
compliance 7,500 6,941 5,500
Coopers & Lybrand Fiscal year
audit and
tax return 7,000 6,825 7,000
Misc. Accounting Administra-
tion of
Fund 25,000 25,000 25,000
------ ------ ------
39,500 38,766 37,500
====== ====== ======
<PAGE>
<PAGE>
KEYCO BOND FUND, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
Keyco Bond Fund, Inc.
Contents
Pages
-----
Report of Independent Accountants 1
Financial Statements:
Statement of Assets and Liabilities as of
September 30, 1995 2
Statement of Operations for the Year Ended
September 30, 1995 3
Statement of Changes in Net Assets for the
Years Ended September 30, 1995 and 1994 4
Notes to Financial Statements 5-6
Supplemental Schedules:
Schedule of Portfolio Investments, September
30, 1995 7-8
Financial Highlights for the Years Ended
September 30, 1995, 1994, 1993, 1992
and 1991 9
<PAGE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Keyco Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Keyco Bond Fund, Inc., including the schedule of portfolio investments,
as of September 30, 1995, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. 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. Our procedures included
confirmation of securities owned as of September 30, 1995 by
correspondence with the custodian. 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 Keyco Bond Fund, Inc. as of September 30, 1995, the results
of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/S/ COOPERS & LYBRAND LLP
Detroit, Michigan
October 27, 1995
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Statement of Assets and Liabilities
as of September 30, 1995
ASSETS
Investments in securities, at fair value (cost $24,689,240) $26,417,925
Cash 6,415
Accrued interest receivable 562,629
----------
Total assets 26,986,969
----------
LIABILITIES
Dividends payable 146,368
Accrued liabilities 325
----------
Total liabilities 146,693
----------
Net assets applicable to outstanding capital shares,
equivalent to $21.18 per share based on 1,267,258 shares
of capital stock outstanding $26,840,276
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Statement of Operations
for the year ended September 30, 1995
Interest income $ 1,635,126
Expenses:
Legal and accounting $ 38,766
Custodial fee 10,356
Directors' fees 2,000
Miscellaneous expense 1,877
------
Total expenses 52,999
----------
Net investment income 1,582,127
Realized loss on investments:
Proceeds from calls and sales 2,477,561
Cost of securities called or sold 2,508,658
---------
Realized loss on investments (31,097)
Unrealized appreciation of investments:
Investments held, September 30, 1995:
At cost 24,689,240
At fair value 26,417,925
----------
Balance, September 30, 1995 1,728,685
Less balance, September 30, 1994 1,119,724
----------
Unrealized appreciation of investments 608,961
----------
Increase in net assets resulting from
operations $2,159,991
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Statement of Changes in Net Assets
for the years ended September 30, 1995 and 1994
1995 1994
---------- ----------
Net assets, beginning of period $26,264,357 $27,905,031
---------- ----------
Changes in net assets from operations:
Net investment income 1,582,127 1,584,367
Realized loss on investments (31,097) (14,160)
Unrealized appreciation (depreciation) of
investments 608,961 (1,614,136)
---------- ----------
Increase (decrease) in net assets from
operations 2,159,991 (43,929)
Changes in net assets from capital transactions:
Dividends declared from net investment income (1,584,072) (1,596,745)
---------- -----------
Net increase (decrease) in net assets 575,919 (1,640,674)
---------- -----------
Net assets, end of year $26,840,276 $26,264,357
========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Notes to Financial Statements
1. Significant Accounting Policies:
Keyco Bond Fund, Inc. (the "Company") has registered under the
Investment Company Act of 1940, as amended, as a closed-end, diversified
management company. The Company became qualified as a regulated
investment company under the Internal Revenue Code on October 1, 1979.
Management intends to distribute to the shareholders substantially all
earnings from that date. The following is a summary of significant
accounting policies followed by the Company in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
a. Security Valuation: The Company has invested substantially all
of its assets in long-term state and municipal debt obligations.
Investments in these tax-exempt securities are stated at fair value. The
fair value of the investments is provided by the Company's custodian, who
utilizes a matrix pricing system. Due principally to a decrease in
interest rates, the fair value of the investments is currently above
cost, resulting in unrealized appreciation. The principal amount of each
bond, as reflected in the schedule of portfolio investments, is due at
maturity when the bond must be redeemed by the issuer.
b. Federal Income Taxes: It is the Company's intention to
comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its income to
its shareholders. Therefore, no federal income tax provision is
recorded.
c. Other: Security transactions are accounted for on a trade-date
basis. Cost of securities sold is determined by specific identification.
Distributions to shareholders are recorded when declared. Interest on
investments is recorded as earned.
2. Net Assets Applicable to Outstanding Capital Shares:
Details of net assets applicable to outstanding capital shares are
as follows:
Capital stock, $.02 par value; authorized
3,000,000 shares; issued and outstanding
1,267,258 shares at September 30, 1995 $ 25,345
Additional paid-in capital 730,733
Retained earnings prior to July 1, 1979 24,093,500
Accumulated undistributed net investment income 307,270
Accumulated undistributed net realized loss from
securities transactions (45,257)
Net unrealized appreciation of investments,
September 30, 1995 1,728,685
-----------
Net assets, September 30, 1995 $26,840,276
===========
3. Purchases and Dispositions of Securities:
The cost of purchases and the proceeds from dispositions of
securities, other than United States government obligations and short-
term notes, aggregated $2,425,472 and $2,477,561, respectively.
4. Portfolio Manager:
Effective October 19, 1994, the Board of Directors determined that
the Company will no longer retain the services of an investment advisor
or a third-party portfolio manager, but rather the Company, acting
through its officers and with the review provided by the Board, will make
investment decisions internally.
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Schedule of Portfolio Investments
September 30, 1995
<TABLE>
<CAPTION>
Long-Term State and Principal Fair
Municipal Obligations Amount Cost Value
- ---------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Avondale, Michigan, School District, 7.5%, May 2003 $ 500,000 $ 500,000 $ 542,395
Avondale, Michigan, School District, 7.5%, May 2004 700,000 700,000 759,354
Bay City, Michigan, Electric Utility Revenue, 6.6%,
January 2012 500,000 494,900 534,077
Brandon, Michigan, School District, 6.25%, May 2008 500,000 483,765 516,834
Brandon, Michigan, School District, 6.25%, May 2009 250,000 238,645 257,683
Capac, Michigan, Community School District, 6.25%,
July 2003 100,000 96,920 103,595
Central Michigan University, 5.3%, October 2006 70,000 66,345 70,284
Chippewa Valley, Michigan, Schools, 7.75%, May 2002 500,000 502,600 541,470
Crosswell and Lexington, Michigan, Community Schools
Building and Site, 6%, May 2016 500,000 500,000 497,739
Dearborn, Michigan, School District, 6.7%, May 1999 100,000 108,744 107,628
Dearborn, Michigan, School District, 6.7%, May 2000 135,000 147,775 147,190
Detroit, Michigan, City Distributable State Aid, 7.2%,
May 2009 1,000,000 995,000 1,105,262
Detroit, Michigan, City School District, 4.95%, May
2005 200,000 186,398 194,194
Grand Rapids, Michigan, Sanitary Sewer System, 6%,
January 2012 500,000 500,000 502,607
Jackson County, Michigan, 5%, April 2006 300,000 277,173 294,044
Lansing, Michigan, School District, 6.8%, May 2004 460,000 512,067 518,258
Marquette County, Michigan, Wastewater Treatment
System, 6%, December 2007 175,000 154,553 179,635
Marquette County, Michigan, Wastewater Treatment
System, 6%, December 2008 170,000 149,913 174,266
Michigan Municipal Bond Authority Revenue, Local
Government Wayne County, PJ-GRP 1213, 7.4%,
December 2002 1,075,000 1,065,497 1,238,637
Michigan State Building Authority Revenue, 5.125%,
October 2008 100,000 91,772 96,547
Michigan State Building Revenue, Series I, 5.3%,
October 2012 500,000 418,505 469,955
Michigan State Building Authority Revenue, Series I,
5.0%, October 2014 500,000 500,000 455,365
Michigan State Housing Development Authority, Rental
Housing Revenue, 5.6%, April 2006 500,000 489,640 512,058
Michigan State University Revenue, 6.125%, August 2010, 1,200,000 1,190,892 1,231,012
Oxford, Michigan, Area Community School District, 6.60%,
May 1996 300,000 300,000 304,925
Pickney, Michigan, Community Schools, Livingston and
Washtenaw Counties, 5.50%, May 2004 300,000 268,500 306,433
Rochester, Michigan, Community School District, 7.9%,
May 2001 625,000 625,000 648,460
South Lyon Community School District, Counties of
Oakland, Washtenaw and Livingston, State of Michigan
Building Site Bonds, 7.8%, May 2014 500,000 500,000 550,503
Sturgis, Michigan, Government Hospital, 6.55%, October
2000 325,000 308,750 333,185
Sturgis, Michigan, Government Hospital, 6.60%, October
2001 250,000 237,500 256,329
University of Michigan, Hospital Revenue, 7%, December
2021 75,000 78,366 84,126
Washtenaw, Michigan, Community College, 6.20%, April 1998 500,000 487,485 510,973
West Bloomfield, Michigan, School District, 5%, May 2006 100,000 92,357 98,462
Wyandotte, Michigan, Downtown Development, 6.25%,
December 2008 750,000 727,440 808,007
Alaska State Housing Finance Corporation, 6.1%, June 2007 160,000 160,000 166,624
Alaska State Housing Finance Corporation, 6.2%, June 2008 300,000 300,000 312,650
California State, 5.70%, August 2003 500,000 481,055 512,216
California State, 5.70%, August 2004 250,000 237,263 257,788
Brevard County, Florida, Health Facilities Authority
Revenue, Hospital-Holmes Regional Medical Center,
7.4%, October 2003 305,000 305,000 320,337
Gainsville, Florida, Utilities System Revenue, 6.50%,
October 2014 750,000 724,900 784,343
Florida State, Hillsborough County Expressway, G.O.,
5.90%, October 2005 750,000 664,058 759,823
Honolulu, Hawaii, New Public Housing Authority,
5.75%, August 2008 290,000 258,381 296,783
Honolulu, Hawaii, New Public Housing Authority,
5.75%, August 2009 700,000 622,804 715,464
Maryland State Health and Higher Educational
Facilities Authority Revenue Johns Hopkins Hospital
Redevelopment Issue, 6.625%, July 2008 500,000 500,000 544,793
Minnesota State Housing Finance Agency, 6.75%,
February 2001 150,000 150,000 153,283
Mercer County, New Jersey, Improvement Authority
Revenue, State Justice Complex, 6.40%, January 2018 500,000 463,270 516,218
New York, New York, City Municipal Assistance
Corporation, 6%, July 2008 750,000 755,625 780,038
New York, New York, City Municipal Water Finance
Authority, Water-Sewer System Revenue, 6.75%,
June 2016 400,000 412,768 426,851
New York State Refunding, 6.1%, November 2008 500,000 500,000 517,182
Monroe County, New York, Water Improvement, 5.5%,
December 2008 610,000 589,034 610,730
Erie County, Hospital Authority PA Revenue, Erie
County Geriatric Center, U. S. Treasury, 6.25%,
July 2011 1,000,000 993,560 1,026,164
South Carolina State Housing Authority, Single
Family Mortgage Purchase, 7%, July 2011 500,000 502,500 513,912
Met. Government Nashville and Davidson County,
Tennessee, Health and Educational Facilities Board
Revenue, Meharry Medical College-HEW, collateralized,
7.875%, December 2004 225,000 222,059 253,053
Austin, Texas, Utility System Revenue, 6%, April 2006 500,000 474,565 527,922
Sherman, Texas, New Public Housing Authority, 5.75%,
March 2006 200,000 178,876 203,243
Texas Coastal Water Authority, Water Convey System
Revenue, 8.125%, December 2017 700,000 712,250 756,050
Virginia State Housing Development Authority,
Multifamily Mortgage Section 8 Assisted, 8.25%,
November 2012 25,000 24,770 25,295
Washington State, Public Power Supply System, Nuclear
Project No. 2 Revenue, 6%, July 2012 500,000 460,000 485,671
------------ ----------- -----------
Total investments $25,325,000 $24,689,240 $26,417,925
============= =========== ===========
</TABLE>
<PAGE>
<PAGE>
Keyco Bond Fund, Inc.
Financial Highlights
Contained below are per share operating performance data for a share
outstanding, total investment return, ratios and supplemental data. This
information has been derived from information provided in the financial
statements.
Years Ended September 30,
----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Per Share Operating Performance:
Net asset value,
beginning of period $ 20.73 $ 22.02 $ 21.40 $ 20.62 $ 19.07
------- ------- ------- ------- -------
Net investment income 1.25 1.25 1.29 1.32 1.33
Net realized and unrealized
gain (loss) on investments 0.45 (1.28) 0.76 0.78 1.54
------- ------- ------- ------- -------
Total from investment
operations 1.70 (.03) 2.05 2.10 2.87
------- ------- ------- ------- ------
Less distributions from:
Net investment income (1.25) (1.26) (1.32) (1.32) (1.32)
Net realized investment
income -- -- (.11) -- --
------- ------ ------- ------- -------
Total distributions (1.25) (1.26) (1.43) (1.32) (1.32)
------- ------- ------- ------- -------
Net asset value, end of
period $ 21.18 $ 20.73 $ 22.02 $ 21.40 $ 20.62
======= ======= ======= ======= =======
Total Return per Share Net Asset
Value (a) 8.2% (.1)% 9.6% 10.2% 15.1%
Ratios and Supplemental Data:
Net assets, end of period
(in 000s) $26,840 $26,264 $27,905 $27,118 $26,125
Ratio of net investment income
to average net assets 6.0% 5.9% 5.9% 6.3% 6.7%
Ratio of expenses to average
net assets .2% .2% .2% .2% .2%
Portfolio turnover rate 9.4% 25.4% 16.5% 2.8% -
(a) Total investment return based on per share net asset value reflects
the percent return calculated on beginning of period net asset
value and assumes dividends and capital gain distributions were not
reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Company.
