KEYCO BOND FUND, INC.
27777 Franklin Road - Suite 1850
Southfield, Michigan 48034
(810) 353-0790
May 22, 1996
To Our Shareholders:
We are pleased to send you this Semi-Annual Report of Keyco Bond Fund, Inc.
for the six-month period ended March 31, 1996.
For most of the six-month period, market interest rates for tax-exempt
municipal securities trended downward before beginning to increase in March
1996. Market interest rates ended the six-month period about where they
began in October 1995, resulting in a small unrealized gain of $10,665 in
the Fund's portfolio.
During the period, four bonds were called providing proceeds of $237,250 and
a gain of $2,250. Near the end of the period, we took the opportunity to
sell two bonds and a portion of a third bond which had been pre-refunded for
early call within a few months in order to make quality purchases. The
proceeds from these sales totaled $1,160,948, and the Fund realized gains
totaling $58,538 on these sales. The cash from these dispositions was
reinvested in bonds maturing in eight to seventeen years. Portfolio
turnover for the six-month period was 5.2%.
Net investment income for the six months was $781,189 or $.62 per share
compared with $784,309 or $.62 per share last year. The $3,120 change was
caused almost entirely by lower interest income.
The net asset value was $26,919,891 or $21.24 per share at March 31, 1996,
which was an increase of $79,615 or $.06 per share from September 30, 1995.
As of March 31, 1996, the weighted average annual yield on the Fund's
portfolio was 6.6% based on cost and 6.1% based on market value, and the
weighted average maturity was 10.4 years.
Dividends of $.61 per share have been declared for the period ended March
31, 1996. The Board also voted to continue the policy of paying dividends
on a monthly basis where the amount to be paid is over $500. We expect to
pay total dividends of $1.24 per share for the fiscal year ending September
30, 1996, and most shareholders will receive their entire dividend in
October 1996.
The Annual Meeting of Shareholders of Keyco Bond Fund, Inc. was held
December 21, 1995. At the meeting, Gail A. Dishell, Mark E. Schlussel,
David K. Page, Thomas E. Purther and Ellen T. Horing were elected Directors,
and the selection of Coopers & Lybrand as independent auditors was ratified
and confirmed.
If you have any questions concerning the Fund or the attached information,
please feel free to call me.
On behalf of the Board of Directors,
/S/ Joel D. Tauber
- --------------------
Joel D. Tauber, President
<PAGE>
Keyco Bond Fund, Inc.
Statement of Assets and Liabilities
as of March 31, 1996
Assets
Investments in securities, at fair value
(cost $24,795,520) $ 26,534,870
Cash 18,001
Receivable for investments sold 582,850
Accrued interest receivable 553,947
Other assets 741
------------
Total assets 27,690,409
------------
Liabilities
Payable for investments purchased 599,770
Dividends payable 156,959
Accrued liabilities 13,789
------------
Total liabilities 770,518
------------
Net assets applicable to outstanding capital
shares, equivalent to $21.24 per share based on
1,267,258 shares of capital stock outstanding $ 26,919,891
============
The accompanying notes are an integral part of
the financial statements.
<PAGE>
Keyco Bond Fund, Inc.
Statement of Operations
for the six months ended March 31, 1996
Interest income $ 815,550
Expenses:
Legal and accounting $ 25,347
Custodial fee 6,000
Directors' fees 2,000
Miscellaneous expense 1,014
------------
Total expenses 34,361
------------
Net investment income 781,189
Realized gain on investments:
Proceeds from calls and sales 1,398,198
Cost of securities called or sold 1,337,410
---------
Realized gain on investments 60,788
Unrealized appreciation of investments:
Investments held, March 31, 1996:
At cost 24,795,520
At fair value 26,534,870
----------
Balance, March 31, 1996 1,739,350
Less balance, September 30, 1995 1,728,685
---------
Unrealized appreciation of investments 10,665
------
Increase in net assets resulting from operations $ 852,642
============
The accompanying notes are an integral part of the financial
statements.
<PAGE>
Keyco Bond Fund, Inc.
Statement of Changes in Net Assets
for the six months ended March 31, 1996 and 1995
1996 1995
Net assets, beginning of period $ 26,840,276 $ 26,264,357
------------ ------------
Changes in net assets from operations:
Net investment income 781,189 784,309
Realized gain (loss) on investments 60,788 (119,437)
Unrealized appreciation of investments 10,665 393,774
------------ ------------
Increase in net assets from operations 852,642 1,058,646
Changes in net assets from capital transactions:
Dividends declared from net investment income (773,027) (785,700)
------------- -------------
Net increase in net assets 79,615 272,946
------------- ------------
Net assets, end of period $ 26,919,891 $ 26,537,303
============ ============
The accompanying notes are an integral part of the financial statements.
<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 March 31, 1996 $ 25,345
Additional paid-in capital 730,733
Retained earnings prior to July 1, 1979 24,093,500
Accumulated undistributed net investment income 315,432
Accumulated undistributed net realized gain
from securities transactions 15,531
Net unrealized appreciation of investments,
March 31, 1996 1,739,350
------------
Net assets, March 31, 1996 $ 26,919,891
============
<PAGE>
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 $1,443,691 and $1,398,198, respectively.
4. Portfolio Manager:
The Company does not retain the services of an investment advisor or a
third-party portfolio manager. The Company, acting through its officers
and with the review provided by the Board, makes investment decisions
internally.
<PAGE>
Keyco Bond Fund, Inc.
Schedule of Portfolio Investments
March 31, 1996
<TABLE>
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 $ 537,579
Avondale, Michigan, School District, 7.5%, May 2004 700,000 700,000 752,611
Bay City, Michigan, Electric Utility Revenue, 6.6%, January 2012 500,000 494,900 525,810
Capac, Michigan, Community School District, 6.25%, July 2003 100,000 96,920 102,444
Central Michigan University, 5.3%, October 2006 70,000 66,345 70,417
Chippewa Valley, Michigan, Schools, 7.75%, May 2002 500,000 502,600 535,125
Crosswell and Lexington, Michigan, Community Schools Building and Site, 6%, May 2016 500,000 500,000 507,888
Dearborn, Michigan, School District, 6.7%, May 1999 100,000 108,744 106,814
Dearborn, Michigan, School District, 6.7%, May 2000 135,000 147,775 145,927
Detroit, Michigan, City Distributable State Aid, 7.2%, May 2009 1,000,000 995,000 1,098,292
Detroit, Michigan, City School District, 4.95%, May 2005 200,000 186,398 195,414
Grand Rapids, Michigan, Sanitary Sewer System, 6%, January 2012 500,000 500,000 507,698
Jackson County, Michigan, 5%, April 2006 300,000 277,173 295,822
Lansing, Michigan, School District, 6.8%, May 2004 460,000 512,067 515,822
Marquette County, Michigan, Wastewater Treatment System, 6% December 2007 175,000 154,553 180,630
Marquette County, Michigan, Wastewater Treatment System, 6%, December 2008 170,000 149,913 175,422
Michigan Municipal Bond Authority Revenue, Local Government Wayne County, PJ-GRP 1213,
7.4%, December 2002 1,075,000 1,065,497 1,238,884
Michigan Municipal Bond Authority Revenue, State Revolving Fund, 6.5%, October 2010 550,000 599,769 599,769
Michigan Municipal Bond Authority Revenue, State Revolving Fund, 6.55%, October 2013 100,000 109,445 106,359
Michigan State Building Authority Revenue, 5.125%, October 2008 100,000 91,772 97,256
Michigan State Building Revenue, Series I, 5.3%, October 2012 500,000 418,505 474,180
Michigan State Building Authority Revenue, Series I, 5.0%, October 2014 500,000 500,000 464,612
Michigan State Housing Development Authority, Rental Housing Revenue, 5.375%, April 2004 70,000 71,537 71,622
Michigan State Housing Development Authority, Rental Housing Revenue, 5.6%, April 2006 500,000 489,640 513,625
Michigan State University Revenue, 6.125%, August 2010 1,200,000 1,190,892 1,237,777
Oxford, Michigan, Area Community School District, 6.60%, May 1996 300,000 300,000 300,795
Pickney, Michigan, Community Schools, Livingston and Washtenaw Counties, 5.50%, May 2004 300,000 268,500 306,464
Rochester, Michigan, Community School District, 7.9%, May 2001 245,000 245,000 249,585
South Lyon Community School District, Counties of Oakland, Washtenaw and Livingston,
State of Michigan Building Site Bonds, 7.8% May 2014 500,000 500,000 545,140
Sturgis, Michigan, Government Hospital, 6.55%, October 2000 325,000 308,750 331,767
Sturgis, Michigan, Government Hospital, 6.60%, October 2001 250,000 237,500 255,269
University of Michigan, Hospital Revenue, 7%, December 2021 75,000 78,366 83,801
Washtenaw, Michigan, Community College, 6.20%, April 1998 500,000 487,485 505,000
West Bloomfield, Michigan, School District, 5%, May 2006 100,000 92,357 98,749
Wyandotte, Michigan, Downtown Development, 6.25%, December 2008 750,000 727,440 810,047
Alaska State Housing Finance Corporation, 6.1%, June 2007 155,000 155,000 161,267
Alaska State Housing Finance Corporation, 6.2%, June 2008 285,000 285,000 296,519
California State, 5.70%, August 2003 500,000 481,055 513,436
California State, 5.70%, August 2004 250,000 237,263 255,789
Brevard County, Florida, Health Facilities Authority Revenue, Hospital-Holmes
Regional Medical Center, 7.4%, October 2003 240,000 240,000 248,477
Gainsville, Florida, Utilities System Revenue, 6.50%, October 2014 750,000 724,900 817,156
Florida State, Hillsborough County Expressway, G.O., 5.90%, October 2005 750,000 664,058 759,276
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2008 290,000 258,381 292,317
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2009 700,000 622,804 702,818
Joliet, Illinois Corporate Purpose, 7%, January 2012 100,000 106,994 106,926
<PAGE>
Keyco Bond Fund, Inc.
Schedule of Portfolio Investments, Continued
Long-Term State and Principal Fair
Municipal Obligations Amount Cost Value
- ----------------------------------------------------------------------------------------- ---------- ---------- ---------
Maryland State Health and Higher Educational Facilities Authority Revenue
Johns Hopkins Hospital Redevelopment Issue, 6.625%, July 2008 $ 500,000 $ 500,000 $ 560,557
Mercer County, New Jersey, Improvement Authority Revenue, State Justice Complex,
6.40%, January 2018 500,000 463,270 536,759
New York, New York, City Municipal Assistance Corporation, 6%, July 2008 750,000 755,625 778,123
New York, New York, City Municipal Water Finance Authority, Water-Sewer System Revenue,
6.75%, June 2016 400,000 412,768 429,892
New York State Refunding, 6.1%, November 2008 500,000 500,000 519,713
Monroe County, New York, Water Improvement, 5.5%, December 2008 610,000 589,034 612,504
Ohio State Building Authority, State Transportation Facilities, 7%, September 2003 500,000 555,945 552,109
Erie County, Hospital Authority PA Revenue, Erie County Geriatric Center, U. S. Treasury,
6.25%, July 2011 1,000,000 993,560 1,068,114
South Carolina State Housing Authority, Single Family Mortgage Purchase, 7%, July 2011 500,000 502,500 510,910
Met. Government Nashville and Davidson County, Tennessee, Health and Educational
Facilities Board Revenue, Meharry Medical College-HEW, collateralized, 7.875%,
December 2004 225,000 222,059 253,180
Austin, Texas, Utility System Revenue, 6%, April 2006 500,000 474,565 538,179
Sherman, Texas, New Public Housing Authority, 5.75%, March 2006 200,000 178,876 204,963
Texas Coastal Water Authority, Water Convey System Revenue, 8.125%, December 2017 700,000 712,250 750,322
Virginia State Housing Development Authority, Multifamily Mortgage Section 8 Assisted,
8.25%, November 2012 25,000 24,770 25,299
Washington State, Public Power Supply System, Nuclear Project No. 2 Revenue,
6%, July 2012 500,000 460,000 495,849
----------- ----------- -----------
Total investments $25,280,000 $24,795,520 $26,534,870
=========== =========== ===========
</TABLE>
Keyco Bond Fund, Inc.
Financial Highlights
<TABLE>
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.
Six Months
Ended
3/31/96 Years Ended September 30,
----------------------------------------------
(Unaudited) 1995 1994 1993 1992
----------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 21.18 $ 20.73 $ 22.02 $ 21.40 $ 20.62
---------- ---------- ------------ ------------ ------------
Net investment income .62 1.25 1.25 1.29 1.32
Net realized gain (loss) on investments .05 .45 (1.28) .76 .78
---------- ---------- ------------- ----------- ------------
Total from investment operations .67 1.70 (.03) 2.05 2.10
Less distributions from:
Net investment income (.61) (1.25) (1.26) (1.32) (1.32)
Net realized investment income - - - (.11) -
---------- ----------- ------------ ------------ ------------
Total distributions (.61) (1.25) (1.26) (1.43) (1.32)
----------- ---------- ------------ ------------ ------------
Net asset value, end of period $ 21.24 $ 21.18 $ 20.73 $ 22.02 $ 21.40
=========== ========== ============ ============ ============
Total Return per Share Net Asset Value (a) 3.1% (c) 8.2% (.1)% 9.6% 10.2%
Ratios and Supplemental Data:
Net assets, end of period (in 000s) $ 26,920 $ 26,840 $ 26,264 $ 27,905 $ 27,118
Ratio of net investment income to average net assets 5.8% (b) 6.0% 5.9% 5.9% 6.3%
Ratio of expenses to average net assets .3% (b) .2% .2% .2% .2%
Portfolio turnover rate 5.2% (c) 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.
(b) Annualized
(c) Not annualized
</TABLE>
