KEYCO BOND FUND, INC.
27777 Franklin Road - Suite 1850
Southfield, Michigan 48034
(248) 353-0790
November 19, 1999
To Our Shareholders:
We are pleased to send you this Annual Report of Keyco Bond Fund, Inc. for
the year ended September 30, 1999.
Net investment income for the year was $1,441,651 or $1.13 per share
compared with $1,499,756 or $1.18 per share last year. Most of this change
was caused by a $58,855 decline in interest income as bonds purchased in
recent years yielded less than the matured or called bonds which they
replaced, many of which were purchased a number of years ago.
During the fiscal year, market interest rates increased causing the value of
the Fund's bond portfolio to decrease by $1,184,299 or 4.4%.
During the year, 26 bonds were either called, sold or matured for total
proceeds of $5,714,974. Near the end of the year when interest rates were
rising, the Fund took the opportunity to improve yields and extend
maturities. As a result of the dispositions, the Fund realized a loss of
$59,523 which can be used to offset future gains.
The cash from these dispositions was reinvested in bonds maturing in sixteen
to nineteen years. Portfolio turnover was 21.6%, which was higher than
recent years as a result of early calls and the changing interest rate
environment.
The net asset value of the Fund was $20.47 per share on September 30, 1999,
a decrease of $.99 per share from the prior year. The weighted average
annual yield on the bonds in the Fund as of September 30, 1999 was 6% based
on cost, and 5.8% based on market value, and the weighted average maturity
was 9.4 years.
The Board of Directors, on November 2, 1999, declared quarterly dividends
which total $1.12 per share for the year ending September 30, 2000. All
shareholders will be sent quarterly dividend payments on November 2, 1999,
February 1, 2000, May 1, 2000, August 1, 2000 and November 1, 2000.
The Annual Meeting of Shareholders of Keyco Bond Fund, Inc. will be held at
27777 Franklin Road, Suite 1850, Southfield, Michigan, on Wednesday,
December 15, 1999, at 11:00 a.m. for the purpose of electing Directors and
ratifying the selection of PricewaterhouseCoopers LLP as our auditors.
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.
On behalf of the Board of Directors,
/S/ Joel D. Tauber
President
Enclosures
<PAGE>
KEYCO BOND FUND, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
for the year ended September 30, 1999
Keyco Bond Fund, Inc.
Contents Pages
Report of Independent Accountants 1
Financial Statements:
Statement of Assets and Liabilities as of
September 30, 1999 2
Statement of Operations for the Year Ended
September 30, 1999 3
Statement of Changes in Net Assets for the Years
Ended September 30, 1999 and 1998 4
Notes to Financial Statements 5-6
Supplemental Schedules:
Schedule of Portfolio Investments, September 30, 1999 7-8
Financial Highlights for the Years Ended September 30,
1999, 1998, 1997, 1996 and 1995 9
<PAGE>
[PricewaterhouseCoopers Letterhead]
Report of Independent Accountants
To the Board of Directors and Shareholders of
Keyco Bond Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities of
Keyco Bond Fund, Inc., including the schedule of portfolio investments, as
of September 30, 1999, 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 present fairly, in all material respects, the
financial position of Keyco Bond Fund, Inc. as of September 30, 1999, 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. 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 which
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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of September 30,
1999 by correspondence with the custodian. We believe that our audits
provide a reasonable basis for the opinion expressed above.
/S/ PricewaterhouseCoopers LLP
October 22, 1999
<PAGE>
Keyco Bond Fund, Inc.
Statement of Assets and Liabilities
as of September 30, 1999
ASSETS
Investments in securities, at fair value (cost $24,685,886) $25,571,854
Cash 85,021
Accrued interest receivable 503,373
-----------
Total assets 26,160,248
-----------
LIABILITIES
Dividends payable 215,434
Accrued liabilities 841
-----------
Total liabilities 216,275
-----------
Net assets applicable to outstanding capital shares,
equivalent to $20.47 per share based on 1,267,258 shares
of capital stock outstanding $25,943,973
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Keyco Bond Fund, Inc.
Statement of Operations
for the year ended September 30, 1999
Interest income $1,496,155
Expenses:
Legal and accounting $ 39,071
Custodial fee 12,000
Directors' fees 2,000
Miscellaneous expense 1,433
-------------
Total expenses 54,504
----------
Net investment income 1,441,651
Realized loss on investments:
Proceeds from maturity, calls and sales 5,714,974
Cost of securities matured, called or sold 5,774,497
-------------
Realized loss on investments (59,523)
Unrealized depreciation of investments:
Investments held, September 30, 1999:
At cost 24,685,886
At fair value 25,571,854
-------------
Unrealized appreciation, September 30, 1999 885,968
Less unrealized appreciation,
September 30, 1998 2,070,267
-------------
Unrealized depreciation of investments (1,184,299)
-----------
Increase in net assets resulting from operations $ 197,829
===========
The accompanying notes are an integral part
of the financial statements.
<PAGE>
Keyco Bond Fund, Inc.
Statement of Changes in Net Assets
for the years ended September 30, 1999 and 1998
1999 1998
Net assets, beginning of period $27,190,818 $27,123,058
Changes in net assets from operations:
Net investment income 1,441,651 1,499,756
Realized gain (loss) on investments (59,523) 153,871
Unrealized appreciation (depreciation) of
investments (1,184,299) 105,533
----------- -----------
Increase in net assets from operations 197,829 1,759,160
Changes in net assets from capital transactions:
Dividends declared from net investment income (1,444,674) (1,533,382)
Dividends declared from net capital gains - (158,018)
----------- -----------
Net increase (decrease) in net assets (1,246,845) 67,760
----------- -----------
Net assets, end of period $25,943,973 $27,190,818
=========== ===========
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 "Fund") has registered under the
Investment Company Act of 1940, as amended, as a closed-end,
diversified management company. The Fund 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 Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting
principles.
a. Security Valuation: The Fund 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 Fund's custodian, who utilizes a matrix
pricing system. 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 Fund'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.
d. Estimates: 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 and
disclosure of contingent 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 those estimates.
<PAGE>
<PAGE>
Notes to Financial Statements, Continued
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, 1999 $ 25,345
Additional paid-in capital 730,733
Retained earnings prior to July 1, 1979 24,093,500
Accumulated undistributed net investment income 267,950
Accumulated undistributed net realized loss from
securities transactions (59,523)
Net unrealized appreciation of investments,
September 30, 1999 885,968
-----------
Net assets, September 30, 1999 $25,943,973
===========
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 $5,683,286 and $5,714,974,
respectively.
4. Portfolio Manager:
The Fund does not retain the services of an investment advisor or a
third-party portfolio manager. The Fund, acting through its
officers and with the review provided by the Board, makes
investment decisions internally.
5. Related Parties:
Legal and accounting expenses incurred include $25,000 for
accounting and administrative services provided by an entity owned
by an officer of the Fund.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Keyco Bond Fund, Inc.
Schedule of Portfolio Investments
September 30, 1999
Long-Term State and Principal Fair
Municipal Obligations Amount Cost Value
<S> <C> <C> <C>
Bay City, Michigan, Electric Utility Revenue, 6.6%, January 2012 $ 500,000 $ 494,900 $ 526,345
Capac, Michigan, Community School District, 6.25%, July 2003 100,000 96,920 102,426
Central Michigan University, 5.3%, October 2006 70,000 66,345 71,634
Crosswell and Lexington, Michigan, Community Schools
Building and Site, 6%, May 2016 500,000 500,000 507,760
Dearborn, Michigan, School District, 6.7%, May 2000 135,000 147,775 137,337
Detroit, Michigan, FSA, Series A, 5%, April 2019 640,000 601,811 575,834
Detroit, Michigan, Distributable State Aid, 5.2%, May 2007 520,000 516,001 529,433
Detroit, Michigan, City School District, 4.95%, May 2005 200,000 186,398 201,350
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 20,000 21,345 21,257
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 80,000 85,381 80,498
Detroit, Michigan, Sewage Disposal, Series B, 5.25%, July 2015 500,000 484,270 483,320
East Detroit, Michigan, School District, 4.9%, May 2016 500,000 494,290 455,425
Grand Rapids, Michigan, Community College, 5.375%, May 2016 400,000 418,420 389,916
Grand Rapids, Michigan, Sanitary Sewer System, 6%, January 2012 500,000 500,000 528,665
Jackson County, Michigan, 5%, April 2006 300,000 277,173 304,152
Lansing, Michigan, School District, 6.8%, May 2004 460,000 512,067 503,778
Lincoln, Michigan, Consolidated School District, 5%, May 2018 170,000 170,000 157,194
Madison, Michigan, District Public Schools, 5.125%, May 2018 750,000 711,555 697,672
Michigan Municipal Bond Authority Revenue, Local Government
Wayne County, PJ-GRP 1213, 7.4%, December 2002 1,075,000 1,065,497 1,172,997
Michigan Municipal Bond Authority Revenue, State Revolving
Fund, 6.5%, October 2010 550,000 599,769 607,854
Michigan Municipal Bond Authority Revenue, State Revolving
Fund, 6.55%, October 2013 100,000 109,445 108,124
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 6%, December 2013 130,000 134,940 136,305
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 5.375%, November 2017 150,000 154,161 144,207
Michigan Public Power Agency Revenue, Belle River, 5.25%, January 2018 425,000 410,418 404,825
Michigan State Building Authority Revenue, 5.125%, October 2008 100,000 91,772 100,590
Michigan State Building Authority Revenue, Series I, 5.875%,
October 2008 400,000 428,888 424,960
Michigan State Building Revenue, Series I, 5.3%, October 2012 500,000 418,505 495,830
Michigan State Building Authority Revenue, Series I, 5%, October 2014 210,000 210,000 208,211
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.375%, April 2004 70,000 71,537 72,328
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.6%, April 2006 500,000 489,640 519,390
Michigan State University Revenue, 6.125%, August 2010 1,200,000 1,190,892 1,270,848
Michigan State Trunk Line, Series A, 5.75%, October 2012 250,000 248,673 260,325
Pinckney, Michigan, Community Schools, Livingston and
Washtenaw Counties, 5.5%, May 2004 300,000 268,500 306,213
Plymouth-Canton, Michigan, Community School District,
5.5%, May 2013 100,000 104,191 100,615
Portage, Michigan, Public Schools, 5.7%, May 2012 230,000 227,619 243,232
South Lyon, Michigan, Community Schools, 6.25%, May 2014 55,000 58,592 56,251
Sturgis, Michigan, Government Hospital, 6.55%, October 2000 325,000 308,750 329,329
Sturgis, Michigan, Government Hospital, 6.6%, October 2001 250,000 237,500 252,930
University of Michigan, Hospital Revenue, 7%, December 2021 75,000 78,366 79,159
Wayland, Michigan, Unified School District, 5.125%, May 2017 1,025,000 976,231 960,035
Wayne County, Michigan, Airport Revenue, Series B,
5.25%, December 2015 135,000 136,832 128,901
West Bloomfield, Michigan, School District, 5%, May 2006 100,000 92,357 101,565
Wyandotte, Michigan, Downtown Development, 6.25%, December 2008 750,000 727,440 819,952
Alaska State Housing Finance Corporation, 6.1%, June 2007 135,000 135,000 142,696
Alaska State Housing Finance Corporation, 6.2%, June 2008 255,000 255,000 269,489
District of Columbia, MBIA, Series B, 6.3%, June 2007 250,000 263,922 267,453
Gainesville, Florida, Utilities System Revenue, 6.5%, October 2014 750,000 724,900 754,440
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2008 290,000 258,381 296,508
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2009 700,000 622,804 715,561
Maryland State Health and Higher Educational Facilities Authority Revenue
Johns Hopkins Hospital Redevelopment Issue, 6.625%, July 2008 455,000 455,000 482,992
Mercer County, New Jersey, Improvement Authority Revenue,
State Justice Complex, 6.4%, January 2018 500,000 463,270 543,505
Akron, New York, Central School District, 5.9%, June 2014 100,000 108,776 103,034
Metropolitan Transportation Authority, New York, Commuter Facilities
Revenue, 5.25%, July 2017 310,000 299,541 292,869
Monroe County, New York, Water Improvement, 5.5%, December 2008 610,000 589,034 624,256
New York, New York, City Municipal Assistance Corporation,
6%, July 2008 750,000 755,625 774,840
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 210,848
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 207,748
New York State Refunding, 6.1%, November 2008 500,000 500,000 530,555
Ohio State Building Authority, State Transportation Facilities, 7%,
September 2003 350,000 389,162 367,066
Erie County, Hospital Authority PA Revenue, Erie County Geriatric Center,
U. S. Treasury, 6.25%, July 2011 905,000 899,172 923,019
Puerto Rico Commonwealth Highway and Transportation Authority
Highway Revenue, 6.25%, July 2012 500,000 544,085 544,065
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, 1998 Series A, 5.375%,
October 2013 1,000,000 1,044,010 996,590
Met. Government Nashville and Davidson County, Tennessee,
Health and Educational Facilities Board Revenue, Meharry
Medical College-HEW, collateralized, 7.875%, December 2004 165,000 162,059 178,292
Austin, Texas, Utility System Revenue, 6%, April 2006 500,000 474,565 536,925
Sherman, Texas, New Public Housing Authority, 5.75%, March 2006 200,000 178,876 204,828
Virginia State Housing Development Authority, Multifamily
Mortgage Section 8 Assisted, 8.25%, November 2012 25,000 24,770 25,303
----------- ----------- -----------
Total investments $25,000,000 $24,685,886 $25,571,854
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
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,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $21.46 $21.40 $21.14 $21.18 $20.73
------ ------ ------ ------ ------
Net investment income 1.13 1.18 1.22 1.24 1.25
Net realized and unrealized gain (loss) on investments (0.98) 0.21 0.28 (0.02) 0.45
------ ------ ------ ------ ------
Total from investment operations 0.15 1.39 1.50 1.22 1.70
------ ------ ------ ------ ------
Less distributions from:
Net investment income (1.14) (1.21) (1.23) (1.24) (1.25)
Net realized gain on investments - (0.12) (0.01) (0.02) -
------ ------ ------ ------ ------
Total distributions ( 1.14) ( 1.33) ( 1.24) ( 1.26) ( 1.25)
------ ------ ------ ------ ------
Net asset value, end of period $20.47 $21.46 $21.40 $21.14 $21.18
====== ====== ====== ====== ======
Total Return per Share Net Asset Value (a) .7% 6.5% 7.1% 5.8% 8.2%
Ratios and Supplemental Data:
Net assets, end of period (in 000s) $25,944 $27,191 $27,123 $26,796 $26,840
Ratio of net investment income to average net assets 5.4% 5.5% 5.8% 5.8% 6.0%
Ratio of expenses to average net assets .2% .2% .2% .2% .2%
Portfolio turnover rate 21.6% 13.8% 3.5% 9.2% 9.4%
(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 Fund.
</TABLE>
