KEYCO BOND FUND, INC.
27777 Franklin Road - Suite 1850
Southfield, Michigan 48034
(248) 353-0790
May 21, 1999
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, 1999.
Net investment income for the six months was $722,094 or $.57 per share
compared with $754,426 or $.60 per share last year. The $32,332 decrease
resulted primarily from lower interest income. Interest income has been
decreasing in recent years due to declining interest rates on replacement
bonds purchased upon the maturity, call or sale of older bonds.
During the period, ten bonds were called or sold. The $1,494,522 proceeds
from these dispositions were reinvested in bonds maturing in sixteen to
seventeen years. Portfolio turnover for the six-month period was 5.6%.
The net asset value of the Fund was $27,103,796 or $21.39 per share at March
31, 1999, which was a decrease of $87,022 or $.07 per share from September
30, 1998. This net decrease is the amount by which unrealized depreciation
of investments exceeded the undistributed income and realized gains. As of
March 31, 1999, the weighted average annual yield on the Fund's portfolio
was 6% based on cost and 5.6% based on market value, and the weighted
average maturity was 9.2 years.
In October 1998 the Board of Directors declared quarterly dividends which
total $1.14 per share for the year ending September 30, 1999. Dividends of
$.39 per share have been paid during the six months ended March 31, 1999.
Dividends are paid quarterly on the first business day of November,
February, May and August.
The Annual Meeting of Shareholders of Keyco Bond Fund, Inc. was held
December 16, 1998. 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 PricewaterhouseCoopers LLP 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
President
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<PAGE>
Keyco Bond Fund, Inc.
Statement of Assets and Liabilities
as of March 31, 1999
ASSETS
Investments in securities, at fair value (cost $24,877,163) $26,573,128
Cash 23,384
Accrued interest receivable 506,587
Other assets 697
----------
Total assets 27,103,796
----------
LIABILITIES
Total liabilities 0
----------
Net assets applicable to outstanding capital shares,
equivalent to $21.39 per share based on 1,267,258
shares of capital stock outstanding $27,103,796
==========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Keyco Bond Fund, Inc.
Statement of Operations
for the six months ended March 31, 1999
Interest income $ 755,498
Expenses:
Legal and accounting $ 24,669
Custodial fee 6,000
Directors' fees 2,000
Miscellaneous expense 735
---------
Total expenses 33,404
--------
Net investment income 722,094
Realized gain on investments:
Proceeds from calls and sales 1,494,522
Cost of securities called or sold 1,435,105
---------
Realized gain on investments 59,417
Unrealized appreciation (depreciation)
of investments:
Investments held, March 31,1999:
At cost 24,877,163
At fair value 26,573,128
----------
Balance, March 31, 1999 1,695,965
Less balance, September 30, 1998 2,070,267
----------
Unrealized appreciation (depreciation)
of investments (374,302)
---------
Increase in net assets resulting from operations $ 407,209
=========
The accompanying notes are an integral part of the financial statements.
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Keyco Bond Fund, Inc.
Statement of Changes in Net Assets
for the six months ended March 31, 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 722,094 754,426
Realized gain on investments 59,417 142,592
Unrealized depreciation of investments (374,302) (65,113)
---------- ----------
Increase in net assets from operations 407,209 831,905
Changes in net assets from capital transactions:
Dividends declared from net investment income (494,231) (557,593)
---------- ----------
Net increase (decrease) in net assets (87,022) 274,312
---------- ----------
Net assets, end of period $27,103,796 $27,397,370
========== ==========
The accompanying notes are an integral part of the financial statements.
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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. 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 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.
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, 1999 $ 25,345
Additional paid-in capital 730,733
Retained earnings prior to July 1, 1979 24,093,500
Accumulated undistributed net investment income 498,836
Assumulated undistributed net realized gain from
securities transactions 59,417
Net unrealized appreciation of investments,
March 31, 1999 1,695,965
---------
Net assets, March 31, 1999 $27,103,796
===========
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 $1,535,170 and $1,494,522,
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 $12,500 for
accounting and administrative services provided by an entity owned
by an officer of the Fund.
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Keyco Bond Fund, Inc.
Schedule of Portfolio Investments
March 31, 1999
<TABLE>
<CAPTION>
Principal Fair
Long-Term State and Municipal Obligations Amount Cost Value
- ----------------------------------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Almont, Michigan, Community Schools, 5.25%, May 2015 $ 425,000 $ 441,702 $ 431,252
Bay City, Michigan, Electric Utility Revenue, 6.6%, January 2012 500,000 494,900 535,910
Capac, Michigan, Community School District, 6.25%, July 2003 100,000 96,920 102,566
Central Michigan University, 5.3%, October 2006 70,000 66,345 73,693
Crosswell and Lexington, Michigan, Community Schools
Building and Site, 6%, May 2016 500,000 500,000 522,630
Dearborn, Michigan, School District, 6.7%, May 1999 100,000 108,744 100,294
Dearborn, Michigan, School District, 6.7%, May 2000 135,000 147,775 140,031
Detroit, Michigan, Distributable State Aid, 5.2%, May 2007 520,000 516,001 550,560
Detroit, Michigan, City Distributable State Aid, 7.2%, May 2009 660,000 656,700 675,391
Detroit, Michigan, City School District, 4.95%, May 2005 200,000 186,398 207,104
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 20,000 21,345 21,793
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 80,000 85,381 83,359
East Grand Rapids, Michigan, Public School District, 5%, May 2016 660,000 675,048 664,765
Farmington, Michigan, Public School District, 5%, May 2011 210,000 212,283 214,754
Grand Haven, Michigan, Electric Revenue, 5.25%, July 2013 1,000,000 1,024,780 1,023,430
Grand Rapids, Michigan, Sanitary Sewer System, 6%, January 2012 500,000 500,000 539,365
Grand Rapids, Michigan, Community College, 5.375%, May 2016 400,000 418,420 411,416
Jackson County, Michigan, 5%, April 2006 300,000 277,173 308,817
Lansing, Michigan, School District, 6.8%, May 2004 460,000 512,067 520,053
Michigan Municipal Bond Authority Revenue, Local Government
Wayne County, PJ-GRP 1213, 7.4%, December 2002 1,075,000 1,065,497 1,212,890
Michigan Municipal Bond Authority Revenue, State Revolving
Fund, 6.5%, October 2010 550,000 599,769 626,719
Michigan Municipal Bond Authority Revenue, State Revolving
Fund, 6.55%, October 2013 100,000 109,445 110,861
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 6%, December 2013 130,000 134,940 141,057
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 5.375%, November 2017 150,000 154,161 153,146
Michigan State Building Authority Revenue, 5.125%, October 2008 100,000 91,772 103,888
Michigan State Building Authority Revenue, Series I, 5.875%,
October 2008 400,000 428,888 434,664
Michigan State Building Revenue, Series I, 5.3%, October 2012 500,000 418,505 513,820
Michigan State Building Authority Revenue, Series I, 5%, October 2014 210,000 210,000 211,203
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.375%, April 2004 70,000 71,537 74,323
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.6%, April 2006 500,000 489,640 533,805
Michigan State Trunk Line, Series A, 5.75%, October 2012 250,000 248,673 266,258
Michigan State University Revenue, 6.125%, August 2010 1,200,000 1,190,892 1,300,416
Milan, Michigan, Area Schools, 5%, May 2013 300,000 299,985 303,735
Pinckney, Michigan, Community Schools, Livingston and
Washtenaw Counties, 5.5%, May 2004 300,000 268,500 306,348
Plymouth-Canton, Michigan, Community School District,
5.5%, May 2013 100,000 104,191 105,103
Portage, Michigan, Public Schools, 5.7%, May 2012 230,000 227,619 249,244
South Lyon, Michigan, Community Schools, 6.25%, May 2014 55,000 58,592 57,456
Sturgis, Michigan, Government Hospital, 6.55%, October 2000 325,000 308,750 329,969
Sturgis, Michigan, Government Hospital, 6.6%, October 2001 250,000 237,500 253,548
University of Michigan, Hospital Revenue, 7%, December 2021 75,000 78,366 80,727
Wayne County, Michigan, Airport Revenue, Series B,
5.25%, December 2015 135,000 136,832 137,588
West Bloomfield, Michigan, School District, 5%, May 2006 100,000 92,357 105,104
Wyandotte, Michigan, Downtown Development, 6.25%, December 2008 750,000 727,440 858,240
Alaska State Housing Finance Corporation, 6.1%, June 2007 140,000 140,000 152,575
Alaska State Housing Finance Corporation, 6.2%, June 2008 265,000 265,000 288,855
California State, 5.7%, August 2003 500,000 481,055 503,270
California State, 5.7%, August 2004 250,000 237,263 251,542
District of Columbia, MBIA, Series B, 6.3%, June 2007 250,000 263,922 273,535
Gainesville, Florida, Utilities System Revenue, 6.5%, October 2014 750,000 724,900 754,095
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2008 290,000 258,381 297,082
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2009 700,000 622,804 716,828
Joliet, Illinois, Corporate Purpose, 7%, January 2012 100,000 106,994 100,538
Maryland State Health and Higher Educational Facilities
Authority Revenue Johns Hopkins Hospital
Redevelopment Issue, 6.625%, July 2008 495,000 495,000 549,683
Mercer County, New Jersey, Improvement Authority Revenue,
State Justice Complex, 6.4%, January 2018 500,000 463,270 591,940
New York, New York, City Municipal Assistance Corporation,
6%, July 2008 750,000 755,625 788,685
Akron, New York, Central School District, 5.9%, June 2014 100,000 108,776 107,352
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 215,166
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 212,444
New York State Refunding, 6.1%, November 2008 500,000 500,000 543,620
Monroe County, New York, Water Improvement,
5.5%, December 2008 610,000 589,034 642,440
Ohio State Building Authority, State Transportation Facilities,
7%, September 2003 350,000 389,162 374,350
Erie County, Hospital Authority PA Revenue, Erie County Geriatric
Center, U. S. Treasury, 6.25%, July 2011 930,000 924,011 998,355
Puerto Rico Commonwealth Highway and Transportation
Authority Highway Revenue, 6.25%, July 2012 500,000 544,085 574,680
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 1,049,050
Met. Government Nashville and Davidson County, Tennessee,
Health and Educational Facilities Board Revenue, Meharry
Medical College-HEW, collateralized, 7.875%, December 2004 180,000 177,059 199,595
Austin, Texas, Utility System Revenue, 6%, April 2006 500,000 474,565 559,560
Sherman, Texas, New Public Housing Authority, 5.75%, March 2006 200,000 178,876 205,278
Virginia State Housing Development Authority, Multifamily
Mortgage Section 8 Assisted, 8.25%, November 2012 25,000 24,770 25,315
----------- ----------- -----------
Total investments $24,980,000 $24,877,163 $26,573,128
=========== =========== ===========
</TABLE>
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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.
<TABLE>
<CAPTION>
Six Months
Ended Years Ended September 30,
3/31/99 ----------------------------------
(Unaudited) 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 0.57 1.18 1.22 1.24 1.25
Net realized and unrealized gain
(loss) on investments (0.25) 0.21 0.28 (0.02) 0.45
----- ----- ----- ----- -----
Total from investment operations 0.32 1.39 1.50 1.22 1.70
----- ----- ----- ----- -----
Less distributions from:
Net investment income (0.39) (1.21) (1.23) (1.24) (1.25)
Net realized investment income - (0.12) (0.01) (0.02) -
----- ----- ----- ----- -----
Total distributions (0.39) (1.33) (1.24) (1.26) (1.25)
----- ----- ----- ----- -----
Net asset value, end of period $21.39 $21.46 $21.40 $21.14 $21.18
===== ===== ===== ===== =====
Total Return per Share Net
Asset Value (a) 1.5%(c) 6.5% 7.1% 5.8% 8.2%
Ratios and Supplemental Data:
Net assets, end of period (in 000s) $27,104 $27,191 $27,123 $26,796 $26,840
Ratio of net investment income to
average net assets 5.3%(b) 5.5% 5.8% 5.8% 6.0%
Ratio of expenses to average net assets .2%(b) .2% .2% .2% .2%
Portfolio turnover rate 5.6%(c) 13.8% 3.5% 9.2% 9.4%
</TABLE>
_______
(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.
(b) Annualized.
(c) Not annualized.
