<PAGE> 1
KEYCO BOND FUND, INC.
27777 FRANKLIN ROAD - SUITE 1850
SOUTHFIELD, MICHIGAN 48034
(248) 353-0790
May 19, 2000
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, 2000.
Net investment income for the six months was $707,784 or $.56 per share compared
with $722,094 or $.57 per share last year. The $14,310 decrease resulted 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, nine bonds were called or sold. The $1,227,476 proceeds from
these dispositions were reinvested in bonds maturing in sixteen to nineteen
years. Portfolio turnover for the six-month period was 4.9%.
The net asset value of the Fund was $25,988,061 or $20.51 per share at March 31,
2000, which was an increase of $44,088 or $.04 per share from September 30,
1999. This net increase is the amount by which undistributed income exceeded
unrealized depreciation of investments and realized losses. As of March 31,
2000, the weighted average annual yield on the Fund's portfolio was 5.9% based
on cost and 5.8% based on market value, and the weighted average maturity was
9.3 years.
In November 1999, the Board of Directors declared quarterly dividends which
total $1.12 per share for the year ending September 30, 2000. Dividends of $.38
per share have been paid during the six months ended March 31, 2000. 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
15, 1999. 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
<PAGE> 2
KEYCO BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
as of March 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at fair value (cost $24,629,448) $25,393,696
Cash 83,441
Accrued interest receivable 510,226
Other assets 698
------------
Total assets 25,988,061
------------
LIABILITIES
Total liabilities 0
------------
Net assets applicable to outstanding capital shares, equivalent to $20.51
per share based on 1,267,258 shares of capital stock outstanding $25,988,061
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 3
KEYCO BOND FUND, INC.
STATEMENT OF OPERATIONS
for the six months ended March 31, 2000
<TABLE>
<S> <C> <C>
Interest income $ 741,513
Expenses:
Legal and accounting $ 23,661
Custodial fee 7,250
Directors' fees 2,000
Miscellaneous expense 818
----------------
Total expenses 33,729
-----------
Net investment income 707,784
Realized loss on investments:
Proceeds from calls and sales 1,227,476
Cost of securities called or sold 1,287,894
----------------
Realized loss on investments (60,418)
Unrealized depreciation of investments:
Investments held, March 31, 2000:
At cost 24,629,448
At fair value 25,393,696
----------------
Unrealized appreciation, March 31, 2000 764,248
Less unrealized appreciation, September 30, 1999 885,968
----------------
Unrealized depreciation of investments (121,720)
-----------
Increase in net assets resulting from operations $ 525,646
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 4
KEYCO BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
for the six months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net assets, beginning of period $25,943,973 $27,190,818
----------------- -----------------
Changes in net assets from operations:
Net investment income 707,784 722,094
Realized gain (loss) on investments (60,418) 59,417
Unrealized depreciation of investments (121,720) (374,302)
----------------- -----------------
Increase in net assets from operations 525,646 407,209
Changes in net assets from capital transactions:
Dividends declared from net investment income (481,558) (494,231)
----------------- -----------------
Net increase (decrease) in net assets 44,088 (87,022)
----------------- -----------------
Net assets, end of period $25,988,061 $27,103,796
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
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.
4
<PAGE> 6
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:
<TABLE>
<S> <C>
Capital stock, $.02 par value; authorized 3,000,000 shares;
issued and outstanding, 1,267,258 shares at
March 31, 2000 $ 25,345
Additional paid-in capital 730,733
Retained earnings prior to July 1, 1979 24,093,500
Accumulated undistributed net investment income 494,177
Accumulated undistributed net realized loss from
securities transactions (119,942)
Net unrealized appreciation of investments, March 31, 2000 764,248
------------
Net assets, March 31, 2000 $ 25,988,061
============
</TABLE>
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
$1,231,457 and $1,227,476, 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.
5
<PAGE> 7
KEYCO BOND FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
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 $ 518,495
Capac, Michigan, Community School District, 6.25%, July 2003 100,000 96,920 102,319
Central Michigan University, 5.3%, October 2006 70,000 66,345 70,809
Crosswell and Lexington, Michigan, Community Schools Building
and Site, 6%, May 2016 500,000 500,000 508,455
Dearborn, Michigan, School District, 6.7%, May 2000 135,000 147,775 135,270
Dearborn, Michigan, Sewage Disposal System Revenue, 5.125%,
April 2016 110,000 101,748 106,329
Detroit, Michigan, FSA, Series A, 5%, April 2019 640,000 601,811 578,784
Detroit, Michigan, Distributable State Aid, 5.2%, May 2007 520,000 516,001 522,730
Detroit, Michigan, City School District, 4.95%, May 2005 200,000 186,398 198,222
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 20,000 21,345 20,889
Detroit, Michigan, Sewage Disposal, Series A, 5.7%, July 2013 80,000 85,381 80,750
Detroit, Michigan, Sewage Disposal, Series B, 5.25%, July 2015 500,000 484,270 487,670
East Detroit, Michigan, School District, 4.9%, May 2016 500,000 494,290 459,705
Grand Rapids, Michigan, Sanitary Sewer System, 6%, January 2012 500,000 500,000 521,265
Jackson County, Michigan, 5%, April 2006 300,000 277,173 299,538
Lansing, Michigan, School District, 6.8%, May 2004 460,000 512,067 492,315
Lincoln, Michigan, Consolidated School District, 5%, May 2018 170,000 170,000 158,670
Madison, Michigan, District Public Schools, 5.125%, May 2018 750,000 711,555 703,297
Michigan Municipal Bond Authority Revenue, Local Government
Wayne County, PJ-GRP 1213, 7.4%, December 2002 1,075,000 1,065,497 1,145,746
Michigan Municipal Bond Authority Revenue, State Revolving Fund,
6.5%, October 2010 550,000 599,769 594,699
Michigan Municipal Bond Authority Revenue, State Revolving Fund,
6.55%, October 2013 100,000 109,445 106,048
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 6%, December 2013 130,000 134,940 133,211
Michigan Municipal Bond Authority Revenue, Local Government
Loan Program, 5.375%, November 2017 150,000 154,161 145,270
Michigan Public Power Agency Revenue, Belle River, 5.25%,
January 2018 425,000 410,418 408,365
Michigan State Building Authority Revenue, 5.125%, October 2008 100,000 91,772 99,966
Michigan State Building Authority Revenue, Series I, 5.875%,
October 2008 400,000 428,888 417,896
Michigan State Building Revenue, Series I, 5.3%, October 2012 500,000 418,505 497,745
Michigan State Building Authority Revenue, Series I, 5%, October 2014 40,000 40,000 38,561
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.375%, April 2004 70,000 71,537 71,042
Michigan State Housing Development Authority, Rental Housing
Revenue, 5.6%, April 2006 500,000 489,640 511,575
Michigan State University Revenue, 6.125%, August 2010 1,200,000 1,190,892 1,248,636
Michigan State Trunk Line, Series A, 5.75%, October 2012 250,000 248,673 256,005
Pinckney, Michigan, Community Schools, Livingston and Washtenaw
Counties, 5.5%, May 2004 300,000 268,500 306,105
Plymouth-Canton, Michigan, Community School District 5.5%, May 2013 100,000 104,191 100,170
Portage, Michigan, Public Schools, 5.7%, May 2012 230,000 227,619 239,039
Saginaw Valley State University General Revenue, Michigan, 5.25%,
July 2019 610,000 569,478 571,344
South Lyon, Michigan, Community Schools, 6.25%, May 2014 55,000 58,592 56,214
</TABLE>
6
<PAGE> 8
KEYCO BOND FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
<TABLE>
<CAPTION>
LONG-TERM STATE AND PRINCIPAL FAIR
MUNICIPAL OBLIGATIONS AMOUNT COST VALUE
- --------------------------------------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
Sturgis, Michigan, Government Hospital, 6.55%, October 2000 $ 325,000 $ 308,750 $ 328,660
Sturgis, Michigan, Government Hospital, 6.6%, October 2001 250,000 237,500 252,530
University of Michigan, Hospital Revenue, 7%, December 2021 75,000 78,366 77,835
Wayland, Michigan, Unified School District, 5.125%, May 2017 1,025,000 976,231 968,615
Wayne County, Michigan, Airport Revenue, Series B, 5.25%,
December 2015 135,000 136,832 130,104
West Bloomfield, Michigan, School District, 5%, May 2006 100,000 92,357 100,048
Wyandotte, Michigan, Downtown Development, 6.25%,
December 2008 750,000 727,440 810,293
Alaska State Housing Finance Corporation, 6.1%, June 2007 120,000 120,000 125,112
Alaska State Housing Finance Corporation, 6.2%, June 2008 220,000 220,000 230,045
District of Columbia, MBIA, Series B, 6.3%, June 2007 250,000 263,922 262,703
Gainesville, Florida, Utilities System Revenue, 6.5%, October 2014 750,000 724,900 754,717
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2008 290,000 258,381 296,354
Honolulu, Hawaii, New Public Housing Authority, 5.75%, August 2009 700,000 622,804 715,239
Maryland State Health and Higher Educational Facilities Authority
Revenue Johns Hopkins Hospital Redevelopment Issue,
6.625%, July 2008 455,000 455,000 477,764
Mercer County, New Jersey, Improvement Authority Revenue,
State Justice Complex, 6.4%, January 2018 500,000 463,270 546,945
Akron, New York, Central School District, 5.9%, June 2014 100,000 108,776 103,350
Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue, 5.25%, July 2017 310,000 299,541 295,433
Monroe County, New York, Water Improvement, 5.5%, December 2008 610,000 589,034 619,974
New York, New York, City Municipal Assistance Corporation, 6%,
July 2008 750,000 755,625 765,203
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 207,604
New York, New York, City Municipal Water Finance Authority,
Water-Sewer System Revenue, 6.75%, June 2016 200,000 206,384 205,910
New York State Refunding, 6.1%, November 2008 500,000 500,000 521,100
Ohio State Building Authority, State Transportation Facilities, 7%,
September 2003 350,000 389,162 360,916
Erie County, Hospital Authority PA Revenue, Erie County Geriatric
Center, U. S. Treasury, 6.25%, July 2011 880,000 874,333 897,714
Puerto Rico Commonwealth Highway and Transportation Authority
Highway Revenue, 6.25%, July 2012 500,000 544,085 544,235
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority, 1998
Series A, 5.375%, October 2013 435,000 454,144 436,214
Puerto Rico Public Finance Corporation Commonwealth
Appropriation, 5.375%, June 2017 565,000 560,231 551,655
Met. Government Nashville and Davidson County, Tennessee,
Health and Educational Facilities Board Revenue, Meharry
Medical College-HEW, collateralized, 7.875%, December 2004 155,000 152,059 164,687
Austin, Texas, Utility System Revenue, 6%, April 2006 500,000 474,565 526,970
Sherman, Texas, New Public Housing Authority, 5.75%, March 2006 200,000 178,876 202,618
--------------- -------------- --------------
Total investments $25,040,000 $24,629,448 $25,393,696
=============== ============== ==============
</TABLE>
7
<PAGE> 9
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,
3/31/00 ----------------------------------------------
(UNAUDITED) 1999 1998 1997 1996
------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 20.47 $ 21.46 $ 21.40 $ 21.14 $ 21.18
Net investment income 0.56 1.13 1.18 1.22 1.24
Net realized and unrealized gain (loss) on investments (0.14) (0.98) 0.21 0.28 (0.02)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.42 0.15 1.39 1.50 1.22
---------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income (0.38) (1.14) (1.21) (1.23) (1.24)
Net realized gain on investments - - (0.12) (0.01) (0.02)
---------- ---------- ---------- ---------- ----------
Total distributions (0.38) (1.14) (1.33) (1.24) (1.26)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.51 $ 20.47 $ 21.46 $ 21.40 $ 21.14
========== ========== ========== ========== ==========
TOTAL RETURN PER SHARE NET ASSET VALUE (a) 2.0% (c) 0.7% 6.5% 7.1% 5.8%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) $ 25,988 $ 25,944 $ 27,191 $ 27,123 $ 26,796
Ratio of net investment income to average net assets 5.5% (b) 5.4% 5.5% 5.8% 5.8%
Ratio of expenses to average net assets 0.3% (b) 0.2% 0.2% 0.2% 0.2%
Portfolio turnover rate 4.9% (c) 21.6% 13.8% 3.5% 9.2%
</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
8
