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Keyco Bond Fund Inc – ‘N-CSR’ for 9/30/14

On:  Wednesday, 11/26/14, at 4:07pm ET   ·   Effective:  11/26/14   ·   For:  9/30/14   ·   Accession #:  1193125-14-427170   ·   File #:  811-02957

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/26/14  Keyco Bond Fund Inc               N-CSR       9/30/14    3:294K                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR       Certified Annual Shareholder Report of a            HTML    161K 
                          Management Investment Company                          
 3: EX-99.906CE  Miscellaneous Exhibit                              HTML      7K 
 2: EX-99.CERT  Miscellaneous Exhibit                               HTML     15K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-2957

Keyco Bond Fund, Inc.

(Exact name of registrant as specified in charter)

Joel D. Tauber, President

Keyco Bond Fund, Inc.

27777 Franklin Road, Suite 1630

Southfield, Michigan 48034

(Name and Address of agent for service)

Registrant’s telephone number, including area code: (248) 353-0790

Date of fiscal year end: September 30

Date of reporting period: September 30, 2014

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

KEYCO BOND FUND, INC.

Table of Contents

2

Item 1. Annual Report to Shareholders.

KEYCO BOND FUND, INC.

27777 Franklin Road - Suite 1630

Southfield, Michigan 48034

(248) 353-0790

November 21, 2014

To Our Shareholders:

Enclosed is the Annual Report of Keyco Bond Fund, Inc. for the year ended September 30, 2014.

It is with deep regret that I inform you that long-time Board member David K. Page passed away in July. He provided the Board with astute analysis, competent decision-making and compassionate understanding in helping to guide the Fund’s success over his 25 years of service. The remaining Board members elected Steve Milgrom to fill the vacancy.

Municipal bond interest rates have decreased during the year resulting in a significant increase in the value of the Fund’s bond portfolio. As a result, the year-end value of the Fund’s bond portfolio appreciated by $904,655.

The Board of Directors, on November 4, 2014, declared quarterly dividends totaling $0.68 per share for the year ending September 30, 2015. This amount is subject to revision in September 2015 based upon actual net investment income for the year. Dividends will be paid quarterly on the last business day of January and the first business day of May, August and November.

An IRS Form 1099-DIV will be issued in January 2015 to those shareholders receiving $10 or more of tax-exempt dividends, reported as exempt-interest dividends, in 2014. The tax reporting letter will be sent with your Form 1099-DIV.

The Annual Meeting of Shareholders of Keyco Bond Fund, Inc. will be held on Thursday, December 11, 2014, at 2:00 p.m. at 27777 Franklin Road, Suite 1630, Southfield, Michigan, for the purpose of electing Directors, ratifying the selection of Grant Thornton LLP as our auditors and advisory votes on executive compensation and how often the shareholders should vote on such executive compensation.

Mark Schlussel and Steve Milgrom serve as independent outside Directors with remuneration of $2,000 each per meeting. In addition, the Fund pays Tauber Enterprises, LLC $45,000 annually for certain accounting and administrative services and office space rental.

3

If you have any questions concerning the Fund or the enclosed information, please call me.

On behalf of the Board of Directors,

4

KEYCO BOND FUND, INC.

Management’s Discussion of Fund Performance

For the Year Ended September 30, 2014

The Fund’s primary investment objective is to earn as high a level of current interest income exempt from federal income taxes as is available from municipal bonds, consistent with prudent investment management and preservation of capital. Capital appreciation is a minor investment objective of the Fund.

Net Investment Income

The Fund’s net investment income is primarily dependent upon interest rates at the times the bonds in the portfolio were purchased.

Net investment income for the year was $896,962 or $.71 per share compared with $865,179 or $.68 per share last year. This $31,783 change was the result of an increase of $17,816 in interest income and a decrease of $13,967 in expenses, primarily in legal expenses.

As of September 30, 2014, the weighted average annual yield on the Fund’s portfolio was 4.65% based on cost and 4.46% based on market value.

Valuation of Bonds and Net Asset Value

Because the municipal bonds in the Fund’s portfolio are not actively traded and market quotations are not readily available, the bonds are stated at fair value. The fair value for each bond is provided by the Fund’s custodian, who uses an evaluation methodology.

The Fund’s net asset value is calculated by subtracting the Fund’s liabilities from its assets. The valuation of the Fund’s most significant assets, its bond portfolio, is affected by market interest rates and maturity and call dates. When rates increase, the value of the bond portfolio decreases. When rates decrease, the value of the bond portfolio increases. Longer maturity dates magnify the effect of interest rate changes.

The net asset value of the Fund was $26,071,364 or $20.57 per share at September 30, 2014, an increase of $836,811 or $.66 per share from September 30, 2013. Municipal bond interest rates ended the year lower than at the beginning of the year.

The weighted average maturity was 13.8 years, an increase from the prior year weighted average maturity of 13.2 years.

5

KEYCO BOND FUND, INC.

Management’s Discussion of Fund Performance

For the Year Ended September 30, 2014

Page 2

Asset Allocation

Based on net asset value, the bond portfolio is allocated by state/territory as follows:

Other

During the year 15 bonds either matured or were called or sold for total proceeds of $3,224,708. The Fund has a net realized capital loss of $77,704 carryover from these transactions which is available to offset future realized capital gains.

Cash from these dispositions was reinvested in bonds maturing in thirteen to twenty-seven years. Portfolio turnover was 12.9%

6

KEYCO BOND FUND, INC.

Additional Information

September 30, 2014

Obtaining Quarterly Portfolio Holdings

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC’s web site at http://www.sec.gov. The Fund’s Form N-Q may be viewed and copied at the SEC’s Public Reference Room in Washington DC. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-202-551-8090. For a complete list of the Fund’s portfolio holdings, a copy of the Fund’s most recent quarterly holding report, semi-annual report, or annual report may be requested by writing Keyco Bond Fund, Inc., 27777 Franklin Road, Suite 1630, Southfield, MI 48034.

Information on Proxy Voting Policies, Procedures and Records

The Fund has not adopted policies and procedures with respect to voting proxies because the Fund does not invest in voting securities. The Fund has not voted any proxies.

7

Keyco Bond Fund, Inc.

Financial Statements and Report of Independent

Registered Public Accounting Firm

September 30, 2014

8

CONTENTS

9

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Keyco Bond Fund, Inc.

We have audited the accompanying statement of assets and liabilities of Keyco Bond Fund, Inc. (“the Fund”), including the schedule of portfolio investments, as of September 30, 2014, and the related statement of operations for the year then ended, the statements 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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian and broker. 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, 2014, 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 accounting principles generally accepted in the United States of America.

10

Keyco Bond Fund, Inc.

Statement of Assets and Liabilities

September 30, 2014

The accompanying notes are an integral part of these financial statements.

11

Keyco Bond Fund, Inc.

Statement of Operations

For the Year Ended September 30, 2014

The accompanying notes are an integral part of these financial statements.

12

Keyco Bond Fund, Inc.

Statements of Changes in Net Assets

For the Years Ended September 30,

The accompanying notes are an integral part of these financial statements.

13

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 for the years ended September 30.

The accompanying notes are an integral part of these financial statements.

14

Keyco Bond Fund, Inc.

Schedule of Portfolio Investments

September 30, 2014

15

Keyco Bond Fund, Inc.

Schedule of Portfolio Investments - Continued

September 30, 2014

16

Keyco Bond Fund, Inc.

Schedule of Portfolio Investments - Continued

September 30, 2014

The accompanying notes are an integral part of these financial statements.

17

Keyco Bond Fund, Inc.

Notes to Financial Statements

Keyco Bond Fund, Inc. (the “Fund”) has registered under the Investment Company Act of 1940, as amended, as a closed-end, diversified management investment 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 accounting principles generally accepted in the United States of America.

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 Fund’s custodian uses an evaluation methodology to determine fair value. The evaluations include information from actual trades for active issues. Evaluations are also based on reviews of current economic conditions, trading levels, spread relationships and the slope of the yield curve. Evaluations are also adjusted for various attributes such as discounts, premiums, credit, use of proceeds and callability. In the unlikely event that the Fund’s custodian is unable to value one or more of the bonds, the valuation(s) will be obtained from a brokerage firm that markets municipal bonds or a source referred by that brokerage firm. The Fund’s policies require that the Board of Directors (“Board”) be notified that this alternative valuation method was used at the next regularly scheduled meeting of the Board.

Various inputs are used to determine the value of the Fund’s investments. These inputs are summarized in three broad levels listed below:

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

There were no transfers between the levels during the year ended September 30, 2014.

18

Keyco Bond Fund, Inc.

Notes to Financial Statements - Continued

Income Taxes

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.

The cost of securities for federal income tax purposes approximates the cost for financial statement purposes. The components of distributable earnings on a tax basis were as follows:

The tax character of distributions paid was as follows:

Michigan Corporate Income Tax

It has been determined that the Fund has no liability for the Michigan Corporate Income Tax which became effective January 1, 2012, or its predecessor tax, the Michigan Business Tax, which was in effect from January 1, 2008 until January 1, 2012.

The Fund has reviewed all open tax years for federal and State of Michigan tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. There are no unrecognized tax benefits in the financial statements. The Fund’s tax returns are subject to examination for federal purposes for three years from the date of filing and for State purposes for four years from the date of filing. The Fund has not been subject to interest and/or penalties on its tax return filings.

Other

The Fund follows industry practice and records security transactions on the trade date. Cost of securities sold is determined by specific identification. Distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on an accrual basis.

19

Keyco Bond Fund, Inc.

Notes to Financial Statements - Continued

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

The cost of purchases and the proceeds from dispositions of securities, other than United States government obligations and short-term notes, aggregated $3,363,760 and $3,224,708, respectively for the year ended September 30, 2014.

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.

Legal and accounting expenses incurred include $45,000 for accounting and administrative services provided by an entity owned by an officer of the Fund.

The Fund invests in municipal bonds. Municipal bonds are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with investments in municipal bonds, it is possible that changes in the values of the bonds will occur in the near term and that such changes could materially affect the amounts reported in the Statement of Assets and Liabilities. The ability of issuers of debt instruments held by the Fund to meet their obligations may also be affected by economic and political developments in a specific state or region.

The Fund has evaluated subsequent events through the date these financial statements were issued. No events have taken place that meet the definition of a subsequent event that requires disclosure in these financial statements.

20

Item 2. Code of Ethics.

As of September 30, 2014, the registrant had adopted a code of ethics applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether such individuals are employed by the registrant or a third-party. A copy of the registrant’s Code of Ethics is available to shareholders upon request. If you would like to receive a copy, please contact Keyco Bond Fund, Inc. at 27777 Franklin Road, Suite 1630, Southfield, Michigan 48034 and one will be sent, without charge, by first-class mail.

There have been no amendments to the registrant’s code of ethics during the past year. No waivers have been granted under a provision of the code of ethics during the past year.

Item 3. Audit Committee Financial Expert.

The Board of Directors of the registrant has determined that the registrant does not currently have a member serving on its Board of Directors that meets the definition of an “audit committee financial expert” as defined in the instructions to this Form N-CSR.

Although each member of the registrant’s Board of Directors has one or more of the attributes required in order for such person to be determined to be an audit committee financial expert, no member has all of such required attributes. The Directors reviewed the attributes, education, and experience of each member of the registrant’s Board of Directors, the nature of the accounting principles applicable to the registrant, and the registrant’s underlying internal controls and reporting mechanisms and determined that the members of the registrant’s Board of Directors, as a group, have the experience and education necessary to perform the audit committee’s responsibilities, including with respect to the evaluation of the financial statements of the registrant. In addition, the Directors determined that the Board has the resources and authority necessary to discharge its responsibilities, including the authority to retain at any time independent counsel and other advisers and experts.

Item 4. Principal Accountant Fees and Services.

Information is contained under the caption “Fees of Independent Public Accountant” in the registrant’s Proxy Statement dated November 21, 2014 and is incorporated herein by reference.

The registrant’s Board of Directors pre-approves all audit and permissible non-audit services rendered to the registrant.

Item 5. Audit Committee of Listed Registrant.

The registrant’s shares are not listed for trading on a national securities exchange.

Item 6. Schedule of Investments.

This Schedule is included as part of the Report to Shareholders filed under Item 1 hereof.

21

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-end Management Investment Companies.

Not applicable because the registrant invests exclusively in non-voting fixed income debt securities.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Portfolio Manager: Joel D. Tauber, President of the registrant since 1995, has primary responsibility for the day-to-day management of the Fund’s portfolio. He has served as a manufacturing executive, business consultant and investor since prior to 1999. Following is a report of the number and types of other accounts managed by Mr. Tauber and the assets under management in those accounts:

Other accounts:

Mr. Tauber is managing officer of several limited liability companies which invest directly or indirectly in operating businesses and which may also invest in other investment partnerships and/or marketable securities. The value of the total assets held by each of these limited liability companies is not available because most of the investments held by these entities do not have readily available market values.

Mr. Tauber does not receive any advisory fees which are based on the performance of the investments in these limited liability companies.

Conflicts of Interest: While it is possible for a limited liability company of which Mr. Tauber is managing officer to invest directly in individual municipal bonds, these companies have not done so. It is more likely that, if these entities choose to invest in municipal bonds, they will do so through some type of investment where they will not control or have any influence on which municipal bonds are purchased.

Since Mr. Tauber receives no advisory fee which is based on the performance of any of the accounts of these companies, no potential conflict of interest exists with regard to advisory fees.

The registrant has adopted a Code of Ethics and obtains the quarterly transactions and annual holdings of Mr. Tauber and the accounts over which he has signature authority to review the transactions and holdings for possible conflicts of interest.

Compensation: Mr. Tauber receives no compensation for his services to the registrant.

Valuation of Ownership: The value of the registrant’s shares beneficially owned by Mr. Tauber is over $1,000,000.

22

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

There were no purchases by or on behalf of the registrant or any “affiliated purchaser” of shares of the registrant’s equity securities during the period covered by this report.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) Based on their evaluation of registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)), within 90 days prior to the filing of this report, the registrant’s principal executive officer and principal financial officer determined that the registrant’s disclosure controls and procedures are appropriately designed to ensure that information required to be disclosed by registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission.

(b) There have been no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, including no significant deficiencies or material weaknesses that required corrective action.

Item 12. Exhibits.

(a)(1) Not applicable.

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

(a)(3) Not applicable.

(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

23

DIRECTORS AND OFFICERS

Following are the directors and officers of the registrant together with a brief description of their principal occupations during the past five years or, in some cases, more than five years. Each director and officer is elected for a one-year term. Mr. Tauber is the father of Ms. Horing. Mr. Purther, Ms. Horing and Mr. Pullman are cousins. The registrant is the only fund in the fund complex. The address for each director and officer is in care of the Company at 27777 Franklin Road, Suite 1630, Southfield, Michigan 48034.

INTERESTED DIRECTORS AND OFFICERS

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DIRECTORS AND OFFICERS - continued

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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EXHIBIT INDEX

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-CSR’ Filing		Date		Other Filings
		1/31/17
		9/30/15
		12/11/14		DEF 14A
Filed on / Effective on:		11/26/14
		11/21/14		DEF 14A,  NSAR-B
		11/14/14
		11/4/14
For Period End:		9/30/14		NSAR-B
		9/30/13		N-CSR,  NSAR-B
		8/13/13
		1/1/12
		12/10/10
		1/1/08
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Filing Submission 0001193125-14-427170   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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