Form N-CSRS KEYCO BOND FUND INC For: Mar 31

May 26, 2022 8:01 AM EDT

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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)

 

27777 Franklin Road, Suite 1575 

Southfield, Michigan

48034

(Address of principal executive offices) (Zip code) 

 

Joel D. Tauber, President 

Keyco Bond Fund, Inc. 

27777 Franklin Road, Suite 1575 

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: March 31, 2022

 

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

 

Page

 

President’s Letter 3
Management’s Discussion of Fund Performance 4
Additional Information 6
Portfolio of Investments in Securities (unaudited) 8
Statement of Assets and Liabilities (unaudited) 12
Statement of Operations (unaudited) 13
Statements of Changes in Net Assets (unaudited) 14
Financial Highlights (unaudited) 15
Notes to Financial Statements (unaudited) 16
Signatures 23

EX-99.302CERT

 

EX-99.906CERT

 

 2

 

 

Item 1. Semi-Annual Report to Shareholders.

 

KEYCO BOND FUND, INC. 

27777 Franklin Road - Suite 1575 

Southfield, Michigan 48034 

(248) 353-0790

 

May 26, 2022

 

To Our Shareholders:

 

We are pleased to send you this Semi-Annual Report of Keyco Bond Fund, Inc. for the six months ended March 31, 2022. Included in this mailing are the Fund’s financial statements, Management’s Discussion of Fund Performance, Additional Information including the actions taken at the December 2021 annual meeting and at the March 2022 special meeting and the Fund’s Privacy Policy.

 

We want to highlight, as reported in the Additional Information, that the shareholders unanimously approved a new investment objective that permits the Fund to invest in equity securities. The first equity purchase occurred in April.

 

In November 2021, the Board of Directors declared dividends to be disbursed equal to the Fund’s net investment income for the year ending September 30, 2022. Regular dividends of $11.10 per share have been paid during the six months ended March 31, 2022. In addition, a regular dividend of $11.00 per share was paid on May 2, 2022. Dividends are paid quarterly on the last business day of January and the first business day of May, August and November.

 

We also wish to let you know that the Fund recently moved to a new suite. The letterhead above reports the Fund’s new address.

 

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

 

Joel D. Tauber 

President

 

Enclosures

 

 3

 

 

KEYCO BOND FUND, INC. 

Management’s Discussion of Fund Performance 

For the Six Months Ended March 31, 2022

 

The Fund’s primary investment objective is to receive 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 achieved through an investment in equity securities is a secondary 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 six-month period was $263,447 or $21.26 per share compared with $323,519 or $26.11 per share for the six-month period ended March 31, 2021.

 

Interest income continued to decline as bonds purchased provide less income than those they replaced. As a result of low interest rates, most of the bonds purchased during this period, particularly those purchased during the first four months, will mature or be called in 16 months or less. Most of these new purchases have extremely low interest rates. During 2022, interest rates have begun to increase. As rates rise, we expect to purchase bonds with higher yields.

 

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 market rates increase, the value of the bond portfolio decreases. When market 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 $25,179,023 or $2,032.20 per share at March 31, 2022, a decrease of $1,003,549 or $81 per share from September 30, 2021. This change was the result of undistributed income of $125,918 and a reduction in unrealized appreciation of investments of $1,129,467. Interest rates spiked in March causing the decrease in the value of the bond portfolio.

 

 4

 

 

KEYCO BOND FUND, INC. 

 

Management’s Discussion of Fund Performance 

For the Six Months Ended March 31, 2022 

Page 2

 

The weighted average maturity was 13.4 years, a decline from the prior year-end weighted average maturity of 13.6 years. Due to the unfavorable interest rate situation during most of the period, the Fund purchased a number of bonds that will mature or be called in the short term.

 

Asset Allocation

 

The bond portfolio is allocated by state as follows:

 

 

Other

 

During the period, ten bonds were called or matured for total proceeds of $1,870,000. Cash from these dispositions was reinvested in bonds to mature in eight months to 24 years. Portfolio turnover was 7.6%.

 

 5

 

 

KEYCO BOND FUND, INC. 

Additional Information 

March 31, 2022 

 

RESULTS OF MEETINGS OF SHAREHOLDERS

 

The annual meeting of shareholders was held on Wednesday, December 15, 2021. The results of the votes taken on the proposals before the shareholders are reported below. Each vote represents one share held on the record date for the meeting.

 

Item 1.Election of Directors

 

    Number of Shares
        Withheld
Nominee   For   Authority
Mark E. Schlussel   12,376   0
Steve Milgrom   12,376   0
Thomas E. Purther   12,376   0
Ellen T. Horing   12,376   0
Michael Pullman   12,376   0

 

Item 2.Ratify the selection of registered independent accountants

 

Ratify the selection of Sanville & Company as the Fund’s registered independent public accountants for the year ending September 30, 2022

 

  Number  
  of Shares  
For 11,520  
Against 0  
Abstain 856  

 

A special meeting of shareholders was held on Wednesday, March 23, 2022. The results of the vote taken on the proposal before the shareholders is reported below. Each vote represents one share hold on the record date for the meeting.

 

 6

 

 

Item 1. Approve new investment objective

 

The Company’s primary investment objective is to receive current interest income exempt from federal income taxes as is available from Municipal Bonds (defined below) and as is consistent with prudent investment management and preservation of capital, and capital appreciation achieved through an investment in equity securities will be a secondary objective of the Company.

 

The Company defines Municipal Bonds as debt obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia, their respective political subdivisions, agencies and instrumentalities, the interest from which is exempt from federal income tax in the opinion of bond counsel for the issuers.

 

  Number
of Shares
 
For 12,370  
Against 0  
Abstain 0  

 

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-PORT starting with the report for June 30, 2020. Form N-PORT is available on the SEC’s web site at http://www.sec.gov. 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 1575, Southfield, MI 48034.

 

INFORMATION ON PROXY VOTING POLICIES, PROCEDURES AND RECORDS

 

The Fund has adopted policies and procedures whereby the Fund will “mirror vote” proxies. “Mirror vote” means voting “in the same proportion as the vote of all other holders of such security” as defined in the Investment Company Act of 1940. The Fund has not voted any proxies.

 

 7

 

Keyco Bond Fund, Inc. 

Portfolio of Investments in Securities 

March 31, 2022 (unaudited) 

 

   Principal    Fair  
Long-Term State and Municipal Obligations - 95.7%  Amount    Value  
Michigan - 46.9%          
Bay City, Michigan, School District, 3.5%, November 1, 2034 (Q-SBLF enhanced)  $400,000   $409,532 
Beaverton, Michigan, Schools, 2%, May 1, 2022 (Q-SBLF enhanced)   280,000    280,218 
Beaverton, Michigan, Schools, 2%, May 1, 2023 (Q-SBLF enhanced)   175,000    175,445 
Berkley, Michigan, School District, 4%, May 1, 2040 (Q-SBLF enhanced)   500,000    520,690 
Byron Center, Michigan, Public Schools, 4%, May 1, 2039 (Q-SBLF enhanced)   200,000    215,504 
Center Line, Michigan, Public Schools, 5%, May 1, 2042 (Q-SBLF enhanced)   500,000    565,765 
Chesaning, Michigan, Union Schools, 3%, May 1, 2022 (Q-SBLF enhanced)   200,000    200,322 
Dansville, Michigan, Schools, 4%, May 1, 2042 (Q-SBLF enhanced)   250,000    260,135 
Escanaba, Michigan, Area Public Schools, 3.25%, May 1, 2028 (Q-SBLF enhanced)   400,000    405,724 
Fowlerville, Michigan, Community Schools, 3%, May 1, 2025 (Q-SBLF enhanced) (Pre-refunded)   500,000    500,790 
Fruitport, Michigan, Community Schools, 5%, May 1, 2043 (Q-SBLF enhanced)   500,000    557,220 
Gibraltar, Michigan, School District, 5%, May 1, 2037 (Q-SBLF enhanced)   250,000    285,750 
Godfrey-Lee, Michigan, Public Schools, 4%, May 1, 2043 (Q-SBLF enhanced)   250,000    272,142 
Godfrey-Lee, Michigan, Public Schools, 4%, May 1, 2046 (Q-SBLF enhanced)   300,000    324,600 
Macomb Interceptor Drain, Drainage District, County of Macomb, Michigan, 4%, May 1, 2036   500,000    533,580 
Michigan State Building Authority, Revenue, 5%, October 15, 2029   250,000    261,705 
Michigan State Building Authority, Revenue, 4%, October 15, 2036   350,000    370,359 
Michigan State Building Authority, Revenue, 4%, April 15, 2040   250,000    261,075 
Michigan State Building Authority, Revenue, 5%, October 15, 2045   325,000    351,071 
Michigan State Housing Development Authority, Rental Housing Revenue, Series A-2, 4.5%, October 1, 2036 (Pre-refunded)   500,000    500,000 
Michigan State Housing Development Authority, Rental Housing Revenue, Series A, 4.625%, October 1, 2039   500,000    507,855 
Michigan State Trunk Line, 5%, November 15, 2022   250,000    255,643 
Michigan State Trunk Line, 4%, November 15, 2046   225,000    241,475 
Niles, Michigan, Community Schools, 4%, May 1, 2035 (Q-SBLF enhanced)   400,000    420,792 
Pinckney, Michigan, Community Schools, 5%, May 1, 2035 (Q-SBLF enhanced)   500,000    552,490 
Rockford, Michigan, Public Schools, 4%, May 1, 2039 (Q-SBLF enhanced)   800,000    821,512 
Saginaw, Michigan, Water Supply System, Revenue, 4%, July 1, 2041 (AGM insured)   250,000    273,290 
University of Michigan, Revenue, 4%, April 1, 2043   250,000    268,532 
Walled Lake, Michigan, Consolidated School District, 5%, May 1, 2037 (Q-SBLF enhanced) (Pre-refunded)   485,000    509,041 
Warren Woods, Michigan, Public Schools, 5%, May 1, 2037 (Q-SBLF enhanced)   250,000    282,420 
Woodhaven-Brownstown, Michigan, School District, 5%, May 1, 2040 (Q-SBLF enhanced)   375,000    410,846 
         11,795,523 

 

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

 

 8

 

 

Keyco Bond Fund, Inc. 

Portfolio of Investments in Securities - Continued 

March 31, 2022 (unaudited) 

 

   Principal    Fair  
Long-Term State and Municipal Obligations - 95.7%  Amount    Value  
Arizona - 2.1%          
Arizona Board of Regents, University of Arizona System, Revenue, 5%, June 1, 2038 (Pre-refunded)  $250,000   $259,618 
Arizona Board of Regents, University of Arizona System, Revenue, 4%, June 1, 2045   250,000    261,597 
         521,215 
Colorado - 0.5%          
Weld County, Weld County School District No. 6, 4%, December 1, 2045 (School District Intercept Program guarantee)   125,000    136,445 
           
District of Columbia - 1.1%          
District of Columbia, Income Tax Secured Revenue, 4%, May 1, 2045   250,000    268,802 
           
Florida - 2.4%          
Miami-Dade County, Florida, Subordinate Special Obligation Refunding, 5%, October 1, 2035 (Pre-refunded)   210,000    213,933 
Florida State Board of Education, Public Education, Capital Outlay, 2018, Series B, 4%, June 1, 2044   200,000    215,258 
St. Petersburg, Florida, Public Utility, Revenue, 4%, October 1, 2030 (Pre-refunded)   175,000    177,424 
         606,615 
Georgia - 2.2%          
Georgia State Housing and Finance Authority, 3.5%, December 1, 2030   155,000    156,163 
Georgia State Housing and Finance Authority, 3.45%, December 1, 2032   405,000    406,539 
         562,702 
Hawaii - 2.1%          
Hawaii State, Series FG, 4%, October 1, 2036   500,000    533,705 
           
Illinois - 1.9%          
Rock Island County, Illinois, Public Building Revenue, 4%, December 1, 2045   475,000    484,581 
           
Indiana - 2.0%          
Greater Clark Building Corporation, Indiana, First Mortgage, Series 2018, 4%, January 15, 2038   455,000    488,847 
           
Iowa - 0.6%          
Ankeny, Iowa, Community School District, 5%, June 1, 2023   145,000    150,578 
           
Louisiana - 0.8%          
Louisiana Public Facilities, Hospital, Revenue, 5%, July 1, 2042 (Pre-refunded)   190,000    191,822 
           
Maine - 0.6%          
Maine State Housing Authority, Mortgage Purchase, 2018 Series B, 3.75%, November 15, 2038   155,000    157,395 

 

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

 

 9

 

 

Keyco Bond Fund, Inc. 

Portfolio of Investments in Securities - Continued 

March 31, 2022 (unaudited) 

 

   Principal    Fair  
Long-Term State and Municipal Obligations - 95.7%  Amount    Value  
Maryland - 0.5%          
Montgomery County, Maryland, Housing Opportunities Commission, 0.55%, January 1, 2025 (FHA risk sharing mortgage insurance)  $135,000   $129,481 
           
Minnesota - 0.4%          
Rochester, Minnesota, Health Care Facilities, Revenue, 4%, November 15, 2039 (when issued)   100,000    108,774 
           
Nevada - 1.1%          
Clark County, Nevada, General Obligation (Limited Tax) Park Improvement, Series 2018, 4%, December 1, 2038   250,000    270,730 
           
New Hampshire - 3.7%          
New Hampshire Municipal Bond Bank, 2016 Series D, 4%, August 15, 2039   875,000    926,275 
           
New York - 9.6%          
New York, New York City, Transitional Finance Authority, Revenue, 4%, Fiscal 2017, August 1, 2035   275,000    288,813 
New York, New York City, Transitional Finance Authority, Revenue, 4%, Fiscal 2017, August 1, 2037   250,000    261,207 
 New York, New York City, Transitional Finance Authority, Revenue, 4%, Fiscal 2017, August 1, 2041   335,000    347,804 
New York, New York City, Transitional Finance Authority, Revenue, 4%, Fiscal 2019, August 1, 2041   140,000    146,723 
New York, New York City, Transitional Finance Authority, Building Aid, Revenue, 4%, July 15, 2040   250,000    258,455 
New York, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue, Fiscal 2016 Subseries CC-1, 4%, June 15, 2038   75,000    79,722 
New York State Dormitory Authority, State Personal Income Tax Revenue, Series 2018A, 4%, March 15, 2043   300,000    316,497 
New York State Environmental Facilities Corporation, State Clean Water and Drinking Water, 4%, June 15, 2046   500,000    525,350 
New York State Mortgage Agency, 3.1%, April 1, 2028   200,000    200,686 
         2,425,257 
Ohio - 1.4%          
Fairborn, Ohio, City School District, 4%, December 1, 2043   345,000    359,280 
           
Pennsylvania - 5.2%          
Pennsylvania State, Series 1, 4%, June 15, 2033   550,000    568,508 
Pennsylvania State, Second Series, 4%, August 15, 2035   500,000    524,690 
West View, Pennsylvania, Water Authority, Revenue, 4%, November 15, 2039   200,000    211,502 
         1,304,700 

 

 

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

 

 10

 

 

Keyco Bond Fund, Inc. 

Portfolio of Investments in Securities - Continued 

March 31, 2022 (unaudited) 

 

   Principal   Fair 
Long-Term State and Municipal Obligations - 95.7%  Amount   Value 
Tennessee - 2.1%        
Clarksville, Tennessee, Water, Sewer and Gas, Revenue, 5%, February 2023  $175,000   $180,093 
Metropolitan Government of Nashville and Davidson County, Tennessee, General Obligation, 5%, July 1, 2023   335,000    348,457 
         528,550 
Texas - 7.1%          
Canadian River, Texas, Municipal Water Authority, Revenue, 4%, February 15, 2023   100,000    102,079 
Corpus Christi, Texas, Independent School District, 4%, August 15, 2034 (Texas Permanent School Fund guarantee)   250,000    263,837 
Crosby, Texas, Independent School District, 5%, February 15, 2043 (Texas Permanent School Fund guarantee) (Pre-refunded)   250,000    261,153 
Houston, Texas, Independent School District, 4%, June 1, 2029 (Texas Permanent School Fund guarantee)   350,000    359,180 
Prosper, Texas, 4%, February 15, 2035   265,000    275,616 
University of Houston, Texas, Revenue, 3%, February 15, 2028   340,000    343,737 
Waco, Texas, 3.125%, February 1, 2036   180,000    180,243 
         1,785,845 
Virginia - 1.4%          
Richmond, Virginia, Public Utility, Revenue, 5%, January 15, 2043 (Pre-refunded)   250,000    256,898 
Virginia Public Building Authority, Public Facilities, Revenue, 5%, August 1, 2023   100,000    104,267 
         361,165 
           
Total long-term state and municipal obligations          
   (Cost $23,838,298) - 95.7%        24,098,287 
           
Money Market Fund - 4.2%  Shares      
Goldman Sachs Financial Square Government Fund, Institutional Shares, 0.23%*          
  (Cost $1,067,134)   1,067,134    1,067,134 
           
Total investments (Cost $24,905,432) - 99.9%        25,165,421 
           
Other assets less liabilities, net - 0.1%        13,602 
           
Net assets (100%)       $25,179,023 
           
*  Seven-day yield.          

 

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

 

 11

 

Keyco Bond Fund, Inc. 

Statement of Assets and Liabilities 

March 31, 2022 (unaudited) 

 

Assets   
Investments in securities, at fair value (cost $24,905,432)  $25,165,421 
Cash   28,296 
Interest and dividend receivable   319,232 
Other   450 
Total assets   25,513,399 
      
Liabilities     
Payable for investments purchased   324,541 
Accrued expenses   9,835 
Total liabilities   334,376 
Net Assets  $25,179,023 
      
Net Assets consist of:     
Paid-in capital  $754,004 
Total distributable earnings   24,425,019 
Net Assets  $25,179,023 
      
Capital stock shares issued and outstanding ($2.04 par value, 29,411 shares authorized)   12,390 
      
Net Asset Value per share  $2,032.20 

 

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

 

 12

 

Keyco Bond Fund, Inc. 

Statement of Operations 

For the Six Months Ended March 31, 2022 (unaudited) 

 

Interest income     $351,588 
Dividend income        205 
Total investment income        351,793 
           
Expenses          
Administration fees (Note 5)  $29,000      
Professional fees   39,905      
Custodial fee   6,652      
Directors’ fees   5,000      
Insurance   450      
Miscellaneous   7,339      
Total expenses        88,346 
Net investment income        263,447 
           
Realized and unrealized gain (loss) on investments          
Realized gain on investments         
Net change in unrealized appreciation (depreciation) of investments        (1,129,467)
Net realized and unrealized gain (loss) on investments        (1,129,467)
           
Net decrease in net assets resulting from operations       $(866,020)

 

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

 

 13

 

 

Keyco Bond Fund, Inc. 

Statements of Changes in Net Assets 

 

   Six Months     
   Ended     
   March 31,    Year Ended  
   2022    Sept. 30,  
   (unaudited)    2021  
Increase (decrease) in net assets from operations          
Net investment income  $263,447   $639,725 
Net realized gain on investments       18,455 
Changes in unrealized appreciation (depreciation) of investments   (1,129,467)   (272,324)
Net increase (decrease) in net assets resulting from operations   (866,020)   385,856 
           
Distributions to shareholders          
From net investment income   (137,529)   (639,725)
           
Total decrease in net assets   (1,003,549)   (253,869)
           
Net Assets          
Beginning of period   26,182,572    26,436,441 
End of period  $25,179,023   $26,182,572 

 

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

 

 14

 

 

Keyco Bond Fund, Inc. 

Financial Highlights 

 

   Six Months                     
   Ended                     
   3/31/2022   Years Ended September 30 
   (unaudited)   2021   2020   2019   2018   2017 
Per share operating performance                              
Net asset value, beginning of period  $2,113.20   $2,133.69   $2,115.00   $2,001.16   $2,056.98   $2,107.34 
                               
Net investment income   21.26    51.63    58.35    62.59    65.23    66.20 
Net realized and unrealized gain (loss) on investments   (91.16)   (20.49)   18.68    113.81    (55.87)   (50.39)
Total from investment operations   (69.90)   31.14    77.03    176.40    9.36    15.81 
                               
Less distributions from                              
Net investment income   (11.10)   (51.63)   (58.34)   (62.56)   (65.18)   (66.17)
                               
Net asset value, end of period  $2,032.20   $2,113.20   $2,133.69   $2,115.00   $2,001.16   $2,056.98 
                               
Total return per share net asset value (a)   -3.3%(c)   1.5%   3.7%   8.9%   0.5%   0.8%
                               
Ratios and supplemental data                              
                               
Net assets, end of period (in 000s)  $25,179   $26,183   $26,436   $26,205   $24,794   $25,486 
Ratio of net investment income to average net assets   2.0%(b)   2.4%   2.7%   3.0%   3.2%   3.2%
Ratio of expenses to average net assets   0.7%(b)   0.5%   0.4%   0.4%   0.4%   0.5%
Portfolio turnover rate   7.6%(c)   14.7%   5.3%   6.0%   20.3%   19.2%

 

(a)Total return in the table above represents the rate that the investor would have earned or lost on an investment in the Fund if there were reinvestment of dividends.

 

(b)Annualized

 

(c)Not annualized

 

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

 

 15

 

 

Keyco Bond Fund, Inc. 

Notes to Financial Statements 

March 31, 2022 (unaudited) 

 

1.Organization

 

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 Fund’s primary investment objective is to receive current interest income exempt from federal income taxes as is available from municipal bonds, consistent with prudent investment management and preservation of capital, and capital appreciation achieved through an investment in equity securities will be a secondary objective.

 

2.Significant Accounting Policies

 

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund is an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 applicable to investment companies.

 

Security Valuations

 

Processes and Structure

 

The Fund’s Board of Directors has adopted guidelines for valuing securities including in circumstances in which market quotes are not readily available. In the unlikely event that the entity that provides custodial services for the Fund is unable to value one or more bonds in the portfolio and an alternate resource is used for pricing, the Board is to be notified at its next regularly scheduled meeting.

 

Hierarchy of Fair Value Inputs

 

The Fund utilizes various methods to measure the fair value of most of its investments on a recurring basis. U.S. generally accepted accounting principles (GAAP) establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:

 

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date.

 

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instruments on an inactive market, prices for similar instruments in active markets, interest rates, yield curves, implied volatilities, credit spreads and market-collaborated inputs.

 

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

 16

 

 

Keyco Bond Fund, Inc. 

Notes to Financial Statements – Continued 

March 31, 2022 (unaudited) 

 

2.Significant Accounting Policies – Continued

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

Fair Value Measurements

 

A description of the valuation techniques applied to the Fund’s major category of assets measured at fair value on a recurring basis is as follows. The fair value of the long-term state and municipal obligations is estimated using various techniques which may 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. To the extent that the inputs are observable and timely, the values would be categorized in Level 2 of the fair value hierarchy; otherwise, they would be categorized as Level 3.

 

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

 

   Securities 
   Level 1   Level 2   Level 3   Fair Value 
Long-term state and municipal obligations**  $   $24,098,287   $   $24,098,287 
Money market fund   1,067,134            1,067,134 
Total  $1,067,134   $24,098,287   $   $25,165,421 

 

The Fund did not hold any Level 3 assets during the six-month period ended March 31, 2022. It is the Fund’s policy to recognize transfers into and out of Levels at the end of the reporting period.

 

** Refer to Portfolio of Investments in Securities for breakdown of municipal bonds held by the Fund.

 

Federal Income Taxes

 

It is the Fund’s intention to continue 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. The Fund also intends to distribute sufficient net investment income and net capital gains, if any, so that it will not be subject to excise tax on undistributed income and gains. Therefore, no federal income tax or excise tax provision is required.

 

 17

 

Keyco Bond Fund, Inc. 

Notes to Financial Statements – Continued 

March 31, 2022 (unaudited) 

 

2.

Significant Accounting Policies – Continued

 

The cost of securities for federal income tax purposes is expected to approximate the cost for financial statement purposes. The Fund’s distributable earnings on a tax basis are determined only at the end of each fiscal year. The unrealized appreciation (depreciation) as of March 31, 2022 was as follows:

 

Gross unrealized appreciation  $445,319 
Gross unrealized depreciation   (185,330)
Net unrealized appreciation  $259,989 
      
Cost of investment securities including short-term investments  $24,905,432 

 

The capital loss carryforward of $14,793 at September 30, 2021 qualifies to be carried forward for an unlimited period and will be used to offset any capital gains realized by the Fund in future years. The Fund will not make distributions from capital gains while a capital loss carryforward remains.

 

The Fund’s management has reviewed all open tax years for federal 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 for March 31, 2022. The Fund’s tax returns are subject to examination for federal purposes for the open tax years (2018-20) and for the tax return to be filed for 2021. The Fund has not been subject to interest and/or penalties on its tax return filings. The Fund identifies its major tax jurisdictions as the U.S. federal government and the State of Michigan.

 

Security Transactions and Related Income 

 

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. Discounts and premiums on securities purchased are accreted or amortized using the constant yield method. Dividend income is recorded on the ex-dividend date.

 

When-Issued Security 

 

During the period, the Fund purchased a bond on a when-issued basis. Payment and delivery are scheduled to take place after the customary settlement period. The price for the bond and the date when the security is to be delivered are fixed at the time of the transaction. The bond purchased on a when-issued basis is identified as such in the Portfolio of Investments in Securities.

 

Use of Estimates 

 

The preparation of financial statements in conformity with GAAP 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

 

 18

 

Keyco Bond Fund, Inc. 

Notes to Financial Statements – Continued 

March 31, 2022 (unaudited) 

 

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 $1,858,598 and $1,870,000, respectively, for the six months ended March 31, 2022.

 

4.Portfolio Management

 

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 of Directors, makes investment decisions internally.

 

5.Related Party Transactions

 

Administration fees incurred include $29,000 for accounting, administrative and general office support services provided by Tauber Enterprises, LLC, an entity owned by an officer of the Fund. The agreement is reviewed and renewed annually by the Fund’s Directors.

 

6.Risks and Uncertainties

 

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 could 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.

 

7.Capital Share Transactions

 

There were no transactions in capital stock for the year ended September 30, 2021 and the six-month period ended March 31, 2022.

 

8.Commitments and Contingencies

 

In the normal course of business, the Fund may enter into contracts that may contain a variety of representations and warranties and provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, management considers the risk of loss from such claims to be remote.

 

9.COVID -19

 

COVID-19, a novel coronavirus first detected in December 2019, was declared a pandemic by the World Health Organization during March 2020. There have been market disruptions associated with the pandemic, and uncertainty exists as to the long-term implications. At this time management is unable to determine the effects, if any, that COVID-19 may have on the bonds in the Fund’s portfolio or on the Fund’s performance.

 

 19

 

 

Keyco Bond Fund, Inc. 

Notes to Financial Statements – Continued 

March 31, 2022 (unaudited) 

 

10.Subsequent Events

 

On May 2, 2022, the Fund paid shareholders of record on April 22, 2022, a net investment income distribution of $136,290 equivalent to $11.00 per share.

 

 20

 

 

Item 2. Code of Ethics.

 

Not applicable to this semi-annual filing.

 

Item 3. Audit Committee Financial Expert.

 

Not applicable to this semi-annual filing.

 

Item 4. Principal Accountant Fees and Services.

 

Not applicable to this semi-annual filing.

 

Item 5. Audit Committee of Listed Registrant.

 

Not applicable to this semi-annual filing and also because 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 Semi-Annual Report to Shareholders filed under Item 1 hereof.

 

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

 

Not applicable to this semi-annual filing.

 

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

 

Not applicable to this semi-annual filing.

 

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.

 

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.

 

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.

 

 21

 

 

(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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

(a)(1)        Not applicable.

 

(a)(2)        Not applicable.

 

(a)(3)        Not applicable.

 

(a)(4)        Not applicable.

 

(b)            Not applicable.

 

Item 13. 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).

 

 22

 

 

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.

 

KEYCO BOND FUND, INC.

   
 By: /s/ Joel D. Tauber  
  Joel D. Tauber, President
 

 

Date: May 26, 2022

 

 

 

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.

 
 By: /s/ Joel D. Tauber  
  Joel D. Tauber, President
 

 

 By: /s/ Ellen T. Horing  
  Ellen T. Horing, Treasurer
 

  

Date: May 26, 2022

 

 23

 

 

EXHIBIT INDEX

 

Exhibit No. Description
   
EX.99.302CERT (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
EX.99.906CERT (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

Keyco Bond Fund, Inc. N-CSRS

EX.99.302CERT

 

CERTIFICATION

 

I, Joel D. Tauber, certify that:

 

1.       I have reviewed this report on Form N-CSR of Keyco Bond Fund, Inc.;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  May 26, 2022 /s/ Joel D. Tauber  
  Joel D. Tauber, President  

 

 

 

 

 

EX.99.302CERT

 

CERTIFICATION

 

I, Ellen T. Horing, hereby certify that:

 

1.       I have reviewed this report on Form N-CSR of Keyco Bond Fund, Inc.;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  May 26, 2022 /s/ Ellen T. Horing  
  Ellen T. Horing, Treasurer  

 

 

 

 

Keyco Bond Fund, Inc. N-CSRS

EX-99.906CERT

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

The Chief Executive Officer and the Chief Financial Officer of Keyco Bond Fund, Inc. (the “Registrant”), each certify to the best of his and her knowledge that:

 

1.       The Registrant’s periodic report on Form N-CSR for the period ended March 31, 2022 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.       The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Chief Executive Officer:   Chief Financial Officer:  
       
/s/ Joel D. Tauber   /s/ Ellen T. Horing  
Joel D. Tauber   Ellen T. Horing,  
       
Date:  May 26, 2022   Date:  May 26, 2022  

 

 

 



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