Pioneer Municipal High Income Fund, Inc.
Annual Report | April 30, 2021
Ticker Symbol: MHI
On April 21, 2021, the Fund redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer Municipal High Income Fund, Inc.
Paper copies of the Fund’s shareholder reports are no longer sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer, bank or insurance company. Instead, the reports are available on the Fund’s website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held within the Pioneer Fund complex if you invest directly.
visit us: www.amundi.com/us
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 1
President’s LetterDear Shareholders,
With the first half of 2021 nearly over, we have seen some better news on the COVID-19 pandemic front. In the US, widespread distribution of the COVID-19 vaccines approved for emergency use late last year, and a general decline in both virus cases and related hospitalizations, have had a positive effect on overall market sentiment.
While there may finally be a light visible at the end of the pandemic tunnel, the long-term impact on the global economy from COVID-19, while currently unknown, is likely to be considerable. It is clear that several industries have already felt greater effects than others, and the markets, which do not thrive on uncertainty, have been volatile.
With that said, so far during 2021, we have seen investments typically associated with a higher degree of risk, such as equities and high-yield bonds, outperform investments regarded as less risky, such as government debt. In addition, cyclical stocks, or stocks of companies with greater exposure to the ebbs and flows of the economic cycle, have rallied this year after slumping during the height of the pandemic, as investors have appeared to embrace the potential for a more widespread reopening of the economy in the coming months. Additional fiscal stimulus from the US government in recent months has also helped provide some market momentum.
Despite the strong rebound from the March 2020 lows and positive market performance so far this year, several factors that could lead to increased volatility and weaker performance bear watching. These include: public-health issues such as potential surges in COVID-19 cases, particularly as “variants” of the virus have continued to arise; macroeconomic concerns (inflation, energy prices, sluggish employment figures); and changes to the US government’s fiscal policies, particularly the possibility of higher income tax rates on both individuals and businesses.
After leaving our offices in March of 2020 due to COVID-19, we have re-opened our US locations and have invited our employees to slowly return to the office. I am proud of the careful planning that has taken place. Our business has continued to operate without any disruption and we all look forward to regaining a bit of normalcy after 15 months of remote working.
Since 1928, Amundi US’s investment process has been built on a foundation of fundamental research and active management, principles which have guided our investment decisions for more than 90 years. We believe active management – that is, making active investment decisions – can help mitigate the risks during periods of market volatility.
2 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
At Amundi US, active management begins with our own fundamental, bottom-up research process. Our team of dedicated research analysts and portfolio managers analyzes each security under consideration, communicating directly with the management teams of the companies issuing the securities and working together to identify those securities that best meet our investment criteria for our family of funds. Our risk management approach begins with each and every security, as we strive to carefully understand the potential opportunity, while considering any and all risk factors.
Today, as investors, we have many options. It is our view that active management can serve shareholders well, not only when markets are thriving, but also during periods of market stress.
As you consider your long-term investment goals, we encourage you to work with your financial professional to develop an investment plan that paves the way for you to pursue both your short-term and long-term goals.
We greatly appreciate the trust you have placed in us and look forward to continuing to serve you in the future.
Sincerely,
Lisa M. Jones
Head of the Americas, President and CEO of US
Amundi Asset Management US, Inc.
June 2021
Any information in this shareowner report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. Past performance is no guarantee of future results.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 3
Portfolio Management Discussion |
4/30/21 Note to Shareholders: On April 21, 2021, Pioneer Municipal High Income Trust redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer Municipal High Income Fund, Inc. The redomiciling did not result in any change to the investment adviser, investment objective and strategies, portfolio management team, policies and procedures or the members of the Board overseeing the Fund. Please see Note 7, “Redomiciling,” for more information regarding the redomiciling.
During the 12-month period ended April 30, 2021, the municipal bond market continued its steady recovery from the disruptions and volatility that had beset global financial markets with the onset of the COVID-19 pandemic and the resulting economic downturn. In the following interview, Jonathan Chirunga and David Eurkus discuss the factors that influenced the performance of Pioneer Municipal High Income Fund, Inc. during the 12-month period. Mr. Chirunga, Managing Director, Director of High-Yield Municipals, and a portfolio manager at Amundi Asset Management US, Inc. (Amundi US), and Mr. Eurkus, Managing Director, Director of Municipals, and a portfolio manager at Amundi US, are responsible for the day-to-day management of the Fund.
Q How did the Fund perform during the 12-month period ended April 30, 2021?
A Pioneer Municipal High Income Fund, Inc. returned 12.04% at net asset value (NAV) and 22.33% at market price during the 12-month period ended April 30, 2021. During the same 12-month period, the Fund’s benchmarks, the Bloomberg Barclays U.S. Municipal High Yield Bond Index and the Bloomberg Barclays Municipal Bond Index, returned 20.78% and 7.75% at NAV, respectively. The Bloomberg Barclays U.S. Municipal High Yield Bond Index is an unmanaged measure of the performance of lower-rated municipal bonds, while the Bloomberg Barclays Municipal Bond Index is an unmanaged measure of the performance of investment-grade municipal bonds. Unlike the Fund, the two indices do not use leverage. While use of leverage increases investment opportunity, it also increases investment risk.
During the same 12-month period, the average return at NAV of the 18 closed-end funds in Morningstar’s Closed-End High Yield Municipal category (which may or may not be leveraged) was 19.04%, and the average return at market price of the closed-end funds within the same Morningstar category was 26.42%.
4 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
The shares of the Fund were selling at a 4.0% discount to NAV on April 30, 2021. Comparatively, the shares of the Fund were selling at a 12.1% discount to NAV on April 30, 2020.
On April 30, 2021, the standardized 30-day SEC yield of the Fund’s shares was 1.48%*.
Q How would you describe the investment environment in the municipal bond market during the 12-month period ended April 30, 2021?
A For the overall period, the investment environment for municipal bonds was largely favorable, driven in part by the accommodative stance on monetary policy by the US Federal Reserve System (Fed), healthy demand for tax-free bonds, with limited supply, and the continued longer-term effects on the municipal market from the federal tax overhaul legislation passed in late-2017, which contributed to a decrease in the aforementioned municipal supply. The 2017 tax legislation included key provisions that led to the significant reduction in the issuance of advance-refunding bonds, thus restricting supply, while placing limits on state and local tax deductions. The latter provision helped to increase demand for municipal bonds among high-net-worth individuals in search of tax-exempt income. (An advance-refunding bond is issued to retire, or pre-refund, another outstanding bond more than 90 days in advance of the original bond’s maturity date.)
Like most financial markets, the tax-exempt market had come under significant stress created by the onset of the COVID-19 pandemic in the first quarter of 2020, as virus-mitigation efforts put into place by state and local governments caused many segments of the US economy to shut down and drove unemployment rates into territory rarely seen in recent decades. To combat the very serious economic effects from COVID-19 on individuals, states, municipalities, and the United States overall, the Fed as well as Congress and the Trump administration undertook a large number of monetary and fiscal measures. In early 2020, the Fed reduced the target range of the federal funds rate to near zero, reintroduced lending facilities from the 2008 financial crisis era, instituted new lending facilities, and re-started quantitative easing (that is, injecting massive liquidity into the economy by purchasing Treasury, agency, mortgage, and corporate bonds).
* The 30-day SEC yield is a standardized formula that is based on the hypothetical annualized earning power (investment income only) of the Fund’s portfolio securities during the period indicated.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 5
In addition, US lawmakers approved two large fiscal aid packages during the spring and early summer of 2020, in the form of loans and grants to individuals, small businesses, medical systems, and higher education institutions, in light of the sudden freeze-up in economic activity and continuously rising unemployment. Taken together, those measures helped to calm financial markets, including the municipal bond market.
As the 12-month period progressed, the tax-exempt bond market gradually recovered, as domestic and global investors became aggressive purchasers of these bonds, and earlier yield increases reversed themselves as municipal bond prices rose. At the same time, the stunning contraction in economic activity across the country due to COVID-19 containment measures – especially within the tourism, transportation, retail, and service industries – as well as dramatic reductions in federal, state, and local tax revenues, continued to overshadow the municipal bond market. In September and October of 2020, amid robust demand from buyers, the market saw a rush of tax-exempt and taxable municipal issuance in advance of the November US presidential election. Near the end of the calendar year, the conclusion of the presidential and Congressional elections and investor optimism regarding the direction of the US economy in the wake of rollouts of the first approved COVID-19 vaccines helped to reinforce a strong technical (supply/demand) environment for investing in longer-term municipal bonds.
Lastly, toward the end of the 12-month period, municipal investors began focusing on the ongoing COVID-19 vaccination efforts, the $1.9 trillion stimulus package passed by US lawmakers during the first quarter of 2021, and the continued, albeit gradual, reopening of the US economy.
Throughout the 12-month period, the high-yield municipal bond market received support from strong demand not only from traditional municipal investors, but also from non-traditional investors and foreign purchasers in search of relative safety, lower default rates, and attractive tax-equivalent yields as compared with taxable investments.
Q What factors affected the Fund’s performance relative to the Bloomberg Barclays municipal bond indices during the 12-month period ended April 30, 2021?
A We maintained a well-diversified** portfolio during the 12-month period, with exposures to both investment-grade and high-yield municipal bonds.
** | Diversification does not assure a profit nor protect against loss. |
6 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
A key detractor from the Fund’s performance relative to the overall high-yield municipal market during the 12-month period was a continued portfolio underweight to Puerto Rico. The Fund’s allocation to Puerto Rico’s debt has remained at less than 3% of the total investment portfolio, compared to an approximately 13% weighting in the Bloomberg Barclays US High Yield Municipal Index. The Commonwealth’s bonds have been benefiting from increased investor demand for high-yield municipal bonds. Due to the volume of bonds issued by Puerto Rico, they have managed to retain liquidity. That said, we anticipate keeping the Fund’s portfolio underweight to Puerto Rico, as we have had ongoing concerns about its debt, given the effects the COVID-19 pandemic has had on international tourism, an industry upon which the Commonwealth’s economy has been heavily reliant.
The top-performing municipal bond issues for the Fund relative to the benchmarks during the 12-month period were two series of Tarrant County (Texas) Continuing Care Retirement Facility bonds, which were pre-refunded by the issuer at a premium price. Holdings of California Tobacco Settlement bonds and Arlington (Texas) education bonds also contributed positively to the Fund’s relative performance.
Conversely, the Fund’s position in University of Texas non-callable bonds detracted from relative returns, as a number of high-quality bond issues such as the University of Texas position, felt the negative effects of interest-rate increases over the 12-month period (as did US Treasuries). Holdings of Two Rivers (Montana) Correctional Facility bonds and Clare Oaks (Illinois) Continuing Care Retirement Facility bonds also weighed on the Fund’s relative performance for the period.
Q Did the Fund’s distributions*** to shareholders change during the 12-month period ended April 30, 2021?
A Yes, the Fund’s dividend rose during the period. An increase in the dividend from $0.0450 cents per share to $0.0525 cents per share was announced on November 5, 2020, and paid on November 30, 2020. The distribution then remained unchanged, at $0.0525 per share/per month, for the rest of the Fund’s fiscal year ended April 30, 2021.
Q Did the level of leverage in the Fund change during the 12-month period ended April 30, 2021?
A At the end of the 12-month period ended April 30, 2021, 32.6% of the Fund’s total managed assets were financed by leverage obtained through the issuance of preferred shares, compared with 30.8% of the Fund’s total
*** Distributions are not guaranteed.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 7
managed assets financed by leverage at the start of the period on May 1, 2020. During the 12-month period, the Fund increased the absolute amount of leverage by a total of $20 million, to $145 million as of April 30, 2021. The percentage of the Fund’s total managed assets financed by leverage increased during the 12-month period due to the increase in the amount of preferred shares issued by the Fund.
Q Did the Fund have any exposure to derivative securities during the 12-month period ended April 30, 2021?
A No, the Fund’s portfolio held no derivative securities during the period.
Q What is your investment outlook?
A Because of an apparent lack of a sustained resurgence in US inflation, as well as the frequently repeated pronouncements from the Fed that it will continue to hold the federal funds target range at or near zero for the next several years, we are optimistic regarding the path of interest rates going forward. Additionally, in light of the continued low default rate for the municipal bond asset class and a favorable supply/demand environment, given continually shrinking supply and persistently strong demand from various categories of investors, we believe that the prospects for the tax-exempt bond market are favorable.
Also, if the recently proposed, major federal infrastructure initiative is eventually passed into law by Congress, we believe we might see an increased number of attractive tax-exempt investment opportunities arise from the variety of new construction projects that could be created by the legislation. Lastly, given the enormous and continuing need for federal economic assistance of all sorts in order to cope with the ongoing economic effects of COVID-19, the US government may be forced to deal with its rising debt levels in part by raising taxes on corporations and high-income individuals, which may further increase demand for municipal bonds. In fact, both capital gains and other tax increases had already been proposed by the Biden administration prior to the end of the 12-month period.
Consistent with our investment discipline in managing the Fund’s portfolio, we intend to continue to focus on intensive, fundamental research into individual bond issues, while maintaining a close watch on any economic factors that could influence the high-yield and investment-grade municipal markets. Based on those factors, we do not anticipate making any significant changes to the portfolio’s positioning and structure in the near future.
8 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Please refer to the Schedule of Investments on pages 15–24 for a full listing of Fund securities.
All investments are subject to risk, including the possible loss of principal. In the past several years, financial markets have experienced increased volatility and heightened uncertainty. The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. These conditions may continue, recur, worsen or spread.
Investments in high-yield or lower-rated securities are subject to greater-than-average risk.
The Fund may invest in securities of issuers that are in default or that are in bankruptcy.
A portion of income may be subject to state, federal, and/or alternative minimum tax. Capital gains, if any, are subject to a capital gains tax.
When interest rates rise, the prices of debt securities held by the Fund will generally fall. Conversely, when interest rates fall the prices of debt securities held by the Fund generally will rise.
A general rise in interest rates could adversely affect the price and liquidity of fixed income securities.
By concentrating in municipal securities, the Fund is more susceptible to adverse economic, political or regulatory developments than is a portfolio that invests more broadly.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of the underlying securities and the issuers’ inability to meet their debt obligations.
The Fund may invest up to 20% of its total assets in illiquid securities. Illiquid securities may be difficult to dispose of at a price reflective of their value at the times when the Fund believes it is desirable to do so, and the market price of illiquid securities is generally more volatile than that of more liquid securities. Illiquid securities are also more difficult to value and investment of the Fund’s assets in illiquid securities may restrict the Fund’s ability to take advantage of market opportunities.
The Fund uses leverage through the issuance of preferred shares. Leverage creates significant risks, including the risk that the Fund’s incremental income or capital appreciation for investments purchased with the proceeds of leverage will not be sufficient to cover the cost of the leverage, which may adversely affect the return for the holders of common shares.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 9
The Fund is required to maintain certain regulatory, rating agency and other asset coverage requirements in connection with its outstanding preferred shares. In order to maintain required asset coverage levels, the Fund may be required to alter the composition of its investment portfolio or take other actions, such as redeeming preferred shares with the proceeds from portfolio transactions, at what might be inopportune times in the market. Such actions could reduce the net earnings or returns to holders of the Fund’s common shares over time, which is likely to result in a decrease in the market value of the Fund’s shares.
These risks may increase share price volatility.
Any information in this shareholder report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. Past performance is no guarantee of future results.
10 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Portfolio Summary |
4/30/21 Portfolio Diversification
(As a percentage of total investments)*
Portfolio Maturity
(As a percentage of total investments)*
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 11
Portfolio Summary | 4/30/21 (continued)
State Diversification
(As a percentage of total investments)*
| 10 Largest Holdings | |
(As a percentage of total investments)*
| |
| 1. | Metropolitan Pier & Exposition Authority, McCormick Place, 5.65%, | |
| 6/15/22 (NATL-RE Insured) | 3.68% |
| 2. | State of Washington, Motor Vehicle Sales Tax, Series C, 6/1/22 | |
| (NATL Insured) | 3.24 |
| 3. | Massachusetts Development Finance Agency, WGBH Foundation, | |
| Series A, 5.75%, 1/1/42 (AMBAC Insured) | 2.58 |
| 4. | New York State Dormitory Authority, Series A, 4.0%, 7/1/41 | 2.14 |
| 5. | New York State Dormitory Authority, Series C, 5.0%, 3/15/39 | 1.91 |
| 6. | Brookhaven Development Authority, 4.0%, 7/1/49 | 1.86 |
| 7. | New York State Dormitory Authority, 5.0%, 10/1/50 | 1.77 |
| 8. | University of Texas System, Financing System, Series A, 5.0%, 8/15/49 | 1.75 |
| 9. | Massachusetts Development Finance Agency, Harvard University, | |
| Series A, 5.0%, 7/15/40 | 1.72 |
| 10. | University System of Maryland, 4.0%, 4/1/43 | 1.46 |
* Excludes temporary cash investments and all derivative contracts except for options purchased. |
| The Fund is actively managed, and current holdings may be different. The holdings listed should not |
| be considered recommendations to buy or sell any securities. | |
12 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Prices and Distributions |
4/30/21 Market Value per Common Share^
| | | | | | | |
| | 4/30/21 | | | 4/30/20 | |
Market Value | | $ | 12.61 | | | $ | 10.82 | |
Discount | | | (4.03 | )% | | | (12.10 | )% |
| | | |
| Net Asset Value per Common Share^ | |
|
| 4/30/21 | 4/30/20 |
Net Asset Value | $13.14 | $12.31 |
| | | | |
| Distributions per Common Share*: | |
|
|
| Net | | |
| Investment | Short-Term | Long-Term |
| Income | Capital Gains | Capital Gains |
5/1/20 – 4/30/21 | $0.585 | $— | $ — |
| | | |
| Yields | | |
|
| 4/30/21 | 4/30/20 |
30-Day SEC Yield | 1.48% | 2.67% |
The data shown above represents past performance, which is no guarantee of future results. |
^ | Net asset value and market value are published in Barron’s on Saturday, The Wall Street Journal on |
| Monday and The New York Times on Monday and Saturday. Net asset value and market value are |
| published daily on the Fund’s website at www.amundi.com/us. |
* | The amount of distributions made to shareholders during the period was in excess of the net |
| investment income earned by the Fund during the period. The Fund has accumulated undistributed |
| net investment income which is part of the Fund’s NAV. A portion of this accumulated net |
| investment income was distributed to shareowners during the period. A decrease in distributions |
| may have a negative effect on the market value of the Fund’s shares. |
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 13
Performance Update |
4/30/21 Investment Returns
The mountain chart on the right shows the change in market value, including reinvestment of dividends and distributions, of a $10,000 investment made in common shares of Pioneer Municipal High Income Fund, Inc. during the periods shown, compared to that of the Bloomberg Barclays Municipal Bond Index and Bloomberg Barclays U.S. Municipal High Yield Bond Index.
| | | | | | | | | | | | | |
| Average Annual Total Returns | | | | |
(As of April 30, 2021) | | | | | | | |
| | |
| | | | | | | | | | | BBG | |
| | | | | | | | BBG | | | Barclays | |
| | Net | | | | | | Barclays | | | U.S. | |
| | Asset | | | | | | Municipal | | | Municipal | |
| | Value | | | Market | | | Bond | | | High Yield | |
| Period | | (NAV)
| | | Price | | | Index | | | Bond Index | |
10 years | | | 6.75 | % | | | 5.99 | % | | | 4.44 | % | | | 7.10 | % |
5 years | | | 4.72 | | | | 2.99 | | | | 3.51 | | | | 6.61 | |
1 year | | | 12.04 | | | | 22.33 | | | | 7.75 | | | | 20.78 | |
Call 1-800-225-6292 or visit www.amundi.com/us for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted.
Performance data shown represents past performance. Past performance is no guarantee of future results. Investment return and market price will fluctuate, and your shares may trade below NAV due to such factors as interest rate changes and the perceived credit quality of borrowers.
Total investment return does not reflect broker sales charges or commissions. All performance is for common shares of the Fund.
Shares of closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are bought and sold in the open market through a stock exchange and frequently trade at prices lower than their NAV. NAV per common share is total assets less total liabilities, which include preferred shares or borrowings, as applicable, divided by the number of common shares outstanding.
When NAV is lower than market price, dividends are assumed to be reinvested at the greater of NAV or 95% of the market price. When NAV is higher, dividends are assumed to be reinvested at prices obtained through open-market purchases under the Fund’s dividend reinvestment plan.
The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the sale of Fund shares. Had these fees and taxes been reflected, performance would have been lower.
The Bloomberg Barclays Municipal Bond Index is an unmanaged, broad measure of the municipal bond market. The Bloomberg Barclays U.S. Municipal High Yield Bond Index is unmanaged, totals over $26 billion in market value and maintains over 1,300 securities. Municipal bonds in this index have the following requirements: maturities of one year or greater, sub investment grade (below Baa or non-rated), fixed coupon rate, issued after 12/31/90, deal size over $20 million, and maturity size of at least $3 million. Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. The indices do not use leverage. It is not possible to invest directly in the indices.
Please refer to the financial highlights for a more current total return ratio.
14 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/21
Schedule of Investments |
4/30/21 | | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | UNAFFILIATED ISSUERS — 146.8% | |
| | | MUNICIPAL BONDS — 146.8% of Net Assets(a) | |
| | | Arizona — 2.4% | |
| 4,000,000(b) | | City of Phoenix, 5.0%, 7/1/27 | $ 4,883,720 |
| 2,230,000 | | City of Phoenix, Industrial Development Authority, | |
| | 3rd & Indian School Assisted Living Project,
| |
| | | 5.4%, 10/1/36 | 2,302,542 |
| 24,000 | | County of Pima, Industrial Development Authority, | |
| | | Arizona Charter Schools Project, Series C, 6.75%, 7/1/31 | 24,447 |
| | | Total Arizona | $ 7,210,709 |
| | | Arkansas — 0.9% | |
| 2,500,000 | | Arkansas Development Finance Authority, Big River | |
| | | Steel Project, 4.5%, 9/1/49 (144A) | $ 2,752,825 |
| | | Total Arkansas | $ 2,752,825 |
| | | California — 6.0% | |
| 1,000,000 | | California County Tobacco Securitization Agency, 5.0%, | |
| | | 6/1/49 | $ 1,243,630 |
| 10,000,000(c) | | California County Tobacco Securitization Agency, | |
| | | Capital Appreciation, Stanislaus County, Subordinated, | |
| | | Series A, 6/1/46 | 2,426,300 |
| 2,000,000 | | California Educational Facilities Authority, Stanford | |
| | | University, Series U-7, 5.0%, 6/1/46 | 3,053,580 |
| 530,000 | | California Municipal Finance Authority, Santa Rosa | |
| | | Academy Project, Series A, 5.75%, 7/1/30 | 546,022 |
| 1,590,000(d) | | California School Finance Authority, Classical Academies | |
| | | Project, Series A, 7.375%, 10/1/43 | 1,746,090 |
| 1,400,000 | | California Statewide Communities Development | |
| | | Authority, Lancer Plaza Project, 5.625%, 11/1/33 | 1,420,342 |
| 1,250,000 | | City of Oroville, Oroville Hospital, 5.25%, 4/1/54 | 1,430,575 |
| 2,000,000(b)(d) | | Los Angeles Community College District, Series G, | |
| | | 4.0%, 8/1/39 | 2,241,980 |
| 1,605,000 | | Los Angeles County Metropolitan Transportation | |
| | | Authority, Series A, 5.0%, 7/1/30 | 2,024,676 |
| 1,500,000(b) | | State of California, 3.0%, 10/1/33 | 1,711,455 |
| | | Total California | $ 17,844,650 |
| | | Colorado — 2.2% | |
| 2,180,000 | | Board of Water Commissioners City & County of | |
| | | Denver, 4.0%, 9/15/42 | $ 2,479,772 |
| 1,500,000(d) | | Colorado Educational & Cultural Facilities Authority, | |
| | Rocky Mountain Classical Academy Project, |
| | | 8.0%, 9/1/43 | 1,763,535 |
| 1,665,000(e) | | Tender Option Bond Trust Receipts/Certificates, RIB, | |
| | | 0.0%, 6/1/39 (144A) | 2,363,001 |
| | Total Colorado | $ 6,606,308 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 15
Schedule of Investments | 4/30/21 (continued)
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Connecticut — 3.0% | |
| 3,465,000 | | Mohegan Tribal Finance Authority, 7.0%, 2/1/45 (144A) | $ 3,543,690 |
| 5,000,000(b) | | State of Connecticut, Series E, 4.0%, 9/1/30 | 5,406,750 |
| | | Total Connecticut | $ 8,950,440 |
| | | District of Columbia — 3.6% | |
| 2,380,000 | | District of Columbia Tobacco Settlement Financing | |
| | | Corp., Asset-Backed, 6.5%, 5/15/33 | $ 2,597,889 |
| 6,000,000 | | District of Columbia Tobacco Settlement Financing | |
| | | Corp., Asset-Backed, 6.75%, 5/15/40 | 6,128,400 |
| 10,000,000(c) | | District of Columbia Tobacco Settlement Financing | |
| | Corp., Capital Appreciation, Asset-Backed,
|
| | | Series A, 6/15/46 | 2,193,100 |
| | | Total District of Columbia | $ 10,919,389 |
| | | Florida — 3.7% | |
| 5,000,000 | | County of Miami-Dade, Water & Sewer System | |
| | | Revenue, Series A, 4.0%, 10/1/44 | $ 5,721,500 |
| 5,000,000 | | Florida’s Turnpike Enterprise, Department of | |
| | | Transportation, Series A, 4.0%, 7/1/34 | 5,343,800 |
| | | Total Florida | $ 11,065,300 |
| | | Georgia — 5.0% | |
| 7,010,000 | | Brookhaven Development Authority, 4.0%, 7/1/49 | $ 8,152,069 |
| 2,500,000 | | County of Fulton GA Water & Sewerage Revenue, | |
| | | 2.25%, 1/1/42 | 2,550,625 |
| 4,000,000 | | Private Colleges & Universities Authority, Emory | |
| | | University, Series A, 5.0%, 10/1/43 | 4,394,840 |
| | | Total Georgia | $ 15,097,534 |
| | | Idaho — 1.7% | |
| 5,000,000 | | Power County Industrial Development Corp., FMC Corp. | |
| | | Project, 6.45%, 8/1/32 | $ 5,032,550 |
| | | Total Idaho | $ 5,032,550 |
| | | Illinois — 9.4% | |
| 704,519(c) | | Illinois Finance Authority, 11/15/52 | $ 56,277 |
| 1,116,010(e) | | Illinois Finance Authority, 4.0%, 11/15/52 | 1,134,971 |
| 3,500,000 | | Illinois Finance Authority, The Admiral at the Lake | |
| | | Project, 5.25%, 5/15/42 | 3,493,315 |
| 4,000,000 | | Illinois Finance Authority, The Admiral at the Lake | |
| | | Project, 5.5%, 5/15/54 | 4,026,400 |
| 1,610,000(f) | | Metropolitan Pier & Exposition Authority, McCormick | |
| | | Place, 5.65%, 6/15/22 (NATL-RE Insured) | 1,705,232 |
| 13,785,000 | | Metropolitan Pier & Exposition Authority, McCormick | |
| | | Place, 5.65%, 6/15/22 (NATL-RE Insured) | 14,457,708 |
| 1,000,000 | | Metropolitan Pier & Exposition Authority, McCormick | |
| | | Place, Series B, 5.0%, 6/15/52 (ST APPROP Insured) | 1,034,520 |
The accompanying notes are an integral part of these financial statements.
16 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Illinois — (continued) | |
| 1,485,000(f) | | Metropolitan Pier & Exposition Authority, McCormick | |
| | | Place, Series B, 5.65%, 6/15/22 (NATL-RE Insured) | $ 1,575,644 |
| 695,000 | | Southwestern Illinois Development Authority, Village of | |
| | | Sauget Project, 5.625%, 11/1/26 | 660,264 |
| | | Total Illinois | $ 28,144,331 |
| | | Indiana — 1.5% | |
| 2,000,000 | | City of Evansville, Silver Birch Evansville Project, | |
| | | 5.45%, 1/1/38 | $ 2,016,500 |
| 1,500,000 | | City of Mishawaka, Silver Birch Mishawaka Project, | |
| | | 5.375%, 1/1/38 (144A) | 1,508,640 |
| 1,000,000 | | Indiana Finance Authority, Multipurpose Educational | |
| | | Facilities, Avondale Meadows Academy Project, | |
| | | 5.375%, 7/1/47 | 1,105,060 |
| | | Total Indiana | $ 4,630,200 |
| | | Louisiana — 0.8% | |
| 2,260,000(d) | | Jefferson Parish Hospital Service District No. 2, East | |
| | | Jefferson General Hospital, 6.375%, 7/1/41 | $ 2,281,606 |
| | | Total Louisiana | $ 2,281,606 |
| | | Maine — 2.6% | |
| 1,400,000 | | City of Portland ME General Airport Revenue, | |
| | | 4.0%, 1/1/40 | $ 1,603,714 |
| 1,500,000(d) | | Maine Health & Higher Educational Facilities Authority, | |
| | | Maine General Medical Center, 7.5%, 7/1/32 | 1,518,450 |
| 4,480,000 | | Maine Turnpike Authority, Series A, 5.0%, 7/1/42 | 4,678,778 |
| | | Total Maine | $ 7,800,942 |
| | | Maryland — 3.1% | |
| 1,350,000 | | Maryland Health & Higher Educational Facilities | |
| | | Authority, City Neighbors, Series A, 6.75%, 7/1/44 | $ 1,455,111 |
| 5,365,000 | | University System of Maryland, 4.0%, 4/1/43 | 6,436,337 |
| 1,250,000 | | Washington Suburban Sanitary Commission, 3.0%, | |
| | | 6/1/47 (CNTY GTD Insured) | 1,345,775 |
| | | Total Maryland | $ 9,237,223 |
| | | Massachusetts — 16.2% | |
| 2,000,000(b) | | City of Boston, Series A, 5.0%, 3/1/39 | $ 2,531,660 |
| 4,000,000(b) | | Commonwealth of Massachusetts, 3.0%, 3/1/49 | 4,268,600 |
| 7,000,000(c) | | Massachusetts Bay Transportation Authority, | |
| | | Series A, 7/1/28 | 6,245,190 |
| 1,550,000 | | Massachusetts Development Finance Agency, Harvard | |
| | | University, Series A, 5.0%, 7/15/36 | 2,267,061 |
| 5,000,000 | | Massachusetts Development Finance Agency, Harvard | |
| | | University, Series A, 5.0%, 7/15/40 | 7,567,050 |
| 1,000,000 | | Massachusetts Development Finance Agency, Partners | |
| | | Healthcare System, 4.0%, 7/1/41 | 1,124,690 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 17
Schedule of Investments | 4/30/21 (continued)
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Massachusetts — (continued) | |
| 5,000,000 | | Massachusetts Development Finance Agency, Partner’s | |
| | | Healthcare System, Series S-1, 4.0%, 7/1/41 | $ 5,825,700 |
| 7,100,000 | | Massachusetts Development Finance Agency, WGBH | |
| | | Foundation, Series A, 5.75%, 1/1/42 (AMBAC Insured) | 11,346,794 |
| 70,000 | | Massachusetts Educational Financing Authority, Series I, | |
| | | 6.0%, 1/1/28 | 70,343 |
| 3,100,000 | | Massachusetts Health & Educational Facilities Authority, | |
| | | Massachusetts Institute of Technology, Series K, | |
| | | 5.5%, 7/1/32 | 4,508,330 |
| 2,800,000(b) | | Town of Arlington MA, 2.0%, 9/15/41 | 2,832,032 |
| | | Total Massachusetts | $ 48,587,450 |
| | | Michigan — 1.3% | |
| 1,000,000 | | David Ellis Academy, 5.25%, 6/1/45 | $ 1,047,070 |
| 2,640,000 | | Michigan State University, Series A, 5.0%, 8/15/41 | 2,874,353 |
| | | Total Michigan | $ 3,921,423 |
| | | Minnesota — 4.5% | |
| 1,840,000 | | Bloomington Port Authority, Radisson Blu Mall of | |
| | | America, 9.0%, 12/1/35 | $ 1,840,258 |
| 1,000,000 | | City of Ham Lake, DaVinci Academy, Series A, | |
| | | 5.0%, 7/1/47 | 1,020,240 |
| 1,000,000 | | City of Rochester, Health Care Facilities, Mayo Clinic, | |
| | | 4.0%, 11/15/48 | 1,154,670 |
| 2,300,000 | | City of Rochester, Mayo Clinic, Series B, 5.0%, 11/15/35 | 3,521,346 |
| 5,000,000(b) | | State of Minnesota, Series B, 4.0%, 8/1/27 | 5,877,300 |
| | | Total Minnesota | $ 13,413,814 |
| | | Montana — 0.0%† | |
| 1,600,000(g) | | Two Rivers Authority, Inc., 7.375%, 11/1/27 | $ 122,560 |
| | | Total Montana | $ 122,560 |
| | | New Hampshire — 0.7% | |
| 1,000,000 | | New Hampshire Health & Education Facilities | |
| | | Authority Act, 5.0%, 8/1/59 | $ 1,573,680 |
| 375,000 | | New Hampshire Health & Education Facilities | |
| | | Authority Act, Catholic Medical Centre, 3.75%, 7/1/40 | 413,066 |
| | | Total New Hampshire | $ 1,986,746 |
| | | New Jersey — 2.3% | |
| 1,000,000 | | New Jersey Economic Development Authority, | |
| | | Charter Marion P Thomas, 5.375%, 10/1/50 (144A) | $ 1,098,390 |
| 3,000,000 | | New Jersey Economic Development Authority, | |
| | | Continental Airlines, 5.25%, 9/15/29 | 3,116,670 |
| 2,500,000 | | New Jersey Economic Development Authority, | |
| | | Continental Airlines, 5.75%, 9/15/27 | 2,599,795 |
| | | Total New Jersey | $ 6,814,855 |
The accompanying notes are an integral part of these financial statements.
18 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | New Mexico — 1.2% | |
| 650,000 | | County of Otero, Otero County Jail Project, 9.0%, 4/1/23 | $ 641,881 |
| 2,960,000(e) | | County of Otero, Otero County Jail Project, 9.0%, 4/1/28 | 2,923,000 |
| | | Total New Mexico | $ 3,564,881 |
| | | New York — 17.3% | |
| 3,000,000 | | Metropolitan Transportation Authority, 4.0%, 11/15/45 | $ 3,401,250 |
| 2,000,000 | | Metropolitan Transportation Authority, 4.0%, 11/15/48 | 2,262,060 |
| 2,500,000 | | Metropolitan Transportation Authority, 5.0%, 11/15/33 | 3,202,775 |
| 2,000,000 | | Metropolitan Transportation Authority, 5.25%, 11/15/55 | 2,473,100 |
| 2,500,000 | | New York State Dormitory Authority, 3.0%, 3/15/41 | 2,664,025 |
| 4,865,000 | | New York State Dormitory Authority, 5.0%, 10/1/50 | 7,760,064 |
| 8,000,000 | | New York State Dormitory Authority, Series A, | |
| | | 4.0%, 7/1/41 | 9,400,000 |
| 2,500,000 | | New York State Dormitory Authority, Series A, | |
| | | 5.0%, 3/15/41 | 3,105,450 |
| 7,500,000 | | New York State Dormitory Authority, Series C, | |
| | | 5.0%, 3/15/39 | 8,403,675 |
| 1,500,000 | | New York State Dormitory Authority, Trustees of | |
| | | Columbia University, 5.0%, 10/1/45 | 2,345,670 |
| 3,000,000 | | New York State Urban Development Corp., 3.0%, 3/15/49 | 3,121,290 |
| 1,000,000 | | Troy Capital Resource Corp., 4.0%, 9/1/40 | 1,152,800 |
| 2,312,177 | | Westchester County Healthcare Corp., Series A, | |
| | | 5.0%, 11/1/44 | 2,458,052 |
| | | Total New York | $ 51,750,211 |
| | | North Carolina — 2.9% | |
| 2,500,000(b) | | County of Mecklenburg NC, 2.0%, 3/1/41 | $ 2,524,425 |
| 4,225,000(e) | | Tender Option Bond Trust Receipts/Certificates, | |
| | | RIB, 0.0%, 1/1/38 (144A) | 6,218,566 |
| | | Total North Carolina | $ 8,742,991 |
| | | North Dakota — 0.9% | |
| 2,525,000(d) | | County of Burleigh, St. Alexius Medical Center, | |
| | | 5.0%, 7/1/38 | $ 2,653,245 |
| | | Total North Dakota | $ 2,653,245 |
| | | Ohio — 2.0% | |
| 1,000,000 | | Buckeye Tobacco Settlement Financing Authority, | |
| | | 4.0%, 6/1/48 | $ 1,104,180 |
| 1,000,000 | | Buckeye Tobacco Settlement Financing Authority, | |
| | | 5.0%, 6/1/55 | 1,123,750 |
| 1,000,000 | | Ohio Housing Finance Agency, Sanctuary Springboro | |
| | | Project, 5.45%, 1/1/38 (144A) | 1,013,480 |
| 2,500,000(b)(d) | | State of Ohio, Common Schools, Series B, | |
| | | 5.0%, 6/15/29 | 2,638,375 |
| | Total Ohio | $ 5,879,785 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 19
Schedule of Investments | 4/30/21 (continued)
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Oregon — 2.2% | |
| 1,000,000 | | Oregon Health & Science University, Series A, | |
| | | 5.0%, 7/1/42 | $ 1,209,580 |
| 5,190,000(d) | | Oregon Health & Science University, Series E, | |
| | | 5.0%, 7/1/32 | 5,456,974 |
| | | Total Oregon | $ 6,666,554 |
| | | Pennsylvania — 4.0% | |
| 3,000,000 | | Geisinger Authority, Geisinger Health System, | |
| | | series A-1, 5.0%, 2/15/45 | $ 3,590,280 |
| 2,000,000 | | Pennsylvania Housing Finance Agency, 2.05%, 4/1/41 | 1,995,920 |
| 1,500,000 | | Pennsylvania Turnpike Commission, 5.25%, 12/1/44 | 1,933,590 |
| 1,000,000 | | Philadelphia Authority for Industrial Development, | |
| | | 5.0%, 11/15/50 | 1,023,030 |
| 500,000 | | Philadelphia Authority for Industrial Development, | |
| | | 5.5%, 6/1/49 (144A) | 533,010 |
| 460,000 | | Philadelphia Authority for Industrial Development, | |
| | | Greater Philadelphia Health Action, Inc., Project, | |
| | | Series A, 6.625%, 6/1/50 | 490,190 |
| 2,000,000(d) | | Philadelphia Authority for Industrial Development, | |
| | | Nueva Esperanze, Inc., 8.2%, 12/1/43 | 2,260,080 |
| | | Total Pennsylvania | $ 11,826,100 |
| | | Puerto Rico — 4.2% | |
| 6,255,000(b)(g) | | Commonwealth of Puerto Rico, 8.0%, 7/1/35 | $ 5,019,638 |
| 1,000,000 | | Puerto Rico Electric Power Authority, 5.25%, 7/1/21 | 922,500 |
| 1,386,000 | | Puerto Rico Sales Tax Financing Corp. Sales Tax | |
| | | Revenue, 4.536%, 7/1/53 | 1,518,751 |
| 2,000,000 | | Puerto Rico Sales Tax Financing Corp. Sales Tax | |
| | | Revenue, 4.784%, 7/1/58 | 2,226,220 |
| 2,500,000 | | Puerto Rico Sales Tax Financing Corp. Sales Tax | |
| | | Revenue, 5.0%, 7/1/58 | 2,816,400 |
| | | Total Puerto Rico | $ 12,503,509 |
| | | Rhode Island — 2.8% | |
| 5,900,000(g) | | Central Falls Detention Facility Corp., 7.25%, 7/15/35 | $ 1,062,000 |
| 2,000,000 | | Rhode Island Health & Educational Building Corp., | |
| | | Brown University, Series A, 4.0%, 9/1/37 | 2,336,500 |
| 1,000,000 | | Rhode Island Turnpike & Bridge Authority, 4.0%, 10/1/44 | 1,162,050 |
| 2,500,000(e) | | Tender Option Bond Trust Receipts/Certificates, | |
| | | RIB, 0.0%, 9/1/47 (144A) | 3,745,800 |
| | | Total Rhode Island | $ 8,306,350 |
| | | South Carolina — 1.1% | |
| 2,850,000 | | City of Charleston SC Waterworks & Sewer System | |
| | | Revenue, 4.0%, 1/1/49 | $ 3,323,470 |
| | | Total South Carolina | $ 3,323,470 |
The accompanying notes are an integral part of these financial statements.
20 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Texas — 9.6% | |
| 500,000 | | Arlington Higher Education Finance Corp., 5.45%, | |
| | | 3/1/49 (144A) | $ 554,100 |
| 1,000,000 | | Arlington Higher Education Finance Corp., Universal | |
| | | Academy, Series A, 7.0%, 3/1/34 | 1,106,080 |
| 1,000,000 | | City of Houston TX Combined Utility System Revenue, | |
| | | 4.0%, 11/15/35 | 1,220,550 |
| 1,490,000(b) | | County of Harris, Series A, 5.0%, 10/1/26 | 1,790,637 |
| 5,000,000(b)(d) | | Goose Creek Consolidated Independent School | |
| | | District, Series C, 4.0%, 2/15/26 (PSF-GTD Insured) | 5,517,750 |
| 3,785,000 | | North Texas Tollway Authority, Series A, 5.0%, 1/1/35 | 4,331,895 |
| 1,500,000(d) | | Red River Health Facilities Development Corp., MRC | |
| | | Crestview, Series A, 8.0%, 11/15/41 | 1,560,990 |
| 3,960,000(g) | | Sanger Industrial Development Corp., Texas Pellets | |
| | | Project, Series B, 8.0%, 7/1/38 | 975,150 |
| 990,082 | | Texas Department of Housing & Community Affairs, | |
| | | 2.3%, 7/1/37 (FNMA HUD SECT 8 Insured) | 1,016,828 |
| 350,000 | | Texas Municipal Gas Acquisition & Supply Corp. III, | |
| | | 5.0%, 12/15/31 | 464,940 |
| 2,000,000 | | Texas Water Development Board, 4.0%, 10/15/44 | 2,388,300 |
| 4,990,000 | | University of Texas System, Financing System, Series A, | |
| | | 5.0%, 8/15/49 | 7,709,899 |
| | | Total Texas | $ 28,637,119 |
| | | Utah — 0.4% | |
| 1,000,000 | | Salt Lake City Corp., Airport Revenue, Series B, | |
| | | 5.0%, 7/1/35 | $ 1,198,880 |
| | | Total Utah | $ 1,198,880 |
| | | Virginia — 10.9% | |
| 5,000,000(b) | | City of Alexandria VA, 3.0%, 7/15/46 (ST AID | |
| | | WITHHLDG Insured) | $ 5,448,800 |
| 1,000,000 | | City of Richmond VA Public Utility Revenue, | |
| | | 3.0%, 1/15/45 | 1,083,670 |
| 2,200,000(b) | | County of Arlington, 4.0%, 8/15/35 | 2,524,610 |
| 1,415,000(b) | | County of Fairfax, Series A, 4.0%, 10/1/33 (ST AID | |
| | | WITHHLDG Insured) | 1,665,059 |
| 5,000,000 | | University of Virginia, Series A, 5.0%, 4/1/42 | 6,118,900 |
| 4,000,000(d) | | Upper Occoquan Sewage Authority, 4.0%, 7/1/41 | 4,607,560 |
| 5,000,000 | | Virginia College Building Authority, Series A, | |
| | | 3.0%, 2/1/36 | 5,572,100 |
| 4,000,000 | | Virginia Commonwealth Transportation Board, Capital | |
| | | Projects, 3.0%, 5/15/37 | 4,443,480 |
| 1,000,000 | | Virginia Public Building Authority, 4.0%, 8/1/39 | 1,204,730 |
| | | Total Virginia | $ 32,668,909 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 21
Schedule of Investments | 4/30/21 (continued)
| | | | |
| Principal | | | |
| Amount | | | |
| USD ($) | | | Value |
| | | Washington — 10.7% | |
| 3,745,000 | | City of Seattle, Water System Revenue, 4.0%, 8/1/32 | $ 4,367,606 |
| 2,500,000(b) | | King County, Issaquah School District No. 411, 4.0%, | |
| | | 12/1/31 (SCH BD GTY Insured) | 2,871,425 |
| 1,000,000(b) | | State of Washington, 4.0%, 7/1/39 | 1,229,830 |
| 14,315,000(b)(c) | | State of Washington, Motor Vehicle Sales Tax, Series C, | |
| | | 6/1/22 (NATL Insured) | 14,235,122 |
| 3,285,000(e) | | Tender Option Bond Trust Receipts/Certificates, | |
| | | RIB, 0.0%, 1/1/45 (144A) | 5,231,034 |
| 2,500,000 | | University of Washington, Series B, 5.0%, 6/1/29 | 2,956,550 |
| 1,150,000(d) | | Washington State Housing Finance Commission, | |
| | | Mirabella Project, Series A, 6.75%, 10/1/47 (144A) | 1,254,926 |
| | | Total Washington | $ 32,146,493 |
| | | Wisconsin — 5.7% | |
| 1,500,000 | | Public Finance Authority, Gardner Webb University, | |
| | | 5.0%, 7/1/31 (144A) | $ 1,659,525 |
| 5,000,000 | | Public Finance Authority, Glenridge Palmer Ranch, | |
| | | Series A, 8.25%, 6/1/46 (144A) | 5,119,450 |
| 750,000 | | Public Finance Authority, Roseman University Health | |
| | | Sciences Project, 5.875%, 4/1/45 | 785,152 |
| 1,000,000 | | Public Finance Authority, SearStone CCRC Project, | |
| | | Series A, 5.3%, 6/1/47 | 1,005,120 |
| 1,465,000(d) | | Public Finance Authority, SearStone CCRC Project, | |
| | | Series A, 8.625%, 6/1/47 | 1,588,778 |
| 5,000,000 | | Wisconsin Department of Transportation, Series A, | |
| | | 5.0%, 7/1/28 | 5,697,350 |
| 1,220,000 | | Wisconsin Housing & Economic Development | |
| | | Authority, 2.95%, 3/1/42 (FNMA COLL Insured) | 1,269,727 |
| | | Total Wisconsin | $ 17,125,102 |
| | | TOTAL MUNICIPAL BONDS | |
| | | (Cost $414,016,481) | $ 439,414,454 |
| | | TOTAL INVESTMENTS IN UNAFFILIATED | |
| | | ISSUERS — 146.8% | |
| | | (Cost $414,016,481) | $ 439,414,454 |
| | | OTHER ASSETS AND LIABILITIES — (46.8)% | $ (140,134,679) |
| | | NET ASSETS APPLICABLE TO COMMON | |
| | | SHAREOWNERS — 100.0% | $ 299,279,775 |
| | |
RIB | Residual Interest Bond is purchased in a secondary market. The interest rate is |
| subject to change periodically and inversely based upon prevailing market rates. |
| The interest rate shown is the rate at April 30, 2021. |
(144A) | Security is exempt from registration under Rule 144A of the Securities Act of |
| 1933. Such securities may be resold normally to qualified institutional buyers in a |
| transaction exempt from registration. At April 30, 2021, the value of these |
| securities amounted to $36,596,437, or 12.2% of net assets applicable to |
| common shareowners. |
The accompanying notes are an integral part of these financial statements.
22 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/21
AMBAC CNTY-GTD FNMA COLL FNMA HUD SECT 8 | Ambac Assurance Corp. County Guaranteed. Federal National Mortgage Association Collateral. Federal National Mortgage Association U.S. Department of Housing and Urban Development Section 8. |
NATL PSF-GTD SCH BD GTY | National Public Finance Guarantee Corp. Permanent School Fund Guaranteed. School Board Guaranty. |
ST AID WITHHLDG
| State Aid Withholding. |
ST APPROP
| State Appropriations. |
†
| Amount rounds to less than 0.1%. |
(a)
| Consists of Revenue Bonds unless otherwise indicated.
|
(b)
| Represents a General Obligation Bond.
|
(c)
| Security issued with a zero coupon. Income is recognized through accretion of discount.
|
(d) | Pre-refunded bonds have been collateralized by U.S. Treasury or U.S. Government Agency securities which are held in escrow to pay interest and principal on the tax exempt issue and to retire the bonds in full at the earliest refunding date. |
(e) | The interest rate is subject to change periodically. The interest rate and/or reference index and spread shown at April 30, 2021. |
(f)
| Escrow to maturity.
|
| (g) | Security is in default. |
Purchases and sales of securities (excluding temporary cash investments) for the year ended April 30, 2021, aggregated $68,117,850 and $43,426,372, respectively.
The Fund is permitted to engage in purchase and sale transactions (“cross trades”) with certain funds and accounts for which the Amundi Asset Management US, Inc. (the “Adviser”) serves as the Fund’s investment adviser, as set forth in Rule 17a-7 under the Investment Company Act of 1940, pursuant to procedures adopted by the Board of Directors. Under these procedures, cross trades are effected at current market prices. During the year ended April 30, 2021, the Fund did not engage in any cross trade activity.
At April 30, 2021, the net unrealized appreciation on investments based on cost for federal tax purposes of $411,832,479 was as follows:
| | |
Aggregate gross unrealized appreciation for all investments in which | |
there is an excess of value over tax cost | $ 38,847,614 |
Aggregate gross unrealized depreciation for all investments in which | |
there is an excess of tax cost over value | (11,265,639) |
Net unrealized appreciation | $ 27,581,975 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 23
Schedule of Investments | 4/30/21 (continued)
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels below.
| |
| Level 1 – unadjusted quoted prices in active markets for identical securities. |
| Level 2 – other significant observable inputs (including quoted prices for similar securities, |
| interest rates, prepayment speeds, credit risks, etc.). See Notes to Financial |
| Statements — Note 1A. |
| Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining |
| fair value of investments). See Notes to Financial Statements — Note 1A. |
The following is a summary of the inputs used as of April 30, 2021, in valuing the Fund’s investments:
| | | | | |
| Level 1 | Level 2 | Level 3 | Total |
Municipal Bonds | $ — | $ 439,414,454 | — | $ 439,414,454 |
| Total Investments in Securities | $ — | $ 439,414,454 | $ — | $ 439,414,454 |
| Other Financial Instruments | | | | |
Variable Rate MuniFund Term | | | | |
Preferred Shares(a) | $ — | $(145,000,000) | $ — | $(145,000,000) |
| Total Other Financial Instruments | $ — | $(145,000,000) | $ — | $(145,000,000) |
(a) The Fund may hold liabilities in which the fair value approximates the carrying amount for financial |
| statement purposes. |
During the year ended April 30, 2021, there were no transfers in or out of Level 3. |
The accompanying notes are an integral part of these financial statements.
24 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Statement of Assets and Liabilities |
4/30/21
| ASSETS: | | | |
| Investments in unaffiliated issuers, at value (cost $414,016,481) | | $ | 439,414,454 | |
| Cash | | | 2,525,065 | |
| Receivables — | | | | |
| Interest | | | 5,190,669 | |
| Other assets | | | 1,020 | |
| Total assets | | $ | 447,131,208 | |
| LIABILITIES: | | | | |
| Variable Rate MuniFund Term Preferred Shares* | | | 145,000,000 | |
| Payables — | | | | |
| Investment securities purchased | | | 2,776,619 | |
| Distributions | | | 25 | |
| Directors’ fees | | | 629 | |
| Due to affiliates | | | 26,013 | |
| Accrued expenses | | | 48,147 | |
| Total liabilities | | $ | 147,851,433 | |
| NET ASSETS APPLICABLE TO COMMON SHAREOWNERS: | | | | |
| Paid-in capital | | $ | 300,996,046 | |
| Distributable earnings (loss) | | | (1,716,271 | ) |
| Net assets applicable to common shareowners | | $ | 299,279,775 | |
| NET ASSET VALUE PER COMMON SHARE: | | | | |
| No par value | | | | |
| Based on $299,279,775/22,771,349 common shares | | $ | 13.14 | |
* $100,000 liquidation value per share applicable to 1,450 shares.
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 25
FOR THE YEAR ENDED 4/30/21
| | | | | | | |
| INVESTMENT INCOME: | | | | | | |
| Interest from unaffiliated issuers | | $ | 17,334,023 | | | | |
| Total investment income | | | | | | $ | 17,334,023 | |
| EXPENSES: | | | | | | | | |
| Management fees | | $ | 2,554,454 | | | | | |
| Administrative expense | | | 200,779 | | | | | |
| Transfer agent fees | | | 10,655 | | | | | |
| Shareowner communications expense | | | 23,900 | | | | | |
| Custodian fees | | | 5,074 | | | | | |
| Registration fees | | | 19,600 | | | | | |
| Professional fees | | | 473,786 | | | | | |
| Printing expense | | | 18,352 | | | | | |
| Pricing fees | | | 6,388 | | | | | |
| Directors’ fees | | | 17,002 | | | | | |
| Insurance expense | | | 733 | | | | | |
| Interest expense | | | 1,392,200 | | | | | |
| Miscellaneous | | | 84,441 | | | | | |
| Total expenses | | | | | | $ | 4,807,364 | |
| Net investment income | | | | | | $ | 12,526,659 | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | | | | | |
| Net realized gain (loss) on: | | | | | | | | |
| Investments in unaffiliated issuers | | $ | (262,256 | ) | | | | |
| Change in net unrealized appreciation (depreciation) on: | | | | | | | | |
| Investments in unaffiliated issuers | | | 20,078,824 | | | | | |
| Net realized and unrealized gain (loss) on investments | | | | | | $ | 19,816,568 | |
| Net increase in net assets resulting from operations | | | | | | $ | 32,343,227 | |
The accompanying notes are an integral part of these financial statements.
26 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Statements of Changes in Net Assets
| | Year | | | Year | |
| | Ended | | | Ended | |
| | 4/30/21 | | | 4/30/20 | |
| FROM OPERATIONS: | | | | | | |
Net investment income (loss) | | $ | 12,526,659 | | | $ | 12,469,533 | |
Net realized gain (loss) on investments | | | (262,256 | ) | | | 1,931,953 | |
Change in net unrealized appreciation (depreciation) | | | | | | | | |
| on investments | | | 20,078,824 | | | | (9,109,466 | ) |
| Net increase in net assets resulting from operations | | $ | 32,343,227 | | | $ | 5,292,020 | |
| DISTRIBUTIONS TO COMMON SHAREOWNERS: | | | | | | | | |
($0.59 and $0.57 per share, respectively) | | $ | (13,321,239 | ) | | $ | (12,979,669 | ) |
| Total distributions to common shareowners | | $ | (13,321,239 | ) | | $ | (12,979,669 | ) |
| Net increase (decrease) in net assets applicable to | | | | | | | | |
| common shareowners | | $ | 19,021,988 | | | $ | (7,687,649 | ) |
| NET ASSETS APPLICABLE TO COMMON SHAREOWNERS: | | | | | | | | |
Beginning of year | | $ | 280,257,787 | | | $ | 287,945,436 | |
End of year | | $ | 299,279,775 | | | $ | 280,257,787 | |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 27
FOR THE YEAR ENDED 4/30/21
| Cash Flows From Operating Activities: | | | |
| Net Increase in net assets resulting from operations | | $ | 32,343,227 | |
| Adjustments to reconcile net increase in net assets resulting | | | | |
| from operations to net cash, restricted cash and foreign | | | | |
| currencies used in operating activities: | | | | |
| Purchases of investment securities | | $ | (69,349,720 | ) |
| Proceeds from disposition and maturity of investment securities | | | 44,426,391 | |
| Net (accretion) and amortization of discount/premium on investment securities | | | 564,089 | |
| Change in unrealized appreciation on investments in unaffiliated issuers | | | (20,078,824 | ) |
| Net realized loss on investments in unaffiliated issuers | | | 262,256 | |
| Decrease in interest receivable | | | 340,725 | |
| Decrease in other assets | | | 107,151 | |
| Decrease in due from advisor | | | 166,532 | |
| Increase in due to affiliates | | | 23,272 | |
| Increase in Directors’ fees payable | | | 583 | |
| Decrease in interest expense payable | | | (28,550 | ) |
| Decrease in accrued expenses payable | | | (40,712 | ) |
| Net cash, restricted cash and foreign currencies used in operating activities | | $ | (11,263,580 | ) |
| Cash Flows Provided by Financing Activities: | | | | |
| Payments on borrowings | | $ | 20,000,000 | |
| Distributions to shareowners | | | (13,321,239 | ) |
| Net cash, restricted cash and foreign currencies provided by | | | | |
| financing activities | | $ | 6,678,761 | |
| Cash, Restricted Cash and Foreign Currencies: | | | | |
| Beginning of year* | | $ | 7,109,884 | |
| End of year* | | $ | 2,525,065 | |
| Cash Flow Information: | | | | |
| Cash paid for interest | | $ | 1,421,627 | |
* The following table provides a reconciliation of cash, restricted cash and foreign currencies reported within Statement of Assets and Liabilities that sum to the total of the same such amounts shown in the Statement of Cash Flows:
| Year | Year |
| Ended | Ended |
| 4/30/21 | 4/30/20 |
Cash | $2,525,065 | $7,109,884 |
| Total cash, restricted cash and foreign currencies | | |
| shown in the Statement of Cash Flows | $2,525,065 | $7,109,884 |
The accompanying notes are an integral part of these financial statements.
28 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
| | Year | Year | Year | Year | Year |
| | Ended | Ended | Ended | Ended | Ended |
| | 4/30/21 | 4/30/20 | 4/30/19 | 4/30/18 | 4/30/17* |
| Per Share Operating Performance | | |
Net asset value, beginning of period | $ 12.31 | $ 12.65 | $ 12.50 | $ 12.72 | $ 13.49 |
Increase (decrease) from investment operations: (a) | |
| Net investment income (b) | $ 0.55 | $ 0.55 | $ 0.74 | $ 0.78 | $ 0.73 |
| Net realized and unrealized gain (loss) on investments | 0.87 | (0.32) | 0.19 | (0.29) | (0.76) |
Distributions to preferred shareowners from: | | |
| Net investment income (b) | $ — | $ — | $ (0.15) | $ (0.09) | $ (0.05) |
| Net increase (decrease) from investment operations | $ 1.42 | $ 0.23 | $ 0.78 | $ 0.40 | $ (0.08) |
Distributions to common shareowners from: | | |
| Net investment income and previously undistributed net |
| investment income | $ (0.59)** | $ (0.57)** | $ (0.63) | $ (0.62) | $ (0.69) |
| Net increase (decrease) in net asset value | $ 0.83 | $ (0.34) | $ 0.15 | $ (0.22) | $ (0.77) |
Net asset value, end of period | $ 13.14 | $ 12.31 | $ 12.65 | $ 12.50 | $ 12.72 |
Market value, end of period | $ 12.61 | $ 10.82 | $ 11.91 | $ 11.25 | $ 11.75 |
| Total return at net asset value (c) | 12.04% | 2.00%(d) | 6.93% | 3.53% | (0.45)% |
| Total return at market value (c) | 22.33% | (4.77)% | 11.86% | 0.87% | (11.83)% |
Ratios to average net assets of common shareowners: | |
| Total expenses plus interest expense (e) (f) | 1.62% | 2.13% | 1.03% | 1.01% | 1.00% |
| Net investment income before preferred share distributions (b) | 4.22% | 4.24% | 5.92% | 6.14% | 5.54% |
| Net investment income (f) | 4.22% | 4.24% | 4.69% | 5.44% | 5.16% |
| Preferred share distributions (b) | —% | —% | (1.23)% | 0.71% | 0.38% |
Portfolio turnover rate | 10% | 17% | 16% | 20% | 19% |
Net assets of common shareowners, end of period (in thousands) | $299,280 | $280,258 | $287,945 | $284,596 | $289,741 |
The accompanying notes are an integral part of these financial statements.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 29
Financial Highlights (continued)
| | | | | | |
| Year | Year | Year | Year | Year |
| Ended | Ended | Ended | Ended | Ended |
| 4/30/21 | 4/30/20 | 4/30/19 | 4/30/18 | 4/30/17* |
Preferred shares outstanding (in thousands) (g) (h) (i) | $145,000 | $125,000 | $125,000 | $125,000 | $101,000 |
Asset coverage per preferred share, end of period | $306,399 | $324,229 | $330,370 | $327,672 | $ 96,723 |
Average market value per preferred share (j) | $100,000 | $100,000 | $100,000 | $100,000 | $ 25,000 |
Liquidation value, including interest expense payable, per preferred share | $ 99,999 | $100,023 | $100,014 | $ 99,996 | $ 25,006 |
* | The Fund was audited by an independent registered public accounting firm other than Ernst & Young LLP. |
** | The amount of distributions made to shareowners during the year were in excess of the net investment income earned by the Fund during the year. The Fund has accumulated undistributed net investment income which is part of the Fund’s NAV. A portion of the accumulated net investment income was distributed to shareowners during the year.
|
(a) | The per common share data presented above is based upon the average common shares outstanding for the periods presented. |
(b) | Beginning April 30, 2020, distribution payments to preferred shareowners are included as a component of net investment income. |
(c) | Total investment return is calculated assuming a purchase of common shares at the current net asset value or market value on the first day and a sale at the current net asset value or market value on the last day of the periods reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions. Past performance is not a guarantee of future results.
|
(d) | If the Fund had not recognized gains in settlement of class action lawsuits during the year ended April 30, 2020, the total return would have been 1.73%. |
(e) | Prior to April 30, 2020, the expense ratios do not reflect the effect of distribution payments to preferred shareowners. |
(f) | Includes interest expense of 0.47%, 1.10%, —%, —% and —%, respectively. |
(g) | Prior to February 9, 2018 there were 4,040 Auction Preferred Shares (“APS”) outstanding with a liquidation preference of $25,000 per share. The Fund redeemed all 2,000 outstanding Series A APS on February 14, 2018 and all 2,040 outstanding Series B APS on February 15, 2018.
|
(h) | The Fund issued 1,250 Variable Rate MuniFund Term Preferred Shares, with a liquidation preference of $100,000 per share, on February 9, 2018. |
(i) | The Fund issued 200 Variable Rate MuniFund Term Preferred Shares, with a liquidation preference of $100,000 per share, on February 16, 2021. |
(j) | Market value is redemption value without an active market. |
The accompanying notes are an integral part of these financial statements.
30 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Notes to Financial Statements |
4/30/21
1. Organization and Significant Accounting Policies
Pioneer Municipal High Income Fund, Inc. (the “Fund”) is organized as a Maryland corporation. Prior to April 21, 2021, the Fund was organized as a Delaware statutory trust. On April 21, 2021, the Fund redomiciled to a Maryland corporation through a statutory merger of the predecessor Delaware statutory trust with and into a newly-established Maryland corporation formed for the purpose of effecting the redomiciling. The Fund was originally organized on March 13, 2003. Prior to commencing operations on July 21, 2003, the Fund had no operations other than matters relating to its organization and registration as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The investment objective of the Fund is to seek a high level of current income exempt from regular federal income tax, and the Fund may, as a secondary objective, also seek capital appreciation to the extent that it is consistent with its primary investment objective.
Amundi Asset Management US, Inc., an indirect, wholly owned subsidiary of Amundi and Amundi’s wholly owned subsidiary, Amundi USA, Inc., serves as the Fund’s investment adviser (the “Adviser”). Prior to January 1, 2021, the Adviser was named Amundi Pioneer Asset Management, Inc.
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2018-13 “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) which modifies disclosure requirements for fair value measurements, principally for Level 3 securities and transfers between levels of the fair value hierarchy. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Fund has adopted ASU 2018-13 for the year ended April 30, 2021. The impact to the Fund’s adoption was limited to changes in the Fund’s disclosures regarding fair value, primarily those disclosures related to transfers between levels of the fair value hierarchy and disclosure of the range and weighted average used to develop significant unobservable inputs for Level 3 fair value investments, when applicable.
In March 2020, FASB issued an Accounting Standard Update, ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”) and other LIBOR-based reference rates at the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 31
contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the Fund’s investments, derivatives, debt and other contracts, if applicable, that will undergo reference rate-related modifications as a result of the reference rate reform.
The Fund is an investment company and follows investment company accounting and reporting guidance under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). U.S. GAAP requires the management of the Fund to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses and gain or loss on investments during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:
A. Security Valuation
The net asset value of the Fund is computed once daily, on each day the New York Stock Exchange (“NYSE”) is open, as of the close of regular trading on the NYSE.
Fixed-income securities are valued by using prices supplied by independent pricing services, which consider such factors as market prices, market events, quotations from one or more brokers, Treasury spreads, yields, maturities and ratings, or may use a pricing matrix or other fair value methods or techniques to provide an estimated value of the security or instrument. A pricing matrix is a means of valuing a debt security on the basis of current market prices for other debt securities, historical trading patterns in the market for fixed-income securities and/or other factors. Non-U.S. debt securities that are listed on an exchange will be valued at the bid price obtained from an independent third party pricing service. When independent third party pricing services are unable to supply prices, or when prices or market quotations are considered to be unreliable, the value of that security may be determined using quotations from one or more broker-dealers.
Securities for which independent pricing services or broker-dealers are unable to supply prices or for which market prices and/or quotations are not readily available or are considered to be unreliable are valued by a fair valuation team comprised of certain personnel of the Adviser pursuant to procedures adopted by the Fund’s Board of Directors. The Adviser’s fair valuation team uses fair value methods approved by the Valuation Committee of the Board of Directors. The Adviser’s fair valuation team is responsible for monitoring developments that may impact fair valued
32 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
securities and for discussing and assessing fair values on an ongoing basis, and at least quarterly, with the Valuation Committee of the Board of Directors.
Inputs used when applying fair value methods to value a security may include credit ratings, the financial condition of the company, current market conditions and comparable securities. The Fund may use fair value methods if it is determined that a significant event has occurred after the close of the exchange or market on which the security trades and prior to the determination of the Fund’s net asset value. Examples of a significant event might include political or economic news, corporate restructurings, natural disasters, terrorist activity or trading halts. Thus, the valuation of the Fund’s securities may differ significantly from exchange prices, and such differences could be material.
At April 30, 2021, no securities were valued using fair value methods (other than securities valued using prices supplied by independent pricing services, broker-dealers or using a third party insurance industry pricing model).
B. Investment Income and Transactions
Interest income, including interest on income-bearing cash accounts, is recorded on the accrual basis. Dividend and interest income are reported net of unrecoverable foreign taxes withheld at the applicable country rates and net of income accrued on defaulted securities.
Discounts and premiums on purchase prices of debt securities are accreted or amortized, respectively, daily, into interest income on an effective yield to maturity basis with a corresponding increase or decrease in the cost basis of the security. Premiums and discounts related to certain mortgage-backed securities are amortized or accreted in proportion to the monthly paydowns.
Interest and dividend income payable by delivery of additional shares is reclassified as PIK (payment-in-kind) income upon receipt and is included in interest and dividend income, respectively.
Security transactions are recorded as of trade date. Gains and losses on sales of investments are calculated on the identified cost method for both financial reporting and federal income tax purposes.
C. Federal Income Taxes
It is the Fund’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net taxable income and net realized capital gains, if any, to its shareowners. Therefore, no provision for federal income taxes is
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 33
required. As of April 30, 2021, the Fund did not accrue any interest or penalties with respect to uncertain tax positions, which, if applicable, would be recorded as an income tax expense on the Statement of Operations. Tax returns filed within the prior three years remain subject to examination by federal and state tax authorities.
The amount and character of income and capital gain distributions to shareowners are determined in accordance with federal income tax rules, which may differ from U.S. GAAP. Distributions in excess of net investment income or net realized gains are temporary over distributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes. Capital accounts within the financial statements are adjusted for permanent book/tax differences to reflect tax character, but are not adjusted for temporary differences.
At April 30, 2021, the Fund was permitted to carry forward indefinitely $888,961 of short-term losses $28,414,581 of long-term losses.
The tax character of distributions paid during the years ended April 30, 2021 and April 30, 2020, were as follows:
| 2021 | 2020 |
| Distributions paid from: | | |
Tax-exempt distributions | $13,892,324 | $15,198,352 |
Ordinary income | 821,115 | 1,011,767 |
| Total | $14,713,439 | $16,210,119 |
The following shows the components of distributable earnings (losses) on a federal income tax basis at April 30, 2021:
| | |
| 2021 |
| Distributable earnings/(loss): | |
Undistributed Ordinary Income | $ 1,121 |
Capital loss carryforward | (29,303,542) |
Other book/tax temporary differences | (25) |
Unrealized appreciation | 27,581,975 |
Undistributed tax-exempt income | 4,200 |
| Total | $ (1,716,271) |
The difference between book-basis and tax-basis unrealized appreciation/depreciation is primarily attributable to the book/tax differences in the accrual of income on securities in default, the difference between book and tax amortization methods and discounts on fixed income securities.
34 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
D. Automatic Dividend Reinvestment Plan
All shareowners whose shares are registered in their own names automatically participate in the Automatic Dividend Reinvestment Plan (the “Plan”), under which participants receive all dividends and capital gain distributions (collectively, dividends) in full and fractional shares of the Fund in lieu of cash. Shareowners may elect not to participate in the Plan. Shareowners not participating in the Plan receive all dividends and capital gain distributions in cash. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notifying American Stock Transfer & Trust Company (“AST”), the agent for shareowners in administering the Plan (the “Plan Agent”), in writing prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.
If a shareowner’s shares are held in the name of a brokerage firm, bank or other nominee, the shareowner can ask the firm or nominee to participate in the Plan on the shareowner’s behalf. If the firm or nominee does not offer the Plan, dividends will be paid in cash to the shareowner of record. A firm or nominee may reinvest a shareowner’s cash dividends in shares of the Fund on terms that differ from the terms of the Plan.
Whenever the Fund declares a dividend on shares payable in cash, participants in the Plan will receive the equivalent in shares acquired by the Plan Agent either (i) through receipt of additional unissued but authorized shares from the Fund or (ii) by purchase of outstanding shares on the New York Stock Exchange or elsewhere. If, on the payment date for any dividend, the net asset value per share is equal to or less than the market price per share plus estimated brokerage trading fees (market premium), the Plan Agent will invest the dividend amount in newly issued shares. The number of newly issued shares to be credited to each account will be determined by dividing the dollar amount of the dividend by the net asset value per share on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance does not exceed 5%. If, on the payment date for any dividend, the net asset value per share is greater than the market value (market discount), the Plan Agent will invest the dividend amount in shares acquired in open-market purchases. There are no brokerage charges with respect to newly issued shares. However, each participant will pay a pro rata share of brokerage trading fees incurred with respect to the Plan Agent’s open-market purchases. Participating in the Plan does not relieve shareowners from any federal, state or local taxes which may be due on dividends paid in any taxable year. Shareowners holding Plan shares in a brokerage account may be able to transfer the shares to another broker and continue to participate in the Plan.
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 35
E. Risks
The value of securities held by the Fund may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political or regulatory conditions, recessions, the spread of infectious illness or other public health issues, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
At times, the Fund’s investments may represent industries or industry sectors that are interrelated or have common risks, making the Fund more susceptible to any economic, political, or regulatory developments or other risks affecting those industries and sectors.
The municipal bond market can be susceptible to unusual volatility, particularly for lower-rated and unrated securities. Liquidity can be reduced unpredictably in response to overall economic conditions or credit tightening. Municipal issuers may be adversely affected by rising health care costs, increasing unfunded pension liabilities, and by the phasing out of federal programs providing financial support. Unfavorable conditions and developments relating to projects financed with municipal securities can result in lower revenues to issuers of municipal securities, potentially resulting in defaults. Issuers often depend on revenues from these projects to make principal and interest payments. The value of municipal securities can also be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory and political developments, tax law changes or other legislative actions, and by uncertainties and public perceptions concerning these and other factors. Municipal securities may be more susceptible to down-grades or defaults during recessions or similar periods of economic stress. In recent periods, an increasing number of municipal issuers in the United States have defaulted on obligations and commenced insolvency proceedings. Financial difficulties of municipal issuers may continue or get worse. To the extent the Fund invests significantly in a single state, including New York, Massachusetts, Virginia, Washington, Texas and Illinois, or in securities the payments on which are dependent upon a single project or source of revenues, or that relate to a sector or industry, including health care facilities, education, transportation, special revenues and pollution control, the Fund will be more susceptible to associated risks and developments.
The Fund invests in below-investment-grade (high-yield) debt securities and preferred stocks. Some of these high-yield securities may be convertible into equity securities of the issuer. Debt securities rated below-
36 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
investment-grade are commonly referred to as “junk bonds” and are considered speculative. These securities involve greater risk of loss, are subject to greater price volatility, and are less liquid, especially during periods of economic uncertainty or change, than higher rated debt securities.
With the increased use of technologies such as the Internet to conduct business, the Fund is susceptible to operational, information security and related risks. While the Fund’s Adviser has established business continuity plans in the event of, and risk management systems to prevent, limit or mitigate, such cyber-attacks, there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified. Furthermore, the Fund cannot control the cybersecurity plans and systems put in place by service providers to the Fund such as Brown Brothers Harriman & Co., the Fund’s custodian and accounting agent, and American Stock Transfer & Trust Company (“AST”), the Fund’s transfer agent. In addition, many beneficial owners of Fund shares hold them through accounts at broker-dealers, retirement platforms and other financial market participants over which neither the Fund nor the Adviser exercises control. Each of these may in turn rely on service providers to them, which are also subject to the risk of cyber-attacks. Cybersecurity failures or breaches at the Adviser or the Fund’s service providers or intermediaries have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Fund’s ability to calculate its net asset value, impediments to trading, the inability of Fund shareowners to effect share purchases or sales or receive distributions, loss of or unauthorized access to private shareowner information and violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, or additional compliance costs. Such costs and losses may not be covered under any insurance. In addition, maintaining vigilance against cyber-attacks may involve substantial costs over time, and system enhancements may themselves be subject to cyber-attacks.
COVID-19
The respiratory illness COVID-19 caused by a novel coronavirus has resulted in a global pandemic and major disruption to economies and markets around the world, including the United States. Global financial markets have experienced extreme volatility and severe losses, and trading in many instruments has been disrupted. Liquidity for many instruments has been greatly reduced for periods of time. Some interest rates are very low and in some cases yields are negative. Some sectors of the economy and individual issuers have experienced particularly large losses. These circumstances may continue for an extended period of time, and may continue to affect
Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21 37
adversely the value and liquidity of the Fund’s investments. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. Governments and central banks, including the Federal Reserve in the U.S., have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. These actions have resulted in significant expansion of public debt, including in the U.S. The impact of these measures, and whether they will be effective to mitigate the economic and market disruption, will not be known for some time. The consequences of high public debt, including its future impact on the economy and securities markets, likewise may not be known for some time.
F. Statement of Cash Flows
Information on financial transactions which have been settled through the receipt or disbursement of cash or restricted cash is presented in the Statement of Cash Flows. Cash as presented in the Fund’s Statement of Assets and Liabilities includes cash on hand at the Fund’s custodian bank and does not include any short-term investments. As of and for the year ended April 30, 2021, the Fund had no restricted cash presented on the Statement of Assets and Liabilities.
2. Management Agreement
The Adviser manages the Fund’s portfolio. Management fees payable under the Fund’s Advisory Agreement with the Adviser are calculated daily and paid monthly at the annual rate of 0.60% of the Fund’s average daily managed assets. “Managed assets” means (a) the total assets of the Fund, including any form of investment leverage, minus (b) all accrued liabilities incurred in the normal course of operations, which shall not include any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other similar preference securities, and/or (iii) any other means. For the year ended April 30, 2021, the net management fee was 0.60% (annualized) of the Fund’s average daily managed assets, which was equivalent to 0.86% (annualized) of the Fund’s average daily net assets.
In addition, under the management and administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid by the Fund as administrative
38 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
reimbursements. Included in “Due to affiliates” reflected on the Statement of Assets and Liabilities is $26,013 in management fees, administrative costs and certain other reimbursements payable to the Adviser at April 30, 2021.
3. Compensation of Directors and Officers
The Fund pays an annual fee to its Directors. The Adviser reimburses the Fund for fees paid to the Interested Directors. The Fund does not pay any salary or other compensation to its officers. For the year ended April 30, 2021, the Fund paid $17,002 in Directors’ compensation, which is reflected on the Statement of Operations as Directors’ fees. At April 30, 2021, the Fund had a payable for Directors’ fees on its Statement of Assets and Liabilities of $629.
4. Transfer Agent
American Stock Transfer & Trust Company (“AST”) serves as the transfer agent with respect to the Fund’s common shares. The Fund pays AST an annual fee, as is agreed to from time to time by the Fund and AST, for providing such services.
In addition, the Fund reimbursed the transfer agent for out-of-pocket expenses incurred by the transfer agent related to shareowner communications activities such as proxy and statement mailings, and outgoing phone calls.
5. Fund Shares
There are 1,000,000,000 shares of common stock of the Fund (“common shares”), $0.001 par value per share authorized.
Transactions in common shares for the year ended April 30, 2021 and year ended April 30, 2020 were as follows:
| 4/30/21 | 4/30/20 |
Shares outstanding at beginning of year | 22,771,349 | 22,771,349 |
| Shares outstanding at end of year | 22,771,349 | 22,771,349 |
The Fund may classify or reclassify any unissued shares into one or more series of preferred shares.
As of April 30, 2021, the Fund has outstanding 1,450 Variable Rate MuniFund Term Preferred Shares Series 2021 (“Series 2021 VMTP Shares or “VMTP Shares”). The Fund issued 1,250 VMTP Shares on February 9, 2018 and 200 VMTP Shares on February 16, 2021. See Note 6 for additional information.
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Prior to February 9, 2018, the Fund had outstanding 2,000 Series A APS and 2,040 Series B APS. The Fund mailed a notice of redemption and deposited funds sufficient to redeem the APS with the auction agent on February 9, 2018. The Fund redeemed all outstanding Series A APS and Series B APS on February 14, 2018 and February 15, 2018, respectively.
6. Variable Rate MuniFund Term Preferred Shares
The Fund has 1,450 shares issued and outstanding of Series 2021 VMTP Shares, with a liquidation preference of $100,000 per share. VMTP Shares are issued via private placement and are not publicly available.
The Fund is obligated to redeem its VMTP Shares by the date as specified in its offering document (“Term Redemption Date”), unless earlier redeemed by the Fund. VMTP Shares are subject to optional and mandatory redemption in certain circumstances. The VMTP Shares may be redeemed at the option of the Fund, subject to payment of premium for approximately one year following the date of issuance (“Optional Redemption Date”), and at the redemption price per share thereafter. The redemption price per share is equal to the sum of the liquidation preference per share plus any accumulated but unpaid dividends. The Fund may be obligated to redeem a certain amount of the VMTP Shares if it fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The Term Redemption Date for the Fund's Series 2021 VMTP Shares was extended from August 2, 2021 to August 2, 2024 in February 2021. Six months prior to Term Redemption Date, the Fund is required to segregate liquid assets with the Fund's custodian in an amount equal to at least 110% of the term redemption amount.
VMTP Shares are subject to restrictions on transfer, generally do not trade, and market quotations are generally not available. VMTP Shares are short-term or short/intermediate-term instruments that pay a variable dividend rate tied to a short-term index, plus an additional fixed “spread” amount established at the time of issuance. For financial reporting purposes, the liquidation preference of VMTP Shares is a liability and is recognized as a component of “Variable Rate MuniFund Term Preferred Shares”, on the Statement of Assets and Liabilities since the shares have a stated mandatory redemption date.
Dividends on the VMTP Shares (which are treated as interest payments for financial reporting purposes and are recorded as interest expense on the Statement of Operations) are declared daily, paid monthly and recorded as incurred. For the year ended April 30, 2021, interest expense on VMTP Shares amounted to $1,392,200. The dividend rate for the VMTP Shares is
40 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
determined weekly. Unpaid dividends on VMTP Shares are recognized as “Interest Expense Payable” on the Statement of Assets and Liabilities. For the year-ended April 30, 2021, interest expense payable on VMTP Shares amounted to $0. From April 30, 2020 through April 30, 2021, the Series 2021 VMTP Shares paid an average dividend rate of 1.05% and the average liquidation value outstanding of VMTP Shares for the Fund during the year ended April 30, 2021, was $129,054,795.
The Fund did not incur any offering costs as a result of the offerings on February 9, 2018 and February 16, 2021.
Transactions in the Series 2021 VMTP Shares during the Fund’s current and prior reporting periods were as follows:
| | | | | |
| Year Ended 4/30/21 | Year Ended 4/30/20 |
| Shares | Amount | Shares | Amount |
VMTP Shares issued | 200 | $20,000,000 | — | — |
VMTP Shares exchanged | — | — | — | — |
Net increase | 200 | $20,000,000 | — | $ — |
7. Redomiciling
On April 21, 2021, the Fund, previously organized as a Delaware statutory trust, redomiciled to a Maryland corporation (the “redomiciling”). The redomiciling was effected through a statutory merger of the predecessor Delaware statutory trust (the “Predecessor Entity”) with and into a newly-established Maryland corporation formed for the purpose of effecting the redomiciling (the “Successor Entity”) pursuant to the terms of an Agreement and Plan of Merger entered into by and between the Predecessor Entity and the Successor Entity (the “Merger”). Upon effectiveness of the Merger, (i) the Successor Entity became the successor in interest to the Fund, (ii) each outstanding share of common stock of the Predecessor Entity was automatically converted into one share of common stock of the Successor Entity, (iii) each outstanding VMTP Share of the Predecessor Entity was automatically converted into one VMTP Share of the Successor Entity, and (iv) the shareholders of the Predecessor Entity became stockholders of the Successor Entity. Neither the Fund nor its stockholders realized gain (loss) as a direct result of the Merger. Accordingly, the Merger had no effect on the Fund’s operations.
In connection with the redomiciling, the Fund’s name changed from Pioneer Municipal High Income Trust to Pioneer Municipal High Income Fund, Inc. The Fund’s ticker symbol on the New York Stock Exchange did not change.
The redomiciling did not result in any change to the investment adviser, investment objective and strategies, portfolio management team, policies and procedures or the members of the Board overseeing the Fund.
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Following the Fund’s redomiciling, the rights of shareholders are governed by Maryland General Corporation Law and the Articles of Incorporation and Bylaws of the Successor Entity. In addition, the Fund is subject to the Maryland Control Share Acquisition Act (the “Control Share Act”) following the redomiciling.
The Control Share Act generally provides that any holder of “control shares” acquired in a “control share acquisition” may not exercise voting rights with respect to the “control shares,” except to the extent approved by a vote of two-thirds of all the votes entitled to be cast on the matter. Generally, “control shares” are shares that, when aggregated with shares already owned by an acquiring person, would entitle the acquiring person to exercise 10% or more, 33 1/3% or more, or a majority of the total voting power of shares entitled to vote in the election of directors. The Control Share Act provides that a “control share acquisition” does not include the acquisition of shares in a merger, consolidation or share exchange. Therefore, a shareholder of the Fund that acquired shares of the Successor Entity as a result of the Merger will be able to exercise voting rights as to those shares even if the number of such shares acquired by the shareholder in the Merger exceeds one or more of the thresholds of the Control Share Act.
The above description of the Control Share Act is only a high-level summary and does not purport to be complete. Investors should refer to the actual provisions of the Control Share Act and the Fund’s Bylaws for more information, including definitions of key terms, various exclusions and exemptions from the statute’s scope, and the procedures by which stockholders may approve the reinstatement of voting rights to holders of “control shares.”
8. Subsequent Events
A monthly dividend was declared on May 4, 2021 from undistributed and accumulated net investment income of $0.0475 per common share payable May 28, 2021, to common shareowners of record on May 19, 2021.
Subsequent to April 30, 2021, dividends declared and paid on VMTP Shares totaled $108,955 through May 27, 2021.
42 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and the Shareholders of Pioneer Municipal High Income Fund, Inc.:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Pioneer Municipal High Income Fund, Inc. (the “Fund”) (formerly known as Pioneer Municipal High Income Trust), including the schedule of investments, as of April 30, 2021, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the four years in the period then ended and the related notes (collectively referred to as the “financial statements”). The financial highlights for the period ended April 30, 2017 were audited by another independent registered public accounting firm whose report, dated June 19, 2017, expressed an unqualified opinion on those financial highlights. In our opinion, the financial statements present fairly, in all material respects, the financial position of Pioneer Municipal High Income Fund, Inc. at April 30, 2021, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the four years in the period then ended in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are
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required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2021, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Amundi Pioneer investment companies since 2017.
Boston, Massachusetts
June 25, 2021
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Additional Information (unaudited)
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, its shares in the open market.
The percentages of the Fund’s ordinary income distributions that are exempt from nonresident alien (NRA) tax withholding resulting from qualified interest income was 95.52%.
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Investment Objectives, Principal Investment Strategies and Principal Risks
CHANGES OCCURRING DURING MOST RECENT FISCAL YEAR
The following information in this annual report is a summary of certain changes during the most recent fiscal year. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund. The following principal risk disclosure has been added with respect to the Fund:
Recent events. The respiratory illness COVID-19 caused by a novel coronavirus has resulted in a global pandemic and major disruption to economies and markets around the world, including the United States. Global financial markets have experienced extreme volatility and severe losses, and trading in many instruments has been disrupted. Liquidity for many instruments has been greatly reduced for periods of time. Some interest rates are very low and in some cases yields are negative. Some sectors of the economy and individual issuers have experienced particularly large losses. These circumstances may continue for an extended period of time, and may continue to affect adversely the value and liquidity of the Fund’s investments. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. Governments and central banks, including the Federal Reserve in the U.S., have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. These actions have resulted in significant expansion of public debt, including in the U.S. The impact of these measures, and whether they will be effective to mitigate the economic and market disruption, may not be known for some time. The consequences of high public debt, including its future impact on the economy and securities markets, likewise may not be known for some time.
LIBOR risk. LIBOR (London Interbank Offered Rate) is used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds, bank loans, asset-backed and mortgage-related securities, and interest rate swaps and other derivatives. In 2017, the head of the UK Financial Conduct Authority (“FCA”) announced a desire to phase out the use of LIBOR by the end of 2021. The FCA and LIBOR’s administrator, ICE Benchmark Administration (“IBA”), have announced that most LIBOR rates will no longer be published after the end of 2021 and a majority of U.S. dollar LIBOR rates will no longer by published after June 30, 2023. It is possible that the FCA may compel the IBA to publish a subset of LIBOR
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settings after these dates on a “synthetic” basis, but any such publications would be considered non-representative of the underlying market. Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies. Based on the recommendations of the New York Federal Reserve's Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), the U.S. Federal Reserve began publishing a Secured Overnight Funding Rate (“SOFR”) that is intended to replace U.S. Dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication, such as SONIA in the United Kingdom. Markets are slowly developing in response to these new rates, and transition planning is at a relatively early stage. Neither the effect of the transition process nor its ultimate success is known. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. The effect of any changes to —or discontinuation of—LIBOR on the portfolio will vary depending on, among other things, provisions in individual contracts and whether, how, and when industry participants develop and adopt new reference rates and alternative reference rates for both legacy and new products and instruments. Because the usefulness of LIBOR as a benchmark may deteriorate during the transition period, these effects could materialize prior to the end of 2021.
Anti-takeover provisions. The Fund’s Articles of Incorporation and Bylaws include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to open-end status. The Fund’s Bylaws also contain a provision providing that the Board of Directors has adopted a resolution to opt in the Fund to the provisions of the Maryland Control Share Acquisition Act (“MCSAA”). Such a provision may discourage third parties from seeking to obtain control of the Fund, which could have an adverse impact on the market price of the Fund’s shares. There can be no assurance, however, that such a provision will be sufficient to deter activist investors that seek to cause the Fund to take actions that may not be aligned with the interests of long-term shareholders.
INVESTMENT OBJECTIVES
The Fund’s primary investment objective is to provide its common shareholders with a high level of current income exempt from regular federal income tax. Distributions of interest income from the Fund’s portfolio of municipal securities generally will be exempt from regular federal income tax. As a secondary investment objective, the Fund also may seek capital appreciation to the extent consistent with its primary objective. Distributions from sources other than interest income from the Fund’s portfolio of municipal securities, including capital gain distributions, are not exempt from regular federal income tax. The Fund’s investment objectives
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and its policy with respect to investment in municipal securities are fundamental policies and may not be changed without the approval of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund. There can be no assurance that the Fund will achieve its investment objectives.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all (at least 80%) of its assets (net assets plus borrowings for investment purposes) in debt securities and other obligations issued by or on behalf of states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest on which is exempt from regular federal income tax (“municipal securities”). Municipal securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal securities include private activity bonds, pre-refunded municipal securities and auction rate securities. The municipal securities in which the Fund invests may have fixed or variable principal payments and all types of interest rate payments and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features.
Although distributions of interest income from the Fund’s municipal securities generally are exempt from regular federal income tax, distributions from other sources, including capital gain distributions, are not. The Fund is not limited in the portion of its assets that may be invested in municipal securities the interest income on which is a preference item for purposes of the alternative minimum tax for individuals or entities that are subject to such tax. All interest on municipal securities may result in or increase a corporate shareholder’s liability for federal alternative minimum tax. Shareholders should consult a tax adviser about whether an alternative minimum tax applies to them and about state and local taxes on their distributions from the Fund.
The Fund may invest in municipal securities with a broad range of maturities and credit ratings, including both investment grade and below investment grade municipal securities. In managing the Fund’s portfolio, the Adviser adjusts the portfolio’s duration and overall credit quality in light of changing market and economic conditions. In making decisions with respect to specific municipal securities for the Fund’s portfolio, the Adviser employs a disciplined approach, driven primarily by proprietary research
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regarding prevailing interest rates, economic fundamentals at both the national and state levels and in-depth credit research conducted by the Adviser’s investment staff.
The Fund may invest in securities of issuers that are in default or that are in bankruptcy.
Security selection
The Adviser anticipates that the Fund’s investments in revenue obligations will emphasize municipal securities backed by revenue from essential services, such as hospitals and healthcare, power generation, transportation, education and housing. The Adviser considers both broad economic and issuer specific factors in selecting a portfolio designed to achieve the Fund’s investment objectives. In assessing the appropriate maturity, rating and sector weightings of the Fund’s portfolio, the Adviser considers a variety of factors that are expected to influence economic activity and interest rates. These factors include fundamental economic indicators such as the rates of economic growth and inflation, Federal Reserve monetary policy and the relative value of the U.S. dollar compared to other currencies. Once the Adviser determines the preferable portfolio characteristics, the Adviser selects individual securities based upon the terms of the securities (such as yields compared to U.S. Treasuries or comparable issues), liquidity and rating, sector and issuer diversification.
The Adviser attempts to identify investment grade and below investment grade municipal securities that are trading at attractive valuations relative to the Adviser’s evaluation of the issuer’s credit worthiness and, with respect to private activity bonds, the profit potential of the corporation from which the revenue supporting the bonds is derived. The Adviser’s overall investment approach is both top-down and bottom-up. The Adviser first seeks to identify the sectors or regions of the municipal bond market that present the best relative value opportunities, and then bases the Fund’s overall sector and regional weightings on that determination. Once the Adviser establishes the overall regional and sector weightings, the Adviser focuses on selecting those securities within each sector or region that meet its fundamental criteria. In determining sector weightings, the Fund’s portfolio management team also maintains frequent contact with the Adviser’s investment professionals who follow U.S. equities and those who focus on corporate fixed income investments. In many cases, the Adviser will augment its municipal bond credit research and security selection processes with equity research analysis. The Adviser has a
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fundamental bias towards long-term security selection, rather than engaging in frequent “market timing” or short-term trading. There can be no assurance that this process will be successful.
Duration management
The Adviser actively manages the duration of the Fund’s portfolio of municipal securities based primarily on the Adviser’s outlook for interest rates. The Adviser considers economic trends, Federal Reserve Board actions and capital markets activity, among other factors, in developing its outlook for interest rates. The Adviser believes that maintaining duration at an appropriate level offers the potential for above-average returns while limiting the risks of interest rate volatility. Duration seeks to measure the price sensitivity of a fixed income security to changes in interest rates. Unlike maturity, duration takes into account interest payments that occur throughout the course of holding the bond. The longer a portfolio’s duration, the more sensitive it will be to changes in interest rates. For example, if the Fund has a two year duration, then all other things being equal, the Fund will decrease in value by two percent if interest rates rise one percent. The Adviser modifies the average duration of the Fund’s portfolio in response to market conditions. The Adviser may employ certain strategies to reduce the Fund’s interest rate sensitivity, including investments in interest rate swap or cap transactions. There is no assurance that the Adviser will do so or that such strategies will be successful.
Credit management
The Fund may invest in municipal securities with a broad range of credit ratings, including both investment grade and below investment grade municipal securities. At least 40% of the Fund’s portfolio of municipal securities will be rated investment grade at the time of acquisition (that is, at least Baa by Moody’s or BBB by S&P) or, if unrated, determined by the Adviser to be of comparable credit quality. No more than 60% of the Fund’s portfolio of municipal securities will be rated below investment grade at the time of acquisition (that is, Ba or lower by Moody’s or BB or lower by S&P or, if unrated, determined by the Adviser to be of comparable credit quality). Municipal securities of below investment grade quality are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal, and are commonly referred to as “junk bonds” or “high yield securities.” They involve greater risk of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than higher rated municipal securities. Municipal securities rated Ba or BB may face significant ongoing uncertainties or exposure to adverse business, financial or economic conditions that could lead to the issuer being unable
50 Pioneer Municipal High Income Fund, Inc. | Annual Report | 4/30/21
to meet its financial commitments. The protection of interest and principal payments may be moderate and not well-safeguarded during both good and bad times. Municipal securities rated B generally lack the characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be low, and such municipal securities are more vulnerable to nonpayment than obligations rated BB. Adverse business, financial or economic conditions will likely impair the issuer’s capacity or willingness to meet its financial commitment on municipal securities. Municipal securities rated CCC, CC, C, Caa, Ca or C are generally speculative to a high degree. These municipal securities may be in default or there may be present elements of danger with respect to principal or interest. Generally, issuers are dependent upon favorable business, financial and economic conditions to meet their financial commitment on such municipal securities. The Fund may invest in high yield municipal securities of any rating, including securities that are in default at the time of purchase.
The Adviser determines the allocation of the Fund’s assets among securities with different credit ratings depending upon the Adviser’s evaluation of factors such as the spread between the yields on municipal securities of different ratings, changes in default rates, general economic conditions and the outlook for fiscal issues facing municipal issuers. Generally, as the spread between the yield on investment grade and non-investment grade securities widens, the Adviser will allocate a greater portion of the Fund’s assets to non-investment grade municipal securities. If the spread based on relative credit quality narrows, the Adviser may determine that high yield municipal securities no longer offer a sufficient risk premium and increase the average credit quality of the Fund’s portfolio. As the economy strengthens and the default risk lessens, the Adviser may increase the Fund’s investment in lower quality non-investment grade securities. The Adviser also seeks to mitigate the risks of investing in below investment grade securities through a disciplined approach, driven primarily by fundamental research to assess an issuer’s credit quality and the relative value of its securities. Moreover, with respect to below investment grade securities that are private activity bonds, the Adviser intends to emphasize securities that are backed by revenue from publicly traded companies. The Adviser believes that this focus offers the potential for an informational advantage due to the substantial reporting requirements of public companies. With respect to investments in below investment grade private activity bonds, the Adviser also seeks to leverage its corporate credit research capabilities by selecting securities for the Fund payable by revenue derived from issuers followed by its staff focusing on below investment grade corporate issuers. The Adviser believes that a prudent blend of investment grade and non-investment grade municipal securities offers
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investors the opportunity for high current yield while managing credit risk. High yield municipal securities have also shown low correlation to other asset classes, including corporate bonds and U.S. Treasury securities, providing potential diversification to an investment portfolio.
Portfolio Contents
Municipal securities. Municipal securities are often issued to obtain funds for various public purposes, including refunding outstanding obligations, funding for general operating expenses and lending to other public institutions and facilities. Municipal securities also include certain “private activity bonds” or industrial development bonds, which are issued by or on behalf of public authorities to provide financing aid to acquire sites or construct or equip facilities within a municipality for privately or publicly owned corporations. The two principal classifications of municipal securities are “general obligations” and “revenue obligations.” General obligations are secured by the issuer’s pledge of its full faith and credit for the payment of principal and interest, although the characteristics and enforcement of general obligations may vary according to the law applicable to the particular issuer. Revenue obligations, which include, but are not limited to, private activity bonds, certificates of participation and certain municipal notes, are not backed by the credit and taxing authority of the issuer and are payable solely from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. The obligations of the issuer of a revenue obligation may, in addition, be backed by a letter of credit from a bank, a guarantee from another issuer or insurance. The credit rating assigned to municipal securities may reflect the existence of these guarantees, letters of credit or other credit enhancement features. General obligations and revenue obligations may be issued in a variety of forms, including commercial paper, fixed, variable and floating rate securities, tender option bonds, auction rate bonds, zero coupon bonds, deferred interest bonds and capital appreciation bonds. In addition to general obligations and revenue obligations, there are a variety of hybrid and special types of municipal securities.
One or a small number of institutional investors such as the Fund may purchase an entire issue of municipal securities. Thus, the issue may not be said to be publicly offered. Unlike some securities that are not publicly offered, a secondary market exists for many municipal securities that were not publicly offered initially and such securities may be readily marketable.
Although distributions of interest income from the Fund’s municipal securities are generally exempt from regular federal income tax, distributions from other sources, including capital gain distributions, and
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any gains on the sale of your common shares are not. You should consult your tax adviser as to whether the alternative minimum tax applies to you and as to whether you will be subject to state and local taxes on your distributions from the Fund.
From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on municipal securities. The Fund cannot predict what legislation, if any, may be proposed in the future in Congress regarding the federal income tax status of interest on municipal securities. Such proposals, if enacted, might materially and adversely affect the Fund.
The Fund may invest 25% or more of the value of its total assets in municipal securities of issuers located in the same state or territory or in the same economic sector. The Fund will not invest more than 25% of its total assets in issuers in a single industry. Governmental issuers of municipal securities are not considered part of any industry.
The Fund may invest in municipal securities that are collateralized by the proceeds from class action or other litigation against the tobacco industry. Payment by tobacco industry participants of such proceeds is spread over several years, and the collection and distribution of such proceeds to the issuers of municipal securities is dependent upon the financial health of such tobacco industry participants, which cannot be assured. Additional litigation, government regulation or prohibition on the sales of tobacco products, or the seeking of protection under the bankruptcy laws, could adversely affect the tobacco industry which, in turn, could have an adverse affect on tobacco-related municipal securities. Under normal market conditions, the Fund intends to limit its investment in tobacco settlement bonds to approximately 10% of the Fund’s total assets.
Municipal Leases and Certificates of Participation. The Fund may invest in municipal leases and certificates of participation in such leases. A municipal lease is an obligation in the form of a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations is generally exempt from state and local taxes in the state of issuance. Municipal leases frequently involve special risks not normally associated with general obligations or revenue obligations. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt issuance limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation” clauses that relieve the governmental issuer of any obligation to make future payments under the lease or
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contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering or the failure fully to recover the Fund’s original investment. To the extent that the Fund invests in unrated municipal leases or participates in such leases, the credit quality and risk of cancellation of such unrated leases will be monitored on an ongoing basis.
A certificate of participation represents an undivided interest in an unmanaged pool of municipal leases, installment purchase agreements or other instruments. The certificates are typically issued by a municipal agency, a trust or other entity that has received an assignment of the payments to be made by the state or political subdivision under such leases or installment purchase agreements. Such certificates provide the Fund with the right to a pro rata undivided interest in the underlying municipal securities. In addition, such participations generally provide the Fund with the right to demand payment, on not more than seven days’ notice, of all or any part of the Fund’s participation interest in the underlying municipal securities, plus accrued interest.
Certain municipal lease obligations and certificates of participation may be deemed to be illiquid for the purpose of the Fund’s limitation on investments in illiquid securities. Other municipal lease obligations and certificates of participation acquired by the Fund may be determined by the Adviser, pursuant to guidelines adopted by the Board of Directors, to be liquid securities for the purpose of such limitation. In determining the liquidity of municipal lease obligations and certificates of participation, the Adviser will consider a variety of factors, including: (i) the willingness of dealers to bid for the obligation; (ii) the number of dealers willing to purchase or sell the obligation and the number of other potential buyers; (iii) the frequency of trades or quotes for the obligation; and (iv) the nature of the marketplace trades. In addition, the Adviser will consider factors unique to particular lease obligations and certificates of participation affecting the marketability thereof. These include the general creditworthiness of the issuer, the importance to the issuer of the property covered by the lease and the likelihood that the marketability of the obligation will be maintained throughout the time the obligation is held by the Fund.
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Municipal Notes. Municipal securities in the form of notes generally are used to provide for short-term capital needs, in anticipation of an issuer’s receipt of other revenues or financing, and typically have maturities of up to three years. Such instruments may include tax anticipation notes, revenue anticipation notes, bond anticipation notes, tax and revenue anticipation notes and construction loan notes. Tax anticipation notes are issued to finance the working capital needs of governments. Generally, they are issued in anticipation of various tax revenues, such as income, sales, property, use and business taxes, and are payable from these specific future taxes. Revenue anticipation notes are issued in expectation of receipt of other kinds of revenue, such as federal revenues available under federal revenue sharing programs. Bond anticipation notes are issued to provide interim financing until long-term bond financing can be arranged. In most cases, the long-term bonds then provide the funds needed for repayment of the notes. Tax and revenue anticipation notes combine the funding sources of both tax anticipation notes and revenue anticipation notes. Construction loan notes are sold to provide construction financing. Mortgage notes insured by the Federal Housing Authority secure these notes; however, the proceeds from the insurance may be less than the economic equivalent of the payment of principal and interest on the mortgage note if there has been a default. The anticipated revenues from taxes, grants or bond financing generally secure the obligations of an issuer of municipal notes. An investment in such instruments, however, presents a risk that the anticipated revenues will not be received or that such revenues will be insufficient to satisfy the issuer’s payment obligations under the notes or that refinancing will be otherwise unavailable.
Tax-exempt commercial paper. Issues of commercial paper typically represent short-term, unsecured, negotiable promissory notes. These obligations are issued by state and local governments and their agencies to finance the working capital needs of municipalities or to provide interim construction financing and are paid from general revenues of municipalities or are refinanced with long-term debt. In most cases, tax-exempt commercial paper is backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or other institutions.
Pre-refunded municipal securities. The principal of and interest on pre-refunded municipal securities are no longer paid from the original revenue source for the securities. Instead, the source of such payments is typically an escrow fund consisting of U.S. government securities. The assets in the escrow fund are derived from the proceeds of refunding bonds issued by the same issuer as the pre-refunded municipal securities. Issuers of municipal
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securities use this advance refunding technique to obtain more favorable terms with respect to securities that are not yet subject to call or redemption by the issuer. For example, advance refunding enables an issuer to refinance debt at lower market interest rates, restructure debt to improve cash flow or eliminate restrictive covenants in the indenture or other governing instrument for the pre-refunded municipal securities. However, except for a change in the revenue source from which principal and interest payments are made, the pre-refunded municipal securities remain outstanding on their original terms until they mature or are redeemed by the issuer.
Private activity bonds. Private activity bonds, formerly referred to as industrial development bonds, are issued by or on behalf of public authorities to obtain funds to provide privately operated housing facilities, airport, mass transit or port facilities, sewage disposal, solid waste disposal or hazardous waste treatment or disposal facilities and certain local facilities for water supply, gas or electricity. Other types of private activity bonds, the proceeds of which are used for the construction, equipment, repair or improvement of privately operated industrial or commercial facilities, may constitute municipal securities, although the current federal tax laws place substantial limitations on the size of such issues. The Fund’s distributions of its interest income from private activity bonds may subject certain investors to the federal alternative minimum tax.
Tender option bonds. A tender option bond is a municipal security (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially higher than prevailing short-term, tax-exempt rates. The bond is typically issued with the agreement of a third party, such as a bank, broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities to the institution and receive the face value thereof. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the bond’s fixed coupon rate and the rate, as determined by a remarketing or similar agent at or near the commencement of such period, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. However, an institution will not be obligated to accept tendered bonds in the event of certain defaults or a significant downgrade in the credit rating assigned to the issuer of the
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bond. The liquidity of a tender option bond is a function of the credit quality of both the bond issuer and the financial institution providing liquidity. Tender option bonds are deemed to be liquid unless, in the opinion of the Adviser, the credit quality of the bond issuer and the financial institution is deemed, in light of the Fund’s credit quality requirements, to be inadequate and the bond would not otherwise be readily marketable. The Fund intends to invest in tender option bonds the interest on which will, in the opinion of bond counsel, counsel for the issuer of interests therein or counsel selected by the Adviser, be exempt from regular federal income tax. However, because there can be no assurance that the Internal Revenue Service (the “IRS”) will agree with such counsel’s opinion in any particular case, there is a risk that the Fund will not be considered the owner of such tender option bonds and thus will not be entitled to treat such interest as exempt from such tax. Additionally, the federal income tax treatment of certain other aspects of these investments, including the proper tax treatment of tender option bonds and the associated fees in relation to various regulated investment company tax provisions, is unclear. The Fund intends to manage its portfolio in a manner designed to eliminate or minimize any adverse impact from the tax rules applicable to these investments.
Auction rate securities. The Fund may invest in auction rate securities. Auction rate securities include auction rate municipal securities and auction rate preferred securities issued by closed-end investment companies that invest primarily in municipal securities (collectively, “auction rate securities”). Provided that the auction mechanism is successful, auction rate securities usually permit the holder to sell the securities in an auction at par value at specified intervals. The dividend is reset by “Dutch” auction in which bids are made by broker-dealers and other institutions for a certain amount of securities at a specified minimum yield. The dividend rate set by the auction is the lowest interest or dividend rate that covers all securities offered for sale. While this process is designed to permit auction rate securities to be traded at par value, there is some risk that an auction will fail due to insufficient demand for the securities. The Fund will take the time remaining until the next scheduled auction date into account for purpose of determining the securities’ duration. The Fund’s investments in auction rate securities of closed-end funds are subject to the limitations prescribed by the 1940 Act.
Illiquid securities. The Fund may invest in bonds or other municipal securities that lack a secondary trading market or are otherwise considered illiquid. Liquidity of a security relates to the ability easily to dispose of the
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security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable, more liquid security. The Fund may invest up to 20% of its total assets in illiquid investments. Such investments may affect the Fund’s ability to realize its net asset value in the event of a voluntary or involuntary liquidation of its assets.
Structured securities. The Fund may invest in structured securities. The value of the principal and/or interest on such securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (“reference”) or the relative change in two or more references. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the reference. The terms of the structured securities may provide, in certain circumstances, that no principal is due at maturity and, therefore, may result in a loss of the Fund’s investment. Changes in the interest rate or principal payable at maturity may be a multiple of the changes in the value of the reference. Consequently, structured securities may entail a greater degree of market risk than other types of fixed income securities.
Insured municipal securities. The Fund may invest in “insured” municipal securities, which are securities for which scheduled payments of interest and principal are guaranteed by a private (non-governmental) insurance company. The insurance only entitles the Fund to receive at maturity the face or par value of the securities held by the Fund. The insurance does not guarantee the market value of the municipal securities or the value of the shares of the Fund. The Fund may utilize new issue or secondary market insurance. A bond issuer who wishes to increase the credit rating of a security purchases a new issue insurance policy. By paying a premium and meeting the insurer’s underwriting standards, the bond issuer is able to obtain a high credit rating (usually, Aaa from Moody’s or AAA from S&P) for the issued security. Such insurance is likely to increase the purchase price and resale value of the security. New issue insurance policies are non-cancelable and continue in force as long as the bonds are outstanding. A secondary market insurance policy is purchased by an investor subsequent to a bond’s original issuance and generally insures a particular bond for the remainder of its term.
Standby commitments. In order to enhance the liquidity of municipal securities, the Fund may acquire the right to sell a security to another party at a guaranteed price and date. Such a right to resell may be referred to as a “standby commitment” or “liquidity put,” depending on its characteristics.
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The aggregate price which the Fund pays for securities with standby commitments may be higher than the price which otherwise would be paid for the securities. Standby commitments may not be available or may not be available on satisfactory terms. Standby commitments may involve letters of credit issued by domestic or foreign banks supporting the other party’s ability to purchase the security. The right to sell may be exercisable on demand or at specified intervals and may form part of a security or be acquired separately by the Fund.
Because the period prior to the put date is generally less than 365 days, the Fund generally values the municipal securities subject to standby commitments at amortized cost. The Board of Directors has adopted procedures pursuant to which the Adviser may determine that amortized cost represents the fair value of these securities. The exercise price of the standby commitments is expected to approximate such amortized cost. Consequently, no separate value is assigned to standby commitments for purposes of determining the Fund’s net asset value. The cost of a standby commitment is carried as unrealized depreciation from the time of purchase until it is exercised or expires. Since the value of a standby commitment is dependent on the ability of the standby commitment writer to meet its obligation to repurchase, the Fund’s policy is to enter into standby commitment transactions only with banks, brokers or dealers that present a minimal risk of default. However, this policy reduces, but does not eliminate, the risk of default by the standby commitment writer.
Use of Leverage by the Fund. The Fund may use financial leverage on an ongoing basis for investment purposes. The Fund currently uses leverage through the issuance of Variable Rate MuniFund Term Preferred Shares (“VMTP Shares”). VMTP Shares are issued via private placement and are not publicly available. Leverage creates special risks not associated with unleveraged funds having a similar investment objectives and policies. These include the possibility of higher volatility of both the net asset value of the Fund and the value of assets serving as asset coverage for the borrowing. The fees and expenses attributed to leverage, including any increase in the management fees, will be borne by holders of common shares. The Adviser intends only to leverage the Fund when it believes that the potential total return on additional investments purchased with the proceeds of leverage is likely to exceed the costs incurred in connection with the leverage. The Fund may not be leveraged at all times, and the amount of leverage, if any, may vary depending on a variety of factors, including the Adviser’s outlook for interest rates and credit markets and the costs that the Fund would incur as a result of such leverage. The Fund’s leveraging strategy may not be successful.
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Except for the Fund’s investment objectives and the Fund’s policy to invest at least 80% of its assets in municipal securities, the Fund’s investment strategies and policies may be changed from time to time without shareholder approval, unless specifically stated otherwise.
Other Investments. Normally, the Fund will invest substantially all of its assets to meet its investment objectives. The Fund may invest the remainder of its assets in securities with remaining maturities of less than one year or cash equivalents, or it may hold cash. For temporary defensive purposes, the Fund may depart from its principal investment strategies and invest part or all of its assets in securities with remaining maturities of less than one year or cash equivalents, or it may hold cash. During such periods, the Fund may not be able to achieve its investment objectives.
Zero Coupon Securities. The Fund may invest in zero coupon securities. Zero coupon securities are debt instruments that do not pay interest during the life of the security but are issued at a discount from the amount the investor will receive when the issuer repays the amount borrowed (the face value). The discount approximates the total amount of interest that would be paid at an assumed interest rate.
Derivatives. The Fund may, but is not required to, use futures and options on securities, indices and currencies, forward foreign currency exchange contracts, swaps, credit-linked notes and other derivatives. The Fund also may enter into credit default swaps, which can be used to acquire or to transfer the credit risk of a security or index of securities without buying or selling the security or securities comprising the relevant index. A derivative is a security or instrument whose value is determined by reference to the value or the change in value of one or more securities, currencies, indices or other financial instruments. The Fund may use derivatives for a variety of purposes, including:
• | In an attempt to hedge against adverse changes in the market prices |
| of securities, interest rates or currency exchange rates |
• | As a substitute for purchasing or selling securities |
• | To attempt to increase the Fund’s return as a non-hedging strategy |
| that may be considered speculative |
• | To manage portfolio characteristics (for example, the duration or |
| credit quality of the Fund’s portfolio) |
• | As a cash flow management technique |
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The Fund may choose not to make use of derivatives for a variety of reasons, and any use may be limited by applicable law and regulations.
Other Investment Companies. The Fund may invest in the securities of other investment companies to the extent that such investments are consistent with the Fund’s investment objectives and principal investment strategies and permissible under the 1940 Act. Subject to the limitations on investment in other investment companies, the Fund may invest in “ETFs.”
Repurchase Agreements. In a repurchase agreement, the Fund purchases securities from a broker/dealer or a bank, called the counterparty, upon the agreement of the counterparty to repurchase the securities from the Fund at a later date, and at a specified price, which is typically higher than the purchase price paid by the Fund. The securities purchased serve as the Fund’s collateral for the obligation of the counterparty to repurchase the securities. If the counterparty does not repurchase the securities, the Fund is entitled to sell the securities, but the Fund may not be able to sell them for the price at which they were purchased, thus causing a loss. Additionally, if the counterparty becomes insolvent, there is some risk that the Fund will not have a right to the securities, or the immediate right to sell the securities.
PRINCIPAL RISKS
General. The Fund is a closed-end management investment company designed primarily as a long-term investment and not as a trading tool. The Fund is not a complete investment program and should be considered only as an addition to an investor’s existing portfolio of investments. Because the Fund may invest substantially in high yield debt securities, an investment in the Fund’s shares is speculative in that it involves a high degree of risk. Due to uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objective. Instruments in which the Fund invests may only have limited liquidity, or may be illiquid.
Market price of shares. Common Shares of closed-end funds frequently trade at a price lower than their net asset value. This is commonly referred to as “trading at a discount.” This characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the Fund’s net asset value may decrease. Both long and short-term investors, including investors who sell their shares within a relatively short period after completion of the initial public offering, will be exposed to this risk. The Fund is designed
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primarily for long-term investors and should not be considered a vehicle for trading purposes. The net asset value of the Fund will be reduced following the offering by the sales load and the amount of offering expenses paid by the Fund.
Whether investors will realize a gain or loss upon the sale of the Fund’s Common Shares will depend upon whether the market value of the shares at the time of sale is above or below the price the investor paid, taking into account transaction costs, for the shares and is not directly dependent upon the Fund’s net asset value. Because the market value of the Fund’s shares will be determined by factors such as the relative demand for and supply of the shares in the market, general market conditions and other factors beyond the control of the Fund, the Fund cannot predict whether its Common Shares will trade at, below or above net asset value, or below or above the initial offering price for the shares.
Market risk. The market prices of securities held by the Fund may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues, or adverse investor sentiment. In the past decade, financial markets throughout the world have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. Governmental and non-governmental issuers have defaulted on, or been forced to restructure, their debts. These conditions may continue, recur, worsen or spread. Events that have contributed to these market conditions include, but are not limited to, major cybersecurity events; geopolitical events (including wars and terror attacks); measures to address budget deficits; downgrading of sovereign debt; changes in oil and commodity prices; dramatic changes in currency exchange rates; global pandemics; and public sentiment. U.S. and non-U.S. governments and central banks have provided significant support to financial markets, including by keeping interest rates at historically low levels. U.S. Federal Reserve or other U.S. or non-U.S. governmental or central bank actions, including interest rate increases or decreases, or contrary actions by different governments, could negatively affect financial markets generally, increase market volatility and reduce the value and liquidity of securities in which the Fund invests. Policy and legislative changes in the U.S. and in other countries are affecting many aspects of financial regulation, and these and other events affecting global markets, such as the United Kingdom’s exit from the European Union (or Brexit), may in some instances contribute
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to decreased liquidity and increased volatility in the financial markets. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, terrorism, natural disasters, infectious illness or public health issues, and other circumstances in one country or region could have profound impacts on global economies or markets. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively affected. The Fund may experience a substantial or complete loss on any individual security or derivative position.
Recent events. The respiratory illness COVID-19 caused by a novel coronavirus has resulted in a global pandemic and major disruption to economies and markets around the world, including the United States. Global financial markets have experienced extreme volatility and severe losses, and trading in many instruments has been disrupted. Liquidity for many instruments has been greatly reduced for periods of time. Some interest rates are very low and in some cases yields are negative. Some sectors of the economy and individual issuers have experienced particularly large losses. These circumstances may continue for an extended period of time, and may continue to affect adversely the value and liquidity of the Fund’s investments. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. Governments and central banks, including the Federal Reserve in the U.S., have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. These actions have resulted in significant expansion of public debt, including in the U.S. The impact of these measures, and whether they will be effective to mitigate the economic and market disruption, may not be known for some time. The consequences of high public debt, including its future impact on the economy and securities markets, likewise may not be known for some time.
LIBOR risk. LIBOR (London Interbank Offered Rate) is used extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial contracts, including corporate and municipal bonds, bank loans, asset-backed and mortgage-related securities, and interest rate swaps and other derivatives. In 2017, the head of the UK
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Financial Conduct Authority (“FCA”) announced a desire to phase out the use of LIBOR by the end of 2021. The FCA and LIBOR’s administrator, ICE Benchmark Administration (“IBA”), have announced that most LIBOR rates will no longer be published after the end of 2021 and a majority of U.S. dollar LIBOR rates will no longer by published after June 30, 2023. It is possible that the FCA may compel the IBA to publish a subset of LIBOR settings after these dates on a “synthetic” basis, but any such publications would be considered non-representative of the underlying market. Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies. Based on the recommendations of the New York Federal Reserve's Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), the U.S. Federal Reserve began publishing a Secured Overnight Funding Rate (“SOFR”) that is intended to replace U.S. Dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication, such as SONIA in the United Kingdom. Markets are slowly developing in response to these new rates, and transition planning is at a relatively early stage. Neither the effect of the transition process nor its ultimate success is known. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. The effect of any changes to —or discontinuation of—LIBOR on the portfolio will vary depending on, among other things, provisions in individual contracts and whether, how, and when industry participants develop and adopt new reference rates and alternative reference rates for both legacy and new products and instruments. Because the usefulness of LIBOR as a benchmark may deteriorate during the transition period, these effects could materialize prior to the end of 2021.
High yield or “junk” bond risk. Debt securities that are below investment grade, called “junk bonds,” are speculative, have a higher risk of default or are already in default, tend to be less liquid and are more difficult to value than higher grade securities. Junk bonds tend to be volatile and more susceptible to adverse events and negative sentiments. These risks are more pronounced for securities that are already in default.
Interest rate risk. Interest rates may go up, causing the value of the Fund’s investments to decline (this risk generally will be greater for securities with longer maturities or durations). For example, if interest rates increase by 1%, the value of a Fund’s portfolio with a portfolio duration of ten years would be expected to decrease by 10%, all other things being equal. The
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maturity of a security may be significantly longer than its effective duration. A security’s maturity and other features may be more relevant than its effective duration in determining the security’s sensitivity to other factors affecting the issuer or markets generally, such as changes in credit quality or in the yield premium that the market may establish for certain types of securities.
Rising interest rates can lead to increased default rates, as issuers of floating rate securities find themselves faced with higher payments. Unlike fixed rate securities, floating rate securities generally will not increase in value if interest rates decline. Changes in interest rates also will affect the amount of interest income the Fund earns on its floating rate investments
Credit risk. If an issuer or guarantor of a security held by the Fund or a counterparty to a financial contract with the Fund defaults on its obligation to pay principal and/or interest, has its credit rating downgraded or is perceived to be less creditworthy, or the credit quality or value of any underlying assets declines, the value of your investment will typically decline.
Prepayment or call risk. Many issuers have a right to prepay their securities. If interest rates fall, an issuer may exercise this right. If this happens, the Fund will not benefit from the rise in market price that normally accompanies a decline in interest rates, and will be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security. The Fund also may lose any premium it paid on the security.
Extension risk. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security’s duration and reduce the value of the security.
Risk of illiquid investments. Certain securities and derivatives held by the Fund may be impossible or difficult to purchase, sell or unwind. Illiquid securities and derivatives also may be difficult to value. Liquidity risk may be magnified in a rising interest rate environment. If the Fund is forced to sell an illiquid asset or unwind a derivatives position, the Fund may suffer a substantial loss or may not be able to sell at all.
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Portfolio selection risk. The Adviser’s judgment about the quality, relative yield, relative value or market trends affecting a particular sector or region, market segment, security or about interest rates generally may prove to be incorrect, or there may be imperfections, errors or limitations in the models, tools and information used by the Adviser.
Municipal securities risk. The municipal bond market can be susceptible to unusual volatility, particularly for lower-rated and unrated securities. Liquidity can be reduced unpredictably in response to overall economic conditions or credit tightening. Issuers of municipal securities tend to derive a significant portion of their revenue from taxes, particularly property and income taxes, and decreases in personal income levels and property values and other unfavorable economic factors, such as a general economic recession, adversely affect municipal securities. Municipal issuers may also be adversely affected by rising health care costs, increasing unfunded pension liabilities and by the phasing out of federal programs providing financial support. Where municipal securities are issued to finance particular projects, especially those relating to education, health care, transportation, housing, water or sewer and utilities, issuers often depend on revenues from those projects to make principal and interest payments. Adverse conditions and developments in those sectors can result in lower revenues to issuers of municipal securities, potentially resulting in defaults, and can also have an adverse effect on the broader municipal securities market. To the extent the Fund invests significantly in a single state, or in securities the payments on which are dependent upon a single project or source of revenues, or that relate to a sector or industry, including health care facilities, education, special revenues and housing, the Fund will be more susceptible to associated risks and developments.
There may be less public information available on municipal issuers or projects than other issuers, and valuing municipal securities may be more difficult. In addition, the secondary market for municipal securities is less well developed and liquid than other markets, and dealers may be less willing to offer and sell municipal securities in times of market turbulence. Changes in the financial condition of one or more individual municipal issuers (or one or more insurers of municipal issuers), or one or more defaults by municipal issuers or insurers, can adversely affect liquidity and valuations in the overall market for municipal securities. The value of municipal securities can also be adversely affected by regulatory and political developments affecting the ability of municipal issuers to pay interest or
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repay principal, actual or anticipated tax law changes or other legislative actions, and by uncertainties and public perceptions concerning these and other factors. Municipal securities may be more susceptible to downgrades or defaults during recessions or similar periods of economic stress. In recent years, an increasing number of municipal issuers in the United States have defaulted on obligations and commenced insolvency proceedings. Financial difficulties of municipal issuers may continue or get worse.
The rate of interest paid on municipal securities normally is lower than the rate of interest paid on fully taxable securities. Some municipal securities, such as general obligation issues, are backed by the issuer’s taxing authority, while other municipal securities, such as revenue issues, are backed only by revenues from certain facilities or other sources and not by the issuer itself. The payment of principal and interest on private activity and industrial development revenue bonds is solely dependent on the ability of the facility’s user to meet its financial obligations and the pledge, if any, of the facility or other property as security for payment.
Taxable investment risk. Although distributions of interest income from the Fund’s tax-exempt securities are generally exempt from regular federal income tax, distributions from other sources, including capital gain distributions, and any gains on the sale of your shares are not. In addition, the interest on the Fund’s municipal securities could become subject to regular federal income tax or the AMT due to noncompliant conduct by issuers, unfavorable legislation or litigation, or adverse interpretations by regulatory authorities. You should consult a tax adviser about whether the AMT applies to you and about state and local taxes on your Fund distributions.
Risks of subordinated securities. A holder of securities that are subordinated or “junior” to more senior securities of an issuer is entitled to payment after holders of more senior securities of the issuer. Subordinated securities are more likely to suffer a credit loss than non-subordinated securities of the same issuer, any loss incurred by the subordinated securities is likely to be proportionately greater, and any recovery of interest or principal may take more time. As a result, even a perceived decline in creditworthiness of the issuer is likely to have a greater impact on subordinated securities than more senior securities.
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U.S. Treasury obligations risk. The market value of direct obligations of the U.S. Treasury may vary due to changes in interest rates. In addition, changes to the financial condition or credit rating of the U.S. government may cause the value of the Fund’s investments in obligations issued by the U.S. Treasury to decline.
U.S. government agency obligations risk. The Fund invests in obligations issued by agencies and instrumentalities of the U.S. government. Government-sponsored entities such as FNMA, FHLMC and the FHLBs, although chartered or sponsored by Congress, are not funded by congressional appropriations and the debt and mortgage-backed securities issued by them are neither guaranteed nor issued by the U.S. government. The maximum potential liability of the issuers of some U.S. government obligations may greatly exceed their current resources, including any legal right to support from the U.S. government. Such debt and mortgage-backed securities are subject to the risk of default on the payment of interest and/or principal, similar to debt of private issuers. Although the U.S. government has provided financial support to FNMA and FHLMC in the past, there can be no assurance that it will support these or other government-sponsored entities in the future.
Mortgage-related and asset-backed securities risk. The value of mortgage-related and asset-backed securities will be influenced by factors affecting the assets underlying such securities. As a result, during periods of declining asset value, difficult or frozen credit markets, swings in interest rates, or deteriorating economic conditions, mortgage-related and asset-backed securities may decline in value, face valuation difficulties, become more volatile and/or become illiquid. Mortgage-backed securities tend to be more sensitive to changes in interest rate than other types of debt securities. These securities are also subject to prepayment and extension risks. Some of these securities may receive little or no collateral protection from the underlying assets and are thus subject to the risk of default. The risk of such defaults is generally higher in the case of mortgage-backed investments offered by non-governmental issuers and those that include so-called “sub-prime” mortgages. The structure of some of these securities may be complex and there may be less available information than for other types of debt securities. Upon the occurrence of certain triggering events or defaults, the Fund may become the holder of underlying assets at a time when those assets may be difficult to sell or may be sold only at a loss.
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Risks of investing in collateralized debt obligations. Investment in a collateralized debt obligation (CDO) is subject to the credit, subordination, interest rate, valuation, prepayment, extension and other risks of the obligations underlying the CDO and the tranche of the CDO in which the Fund invests. CDOs are subject to liquidity risk. Synthetic CDOs are also subject to the risks of investing in derivatives, such as credit default swaps, and leverage risk.
Risks of instruments that allow for balloon payments or negative amortization payments. Certain debt instruments allow for balloon payments or negative amortization payments. Such instruments permit the borrower to avoid paying currently a portion of the interest accruing on the instrument. While these features make the debt instrument more affordable to the borrower in the near term, they increase the risk that the borrower will be unable to make the resulting higher payment or payments that become due at the maturity of the loan.
Risks of zero coupon bonds, payment in kind, deferred and contingent payment securities. These securities may be more speculative and may fluctuate more in value than securities which pay income periodically and in cash. In addition, although the Fund receives no periodic cash payments on such securities, the Fund is deemed for tax purposes to receive income from such securities, which applicable tax rules require the Fund to distribute to shareholders. Such distributions may be taxable when distributed to shareholders
Derivatives risk. Using swaps, forward foreign currency exchange contracts, bond and interest rate futures and other derivatives can increase Fund losses and reduce opportunities for gains when market prices, interest rates or the derivative instruments themselves behave in a way not anticipated by the Fund. Using derivatives may increase the volatility of the Fund’s net asset value and may not provide the result intended. Derivatives may have a leveraging effect on the Fund. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment. Derivatives are generally subject to the risks applicable to the assets, rates, indices or other indicators underlying the derivative. Changes in a derivative’s value may not correlate well with the referenced asset or metric. The Fund also may have to sell assets at inopportune times to satisfy its obligations. Derivatives may be difficult to sell, unwind or value, and the counterparty may default on its obligations to the Fund. Use of
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derivatives may have different tax consequences for the Fund than an investment in the underlying security, and such differences may affect the amount, timing and character of income distributed to shareholders. The U.S. government and foreign governments are in the process of adopting and implementing regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make them more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt markets.
Synthetic municipal securities risk. The tax-exempt character of the interest paid on tender option bonds, bond receipts and similar synthetic municipal securities, a type of derivative instrument, is based on the tax-exempt income stream from the collateral. In addition to the risks of investing in municipal securities and in derivatives generally, investments in synthetic municipal securities are subject to the risk that income derived from such securities is deemed to be taxable.
Risks of investing in inverse floating rate obligations. The interest rate on inverse floating rate obligations will generally decrease as short-term interest rates increase, and increase as short-term rates decrease. Due to their leveraged structure, the sensitivity of the market value of an inverse floating rate obligation to changes in interest rates is generally greater than a comparable long-term bond issued by the same issuer and with similar credit quality, redemption and maturity provisions. Inverse floating rate obligations may be volatile and involve leverage risk.
Credit default swap risk. Credit default swap contracts, a type of derivative instrument, involve special risks and may result in losses to the Fund. Credit default swaps may in some cases be illiquid, and they increase credit risk since the Fund has exposure to the issuer of the referenced obligation and either the counterparty to the credit default swap or, if it is a cleared transaction, the brokerage firm through which the trade was cleared and the clearing organization that is the counterparty to that trade.
Structured securities risk. Structured securities may behave in ways not anticipated by the Fund, or they may not receive the tax, accounting or regulatory treatment anticipated by the Fund.
Leveraging risk. The value of your investment may be more volatile and other risks tend to be compounded if the Fund borrows or uses derivatives or other investments, such as ETFs, that have embedded leverage. Leverage
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generally magnifies the effect of any increase or decrease in the value of the Fund’s underlying assets and creates a risk of loss of value on a larger pool of assets than the Fund would otherwise have, potentially resulting in the loss of all assets. Engaging in such transactions may cause the Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations or meet segregation requirements.
The Fund may use financial leverage on an ongoing basis for investment purposes by issuing preferred shares. The fees and expenses attributed to leverage, including any increase in the management fees, will be borne by holders of common shares. Since the Adviser’s fee is based on a percentage of the Fund’s managed assets, its fee will be higher if the Fund is leveraged, and the Adviser will thus have an incentive to leverage the Fund.
Repurchase agreement risk. In the event that the other party to a repurchase agreement defaults on its obligations, the Fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. In addition, if the Fund is characterized by a court as an unsecured creditor, it would be at risk of losing some or all of the principal and interest involved in the transaction.
Market segment risk. To the extent the Fund emphasizes, from time to time, investments in a market segment, the Fund will be subject to a greater degree to the risks particular to that segment, and may experience greater market fluctuation than a fund without the same focus.
Valuation risk. The sales price the Fund could receive for any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for illiquid securities and securities that trade in thin or volatile markets or that are valued using a fair value methodology. These differences may increase significantly and affect Fund investments more broadly during periods of market volatility. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
Cybersecurity risk. Cybersecurity failures by and breaches of the Fund’s adviser, transfer agent, custodian, Fund accounting agent or other service providers may disrupt Fund operations, interfere with the Fund’s ability to calculate its NAV, prevent Fund shareholders from purchasing or redeeming shares or receiving distributions, cause loss of or unauthorized access to
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private shareholder information, and result in financial losses to the Fund and its shareholders, regulatory fines, penalties, reputational damage, or additional compliance costs.
Cash management risk. The value of the investments held by the Fund for cash management or temporary defensive purposes may be affected by market risks, changing interest rates and by changes in credit ratings of the investments. To the extent that the Fund has any uninvested cash, the Fund would be subject to credit risk with respect to the depository institution holding the cash. If the Fund holds cash uninvested, the Fund will not earn income on the cash and the Fund’s yield will go down. During such periods, it may be more difficult for the Fund to achieve its investment objective.
Anti-takeover provisions. The Fund’s Articles of Incorporation and Bylaws include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to open-end status. The Fund’s Bylaws also contain a provision providing that the Board of Directors has adopted a resolution to opt in the Fund to the provisions of the Maryland Control Share Acquisition Act (“MCSAA”). Such a provision may discourage third parties from seeking to obtain control of the Fund, which could have an adverse impact on the market price of the Fund’s shares. There can be no assurance, however, that such a provision will be sufficient to deter activist investors that seek to cause the Fund to take actions that may not be aligned with the interests of long-term shareholders.
Please note that there are many other factors that could adversely affect your investment and that could prevent the Fund from achieving its goals. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
INVESTMENT RESTRICTIONS
The following are the Fund’s fundamental investment restrictions. These restrictions, along with the Fund’s investment objectives, may not be changed without the approval of the holders of a majority of the Fund’s outstanding voting securities (which for this purpose and under the 1940 Act means the lesser of (i) 67% of the common shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding common shares).
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The Fund may not:
(1) Issue senior securities, except as permitted by applicable law, as amended and interpreted or modified from time to time by any regulatory authority jurisdiction.
(2) Borrow money, except as permitted by applicable law, as amended and interpreted or modified from time to time by any regulatory authority jurisdiction.
(3) Invest in real estate, except the Fund may invest in securities of issuers that invest in real estate or interests therein, securities that are secured by real estate or interests therein, securities of real estate investment trusts, mortgage-backed securities and other securities that represent a similar indirect interest in real estate, and the Fund may acquire real estate or interests therein through exercising rights or remedies with regard to an instrument.
(4)Make loans, except that the Fund may (i) lend portfolio securities in accordance with the Fund’s investment policies, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of publicly distributed debt securities, bank loan participation interests, bank certificates of deposit, acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities, (iv) participate in a credit facility whereby the Fund may directly lend to and borrow money from other affiliated funds to the extent permitted under the 1940 Act or an exemption therefrom and (v) make loans in any other manner consistent with applicable law, as amended and interpreted or modified from time to time by any regulatory authority having jurisdiction.
(5) Invest in commodities or commodity contracts, except that the Fund may invest in currency instruments and contracts and financial instruments and contracts that might be deemed to be commodities and commodity contracts.
(6) Act as an underwriter, except insofar as the Fund technically may be deemed to be an underwriter in connection with the purchase or sale of its portfolio securities.
(7) Make any investment inconsistent with its classification as a diversified closed-end investment company (or series thereof) under the 1940 Act.
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(8) Invest 25% or more of the value of its total assets in any one industry, provided that this limitation does not apply to municipal securities other than those municipal securities backed only by assets and revenues of non-governmental issuers.
(9) Under normal market conditions, the Fund will invest substantially all (at least 80%) of its assets (net assets plus borrowings for investment purposes) in debt securities and other obligations issued by or on behalf of states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest on which is exempt from regular federal income tax.
All other investment policies of the Fund are considered non-fundamental and may be changed by the Board of Directors without prior approval of the Fund’s outstanding voting shares.
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The following table is furnished in response to requirements of the Securities and Exchange Commission. It is designed to illustrate the effects of leverage on common share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in the Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. The table below reflects the Fund’s borrowings under a credit agreement as a percentage of the Fund’s total assets (which includes the amounts of leverage obtained through such borrowings), the annual rate of interest on the borrowings as of April 30, 2021, and the annual return that the Fund’s portfolio must experience (net of expenses) in order to cover such costs. The information below does not reflect the Fund’s use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as covered credit default swaps or other derivative instruments.
The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual borrowing expenses associated with borrowings by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
Preferred Shares as a percentage of total managed assets | |
| (including assets attributable to borrowings) | 32.64% |
Annual effective interest rate payable by Fund on Preferred Shares | 1.05% |
Annual return Fund portfolio must experience (net of expenses) to cover | |
| interest rate on Preferred Shares | 0.34% |
Common share total return for (10.00)% assumed portfolio total return | (15.35)% |
Common share total return for (5.00)% assumed portfolio total return | (7.93)% |
Common share total return for 0.00% assumed portfolio total return | (0.51)% |
Common share total return for 5.00% assumed portfolio total return | 6.91% |
Common share total return for 10.00% assumed portfolio total return | 14.34% |
Common share total return is composed of two elements – investment income net of the Fund’s expenses, including any interest/dividends on assets resulting from leverage, and gains or losses on the value of the securities the Fund owns. As required by Securities and Exchange Commission rules, the table assumes that the Fund is more likely to suffer capital losses than to enjoy capital appreciation. For example, to assume a total return of 0%, the Fund must assume that the income it receives on its investments is entirely offset by losses in the value of those investments.
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This table reflects hypothetical performance of the Fund’s portfolio and not the performance of the Fund’s common shares, the value of which will be determined by market forces and other factors.
Should the Fund elect to add additional leverage to its portfolio, the potential benefits of leveraging the Fund’s shares cannot be fully achieved until the proceeds resulting from the use of leverage have been received by the Fund and invested in accordance with the Fund’s investment objective and principal investment strategies. The Fund’s willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors, including, among other things, the Adviser’s assessment of the yield curve environment, interest rate trends, market conditions and other factors.
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Directors, Officers and Service ProvidersInvestment Adviser and AdministratorAmundi Asset Management US, Inc.
Custodian and Sub-Administrator
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Legal Counsel
Morgan, Lewis & Bockius LLP
Transfer Agent
American Stock Transfer & Trust Company
Proxy Voting Policies and Procedures of the Fund are available without charge, upon request, by calling our toll free number (1-800-225-6292). Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is publicly available to shareowners at www.amundi.com/us. This information is also available on the Securities and Exchange Commission’s web site at www.sec.gov.
Directors and Officers
The Fund’s Directors and officers are listed below, together with their principal occupations and other directorships they have held during at least the past five years. Directors who are interested persons of the Fund within the meaning of the 1940 Act are referred to as Interested Directors. Directors who are not interested persons of the Fund are referred to as Independent Directors. Each of the Directors serves as a Director or Trustee of each of the 45 U.S. registered investment portfolios for which Amundi US serves as investment adviser (the “Pioneer Funds”). The address for all Directors and all officers of the Fund is 60 State Street, Boston, Massachusetts 02109.
The Statement of Additional Information of the Fund includes additional information about the Directors and is available, without charge, upon request, by calling 1-800-225-6292.
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| | | | |
| Independent Directors | | |
|
| Name, Age and Position | Term of Office and | | Other Directorships |
| Held With the Fund | Length of Service | Principal Occupation | Held by Director |
| Thomas J. Perna (70) | Class II Director since | Private investor (2004 – 2008 and 2013 – present); Chairman (2008 – 2013) | Director, Broadridge Financial |
Chairman of the Board | 2006. Term expires | and Chief Executive Officer (2008 – 2012), Quadriserv, Inc. (technology | Solutions, Inc. (investor |
and Director | in 2021. | products for securities lending industry); and Senior Executive Vice | communications and securities |
| | President, The Bank of New York (financial and securities services) | processing provider for financial |
| | (1986 – 2004) | services industry) (2009 – present); |
| | | Director, Quadriserv, Inc. (2005 – |
| | | 2013); and Commissioner, New |
| | | Jersey State Civil Service |
| | | Commission (2011 – 2015) |
| John E. Baumgardner, | Class I Director since | Of Counsel (2019 – present), Partner (1983-2018), Sullivan & | Chairman, The Lakeville Journal |
| Jr. (70) | 2019. Term expires | Cromwell LLP (law firm). | Company, LLC, (privately-held |
Director | in 2022. | | community newspaper group) |
| | | (2015-present) |
| Diane Durnin (64) | Class II Director since | Managing Director - Head of Product Strategy and Development, BNY | None |
Director | 2020. Term expires | Mellon Investment Management (investment management firm) (2012-2018); | |
| in 2023. | Vice Chairman – The Dreyfus Corporation (2005 – 2018): Executive Vice | |
| | President Head of Product, BNY Mellon Investment Management (2007-2012); | |
| | Executive Director- Product Strategy, Mellon Asset Management (2005-2007); | |
| | Executive Vice President Head of Products, Marketing and Client Service, | |
| | Dreyfus Corporation (investment management firm) (2000-2005); and | |
| | Senior Vice President Strategic Product and Business Development, Dreyfus | |
| | Corporation (1994-2000) | |
