UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number
811-02653
BNY Mellon Municipal Bond Funds, Inc.
(Exact name of Registrant as specified in charter)
c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 (Address of principal executive offices) (Zip code)
Bennett A. MacDougall, Esq.
240 Greenwich Street
New York, New York 10286
(Name and address of agent for service)
Registrant's telephone number, including area code: | (212) | 922-6400 | |
Date of fiscal year end: | 08/31 | ||
Date of reporting period: | 02/29/20 |
FORM N-CSR
Item 1. Reports to Stockholders.
2
BNY Mellon Municipal Bond Fund
SEMIANNUAL REPORT February 29, 2020 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
T H E F U N D
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
the Fund’s Management Agreement |
F O R M O R E I N F O R M AT I O N
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Municipal Bond Fund, covering the six-month period from September 1, 2019 through February 29, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations during September and October 2019. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of 2019. However, the euphoria was short-lived, as concerns over the spread of the Coronavirus roiled markets in January and late February, leading to a significant dip in equity valuations at the end of the reporting period.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor perception of future economic growth prospects. The Fed cut rates in September and October 2019, for a total 50 basis point reduction in the federal funds rate during the reporting period. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements to global economic growth rates in the coming year. However, concerns regarding the spread of the Coronavirus and the resulting economic constraints caused rates throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020.
We believe that despite recent market volatility, the outlook for the U.S. remains positive over the near term. As always, we will monitor relevant data for any signs of a change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
March 16, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from September 1, 2019 through February 29, 2020, as provided by Daniel Marques and Daniel Rabasco, Primary Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended February 29, 2020, BNY Mellon Municipal Bond Fund (formerly Dreyfus Municipal Bond Fund) achieved a total return of 3.15%.1 In comparison, the fund’s benchmark, the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”), produced a total return of 3.04%.2
Municipal bonds generally produced positive total returns over the reporting period due to favorable supply-demand dynamics, solid fundamentals and support by Federal Reserve (the “Fed”) policy. The fund produced a higher return than the Index, due to security selection, yield curve positioning and asset allocation.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal income tax, to the extent consistent with the preservation of capital.
To pursue this goal, the fund normally invests substantially all of its net assets in municipal bonds that provide income exempt from federal income tax. The fund invests at least 75% of its assets in municipal bonds rated A or higher or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. The fund may invest up to 25% of its assets in municipal bonds rated below A or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc., including bonds rated below investment-grade quality (“high yield” or “junk” bonds). The dollar-weighted average maturity of the fund’s portfolio is not restricted, but normally exceeds 10 years.
We focus on identifying undervalued sectors and securities and minimize the use of interest-rate forecasting. The portfolio managers select municipal bonds for the fund’s portfolio by:
· Using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities, and to exploit pricing inefficiencies in the municipal bond market.
· Actively trading among various sectors, such as pre-refunded, general obligation and revenue, based on their apparent relative values. The fund seeks to invest in several of these sectors.
Strong Demand and Fed Accommodation Drove Municipal Bonds
The municipal bond market benefited from strong demand and concerns about economic momentum, due in part to concerns about trade tensions. Demand was driven especially by investors in states with high income-tax rates. These investors have moved increasingly into municipal bonds as a way to shelter income from federal income taxes, which rose as a result of the cap on the federal deductibility of state and local taxes in the Tax Cuts and Jobs Act of 2017. Demand remained strong throughout the reporting period.
The Federal Reserve (the “Fed”) cut the federal funds rate twice during the reporting period, causing yields to decline all across the municipal bond yield curve. But investors continued
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
to favor longer-term issues, causing the municipal bond yield curve to flatten during the period.
Revenue bonds outperformed general obligation bonds during the period, and in the general obligation sector, local bonds outperformed state bonds. Among revenue bonds, the hospital and housing sectors led the way, while water system bonds lagged. Lower quality bonds outperformed those of higher quality, as A rated and BBB rated issues beat those rated AAA and AA.
Supply increased somewhat during the reporting period, as low interest rates led issuers to seek to capture favorable financing. But tax exempt supply may have been inhibited by the absence of advance refunding, which was eliminated by the Tax Cuts and Jobs Act of 2017. In the past, advance refunding allowed issuers to replace higher-yielding, tax-exempt debt with lower-yielding, tax-exempt debt. A growing trend emerged however with some entities taking advantage of low yields by issuing taxable municipal debt instead of tax-exempt debt to advance refund higher cost debt.
Generally, fundamentals in the municipal bond market remained healthy during the reporting period. Steady but slower economic growth supported tax revenues, fiscal balances and “rainy day” funds.
Security Selection, Yield Curve Positioning and Asset Allocation Drove Performance
The fund outperformed the Index during the reporting period, due primarily to security selection in the health care, water, and tobacco segments. Yield curve positioning also contributed positively to fund results. More specifically, longer duration bonds outperformed as interest rates declined. An overweight to revenue bonds also proved advantageous, especially in the housing, tobacco and education segments.
On the negative side, security selection was unfavorable in certain segments. Selections in health care and special tax, in particular, contributed negatively to fund performance. Allocations to certain sectors, such as essential service power bonds, also lagged. The fund did not employ derivatives during the period.
A Focus on Diversification
Looking ahead, volatility is expected amid the uncertainty of the COVID-19 pandemic fallout which could lead to economic contraction and pressure budgets for state and local governments. Fundamentals however are generally healthy among issuers, which would help provide a cushion for any economic slowdown. In the general obligation sector, we will continue to position the fund with a bias toward states with strong reserves. Our liquidity remains adequate to take advantage of buying opportunities.
We anticipate that demand for municipals will remain dominated by retail investors via direct holdings and mutual funds. We continue to monitor the activity of banks and insurance companies, which have backed away from the market since the 2017 tax law was passed. New issuance could be as robust as in 2019 if low rates persist, and possibly increasing marginally, as issuers continue to seek to capture attractive financing rates.
Strategy positioning in the near term will emphasize sector diversification across both revenue and general obligation issues. A bias to economically defensive sectors such as
4
water/sewer and public power represent key holdings. Stable issuers within hospital and airport sectors drive the yield profile. We also continue to maintain a neutral-to-long duration positioning versus the benchmark.
March 16, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price, yield, and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Income may be subject to state and local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are fully taxable.
2 Source: Lipper Inc. — The Bloomberg Barclays U.S. Municipal Bond Index covers the USD-denominated, long-term, tax-exempt bond market. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines. High yield bond funds involve increased credit and liquidity risk compared with higher-quality bond funds. Below-investment-grade bonds are considered speculative as to the continuing ability of an issuer to make interest payments and repay principal.
Auction-rate securities include preferred shares of closed-end funds, long-term debt issued by municipalities and many other taxable and tax-exempt issuers. The dividend rates on these securities generally reset through bank-managed auctions periodically, including periods ranging from 7 days to 35 days.
5
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Municipal Bond Fund from September 1, 2019 to February 29, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended February 29, 2020 |
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Expense paid per $1,000† | $3.59 |
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Ending value (after expenses) | $1,031.50 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended February 29, 2020 |
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Expense paid per $1,000† | $3.57 |
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Ending value (after expenses) | $1,021.33 |
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†Expenses are equal to the fund’s annualized expense ratio of .71%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
February 29, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - .3% | |||||||||
Collateralized Municipal-Backed Securities - .3% | |||||||||
Arizona Industrial Development Authority, Revenue Bonds, Ser. 2019-2 | 3.63 | 5/20/2033 | 3,480,724 | 4,050,728 | |||||
Long-Term Municipal Investments - 99.4% | |||||||||
Alabama - 3.6% | |||||||||
Birmingham-Jefferson Civic Center Authority, Special Tax Bonds, Ser. B | 5.00 | 7/1/2043 | 7,500,000 | 9,278,775 | |||||
Black Belt Energy Gas District, Revenue Bonds, Ser. B1, 1 Month LIBOR x .67 +.90% | 2.01 | 12/1/2023 | 5,000,000 | a | 5,059,950 | ||||
Jefferson County, Revenue Bonds, Refunding | 5.00 | 9/15/2035 | 2,500,000 | 3,070,450 | |||||
Jefferson County, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. C | 0/6.60 | 10/1/2042 | 20,000,000 | b | 19,973,800 | ||||
The Lower Alabama Gas District, Revenue Bonds, Ser. A | 5.00 | 9/1/2028 | 3,300,000 | 4,156,383 | |||||
University of Alabama at Birmingham, Revenue Bonds, Ser. B | 4.00 | 10/1/2035 | 4,005,000 | 4,830,551 | |||||
46,369,909 | |||||||||
Arizona - 1.7% | |||||||||
Arizona Industrial Development Authority, Revenue Bonds (Equitable School Revolving Fund Obligated Group) Ser. A | 5.00 | 11/1/2044 | 1,975,000 | 2,449,178 | |||||
Glendale Industrial Development Authority, Revenue Bonds, Refunding (Sun Health Services Obligated Group) Ser. A | 5.00 | 11/15/2048 | 5,500,000 | 6,422,900 | |||||
La Paz County Industrial Development Authority, Revenue Bonds (Charter School Solutions) Ser. A | 5.00 | 2/15/2046 | 1,500,000 | c | 1,695,180 | ||||
Maricopa County Industrial Development Authority, Revenue Bonds (Banner Health Obligated Group) Ser. A | 5.00 | 1/1/2041 | 2,500,000 | 3,087,725 | |||||
Maricopa County Industrial Development Authority, Revenue Bonds, Refunding (Banner Health Obligated Group) | 5.00 | 1/1/2031 | 1,750,000 | 2,177,105 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Arizona - 1.7% (continued) | |||||||||
Phoenix Civic Improvement Corp., Revenue Bonds, Ser. B | 4.00 | 7/1/2044 | 2,000,000 | 2,328,940 | |||||
The Pima County Industrial Development Authority, Revenue Bonds (Tucson Electric Power) Ser. A | 5.25 | 10/1/2040 | 4,185,000 | 4,280,251 | |||||
22,441,279 | |||||||||
California - 7.0% | |||||||||
California, GO | 5.00 | 10/1/2030 | 8,000,000 | 10,582,640 | |||||
California, GO, Refunding | 5.00 | 4/1/2033 | 7,900,000 | 10,525,960 | |||||
California, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) | 5.25 | 8/1/2032 | 5,500,000 | 7,969,225 | |||||
California County Tobacco Securitization Agency, Revenue Bonds, Refunding | 5.00 | 6/1/2034 | 5,295,000 | 5,653,683 | |||||
California Health Facilities Financing Authority, Revenue Bonds, Refunding (Sutter Health Obligated Group) Ser. B | 5.00 | 11/15/2046 | 6,750,000 | 8,209,688 | |||||
California Public Works Board, Revenue Bonds (Various Capital Projects) Ser. I | 5.00 | 11/1/2038 | 2,500,000 | 2,868,950 | |||||
California Statewide Communities Development Authority, Revenue Bonds (Loma Linda University Medical Center Obligated Group) | 5.25 | 12/1/2048 | 1,800,000 | c | 2,158,524 | ||||
Golden State Tobacco Securitization Corp., Revenue Bonds, Refunding, Ser. A1 | 5.00 | 6/1/2028 | 3,265,000 | 4,144,330 | |||||
Los Angeles Department of Airports, Revenue Bonds, Ser. A | 5.00 | 5/15/2033 | 5,000,000 | 5,621,400 | |||||
San Diego County Regional Airport Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2043 | 6,000,000 | 6,699,600 | |||||
San Francisco City & County Airport Commission, Revenue Bonds, Refunding (San Francisco International Airport) Ser. B | 5.00 | 5/1/2041 | 12,500,000 | 15,072,375 | |||||
San Francisco City & County Airport Commission, Revenue Bonds, Refunding, Ser. E | 5.00 | 5/1/2050 | 3,500,000 | 4,422,985 | |||||
University of California Regents Medical Center, Revenue Bonds, Refunding, Ser. J | 5.00 | 5/15/2043 | 5,000,000 | 5,587,800 | |||||
89,517,160 |
8
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Colorado - 4.6% | |||||||||
Colorado Health Facilities Authority, Revenue Bonds (Covenant Retirement Communities Obligated Group) | 5.00 | 12/1/2048 | 6,000,000 | 7,165,740 | |||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (Adventist Health System Obligated Group) | 5.00 | 11/19/2026 | 5,000,000 | 6,285,450 | |||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (CommonSpirit Health Obligated Group) Ser. A | 4.00 | 8/1/2049 | 3,500,000 | 4,013,765 | |||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (Sisters of Charity of Leavenworth Health System Obligation Group) Ser. A | 4.00 | 1/1/2038 | 5,000,000 | 5,988,700 | |||||
Denver City & County Airport System, Revenue Bonds, Refunding, Ser. A | 5.00 | 12/1/2031 | 2,000,000 | 2,581,960 | |||||
Denver City & County Airport System, Revenue Bonds, Refunding, Ser. A | 5.00 | 12/1/2048 | 5,000,000 | 6,241,000 | |||||
Denver City & County Airport System, Revenue Bonds, Ser. A | 5.25 | 11/15/2043 | 6,000,000 | 6,783,180 | |||||
Denver City & County Airport System, Revenue Bonds, Ser. A | 5.50 | 11/15/2027 | 6,000,000 | 6,935,160 | |||||
Denver City & County School District No. 1, GO (Insured; State Aid Withholding) Ser. A | 5.50 | 12/1/2041 | 1,550,000 | 2,006,770 | |||||
Denver Convention Center Hotel Authority, Revenue Bonds, Refunding | 5.00 | 12/1/2036 | 1,315,000 | 1,568,401 | |||||
Denver Convention Center Hotel Authority, Revenue Bonds, Refunding | 5.00 | 12/1/2027 | 3,860,000 | 4,720,394 | |||||
Dominion Water & Sanitation District, Revenue Bonds | 5.75 | 12/1/2036 | 3,500,000 | 3,754,240 | |||||
Dominion Water & Sanitation District, Revenue Bonds | 6.00 | 12/1/2046 | 500,000 | 537,630 | |||||
58,582,390 | |||||||||
Connecticut - 2.4% | |||||||||
Connecticut, GO, Ser. A | 5.00 | 10/15/2025 | 10,600,000 | 12,147,600 | |||||
Connecticut, GO, Ser. C | 5.00 | 6/15/2035 | 1,000,000 | 1,267,740 | |||||
Connecticut, GO, Ser. C | 5.00 | 6/15/2034 | 1,020,000 | 1,295,441 | |||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 9/1/2033 | 6,000,000 | 7,035,660 | |||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 10/1/2029 | 2,500,000 | 2,849,300 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Connecticut - 2.4% (continued) | |||||||||
The Metropolitan District Hartford County, Revenue Bonds, Refunding (Green Bond) Ser. A | 5.00 | 11/1/2034 | 5,025,000 | 5,943,871 | |||||
30,539,612 | |||||||||
District of Columbia - 1.4% | |||||||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding | 5.00 | 10/1/2035 | 2,000,000 | 2,495,900 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding (Dulles Metrorail & Capital Improvement Projects) Ser. B | 4.00 | 10/1/2053 | 1,000,000 | 1,167,810 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 10/1/2038 | 4,000,000 | 5,063,600 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 10/1/2035 | 2,000,000 | 2,442,080 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 10/1/2031 | 1,500,000 | 1,944,645 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 10/1/2028 | 4,000,000 | 4,399,720 | |||||
17,513,755 | |||||||||
Florida - 5.7% | |||||||||
Broward County Airport System, Revenue Bonds | 5.00 | 10/1/2047 | 5,000,000 | 6,101,950 | |||||
Broward County School District, COP, Refunding, Ser. A | 5.00 | 7/1/2027 | 4,900,000 | 6,250,685 | |||||
Central Florida Expressway Authority, Revenue Bonds, Refunding | 5.00 | 7/1/2038 | 2,500,000 | 3,116,050 | |||||
Citizens Property Insurance Corp., Revenue Bonds, Ser. A1 | 5.00 | 6/1/2025 | 1,500,000 | 1,787,895 | |||||
Escambia County, Revenue Bonds | 5.00 | 10/1/2046 | 5,000,000 | 6,099,700 | |||||
Gainesville Utilities System, Revenue Bonds, Ser. A | 5.00 | 10/1/2037 | 2,000,000 | 2,533,380 | |||||
Miami Beach, Revenue Bonds, Refunding | 5.00 | 9/1/2047 | 7,000,000 | 7,697,900 | |||||
Miami Beach Redevelopment Agency, Tax Allocation Bonds, Refunding | 5.00 | 2/1/2035 | 1,500,000 | 1,712,010 | |||||
Miami-Dade County Seaport Department, Revenue Bonds, Ser. A | 5.50 | 10/1/2042 | 3,500,000 | 4,039,420 |
10
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Florida - 5.7% (continued) | |||||||||
Orlando Utilities Commission, Revenue Bonds (Series 2018 Project) Ser. A | 5.00 | 10/1/2038 | 3,000,000 | 3,773,640 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) | 5.00 | 11/15/2045 | 11,500,000 | 13,568,505 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds, Refunding (Baptist Health South Florida Obligated Group) | 4.00 | 8/15/2049 | 4,760,000 | 5,513,556 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds, Refunding (Baptist Health South Florida Obligated Group) | 5.00 | 8/15/2039 | 1,000,000 | 1,286,240 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds, Refunding (Baptist Health South Florida Obligated Group) | 5.00 | 8/15/2038 | 1,200,000 | 1,547,088 | |||||
Pinellas County Health Facilities Authority, Revenue Bonds, Refunding (BayCare Health Obligated Group) (Insured; National Public Finance Guarantee Corp.) Ser. A2 | 2.38 | 11/15/2023 | 1,475,000 | d | 1,475,000 | ||||
Sunshine Skyway Bridge, Revenue Bonds, Ser. A | 4.00 | 7/1/2035 | 5,875,000 | 7,038,602 | |||||
73,541,621 | |||||||||
Georgia - 4.6% | |||||||||
Atlanta Airport Passenger Facility Charge, Revenue Bonds, Ser. C | 5.00 | 7/1/2040 | 8,555,000 | 11,122,527 | |||||
Georgia Municipal Electric Authority, Revenue Bonds (Plant Vogtle Units 3&4 Project) | 5.00 | 1/1/2039 | 1,000,000 | 1,240,460 | |||||
Georgia Municipal Electric Authority, Revenue Bonds, Refunding (Project 1) Ser. A | 5.00 | 1/1/2028 | 8,400,000 | 10,221,708 | |||||
Georgia Municipal Electric Authority, Revenue Bonds, Refunding (Project One) Ser. A | 5.00 | 1/1/2021 | 7,705,000 | 7,955,104 | |||||
Main Street Natural Gas, Revenue Bonds (Main Street Natural Gas) Ser. B, 1 Month LIBOR x .67 +.75% | 1.86 | 9/1/2023 | 7,500,000 | a | 7,593,900 | ||||
Main Street Natural Gas, Revenue Bonds, Ser. C | 4.00 | 9/1/2026 | 9,000,000 | 10,526,760 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Georgia - 4.6% (continued) | |||||||||
Private Colleges & Universities Authority, Revenue Bonds, Refunding (Emory University) Ser. A | 5.00 | 10/1/2043 | 8,875,000 | 10,058,659 | |||||
58,719,118 | |||||||||
Hawaii - .5% | |||||||||
Hawaii Airports System, Revenue Bonds, Ser. A | 5.00 | 7/1/2043 | 5,000,000 | 6,242,550 | |||||
Idaho - .6% | |||||||||
Power County Industrial Development Corp., Revenue Bonds (FMC Corp. Project) | 6.45 | 8/1/2032 | 7,625,000 | 7,660,685 | |||||
Illinois - 8.7% | |||||||||
Chicago Board of Education, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 12/1/2035 | 1,000,000 | 1,239,730 | |||||
Chicago Board of Education, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 12/1/2034 | 1,000,000 | 1,246,910 | |||||
Chicago Board of Education, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. C | 5.00 | 12/1/2030 | 1,500,000 | 1,887,630 | |||||
Chicago Board of Education, Revenue Bonds | 5.00 | 4/1/2046 | 2,500,000 | 2,943,625 | |||||
Chicago II Waterworks, Revenue Bonds | 5.00 | 11/1/2028 | 7,200,000 | 8,699,256 | |||||
Chicago II Waterworks, Revenue Bonds (Second Lien Project) | 5.00 | 11/1/2027 | 2,695,000 | 3,129,111 | |||||
Chicago Metropolitan Water Reclamation District, GO (Green Bond) Ser. A | 5.00 | 12/1/2044 | 5,000,000 | 5,753,200 | |||||
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2048 | 3,500,000 | 4,304,160 | |||||
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2029 | 6,185,000 | 7,238,986 | |||||
Chicago Park District, GO, Refunding, Ser. B | 5.00 | 1/1/2027 | 3,000,000 | 3,383,130 | |||||
Cook County II, Revenue Bonds, Refunding | 5.00 | 11/15/2036 | 7,000,000 | 8,668,100 | |||||
Illinois, Revenue Bonds (Insured; Build America Mutual) Ser. A | 5.00 | 6/15/2032 | 4,325,000 | 5,366,763 | |||||
Illinois, Revenue Bonds, Refunding | 5.00 | 6/15/2024 | 5,000,000 | 5,601,300 | |||||
Illinois Finance Authority, Revenue Bonds (Advocate Health Care Network Obligated Group) | 5.00 | 6/1/2023 | 2,305,000 | e | 2,615,207 |
12
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Illinois - 8.7% (continued) | |||||||||
Illinois Finance Authority, Revenue Bonds (University of Illinois At Urbana-Champaign Project) | 5.00 | 10/1/2044 | 1,100,000 | 1,387,540 | |||||
Illinois Finance Authority, Revenue Bonds, Refunding (OSF Healthcare System Obligated Group) Ser. A | 5.00 | 11/15/2045 | 2,500,000 | 2,905,075 | |||||
Illinois Finance Authority, Revenue Bonds, Refunding, Ser. A | 6.00 | 7/1/2043 | 3,250,000 | 3,688,197 | |||||
Illinois Municipal Electric Agency, Revenue Bonds, Refunding, Ser. A | 5.00 | 2/1/2032 | 5,000,000 | 5,966,650 | |||||
Illinois Toll Highway Authority, Revenue Bonds, Ser. B | 5.00 | 1/1/2036 | 1,500,000 | 1,809,495 | |||||
Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Project) Ser. A | 5.00 | 6/15/2042 | 13,090,000 | 14,053,686 | |||||
Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding | 5.00 | 6/15/2050 | 1,000,000 | 1,227,190 | |||||
Railsplitter Tobacco Settlement Authority, Revenue Bonds | 5.00 | 6/1/2026 | 4,290,000 | 5,295,705 | |||||
Sales Tax Securitization Corp., Revenue Bonds, Refunding (Insured; Build America Mutual) Ser. A | 4.00 | 1/1/2040 | 6,175,000 | 7,294,960 | |||||
University of Illinois, Revenue Bonds, Refunding, Ser. A | 5.00 | 4/1/2027 | 5,000,000 | 5,572,300 | |||||
111,277,906 | |||||||||
Indiana - 1.5% | |||||||||
Indiana Finance Authority, Revenue Bonds, Refunding (Community Health Network Obligated Group) Ser. A | 5.00 | 5/1/2042 | 12,460,000 | 13,727,805 | |||||
Indiana Municipal Power Agency, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2037 | 2,500,000 | 3,051,575 | |||||
Indianapolis Local Public Improvement Bond Bank, Revenue Bonds, Refunding, Ser. A1 | 5.00 | 1/1/2026 | 2,000,000 | 2,427,660 | |||||
19,207,040 | |||||||||
Iowa - .8% | |||||||||
Iowa Finance Authority, Revenue Bonds (Genesis Health System Obligated Group) | 5.00 | 7/1/2025 | 5,910,000 | 6,675,345 | |||||
Iowa Finance Authority, Revenue Bonds, Refunding, Ser. E | 5.00 | 8/15/2032 | 2,500,000 | 2,982,750 | |||||
9,658,095 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Kentucky - 3.2% | |||||||||
Kentucky Public Energy Authority, Revenue Bonds, Ser. A | 4.00 | 4/1/2024 | 2,780,000 | 3,093,028 | |||||
Kentucky Public Energy Authority, Revenue Bonds, Ser. A | 4.00 | 4/1/2024 | 10,000,000 | 11,122,900 | |||||
Kentucky Public Energy Authority, Revenue Bonds, Ser. B | 4.00 | 1/1/2025 | 24,125,000 | 27,254,012 | |||||
41,469,940 | |||||||||
Louisiana - 3.5% | |||||||||
East Baton Rouge Sewerage Commission, Revenue Bonds, Refunding, Ser. B | 5.00 | 2/1/2039 | 8,000,000 | 9,445,200 | |||||
Lafayette Utilities, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) | 5.00 | 11/1/2044 | 1,500,000 | 1,889,145 | |||||
Louisiana Public Facilities Authority, Revenue Bonds (Franciscan Missionaries of Our Lady Health System Obligated Group Project) Ser. A | 5.00 | 7/1/2047 | 4,250,000 | 5,088,057 | |||||
New Orleans Aviation Board, Revenue Bonds, Refunding (Consolidated Rental Car Project) (Insured; Assured Guaranty Municipal Corp.) | 5.00 | 1/1/2037 | 1,750,000 | 2,175,880 | |||||
New Orleans Aviation Board, Revenue Bonds, Ser. B | 5.00 | 1/1/2045 | 5,000,000 | 5,713,550 | |||||
New Orleans Aviation Board, Revenue Bonds, Ser. B | 5.00 | 1/1/2040 | 7,825,000 | 8,996,246 | |||||
St. John the Baptist Parish, Revenue Bonds, Refunding (Marathon Oil) | 2.20 | 7/1/2026 | 1,000,000 | 1,052,160 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.25 | 5/15/2035 | 9,140,000 | 10,162,766 | |||||
44,523,004 | |||||||||
Maine - .4% | |||||||||
Maine Health & Higher Educational Facilities Authority, Revenue Bonds (Maine General Medical Center Obligated Group) | 7.50 | 7/1/2032 | 5,000,000 | 5,403,000 | |||||
Maryland - 1.1% | |||||||||
Baltimore, Revenue Bonds, Refunding | 5.00 | 9/1/2046 | 3,500,000 | 4,157,300 | |||||
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds, Refunding (MedStar Health Obligated Group) | 5.00 | 8/15/2038 | 4,000,000 | 4,637,000 |
14
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Maryland - 1.1% (continued) | |||||||||
Maryland Transportation Authority, Revenue Bonds | 5.00 | 6/1/2029 | 4,360,000 | 5,733,313 | |||||
14,527,613 | |||||||||
Massachusetts - .9% | |||||||||
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. A | 5.00 | 7/1/2044 | 1,000,000 | 1,225,020 | |||||
Massachusetts Educational Financing Authority, Revenue Bonds, Refunding, Ser. K | 5.25 | 7/1/2029 | 2,455,000 | 2,645,582 | |||||
Massachusetts Educational Financing Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2029 | 1,450,000 | 1,877,431 | |||||
Massachusetts Transportation Trust Fund Metropolitan Highway System, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2034 | 4,000,000 | 5,216,280 | |||||
10,964,313 | |||||||||
Michigan - 3.9% | |||||||||
Great Lakes Water Supply System Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2046 | 10,000,000 | 12,025,400 | |||||
Karegnondi Water Authority, Revenue Bonds, Refunding | 5.00 | 11/1/2045 | 4,690,000 | 5,637,145 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding | 5.00 | 11/15/2034 | 2,965,000 | 3,474,417 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding (Great Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | 5.00 | 7/1/2030 | 6,000,000 | 7,016,880 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding (Great Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | 5.00 | 7/1/2032 | 5,000,000 | 5,830,600 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding (Trinity Health Credit Obligated Group) Ser. A | 5.00 | 12/1/2042 | 1,000,000 | 1,250,030 | |||||
Michigan Strategic Fund, Revenue Bonds (AMT-I-75 Improvement Project) | 5.00 | 6/30/2048 | 7,000,000 | 8,509,340 | |||||
Michigan Strategic Fund, Revenue Bonds, Refunding (Genesee Power Station Project) | 7.50 | 1/1/2021 | 645,000 | 645,348 | |||||
Wayne County Airport Authority, Revenue Bonds, Ser. D | 5.00 | 12/1/2045 | 5,000,000 | 5,917,300 | |||||
50,306,460 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Minnesota - .1% | |||||||||
Western Minnesota Municipal Power Agency, Revenue Bonds, Ser. A | 5.00 | 1/1/2024 | 1,000,000 | e | 1,160,470 | ||||
Missouri - 1.1% | |||||||||
Missouri Joint Municipal Electric Utility Commission, Revenue Bonds, Refunding (Iatan 2 Project) Ser. A | 5.00 | 1/1/2033 | 2,200,000 | 2,521,750 | |||||
St. Louis County Industrial Development Authority, Revenue Bonds, Refunding (Friendship Village St. Louis Obligated Group) | 5.00 | 9/1/2048 | 2,250,000 | 2,587,478 | |||||
The Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (CoxHealth Obligated Group) Ser. A | 5.00 | 11/15/2029 | 3,770,000 | 4,535,875 | |||||
The Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (CoxHealth Obligated Group) Ser. A | 5.00 | 11/15/2030 | 3,725,000 | 4,459,160 | |||||
14,104,263 | |||||||||
Nebraska - .3% | |||||||||
Public Power Generation Agency, Revenue Bonds, Refunding | 5.00 | 1/1/2041 | 3,050,000 | 3,645,207 | |||||
Nevada - 2.2% | |||||||||
Clark County, GO | 5.00 | 11/1/2038 | 5,945,000 | 6,758,217 | |||||
Clark County Department of Aviation, Revenue Bonds, Refunding, Ser. A | 5.00 | 7/1/2040 | 14,000,000 | 16,645,160 | |||||
Reno, Revenue Bonds, Refunding (Reno Transportation Rail Access Project) | 5.00 | 6/1/2048 | 1,000,000 | 1,236,220 | |||||
Reno, Revenue Bonds, Refunding, Ser. C | 0.00 | 7/1/2058 | 24,000,000 | c,f | 4,027,440 | ||||
28,667,037 | |||||||||
New Jersey - 4.5% | |||||||||
Essex County Improvement Authority, Revenue Bonds | 5.25 | 7/1/2045 | 5,000,000 | c | 5,065,100 | ||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding | 5.00 | 6/15/2028 | 2,250,000 | 2,413,080 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. NN | 5.00 | 3/1/2028 | 3,250,000 | 3,598,497 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. WW | 5.25 | 6/15/2029 | 3,130,000 | 3,719,661 |
16
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
New Jersey - 4.5% (continued) | |||||||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. WW | 5.25 | 6/15/2031 | 7,550,000 | 8,926,138 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | 5.25 | 6/15/2027 | 5,000,000 | 5,969,850 | |||||
New Jersey Health Care Facilities Financing Authority, Revenue Bonds, Refunding (Virtua Health Obligated Group) | 5.00 | 7/1/2028 | 3,000,000 | 3,442,380 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 5.00 | 6/15/2032 | 1,250,000 | 1,573,500 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds, Ser. BB | 5.00 | 6/15/2044 | 1,000,000 | 1,223,180 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2046 | 6,000,000 | 7,310,700 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2037 | 5,000,000 | 6,247,100 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.25 | 6/1/2046 | 6,350,000 | 7,883,906 | |||||
57,373,092 | |||||||||
New York - 4.7% | |||||||||
Long Island Power Authority, Revenue Bonds | 5.00 | 9/1/2034 | 1,000,000 | 1,257,460 | |||||
Metropolitan Transportation Authority, Revenue Bonds, Refunding, Ser. D | 5.00 | 11/15/2030 | 5,170,000 | 6,441,975 | |||||
New York City Industrial Development Agency, Revenue Bonds, Refunding (TrIPs Obligated Group) Ser. A | 5.00 | 7/1/2021 | 6,150,000 | 6,458,545 | |||||
New York City Water & Sewer System, Revenue Bonds, Ser. DD1 | 4.00 | 6/15/2050 | 3,500,000 | 4,195,345 | |||||
New York Liberty Development Corp., Revenue Bonds, Refunding (4 World Trade Center Project) | 5.00 | 11/15/2031 | 5,000,000 | 5,356,100 | |||||
New York Liberty Development Corp., Revenue Bonds, Refunding (Class 1-3 World Trade Center Project) | 5.00 | 11/15/2044 | 7,500,000 | c | 8,450,475 | ||||
New York Liberty Development Corp., Revenue Bonds, Refunding (Goldman Sachs Headquarters) | 5.25 | 10/1/2035 | 1,000,000 | 1,446,010 |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
New York - 4.7% (continued) | |||||||||
New York State Dormitory Authority, Revenue Bonds (New York University) (Insured; National Public Finance Guarantee Corp.) Ser. A | 5.75 | 7/1/2027 | 4,500,000 | 5,452,920 | |||||
New York State Thruway Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. B | 4.00 | 1/1/2050 | 3,655,000 | 4,325,583 | |||||
New York Transportation Development Corp., Revenue Bonds (Delta Air Lines) | 5.00 | 1/1/2024 | 6,000,000 | 6,813,720 | |||||
New York Transportation Development Corp., Revenue Bonds (LaGuardia Airport Terminal B Redevelopment Project) Ser. A | 5.00 | 7/1/2046 | 6,500,000 | 7,482,410 | |||||
New York Transportation Development Corp., Revenue Bonds, Refunding (American Airlines) | 5.00 | 8/1/2021 | 1,100,000 | 1,155,143 | |||||
New York Transportation Development Corp., Revenue Bonds, Refunding (American Airlines) | 5.00 | 8/1/2026 | 1,500,000 | 1,574,490 | |||||
60,410,176 | |||||||||
North Carolina - .5% | |||||||||
North Carolina Medical Care Commission, Revenue Bonds, Ser. A | 5.00 | 1/1/2049 | 3,000,000 | 3,550,830 | |||||
North Carolina Turnpike Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) | 5.00 | 1/1/2039 | 2,000,000 | 2,442,700 | |||||
5,993,530 | |||||||||
Ohio - 1.2% | |||||||||
Allen County Hospital Facilities, Revenue Bonds, Refunding, Ser. A | 5.00 | 5/1/2042 | 4,465,000 | 4,772,460 | |||||
Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. A2 | 4.00 | 6/1/2048 | 2,500,000 | 2,868,550 | |||||
Cuyahoga County, Revenue Bonds, Refunding (The MetroHealth System) | 5.25 | 2/15/2047 | 2,500,000 | 2,976,675 | |||||
Ohio Higher Educational Facility Commission, Revenue Bonds, Refunding (Cleveland Clinic Health System Obligated Group) | 5.00 | 1/1/2022 | 1,000,000 | e | 1,076,430 |
18
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Ohio - 1.2% (continued) | |||||||||
Ohio Turnpike & Infrastructure Commission, Revenue Bonds (Infrastructure Projects) Ser. A1 | 5.25 | 2/15/2039 | 3,000,000 | 3,345,510 | |||||
15,039,625 | |||||||||
Pennsylvania - 6.9% | |||||||||
Allegheny County Hospital Development Authority, Revenue Bonds, Refunding (UPMC Obligated Group) Ser. A | 4.00 | 7/15/2035 | 2,000,000 | 2,389,760 | |||||
Berks County Industrial Development Authority, Revenue Bonds, Refunding (The Highlands at Wyomissing) | 5.00 | 5/15/2048 | 1,000,000 | 1,137,360 | |||||
Commonwealth Financing Authority, Revenue Bonds | 5.00 | 6/1/2035 | 3,500,000 | 4,390,225 | |||||
Commonwealth Financing Authority, Revenue Bonds | 5.00 | 6/1/2031 | 1,250,000 | 1,583,238 | |||||
Delaware Valley Regional Finance Authority, Revenue Bonds, Ser. C, 1 Month MUNIPSA +.53% | 1.68 | 9/1/2023 | 11,000,000 | a | 11,050,710 | ||||
Lancaster County Hospital Authority, Revenue Bonds, Refunding (The University of Pennsylvania Health System Obligated Group) | 5.00 | 8/15/2042 | 5,240,000 | 6,341,291 | |||||
Luzerne County Industrial Development Authority, Revenue Bonds, Refunding (Pennsylvania-American Water Co.) | 2.45 | 12/3/2029 | 2,500,000 | 2,666,375 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Refunding, Ser. B | 5.00 | 6/1/2028 | 4,500,000 | 5,530,275 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. A | 5.00 | 12/1/2022 | 3,000,000 | e | 3,343,050 | ||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | 5.00 | 12/1/2034 | 2,160,000 | 2,606,407 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | 5.25 | 12/1/2048 | 16,855,000 | 21,237,131 | |||||
The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. A | 5.00 | 9/1/2044 | 7,500,000 | 9,424,350 | |||||
The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. B | 5.00 | 9/1/2043 | 5,280,000 | 6,515,942 | |||||
The Philadelphia School District, GO, Refunding (Insured; State Aid Withholding) Ser. E | 5.25 | 9/1/2023 | 4,000,000 | 4,086,240 |
19
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Pennsylvania - 6.9% (continued) | |||||||||
The Philadelphia School District, GO, Refunding (Insured; State Aid Withholding) Ser. F | 5.00 | 9/1/2027 | 5,000,000 | 6,170,700 | |||||
88,473,054 | |||||||||
South Carolina - 2.7% | |||||||||
South Carolina Ports Authority, Revenue Bonds | 5.00 | 7/1/2038 | 1,600,000 | 1,997,968 | |||||
South Carolina Ports Authority, Revenue Bonds | 5.00 | 7/1/2037 | 2,965,000 | 3,713,485 | |||||
South Carolina Public Service Authority, Revenue Bonds, Refunding (Santee Cooper Project) Ser. B | 5.13 | 12/1/2043 | 16,000,000 | 18,123,680 | |||||
South Carolina Public Service Authority, Revenue Bonds, Refunding (Santee Cooper Project) Ser. C | 5.00 | 12/1/2036 | 10,000,000 | 10,699,300 | |||||
34,534,433 | |||||||||
South Dakota - .7% | |||||||||
South Dakota Health & Educational Facilities Authority, Revenue Bonds (Avera Health Obligated Group) | 5.00 | 7/1/2044 | 5,000,000 | 5,666,900 | |||||
South Dakota Health & Educational Facilities Authority, Revenue Bonds, Refunding (Sanford Obligated Group) | 5.00 | 11/1/2035 | 3,000,000 | 3,543,570 | |||||
9,210,470 | |||||||||
Tennessee - 1.3% | |||||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board, Revenue Bonds, Refunding (Lipscomb University Obligated Group Project) | 5.00 | 10/1/2037 | 1,000,000 | 1,274,930 | |||||
Tennessee Energy Acquisition Corp., Revenue Bonds | 4.00 | 11/1/2025 | 5,000,000 | 5,737,250 | |||||
The Metropolitan Nashville Airport Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2044 | 8,000,000 | 10,295,360 | |||||
17,307,540 | |||||||||
Texas - 8.9% | |||||||||
Austin Convention Enterprises, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2029 | 1,880,000 | 2,296,063 | |||||
Austin Water & Wastewater System, Revenue Bonds, Refunding, Ser. A | 5.00 | 11/15/2043 | 10,500,000 | 11,777,850 | |||||
Central Texas Turnpike System, Revenue Bonds, Refunding, Ser. A | 5.00 | 8/15/2041 | 3,530,000 | 3,890,801 |
20
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Texas - 8.9% (continued) | |||||||||
Central Texas Turnpike System, Revenue Bonds, Refunding, Ser. C | 5.00 | 8/15/2031 | 5,000,000 | 5,856,800 | |||||
Corpus Christi Utility System, Revenue Bonds | 5.00 | 7/15/2040 | 5,000,000 | 5,903,100 | |||||
Garland Electric Utility System, Revenue Bonds, Refunding | 5.00 | 3/1/2044 | 3,000,000 | 3,780,930 | |||||
Love Field Airport Modernization Corp., Revenue Bonds (Southwest Airlines Company Project) | 5.00 | 11/1/2028 | 4,450,000 | 4,891,262 | |||||
Lower Colorado River Authority, Revenue Bonds, Refunding | 5.00 | 5/15/2039 | 6,750,000 | 7,580,047 | |||||
Lower Colorado River Authority, Revenue Bonds, Refunding (LCRA Transmission Services) Ser. A | 4.00 | 5/15/2049 | 1,500,000 | 1,736,355 | |||||
Lower Colorado River Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 5/15/2031 | 7,895,000 | 8,894,349 | |||||
Lubbock Electric Light & Power System, Revenue Bonds | 5.00 | 4/15/2048 | 5,000,000 | 6,162,850 | |||||
North Texas Tollway Authority, Revenue Bonds, Refunding | 5.00 | 1/1/2048 | 1,750,000 | 2,139,865 | |||||
North Texas Tollway Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2039 | 14,250,000 | 17,174,527 | |||||
Northside Independent School District, GO (Insured; Permanent School Fund Guarantee Program) | 5.00 | 8/15/2043 | 8,000,000 | 9,067,920 | |||||
San Antonio Electric & Gas Systems, Revenue Bonds | 5.00 | 2/1/2043 | 9,275,000 | 10,383,919 | |||||
Tarrant County Cultural Education Facilities Finance Corp., Revenue Bonds, Refunding (Baylor Scott & White Health Obligated Group) Ser. A | 5.00 | 11/15/2045 | 2,500,000 | 3,021,175 | |||||
Texas A&M University, Revenue Bonds, Refunding, Ser. E | 5.00 | 5/15/2047 | 2,485,000 | 3,083,686 | |||||
Texas Municipal Power Agency, Revenue Bonds, Refunding | 5.00 | 9/1/2042 | 1,750,000 | 1,784,318 | |||||
West Harris County Regional Water Authority, Revenue Bonds, Refunding | 4.00 | 12/15/2049 | 3,850,000 | 4,494,105 | |||||
113,919,922 | |||||||||
U.S. Related - .4% | |||||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Corp.) Ser. L | 5.25 | 7/1/2041 | 4,900,000 | 5,519,899 |
21
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Utah - .5% | |||||||||
Salt Lake City, Revenue Bonds, Ser. A | 5.00 | 7/1/2037 | 4,500,000 | 5,542,830 | |||||
Utah Charter School Finance Authority, Revenue Bonds | 5.00 | 10/15/2048 | 1,200,000 | 1,462,344 | |||||
7,005,174 | |||||||||
Virginia - .4% | |||||||||
Danville Industrial Development Authority, Revenue Bonds, Refunding (Danville Regional Medical Center) (Insured; American Municipal Bond Assurance Corp.) (Escrowed to Maturity) | 5.25 | 10/1/2028 | 1,300,000 | 1,475,396 | |||||
Virginia Small Business Financing Authority, Revenue Bonds (95 Express Lanes) | 5.00 | 7/1/2034 | 3,400,000 | 3,635,382 | |||||
5,110,778 | |||||||||
Washington - 4.0% | |||||||||
Grant County Public Utility District No. 2, Revenue Bonds, Refunding, Ser. 2017-O | 5.00 | 1/1/2047 | 3,400,000 | 4,211,478 | |||||
Port of Seattle, Revenue Bonds | 5.00 | 4/1/2044 | 5,000,000 | 6,250,050 | |||||
Washington, GO, Ser. A1 | 5.00 | 8/1/2035 | 10,000,000 | 12,073,700 | |||||
Washington Convention Center Public Facilities District, Revenue Bonds | 5.00 | 7/1/2043 | 12,000,000 | 14,898,240 | |||||
Washington Health Care Facilities Authority, Revenue Bonds, Refunding (Providence Health & Services Obligated Group) Ser. A | 5.00 | 10/1/2042 | 12,375,000 | 13,476,004 | |||||
50,909,472 | |||||||||
Wisconsin - 2.9% | |||||||||
Public Finance Authority, Revenue Bonds, Refunding (Renown Regional Medical Center) Ser. A | 5.00 | 6/1/2040 | 6,000,000 | 7,112,820 | |||||
Public Finance Authority, Revenue Bonds, Refunding (WakeMed Hospital Obligated Group) Ser. A | 5.00 | 10/1/2044 | 3,890,000 | 4,858,415 | |||||
Tender Option Bond Trust Receipts (Series 2017-XF2418), (Wisconsin Health & Educational Facilities Authority, Revenue Bonds, Refunding (Ascension Health Alliance Senior Credit Group)) Recourse, Underlying Coupon Rate (%) 5.00 | 9.80 | 11/15/2043 | 10,000,000 | c,g,h | 11,260,450 |
22
�� | |||||||||
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 99.4%(continued) | |||||||||
Wisconsin - 2.9% (continued) | |||||||||
Wisconsin Health & Educational Facilities Authority, Revenue Bonds, Refunding (ProHealth Care Obligated Group) | 5.00 | 8/15/2039 | 6,100,000 | 6,906,786 | |||||
Wisconsin Health & Educational Facilities Authority, Revenue Bonds, Refunding (Rogers Memorial Hospital Obligated Group) Ser. A | 5.00 | 7/1/2049 | 1,500,000 | 1,790,040 | |||||
Wisconsin Public Finance Authority, Revenue Bonds (KU Campus Development Corporation Project) | 5.00 | 3/1/2046 | 5,000,000 | 5,932,200 | |||||
37,860,711 | |||||||||
TotalLong-Term Municipal Investments | 1,274,710,303 | ||||||||
Total Investments(cost $1,173,860,724) | 99.7% | 1,278,761,031 | |||||||
Cash and Receivables (Net) | 0.3% | 3,307,276 | |||||||
Net Assets | 100.0% | 1,282,068,307 |
a Variable rate security—rate shown is the interest rate in effect at period end.
b Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
c Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At February 29, 2020, these securities were valued at $32,657,169 or 2.55% of net assets.
d Auction Rate Security—interest rate is reset periodically under an auction process that is conducted by an auction agent. Rate shown is the interest rate in effect at period end.
e These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on the municipal issue and to retire the bonds in full at the earliest refunding date.
f Security issued with a zero coupon. Income is recognized through the accretion of discount.
g The Variable Rate shall be determined by the Remarketing Agent in its sole discretion based on prevailing market conditions and may, but need not, be established by reference to one or more financial indices.
h Collateral for floating rate borrowings. The coupon rate given represents the current interest rate for the inverse floating rate security.
23
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited)† | Value (%) |
Medical | 14.0 |
General | 13.6 |
Airport | 13.4 |
Transportation | 10.2 |
Water | 8.4 |
Power | 7.3 |
General Obligation | 5.8 |
Education | 5.5 |
Development | 4.4 |
Tobacco Settlement | 4.3 |
School District | 3.3 |
Nursing Homes | 3.2 |
Utilities | 2.3 |
Facilities | 1.4 |
Special Tax | .7 |
Prerefunded | .6 |
Pollution | .4 |
Student Loan | .4 |
Multifamily Housing | .3 |
Bond Bank | .2 |
99.7 |
† Based on net assets.
See notes to financial statements.
24
Summary of Abbreviations(Unaudited) | |||
ABAG | Association of Bay Area Governments | ACA | American Capital Access |
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond Assurance Corporation | ARRN | Adjustable Rate Receipt Notes |
BAN | Bond Anticipation Notes | BPA | Bond Purchase Agreement |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse Tax-Exempt Receipts |
EDR | Economic Development Revenue | EIR | Environmental Improvement Revenue |
EFFE | Effective Federal Funds Rate | EURIBOR | Euro Interbank Offered Rate |
FCPR | Farm Credit Prime Rate | FGIC | Financial Guaranty Insurance Company |
FHA | Federal Housing Administration | FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation | FNMA | Federal National Mortgage Association |
GAN | Grant Anticipation Notes | GIC | Guaranteed Investment Contract |
GNMA | Government National Mortgage Association | GO | General Obligation |
HR | Hospital Revenue | IDB | Industrial Development Board |
IDC | Industrial Development Corporation | IDR | Industrial Development Revenue |
LIBOR | London Interbank Offered Rate | LIFERS | Long Inverse Floating Exempt Receipts |
LOC | Letter of Credit | LOR | Limited Obligation Revenue |
LR | Lease Revenue | NAN | Note Anticipation Notes |
MERLOTS | Municipal Exempt Receipts Liquidity Option Tender | MFHR | Multi-Family Housing Revenue |
MFMR | Multi-Family Mortgage Revenue | MUNIPSA | Securities Industry and Financial Markets Association Municipal Swap Index Yield |
PCR | Pollution Control Revenue | P-FLOATS | Puttable Floating Option Tax-Exempt Receipts |
PILOT | Payment in Lieu of Taxes | PRIME | Prime Lending Rate |
PUTTERS | Puttable Tax-Exempt Receipts | OBFR | Overnight Bank Funding Rate |
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes |
RAW | Revenue Anticipation Warrants | RIB | Residual Interest Bonds |
ROCS | Reset Options Certificates | RRR | Resources Recovery Revenue |
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement |
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue |
SOFR | Secured Overnight Financing Rate | SONYMA | State of New York Mortgage Agency |
SPEARS | Short Puttable Exempt Adjustable Receipts | SWDR | Solid Waste Disposal Revenue |
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants |
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
See notes to financial statements.
25
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments | 1,173,860,724 |
| 1,278,761,031 |
| ||
Interest receivable |
| 12,701,433 |
| |||
Receivable for investment securities sold |
| 2,253,796 |
| |||
Receivable for shares of Common Stock subscribed |
| 58,512 |
| |||
Prepaid expenses |
|
|
|
| 25,772 |
|
|
|
|
|
| 1,293,800,544 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 705,792 |
| |||
Cash overdraft due to Custodian |
|
|
|
| 504,930 |
|
Payable for floating rate notes issued—Note 4 |
| 5,000,000 |
| |||
Payable for investment securities purchased |
| 3,946,315 |
| |||
Payable for shares of Common Stock redeemed |
| 1,463,703 |
| |||
Interest and expense payable related to |
| 25,113 |
| |||
Directors’ fees and expenses payable |
| 9,598 |
| |||
Other accrued expenses |
|
|
|
| 76,786 |
|
|
|
|
|
| 11,732,237 |
|
Net Assets ($) |
|
| 1,282,068,307 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 1,170,806,213 |
|
Total distributable earnings (loss) |
|
|
|
| 111,262,094 |
|
Net Assets ($) |
|
| 1,282,068,307 |
|
Shares Outstanding |
|
| ||
(600 million shares of $.001 par value Common Stock authorized) | 104,355,070 |
| ||
Net Asset Value Per Share ($) |
| 12.29 |
| |
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
26
STATEMENT OF OPERATIONS
Six Months Ended February 29, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 20,550,878 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 3,761,521 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 470,659 |
| ||
Directors’ fees and expenses—Note 3(c) |
|
| 57,299 |
| ||
Interest and expense related to floating rate notes issued—Note 4 |
|
| 46,493 |
| ||
Professional fees |
|
| 36,957 |
| ||
Registration fees |
|
| 17,642 |
| ||
Custodian fees—Note 3(b) |
|
| 12,851 |
| ||
Loan commitment fees—Note 2 |
|
| 12,305 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 6,661 |
| ||
Prospectus and shareholders’ reports |
|
| 6,462 |
| ||
Miscellaneous |
|
| 31,995 |
| ||
Total Expenses |
|
| 4,460,845 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (12,851) |
| ||
Net Expenses |
|
| 4,447,994 |
| ||
Investment Income—Net |
|
| 16,102,884 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 9,558,028 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 13,011,792 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 22,569,820 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 38,672,704 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
27
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 16,102,884 |
|
|
| 34,903,970 |
| |
Net realized gain (loss) on investments |
| 9,558,028 |
|
|
| 8,308,389 |
| ||
Net change in unrealized appreciation |
| 13,011,792 |
|
|
| 57,102,811 |
| ||
Net Increase (Decrease) in Net Assets | 38,672,704 |
|
|
| 100,315,170 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders |
|
| (25,659,496) |
|
|
| (37,255,130) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold |
|
| 16,783,719 |
|
|
| 34,264,104 |
| |
Distributions reinvested |
|
| 20,555,963 |
|
|
| 28,945,172 |
| |
Cost of shares redeemed |
|
| (47,416,813) |
|
|
| (130,424,413) |
| |
Increase (Decrease) in Net Assets | (10,077,131) |
|
|
| (67,215,137) |
| |||
Total Increase (Decrease) in Net Assets | 2,936,077 |
|
|
| (4,155,097) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 1,279,132,230 |
|
|
| 1,283,287,327 |
| |
End of Period |
|
| 1,282,068,307 |
|
|
| 1,279,132,230 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Shares sold |
|
| 1,392,601 |
|
|
| 2,932,396 |
| |
Shares issued for distributions reinvested |
|
| 1,710,504 |
|
|
| 2,483,328 |
| |
Shares redeemed |
|
| (3,935,486) |
|
|
| (11,212,030) |
| |
Net Increase (Decrease) in Shares Outstanding | (832,381) |
|
|
| (5,796,306) |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
28
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
February 29, 2020 | Year Ended August 31, | |||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | ||||||
Net asset value, | 12.16 | 11.56 | 11.85 | 12.18 | 11.71 | 11.79 |
Investment Operations: | ||||||
Investment income—neta | .15 | .32 | .34 | .36 | .38 | .39 |
Net realized and unrealized | .22 | .63 | (.29) | (.33) | .47 | (.08) |
Total from Investment Operations | .37 | .95 | .05 | .03 | .85 | .31 |
Distributions: | ||||||
Dividends from | (.15) | (.33) | (.34) | (.36) | (.38) | (.39) |
Dividends from net realized | (.09) | (.02) | (.00)b | - | - | - |
Total Distributions | (.24) | (.35) | (.34) | (.36) | (.38) | (.39) |
Net asset value, end of period | 12.29 | 12.16 | 11.56 | 11.85 | 12.18 | 11.71 |
Total Return (%) | 3.15c | 8.35 | .52 | .29 | 7.32 | 2.67 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .71d | .73 | .72 | .73 | .73 | .72 |
Ratio of net expenses | .71d | .73 | .72 | .73 | .73 | .72 |
Ratio of interest and | .01d | .01 | .01 | .00e | .00e | .01 |
Ratio of net investment | 2.57d | 2.78 | 2.90 | 3.07 | 3.16 | 3.32 |
Portfolio Turnover Rate | 10.14c | 14.49 | 31.21 | 13.89 | 16.38 | 14.65 |
Net Assets, | 1,282,068 | 1,279,132 | 1,283,287 | 1,364,939 | 1,473,395 | 1,429,159 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
e Amount represents less than .01%.
See notes to financial statements.
29
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Municipal Bond Fund (the “fund”) is the sole series of BNY Mellon Municipal Bond Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The fund’s investment objectiveis to seek to maximize current income exempt from federal income tax, to the extent consistent with the preservation of capital.BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly.
30
GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Company’s Board of Directors (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Debt investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of February 29, 2020in valuing the fund’s investments:
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | |
Assets ($) |
|
|
|
|
Investments in Securities: † | ||||
Collateralized Municipal-Backed Securities | - | 4,050,728 | - | 4,050,728 |
Municipal Securities | - | 1,274,710,303 | - | 1,274,710,303 |
Liabilities ($) | ||||
Floating Rate Notes†† | - | (5,000,000) | - | (5,000,000) |
† See Statement of Investments for additional detailed categorizations, if any.
†† Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial reporting purposes.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
(c) Dividends and distributions to shareholders:It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such
32
gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended February 29, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended February 29, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended August 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended August 31, 2019 was as follows: tax-exempt income $35,171,584 and long-term capital gains $2,083,546. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $1.030 billion unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), a subsidiary of BNY Mellon and an affiliate of the Adviser, each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $830 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is in amount equal to $200 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended February 29, 2020, the fund did not borrow under the Facilities.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a)Pursuant to a management agreement with the Adviser, the management fee is computed at the annual rate of .60% of the value of the fund’s average daily net assets and is payable monthly.
(b) Under the Shareholder Services Plan, the fund reimburses the Distributor at an amount not to exceed an annual rate of .25% of the value of the fund’s average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended February 29, 2020, the fund was charged $260,663 pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended February 29, 2020, the fund was charged $118,963 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended February 29, 2020, the fund was charged $12,851 pursuant to the custody agreement. These fees were offset by earnings credits of $12,851.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended February 29, 2020, the fund was charged $6,840 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations.
34
During the period ended February 29, 2020, the fund was charged $6,661 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $603,732, Shareholder Services Plan fees of $45,000, custodian fees of $8,000, Chief Compliance Officer fees of $2,219 and transfer agency fees of $46,841.
(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended February 29, 2020, amounted to $127,773,599 and $149,449,187, respectively.
Inverse Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust (the “Inverse Floater Trust”). The Inverse Floater Trust typically issues two variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals (“Trust Certificates”). A residual interest tax-exempt security is also created by the Inverse Floater Trust, which is transferred to the fund, and is paid interest based on the remaining cash flows of the Inverse Floater Trust, after payment of interest on the other securities and various expenses of the Inverse Floater Trust. An Inverse Floater Trust may be collapsed without the consent of the fund due to certain termination events such as bankruptcy, default or other credit event.
The fund accounts for the transfer of bonds to the Inverse Floater Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the Trust Certificates reflected as fund liabilities in the Statement of Assets and Liabilities.
The fund may invest in inverse floater securities on either a non-recourse or recourse basis. These securities are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par
35
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
plus accrued interest on any business day prior to a termination event. When the fund invests in inverse floater securities on a non-recourse basis, the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event to the holders of the Trust Certificates. When this occurs, the Liquidity Provider typically liquidates all or a portion of the municipal securities held in the Inverse Floater Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the bonds in the Inverse Floater Trust (“Liquidation Shortfall”). When a fund invests in inverse floater securities on a recourse basis, the fund typically enters into a reimbursement agreement with the Liquidity Provider where the fund is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a fund investing in a recourse inverse floater security bears the risk of loss with respect to any Liquidation Shortfall.
The average amount of borrowings outstanding under the inverse floater structure during the period ended February 29, 2020, was approximately $5,000,000, with a related weighted average annualized interest rate of 1.87%.
At February 29, 2020, accumulated net unrealized appreciation on investments was $104,900,307, consisting of $105,252,373 gross unrealized appreciation and $352,066 gross unrealized depreciation.
At February 29, 2020, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 5—Subsequent Event:
The post period-end coronavirus outbreak is impacting the global economy and the market environment. The final impact of the coronavirus outbreak on the investments of the Company is hard to predict. Considering post period-end market conditions, however, the carrying values retained for the investments in the financial statements may differ significantly from the current values of the investments.
36
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on November 5, 2019, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of general and insured municipal debt funds (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional general and insured municipal debt funds (the “Performance Universe”), all for various periods ended September 30, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of funds consisting of all retail no-load general and insured municipal debt funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the
37
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group median for the one-, four- and five-year periods and below the Performance Group median for the two-, three- and ten-year periods, and was at or above the Performance Universe median for the four- and five-year periods, respectively, but below the Performance Universe median for each other period. The Board also considered that the fund’s yield performance was below the Performance Group median yield performance for eight of the ten one-year periods ended September 30th and was at or above the Performance Universe median yield performance for seven of the ten one-year periods ended September 30th. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. The Board also noted that the fund had a four star overall rating from Morningstar based on Morningstar’s risk-adjusted return measures.
The Board reviewed and considered the contractual management fee rate paid by the fund to the Adviser over the fund’s last fiscal year in light of the nature, extent and quality of the management services provided by the Adviser.
The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group and Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense Group and Expense Universe median total expenses.
Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund or separate accounts and/or other similar types of client portfolios that are considered to have similar investment strategies and policies as the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also
38
had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
39
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
40
NOTES
41
BNY Mellon Municipal Bond Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbol: DRTAX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
Item 2. | Code of Ethics. |
Not applicable. | |
Item 3. | Audit Committee Financial Expert. |
Not applicable. | |
Item 4. | Principal Accountant Fees and Services. |
Not applicable. | |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable. | |
Item 6. | Investments. |
(a) | Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment |
Companies. | |
Not applicable. | |
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable. | |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated |
Purchasers. | |
Not applicable. | |
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures applicable to Item 10. | |
Item 11. | Controls and Procedures. |
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
3
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the
Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the
Investment Company Act of 1940.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BNY Mellon Municipal Bond Funds, Inc.
By: | /s/ Renee LaRoche-Morris |
Renee LaRoche-Morris | |
President (Principal Executive Officer) | |
Date: | April27, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Renee LaRoche-Morris |
Renee LaRoche-Morris | |
President (Principal Executive Officer) | |
Date: | April27, 2020 |
By: | /s/ James Windels |
James Windels | |
Treasurer (Principal Financial Officer) | |
Date: | April24, 2020 |
5
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under
the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under
the Investment Company Act of 1940. (EX-99.906CERT)
6