We are pleased to present this semiannual report for BNY Mellon Municipal Income, Inc., covering the six-month period from October 1, 2019 through March 31, 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. 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. However, the positive outlook was short-lived, as concerns over the spread of the coronavirus roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. 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 in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of 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.
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by Daniel Rabasco and Jeffrey Burger, Primary Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Municipal Income, Inc. produced a total return of -4.18% on a net-asset-value basis and -9.99% on a market price basis.1 Over the same period, the fund provided aggregate income dividends of $0.21 per share, which reflects a distribution rate of 5.11%.2
Municipal bonds declined during the reporting period, due largely to the market turmoil resulting from COVID-19 pandemic. The municipal bond market rallied through much of the period, supported by strong demand and interest rate cuts by the Federal Reserve (the “Fed”). But the emergence of the COVID-19 crisis resulted in a flight to safety that hurt municipal market performance.
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. Under normal market conditions, the fund invests at least 80% of the value of its net assets in municipal obligations and invests in municipal obligations which, at the time of purchase, are rated investment grade or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. in the case of bonds, and rated in the two highest rating categories or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. in the case of short-term obligations having, or deemed to have, maturities of less than one year.
To this end, we have constructed a portfolio based on identifying income opportunities through analysis of each bond’s structure, including paying close attention to each bond’s yield, maturity and early redemption features. Over time, many of the fund’s relatively higher-yielding bonds mature or are redeemed by their issuers, and we generally attempt to replace those bonds with investments consistent with the fund’s investment policies, albeit with yields that reflect the then-current interest-rate environment. When making new investments, we focus on identifying undervalued sectors and securities, and we minimize the use of interest-rate forecasting. We use fundamental analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market.
COVID-19 Concerns and Supply-Demand Factors Drove Municipal Bonds
Through most of the reporting period, the municipal bond market experienced strong demand against a backdrop of moderating economic growth and mundane inflation prospects. Demand was driven especially by investors in states with high income-tax rates. Many of these investors moved into municipal bonds as a way to reduce their 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.
Actions by the Fed early in the period, including two rate cuts, also helped performance in the municipal bond market. This contributed to a decline in yields across the municipal bond
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.
Supply increased somewhat during the reporting period, as low interest rates led issuers to seek to capture favorable financing. New issuance may have been inhibited by the absence of advance refunding, which was eliminated by the Tax Cuts and Jobs Act of 2017.
The municipal bond market continued to perform well early in 2020 until the emergence of the COVID-19 crisis, which resulted in turmoil and hindered returns, particularly in March. A conflict between Russia and Saudi Arabia over oil prices also contributed to economic deterioration and uncertainty, leading to a flight to quality.
Actions by the Fed, including two emergency rate cuts in March 2020, provided some support to the municipal bond market, but technical supply and demand factors became the predominant driver. Though the municipal bond market often benefits from economic uncertainty, in this environment that was not the case. Fears of widespread economic damage due to the COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented them from hedging their municipal bond purchases by shorting Treasuries, as they normally do.
In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond yields rose, insurance companies and other large investors were expected to step in, but since there was also a lack of liquidity in corporate bonds, which normally would have financed their municipal bond purchases, these investors were hindered in their ability to act. As a result, the municipal market yield spreads rose significantly, especially among high yield and lower-rated investment grade bonds, weakening performance.
Fundamentals in the municipal bond market were quite healthy heading into the crises exhibiting strong fiscal balances and “rainy day” funds.
Asset Allocation and Leverage Hampered Fund Results
The fund’s performance was hindered during the reporting period by its overweight position in revenue bonds and an underweight position in general obligation bonds. Security selection was unfavorable as well, as positions in Illinois and Chicago general obligation bonds underperformed. In addition, positions in the health care, airport and tobacco sectors were detrimental. The fund’s tender option bond positions, also hindered performance as the funding costs associated with this leverage skyrocketed. Additionally, the fund hedged the added duration of the tender option bonds by shorting long-term Treasuries; however, this hedge against rising interest rates became untenable as rates on long-term Treasury securities actually declined.
On a more positive note, the fund’s performance was assisted by its yield curve positioning. Two-year and five-year bonds, in particular, performed well, and the fund’s longer duration proved advantageous for the earlier portion of the period.
4
A Constructive Investment Posture
Despite the recent turmoil and the continuing economic uncertainty, we remain, on a whole, constructive on the medium to long term prospects of the market. Although defaults and credit downgrades are likely, the economy will be supported by the COVID-19 Aid, Relief, and Economic Security (CARES) Act, and programs recently announced by the Fed, including direct lending to municipalities, should support the municipal bond market. The fund increased its income generation prospects by executing bond swaps out of lower book yielding issues into those offering higher yields as a result of the market dislocation characterized by spread widening.
April 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid, based upon net asset value per share or market price per share, as applicable. Past performance is no guarantee of future results. Market price per share, net asset value per share and investment return fluctuate. 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 Distribution rate per share is based upon dividends per share paid from net investment income during the period, divided by the market price per share at the end of the period, adjusted for any capital gain distributions.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines. High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
5
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Bonds and Notes - 1.0% | | | | | |
Collateralized Municipal-Backed Securities - 1.0% | | | | | |
Federal Home Loan Mortgage Corp. Multifamily Variable Rate Certificate, Revenue Bonds, Ser. M048
(cost $1,510,890) | | 3.15 | | 1/15/2036 | | 1,500,000 | a | 1,729,380 | |
| | | | | | | | | |
Long-Term Municipal Investments - 161.5% | | | | | |
Alabama - 4.6% | | | | | |
Jefferson County, Revenue Bonds, Refunding, Ser. F | | 0/7.75 | | 10/1/2046 | | 4,000,000 | b | 3,755,520 | |
The Lower Alabama Gas District, Revenue Bonds, Ser. A | | 5.00 | | 9/1/2046 | | 2,500,000 | | 2,940,200 | |
University of Alabama at Birmingham, Revenue Bonds, Ser. B | | 4.00 | | 10/1/2036 | | 1,500,000 | | 1,739,865 | |
| | 8,435,585 | |
Arizona - 3.8% | | | | | |
Glendale Industrial Development Authority, Revenue Bonds, Refunding (Sun Health Services Obligated Group) Ser. A | | 5.00 | | 11/15/2054 | | 1,500,000 | | 1,637,565 | |
La Paz County Industrial Development Authority, Revenue Bonds (Charter School Solutions) Ser. A | | 5.00 | | 2/15/2046 | | 1,500,000 | a | 1,591,080 | |
La Paz County Industrial Development Authority, Revenue Bonds (Charter School Solutions) Ser. A | | 5.00 | | 2/15/2036 | | 1,000,000 | a | 1,077,410 | |
Salt Verde Financial Corp., Revenue Bonds | | 5.00 | | 12/1/2037 | | 2,190,000 | | 2,582,711 | |
| | 6,888,766 | |
California - 15.1% | | | | | |
California, GO | | 6.00 | | 3/1/2033 | | 1,250,000 | | 1,251,550 | |
Santa Ana Community Redevelopment Agency, Tax Allocation Bonds, Refunding (Merged Project Area) Ser. A | | 6.75 | | 3/1/2021 | | 3,000,000 | c | 3,156,510 | |
Southern California Tobacco Securitization Authority, Revenue Bonds, Refunding | | 5.00 | | 6/1/2048 | | 1,000,000 | | 1,051,590 | |
6
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
California - 15.1% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0371), (Los Angeles Department of Airports, Revenue Bonds (Los Angeles International Airport)) Non-recourse, Underlying Coupon Rate (%) 5.25 | | 2.05 | | 5/15/2029 | | 10,000,000 | a,d,e | 10,044,700 | |
Tender Option Bond Trust Receipts (Series 2016-XM0387), (Los Angeles Department of Airports, Revenue Bonds (Los Angeles International Airport)) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 1.18 | | 5/15/2038 | | 4,000,000 | a,d,e | 4,319,070 | |
Tender Option Bond Trust Receipts (Series 2016-XM0390), (The Regents of the University of California, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 1.18 | | 5/15/2036 | | 3,750,000 | a,d,e | 4,123,869 | |
Tender Option Bond Trust Receipts (Series 2019-XF2838), (San Francisco California City & County Airports Community International Airport, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 4.00 | | -2.84 | | 5/1/2050 | | 3,250,000 | a,d,e | 3,429,708 | |
| | | | | | |
| 27,376,997 | |
Colorado - 8.0% | | | | | |
Colorado Educational & Cultural Facilities Authority, Revenue Bonds, Refunding (Johnson & Wales University) Ser. B | | 5.00 | | 4/1/2031 | | 1,680,000 | | 1,806,118 | |
Colorado High Performance Transportation Enterprise, Revenue Bonds | | 5.00 | | 12/31/2051 | | 1,500,000 | | 1,527,135 | |
E-470 Public Highway Authority, Revenue Bonds, Refunding, Ser. C | | 5.25 | | 9/1/2025 | | 1,000,000 | | 1,014,860 | |
E-470 Public Highway Authority, Revenue Bonds, Refunding, Ser. C | | 5.38 | | 9/1/2026 | | 1,000,000 | | 1,014,980 | |
Tender Option Bond Trust Receipts (Series 2016-XM0385), (Board of Governors of the Colorado State University, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.58 | | 3/1/2038 | | 2,550,000 | a,d,e | 2,735,464 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Colorado - 8.0% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0433), (Colorado Springs, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00 | | 0.82 | | 11/15/2043 | | 3,997,093 | a,d,e | 4,416,653 | |
Tender Option Bond Trust Receipts (Series 2020-XM0829), (Colorado Health Facilities Authority, Revenue Bonds, Refunding (CommonSpirit Health Obligated Group) Ser. A1) Recourse, Underlying Coupon Rate (%) 4.00 | | 0.01 | | 8/1/2044 | | 1,645,000 | a,d,e | 1,978,913 | |
| | | | | | |
| 14,494,123 | |
Connecticut - 1.6% | | | | | |
Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Trinity Health Obligated Group) | | 5.00 | | 12/1/2045 | | 2,500,000 | | 2,841,600 | |
District of Columbia - 4.2% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0437), (District of Columbia, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00 | | 0.81 | | 12/1/2035 | | 6,997,490 | a,d,e | 7,619,737 | |
Florida - 8.5% | | | | | |
Atlantic Beach, Revenue Bonds (Fleet Landing Project) Ser. A | | 5.00 | | 11/15/2053 | | 1,500,000 | | 1,535,790 | |
Davie, Revenue Bonds (Nova Southeastern University Project) Ser. A | | 5.63 | | 4/1/2043 | | 1,000,000 | | 1,085,080 | |
Florida Higher Educational Facilities Financial Authority, Revenue Bonds (Ringling College Project) | | 5.00 | | 3/1/2049 | | 1,500,000 | | 1,581,450 | |
Halifax Hospital Medical Center, Revenue Bonds, Refunding | | 4.00 | | 6/1/2041 | | 1,000,000 | | 1,034,290 | |
Mid-Bay Bridge Authority, Revenue Bonds, Ser. A | | 7.25 | | 10/1/2021 | | 1,500,000 | c | 1,627,230 | |
Palm Beach County Health Facilities Authority, Revenue Bonds (Lifespace Communities Obligated Group) Ser. B | | 4.00 | | 5/15/2053 | | 1,000,000 | | 889,130 | |
St. Johns County Industrial Development Authority, Revenue Bonds, Refunding (Presbyterian Retirement Communities Obligated Group Project) Ser. A | | 5.88 | | 8/1/2020 | | 2,000,000 | c | 2,029,280 | |
8
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Illinois - 20.9% (continued) | | | | | |
Chicago II Wastewater, Revenue Bonds, Refunding, Ser. C | | 5.00 | | 1/1/2039 | | 1,100,000 | | 1,231,032 | |
Chicago II Wasteworks, Revenue Bonds (2nd Lien Project) | | 5.00 | | 11/1/2028 | | 1,000,000 | | 1,131,150 | |
Chicago O'Hare International Airport, Revenue Bonds | | 5.63 | | 1/1/2035 | | 270,000 | | 277,952 | |
Chicago O'Hare International Airport, Revenue Bonds | | 5.63 | | 1/1/2021 | | 730,000 | c | 754,499 | |
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. A | | 5.00 | | 1/1/2048 | | 2,000,000 | | 2,243,620 | |
Illinois, GO, Refunding, Ser. A | | 5.00 | | 10/1/2029 | | 1,000,000 | | 1,040,580 | |
Illinois, GO, Ser. A | | 5.00 | | 5/1/2038 | | 1,250,000 | | 1,267,700 | |
Illinois, GO, Ser. C | | 5.00 | | 11/1/2029 | | 2,800,000 | | 2,902,592 | |
Illinois Finance Authority, Revenue Bonds, Refunding (Rosalind Franklin University) | | 5.00 | | 8/1/2047 | | 1,350,000 | | 1,419,700 | |
Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Expansion Project) Ser. A | | 5.00 | | 6/15/2053 | | 2,500,000 | | 2,456,075 | |
Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Project) (Insured; National Public Finance Guarantee Corp.) Ser. A | | 0.00 | | 12/15/2036 | | 2,500,000 | f | 1,351,050 | |
Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Project) Ser. B | | 5.00 | | 12/15/2028 | | 1,500,000 | | 1,512,330 | |
Railsplitter Tobacco Settlement Authority, Revenue Bonds | | 6.00 | | 6/1/2021 | | 2,000,000 | c | 2,111,780 | |
Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A | | 4.00 | | 1/1/2038 | | 1,500,000 | | 1,552,275 | |
Tender Option Bond Trust Receipts (Series 2016-XM0378), (Greater Chicago Metropolitan Water Reclamation District, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.45 | | 12/1/2032 | | 2,500,000 | a,d,e | 2,621,381 | |
Tender Option Bond Trust Receipts (Series 2017-XM0492), (Illinois Finance Authority, Revenue Bonds, Refunding (The University of Chicago)) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 1.17 | | 10/1/2040 | | 7,000,000 | a,d,e | 8,133,142 | |
10
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Illinois - 20.9% (continued) | | | | | |
University of Illinois, Revenue Bonds, Refunding, Ser. A | | 5.13 | | 4/1/2036 | | 1,000,000 | | 1,032,080 | |
| | 37,957,082 | |
Indiana - .7% | | | | | |
Indiana Finance Authority, Revenue Bonds (Parkview Health System Obligated Group) Ser. A | | 5.00 | | 11/1/2043 | | 1,000,000 | | 1,210,490 | |
Kentucky - .6% | | | | | |
Kentucky Economic Development Finance Authority, Revenue Bonds, Refunding (Louisville Arena Project) (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 5.00 | | 12/1/2045 | | 1,000,000 | | 1,170,550 | |
Louisiana - 4.6% | | | | | |
Louisiana Local Government Environmental Facilities & Community Development Authority, Revenue Bonds, Refunding (Westlake Chemical Project) | | 3.50 | | 11/1/2032 | | 1,000,000 | | 966,030 | |
Tender Option Bond Trust Receipts (Series 2018-XF2584), (Louisiana Public Facilities Authority, Revenue Bonds (Franciscan Missionaries of Our Lady Health System Project)) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.95 | | 7/1/2047 | | 6,320,000 | a,d,e | 7,339,448 | |
| | 8,305,478 | |
Maine - .7% | | | | | |
Maine Health & Higher Educational Facilities Authority, Revenue Bonds (Maine General Medical Center Obligated Group) | | 7.50 | | 7/1/2032 | | 1,250,000 | | 1,337,887 | |
Maryland - 2.1% | | | | | |
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds (Adventist Healthcare Obligated Group) Ser. A | | 5.50 | | 1/1/2046 | | 1,500,000 | | 1,607,100 | |
Tender Option Bond Trust Receipts (Series 2016-XM0391), (Mayor & City Council of Baltimore, Revenue Bonds, Refunding (Water Projects)) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.94 | | 7/1/2042 | | 2,000,000 | a,d,e | 2,199,330 | |
| | | | | | |
| 3,806,430 | |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Massachusetts - 7.2% | | | | | |
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Atrius Health Obligated Group) Ser. A | | 4.00 | | 6/1/2049 | | 1,500,000 | | 1,554,030 | |
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (UMass Memorial Health Care Obligated Group) | | 5.00 | | 7/1/2044 | | 1,810,000 | | 1,940,953 | |
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. A | | 5.00 | | 7/1/2026 | | 950,000 | | 1,121,884 | |
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. I | | 7.25 | | 1/1/2021 | | 600,000 | c | 626,676 | |
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. I | | 7.25 | | 1/1/2021 | | 900,000 | c | 940,014 | |
Massachusetts Educational Financing Authority, Revenue Bonds, Refunding, Ser. K | | 5.25 | | 7/1/2029 | | 1,090,000 | | 1,156,981 | |
Massachusetts Port Authority, Revenue Bonds, Refunding (Bosfuel Project) Ser. A | | 4.00 | | 7/1/2044 | | 1,500,000 | | 1,602,075 | |
Tender Option Bond Trust Receipts (Series 2016-XM0386), (University of Massachusetts Building Authority, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.50 | | 5/1/2043 | | 3,695,009 | a,d,e | 4,119,834 | |
| | | | | | |
| 13,062,447 | |
Michigan - 4.3% | | | | | |
Detroit Water Supply System, Revenue Bonds, Ser. A | | 5.00 | | 7/1/2036 | | 3,000,000 | | 3,133,470 | |
Detroit Water Supply System, Revenue Bonds, Ser. A | | 5.00 | | 7/1/2031 | | 1,500,000 | | 1,567,695 | |
Michigan Finance Authority, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. D6 | | 5.00 | | 7/1/2036 | | 500,000 | | 561,170 | |
Tender Option Bond Trust Receipts (Series 2019-XF2837), (Michigan State Finance Authority, Revenue Bonds (Henry Ford Health System)) Recourse, Underlying Coupon Rate (%) 4.00 | | -2.81 | | 11/15/2050 | | 2,440,000 | a,d,e | 2,524,644 | |
| | | | | | |
| 7,786,979 | |
12
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Minnesota - 1.4% | | | | | |
Duluth Economic Development Authority, Revenue Bonds, Refunding (Essentia Health Obligated Group) Ser. A | | 5.00 | | 2/15/2058 | | 1,000,000 | | 1,130,840 | |
St. Paul Housing & Redevelopment Authority, Revenue Bonds, Refunding (HealthEast Care System Obligated Group Project) | | 5.00 | | 11/15/2025 | | 1,200,000 | c | 1,444,176 | |
| | 2,575,016 | |
Mississippi - 1.1% | | | | | |
Warren County, Revenue Bonds (International Paper Project) Ser. A | | 5.38 | | 12/1/2035 | | 2,000,000 | | 2,050,220 | |
Missouri - 1.6% | | | | | |
Missouri Health & Educational Facilities Authority, Revenue Bonds (Lutheran Senior Services Obligated Group Projects) Ser. B | | 2.88 | | 2/1/2022 | | 1,000,000 | | 862,030 | |
Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (Lutheran Senior Services Obligated Group Projects) | | 5.00 | | 2/1/2046 | | 2,000,000 | | 2,041,400 | |
| | 2,903,430 | |
Nebraska - .6% | | | | | |
Douglas County Hospital Authority No. 2, Revenue Bonds (Childrens Hospital Obligation Group) | | 5.00 | | 11/15/2036 | | 1,000,000 | | 1,191,860 | |
Nevada - 1.5% | | | | | |
Reno, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) | | 4.00 | | 6/1/2058 | | 1,250,000 | | 1,343,512 | |
Reno, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) | | 4.13 | | 6/1/2058 | | 1,250,000 | | 1,385,512 | |
| | 2,729,024 | |
New Jersey - 6.8% | | | | | |
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | | 5.25 | | 6/15/2027 | | 1,000,000 | | 1,086,100 | |
New Jersey Economic Development Authority, Revenue Bonds, Ser. WW | | 5.25 | | 6/15/2040 | | 1,180,000 | | 1,235,401 | |
New Jersey Economic Development Authority, Revenue Bonds, Ser. WW | | 5.25 | | 6/15/2025 | | 70,000 | c | 84,295 | |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
New Jersey - 6.8% (continued) | | | | | |
New Jersey Transportation Trust Fund Authority, Revenue Bonds | | 5.00 | | 6/15/2046 | | 1,250,000 | | 1,300,850 | |
New Jersey Transportation Trust Fund Authority, Revenue Bonds | | 5.25 | | 6/15/2043 | | 2,000,000 | | 2,134,980 | |
New Jersey Transportation Trust Fund Authority, Revenue Bonds, Ser. AA | | 5.25 | | 6/15/2033 | | 1,000,000 | | 1,059,830 | |
South Jersey Port Corp., Revenue Bonds, Ser. B | | 5.00 | | 1/1/2048 | | 1,000,000 | | 1,035,700 | |
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | | 5.00 | | 6/1/2046 | | 1,250,000 | | 1,280,638 | |
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | | 5.25 | | 6/1/2046 | | 3,000,000 | | 3,088,470 | |
| | 12,306,264 | |
New Mexico - 1.6% | | | | | |
Farmington, Revenue Bonds, Refunding (Public Service Company of New Mexico San Juan Project) Ser. D | | 5.90 | | 6/1/2040 | | 3,000,000 | | 3,004,830 | |
New York - 10.0% | | | | | |
New York City Educational Construction Fund, Revenue Bonds, Ser. A | | 6.50 | | 4/1/2028 | | 1,500,000 | | 1,577,490 | |
New York City Industrial Development Agency, Revenue Bonds (Yankee Stadium Project) (Insured; Assured Guaranty Corp.) | | 7.00 | | 3/1/2049 | | 1,435,000 | | 1,449,780 | |
New York Convention Center Development Corp., Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. B | | 0.00 | | 11/15/2049 | | 5,600,000 | f | 2,054,080 | |
New York Transportation Development Corp., Revenue Bonds (LaGuardia Airport Terminal B Redevelopment Project) Ser. A | | 5.00 | | 7/1/2046 | | 1,500,000 | | 1,522,740 | |
Port Authority of New York & New Jersey, Revenue Bonds (JFK International Air Terminal Project) | | 6.00 | | 12/1/2036 | | 1,500,000 | | 1,541,880 | |
Tender Option Bond Trust Receipts (Series 2016-XM0436), (New York City Municipal Water Finance Authority, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00 | | 0.81 | | 6/15/2044 | | 7,400,000 | a,d,e | 7,802,782 | |
14
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
New York - 10.0% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2020-XM0826), (Metropolitan Transportation Authority, Revenue Bonds, Refunding (Green Bond) (Insured; Assured Guaranty Municipal Corp.) Ser. C) Non-recourse, Underlying Coupon Rate (%) 4.00 | | 0.01 | | 11/15/2046 | | 2,070,000 | a,d,e | 2,158,358 | |
| | | | | | |
| 18,107,110 | |
North Carolina - 2.8% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0444), (North Carolina Medical Care Commission, Revenue Bonds (Duke University Health System)) Recourse, Underlying Coupon Rate (%) 5.00 | | -0.62 | | 6/1/2042 | | 5,000,000 | a,d,e | 5,030,260 | |
Ohio - 1.4% | | | | | |
Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. A2 | | 4.00 | | 6/1/2048 | | 1,000,000 | | 1,073,400 | |
Butler County, Revenue Bonds | | 5.50 | | 11/1/2020 | | 450,000 | c | 461,394 | |
Cuyahoga County, Revenue Bonds, Refunding (The MetroHealth System) | | 5.00 | | 2/15/2057 | | 1,000,000 | | 1,035,060 | |
| | 2,569,854 | |
Pennsylvania - 6.5% | | | | | |
Allentown City School District, GO, Refunding (Insured; Build American Mutual) Ser. B | | 5.00 | | 2/1/2032 | | 1,255,000 | | 1,570,545 | |
Clairton Municipal Authority, Revenue Bonds, Refunding, Ser. B | | 5.00 | | 12/1/2042 | | 1,000,000 | | 1,071,290 | |
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (ACTS Retirement-Life Communities Obligated Group) | | 5.00 | | 11/15/2036 | | 1,000,000 | | 1,023,700 | |
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Sciences) | | 5.00 | | 11/1/2033 | | 2,000,000 | | 2,083,860 | |
Pennsylvania Housing Finance Agency, Revenue Bonds, Refunding, Ser. 114A | | 3.35 | | 10/1/2026 | | 1,500,000 | | 1,534,815 | |
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. A1 | | 5.00 | | 12/1/2046 | | 1,000,000 | | 1,165,560 | |
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | | 5.25 | | 12/1/2048 | | 1,000,000 | | 1,219,450 | |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Pennsylvania - 6.5% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0373), (Geisinger Authority, Revenue Bonds (Geisinger Health System)) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 1.61 | | 6/1/2041 | | 2,000,000 | a,d,e | 2,071,260 | |
| | | | | | |
| 11,740,480 | |
Rhode Island - .3% | | | | | |
Providence Public Building Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 5.00 | | 9/15/2037 | | 500,000 | | 607,280 | |
South Carolina - 6.3% | | | | | |
South Carolina Jobs-Economic Development Authority, Revenue Bonds (Bishop Gadsden Episcopal Retirement Community Obligated Group) | | 5.00 | | 4/1/2054 | | 1,000,000 | | 1,031,430 | |
Tender Option Bond Trust Receipts (Series 2016-XM0384), (South Carolina Public Service Authority, Revenue Bonds, Refunding (Santee Cooper)) Non-recourse, Underlying Coupon Rate (%) 5.13 | | 2.25 | | 12/1/2043 | | 4,800,000 | a,d,e | 5,195,696 | |
Tobacco Settlement Management Authority, Revenue Bonds, Ser. B | | 6.38 | | 5/15/2030 | | 3,750,000 | | 5,189,250 | |
| | | | | | | | 11,416,376 | |
Tennessee - 1.2% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0388), (Metropolitan Government of Nashville & Davidson County, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 0.97 | | 7/1/2040 | | 2,000,000 | a,d,e | 2,195,460 | |
Texas - 12.3% | | | | | |
Clifton Higher Education Finance Corp., Revenue Bonds (Uplift Education) Ser. A | | 4.25 | | 12/1/2034 | | 1,000,000 | | 1,019,900 | |
Harris County-Houston Sports Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 0.00 | | 11/15/2052 | | 4,000,000 | f | 1,082,200 | |
Houston Airport System, Revenue Bonds, Refunding, Ser. A | | 5.00 | | 7/1/2025 | | 1,300,000 | | 1,346,163 | |
North Texas Education Finance Corp., Revenue Bonds (Uplift Education) Ser. A | | 5.13 | | 6/1/2022 | | 2,000,000 | c | 2,156,880 | |
16
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Texas - 12.3% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0377), (San Antonio, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 1.18 | | 2/1/2043 | | 6,300,000 | a,d,e | 6,797,920 | |
Tender Option Bond Trust Receipts (Series 2016-XM0443), (Texas A&M University System Board of Regents, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00 | | -0.63 | | 5/15/2039 | | 5,002,755 | a,d,e | 5,025,815 | |
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Blueridge Transportation Group) | | 5.00 | | 12/31/2055 | | 1,000,000 | | 1,056,640 | |
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Blueridge Transportation Group) | | 5.00 | | 12/31/2050 | | 1,200,000 | | 1,270,656 | |
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Segment 3C Project) | | 5.00 | | 6/30/2058 | | 2,500,000 | | 2,681,475 | |
| | | | | | | | 22,437,649 | |
U.S. Related - 1.3% | | | | | |
Puerto Rico, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 5.00 | | 7/1/2035 | | 1,250,000 | | 1,261,538 | |
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. CC | | 5.25 | | 7/1/2034 | | 1,000,000 | | 1,062,420 | |
| | 2,323,958 | |
Utah - 1.4% | | | | | |
Utah Charter School Finance Authority, Revenue Bonds, Refunding (Summit Academy) Ser. A | | 5.00 | | 4/15/2031 | | 860,000 | | 1,081,132 | |
Utah Infrastructure Agency, Revenue Bonds, Refunding, Ser. A | | 5.00 | | 10/15/2040 | | 1,500,000 | | 1,556,820 | |
| | 2,637,952 | |
Virginia - 1.2% | | | | | |
Virginia Small Business Financing Authority, Revenue Bonds (Transform 66 P3 Project) | | 5.00 | | 12/31/2056 | | 2,000,000 | | 2,182,380 | |
Washington - 10.8% | | | | | |
Port of Seattle, Revenue Bonds | | 4.00 | | 4/1/2044 | | 1,000,000 | | 1,050,970 | |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 161.5%(continued) | | | | | |
Washington - 10.8% (continued) | | | | | |
Tender Option Bond Trust Receipts (Series 2017-XF2423), (King County, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00 | | 2.74 | | 1/1/2029 | | 3,000,000 | a,d,e | 3,086,190 | |
Tender Option Bond Trust Receipts (Series 2018-XM0680), (Washington Convention Center Public Facilities District, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | | 2.73 | | 7/1/2058 | | 13,000,000 | a,d,e | 15,433,405 | |
| | | | | | |
| 19,570,565 | |
TotalLong-Term Municipal Investments
(cost $281,680,666) | | | | | | |
| 293,449,778 | |
| | Annualized
Yield (%) | | | | | | | |
Short-Term Investments - .1% | | | | | |
U.S. Government Securities | | | | | |
U.S. Treasury Bills
(cost $249,852) | | 1.44 | | 4/16/2020 | | 250,000 | g,h | 249,993 | |
Total Investments(cost $283,441,408) | | 162.6% | 295,429,151 | |
Liabilities, Less Cash and Receivables | | (46.0%) | (83,543,471) | |
Preferred Stock, at redemption value | | (16.6%) | (30,225,000) | |
Net Assets Applicable to Common Shareholders | | 100.0% | 181,660,680 | |
a 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 March 31, 2020, these securities were valued at $134,888,538 or 74.25% of net assets.
b Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
c 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.
d 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.
e Collateral for floating rate borrowings. The coupon rate given represents the current interest rate for the inverse floating rate security.
f Security issued with a zero coupon. Income is recognized through the accretion of discount.
g Held by a counterparty for open exchange traded derivative contracts.
h Security is a discount security. Income is recognized through the accretion of discount.
18
| | |
Portfolio Summary (Unaudited)† | Value (%) |
General | 26.5 |
Education | 25.4 |
Medical | 22.6 |
Water | 15.3 |
Airport | 13.6 |
Transportation | 11.0 |
Prerefunded | 8.5 |
General Obligation | 7.4 |
Utilities | 6.8 |
Tobacco Settlement | 6.4 |
Nursing Homes | 5.0 |
Development | 4.8 |
Power | 4.2 |
Pollution | 1.7 |
Multifamily Housing | 1.0 |
School District | .9 |
Single Family Housing | .8 |
Student Loan | .6 |
Government | .1 |
| | 162.6 |
† Based on net assets.
See notes to financial statements.
19
| | | | |
| |
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.
20
STATEMENT OF FUTURES
March 31, 2020 (Unaudited)
| | | | | | | |
Description | Number of
Contracts | Expiration | Notional
Value ($) | Value ($) | Unrealized (Depreciation) ($) | |
Futures Short | | |
U.S. Treasury Ultra Long Bond | 13 | 6/19/2020 | 2,623,947 | 2,884,375 | (260,428) | |
Gross Unrealized Depreciation | | (260,428) | |
See notes to financial statements.
21
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | 283,441,408 | | 295,429,151 | |
Cash | | | | | 704,849 | |
Interest receivable | | 4,032,299 | |
Receivable for investment securities sold | | 1,007,360 | |
Receivable for futures variation margin—Note 3 | | 42,250 | |
Prepaid expenses | | | | | 19,527 | |
| | | | | 301,235,436 | |
Liabilities ($): | | | | |
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 2(b) | | 132,842 | |
Payable for floating rate notes issued—Note 3 | | 86,717,347 | |
Payable for investment securities purchased | | 1,738,576 | |
Interest and expense payable related to
floating rate notes issued—Note 3 | | 580,963 | |
Dividends payable to Preferred Shareholders | | 42,840 | |
Commissions payable—Note 1 | | 36,819 | |
Directors’ fees and expenses payable | | 18,362 | |
Other accrued expenses | | | | | 82,007 | |
| | | | | 89,349,756 | |
Auction Preferred Stock, Series A and B, par value $.001 per share (1,209 shares issued and outstanding at $25,000 per share liquidation preference)—Note 1 | | 30,225,000 | |
Net Assets Applicable to Common Shareholders ($) | | | 181,660,680 | |
Composition of Net Assets ($): | | | | |
Common Stock, par value, $.001 per share
(20,748,492 shares issued and outstanding) | | | | | 20,748 | |
Paid-in capital | | | | | 179,277,015 | |
Total distributable earnings (loss) | | | | | 2,362,917 | |
Net Assets Applicable to Common Shareholders ($) | | | 181,660,680 | |
| | | | | |
Shares Outstanding | | |
(110 million shares authorized) | 20,748,492 | |
Net Asset Value Per Share of Common Stock ($) | | 8.76 | |
| | | | |
See notes to financial statements. | | | | |
22
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
| | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 6,174,316 | |
Expenses: | | | | |
Management fee—Note 2(a) | | | 781,399 | |
Interest and expense related to floating rate notes issued—Note 3 | | | 844,225 | |
Commission fees—Note 1 | | | 45,073 | |
Professional fees | | | 33,844 | |
Directors’ fees and expenses—Note 2(c) | | | 20,341 | |
Shareholders’ reports | | | 17,941 | |
Registration fees | | | 10,000 | |
Shareholder servicing costs | | | 9,352 | |
Chief Compliance Officer fees—Note 2(b) | | | 4,010 | |
Custodian fees—Note 2(b) | | | 229 | |
Miscellaneous | | | 24,091 | |
Total Expenses | | | 1,790,505 | |
Investment Income—Net | | | 4,383,811 | |
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($): | | |
Net realized gain (loss) on investments | (1,063,679) | |
Net realized gain (loss) on futures | (804,481) | |
Net Realized Gain (Loss) | | | (1,868,160) | |
Net change in unrealized appreciation (depreciation) on investments | (9,773,454) | |
Net change in unrealized appreciation (depreciation) on futures | (528,239) | |
Net Change in Unrealized Appreciation (Depreciation) | | | (10,301,693) | |
Net Realized and Unrealized Gain (Loss) on Investments | | | (12,169,853) | |
Dividends to Preferred Shareholders | | | (331,353) | |
Net (Decrease) in Net Assets Applicable to Common
Shareholders Resulting from Operations | | (8,117,395) | |
| | | | | | |
See notes to financial statements. | | | | | |
23
STATEMENT OF CASH FLOWS
Six Months Ended March 31, 2020 (Unaudited)
| | | | | | | |
| | | | | |
| | | | | | |
Cash Flows from Operating Activities ($): | | | | | |
Purchases of portfolio securities | | (15,626,307) | | | |
Proceeds from sales of portfolio securities | 17,701,682 | | | |
Net purchase (sales) of short-term securities | (1,225,330) | | | |
Dividends paid to Preferred Shareholders | (298,377) | | | |
Interest receivable | | 7,429,763 | | | |
Paid to BNY Mellon Investment Adviser, Inc. | | (782,903) | | | |
Operating expenses paid | | (206,436) | | | |
Net Realized and Unrealized Gain (Loss) on futures† | | (1,377,532) | | | |
Net Cash Provided (or Used) in Operating Activities | | | | 5,614,560 | |
Cash Flows from Financing Activities ($): | | | | | |
Dividends paid to Shareholders | | (4,336,378) | | | |
Interest and expense related to floating | | | | | |
| rate notes issued paid | | (820,357) | | | |
Net Cash Provided (or Used) in Financing Activities | | (5,156,735) | |
Net Increase (Decrease) in cash | | 457,825 | |
Cash at beginning of period†† | | 247,024 | |
Cash at end of period | | 704,849 | |
Reconciliation of Net Increase (Decrease) in Net Assets Applicable to | | | |
Common Shareholders Resulting from Operations to | | | |
Net Cash Provided (or Used) in Operating Activities ($): | | | |
Net (Decrease) in Net Assets Resulting From Operations | | (8,117,395) | |
Adjustments to reconcile net (decrease) in net assets | | | |
applicable to Common Shareholder resulting from | | | |
operations to net cash provided (or Used) in operating activities ($): | | | |
Decrease in investments in securities at cost | | 1,216,108 | |
Decrease in interest receivable | | 30,447 | |
Increase in receivable for investment securities sold | | (1,007,360) | |
Increase in prepaid expenses | | (10,686) | |
Decrease in Due to BNY Mellon Investment Adviser, Inc. and affiliates | | (1,504) | |
Increase in payable for investment securities purchased | | 1,738,576 | |
Net change in unrealized appreciation (depreciation) on futures† | | (573,051) | |
Increase in payable for floating rate notes issued | | 1,225,000 | |
Interest and expense related to floating rate notes issued | | 844,225 | |
Increase in dividends payable to Preferred Shareholders | | 32,976 | |
Increase in Directors' fees and expense payable | | 11,355 | |
Decrease in commissions payable and other accrued expenses | | (42,224) | |
Net change in unrealized (appreciation) depreciation on investments | | 10,301,693 | |
Net amortization of premiums on investments | | (33,600) | |
Net Cash Provided (or Used) in Operating Activities | | 5,614,560 | |
Supplemental Disclosure Cash Flow Information ($): | | | |
Non-cash financing activities: | | | |
Reinvestment of dividends | | 20,806 | |
| | | | | | |
† Includes change in variation margin from beginning of period. |
†† Includes deposits held as collateral by broker. |
See notes to financial statements. | | | | | |
24
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | |
| | | | Six Months Ended
March 31, 2020 (Unaudited) | | Year Ended
September 30, 2019 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 4,383,811 | | | | 9,467,301 | |
Net realized gain (loss) on investments | | (1,868,160) | | | | 307,435 | |
Net change in unrealized appreciation
(depreciation) on investments | | (10,301,693) | | | | 9,265,784 | |
Dividends to Preferred Shareholders | | | (331,353) | | | | (799,608) | |
Net Increase (Decrease) in Net Assets Applicable
to Common Shareholders Resulting from
Operations | (8,117,395) | | | | 18,240,912 | |
Distributions ($): | |
Distributions to Common Shareholders | | | (4,357,184) | | | | (8,713,439) | |
Capital Stock Transactions ($): | |
Distributions reinvested | | | 20,806 | | | | - | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | 20,806 | | | | - | |
Total Increase (Decrease) in Net Assets
Applicable to Common Shareholders | (12,453,773) | | | | 9,527,473 | |
Net Assets Applicable to Common Shareholders ($): | |
Beginning of Period | | | 194,114,453 | | | | 184,586,980 | |
End of Period | | | 181,660,680 | | | | 194,114,453 | |
Capital Share Transactions (Common Shares): | |
Shares issued for distributions reinvested | | | 2,211 | | | | - | |
Net Increase (Decrease) in Shares Outstanding | 2,211 | | | | - | |
| | | | | | | | | |
See notes to financial statements. | | | | | | | | |
25
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 and, with respect to common stock, market price data for the fund’s common shares.
| | | | | | | | | | | | | |
| | | | | | |
Six Months Ended March 31, 2020 | Year Ended September 30, |
| (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 9.36 | 8.90 | 9.35 | 9.84 | 9.54 | 9.68 |
Investment Operations: | | | | | | |
Investment income-neta | .21 | .46 | .50 | .52 | .52 | .55 |
Net realized and unrealized gain
(loss) on investments | (.62) | .46 | (.52) | (.49) | .33 | (.06) |
Dividends to Preferred Shareholders
from investment income—net | .02 | (.04) | (.04) | (.03) | (.01) | (.00)b |
Total from Investment Operations | (.39) | .88 | (.06) | - | .84 | .49 |
Distributions to Common Shareholders: | | | | | |
Dividends from investment
income-net | (.21) | (.42) | (.44) | (.49) | (.54) | (.63) |
Net asset value resulting from
Auction Preferred Stock
tendered as a discount | - | - | .05 | - | - | - |
Net asset value, end of period | 8.76 | 9.36 | 8.90 | 9.35 | 9.84 | 9.54 |
Market value, end of period | 8.22 | 9.35 | 7.83 | 9.13 | 9.60 | 9.45 |
Total Return (%)c | (9.99)d | 25.58 | (9.55) | .44 | 7.39 | 11.15 |
26
| | | | | | | | | | | | |
| | | | | | |
Six Months Ended
March 31, 2020 | Year Ended September 30, |
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to average
net assets applicable to
Common Stocke | 1.86f | 1.89 | 1.75 | 1.48 | 1.33 | 1.25 |
Ratio of interest and expense related
to floating rate notes issued to
average net assets applicable to
Common Stocke | .87f | .90 | .60 | .37 | .20 | .16 |
Ratio of net investment income
to average net assets applicable to
Common Stocke | 4.54f | 5.04 | 5.46 | 5.57 | 5.35 | 5.70 |
Ratio of total expenses to
total average net assets | 1.60f | 1.63 | 1.45 | 1.18 | 1.07 | 1.00 |
Ratio of interest and expense related
to floating rate notes issued to total
average net assets | .76f | .78 | .50 | .29 | .16 | .13 |
Ratio of net investment income to
total average net assets | 3.93f | 4.34 | 4.52 | 4.43 | 4.29 | 4.56 |
Portfolio Turnover Rate | 7.87d | 31.62 | 17.70 | 12.49 | 11.66 | 11.17 |
Asset Coverage of Preferred Stock,
end of period | 701 | 742 | 711 | 488 | 508 | 495 |
Net Assets applicable to
Common Shareholders,
end of period ($ x 1,000) | 181,661 | 194,114 | 184,587 | 194,063 | 204,069 | 197,727 |
Preferred Stock Outstanding,
end of period ($ x 1,000) | 30,225 | 30,225 | 30,225 | 50,000 | 50,000 | 50,000 |
Floating Rate Notes Outstanding,
end of period ($ x 1,000) | 86,717 | 85,492 | 74,682 | 51,742 | 46,492 | 51,492 |
a Based on average common shares outstanding.
b Amount represents less than $.01 per share.
c Calculated based on market value.
d Not annualized.
e Does not reflect the effect of dividends to Preferred Shareholders.
f Annualized.
See notes to financial statements.
27
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Municipal Income, Inc. (the “fund”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), is a non-diversified closed-end management investment company. The fund’s investment objective is 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. The fund’s Common Stock trades on the New York Stock Exchange (the “NYSE American”) under the ticker symbol DMF.
The fund has outstanding 616 Series A shares and 593 Series B shares, Auction Preferred Stock (“APS”), with a liquidation preference of $25,000 per share (plus an amount equal to accumulated but unpaid dividends upon liquidation). APS dividend rates are determined pursuant to periodic auctions or by reference to a market rate. Deutsche Bank Trust Company America, as the Auction Agent, receives a fee from the fund for its services in connection with such auctions. The fund also compensates broker-dealers generally at an annual rate of .15%-.25% of the purchase price of shares of APS.
The fund is subject to certain restrictions relating to the APS. Failure to comply with these restrictions could preclude the fund from declaring any distributions to shareholders of Common Stock (“Common Shareholders”) or repurchasing shares of Common Stock and/or could trigger the mandatory redemption of APS at liquidation value. Thus, redemptions of APS may be deemed to be outside of the control of the fund.
The holders of APS, voting as a separate class, have the right to elect at least two directors. The holders of APS will vote as a separate class on certain other matters, as required by law. The fund’s Board of Directors (the “Board”) has designated Nathan Leventhal and Benaree Pratt Wiley as directors to be elected by the holders of APS.
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-
28
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 fundenters 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. 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, excluding short-term investment (other than U.S. Treasury Bills) and futures are valued each business day by an independent
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
pricing service (the “Service”) approved by 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.
U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service. These 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 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.
Futures, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
30
| | | | | |
| | 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 | - | 1,729,380 | - | 1,729,380 |
Municipal Securities | - | 293,449,778 | - | 293,449,778 |
U.S. Treasury Securities | - | 249,993 | - | 249,993 |
Liabilities ($) | | | | |
Floating Rate Notes†† | - | (86,717,347) | - | (86,717,347) |
Other Financial Instruments: | | | | |
Futures††† | (260,428) | - | - | (260,428) |
† 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.
††† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(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) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(d) Dividends and distributions to Common Shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and 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 gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Common Shareholders will have their distributions reinvested in additional shares of the fund, unless such Common Shareholders elect to receive cash, at the lower of the market price or net asset value per share (but not less than 95% of the market price). If market price is equal to or exceeds net asset value, shares will be issued at net asset value. If net asset value exceeds market price, Computershare Inc., the transfer agent for the fund’s Common Stock, will buy fund shares in the open market and reinvest those shares accordingly.
On March 30, 2020, the Board declared a cash dividend of $.035 per share from investment income-net, payable on April 30, 2020 to Common Shareholders of record as of the close of business on April 15, 2020. The ex-dividend date was April 14, 2020.
(e) Dividends and distributions to shareholders of APS: Dividends, which are cumulative, are generally reset every 7 days for each Series of APS pursuant to a process specified in related fund charter documents. Dividend rates as of March 31, 2020, for each Series of APS were as follows: Series A–7.275% and Series B–8.595%. These rates reflect the “maximum rates” under the governing instruments as a result of “failed auctions” in which sufficient clearing bids are not received. The average dividend rates for the period ended March 31, 2020 for each Series of APS were as follows: Series A–2.229% and Series B–2.155%.
(f) 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
32
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 March 31, 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 March 31, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $7,281,976 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2019. The fund has $3,426,355 of short-term capital losses and $3,855,621 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2019 was as follows: tax-exempt income $9,513,047. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Management Fee and Other Transactions with Affiliates:
(a)Pursuant to a management agreement (the “Agreement”) with the Adviser, the management fee is computed at the annual rate of .70% of the value of the fund’s average weekly net assets, inclusive of the outstanding APS, and is payable monthly. The Agreement provides that if in any full fiscal year the aggregate expenses of the fund (excluding taxes, interest on borrowings, brokerage fees and extraordinary expenses) exceed the expense limitation of any state having jurisdiction over the fund, the fund may deduct from payments to be made to the Adviser, or the Adviser will bear, the amount of such excess to the extent required by state law. During the period ended March 31, 2020, there was no expense reimbursement pursuant to the Agreement.
(b)The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets and transaction activity. During the period ended
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
March 31, 2020,the fund was charged $229pursuant to the custody agreement.
The fund has an arrangement with the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
During the period ended March 31, 2020, the fund was charged $4,010 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 $127,613, custodian fees of $3,232 and Chief Compliance Officer fees of $1,997.
(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 3—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities and futures, during the period ended March 31, 2020, amounted to $17,329,845 and $18,128,989, 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
34
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 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 March 31, 2020 was approximately $86,432,975, with a related weighted average annualized interest rate of 1.95%.
Derivatives:A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended March 31, 2020 is discussed below.
Futures:In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk,as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the
35
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at March 31, 2020 are set forth in the Statement of Futures.
The following summarizes the average market value of derivatives outstanding duringthe period ended March 31, 2020:
| | | |
| | Average Market Value ($) |
Interest rate futures | | 7,266,089 |
At March 31, 2020, accumulated net unrealized appreciation on investments was $11,727,315, consisting of $15,124,460 gross unrealized appreciation and $3,397,145 gross unrealized depreciation.
At March 31, 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).
36
OFFICERS AND DIRECTORS
BNY Mellon Municipal Income, Inc.
240 Greenwich Street
New York, NY 10286
| | | | |
Directors | | Officers (continued) | |
Joseph S. DiMartino, Chairman | | Assistant Treasurers (continued) | |
Francine J. Bovich | | Robert Salviolo | |
J. Charles Cardona | | Robert Svagna | |
Gordon J. Davis† | | Chief Compliance Officer | |
Andrew J. Donohue | | Joseph W. Connolly | |
Isabel P. Dunst | | | |
Nathan Leventhal†† | | Portfolio Managers | |
Robin A. Melvin | | Daniel A. Rabasco | |
Roslyn M. Watson | | Jeffrey B. Burger | |
Benaree Pratt Wiley†† | | | |
† Interested Board Member | | | |
†† Elected by APS Holders | | Adviser | |
Officers | | BNY Mellon Investment Adviser, Inc. | |
President | | Custodian | |
Renee-Laroche-Morris | | The Bank of New York Mellon | |
Chief Legal Officer | | Counsel | |
Bennett A. MacDougall | | Proskauer Rose LLP | |
Vice President and Secretary | | Transfer Agent, | |
James Bitetto | | Dividend Disbursing Agent | |
Vice Presidents and Assistant Secretaries | | and Registrar | |
Sonalee Cross | | Computershare Inc. | |
Deirdre Cunnane | | (Common Stock) | |
Sarah S. Kelleher | | Deutsche Bank Trust Company America | |
Jeff Prusnofsky | | (Auction Preferred Stock) | |
Peter M. Sullivan | | Stock Exchange Listing | |
Amanda Quinn | | NYSE American Symbol: DMF | |
Natalya Zelensky | | Initial SEC Effective Date | |
Vice President | | 10/21/88 | |
David DiPetrillo | | Auction Agent | |
Treasurer | | Deutsche Bank Trust Company America | |
James Windels | | (Auction Preferred Stock) | |
Assistant Treasurers | | | |
Gavin C. Reilly | | | |
Robert S. Robol | | | |
The fund’s net asset value per share appears in the following publications: Barron’s, Closed-End Bond Funds section under the heading “Municipal Bond Funds” every Monday; The Wall Street Journal, Mutual Funds section under the heading
“Closed-End Funds” every Monday. |
Notice is hereby given in accordance with Section 23(c) of the Act that the fund may purchase shares of its common stock in the open market when it can do so at prices below the then current net asset value per share. |
37
BNY Mellon Municipal Income, Inc.
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 &
Registrar (Common Stock)
Computershare Inc.
480 Washington Boulevard
Jersey City, NJ 07310
Dividend Disbursing Agent (Common Stock)
Computershare Inc.
P.O. Box 30170
College Station, TX 77842
For more information about the fund, visit https://im.bnymellon.com/us/en/products/closed-end-funds.jsp. Here you will find the fund’s most recently available quarterly fact sheets and other information about the fund. The information posted on the fund’s website is subject to change without notice.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. 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/usand on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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0424SA0320
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