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 | 811-05245 | |||||
BNY Mellon Strategic Municipals, 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) | ||||||
Deirdre Cunnane, 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:
| 09/30 | |||||
Date of reporting period: | 03/31/22
| |||||
FORM N-CSR
Item 1. | Reports to Stockholders. |
BNY Mellon Strategic Municipals, Inc.
SEMIANNUAL REPORT March 31, 2022 |
BNY Mellon Strategic Municipals, Inc. Protecting Your Privacy THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the fund’s policies and practices for collecting, disclosing, and safeguarding “nonpublic personal information,” which may include financial or other customer information. These policies apply to individuals who purchase fund shares for personal, family, or household purposes, or have done so in the past. This notification replaces all previous statements of the fund’s consumer privacy policy, and may be amended at any time. We’ll keep you informed of changes as required by law. YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The fund maintains physical, electronic and procedural safeguards that comply with federal regulations to guard nonpublic personal information. The fund’s agents and service providers have limited access to customer information based on their role in servicing your account. THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT. The fund collects a variety of nonpublic personal information, which may include: • Information we receive from you, such as your name, address, and social security number. • Information about your transactions with us, such as the purchase or sale of fund shares. • Information we receive from agents and service providers, such as proxy voting information. THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS PERMITTED BY LAW. Thank you for this opportunity to serve you. |
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
THE FUND
Information About the Renewal | |
FOR MORE INFORMATION
Back Cover
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DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2021, through March 31, 2022, as provided by Portfolio Managers Daniel Rabasco and Jeffrey Burger, Primary Portfolio Managers of Insight North America LLC Sub-adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2022, BNY Mellon Strategic Municipals, Inc. produced a total return of -8.47% on a net-asset-value basis and -15.43% on a market price basis.1 Over the same period, the fund provided aggregate income dividends of $.185 per share, which reflects an annualized distribution rate of 5.15%.2
Municipal bonds declined during the reporting period as the market was hindered by inflation concerns and rising interest rates.
The Fund’s Investment Approach
The fund’s investment objective is 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 its net assets in municipal obligations. Generally, the fund invests at least 50% of its net assets in municipal bonds considered investment grade or the unrated equivalent as determined by Insight North America LLC, the fund’s Sub-adviser and an affiliate of BNY Mellon Investment Adviser, Inc., in the case of bonds, and in the two highest-rating categories or the unrated equivalent as determined by the fund’s Sub-adviser in the case of short-term obligations having or deemed to have maturities of less than one year.
To this end, portfolio construction focuses on income opportunities, through analysis of each bond’s structure, including close attention to each bond’s yield, maturity and early redemption features. When making new investments, we focus on identifying undervalued sectors and securities, and we minimize reliance on interest-rate forecasting. We select municipal bonds based on 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. We actively trade among various sectors, such as escrowed, general obligation and revenue, based on their apparent relative values. Leverage, which is utilized in the portfolio in order to generate a higher level of current income exempt from regular federal income taxes, does amplify the fund’s exposure to interest-rate movements, and potentially, gains or losses, especially those among the longest maturities.
Inflation and Rising Rates Hindered Returns
Early in the reporting period, the market continued to benefit from policies put in place in response to the COVID-19 pandemic, including support from the federal government. But late in the period, inflation concerns, rising interest rates and retail outflows from municipal bond mutual funds created turmoil.
A strengthening economy, combined with federal support, have supported the fiscal health of issuers. During much of the pandemic, real estate and income tax collections failed to decline as much as predicted, and progressive tax regimes proved beneficial
2
because higher-earning, white-collar workers were largely able to work from home. Strong stock market returns also boosted revenues from capital gains taxes.
Later in the reporting period, however, a number of headwinds emerged. The outlook for inflation shifted away from the view that pricing pressures were “transitory” as oil prices rose, and inflation measures reached multi-decade highs. In addition, investors began to anticipate that the Federal Reserve (the “Fed”) would move to a policy of tightening. Fed officials signaled that short-term interest rates would be raised, and in March 2022, they raised the federal funds rate by 25 basis points.
Historically, municipal bonds have been perceived as a safe haven from turmoil in fixed-income markets. But the persistence of higher-than-expected inflation, combined with measures from the Fed to combat it, led to significant outflows from municipal bond mutual funds, especially late in the reporting period. The need for mutual fund managers to meet redemptions only added to the downward momentum. In addition, the latter part of the period was characterized by volatility stemming from these headwinds as well as the war in Ukraine.
While these headwinds have hindered returns in the near term, credit fundamentals remain strong. In addition, the market turmoil has resulted in more attractive valuations in many segments of the market, creating the potential for outperformance in the future.
Duration and Security Selection Detracted
The fund’s performance was hindered primarily by its duration and security selection. The fund’s long duration was detrimental as the long end of the curve underperformed. In addition, rising rates in the shorter maturity segment of the curve caused the cost of leverage to rise, which also hampered returns. Security selection also produced a net negative effect. Selections were especially unfavorable in the special tax, power, transportation, hospital and water & sewer sectors. Particular securities that were notable detractors included a North Carolina Medical Center bond, New York’s Metropolitan Transportation Authority bonds, and a bond issued by the Greater Orlando Airport.
On a more positive note, the fund’s performance was aided by certain security selections. Selections in the continuing care and retirement center, tobacco, education and industrial development sectors were particularly favorable. General obligation bonds issued by Puerto Rico and New York City also contributed positively to returns, as did City of Chicago water bonds. The fund did not employ derivatives during the period.
Strong Fundamentals and Attractive Valuations Bode Well for the Market
We remain sanguine about the market. Some volatility is to be expected over the medium-to-long term, with the Fed beginning to taper its purchases of Treasuries soon. But we believe that the Fed’s anticipated actions are reflected in current market conditions. In addition, with credit fundamentals still strong, we have little concern
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
about credit risk in the near term. The market’s recent volatility has also resulted in more attractive valuations, creating more plentiful opportunities.
April 15, 2022
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. Return figures provided reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect until November 30, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, the fund’s return would have been lower.
2 Annualized distribution 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.
4
STATEMENT OF INVESTMENTS
March 31, 2022 (Unaudited)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Bonds and Notes - .4% | |||||||||
Collateralized Municipal-Backed Securities - .4% | |||||||||
Arizona Industrial Development Authority, Revenue Bonds, Ser. 2019-2 | 3.63 | 5/20/2033 | 1,676,727 | 1,715,794 | |||||
| |||||||||
Long-Term Municipal Investments - 151.0% | |||||||||
Alabama - 3.7% | |||||||||
Alabama Special Care Facilities Financing Authority, Revenue Bonds (Methodist Home for the Aging Obligated Group) | 5.75 | 6/1/2045 | 6,000,000 | 6,099,100 | |||||
Jefferson County, Revenue Bonds, Refunding, Ser. F | 7.90 | 10/1/2050 | 2,500,000 | a | 2,547,377 | ||||
The Lower Alabama Gas District, Revenue Bonds, Ser. A | 5.00 | 9/1/2046 | 6,000,000 | 7,051,066 | |||||
University of Alabama at Birmingham, Revenue Bonds, Ser. B | 4.00 | 10/1/2036 | 2,000,000 | 2,187,522 | |||||
17,885,065 | |||||||||
Arizona - 8.1% | |||||||||
Arizona Industrial Development Authority, Revenue Bonds (Academics of Math & Science Project) | 5.00 | 7/1/2054 | 1,275,000 | b | 1,325,122 | ||||
Arizona Industrial Development Authority, Revenue Bonds (Cadence Campus Project) Ser. A | 4.00 | 7/15/2030 | 625,000 | b | 645,296 | ||||
Arizona Industrial Development Authority, Revenue Bonds (Cadence Campus Project) Ser. A | 4.00 | 7/15/2040 | 925,000 | b | 928,017 | ||||
Arizona Industrial Development Authority, Revenue Bonds (Legacy Cares Project) Ser. A | 6.00 | 7/1/2051 | 1,000,000 | b | 1,038,717 | ||||
Arizona Industrial Development Authority, Revenue Bonds (Legacy Cares Project) Ser. A | 7.75 | 7/1/2050 | 5,770,000 | b | 6,540,503 | ||||
Arizona Industrial Development Authority, Revenue Bonds (Phoenix Children's Hospital Obligated Group) | 4.00 | 2/1/2050 | 1,500,000 | 1,554,800 | |||||
Arizona Industrial Development Authority, Revenue Bonds, Refunding (Basis Schools Projects) Ser. D | 5.00 | 7/1/2051 | 380,000 | b | 403,507 |
5
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Arizona - 8.1% (continued) | |||||||||
Arizona Industrial Development Authority, Revenue Bonds, Refunding (Basis Schools Projects) Ser. D | 5.00 | 7/1/2047 | 1,035,000 | b | 1,101,563 | ||||
Glendale Industrial Development Authority, Revenue Bonds, Refunding (Sun Health Services Obligated Group) Ser. A | 5.00 | 11/15/2054 | 1,000,000 | 1,082,515 | |||||
La Paz County Industrial Development Authority, Revenue Bonds (Harmony Public Schools) Ser. A | 5.00 | 2/15/2036 | 2,480,000 | b | 2,634,054 | ||||
Maricopa County Industrial Development Authority, Revenue Bonds (Benjamin Franklin Charter School Obligated Group) | 6.00 | 7/1/2052 | 3,000,000 | b | 3,359,939 | ||||
Maricopa County Industrial Development Authority, Revenue Bonds, Refunding (Paradise Schools Projects Paragon Management) | 5.00 | 7/1/2047 | 2,000,000 | b | 2,093,863 | ||||
Salt Verde Financial Corp., Revenue Bonds | 5.00 | 12/1/2037 | 1,000,000 | 1,186,041 | |||||
Tender Option Bond Trust Receipts (Series 2018-XF2537), (Salt Verde Financial Corporation, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00 | 16.24 | 12/1/2037 | 4,030,000 | b,c,d | 4,764,232 | ||||
The Phoenix Industrial Development Authority, Revenue Bonds, Refunding (BASIS Schools Projects) Ser. A | 5.00 | 7/1/2035 | 2,360,000 | b | 2,483,009 | ||||
The Phoenix Industrial Development Authority, Revenue Bonds, Refunding (BASIS Schools Projects) Ser. A | 5.00 | 7/1/2046 | 2,000,000 | b | 2,089,203 | ||||
The Pima County Industrial Development Authority, Revenue Bonds (American Leadership Academy Project) | 5.00 | 6/15/2047 | 6,000,000 | b | 6,045,517 | ||||
39,275,898 | |||||||||
California - 6.8% | |||||||||
California Municipal Finance Authority, Revenue Bonds, Refunding (William Jessup University) | 5.00 | 8/1/2039 | 1,000,000 | 1,030,845 |
6
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
California - 6.8% (continued) | |||||||||
California Statewide Communities Development Authority, Revenue Bonds (Loma Linda University Medical Center Obligated Group) | 5.50 | 12/1/2058 | 1,000,000 | b | 1,134,308 | ||||
Jefferson Union High School District, COP (Teacher & Staff Housing Project) (Insured; Build America Mutual) | 4.00 | 8/1/2055 | 1,000,000 | 1,061,211 | |||||
San Diego County Regional Airport Authority, Revenue Bonds, Ser. B | 4.00 | 7/1/2056 | 4,535,000 | 4,627,056 | |||||
San Francisco City & County Redevelopment Agency, Special Tax Bonds, Refunding, Ser. A | 5.00 | 8/1/2023 | 1,000,000 | 1,009,510 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0379), (Los Angeles Department of Water & Power, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.75 | 7/1/2043 | 5,000,000 | b,c,d | 5,035,260 | ||||
Tender Option Bond Trust Receipts (Series 2016-XM0434), (The Regents of the University of California, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00 | 16.76 | 5/15/2038 | 10,000,000 | b,c,d | 10,344,890 | ||||
Tender Option Bond Trust Receipts (Series 2020-XF2876), (San Francisco California City & County Airport Commission, Revenue Bonds, Refunding, Ser. E) Recourse, Underlying Coupon Rate (%) 5.00 | 16.42 | 5/1/2050 | 7,780,000 | b,c,d | 8,543,391 | ||||
32,786,471 | |||||||||
Colorado - 6.6% | |||||||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (Covenant Living Communities & Services Obligated Group) Ser. A | 4.00 | 12/1/2050 | 4,500,000 | 4,776,362 | |||||
Denver City & County, Revenue Bonds, Refunding (United Airlines Project) | 5.00 | 10/1/2032 | 1,000,000 | 1,029,920 | |||||
Dominion Water & Sanitation District, Revenue Bonds | 6.00 | 12/1/2046 | 4,560,000 | 4,660,292 | |||||
Hess Ranch Metropolitan District No. 6, GO, Ser. A1 | 5.00 | 12/1/2049 | 2,000,000 | 2,058,020 | |||||
Rampart Range Metropolitan District No. 5, Revenue Bonds | 4.00 | 12/1/2051 | 2,000,000 | 1,708,668 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Colorado - 6.6% (continued) | |||||||||
Regional Transportation District, Revenue Bonds, Refunding (Denver Transit Partners) Ser. A | 4.00 | 7/15/2035 | 1,250,000 | 1,309,676 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0433), (Colorado Springs, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00 | 16.75 | 11/15/2043 | 9,752,907 | b,c,d | 10,158,778 | ||||
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 | 15.79 | 8/1/2044 | 4,440,000 | b,c,d | 5,539,167 | ||||
Vauxmont Metropolitan District, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) | 3.25 | 12/15/2050 | 770,000 | 752,748 | |||||
31,993,631 | |||||||||
Connecticut - 3.9% | |||||||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 5/1/2040 | 1,000,000 | 1,153,558 | |||||
Connecticut Health & Educational Facilities Authority, Revenue Bonds (Fairfield University) Ser. U | 4.00 | 7/1/2052 | 1,000,000 | 1,026,400 | |||||
Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Connecticut College) Ser. M | 4.00 | 7/1/2052 | 3,000,000 | 3,139,206 | |||||
Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Trinity Health Obligated Group) | 5.00 | 12/1/2045 | 2,500,000 | 2,722,971 | |||||
Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding, Ser. S | 4.00 | 6/1/2051 | 2,000,000 | 2,101,456 | |||||
Connecticut Housing Finance Authority, Revenue Bonds, Refunding, Ser. A1 | 3.65 | 11/15/2032 | 410,000 | 413,402 | |||||
Harbor Point Infrastructure Improvement District, Tax Allocation Bonds, Refunding (Harbor Point Project) | 5.00 | 4/1/2039 | 3,500,000 | b | 3,807,033 | ||||
University of Connecticut, Revenue Bonds, Ser. A | 5.00 | 5/1/2041 | 4,000,000 | 4,691,160 | |||||
19,055,186 |
8
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
District of Columbia - 4.7% | |||||||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding (Dulles Metrorail & Capital Improvement Projects) Ser. A | 5.00 | 10/1/2039 | 1,000,000 | 1,142,806 | |||||
Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. B | 4.00 | 10/1/2049 | 1,000,000 | 1,036,413 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0437), (District of Columbia, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00 | 16.76 | 12/1/2035 | 19,992,830 | b,c,d | 20,417,240 | ||||
22,596,459 | |||||||||
Florida - 7.9% | |||||||||
Alachua County Health Facilities Authority, Revenue Bonds (Shands Teaching Hospital & Clinics Obligated Group) | 4.00 | 12/1/2049 | 1,625,000 | 1,711,003 | |||||
Atlantic Beach, Revenue Bonds (Fleet Landing Project) Ser. A | 5.00 | 11/15/2053 | 3,000,000 | 3,216,941 | |||||
Capital Trust Agency, Revenue Bonds (WFCS Portfolio Projects) Ser. A | 5.00 | 1/1/2056 | 750,000 | b | 737,924 | ||||
Florida Development Finance Corp., Revenue Bonds (Miami Arts Charter School Project) Ser. A | 6.00 | 6/15/2044 | 5,000,000 | b | 4,471,111 | ||||
Greater Orlando Aviation Authority, Revenue Bonds, Ser. A | 4.00 | 10/1/2044 | 2,000,000 | 2,070,901 | |||||
Miami-Dade County, Revenue Bonds | 0.00 | 10/1/2045 | 3,000,000 | e | 1,154,581 | ||||
Palm Beach County Health Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) | 5.00 | 11/15/2045 | 2,850,000 | 3,105,041 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) Ser. B | 5.00 | 11/15/2042 | 735,000 | 826,609 | |||||
Palm Beach County Health Facilities Authority, Revenue Bonds (Lifespace Communities Obligated Group) Ser. B | 4.00 | 5/15/2053 | 2,600,000 | 2,307,790 | |||||
Pinellas County Industrial Development Authority, Revenue Bonds (Foundation for Global Understanding) | 5.00 | 7/1/2029 | 900,000 | 954,087 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Florida - 7.9% (continued) | |||||||||
Seminole County Industrial Development Authority, Revenue Bonds, Refunding (Legacy Pointe at UCF Project) | 5.75 | 11/15/2054 | 2,500,000 | 2,580,628 | |||||
Tender Option Bond Trust Receipts (Series 2019-XF0813), (Fort Myers Florida Utility, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 4.00 | 12.87 | 10/1/2049 | 3,435,000 | b,c,d | 3,632,306 | ||||
Tender Option Bond Trust Receipts (Series 2019-XM0782), (Palm Beach County Florida Health Facilities Authority, Revenue Bonds, Refunding (Baptist Health South Florida Obligated Group)) Recourse, Underlying Coupon Rate (%) 4.00 | 12.97 | 8/15/2049 | 5,535,000 | b,c,d | 5,689,917 | ||||
Tender Option Bond Trust Receipts (Series 2020-XF2877), (Greater Orlando Aviation Authority, Revenue Bonds, Ser. A) Recourse, Underlying Coupon Rate (%) 4.00 | 12.89 | 10/1/2049 | 4,685,000 | b,c,d | 4,818,547 | ||||
Village Community Development District No. 10, Special Assessment Bonds | 6.00 | 5/1/2044 | 900,000 | 933,576 | |||||
38,210,962 | |||||||||
Georgia - 5.5% | |||||||||
Atlanta Water & Wastewater, Revenue Bonds, Ser. D | 3.50 | 11/1/2028 | 1,275,000 | b | 1,326,227 | ||||
Georgia Municipal Electric Authority, Revenue Bonds, Refunding (Plant Vogtle Units 3&4 Project) Ser. A | 5.00 | 1/1/2056 | 1,250,000 | 1,387,974 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0435), (Private Colleges & Universities Authority, Revenue Bonds, Refunding (Emory University)) Recourse, Underlying Coupon Rate (%) 5.00 | 16.76 | 10/1/2043 | 10,000,000 | b,c,d | 10,405,518 | ||||
Tender Option Bond Trust Receipts (Series 2019-XF2847), (Municipal Electric Authority of Georgia, Revenue Bonds (Plant Vogtle Unis 3&4 Project, Ser. A)) Recourse, Underlying Coupon Rate (%) 5.00 | 16.58 | 1/1/2056 | 3,600,000 | b,c,d | 3,977,201 |
10
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Georgia - 5.5% (continued) | |||||||||
Tender Option Bond Trust Receipts (Series 2020-XM0825), (Brookhaven Development Authority, Revenue Bonds (Children's Healthcare of Atlanta, Ser. A)) Recourse, Underlying Coupon Rate (%) 4.00 | 14.25 | 7/1/2044 | 6,340,000 | b,c,d | 7,201,932 | ||||
The Burke County Development Authority, Revenue Bonds, Refunding (Oglethorpe Power Corp.) Ser. D | 4.13 | 11/1/2045 | 2,400,000 | 2,472,414 | |||||
26,771,266 | |||||||||
Hawaii - .3% | |||||||||
Hawaii Department of Budget & Finance, Revenue Bonds, Refunding (Hawaiian Electric Co.) | 4.00 | 3/1/2037 | 1,500,000 | 1,552,579 | |||||
Idaho - 1.4% | |||||||||
Power County Industrial Development Corp., Revenue Bonds (FMC Corp. Project) | 6.45 | 8/1/2032 | 5,000,000 | 5,019,311 | |||||
Spring Valley Community Infrastructure District No. 1, Special Assessment Bonds | 3.75 | 9/1/2051 | 2,000,000 | b | 1,668,387 | ||||
6,687,698 | |||||||||
Illinois - 12.9% | |||||||||
Chicago Board of Education, GO, Refunding, Ser. A | 5.00 | 12/1/2034 | 1,400,000 | 1,516,919 | |||||
Chicago Board of Education, GO, Ser. D | 5.00 | 12/1/2046 | 2,000,000 | 2,135,519 | |||||
Chicago Board of Education, GO, Ser. H | 5.00 | 12/1/2036 | 2,000,000 | 2,152,169 | |||||
Chicago II, GO, Refunding, Ser. A | 6.00 | 1/1/2038 | 3,000,000 | 3,361,522 | |||||
Chicago II, GO, Ser. A | 5.00 | 1/1/2044 | 4,000,000 | 4,300,042 | |||||
Chicago II, GO, Ser. A | 5.50 | 1/1/2049 | 1,000,000 | 1,103,667 | |||||
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2048 | 3,585,000 | 3,904,275 | |||||
Chicago Transit Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 12/1/2057 | 2,000,000 | 2,228,766 | |||||
Chicago Transit Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 12/1/2045 | 1,000,000 | 1,125,241 | |||||
Illinois, GO, Refunding, Ser. A | 5.00 | 10/1/2029 | 1,100,000 | 1,224,776 | |||||
Illinois, GO, Ser. A | 5.00 | 5/1/2038 | 3,900,000 | 4,219,470 | |||||
Illinois, GO, Ser. C | 5.00 | 11/1/2029 | 1,120,000 | 1,233,580 | |||||
Illinois, GO, Ser. D | 5.00 | 11/1/2028 | 2,825,000 | 3,119,114 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Illinois - 12.9% (continued) | |||||||||
Illinois Finance Authority, Revenue Bonds, Refunding (Lutheran Life Communities Obligated Group) Ser. A | 5.00 | 11/1/2040 | 1,750,000 | 1,838,818 | |||||
Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Expansion Project) | 5.00 | 6/15/2057 | 2,000,000 | 2,112,246 | |||||
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 | e | 1,401,455 | ||||
Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Expansion Project) | 0.00 | 12/15/2054 | 21,800,000 | e | 4,822,369 | ||||
Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Project) Ser. B | 5.00 | 6/15/2052 | 1,650,000 | 1,662,683 | |||||
Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A | 4.00 | 1/1/2038 | 2,000,000 | 2,087,421 | |||||
Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2032 | 2,500,000 | 2,955,076 | |||||
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 | 16.75 | 10/1/2040 | 12,000,000 | b,c,d | 13,028,586 | ||||
University of Illinois, Revenue Bonds (Auxiliary Facilities System) Ser. A | 5.00 | 4/1/2044 | 1,000,000 | 1,049,404 | |||||
62,583,118 | |||||||||
Indiana - 1.7% | |||||||||
Indiana Finance Authority, Revenue Bonds (Green Bond) | 7.00 | 3/1/2039 | 6,025,000 | b | 4,714,259 | ||||
Indiana Finance Authority, Revenue Bonds (Ohio Valley Electric Project) Ser. A | 5.00 | 6/1/2039 | 1,585,000 | 1,589,650 | |||||
Indiana Finance Authority, Revenue Bonds (Ohio Valley Electric Project) Ser. B | 3.00 | 11/1/2030 | 1,000,000 | 936,966 | |||||
Indiana Finance Authority, Revenue Bonds (Parkview Health System Obligated Group) Ser. A | 5.00 | 11/1/2043 | 1,000,000 | 1,149,804 | |||||
8,390,679 |
12
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Iowa - 2.5% | |||||||||
Iowa Finance Authority, Revenue Bonds, Refunding (Iowa Fertilizer Co. Project) | 5.25 | 12/1/2025 | 7,375,000 | 7,638,763 | |||||
Iowa Finance Authority, Revenue Bonds, Refunding (Lifespace Communities Obligated Group) Ser. A | 4.00 | 5/15/2046 | 1,500,000 | 1,388,184 | |||||
Iowa Tobacco Settlement Authority, Revenue Bonds, Refunding, Ser. A2 | 4.00 | 6/1/2049 | 1,500,000 | 1,503,478 | |||||
Iowa Tobacco Settlement Authority, Revenue Bonds, Refunding, Ser. B1 | 4.00 | 6/1/2049 | 1,500,000 | 1,522,960 | |||||
12,053,385 | |||||||||
Kansas - .1% | |||||||||
Kansas Development Finance Authority, Revenue Bonds, Ser. B | 4.00 | 11/15/2025 | 300,000 | 289,603 | |||||
Kentucky - .6% | |||||||||
Henderson , Revenue Bonds (Pratt Paper Project) Ser. A | 4.70 | 1/1/2052 | 500,000 | f | 505,028 | ||||
Kentucky Public Energy Authority, Revenue Bonds, Ser. A1 | 4.00 | 6/1/2025 | 2,500,000 | g | 2,591,574 | ||||
3,096,602 | |||||||||
Louisiana - 3.3% | |||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, Revenue Bonds, Refunding (Westlake Chemical Project) | 3.50 | 11/1/2032 | 3,100,000 | 3,145,502 | |||||
Louisiana Public Facilities Authority, Revenue Bonds, Refunding (Tulane University) | 4.00 | 4/1/2050 | 1,000,000 | 1,042,927 | |||||
Tender Option Bond Trust Receipts (Series 2018-XF2584), (Louisiana Public Facilities Authority, Revenue Bonds (Franciscan Missionaries of Our Lady Health System Project)) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.53 | 7/1/2047 | 10,755,000 | b,c,d | 11,885,269 | ||||
16,073,698 | |||||||||
Maryland - 3.1% | |||||||||
Maryland Economic Development Corp., Tax Allocation Bonds (Port Covington Project) | 4.00 | 9/1/2050 | 1,000,000 | 975,894 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Maryland - 3.1% (continued) | |||||||||
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds (Adventist Healthcare Obligated Group) Ser. A | 5.50 | 1/1/2046 | 3,250,000 | 3,590,934 | |||||
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds, Refunding (Stevenson University Project) | 4.00 | 6/1/2051 | 1,000,000 | 1,007,631 | |||||
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 | 16.75 | 7/1/2042 | 9,000,000 | b,c,d | 9,477,996 | ||||
15,052,455 | |||||||||
Massachusetts - 6.0% | |||||||||
Lowell Collegiate Charter School, Revenue Bonds | 5.00 | 6/15/2049 | 1,750,000 | 1,788,383 | |||||
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (NewBridge Charles Obligated Group) | 5.00 | 10/1/2057 | 1,000,000 | b | 1,062,563 | ||||
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. A | 5.00 | 7/1/2025 | 1,400,000 | 1,520,742 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0389), (Massachusetts School Building Authority, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.75 | 5/15/2043 | 10,000,000 | b,c,d | 10,362,379 | ||||
Tender Option Bond Trust Receipts (Series 2018-XF0610), (Massachusetts Transportation Fund, Revenue Bonds (Rail Enhancement & Accelerated Bridge Programs)) Non-recourse, Underlying Coupon Rate (%) 5.00 | 17.05 | 6/1/2047 | 12,750,000 | b,c,d | 14,240,539 | ||||
28,974,606 | |||||||||
Michigan - 5.9% | |||||||||
Detroit, GO, Ser. A | 5.00 | 4/1/2050 | 2,305,000 | 2,466,416 | |||||
Great Lakes Water Authority Sewage Disposal System, Revenue Bonds, Refunding, Ser. C | 5.00 | 7/1/2036 | 3,000,000 | 3,318,420 | |||||
Michigan Finance Authority, Revenue Bonds (Beaumont Health Credit Obligated Group) | 5.00 | 11/1/2044 | 5,165,000 | 5,598,714 |
14
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Michigan - 5.9% (continued) | |||||||||
Michigan Finance Authority, Revenue Bonds, Refunding (Great Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | 5.00 | 7/1/2031 | 2,000,000 | 2,123,598 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. D6 | 5.00 | 7/1/2036 | 2,000,000 | 2,110,531 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding, Ser. A2 | 5.00 | 6/1/2040 | 4,435,000 | 4,938,528 | |||||
Michigan Finance Authority, Revenue Bonds, Refunding, Ser. D2 | 5.00 | 7/1/2034 | 2,000,000 | 2,160,754 | |||||
Tender Option Bond Trust Receipts (Series 2019-XF2837), (Michigan State Finance Authority, Revenue Bonds (Henry Ford Health System)) Recourse, Underlying Coupon Rate (%) 4.00 | 12.85 | 11/15/2050 | 5,840,000 | b,c,d | 6,063,738 | ||||
28,780,699 | |||||||||
Minnesota - .7% | |||||||||
Duluth Economic Development Authority, Revenue Bonds, Refunding (Essentia Health Obligated Group) Ser. A | 5.00 | 2/15/2058 | 3,000,000 | 3,329,242 | |||||
Missouri - 3.5% | |||||||||
Kansas City Industrial Development Authority, Revenue Bonds (Kansas City International Airport Terminal) Ser. A | 5.00 | 3/1/2044 | 1,000,000 | 1,100,412 | |||||
Missouri Health & Educational Facilities Authority, Revenue Bonds (Mercy Health) | 4.00 | 6/1/2053 | 2,000,000 | 2,102,623 | |||||
St. Louis County Industrial Development Authority, Revenue Bonds (Friendship Village St. Louis Obligated Group) Ser. A | 5.13 | 9/1/2049 | 2,975,000 | 3,107,697 | |||||
St. Louis County Industrial Development Authority, Revenue Bonds (Friendship Village St. Louis Obligated Group) Ser. A | 5.13 | 9/1/2048 | 2,025,000 | 2,116,476 | |||||
St. Louis Land Clearance for Redevelopment Authority, Revenue Bonds | 5.13 | 6/1/2046 | 4,725,000 | 5,036,981 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Missouri - 3.5% (continued) | |||||||||
The St. Louis Missouri Industrial Development Authority, Tax Allocation Bonds (St. Louis Innovation District Project) | 4.38 | 5/15/2036 | 3,500,000 | 3,383,453 | |||||
16,847,642 | |||||||||
Multi-State - .5% | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Variable Rate Certificates, Revenue Bonds, Ser. M048 | 3.15 | 1/15/2036 | 2,365,000 | b | 2,393,968 | ||||
Nevada - .6% | |||||||||
Reno, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) | 4.00 | 6/1/2058 | 2,750,000 | 2,857,853 | |||||
New Hampshire - .2% | |||||||||
New Hampshire Business Finance Authority, Revenue Bonds, Refunding (Green Bond) Ser. B | 3.75 | 7/2/2040 | 1,000,000 | b,g | 967,797 | ||||
New Jersey - 5.0% | |||||||||
New Jersey, GO (COVID-19 Emergency Bonds) Ser. A | 4.00 | 6/1/2031 | 1,000,000 | 1,091,772 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | 5.25 | 6/15/2027 | 4,000,000 | 4,348,842 | |||||
New Jersey Housing & Mortgage Finance Agency, Revenue Bonds, Refunding, Ser. D | 4.00 | 4/1/2025 | 1,560,000 | 1,623,942 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 5.00 | 6/15/2046 | 1,775,000 | 1,942,868 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 5.25 | 6/15/2043 | 2,000,000 | 2,228,462 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds, Ser. AA | 5.25 | 6/15/2033 | 1,500,000 | 1,628,403 | |||||
New Jersey Turnpike Authority, Revenue Bonds, Ser. A | 4.00 | 1/1/2048 | 3,000,000 | 3,158,460 | |||||
Tender Option Bond Trust Receipts (Series 2018-XF2538), (New Jersey Economic Development Authority, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.25 | 17.23 | 6/15/2040 | 3,250,000 | b,c,d | 3,508,423 | ||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.25 | 6/1/2046 | 750,000 | 829,108 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. B | 5.00 | 6/1/2046 | 3,410,000 | 3,683,160 | |||||
24,043,440 |
16
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
New York - 7.8% | |||||||||
Monroe County Industrial Development Corp., Revenue Bonds, Refunding (University of Rochester Project) Ser. A | 4.00 | 7/1/2050 | 1,500,000 | 1,583,772 | |||||
New York Convention Center Development Corp., Revenue Bonds (Hotel Unit Fee) (Insured; Assured Guaranty Municipal Corp.) Ser. B | 0.00 | 11/15/2049 | 6,885,000 | e | 2,028,752 | ||||
New York Liberty Development Corp., Revenue Bonds, Refunding (Class 1-3 World Trade Center Project) | 5.00 | 11/15/2044 | 7,000,000 | b | 7,333,034 | ||||
New York State Dormitory Authority, Revenue Bonds, Refunding (Montefiore Obligated Group) Ser. A | 4.00 | 9/1/2045 | 1,000,000 | 982,598 | |||||
New York Transportation Development Corp., Revenue Bonds (LaGuardia Airport Terminal B Redevelopment Project) Ser. A | 5.25 | 1/1/2050 | 3,500,000 | 3,662,934 | |||||
New York Transportation Development Corp., Revenue Bonds, Refunding (JFK International Air Terminal) Ser. A | 4.00 | 12/1/2039 | 1,475,000 | 1,501,400 | |||||
Niagara Area Development Corp., Revenue Bonds, Refunding (Covanta Holding Project) Ser. A | 4.75 | 11/1/2042 | 2,000,000 | b | 2,019,087 | ||||
Port Authority of New York & New Jersey, Revenue Bonds, Refunding, Ser. 223 | 4.00 | 7/15/2051 | 3,000,000 | 3,070,118 | |||||
Tender Option Bond Trust Receipts (Series 2020-XM0826), (Metropolitan Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp., Ser. C)) Non-recourse, Underlying Coupon Rate (%) 4.00 | 12.73 | 11/15/2046 | 7,045,000 | b,c,d | 7,269,026 | ||||
Triborough Bridge & Tunnel Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 5/15/2057 | 4,355,000 | 5,040,827 | |||||
TSASC, Revenue Bonds, Refunding, Ser. B | 5.00 | 6/1/2045 | 1,165,000 | 1,207,211 |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
New York - 7.8% (continued) | |||||||||
Westchester County Local Development Corp., Revenue Bonds, Refunding (Purchase Senior Learning Community Obligated Group) | 5.00 | 7/1/2056 | 2,000,000 | b | 1,974,000 | ||||
37,672,759 | |||||||||
North Carolina - 2.9% | |||||||||
North Carolina Medical Care Commission, Revenue Bonds, Refunding (Lutheran Services for the Aging Obligated Group) | 4.00 | 3/1/2051 | 3,000,000 | 2,691,580 | |||||
North Carolina Medical Care Commission, Revenue Bonds, Refunding (Pennybyrn at Maryfield Obligated Group) | 5.00 | 10/1/2035 | 1,005,000 | 1,028,366 | |||||
Tender Option Bond Trust Receipts (Series 2019-XF0792), (North Carolina Medical Care Commission, Revenue Bonds, Ser. A) Non-recourse, Underlying Coupon Rate (%) 4.00 | 13.14 | 11/1/2049 | 10,000,000 | b,c,d | 10,360,737 | ||||
14,080,683 | |||||||||
Ohio - 9.4% | |||||||||
Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. A2 | 4.00 | 6/1/2048 | 1,250,000 | 1,255,128 | |||||
Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. B2 | 5.00 | 6/1/2055 | 14,250,000 | 14,839,855 | |||||
Canal Winchester Local School District, GO, Refunding (Insured; National Public Finance Guarantee Corp.) | 0.00 | 12/1/2031 | 3,955,000 | e | 3,002,052 | ||||
Canal Winchester Local School District, GO, Refunding (Insured; National Public Finance Guarantee Corp.) | 0.00 | 12/1/2029 | 3,955,000 | e | 3,222,001 | ||||
Cuyahoga County, Revenue Bonds, Refunding (The MetroHealth System) | 5.00 | 2/15/2052 | 2,000,000 | 2,148,052 | |||||
Franklin County Convention Facilities Authority, Revenue Bonds | 5.00 | 12/1/2044 | 1,250,000 | 1,313,275 | |||||
Ohio Air Quality Development Authority, Revenue Bonds (Pratt Paper OH Project) | 4.50 | 1/15/2048 | 2,250,000 | b | 2,308,596 |
18
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Ohio - 9.4% (continued) | |||||||||
Tender Option Bond Trust Receipts (Series 2016-XM0380), (Hamilton County, Revenue Bonds, Refunding (The Metropolitan Sewer District of Greater Cincinnati)) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.75 | 12/1/2038 | 17,000,000 | b,c,d | 17,759,866 | ||||
45,848,825 | |||||||||
Oklahoma - .3% | |||||||||
Oklahoma Development Finance Authority, Revenue Bonds (OU Medicine Project) Ser. B | 5.25 | 8/15/2048 | 1,500,000 | 1,610,071 | |||||
Oregon - .6% | |||||||||
Clackamas County Hospital Facility Authority, Revenue Bonds, Refunding (Willamette View Obligated Group) Ser. A | 5.00 | 11/15/2047 | 1,500,000 | 1,553,322 | |||||
Yamhill County Hospital Authority, Revenue Bonds, Refunding (Friendsview Manor Obligated Group) Ser. A | 5.00 | 11/15/2056 | 1,220,000 | 1,220,856 | |||||
2,774,178 | |||||||||
Pennsylvania - 3.0% | |||||||||
Allentown School District, GO, Refunding (Insured; Build America Mutual) Ser. B | 5.00 | 2/1/2031 | 1,500,000 | 1,755,842 | |||||
Crawford County Hospital Authority, Revenue Bonds, Refunding (Meadville Medical Center Project) Ser. A | 6.00 | 6/1/2046 | 1,175,000 | 1,254,731 | |||||
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Sciences) | 5.00 | 11/1/2036 | 3,675,000 | 3,912,678 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | 4.00 | 12/1/2051 | 1,500,000 | 1,547,342 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | 4.00 | 12/1/2046 | 1,500,000 | 1,554,402 | |||||
Philadelphia Water & Wastewater, Revenue Bonds, Ser. A | 5.00 | 11/1/2050 | 1,500,000 | 1,725,012 | |||||
The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. A | 4.00 | 9/1/2036 | 2,740,000 | 2,942,899 | |||||
14,692,906 |
19
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Rhode Island - 1.6% | |||||||||
Providence Public Building Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 9/15/2038 | 7,035,000 | 7,920,870 | |||||
South Carolina - 4.1% | |||||||||
South Carolina Jobs-Economic Development Authority, Revenue Bonds (Bishop Gadsden Episcopal Retirement Community Obligated Group) | 5.00 | 4/1/2054 | 1,000,000 | 1,071,758 | |||||
South Carolina Public Service Authority, Revenue Bonds, Refunding, Ser. A | 4.00 | 12/1/2052 | 3,000,000 | 3,143,521 | |||||
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 | 13.01 | 12/1/2043 | 15,000,000 | b,c,d | 15,727,861 | ||||
19,943,140 | |||||||||
Tennessee - 1.1% | |||||||||
Tender Option Bond Trust Receipts (Series 2016-XM0388), (Metropolitan Government of Nashville & Davidson County, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.42 | 7/1/2040 | 5,000,000 | b,c,d | 5,199,034 | ||||
Texas - 11.3% | |||||||||
Central Texas Regional Mobility Authority, Revenue Bonds | 5.00 | 1/1/2048 | 2,500,000 | 2,752,883 | |||||
Central Texas Regional Mobility Authority, Revenue Bonds, Ser. A | 5.00 | 7/1/2025 | 1,000,000 | h | 1,094,128 | ||||
Clifton Higher Education Finance Corp., Revenue Bonds (Uplift Education) Ser. A | 4.50 | 12/1/2044 | 2,500,000 | 2,562,272 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds, Ser. A | 4.00 | 8/15/2051 | 3,100,000 | 3,201,054 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds, Ser. A | 5.75 | 8/15/2045 | 4,500,000 | 4,839,191 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds, Ser. D | 6.13 | 8/15/2048 | 6,000,000 | 6,517,267 | |||||
Grand Parkway Transportation Corp., Revenue Bonds, Refunding | 4.00 | 10/1/2049 | 1,000,000 | 1,046,360 | |||||
Harris County-Houston Sports Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | 0.00 | 11/15/2050 | 6,500,000 | e | 1,745,306 |
20
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Texas - 11.3% (continued) | |||||||||
Mission Economic Development Corp., Revenue Bonds, Refunding (Natgasoline Project) | 4.63 | 10/1/2031 | 1,500,000 | b | 1,576,530 | ||||
Tarrant County Cultural Education Facilities Finance Corp., Revenue Bonds, Refunding (MRC Stevenson Oaks Project) | 6.75 | 11/15/2051 | 1,000,000 | 1,097,045 | |||||
Tender Option Bond Trust Receipts (Series 2016-XM0377), (San Antonio, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | 16.75 | 2/1/2043 | 16,750,000 | b,c,d | 17,208,466 | ||||
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Blueridge Transportation Group) | 5.00 | 12/31/2050 | 1,300,000 | 1,381,250 | |||||
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Segment 3C Project) | 5.00 | 6/30/2058 | 8,930,000 | 9,815,514 | |||||
54,837,266 | |||||||||
U.S. Related - .9% | |||||||||
Guam Housing Corp., Revenue Bonds (Insured; Federal Home Loan Mortgage Corp.) Ser. A | 5.75 | 9/1/2031 | 930,000 | 945,470 | |||||
Puerto Rico, GO, Ser. A | 0.00 | 7/1/2033 | 381,733 | e | 221,049 | ||||
Puerto Rico, GO, Ser. A | 0.00 | 7/1/2024 | 152,585 | e | 139,325 | ||||
Puerto Rico, GO, Ser. A1 | 4.00 | 7/1/2037 | 228,839 | 220,465 | |||||
Puerto Rico, GO, Ser. A1 | 4.00 | 7/1/2033 | 296,629 | 290,352 | |||||
Puerto Rico, GO, Ser. A1 | 4.00 | 7/1/2046 | 323,574 | 305,767 | |||||
Puerto Rico, GO, Ser. A1 | 4.00 | 7/1/2041 | 311,133 | 296,629 | |||||
Puerto Rico, GO, Ser. A1 | 4.00 | 7/1/2035 | 266,630 | 258,080 | |||||
Puerto Rico, GO, Ser. A1 | 5.25 | 7/1/2023 | 331,291 | 339,453 | |||||
Puerto Rico, GO, Ser. A1 | 5.38 | 7/1/2025 | 330,362 | 348,859 | |||||
Puerto Rico, GO, Ser. A1 | 5.63 | 7/1/2027 | 327,370 | 357,942 | |||||
Puerto Rico, GO, Ser. A1 | 5.63 | 7/1/2029 | 322,059 | 359,807 | |||||
Puerto Rico, GO, Ser. A1 | 5.75 | 7/1/2031 | 312,813 | 357,075 | |||||
4,440,273 | |||||||||
Utah - .8% | |||||||||
Utah Charter School Finance Authority, Revenue Bonds, Refunding (Summit Academy) Ser. A | 5.00 | 4/15/2049 | 1,190,000 | 1,322,754 | |||||
Utah Infrastructure Agency, Revenue Bonds, Refunding, Ser. A | 5.00 | 10/15/2037 | 2,345,000 | 2,555,932 | |||||
3,878,686 |
21
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Virginia - 3.3% | |||||||||
Tender Option Bond Trust Receipts (Series 2018-XM0593), (Hampton Roads Transportation Accountability Commission, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.50 | 19.09 | 7/1/2057 | 7,500,000 | b,c,d | 8,588,968 | ||||
Virginia Small Business Financing Authority, Revenue Bonds (Transform 66 P3 Project) | 5.00 | 12/31/2056 | 3,380,000 | 3,741,136 | |||||
Virginia Small Business Financing Authority, Revenue Bonds (Transform 66 P3 Project) | 5.00 | 12/31/2052 | 1,620,000 | 1,794,975 | |||||
Virginia Small Business Financing Authority, Revenue Bonds, Refunding | 4.00 | 1/1/2039 | 1,850,000 | 1,910,979 | |||||
16,036,058 | |||||||||
Washington - 6.1% | |||||||||
King County School District No. 210, GO (Insured; School Bond Guaranty) | 4.00 | 12/1/2034 | 2,000,000 | 2,178,714 | |||||
Port of Seattle, Revenue Bonds, Ser. D | 5.00 | 5/1/2027 | 4,300,000 | 4,829,086 | |||||
Tender Option Bond Trust Receipts (Series 2018-XM0680), (Washington Convention Center Public Facilities District, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00 | 8.66 | 7/1/2058 | 17,000,000 | b,c,d | 18,494,219 | ||||
Washington Housing Finance Commission, Revenue Bonds, Refunding (Presbyterian Retirement Communities Northwest Obligated Group) Ser. A | 5.00 | 1/1/2051 | 3,200,000 | b | 3,221,224 | ||||
Washington Housing Finance Commission, Revenue Bonds, Ser. A1 | 3.50 | 12/20/2035 | 988,204 | 977,118 | |||||
29,700,361 | |||||||||
Wisconsin - 2.3% | |||||||||
Public Finance Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) Ser. A | 5.00 | 11/15/2041 | 1,000,000 | 1,126,306 | |||||
Public Finance Authority, Revenue Bonds (Appalachian University Project) (Insured; Assured Guaranty Municipal Corp.) Ser. A | 4.00 | 7/1/2059 | 2,050,000 | 2,124,685 |
22
Description | Coupon | Maturity Date | Principal Amount ($) |
| Value ($) | ||||
Long-Term Municipal Investments - 151.0% (continued) | |||||||||
Wisconsin - 2.3% (continued) | |||||||||
Public Finance Authority, Revenue Bonds (Roseman University of Health Sciences) | 5.00 | 4/1/2040 | 1,175,000 | b | 1,260,509 | ||||
Public Finance Authority, Revenue Bonds (Southminster Obligated Group) | 5.00 | 10/1/2048 | 2,000,000 | b | 2,073,976 | ||||
Public Finance Authority, Revenue Bonds, Refunding (Blue Ridge Healthcare Obligated Group) Ser. 2020 | 4.00 | 1/1/2045 | 1,835,000 | 1,928,929 | |||||
Public Finance Authority, Revenue Bonds, Refunding (Mary's Woods at Marylhurst Project) | 5.25 | 5/15/2047 | 750,000 | b | 777,136 | ||||
Wisconsin Health & Educational Facilities Authority, Revenue Bonds, Refunding (St. Camillus Health System Obligated Group) | 5.00 | 11/1/2054 | 2,000,000 | 2,059,637 | |||||
11,351,178 | |||||||||
Total Long-Term Municipal Investments | 732,536,290 | ||||||||
Total Investments (cost $717,279,281) | 151.4% | 734,252,084 | |||||||
Liabilities, Less Cash and Receivables | (35.1%) | (170,241,875) | |||||||
Preferred Stock, at redemption value | (16.3%) | (78,900,000) | |||||||
Net Assets Applicable to Common Shareholders | 100.0% | 485,110,209 |
a Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
b 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, 2022, these securities were valued at $345,219,465 or 71.16% of net assets.
c 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.
d Collateral for floating rate borrowings. The coupon rate given represents the current interest rate for the inverse floating rate security.
e Security issued with a zero coupon. Income is recognized through the accretion of discount.
f Security purchased on a when-issued or delayed basis for which the fund has not taken delivery as of March 31, 2022.
g These securities have a put feature; the date shown represents the put date and the bond holder can take a specific action to retain the bond after the put date.
h 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.
23
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited) † | Value (%) |
General | 26.3 |
Education | 25.2 |
Medical | 16.3 |
Transportation | 15.5 |
Water | 12.6 |
Nursing Homes | 11.1 |
Development | 9.8 |
Utilities | 6.3 |
Tobacco Settlement | 6.1 |
Airport | 5.7 |
General Obligation | 5.3 |
Power | 4.9 |
School District | 3.9 |
Multifamily Housing | 1.0 |
Single Family Housing | .6 |
Housing | .4 |
Prerefunded | .2 |
Special Tax | .2 |
151.4 |
† Based on net assets.
See notes to financial statements.
24
Summary of Abbreviations (Unaudited) | |||
ABAG | Association of Bay Area Governments | AGC | ACE Guaranty Corporation |
AGIC | Asset Guaranty Insurance Company | AMBAC | American Municipal Bond Assurance Corporation |
BAN | Bond Anticipation Notes | BSBY | Bloomberg Short-Term Bank Yield Index |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse Tax-Exempt Receipts |
EFFR | Effective Federal Funds 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 |
IDC | Industrial Development Corporation | LIBOR | London Interbank Offered Rate |
LOC | Letter of Credit | LR | Lease Revenue |
NAN | Note Anticipation Notes | MFHR | Multi-Family Housing Revenue |
MFMR | Multi-Family Mortgage Revenue | MUNIPSA | Securities Industry and Financial Markets Association Municipal Swap Index Yield |
OBFR | Overnight Bank Funding Rate | PILOT | Payment in Lieu of Taxes |
PRIME | Prime Lending Rate | PUTTERS | Puttable Tax-Exempt Receipts |
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes |
RIB | Residual Interest Bonds | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SOFR | Secured Overnight Financing Rate |
TAN | Tax Anticipation Notes | TRAN | Tax and Revenue Anticipation Notes |
U.S. T-BILL | U.S. Treasury Bill Money Market Yield | XLCA | XL Capital Assurance |
See notes to financial statements.
25
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2022 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments | 717,279,281 |
| 734,252,084 |
| ||
Cash |
|
|
|
| 5,998,034 |
|
Interest receivable |
| 9,689,630 |
| |||
Receivable for investment securities sold |
| 7,934,934 |
| |||
Prepaid expenses |
|
|
|
| 63,658 |
|
|
|
|
|
| 757,938,340 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 2(b) |
| 323,154 |
| |||
Payable for floating rate notes issued—Note 3 |
| 184,605,737 |
| |||
Payable for investment securities purchased |
| 8,379,870 |
| |||
Interest and expense payable related to |
| 419,899 |
| |||
Commissions payable—Note 1 |
| 53,862 |
| |||
Dividends payable to Preferred Shareholders |
| 5,261 |
| |||
Other accrued expenses |
|
|
|
| 140,348 |
|
|
|
|
|
| 193,928,131 |
|
Auction Preferred Stock, Series M,T,W,Th and F, par value $.001 per share (3,156 shares issued and outstanding at $25,000 per share liquidation value)—Note 1 |
| 78,900,000 |
| |||
Net Assets Applicable to Common Shareholders ($) |
|
| 485,110,209 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Common Stock, par value, $.001 per share |
|
|
|
| 62,291 |
|
Paid-in capital |
|
|
|
| 492,991,198 |
|
Total distributable earnings (loss) |
|
|
|
| (7,943,280) |
|
Net Assets Applicable to Common Shareholders ($) |
|
| 485,110,209 |
|
Shares Outstanding |
|
| ||
(500 million shares authorized) | 62,290,854 |
| ||
Net Asset Value Per Share of Common Stock ($) |
| 7.79 |
| |
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
26
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2022 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 15,007,355 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 2(a) |
|
| 2,273,918 |
| ||
Interest and expense related to floating rate notes issued—Note 3 |
|
| 668,237 |
| ||
Commission fees—Note 1 |
|
| 82,402 |
| ||
Professional fees |
|
| 81,980 |
| ||
Directors’ fees and expenses—Note 2(c) |
|
| 40,321 |
| ||
Shareholders’ reports |
|
| 33,770 |
| ||
Registration fees |
|
| 25,261 |
| ||
Shareholder servicing costs |
|
| 22,295 |
| ||
Custodian fees—Note 2(b) |
|
| 5,324 |
| ||
Chief Compliance Officer fees—Note 2(b) |
|
| 4,731 |
| ||
Miscellaneous |
|
| 23,870 |
| ||
Total Expenses |
|
| 3,262,109 |
| ||
Less—reduction in expenses due to undertaking—Note 2(a) |
|
| (303,189) |
| ||
Net Expenses |
|
| 2,958,920 |
| ||
Net Investment Income |
|
| 12,048,435 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($): |
|
| ||||
Net realized gain (loss) on investments | (1,765,146) |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (56,048,242) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (57,813,388) |
| ||
Dividends to Preferred Shareholders |
|
| (69,921) |
| ||
Net (Decrease) in Net Assets Applicable to Common |
| (45,834,874) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
27
STATEMENT OF CASH FLOWS
Six Months Ended March 31, 2022 (Unaudited)
|
|
|
|
|
| |
|
|
|
|
|
|
|
Cash Flows from Operating Activities ($): |
|
|
|
|
| |
Purchases of portfolio securities |
| (58,186,265) |
|
|
| |
Proceeds from sales of portfolio securities | 73,727,277 |
|
|
| ||
Dividends paid to Preferred Shareholders | (65,267) |
|
|
| ||
Interest income received |
| 15,383,758 |
|
|
| |
Interest and expense related to floating rate notes issued |
| (702,829) |
|
|
| |
Paid to BNY Mellon Investment Adviser, Inc. and affiliates |
| (1,998,806) |
|
|
| |
Operating expenses paid |
| (312,251) |
|
|
| |
Net Cash Provided (or Used) in Operating Activities |
|
|
| 27,845,617 |
| |
Cash Flows from Financing Activities ($): |
|
|
|
|
| |
Dividends paid to Common Shareholders |
| (11,396,643) |
|
|
| |
Decrease in payable for floating rate notes issued |
| (11,250,000) |
|
|
| |
Net Cash Provided (or Used) in Financing Activities |
| (22,646,643) |
| |||
Net Increase (Decrease) in Cash |
| 5,198,974 |
| |||
Cash at beginning of period |
| 799,060 |
| |||
Cash at End of Period |
| 5,998,034 |
| |||
Reconciliation of Net Increase (Decrease) in Net Assets Applicable to |
|
|
| |||
| Common Shareholders Resulting from Operations to |
|
|
| ||
| Net Cash Provided (or Used) in Operating Activities ($): |
|
|
| ||
Net (Decrease) in Net Assets Resulting From Operations |
| (45,834,874) |
| |||
Adjustments to Reconcile Net Increase (Decrease) in Net Assets |
|
|
| |||
| Applicable to Common Shareholders Resulting from |
|
|
| ||
| Operations to Net Cash Provided (or Used) in Operating Activities ($): |
|
|
| ||
Decrease in investments in securities at cost |
| 18,876,382 |
| |||
Decrease in interest receivable |
| 376,403 |
| |||
Increase in receivable for investment securities sold |
| (7,934,934) |
| |||
Increase in prepaid expenses |
| (37,031) |
| |||
Decrease in Due to BNY Mellon Investment Adviser, Inc. and affiliates |
| (18,022) |
| |||
Increase in payable for investment securities purchased |
| 6,364,710 |
| |||
Decrease in interest and expense payable related to floating rate notes issued |
| (34,592) |
| |||
Increase in dividends payable to Preferred Shareholders |
| 4,654 |
| |||
Increase in commissions payable and other accrued expenses |
| 34,679 |
| |||
Net change in unrealized (appreciation) depreciation on investments |
| 56,048,242 |
| |||
Net Cash Provided (or Used) in Operating Activities |
| 27,845,617 |
| |||
Supplemental Disclosure Cash Flow Information ($): |
|
|
| |||
Non-cash financing activities: |
|
|
| |||
Reinvestment of dividends |
| 126,653 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
28
STATEMENT OF CHANGES IN NET ASSETS
|
|
| �� |
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Net investment income |
|
| 12,048,435 |
|
|
| 25,532,441 |
| |
Net realized gain (loss) on investments |
| (1,765,146) |
|
|
| 2,969,621 |
| ||
Net change in unrealized appreciation |
| (56,048,242) |
|
|
| 18,800,839 |
| ||
Dividends to Preferred Shareholders |
|
| (69,921) |
|
|
| (94,802) |
| |
Net Increase (Decrease) in Net Assets Applicable | (45,834,874) |
|
|
| 47,208,099 |
| |||
Distributions ($): |
| ||||||||
Distributions to Common Shareholders |
|
| (11,523,296) |
|
|
| (26,132,167) |
| |
Capital Stock Transactions ($): |
| ||||||||
Distributions reinvested |
|
| 126,653 |
|
|
| 588,440 |
| |
Increase (Decrease) in Net Assets | 126,653 |
|
|
| 588,440 |
| |||
Total Increase (Decrease) in Net Assets | (57,231,517) |
|
|
| 21,664,372 |
| |||
Net Assets Applicable to Common Shareholders ($): |
| ||||||||
Beginning of Period |
|
| 542,341,726 |
|
|
| 520,677,354 |
| |
End of Period |
|
| 485,110,209 |
|
|
| 542,341,726 |
| |
Capital Share Transactions (Common Shares): |
| ||||||||
Shares issued for distributions reinvested |
|
| 14,642 |
|
|
| 66,450 |
| |
Net Increase (Decrease) in Shares Outstanding | 14,642 |
|
|
| 66,450 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
29
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. 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, 2022 | Year Ended September 30, | |||||
| (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 8.71 | 8.37 | 8.68 | 8.28 | 8.63 | 9.12 |
Investment Operations: | ||||||
Net investment incomea | .19 | .41 | .43 | .45 | .50 | .51 |
Net realized and unrealized | (.92) | .35 | (.30) | .40 | (.42) | (.45) |
Dividends to Preferred Shareholders from net investment income | (.00)b | (.00)b | (.02) | (.03) | (.03) | (.03) |
Total from Investment Operations | (.73) | .76 | .11 | .82 | .05 | .03 |
Distributions to | ||||||
Dividends from | (.19) | (.42) | (.42) | (.42) | (.45) | (.52) |
Net asset value resulting from | - | - | - | - | .05 | - |
Net asset value, end of period | 7.79 | 8.71 | 8.37 | 8.68 | 8.28 | 8.63 |
Market value, end of period | 7.19 | 8.70 | 8.28 | 8.58 | 7.50 | 8.79 |
Market Price Total Return (%) | (15.43)c | 10.29 | 1.58 | 20.59 | (9.72) | (.19) |
30
Six Months Ended | ||||||
March 31, 2022 | Year Ended September 30, | |||||
| (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses to average | 1.24e | 1.24 | 1.70 | 1.88 | 1.81 | 1.49 |
Ratio of net expenses to average | 1.12e | 1.12 | 1.58 | 1.77 | 1.69 | 1.37 |
Ratio of interest and expense | .25e | .26 | .73 | .91 | .76 | .39 |
Ratio of net investment income | 4.57e | 4.71 | 5.11 | 5.41 | 5.99 | 5.96 |
Ratio of total expenses | 1.08e | 1.08 | 1.48 | 1.64 | 1.50 | 1.18 |
Ratio of net expenses to | .98e | .98 | 1.37 | 1.54 | 1.40 | 1.08 |
Ratio of interest and expense related to floating rate notes issued to total average net assets | .22e | .23 | .63 | .79 | .63 | .31 |
Ratio of net investment income | 3.97e | 4.11 | 4.44 | 4.70 | 4.96 | 4.71 |
Portfolio Turnover Rate | 11.09c | 11.05 | 36.52 | 33.21 | 17.93 | 8.77 |
Asset Coverage of Preferred Stock, end of period | 715 | 787 | 760 | 784 | 753 | 476 |
Net Assets, applicable to | 485,110 | 542,342 | 520,677 | 539,930 | 514,880 | 535,958 |
Preferred Stock Outstanding, | 78,900 | 78,900 | 78,900 | 78,900 | 78,900 | 142,500 |
Floating Rate Notes Outstanding, | 184,606 | 195,856 | 222,556 | 246,228 | 229,398 | 148,574 |
a Based on average common shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Does not reflect the effect of dividends to Preferred Shareholders.
e Annualized.
See notes to financial statements.
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Strategic Municipals, Inc. (the “fund”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), is a 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. Insight North America LLC (the “Sub-adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser. The fund’s Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol LEO.
The fund has outstanding 763 Series M shares, 747 Series T shares, 660 Series W shares, 566 Series TH shares and 420 series F shares for a total of 3,156 shares of 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 Robin A. Melvin 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
32
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 fund enters 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.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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) are valued each business day by an independent 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.
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.
The following is a summary of the inputs used as of March 31, 2022 in valuing the fund’s investments:
34
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 | - | 1,715,794 | - | 1,715,794 | ||
Municipal Securities | - | 732,536,290 | - | 732,536,290 | ||
Liabilities ($) | ||||||
Other Financial Instruments: | ||||||
Floating Rate Notes†† | - | (184,605,737) | - | (184,605,737) |
† 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) Risk: The value of the securities in which the fund invests may be affected by political, regulatory, economic and social developments, and developments that impact specific economic sectors, industries or segments of the market. 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 businesses, including changes to operations and reducing staff. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
certain countries, companies, industries and market sectors more dramatically than others. The COVID-19 pandemic has had, and any other outbreak of an infectious disease or other serious public health concern could have, a significant negative impact on economic and market conditions and could trigger a prolonged period of global economic slowdown. 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 net investment income 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, 2022, the Board declared a cash dividend of $.030 per share from net investment income, payable on April 29, 2022 to Common Shareholders of record as of the close of business on April 14, 2022. The ex-dividend date was April 13, 2022.
(e) Dividends and distributions to shareholders of APS: Dividends, which are cumulative, are generally reset every seven days for each series of APS pursuant to a process specified in related fund charter documents. Dividend rates as of March 31, 2022, for each series of APS were as follows: Series M-.785%, Series T-.785%, Series W-.785%, Series TH-.785% and Series F-.707%. 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, 2022 for each series of APS were as follows: Series
36
M-.183%, Series T-.180%, Series W-.175%, Series TH-.170% and Series F-.178%.
(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 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, 2022, 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, 2022, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2021 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 $25,136,171 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2021. The fund has $14,595,822 of short-term capital losses and $10,540,349 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, 2021 was as follows: tax-exempt income $25,993,448 and ordinary income $233,521. The tax character of current year distributions will be determined at the end of the current fiscal year.
(g) New accounting pronouncements: In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and in January 2021, the FASB issued Accounting Standards Update 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the LIBOR and other interbank offered rates as of the end of 2021. The temporary relief provided by ASU 2020-04 and ASU 2021-01 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is
37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
evaluating the impact of ASU 2020-04 and ASU 2021-01 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform. Management is also currently actively working with other financial institutions and counterparties to modify contracts as required by applicable regulation and within the regulatory deadlines.
NOTE 2—Management Fee, Sub-Investment Advisory 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 ..75% of the value of the fund’s average weekly net assets (including net assets representing APS outstanding) and is payable monthly. The Agreement provides for an expense reimbursement from the Adviser should the fund’s aggregate expenses (excluding taxes, interest on borrowings, brokerage fees and extraordinary expenses) in any full fiscal year exceed the lesser of (1) the expense limitation of any state having jurisdiction over the fund or (2) 2% of the first $10 million, 1½% of the next $20 million and 1% of the excess over $30 million of the average weekly value of the fund’s net assets. During the period ended March 31, 2022, there was no expense reimbursement pursuant to the Agreement.
The Adviser has currently undertaken, from October 1, 2021 through November 30, 2022, to waive receipt of a portion of the fund’s management fee, in the amount of .10% of the value of the fund’s average weekly net assets (including net assets representing APS outstanding). The reduction in expenses, pursuant to the undertaking, amounted to $303,189 during the period ended March 31, 2022.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-adviser, the Adviser pays the Sub-adviser a monthly fee at an annual rate of .36% of the value of the fund’s average weekly net assets, (including net assets representing APS outstanding).
(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 March 31, 2022, the fund was charged $5,324 pursuant 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
38
includes net earnings credits, if any, as an expense offset in the Statement of Operations.
During the period ended March 31, 2022, the fund was charged $4,731 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 $367,087, custodian fees of $2,580 and Chief Compliance Officer fees of $2,351, which are offset against an expense reimbursement currently in effect in the amount of $48,864.
(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, during the period ended March 31, 2022, amounted to $66,140,560 and $70,405,674, 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
39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2022 was approximately $190,756,149 with a related weighted average annualized interest rate of .70%.
At March 31, 2022, accumulated net unrealized appreciation on investments was $16,972,803, consisting of $29,045,464 gross unrealized appreciation and $12,072,661 gross unrealized depreciation.
At March 31, 2022, 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).
40
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Directors held on November 1-2, 2021, 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, and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Insight North America LLC (the “Sub-adviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “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 and the Sub-adviser. In considering the renewal of the Agreements, 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. Representatives of the Adviser noted that the fund is a closed-end fund without daily inflows and outflows of capital and provided the fund’s asset size.
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, as well as the Adviser’s supervisory activities over the Sub-adviser.
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 based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the fund’s performance with the performance of a group of leveraged closed-end general and insured municipal debt funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all leveraged closed-end general and insured municipal debt funds (the “Performance Universe”), all for various periods ended September 30, 2021, 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 all leveraged closed-end 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 Board with a description of the methodology
41
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. 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 and the extent and manner in which leverage is employed that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Sub-adviser the results of the comparisons and considered that the fund’s total return performance, on a net asset value basis, was at or above the Performance Group and Performance Universe medians for all periods, and the fund’s total return performance, on a market price basis, was below the Performance Group and Performance Universe medians for all periods, except for the three- and ten-year periods when it was above the Performance Group and Performance Universe medians. The Board also considered that the fund’s yield performance, on a net asset value basis, was at or above the Performance Group medians for nine of the ten one-year periods ended September 30th and above the Performance Universe medians for all ten of the one-year periods and, on a market price basis, the fund’s yield performance was above the Performance Group medians for seven of the ten one-year periods ended September 30th and above the Performance Universe medians for all ten one-year periods ended September 30th. The Adviser also provided a comparison of the fund’s calendar year total returns (on a net asset value basis) to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in seven of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Sub-adviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year, which included reductions for a fee waiver arrangement in place that reduced the management fee paid to 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, based on common assets alone, the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and the Expense Universe median total expenses. The Board also considered that, based on common and leveraged assets together, the fund’s actual management fee was higher than the Expense Group median and the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group and the Expense Universe median total expenses.
42
Representatives of the Adviser stated that the Adviser has contractually agreed, until May 31, 2022, to waive receipt of a portion of the fund’s management fee, in the amount of .10% of the value of the fund’s average weekly net assets (including net assets representing auction preferred stock outstanding).
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors, noting that the fund is a closed-end fund. The Board considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of client portfolios advised by the Adviser or the Sub-adviser that are considered to have similar investment strategies and policies as the fund.
The Board considered the fee payable to the Sub-adviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Sub-adviser and the Adviser. The Board also took into consideration that the Sub-adviser’s fee is paid by the Adviser, out of its fee from the fund, and not 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 considered the fee waiver arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also 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 Agreements, considered in relation to the mix of services provided by the Adviser and the Sub-adviser, including the nature, extent and quality of such services, supported the renewal of the Agreements 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. Since the Adviser, and not the fund, pays the Sub-adviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Sub-adviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that, because the fund is a closed-end fund without daily inflows and outflows of capital, there were not significant economies of
43
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
scale at this time to be realized by the Adviser in managing the fund’s assets. 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 and the Sub-adviser from acting as investment adviser and sub-investment adviser, respectively, 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 Agreements. 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 and the Sub-adviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Sub-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 Management 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.
In evaluating the Agreements, 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 and the Sub-adviser, of the Adviser and the Sub-adviser and the services provided to the fund by the Adviser and the Sub-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 Agreements, including information on the investment performance of the fund in comparison to similar 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 the fund had the benefit of a number of years of reviews of the Management 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
44
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 Agreements.
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OFFICERS AND DIRECTORS
BNY Mellon Strategic Municipals, Inc.
240 Greenwich Street
New York, NY 10286
Chief Compliance Officer | |||
Joseph S. DiMartino, Chairman | Joseph W. Connolly | ||
Joni Evans | Portfolio Managers | ||
Joan Gulley | Daniel A. Rabasco | ||
Alan H. Howard | Jeffrey B. Burger | ||
Robin A. Melvin † | |||
Burton N. Wallack | |||
Benaree Pratt Wiley† | Adviser | ||
Gordon Davis†† | BNY Mellon Investment Adviser, Inc. | ||
† Elected by APS Holders | Custodian | ||
†† Advisory Board Member | The Bank of New York Mellon | ||
Officers | Counsel | ||
President | Proskauer Rose LLP | ||
David DiPetrillo | Transfer Agent, | ||
Chief Legal Officer | Dividend Disbursing Agent | ||
Peter M. Sullivan | and Registrar | ||
Vice President and Secretary | Computershare Inc. | ||
James Bitetto | (Common Stock) | ||
Vice President and Secretaries | Deutsche Bank Trust Company America | ||
Deirdre Cunnane | (Auction Preferred Stock) | ||
Sarah S. Kelleher | Auction Agent | ||
Jeff Prusnofsky | Deutsche Bank Trust Company America | ||
Amanda Quinn | (Auction Preferred Stock) | ||
Natalya Zelensky | Stock Exchange Listing | ||
Treasurer | NYSE Symbol: LEO | ||
James Windels | Initial SEC Effective Date | ||
Vice President | 9/23/87 | ||
Daniel Goldstein | |||
Joseph Martella | |||
Assistant Treasurers | |||
Gavin C. Reilly | |||
Robert Salviolo | |||
Robert Svagna | |||
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; and 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. |
BNY Mellon Strategic Municipals, Inc.
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Insight North America LLC
200 Park Avenue, 7th Floor
New York, NY 10166
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
Ticker Symbol: | LEO |
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 at www.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 at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
|
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. |
None.
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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
The fund did not participate in a securities lending program during this period.
Item 13. | Exhibits. |
(a)(1) Not applicable.
(a)(3) Not applicable.
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 Strategic Municipals, Inc.
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: May 20, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: May 20, 2022
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: May 20, 2022
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)