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

811-05877

 

 

 

BNY Mellon Strategic Municipal Bond Fund, Inc.

 

 

(Exact name of Registrant as specified in charter)

 

 

 

 

 

 

c/o BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, New York  10286

 

 

(Address of principal executive offices)        (Zip code)

 

 

 

 

 

Bennett A. MacDougall, Esq.

240 Greenwich Street

New York, New York  10286

 

 

(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: 

(212) 922-6400

 

 

Date of fiscal year end:

 

11/30

 

Date of reporting period:

05/31/2020

 

             

 

 

 


 

FORM N-CSR

Item 1.          Reports to Stockholders.

 


 

BNY Mellon Strategic Municipal Bond Fund, Inc.

 

SEMIANNUAL REPORT

May 31, 2020

 

 

 

BNY Mellon Strategic Municipal Bond Fund, Inc.

Protecting Your Privacy
Our Pledge to You

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

FOR MORE INFORMATION

 

Back Cover

 

       
 


BNY Mellon Strategic Municipal Bond Fund, Inc.

 

The Fund

A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.

Dear Shareholder:

We are pleased to present this semiannual report for BNY Mellon Strategic Municipal Bond Fund, Inc., covering the six-month period from December 1, 2019 through May 31, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

Stock markets performed well over the last month of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Markets were further supported by a December announcement that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final month of 2019. However, the euphoria was short-lived, as concerns over the spread of COVID-19 roiled markets during the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Stocks posted historic losses in March 2020, but regained ground in April and May.

In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. As stocks rallied in December 2019, Treasury bond prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight-to-quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spread widening. The Fed cut rates twice in March, resulting in an overnight lending target rate of nearly zero, and the government launched a large stimulus package. In April and May 2020, risk-asset prices recovered some of their prior losses, as investors turned their attention toward a possible economic recovery. Investment-grade bonds generally posted positive returns for the period.

We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19 and determines a path forward for recovery. However, we are confident that once the economic effects of the virus have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,

Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
June 15, 2020

2

 

DISCUSSION OF FUND PERFORMANCE (Unaudited)

For the period of December 1, 2019 through May 31, 2020, as provided by Daniel Rabasco and Jeffrey Burger, Portfolio Managers

Market and Fund Performance Overview

For the six-month period ended May 31, 2020, BNY Mellon Strategic Municipal Bond Fund, Inc. achieved a total return of -4.62% on a net-asset-value basis.1 Over the same period, the fund provided aggregate income dividends of $0.18 per share, which reflects an annualized distribution rate of 5.02%.2

During the reporting period, municipal bonds were hindered by market turmoil resulting from COVID-19 and the government efforts to contain it. The fund’s performance was driven in part by its asset allocation and security selection decisions.

The Fund’s Investment Approach

The fund seeks to maximize current income exempt from federal income tax to the extent believed by BNY Mellon Investment Adviser, Inc. to be consistent with the preservation of capital. In pursuing this goal, the fund invests at least 80% of its assets in municipal bonds. Under normal market conditions, the weighted average maturity of the fund’s portfolio is expected to exceed 10 years. Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds considered investment grade or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc.

The fund also has issued auction-rate preferred stock (ARPS), a percentage of which remains outstanding from its initial public offering, and has invested the proceeds in a manner consistent with its investment objective. This, along with the fund’s participation in secondary, inverse floater structures, has the effect of “leveraging” the portfolio, which can magnify gain and loss potential depending on market conditions.

Over time, many of the fund’s older, higher-yielding bonds have matured or were redeemed by their issuers. We have attempted to replace those bonds with investments consistent with the fund’s investment policies. We have also sought to upgrade the fund with newly issued bonds that, in our opinion, have better structural or income characteristics than existing holdings. When such opportunities arise, we usually look to sell bonds that are close to their optional redemption date or maturity.

COVID-19 Concerns Drove Municipal Bonds

Initially in the reporting period, the municipal bond market benefited from strong demand resulting from concerns about domestic economic growth. Demand was also driven by investors in states with high income-tax rates, who were seeking a way to reduce their federal income-tax liability, which rose when the cap on the federal deductibility of state and local taxes was implemented in the Tax Cuts and Jobs Act of 2017.

Prior to the reporting period, interest-rate reductions by the Federal Reserve (the “Fed”) in August, September and October also helped performance of the municipal bond market. This contributed to a decline in yields across the municipal bond yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.

Performance of the market was also assisted by a manageable supply of new bonds. Supply increased somewhat during the reporting period, as low interest rates led issuers to seek to capture favorable financing.

Later in the reporting period, the emergence of the COVID-19 crisis resulted in turmoil, particularly in March. Fears of widespread economic damage due to COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond

3

 

DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)

mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented them from hedging their municipal bond purchases by shorting Treasuries, as they normally do.

In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond prices fell, insurance companies and other large investors were expected to step in. Their purchases would normally have been financed by selling some of their corporate bonds, but lack of liquidity in that market hindered their inability to act. As a result, the municipal market yield spreads rose significantly, weakening performance.

But actions by the Fed, including two emergency rate cuts in March 2020 and the implementation of the Municipal Liquidity Facility in April 2020, brought some calm to the market. The liquidity facility provides for the purchase of short-term municipal notes by the Fed, essentially providing a backstop for the market.

May 2020 saw strong rebound in the municipal bond market, particularly among high-quality issues. The market experienced robust inflows from institutional and retail investors, reversing the pattern of the previous two months.

Fundamentals among municipal bond issuers generally were generally healthy prior to the pandemic. Steady but slower economic growth through most of the period had supported tax revenues, fiscal balances and “rainy day” funds. But the economic slowdown due to COVID-19-related shutdowns are likely to weaken the fiscal condition of many issuers.

Asset Allocation and Security Selection Supported Fund Results

The fund’s performance was hindered by its asset allocation and security selection decisions. The fund’s overweight position in revenue bonds was detrimental, as investors moved into general obligation bonds during the COVID-19-related turmoil. In addition, certain market segments underperformed, including charter schools, hospitals, retirement homes, and special tax. As for security selection, the fund’s position in Illinois and Chicago general obligation bonds hindered performance as well. The fund made use of leverage during the reporting period, and this also detracted from performance, as financing rates rose significantly. In addition, the fund implemented a hedge by shorting long-term Treasury yields, and this also detracted from performance.

On the other hand, two factors were beneficial to fund performance. The fund’s relatively long duration contributed positively, as interest rates fell, especially in May 2020, benefiting longer bonds generally. In addition, positions on the shorter portion of the curve were beneficial. Two-year and five-year bonds, in particular, performed well. In addition, to support the fund’s dividend, when yield spreads widened, the fund rebooked yields, swapping current low-yielding securities for higher-yielding securities.

A Constructive Investment Posture

We anticipate that steps taken by the Fed and the government, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act, will benefit the economy and the municipal bond market. It’s also possible that the federal government will implement an additional round of stimulus. In addition, inflation is likely to remain low, and we don’t anticipate higher interest rates in the near future, so we expect to maintain the fund’s longer duration stance in order to capture higher yields. In the near term, seasonal reinvestment of interest and principal payments should also provide some support to the market. Demand for municipal bonds is likely to be buoyed as well by the cap on federal deductibility of state and local taxes.

4

 

We will continue to emphasize sectors that we already own, since these credits are solid, and issuers in these areas have adequate liquidity on their balance sheets. But we will pay close attention to sectors that are likely to be adversely affected in the current environment.

June 15, 2020

1 Total return includes reinvestment of dividends and any capital gains paid, based upon net asset value per share. Past performance is no guarantee of future results. 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 reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an undertaking in effect through November 30, 2020, at which time it may be extended, terminated or modified. Had these expenses not been absorbed, the fund’s returns would have been lower.

2 Distribution rate per share is based upon dividends per share paid from net investment income during the period, annualized and 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, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.

High-yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.

The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

5

 

STATEMENT OF INVESTMENTS
May 31, 2020 (Unaudited)

                   
 

Description

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

 

Value ($)

 

Bonds and Notes - .3%

         

Collateralized Municipal-Backed Securities - .3%

         

Arizona Industrial Development Authority, Revenue Bonds, Ser. 2019-2
(cost $1,413,037)

 

3.63

 

5/20/2033

 

1,287,400

 

1,291,803

 
                 

Long-Term Municipal Investments - 154.6%

         

Alabama - 5.2%

         

Alabama Special Care Facilities Financing Authority, Revenue Bonds (Methodist Home for the Aging Obligated Group)

 

5.50

 

6/1/2030

 

1,800,000

 

1,809,108

 

Alabama Special Care Facilities Financing Authority, Revenue Bonds (Methodist Home for the Aging Obligated Group)

 

5.75

 

6/1/2045

 

1,250,000

 

1,200,425

 

Alabama Special Care Facilities Financing Authority, Revenue Bonds (Methodist Home for the Aging Obligated Group)

 

6.00

 

6/1/2050

 

1,500,000

 

1,485,570

 

Jefferson County, Revenue Bonds, Refunding, Ser. F

 

0/7.75

 

10/1/2046

 

6,000,000

a

5,695,620

 

The Lower Alabama Gas District, Revenue Bonds, Ser. A

 

5.00

 

9/1/2046

 

5,000,000

 

6,578,500

 

University of Alabama at Birmingham, Revenue Bonds, Ser. B

 

4.00

 

10/1/2036

 

2,745,000

 

3,260,950

 
 

20,030,173

 

Arizona - 4.6%

         

Arizona Industrial Development Authority, Revenue Bonds, Refunding (BASIS Schools Projects) Ser. A

 

5.25

 

7/1/2047

 

1,500,000

b

1,515,480

 

Glendale Industrial Development Authority, Revenue Bonds, Refunding (Sun Health Services Obligated Group) Ser. A

 

5.00

 

11/15/2054

 

1,500,000

 

1,571,505

 

Maricopa County Industrial Development Authority, Revenue Bonds, Refunding (Legacy Traditional Schools Project)

 

5.00

 

7/1/2049

 

1,775,000

b

1,769,533

 

Tender Option Bond Trust Receipts (Series 2018-XF2537), (Salt Verde Financial Corporation, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00

 

16.90

 

12/1/2037

 

4,550,000

b,c,d

5,895,975

 

6

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Arizona - 4.6% (continued)

         

The Phoenix Industrial Development Authority, Revenue Bonds (Legacy Traditional Schools Project) Ser. A

 

6.75

 

7/1/2044

 

1,000,000

b

1,092,710

 

The Phoenix Industrial Development Authority, Revenue Bonds, Refunding (BASIS Schools Projects) Ser. A

 

5.00

 

7/1/2046

 

3,000,000

b

2,982,570

 

The Pima County Industrial Development Authority, Revenue Bonds (American Leadership Academy Project)

 

5.00

 

6/15/2047

 

3,000,000

b

2,719,770

 
 

17,547,543

 

California - 8.1%

         

California, GO

 

6.00

 

3/1/2033

 

755,000

 

758,224

 

California Public Finance Authority, Revenue Bonds, Ser. A

 

5.00

 

7/1/2037

 

700,000

b

525,000

 

Golden State Tobacco Securitization Corp., Revenue Bonds, Refunding, Ser. A1

 

5.00

 

6/1/2047

 

1,000,000

 

1,000,810

 

San Buenaventura, Revenue Bonds (Community Memorial Health System)

 

7.50

 

12/1/2041

 

1,500,000

 

1,526,040

 

Tender Option Bond Trust Receipts (Series 2016-XM0379), (Los Angeles Department of Water & Power, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.98

 

7/1/2043

 

5,000,000

b,c,d

5,394,788

 

Tender Option Bond Trust Receipts (Series 2016-XM0387), (Los Angeles Department of Airports, Revenue Bonds (Los Angeles International Airport)) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.89

 

5/15/2038

 

6,000,000

b,c,d

6,544,935

 

Tender Option Bond Trust Receipts (Series 2016-XM0390), (The Regents of the University of California, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.98

 

5/15/2036

 

6,260,000

b,c,d

7,001,904

 

Tender Option Bond Trust Receipts (Series 2016-XM0440), (Los Angeles Department of Airports, Revenue Bonds, Refunding (Los Angeles International Airport)) Recourse, Underlying Coupon Rate (%) 5.00

 

17.45

 

5/15/2031

 

2,057,000

b,c,d

2,077,311

 

7

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

California - 8.1% (continued)

         

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

 

17.07

 

5/1/2050

 

5,190,000

b,c,d

6,005,423

 

30,834,435

Colorado - 5.7%

         

Belleview Station Metropolitan District No. 2, GO, Refunding

 

5.13

 

12/1/2046

 

2,375,000

 

2,261,047

 

Colorado Educational & Cultural Facilities Authority, Revenue Bonds, Refunding (Johnson & Wales University) Ser. B

 

5.00

 

4/1/2031

 

2,685,000

 

2,859,444

 

Denver City & County Airport System, Revenue Bonds, Refunding, Ser. A

 

5.00

 

12/1/2048

 

2,300,000

 

2,661,284

 

Dominion Water & Sanitation District, Revenue Bonds

 

6.00

 

12/1/2046

 

3,210,000

 

3,330,022

 

Sterling Ranch Community Authority Board, Revenue Bonds (Insured; Municipal Government Guaranteed) Ser. A

 

5.00

 

12/1/2047

 

1,250,000

 

1,158,588

 

Tender Option Bond Trust Receipts (Series 2016-XM0385), (Board of Governors of the Colorado State University, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00

 

13.69

 

3/1/2038

 

4,960,000

b,c,d

5,366,422

 

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

 

16.51

 

8/1/2044

 

3,260,000

b,c,d

3,996,084

 

21,632,891

Connecticut - .9%

         

Connecticut, Special Tax Bonds

 

5.00

 

5/1/2038

 

1,000,000

 

1,235,880

 

Connecticut Housing Finance Authority, Revenue Bonds, Refunding, Ser. A1

 

3.65

 

11/15/2032

 

2,000,000

 

2,190,860

 
 

3,426,740

 

District of Columbia - 4.5%

         

Metropolitan Washington Airports Authority, Revenue Bonds, Refunding, Ser. B

 

4.00

 

10/1/2049

 

1,000,000

 

1,014,760

 

8

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

District of Columbia - 4.5% (continued)

         

Tender Option Bond Trust Receipts (Series 2016-XM0437), (District of Columbia, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.00

 

17.43

 

12/1/2035

 

14,834,680

b,c,d

16,302,430

 

17,317,190

Florida - 10.9%

         

Atlantic Beach, Revenue Bonds (Fleet Landing Project) Ser. A

 

5.00

 

11/15/2048

 

2,500,000

 

2,369,300

 

Florida Higher Educational Facilities Financial Authority, Revenue Bonds (Ringling College Project)

 

5.00

 

3/1/2049

 

2,000,000

 

2,043,200

 

Lee County Industrial Development Authority, Revenue Bonds (Shell Point/Waterside Health Project)

 

5.00

 

11/15/2049

 

1,540,000

 

1,560,805

 

Mid-Bay Bridge Authority, Revenue Bonds, Ser. A

 

7.25

 

10/1/2021

 

3,000,000

e

3,276,210

 

Palm Beach County Health Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group)

 

5.00

 

11/15/2045

 

5,775,000

 

5,926,998

 

Palm Beach County Health Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group)

 

5.50

 

11/15/2020

 

6,825,000

e

6,989,278

 

Palm Beach County Health Facilities Authority, Revenue Bonds (Lifespace Communities) Ser. B

 

4.00

 

5/15/2053

 

2,000,000

 

1,540,780

 

Seminole County Industrial Development Authority, Revenue Bonds, Refunding (Legacy Pointe at UCF Project)

 

5.75

 

11/15/2054

 

1,000,000

 

771,260

 

St. Johns County Industrial Development Authority, Revenue Bonds, Refunding (Presbyterian Retirement Communities Project) Ser. A

 

6.00

 

8/1/2020

 

3,500,000

e

3,532,935

 

Tender Option Bond Trust Receipts (Series 2019-XF0813), (Fort Myers Florida Utility, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 4.00

 

11.69

 

10/1/2049

 

2,980,000

b,c,d

3,364,405

 

9

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Florida - 10.9% (continued)

         

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

 

13.54

 

8/15/2049

 

5,535,000

b,c,d

5,976,233

 

Tender Option Bond Trust Receipts (Series 2020-XF2877), (Greater Orlando Aviation Authority, Revenue Bonds, Ser. A) Recourse, Underlying Coupon Rate (%) 4.00

 

13.45

 

10/1/2049

 

4,065,000

b,c,d

4,368,556

 

41,719,960

Georgia - 5.5%

         

Atlanta Water & Wastewater, Revenue Bonds, Ser. D

 

3.50

 

11/1/2028

 

900,000

b

974,097

 

Tender Option Bond Trust Receipts (Series 2016-XM0435), (Private Colleges & Universities Authority, Revenue Bonds, Refunding (Emory University)) Recourse, Underlying Coupon Rate (%) 5.00

 

17.44

 

10/1/2043

 

6,000,000

b,c,d

6,697,095

 

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

 

17.30

 

1/1/2056

 

2,720,000

b,c,d

3,009,884

 

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

 

14.98

 

7/1/2044

 

4,220,000

b,c,d

5,068,948

 

The Atlanta Development Authority, Revenue Bonds, Ser. A1

 

5.25

 

7/1/2040

 

1,000,000

 

1,069,560

 

The Burke County Development Authority, Revenue Bonds, Refunding (Oglethorpe Power Corp.) Ser. D

 

4.13

 

11/1/2045

 

4,200,000

 

4,261,320

 

21,080,904

Hawaii - 1.1%

         

Hawaii Department of Budget & Finance, Revenue Bonds, Refunding (Hawaiian Electric Co.)

 

4.00

 

3/1/2037

 

2,500,000

 

2,662,350

 

10

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Hawaii - 1.1% (continued)

         

Hawaii Pacific Health, Revenue Bonds, Ser. B

 

5.63

 

7/1/2020

 

1,500,000

e

1,506,555

 
 

4,168,905

 

Illinois - 14.8%

         

Chicago Board of Education, GO, Refunding, Ser. A

 

5.00

 

12/1/2033

 

1,250,000

 

1,250,538

 

Chicago Board of Education, GO, Refunding, Ser. B

 

5.00

 

12/1/2031

 

500,000

 

503,540

 

Chicago Board of Education, GO, Refunding, Ser. B

 

5.00

 

12/1/2032

 

400,000

 

401,988

 

Chicago II, GO, Refunding, Ser. A

 

6.00

 

1/1/2038

 

3,000,000

 

3,218,430

 

Chicago II, GO, Refunding, Ser. C

 

5.00

 

1/1/2024

 

1,265,000

 

1,311,299

 

Chicago II, GO, Ser. A

 

5.00

 

1/1/2044

 

3,000,000

 

2,930,490

 

Chicago II Wastewater Transmission, Revenue Bonds, Refunding, Ser. C

 

5.00

 

1/1/2039

 

2,330,000

 

2,606,012

 

Chicago O'Hare International Airport, Revenue Bonds

 

5.63

 

1/1/2035

 

580,000

 

593,665

 

Chicago O'Hare International Airport, Revenue Bonds

 

5.63

 

1/1/2021

 

1,770,000

e

1,825,684

 

Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. A

 

5.00

 

1/1/2048

 

4,000,000

 

4,505,840

 

Illinois, GO, Refunding, Ser. A

 

5.00

 

10/1/2029

 

1,000,000

 

1,013,530

 

Illinois, GO, Refunding, Ser. A

 

5.00

 

10/1/2028

 

2,000,000

 

2,033,940

 

Illinois, GO, Ser. A

 

5.00

 

5/1/2038

 

2,850,000

 

2,855,415

 

Illinois, GO, Ser. B

 

5.00

 

11/1/2030

 

1,500,000

 

1,522,440

 

Illinois, GO, Ser. D

 

5.00

 

11/1/2028

 

3,000,000

 

3,046,290

 

Illinois Finance Authority, Revenue Bonds, Refunding (Plymouth Place Obligated Group)

 

5.25

 

5/15/2045

 

1,000,000

 

903,560

 

Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Expansion Project)

 

5.00

 

6/15/2057

 

2,500,000

 

2,392,275

 

Metropolitan Pier & Exposition Authority, Revenue Bonds (McCormick Place Project) (Insured; National Public Finance Guarantee Corp.) Ser. A

 

0.00

 

12/15/2036

 

2,500,000

f

1,211,000

 

Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Project) Ser. B

 

5.00

 

12/15/2028

 

2,500,000

 

2,500,900

 

11

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Illinois - 14.8% (continued)

         

Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Project) Ser. B

 

5.00

 

6/15/2052

 

3,550,000

 

3,417,301

 

Railsplitter Tobacco Settlement Authority, Revenue Bonds

 

6.00

 

6/1/2021

 

3,600,000

e

3,807,144

 

Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A

 

4.00

 

1/1/2039

 

2,250,000

 

2,326,297

 

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

 

14.88

 

10/1/2040

 

9,000,000

b,c,d

10,476,742

 

56,654,320

Indiana - 2.1%

         

Indiana Finance Authority, Revenue Bonds (Greed Bond) (RES Polyflow Indiana)

 

7.00

 

3/1/2039

 

4,575,000

b

3,861,300

 

Indiana Finance Authority, Revenue Bonds (Parkview Health System Obligated Group) Ser. A

 

5.00

 

11/1/2043

 

3,500,000

 

4,084,010

 
 

7,945,310

 

Iowa - 1.4%

         

Iowa Finance Authority, Revenue Bonds, Refunding (Iowa Fertilizer Co. Project)

 

5.25

 

12/1/2025

 

5,125,000

 

5,181,990

 

Kentucky - 1.5%

         

Christian County, Revenue Bonds, Refunding (Jennie Stuart Medical Center Obligated Group)

 

5.50

 

2/1/2044

 

2,800,000

 

3,044,496

 

Kentucky Public Energy Authority, Revenue Bonds, Ser. A1

 

4.00

 

6/1/2025

 

2,560,000

 

2,792,806

 
 

5,837,302

 

Louisiana - 3.0%

         

Louisiana Local Government Environmental Facilities & Community Development Authority, Revenue Bonds, Refunding (Westlake Chemical Project)

 

3.50

 

11/1/2032

 

2,400,000

 

2,385,600

 

12

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Louisiana - 3.0% (continued)

         

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

 

17.35

 

7/1/2047

 

8,195,000

b,c,d

9,041,568

 

11,427,168

Maine - .5%

         

Maine Health & Higher Educational Facilities Authority, Revenue Bonds (Maine General Medical Center Obligated Group)

 

7.50

 

7/1/2032

 

2,000,000

 

2,081,860

 

Maryland - 2.1%

         

Maryland Health & Higher Educational Facilities Authority, Revenue Bonds (Adventist Healthcare Obligated Group) Ser. A

 

5.50

 

1/1/2046

 

3,250,000

 

3,495,635

 

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

 

14.41

 

7/1/2042

 

4,000,000

b,c,d

4,423,270

 

7,918,905

Massachusetts - 9.7%

         

Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Tufts Medical Center) Ser. I

 

7.25

 

1/1/2021

 

1,505,000

e

1,565,983

 

Massachusetts Development Finance Agency, Revenue Bonds, Refunding (UMass Memorial Health Care Obligated Group) Ser. K

 

5.00

 

7/1/2038

 

2,130,000

 

2,330,795

 

Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. A

 

5.00

 

7/1/2029

 

1,000,000

 

1,217,190

 

Tender Option Bond Trust Receipts (Series 2016-XM0368), (Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Harvard University)) Non-recourse, Underlying Coupon Rate (%) 5.25

 

15.79

 

2/1/2034

 

10,000,000

b,c,d

10,331,050

 

13

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Massachusetts - 9.7% (continued)

         

Tender Option Bond Trust Receipts (Series 2016-XM0372), (Massachusetts, GO) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.92

 

4/1/2027

 

6,400,000

b,c,d

6,651,168

 

Tender Option Bond Trust Receipts (Series 2016-XM0386), (University of Massachusetts Building Authority, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.90

 

5/1/2043

 

7,409,991

b,c,d

8,410,485

 

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

 

14.74

 

6/1/2047

 

5,250,000

b,c,d

6,352,746

 

36,859,417

Michigan - 6.1%

         

Detroit Water Supply System, Revenue Bonds, Ser. A

 

5.00

 

7/1/2021

 

3,290,000

e

3,458,514

 

Detroit Water Supply System, Revenue Bonds, Ser. A

 

5.00

 

7/1/2021

 

3,780,000

e

3,973,612

 

Great Lakes Water Authority Sewage Disposal System, Revenue Bonds, Refunding, Ser. C

 

5.00

 

7/1/2036

 

2,000,000

 

2,400,760

 

Michigan Building Authority, Revenue Bonds, Refunding

 

4.00

 

4/15/2054

 

2,500,000

 

2,868,975

 

Michigan Finance Authority, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. D6

 

5.00

 

7/1/2036

 

1,000,000

 

1,148,040

 

Michigan Strategic Fund, Revenue Bonds (AMT-I-75 Improvement Project)

 

5.00

 

6/30/2048

 

5,000,000

 

5,261,050

 

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

 

3,900,000

b,c,d

4,141,644

 

23,252,595

Minnesota - 1.2%

         

Duluth Economic Development Authority, Revenue Bonds, Refunding (Essentia Health Obligated Group) Ser. A

 

5.00

 

2/15/2058

 

4,000,000

 

4,424,600

 

14

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Missouri - 2.3%

         

Missouri Health & Educational Facilities Authority, Revenue Bonds (Lutheran Senior Services Projects) Ser. A

 

5.00

 

2/1/2042

 

1,000,000

 

976,660

 

Missouri Health & Educational Facilities Authority, Revenue Bonds (Lutheran Senior Services Projects) Ser. B

 

2.88

 

2/1/2022

 

1,365,000

 

1,321,716

 

Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (Lutheran Senior Services Projects)

 

5.00

 

2/1/2046

 

1,200,000

 

1,151,352

 

St. Louis Land Clearance for Redevelopment Authority, Revenue Bonds (National Geospatial-Intelligence)

 

5.13

 

6/1/2046

 

4,845,000

 

5,275,817

 

8,725,545

Multi-State - .7%

         

Federal Home Loan Mortgage Corp. Multifamily Variable Rate Certificate, Revenue Bonds, Ser. M048

 

3.15

 

1/15/2036

 

2,500,000

b

2,818,350

 

Nevada - 1.3%

         

Reno, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.)

 

4.00

 

6/1/2058

 

5,000,000

 

5,110,150

 

New Jersey - 3.9%

         

Essex County Improvement Authority, Revenue Bonds

 

5.25

 

7/1/2045

 

1,000,000

b

1,002,430

 

New Jersey Housing & Mortgage Finance Agency, Revenue Bonds, Refunding, Ser. D

 

4.00

 

10/1/2024

 

2,370,000

 

2,641,839

 

New Jersey Transportation Trust Fund Authority, Revenue Bonds

 

5.00

 

6/15/2046

 

1,365,000

 

1,403,971

 

New Jersey Transportation Trust Fund Authority, Revenue Bonds

 

5.25

 

6/15/2043

 

1,500,000

 

1,576,485

 

South Jersey Port Corp., Revenue Bonds, Ser. B

 

5.00

 

1/1/2042

 

2,025,000

 

2,027,227

 

Tender Option Bond Trust Receipts (Series 2018-XF2538), (New Jersey Economic Development Authority, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.25

 

17.93

 

6/15/2040

 

4,250,000

b,c,d

4,442,563

 

Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. B

 

5.00

 

6/1/2046

 

1,670,000

 

1,753,016

 

14,847,531

15

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

New Mexico - 1.3%

         

Farmington, Revenue Bonds, Refunding (Public Service Company of New Mexico San Juan Project) Ser. D

 

5.90

 

6/1/2040

 

5,000,000

 

5,005,100

 

New York - 13.3%

         

New York City, GO, Ser. D1

 

4.00

 

3/1/2050

 

2,500,000

 

2,815,275

 

New York City Educational Construction Fund, Revenue Bonds, Ser. A

 

6.50

 

4/1/2028

 

2,785,000

 

2,926,673

 

New York Convention Center Development Corp., Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. B

 

0.00

 

11/15/2049

 

5,600,000

f

1,828,400

 

New York Liberty Development Corp., Revenue Bonds, Refunding (Class 1-3 World Trade Center Project)

 

5.00

 

11/15/2044

 

3,400,000

b

3,371,474

 

New York State Dormitory Authority, Revenue Bonds, Refunding (Montefiore Obligated Group) Ser. A

 

4.00

 

9/1/2045

 

1,000,000

 

1,027,610

 

New York Transportation Development Corp., Revenue Bonds (LaGuardia Airport Terminal B Redevelopment Project) Ser. A

 

5.25

 

1/1/2050

 

3,000,000

 

3,156,090

 

Niagara Area Development Corp., Revenue Bonds, Refunding (Convanta Holding Project) Ser. A

 

4.75

 

11/1/2042

 

1,000,000

b

997,220

 

Port Authority of New York & New Jersey, Revenue Bonds (JFK International Air Terminal Project)

 

6.00

 

12/1/2036

 

4,710,000

 

4,736,753

 

Tender Option Bond Trust Receipts (Series 2016-XM0370), (New York City Transitional Finance Authority, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.25

 

15.79

 

11/1/2025

 

5,000,000

b,c,d

5,098,450

 

Tender Option Bond Trust Receipts (Series 2016-XM0436), (New York City Municipal Water Finance Authority, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00

 

17.44

 

3/14/2021

 

12,600,000

b,c,d

13,339,840

 

16

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

New York - 13.3% (continued)

         

Tender Option Bond Trust Receipts (Series 2016-XM0438), (New York City Transitional Finance Authority, Revenue Bonds) Recourse, Underlying Coupon Rate (%) 5.50

 

19.40

 

11/1/2027

 

5,000,000

b,c,d

5,102,638

 

Tender Option Bond Trust Receipts (Series 2020-XM0826), (Metropolitan Transportation Authority, Revenue Bonds, Refunding (Green Bond) (Insured; Assured Guaranty Municipal Corp.) Ser. C) Non-recourse, Underlying Coupon Rate (%) 4.00

 

11.47

 

11/15/2046

 

6,100,000

b,c,d

6,479,517

 

50,879,940

North Carolina - 3.0%

         

North Carolina Turnpike Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.)

 

4.00

 

1/1/2055

 

1,500,000

 

1,626,495

 

Tender Option Bond Trust Receipts (Series 2016-XM0444), (North Carolina Medical Care Commission, Revenue Bonds (Duke University Health System)) Recourse, Underlying Coupon Rate (%) 5.00

 

21.06

 

6/1/2042

 

10,000,000

b,c,d

10,000,000

 

11,626,495

Ohio - 4.6%

         

Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. A2

 

4.00

 

6/1/2048

 

1,250,000

 

1,322,900

 

Buckeye Tobacco Settlement Financing Authority, Revenue Bonds, Refunding, Ser. B2

 

5.00

 

6/1/2055

 

10,750,000

 

10,864,702

 

Butler County, Revenue Bonds

 

5.50

 

11/1/2020

 

960,000

e

980,918

 

Butler County, Revenue Bonds, Refunding

 

5.50

 

11/1/2020

 

2,040,000

e

2,084,452

 

Centerville, Revenue Bonds, Refunding (Graceworks Lutheran Services Obligated Group)

 

5.25

 

11/1/2047

 

1,500,000

 

1,404,900

 

Cuyahoga County, Revenue Bonds, Refunding (The MetroHealth System)

 

5.00

 

2/15/2052

 

1,000,000

 

1,035,460

 

17,693,332

Pennsylvania - 4.3%

         

Allentown School District, GO, Refunding (Insured; Build America Mutual) Ser. B

 

5.00

 

2/1/2031

 

1,510,000

 

1,962,713

 

17

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Pennsylvania - 4.3% (continued)

         

Crawford County Hospital Authority, Revenue Bonds, Refunding (Meadville Medical Center Project) Ser. A

 

6.00

 

6/1/2046

 

1,000,000

 

1,068,930

 

Franklin County Industrial Development Authority, Revenue Bonds (Menno-Haven Project)

 

5.00

 

12/1/2054

 

1,000,000

 

848,650

 

Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Sciences)

 

5.00

 

11/1/2033

 

2,805,000

 

2,810,217

 

Pennsylvania Housing Finance Agency, Revenue Bonds, Refunding, Ser. 114A

 

3.35

 

10/1/2026

 

2,000,000

 

2,058,840

 

Philadelphia, GO, Refunding

 

6.50

 

8/1/2020

 

2,200,000

e

2,222,506

 

Tender Option Bond Trust Receipts (Series 2016-XM0373), (Geisinger Authority, Revenue Bonds (Geisinger Health System)) Non-recourse, Underlying Coupon Rate (%) 5.00

 

15.35

 

6/1/2041

 

3,000,000

b,c,d

3,087,698

 

The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. A

 

4.00

 

9/1/2039

 

2,000,000

 

2,290,520

 

16,350,074

Rhode Island - .2%

         

Providence Public Building Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A

 

5.00

 

9/15/2037

 

500,000

 

620,990

 

South Carolina - 3.1%

         

South Carolina Jobs-Economic Development Authority, Revenue Bonds (Bishop Gadsden Episcopal Retirement Community Obligated Group)

 

5.00

 

4/1/2054

 

1,000,000

 

1,020,690

 

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

 

11.19

 

12/1/2043

 

10,200,000

b,c,d

10,812,850

 

11,833,540

18

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Tennessee - .9%

         

Tender Option Bond Trust Receipts (Series 2016-XM0388), (Metropolitan Government of Nashville & Davidson County, Revenue Bonds, Refunding) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.68

 

7/1/2040

 

3,000,000

b,c,d

3,342,135

 

Texas - 10.6%

         

Central Texas Regional Mobility Authority, Revenue Bonds

 

5.00

 

1/1/2048

 

2,500,000

 

2,727,025

 

Central Texas Regional Mobility Authority, Revenue Bonds, Ser. A

 

5.00

 

1/1/2045

 

1,500,000

 

1,619,790

 

Clifton Higher Education Finance Corp., Revenue Bonds (Uplift Education) Ser. A

 

4.50

 

12/1/2044

 

2,500,000

 

2,507,525

 

Clifton Higher Education Finance Corp., Revenue Bonds, Ser. A

 

5.75

 

8/15/2045

 

2,500,000

 

2,633,850

 

Clifton Higher Education Finance Corp., Revenue Bonds, Ser. D

 

6.13

 

8/15/2048

 

3,000,000

 

3,207,480

 

Grand Parkway Transportation Corp., Revenue Bonds, Refunding (Grand Parkway System)

 

4.00

 

10/1/2049

 

2,000,000

 

2,279,700

 

Harris County-Houston Sports Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A

 

0.00

 

11/15/2051

 

7,500,000

f

1,911,675

 

Love Field Airport Modernization Corp., Revenue Bonds (Southwest Airlines Company Project)

 

5.00

 

11/1/2028

 

1,000,000

 

1,013,760

 

Tarrant County Cultural Education Facilities Finance Corp., Revenue Bonds (Buckingham Senior Living Community Project)

 

5.50

 

11/15/2045

 

3,000,000

g

2,100,000

 

Tender Option Bond Trust Receipts (Series 2016-XM0377), (San Antonio, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00

 

14.92

 

2/1/2043

 

12,450,000

b,c,d

13,636,441

 

Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds (Segment 3C Project)

 

5.00

 

6/30/2058

 

6,150,000

 

6,771,519

 

40,408,765

U.S. Related - 1.2%

         

Puerto Rico, GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A

 

5.00

 

7/1/2035

 

2,500,000

 

2,522,900

 

19

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

U.S. Related - 1.2% (continued)

         

Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. CC

 

5.25

 

7/1/2034

 

2,000,000

 

2,132,540

 

4,655,440

Utah - .5%

         

Utah Infrastructure Agency, Revenue Bonds, Refunding, Ser. A

 

5.00

 

10/15/2037

 

2,000,000

 

2,048,260

 

Virginia - 5.9%

         

Chesterfield County Economic Development Authority, Revenue Bonds, Refunding (Brandermill Woods Project)

 

5.13

 

1/1/2043

 

700,000

 

648,361

 

Henrico County Economic Development Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.)

 

8.47

 

8/23/2027

 

5,100,000

c

6,934,521

 

Tender Option Bond Trust Receipts (Series 2018-XM0593), (Hampton Roads Transportation Accountability Commission, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.50

 

16.97

 

7/1/2057

 

7,500,000

b,c,d

9,430,837

 

Virginia College Building Authority, Revenue Bonds (Green Bond) (Marymount University Project)

 

5.00

 

7/1/2045

 

1,000,000

b

899,770

 

Virginia Small Business Financing Authority, Revenue Bonds (Transform 66 P3 Project)

 

5.00

 

12/31/2052

 

4,350,000

 

4,552,884

 

22,466,373

Washington - 6.3%

         

King County School District No. 210, GO (Insured; School Bond Guaranty)

 

4.00

 

12/1/2034

 

2,000,000

 

2,357,300

 

Port of Seattle, Revenue Bonds

 

4.00

 

4/1/2044

 

1,000,000

 

1,065,200

 

Tender Option Bond Trust Receipts (Series 2017-XF2423), (King County, Revenue Bonds, Refunding) Recourse, Underlying Coupon Rate (%) 5.00

 

17.78

 

1/1/2029

 

8,575,000

b,c,d

8,813,374

 

Tender Option Bond Trust Receipts (Series 2018-XM0680), (Washington Convention Center Public Facilities District, Revenue Bonds) Non-recourse, Underlying Coupon Rate (%) 5.00

 

8.88

 

7/1/2058

 

10,000,000

b,c,d

10,723,250

 

20

 

                   
 

Description

Coupon
Rate (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Long-Term Municipal Investments - 154.6% (continued)

         

Washington - 6.3% (continued)

         

Washington Housing Finance Commission, Revenue Bonds (Transforming Age Project) Ser. A

 

5.00

 

1/1/2055

 

1,465,000

b

1,243,038

 
 

24,202,162

 

Wisconsin - 2.3%

         

Public Finance Authority, Revenue Bonds (Appalachian State University Project) (Insured; Assured Guaranty Municipal Corp.) Ser. A

 

4.00

 

7/1/2055

 

1,750,000

 

1,854,650

 

Public Finance Authority, Revenue Bonds (CHF - Wilmington) (Insured; Assured Guaranty Municipal Corp.)

 

5.00

 

7/1/2058

 

3,665,000

 

4,160,545

 

Public Finance Authority, Revenue Bonds (Gannon University Project)

 

5.00

 

5/1/2042

 

750,000

 

755,670

 

Public Finance Authority, Revenue Bonds, Refunding (Mary's Woods At Marylhurst Project)

 

5.25

 

5/15/2042

 

750,000

b

760,440

 

Wisconsin Health & Educational Facilities Authority, Revenue Bonds, Refunding (St. Camillus Health System Obligated Group)

 

5.00

 

11/1/2054

 

1,250,000

 

1,106,675

 
 

8,637,980

 

Total Long-Term Municipal Investments
(cost $570,435,377)

 

590,614,370

 

21

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

                   
 

Description

Annualized
Yield (%)

 

Maturity Date

 

Principal Amount ($)

 

Value ($)

 

Short-Term Investments - .1%

         

U.S. Government Securities

         

U.S. Treasury Bills
(cost $499,881)

 

0.14

 

7/30/2020

 

500,000

h

499,891

 

Total Investments (cost $572,348,295)

 

155.0%

592,406,064

 

Liabilities, Less Cash and Receivables

 

(42.1%)

(160,981,214)

 

Preferred Stock, at redemption value

 

(12.9%)

(49,300,000)

 

Net Assets Applicable to Common Shareholders

 

100.0%

382,124,850

 


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 May 31, 2020, these securities were valued at $277,741,841 or 72.68% 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 These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on the municipal issue and to retire the bonds in full at the earliest refunding date.

f Security issued with a zero coupon. Income is recognized through the accretion of discount.

g Non-income producing—security in default.

h Security is a discount security. Income is recognized through the accretion of discount.

   

Portfolio Summary (Unaudited)

Value (%)

General

26.4

Education

21.5

Medical

17.5

Water

14.4

Transportation

12.6

Nursing Homes

10.1

Prerefunded

9.2

General Obligation

8.0

Airport

7.8

Development

6.4

Power

4.7

Tobacco Settlement

3.9

Utilities

3.6

School District

2.3

Single Family Housing

1.8

Housing

1.7

Pollution

1.6

Multifamily Housing

1.1

Special Tax

.3

Government

.1

 

155.0


 Based on net assets.

See notes to financial statements.

22

 

       
 

Summary of Abbreviations (Unaudited)

 

ABAG

Association of Bay Area Governments

ACA

American Capital Access

AGC

ACE Guaranty Corporation

AGIC

Asset Guaranty Insurance Company

AMBAC

American Municipal Bond Assurance Corporation

ARRN

Adjustable Rate Receipt Notes

BAN

Bond Anticipation Notes

BPA

Bond Purchase Agreement

CIFG

CDC Ixis Financial Guaranty

COP

Certificate of Participation

CP

Commercial Paper

DRIVERS

Derivative Inverse Tax-Exempt Receipts

EDR

Economic Development Revenue

EIR

Environmental Improvement Revenue

EFFE

Effective Federal Funds Rate

EURIBOR

Euro Interbank Offered Rate

FCPR

Farm Credit Prime Rate

FGIC

Financial Guaranty Insurance Company

FHA

Federal Housing Administration

FHLB

Federal Home Loan Bank

FHLMC

Federal Home Loan Mortgage Corporation

FNMA

Federal National Mortgage Association

GAN

Grant Anticipation Notes

GIC

Guaranteed Investment Contract

GNMA

Government National Mortgage Association

GO

General Obligation

HR

Hospital Revenue

IDB

Industrial Development Board

IDC

Industrial Development Corporation

IDR

Industrial Development Revenue

LIBOR

London Interbank Offered Rate

LIFERS

Long Inverse Floating Exempt Receipts

LOC

Letter of Credit

LOR

Limited Obligation Revenue

LR

Lease Revenue

NAN

Note Anticipation Notes

MERLOTS

Municipal Exempt Receipts Liquidity Option Tender

MFHR

Multi-Family Housing Revenue

MFMR

Multi-Family Mortgage Revenue

MUNIPSA

Securities Industry and Financial Markets Association Municipal Swap Index Yield

PCR

Pollution Control Revenue

P-FLOATS

Puttable Floating Option Tax-Exempt Receipts

PILOT

Payment in Lieu of Taxes

PRIME

Prime Lending Rate

PUTTERS

Puttable Tax-Exempt Receipts

OBFR

Overnight Bank Funding Rate

RAC

Revenue Anticipation Certificates

RAN

Revenue Anticipation Notes

RAW

Revenue Anticipation Warrants

RIB

Residual Interest Bonds

ROCS

Reset Options Certificates

RRR

Resources Recovery Revenue

SAAN

State Aid Anticipation Notes

SBPA

Standby Bond Purchase Agreement

SFHR

Single Family Housing Revenue

SFMR

Single Family Mortgage Revenue

SOFR

Secured Overnight Financing Rate

SONYMA

State of New York Mortgage Agency

SPEARS

Short Puttable Exempt Adjustable Receipts

SWDR

Solid Waste Disposal Revenue

TAN

Tax Anticipation Notes

TAW

Tax Anticipation Warrants

TRAN

Tax and Revenue Anticipation Notes

XLCA

XL Capital Assurance

See notes to financial statements.

23

 

STATEMENT OF ASSETS AND LIABILITIES
May 31, 2020 (Unaudited)

             

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments

572,348,295

 

592,406,064

 

Cash

 

 

 

 

4,960,205

 

Interest receivable

 

8,578,379

 

Prepaid expenses

 

 

 

 

38,236

 

 

 

 

 

 

605,982,884

 

Liabilities ($):

 

 

 

 

Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 2(b)

 

241,317

 

Payable for floating rate notes issued—Note 3

 

169,223,671

 

Payable for investment securities purchased

 

4,038,709

 

Interest and expense payable related to
floating rate notes issued—Note 3

 

906,728

 

Commissions payable—Note 1

 

61,077

 

Directors’ fees and expenses payable

 

15,208

 

Dividends payable to Preferred Shareholders

 

1,399

 

Other accrued expenses

 

 

 

 

69,925

 

 

 

 

 

 

174,558,034

 

Auction Preferred Stock, Series A, B and C, par value $.001 per share (1,972 shares issued and outstanding at $25,000 per share liquidation value)—Note 1

 

49,300,000

 

Net Assets Applicable to Common Shareholders ($)

 

 

382,124,850

 

Composition of Net Assets ($):

 

 

 

 

Common Stock, par value, $.001 per share
(49,421,511 shares issued and outstanding)

 

 

 

 

49,422

 

Paid-in capital

 

 

 

 

370,378,653

 

Total distributable earnings (loss)

 

 

 

 

11,696,775

 

Net Assets Applicable to Common Shareholders ($)

 

 

382,124,850

 

         

Shares Outstanding

 

 

(110 million shares authorized)

49,421,511

 

Net Asset Value Per Share of Common Stock ($)

 

7.73

 

 

 

 

 

 

See notes to financial statements.

 

 

 

 

24

 

STATEMENT OF OPERATIONS
Six Months Ended May 31, 2020 (Unaudited)

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Interest Income

 

 

12,685,376

 

Expenses:

 

 

 

 

Investment advisory fee—Note 2(a)

 

 

1,115,990

 

Interest and expense related to floating rate notes issued—Note 3

 

 

1,670,029

 

Administration fee—Note 2(a)

 

 

557,995

 

Commission fees—Note 1

 

 

61,889

 

Professional fees

 

 

46,622

 

Directors’ fees and expenses—Note 2(c)

 

 

44,366

 

Registration fees

 

 

24,109

 

Shareholders’ reports

 

 

23,253

 

Chief Compliance Officer fees—Note 2(b)

 

 

4,884

 

Custodian fees—Note 2(b)

 

 

4,348

 

Shareholder servicing costs

 

 

3,907

 

Miscellaneous

 

 

22,809

 

Total Expenses

 

 

3,580,201

 

Less—reduction in expenses due to undertaking—Note 2(a)

 

 

(220,799)

 

Less—reduction in fees due to earnings credits—Note 2(b)

 

 

(4,348)

 

Net Expenses

 

 

3,355,054

 

Investment Income—Net

 

 

9,330,322

 

Realized and Unrealized Gain (Loss) on Investments—Note 3 ($):

 

 

Net realized gain (loss) on investments

(4,361,852)

 

Net realized gain (loss) on futures

(2,936,039)

 

Net Realized Gain (Loss)

 

 

(7,297,891)

 

Net change in unrealized appreciation (depreciation) on investments

(20,450,480)

 

Net change in unrealized appreciation (depreciation) on futures

(83,498)

 

Net Change in Unrealized Appreciation (Depreciation)

 

 

(20,533,978)

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

(27,831,869)

 

Dividends to Preferred Shareholders

 

 

(535,939)

 

Net (Decrease) in Net Assets Applicable to Common
Shareholders Resulting from Operations

 

(19,037,486)

 

 

 

 

 

 

 

 

See notes to financial statements.

         

25

 

STATEMENT OF CASH FLOWS
Six Months Ended May 31, 2020 (Unaudited)

             

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities ($):

 

 

 

 

 

Purchases of portfolio securities

 

(76,045,572)

 

 

 

Proceeds from sales of portfolio securities

83,731,294

 

 

 

Net purchase (sales) of short-term securities

12,828,122

 

 

 

Dividends paid to Preferred Shareholders

(544,816)

 

 

 

Interest receivable

 

69,494

 

 

 

Paid to BNY Mellon Investment Adviser, Inc.

 

(1,463,691)

 

 

 

Operating expenses paid

 

(262,439)

 

 

 

Net Realized and Unrealized Gain (Loss) on futures

 

(2,984,193)

 

 

 

Net Cash Provided (or Used) in Operating Activities

 

 

 

15,328,199

 

Cash Flows from Financing Activities ($):

 

 

 

 

 

Dividends paid to Shareholders

 

(8,809,670)

 

 

 

Interest and expense related to floating

 

 

 

 

 

 

rate notes issued paid

 

(1,842,408)

 

 

 

Net Cash Provided (or Used) in Financing Activities

 

(10,652,078)

 

Net Increase (Decrease) in cash

 

4,676,121

 

Cash at beginning of period††

 

284,084

 

Cash at end of period

 

4,960,205

 

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

 

(19,037,486)

 

Adjustments to reconcile net (decrease) in net assets

 

 

 

 

applicable to Common Shareholder resulting from

 

 

 

 

operations to net cash provided (or Used) in operating activities ($):

 

 

 

Decrease in investments in securities at cost

 

22,305,171

 

Decrease in interest receivable

 

234,863

 

Increase in prepaid expenses

 

(25,575)

 

Increase in Due to BNY Mellon Investment Adviser, Inc. and affiliates

 

(10,505)

 

Increase in payable for investment securities purchased

 

2,405,464

 

Net change in unrealized appreciation (depreciation) on futures

 

(48,154)

 

Decrease in payable for floating rate notes issued

 

(12,850,745)

 

Interest and expense related to floating rate notes issued

 

1,670,029

 

Decrease in dividends payable to Preferred Shareholders

 

(8,877)

 

Increase in Directors' fees and expenses payable

 

3,122

 

Decrease in commissions payable and other accrued expenses

 

(8,147)

 

Net change in unrealized (appreciation) depreciation on investments

 

20,533,978

 

Net amortization of premiums on investments

 

165,061

 

Net Cash Provided (or Used) in Operating Activities

 

15,328,199

 

Supplemental Disclosure Cash Flow Information ($):

 

 

 

Non-cash financing activities:

 

 

 

Reinvestment of dividends

 

86,478

 

 

 

 

 

 

 

 

†  Includes change in variation margin from beginning of period.

††  Includes deposits held as collateral by broker.

See notes to financial statements.

         

26

 

STATEMENT OF CHANGES IN NET ASSETS

                   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
May 31, 2020 (Unaudited)

 

Year Ended
November 30, 2019

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

9,330,322

 

 

 

20,409,325

 

Net realized gain (loss) on investments

 

(7,297,891)

 

 

 

6,928

 

Net change in unrealized appreciation
(depreciation) on investments

 

(20,533,978)

 

 

 

20,865,906

 

Dividends to Preferred Shareholders

 

 

(535,939)

 

 

 

(1,268,558)

 

Net Increase (Decrease) in Net Assets Applicable
to Common Shareholders Resulting from
Operations

(19,037,486)

 

 

 

40,013,601

 

Distributions ($):

 

Distributions to Common Shareholders

 

 

(8,896,148)

 

 

 

(20,738,800)

 

Capital Stock Transactions ($):

 

Distributions reinvested

 

 

86,478

 

 

 

347,279

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

86,478

 

 

 

347,279

 

Total Increase (Decrease) in Net Assets
Applicable to Common Shareholders

(27,847,156)

 

 

 

19,622,080

 

Net Assets Applicable to Common Shareholders ($):

 

Beginning of Period

 

 

409,972,006

 

 

 

390,349,926

 

End of Period

 

 

382,124,850

 

 

 

409,972,006

 

Capital Share Transactions (Common Shares):

 

Shares issued for distributions reinvested

 

 

10,449

 

 

 

41,603

 

Net Increase (Decrease) in Shares Outstanding

10,449

 

 

 

41,603

 

 

 

 

 

 

 

 

 

 

 

See notes to financial statements.

               

27

 

FINANCIAL HIGHLIGHTS

The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements, and with respect to common stock, market price data for the fund’s common shares.

               
 

Six Months Ended

 

May 31, 2020

Year Ended November 30,

(Unaudited)

2019

2018

2017

2016

2015

Per Share Data ($):

           

Net asset value, beginning of period

8.30

7.91

8.29

8.19

8.59

8.57

Investment Operations:

           

Investment income—neta

.19

.41

.47

.49

.50

.52

Net realized and unrealized
gain (loss) on investments

(.57)

.43

(.43)

.13

(.39)

(.00)b

Dividends to Preferred Shareholders
from investment income—net

(.01)

(.03)

(.03)

(.02)

(.01)

(.00)b

Total from Investment Operations

(.39)

.81

.01

.60

.10

.52

Distributions to Common Shareholders:

           

Dividends from investment
income—net

(.18)

(.42)

(.43)

(.50)

(.50)

(.50)

Net asset value resulting from Auction
Preferred Stock tender as a discount

-

-

.04

-

-

-

Net asset value, end of period

7.73

8.30

7.91

8.29

8.19

8.59

Market value, end of period

7.17

8.19

7.13

8.40

8.07

7.95

Total Return (%)c

(10.34)d

21.12

(10.14)

10.46

7.55

7.41

28

 

               
 

Six Months Ended

 

May 31, 2020

Year Ended November 30,

(Unaudited)

2019

2018

2017

2016

2015

Ratios/Supplemental Data (%):

           

Ratio of total expenses to
average net assets
applicable to Common Stocke

1.80f

1.86

1.73

1.41

1.24

1.19

Ratio of net expenses to
average net assets
applicable to Common Stocke

1.69f

1.75

1.62

1.28

1.12

1.07

Ratio of interest and expense related to
floating rate notes issued to average net
assets applicable to Common Stocke

.84f

.90

.72

.35

.21

.15

Ratio of net investment income to
average net assets
applicable to Common Stocke

4.70f

5.05

5.78

5.87

5.67

6.10

Ratio of total expenses to
total average net assets

1.60f

1.66

1.51

1.15

1.02

.98

Ratio of net expenses to
total average net assets

1.50f

1.56

1.41

1.05

.92

.88

Ratio of interest and expense related to
floating rate notes issued to
total average net assets

.75f

.80

.63

.29

.17

.13

Ratio of net investment income to
total average net assets

4.18f

4.50

5.02

4.79

4.66

4.99

Portfolio Turnover Rate

17.73d

41.28

24.57

11.20

12.90

15.27

Asset Coverage of Preferred Stock,
end of period

875

932

892

540

533

553

Net Assets, applicable to
Common Shareholders,
end of period ($ x 1,000)

382,125

409,972

390,350

409,095

402,531

421,432

Preferred Stock Outstanding,
end of period ($ x 1,000)

49,300

49,300

49,300

93,000

93,000

93,000

Floating Rate Notes Outstanding,
end of period ($ x 1,000)

169,224

182,074

162,357

109,669

93,369

98,469


a
 Based on average common shares outstanding.

b Amount represents less than $.01 per share.

c Calculated based on market value.

d Not annualized.

e Does not reflect the effect of dividends to Preferred Shareholders.

f Annualized.

See notes to financial statements.

29

 

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

BNY Mellon Strategic Municipal Bond Fund, 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 seek to maximize current income exempt from federal income tax to the extent consistent with the preservation of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. The fund’s Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol DSM.

The fund has outstanding 698 Series A shares, 662 Series B shares and 612 Series C shares, Auction Preferred Stock (“APS”), with a liquidation preference of $25,000 per share (plus an amount equal to accumulated but unpaid dividends upon liquidation). APS dividend rates are determined pursuant to periodic auctions or by reference to a market rate. Deutsche Bank Trust Company America, as the Auction Agent, receives a fee from the fund for its services in connection with such auctions. The fund also compensates broker-dealers generally at an annual rate of .15%-.25% of the purchase price of shares of APS.

The fund is subject to certain restrictions relating to the APS. Failure to comply with these restrictions could preclude the fund from declaring any distributions to shareholders of Common Stock (“Common Shareholders”) or repurchasing shares of Common Stock and/or could trigger the mandatory redemption of APS at liquidation value. Thus, redemptions of APS may be deemed to be outside of the control of the fund.

The holders of APS, voting as a separate class, have the right to elect at least two directors. The holders of APS will vote as a separate class on certain other matters, as required by law. The fund’s Board of Directors (the “Board”) has designated Joni Evans and Robin A. Melvin as director to be elected by the holders of APS.

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-

30

 

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.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. Investments for

31

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Debt investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.

U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service. These securities are generally categorized within Level 2 of the fair value hierarchy.

The Service is engaged under the general oversight of the Board.

When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.

For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.

The following is a summary of the inputs used as of May 31, 2020 in valuing the fund’s investments:

32

 

         

Assets ($)

Level 1 - Unadjusted Quoted Prices

Level 2 - Other Significant Observable Inputs

Level 3 -Significant Unobservable Inputs

Total

Investments in Securities:

 

 

 

 

Collateralized Municipal-Backed
Securities

-

1,291,803

-

1,291,803

Municipal Securities

-

560,614,370

-

590,614,370

U.S. Treasury Securities

-

499,891

-

499,891

Liabilities ($)

       

Floating Rate Notes††

-

(169,223,671)

-

(169,223,671)

 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: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. 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. 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.

33

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(d) Dividends and distributions to Common Shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.

Common Shareholders will have their distributions reinvested in additional shares of the fund, unless such Common Shareholders elect to receive cash, at the lower of the market price or net asset value per share (but not less than 95% of the market price). If market price is equal to or exceeds net asset value, shares will be issued at net asset value. If net asset value exceeds market price, Computershare Inc., the transfer agent for the fund’s Common Stock, will buy fund shares in the open market and reinvest those shares accordingly.

On May 28, 2020, the Board declared a cash dividend of $.030 per share from investment income-net, payable on June 30, 2020 to Common shareholders of record as of the close of business on June 12, 2020. The ex-dividend date was June 11, 2020. .

(e) Dividends and distributions to shareholders of APS: Dividends, which are cumulative, are generally reset every 7 days for each Series of APS pursuant to a process specified in related fund charter documents. Dividend rates as of May 31, 2020, for each Series of APS were as follows: Series A-0.315%, Series B-0.298% and Series C-0.298%. 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 May 31, 2020 for each Series of APS were as follows: Series A-2.164%, Series B-2.191% and Series C-2.167%.

(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 May 31, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest

34

 

and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2020, the fund did not incur any interest or penalties.

Each tax year in the three-year period ended November 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.

The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.

The fund has an unused capital loss carryover of $636,234 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2019. These short-term capital losses can be carried forward for an unlimited period.

The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2019 was as follows: tax-exempt income $22,007,358. The tax character of current year distributions will be determined at the end of the current fiscal year.

NOTE 2—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:

(a) Pursuant to an investment advisory agreement with the Adviser, the management fee is computed at the annual rate of .50% of the value of the fund’s average weekly net assets, inclusive of the outstanding APS, and is payable monthly. The fund also has an administration agreement with the Adviser and a custody agreement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of the Adviser. The fund pays in the aggregate for administration, custody and transfer agency services, a monthly fee based on an annual rate of .25% of the value of the fund’s average weekly net assets, inclusive of the outstanding APS. All out-of-pocket transfer agency and custody expenses, including custody transaction expenses, are paid separately by the fund.

The Adviser has currently undertaken, from December 1, 2019 through November 30, 2020, to waive receipt of a portion of the fund’s investment advisory 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 $220,799 during the period ended May 31, 2020.

(b) The fund compensates the Custodian under a custody agreement for providing custodial services for the fund. These fees are determined based on transaction activity. During the period ended May 31, 2020, the fund

35

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

was charged $4,348 for out-of-pocket and custody transaction expenses, pursuant to the custody agreement. These fees were offset by earnings credits of the amount of $4,348.

The fund has an arrangement with the Custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.

During the period ended May 31, 2020, the fund was charged $4,884 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: investment advisory fees of $179,539, Administration fees of $89,770, Custodian fees of $3,597 and Chief Compliance Officer fees of $1,878, which are offset against an expense reimbursement currently in effect in the amount of $33,467.

(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 3—Securities Transactions:

The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities and futures, during the period ended May 31, 2020, amounted to $78,611,160 and $82,590,677, 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

36

 

the fund due to certain termination events such as bankruptcy, default or other credit event.

The fund accounts for the transfer of bonds to the Inverse Floater Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the Trust Certificates reflected as fund liabilities in the Statement of Assets and Liabilities.

The fund may invest in inverse floater securities on either a non-recourse or recourse basis. These securities are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par 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 May 31, 2020 was approximately $182,013,937, with a related weighted average annualized interest rate of 1.86%.

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended May 31, 2020 is discussed below.

Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a

37

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. At May 31, 2020, there were no futures outstanding.

The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2020:

     

 

 

Average Market Value ($)

Interest rate futures

 

9,681,371

 

 

 

At May 31, 2020, accumulated net unrealized appreciation on investments was $20,057,769, consisting of $28,436,220 gross unrealized appreciation and $8,378,451 gross unrealized depreciation.

At May 31, 2020, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

38

 

PROXY RESULTS (Unaudited)

Common Shareholders and holders of APS voted together as a single class (except as noted below) on the following proposal presented at the annual shareholders’ meeting held on June 16, 2020.

         

 

 

Shares

   

For

 

Authority Withheld

To elect three Class III Directors:

     
 

Burton Wallack

39,691,789

 

3,558,797

 

Benaree Pratt Wiley

39,776,080

 

3,474,506

 

Joan L. Gulley

39,904,481

 

3,346,105

 The terms of these Class III Directors expire in 2023.

39

 

NOTES

40

 

OFFICERS AND DIRECTORS
BNY Mellon Strategic Municipal Bond Fund, Inc.

240 Greenwich Street
New York, NY 10286

       

Directors

 

Officers (continued)

 

Joseph S. DiMartino, Chairman

 

Assistant Treasurers (continued)

 

Gordon J. Davis

 

Robert Salviolo

 

Joni Evans††

 

Robert Svagna

 

Joan Gulley

 

Chief Compliance Officer

 

Ehud Houminer

 

Joseph W. Connolly

 

Alan H. Howard

 

Portfolio Managers

 

Robin A. Melvin ††

 

Daniel A. Rabasco

 

Burton N. Wallack

 

Jeffrey B. Burger

 

Benaree Pratt Wiley

     

Interested Board Member

     

†† Elected by APS Holders

 

Investment Adviser and Administrator

 

Officers

 

BNY Mellon Investment Adviser, Inc.

 

President

 

Custodian

 

Renee Laroche-Morris

 

The Bank of New York Mellon

 

Chief Legal Officer

 

Counsel

 

Bennett A. MacDougall

 

Proskauer Rose LLP

 

Vice President and Secretary

 

Transfer Agent,

 

James Bitetto

 

Dividend -Paying Agent

 

Vice President and Secretaries

 

Disbursing Agent and Registrar

 

Sonalee Cross

 

Computershare Inc.

 

Deirdre Cunnane

 

(Common Stock)

 

Sarah S. Kelleher

 

Deutsche Bank Trust Company America

 

Jeff Prusnofsky

 

(Auction Preferred Stock)

 

Peter M. Sullivan

 

Auction Agent

 

Amanda Quinn

 

Deutsche Bank Trust Company America

 

Natalya Zelensky

 

(Auction Preferred Stock)

 

Vice President

 

Stock Exchange Listing

 

David DiPetrillo

 

NYSE Symbol: DSM

 

Treasurer

 

Initial SEC Effective Date

 

James Windels

 

11/22/89

 

Assistant Treasurers

     

Gavin C. Reilly

     

Robert S. Robol

     

The fund’s net asset value per share appears in the following publications: Barron’s, Closed-End Bond Funds section under the heading “Municipal Bond Funds” every Monday; 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.

41

 

For More Information

BNY Mellon Strategic Municipal Bond Fund, Inc.
240 Greenwich Street
New York, NY 10286

Adviser and Administrator
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286

Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286

Transfer Agent &
Registrar (Common Stock)
Computershare Inc.
480 Washington Boulevard
Jersey City, NJ 07310

Dividend Disbursing Agent (Common Stock)
Computershare Inc.
P.O. Box 30170
College Station, TX 77842

   

Ticker Symbol:

DSM

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.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.

   


0852SA0520

 


 

 

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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.


 

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)(2)     Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(a)(3)     Not applicable.

(b)          Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.

 


 

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 Municipal Bond Fund, Inc.

By:         /s/ Renee LaRoche-Morris

              Renee LaRoche-Morris

              President (Principal Executive Officer)

 

Date:      July 27, 2020

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By:         /s/ Renee LaRoche-Morris

              Renee LaRoche-Morris

              President (Principal Executive Officer)

 

Date:      July 27, 2020

 

 

By:         /s/ James Windels

              James Windels

              Treasurer (Principal Financial Officer)

 

Date:      July 24, 2020

 

 

 


 

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)

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