UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number |
811-05245 |
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BNY Mellon Strategic Municipals, Inc. |
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(Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, New York 10286 |
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(Address of principal executive offices) (Zip code) |
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Deirdre Cunnane, Esq.
240 Greenwich Street
New York, New York 10286 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6400 |
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Date of fiscal year end:
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09/30 |
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Date of reporting period: |
03/31/24
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FORM N-CSR
| Item 1. | Reports to Stockholders. |
BNY Mellon Strategic Municipals, Inc.
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SEMI-ANNUAL REPORT March 31, 2024 |
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BNY Mellon Strategic Municipals, 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. |
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The views expressed
in this report reflect those of the portfolio manager(s) only through the end of the period covered and
do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in
the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time
based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility
to update such views. These views may not be relied on as investment advice and, because investment decisions
for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
FOR MORE INFORMATION
Back Cover
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Save time. Save paper. View your next shareholder report online as soon as it’s
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DISCUSSION
OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2023, through March 31, 2024,
as provided by Daniel Rabasco and Jeffrey Burger, Primary Portfolio Managers of Insight North America
LLC, the fund’s sub-adviser.
Market and Fund Performance Overview
For the six-month period ended March 31,
2024, BNY Mellon Strategic Municipals, Inc. (the “fund”) produced a total return of 13.31% on a net-asset-value
basis and 16.71% on a market-price basis.1 Over the same period, the fund provided
aggregate income dividends of $.1140 per share, which reflects an annualized distribution rate of 3.74%.2
In comparison, the Bloomberg U.S. Municipal Bond Index (the “Index”), the fund’s benchmark, posted
a total return of 7.48% for the same period.3
Municipal
bonds rose during the reporting period, as the market was supported by easing inflation and investor
anticipation of interest-rate cuts by the U.S. Federal Reserve (the “Fed”).
The Fund’s Investment
Approach
The fund’s investment objective is to maximize current income exempt from federal
income tax to the extent consistent with the preservation of capital. Under normal market conditions,
the fund invests at least 80% of its net assets in municipal obligations. Generally, the fund invests
at least 50% of its net assets in municipal bonds considered investment grade or the unrated equivalent,
as determined by the sub-adviser, in the case of bonds, and in the two highest-rating categories or the
unrated equivalent as determined by the sub-adviser, in the event of short-term obligations having or
deemed to have maturities of less than one year.
To this end, portfolio construction focuses
on income opportunities through analysis of each bond’s structure, including close attention to each
bond’s yield, maturity and early redemption features. When making new investments, we focus on identifying
undervalued sectors and securities, and we minimize reliance on interest-rate forecasting. We select
municipal bonds based on fundamental credit analysis to estimate the relative value and attractiveness
of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market.
We actively trade among various sectors, such as escrowed, general obligation and revenue bonds, based
on their apparent relative values. Leverage, which is utilized in the portfolio in order to generate
a higher level of current income exempt from regular federal income taxes, does amplify the fund’s
exposure to interest-rate movements, and potentially, gains or losses, especially with respect to securities
with the longest maturities.
Market Benefits from Declining Inflation, but Timing of Rate Cuts Uncertain
The municipal market posted strong gains early in the reporting period as inflation
eased and the Fed signaled that rate cuts were likely in 2024. However, as the economy remained strong
and inflation persisted, the timing of rate cuts became more uncertain, and investors began to temper
their expectations.
The economy and employment remained strong during the period.
After expanding by 4.9% in the third quarter, the economy continued at an above-trend rate of 3.4% in
the
2
fourth quarter. Growth in the first quarter of 2024 also appeared strong, remaining
well above 2%, according to the Atlanta Federal Reserve Bank’s GDPNow model.
The
Fed’s preferred measure of inflation, the personal consumption expenditure (“PCE”) index, rose
to 2.5% year over year in February 2024, though the core PCE, which excludes food and energy, did edge
slightly downward to 2.8%. Like the PCE, the consumer price (“CPI”) index remained higher than expected
in 2024.
Unexpectedly strong inflation resulted in a higher yield on the 10-year Treasury
as well, but this failed to slow the U.S. economy. Continued economic strength made it difficult for
the Fed to ease monetary policy as easing would only further stimulate economic activity. Thus, the Fed
left the federal funds target rate unchanged at 5.25%–5.50%. While expectations late in 2023 were for
rate cuts to begin midway into 2024, toward the end of the reporting period, investors began to expect
them to be delayed until much later in the year.
Despite a surge in rates in October, the
municipal bond market rebounded strongly towards the end of 2023. Heading into 2024, municipal mutual
bond funds began to receive inflow from retail investors, who had been largely absent. This resulted
in favorable technical conditions as demand was more than adequate to handle increasing new issue supply.
After the initial surge, the market generally moved sideways during the first
months of 2024. This kept interest rates at attractive levels, extending the opportunity for interested
investors.
Duration
Aided Performance
The fund’s results were driven primarily by its relatively
long duration versus the Index. Longer bonds performed especially well as interest rates declined during
the period. Sector allocation also contributed positively, with the overweight to revenue bonds enhancing
returns, especially in continuing care & retirement centers, industrial development and prepaid gas.
While security selection produced a moderately negative effect overall, the effect was positive in some
segments, including education, continuing care & retirement centers, prepaid gas and public power.
Overall, the fund’s performance was hindered modestly by certain security selections,
especially in the hospital, transportation and special tax segments. An overweight to tobacco bonds also
detracted from performance. The fund did not employ derivatives during the period.
Monetary Easing Expected
Later in the Year
Market sentiment has shifted somewhat, and the number of anticipated
rate cuts by the Fed is now less than expected earlier in the reporting period. Employment remains strong,
and inflation has proven to be higher than anticipated. On the plus side, this means that the entry point
for the municipal bond market is attractive, as yields remain high. Inflows to municipal bond mutual
funds have picked up, however, and we believe they are likely to remain strong.
3
DISCUSSION
OF FUND PERFORMANCE (Unaudited) (continued)
We remain constructive on the market for the second half of 2024. While supply
has picked up, it remains manageable and demand remains strong. Credit fundamentals are also healthy,
supported by a resilient economy. In this environment, we anticipate that municipal bond spreads could
tighten, enhancing the potential for total return. We continue to focus on opportunities for improving
incremental yields.
Historically, the municipal bond market has performed well
when the Fed has ended a tightening cycle, and an end to tightening remains a likely scenario as 2024
progresses. The presidential election in November 2024 adds some uncertainty to this outlook and is likely
to result in issuance earlier in the year than would otherwise be the case. Nevertheless, we will continue
to monitor the likely effects of the election and adjust the portfolio as necessary.
April
15, 2024
1 Total
return includes reinvestment of dividends and any capital gains paid, based upon net asset value per
share or market price per share, as applicable. Past performance is no guarantee of future results. Market
price per share, net asset value per share and investment return fluctuate. Income may be subject to
state and local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for
certain investors. Capital gains, if any, are fully taxable. Return figures provided reflects the absorption
of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect until
November 29, 2024, at which time it may be extended, modified or terminated. Had these expenses not been
absorbed, the fund’s return would have been lower.
2 Annualized distribution rate per share is based upon dividends
per share paid from net investment income during the period, divided by the market price per share at
the end of the period, adjusted for any capital gain distributions.
3 Source: Lipper Inc. — The Bloomberg U.S. Municipal Bond
Index covers the U.S. Dollar-denominated long-term tax-exempt bond market. Unlike a fund, the Index is
not subject to fees and other expenses. Investors can not invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks,
to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate
changes, and rate increases can cause price declines. High yield bonds are subject to increased credit
risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest
payments on a timely basis and to repay principal upon maturity. The use of leverage may magnify the
fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or
level of the underlying asset can result in a loss that is much greater than the original investment
in the derivative.
4
STATEMENT
OF INVESTMENTS
March 31, 2024 (Unaudited)
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Description
| Coupon
Rate (%) | | Maturity Date | | Principal Amount
($) | | Value
($) | |
Bonds
and Notes - .6% | | | | | |
Collateralized
Municipal-Backed Securities - .6% | | | | | |
California Housing Finance Agency, Revenue
Bonds, Ser. A (cost $2,399,555) | | 3.25 | | 8/20/2036 | | 2,698,859 | | 2,490,280 | |
| | | | | | | | |
Long-Term
Municipal Investments - 141.5% | | | | | |
Alabama - 3.5% | | | | | |
Alabama
Special Care Facilities Financing Authority, Revenue Bonds (Methodist Home for the Aging Obligated
Group) | | 6.00 | | 6/1/2050 | | 5,970,000 | | 5,484,294 | |
Black Belt Energy Gas
District, Revenue Bonds, Refunding (Gas Project) Ser. D1 | | 5.50 | | 2/1/2029 | | 5,555,000 | a | 5,922,850 | |
Jefferson County, Revenue Bonds, Refunding | | 5.25 | | 10/1/2049 | | 2,500,000 | | 2,688,658 | |
Jefferson County, Revenue Bonds, Refunding | | 5.50 | | 10/1/2053 | | 1,250,000 | | 1,363,276 | |
| 15,459,078 | |
Alaska
- .6% | | | | | |
Northern Tobacco Securitization Corp., Revenue Bonds, Refunding,
Ser. A | | 4.00 | | 6/1/2050 | | 3,000,000 | | 2,783,591 | |
Arizona
- 5.8% | | | | | |
Arizona Industrial Development Authority, Revenue Bonds (Academics
of Math & Science Project) | | 5.00 | | 7/1/2054 | | 1,275,000 | b | 1,199,296 | |
Arizona Industrial Development Authority, Revenue Bonds (Legacy
Cares Project) Ser. A | | 6.00 | | 7/1/2051 | | 1,000,000 | b,c | 60,000 | |
Arizona Industrial Development Authority, Revenue Bonds (Legacy
Cares Project) Ser. A | | 7.75 | | 7/1/2050 | | 5,770,000 | b,c | 346,200 | |
Arizona Industrial Development Authority, Revenue Bonds (Sustainable
Bond) (Equitable School Revolving Fund Obligated Group) Ser. A | | 5.25 | | 11/1/2053 | | 2,000,000 | | 2,132,662 | |
Arizona Industrial Development Authority, Revenue Bonds,
Refunding (BASIS Schools Projects) Ser. A | | 5.25 | | 7/1/2047 | | 1,600,000 | b | 1,600,870 | |
5
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
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Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Arizona
- 5.8% (continued) | | | | | |
Arizona Industrial
Development Authority, Revenue Bonds, Refunding (BASIS Schools Projects) Ser. D | | 5.00 | | 7/1/2047 | | 1,035,000 | b | 1,004,453 | |
Arizona Industrial Development Authority, Revenue Bonds,
Refunding (BASIS Schools Projects) Ser. D | | 5.00 | | 7/1/2051 | | 380,000 | b | 364,154 | |
Glendale Industrial Development Authority, Revenue Bonds,
Refunding (Sun Health Services Obligated Group) Ser. A | | 5.00 | | 11/15/2054 | | 1,170,000 | | 1,140,002 | |
La Paz County Industrial Development Authority, Revenue Bonds
(Harmony Public Schools) Ser. A | | 5.00 | | 2/15/2036 | | 2,480,000 | b | 2,508,682 | |
Maricopa County Industrial Development Authority, Revenue
Bonds (Benjamin Franklin Charter School Obligated Group) | | 6.00 | | 7/1/2052 | | 3,000,000 | b | 3,064,929 | |
Maricopa County Industrial Development Authority, Revenue
Bonds, Refunding (Paradise Schools Projects Paragon Management) | | 5.00 | | 7/1/2047 | | 2,000,000 | b | 1,975,472 | |
Salt Verde Financial Corp., Revenue Bonds | | 5.00 | | 12/1/2037 | | 1,000,000 | | 1,089,301 | |
Tender Option Bond Trust Receipts (Series 2018-XF2537), (Salt
Verde Financial Corporation, Revenue Bonds) Recourse, Underlying Coupon Rate 5.00% | | 4.26 | | 12/1/2037 | | 4,030,000 | b,d,e | 4,389,938 | |
The Phoenix Arizona Industrial Development Authority, Revenue
Bonds, Refunding (BASIS Schools Projects) Ser. A | | 5.00 | | 7/1/2035 | | 2,360,000 | b | 2,374,848 | |
The Phoenix Arizona Industrial Development Authority, Revenue
Bonds, Refunding (BASIS Schools Projects) Ser. A | | 5.00 | | 7/1/2046 | | 2,000,000 | b | 1,954,967 | |
| 25,205,774 | |
Arkansas
- .6% | | | | | |
Arkansas Development Finance Authority, Revenue Bonds (Sustainable
Bond) (U.S. Steel Corp.) | | 5.70 | | 5/1/2053 | | 2,600,000 | | 2,701,006 | |
6
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Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
California
- 4.7% | | | | | |
California County Tobacco Securitization Agency, Revenue
Bonds, Refunding, Ser. A | | 4.00 | | 6/1/2049 | | 1,400,000 | | 1,360,936 | |
California Municipal
Finance Authority, Revenue Bonds, Refunding (HumanGood California Obligated Group) Ser. A | | 5.00 | | 10/1/2044 | | 1,000,000 | | 1,023,429 | |
California Municipal
Finance Authority, Revenue Bonds, Refunding (William Jessup University) | | 5.00 | | 8/1/2039 | | 1,000,000 | b | 960,593 | |
California Statewide Communities Development Authority, Revenue
Bonds (Loma Linda University Medical Center Obligated Group) Ser. A | | 5.25 | | 12/1/2056 | | 1,000,000 | b | 1,010,976 | |
Golden State Tobacco Securitization Corp., Revenue Bonds,
Refunding (Tobacco Settlement Asset) Ser. B | | 5.00 | | 6/1/2051 | | 1,500,000 | | 1,572,825 | |
Orange County Community Facilities District, Special Tax
Bonds, Ser. A | | 5.00 | | 8/15/2052 | | 1,500,000 | | 1,524,578 | |
San Diego County Regional
Airport Authority, Revenue Bonds, Ser. B | | 5.00 | | 7/1/2051 | | 4,750,000 | | 4,976,574 | |
Tender Option Bond Trust Receipts (Series 2022-XF3024), (San
Francisco City & County, Revenue Bonds, Refunding, Ser. A) Recourse, Underlying Coupon Rate 5.00% | | 4.83 | | 5/1/2044 | | 7,860,000 | b,d,e | 8,155,549 | |
| 20,585,460 | |
Colorado - 6.7% | | | | | |
Colorado
Health Facilities Authority, Revenue Bonds (CommonSpirit Health Obligated Group) | | 5.25 | | 11/1/2052 | | 1,500,000 | | 1,610,724 | |
Colorado Health Facilities Authority, Revenue Bonds (Covenant
Retirement Communities & Services Obligated Group) | | 5.00 | | 12/1/2048 | | 1,250,000 | | 1,245,889 | |
Colorado Health Facilities Authority, Revenue Bonds, Refunding
(Covenant Living Communities & Services Obligated Group) Ser. A | | 4.00 | | 12/1/2050 | | 4,500,000 | | 3,803,788 | |
Colorado High Performance Transportation Enterprise, Revenue
Bonds (C-470 Express Lanes System) | | 5.00 | | 12/31/2056 | | 1,245,000 | | 1,247,712 | |
Denver City & County, Revenue Bonds, Refunding (United
Airlines Project) | | 5.00 | | 10/1/2032 | | 1,000,000 | | 1,000,004 | |
7
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
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Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Colorado
- 6.7% (continued) | | | | | |
Dominion Water &
Sanitation District, Revenue Bonds, Refunding | | 5.88 | | 12/1/2052 | | 4,500,000 | | 4,473,292 | |
Hess Ranch Metropolitan District No. 6, GO, Ser. A1 | | 5.00 | | 12/1/2049 | | 2,000,000 | | 1,833,895 | |
Rampart Range Metropolitan
District No. 5, Revenue Bonds | | 4.00 | | 12/1/2051 | | 2,000,000 | | 1,486,370 | |
Regional Transportation
District, Revenue Bonds, Refunding (Denver Transit Partners) Ser. A | | 4.00 | | 7/15/2034 | | 1,500,000 | | 1,551,766 | |
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% | | 3.90 | | 8/1/2044 | | 4,440,000 | b,d,e | 5,130,299 | |
Tender Option Bond Trust Receipts (Series 2023-XM1124), (Colorado
Health Facilities Authority, Revenue Bonds (Adventist Health System/Sunbelt Obligated Group) Ser. A)
Recourse, Underlying Coupon Rate 4.00% | | 1.43 | | 11/15/2048 | | 5,535,000 | b,d,e | 5,350,873 | |
Vauxmont Metropolitan District, GO, Refunding (Insured; Assured
Guaranty Municipal Corp.) | | 3.25 | | 12/15/2050 | | 650,000 | | 539,847 | |
| 29,274,459 | |
Connecticut
- 1.4% | | | | | |
Connecticut Health & Educational Facilities Authority, Revenue
Bonds (The Hartford University) Ser. P | | 5.38 | | 7/1/2052 | | 1,500,000 | | 1,409,824 | |
Connecticut Health & Educational Facilities Authority, Revenue
Bonds, Refunding (Fairfield University) Ser. T | | 4.00 | | 7/1/2055 | | 1,000,000 | | 940,902 | |
Connecticut Housing Finance Authority, Revenue Bonds, Refunding,
Ser. A1 | | 3.65 | | 11/15/2032 | | 410,000 | | 406,049 | |
Harbor Point Infrastructure
Improvement District, Tax Allocation Bonds, Refunding (Harbor Point Project) | | 5.00 | | 4/1/2039 | | 3,500,000 | b | 3,518,073 | |
| 6,274,848 | |
8
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|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Delaware
- .2% | | | | | |
Delaware Economic Development Authority, Revenue Bonds (ACTS
Retirement-Life Communities Obligated Group) Ser. B | | 5.25 | | 11/15/2053 | | 1,000,000 | | 1,044,217 | |
District of Columbia - .5% | | | | | |
Metropolitan
Washington Airports Authority, Revenue Bonds, Refunding (Dulles Metrorail) Ser. B | | 4.00 | | 10/1/2049 | | 2,500,000 | | 2,356,841 | |
Florida - 10.5% | | | | | |
Atlantic
Beach, Revenue Bonds (Fleet Landing Project) Ser. A | | 5.00 | | 11/15/2053 | | 3,000,000 | | 2,909,662 | |
Capital Trust Agency, Revenue Bonds (WFCS Portfolio Projects)
Ser. A | | 5.00 | | 1/1/2056 | | 750,000 | b | 613,262 | |
Collier County Industrial Development Authority, Revenue
Bonds (NCH Healthcare System Project) (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 5.00 | | 10/1/2049 | | 1,700,000 | | 1,818,784 | |
Florida Development
Finance Corp., Revenue Bonds (Miami Arts Charter School Project) Ser. A | | 6.00 | | 6/15/2044 | | 5,000,000 | b | 4,207,053 | |
Florida Housing Finance Corp., Revenue Bonds (Insured; GNMA/FNMA/FHLMC)
Ser. 1 | | 4.40 | | 7/1/2044 | | 2,500,000 | | 2,481,730 | |
Greater Orlando Aviation
Authority, Revenue Bonds, Ser. A | | 4.00 | | 10/1/2049 | | 4,685,000 | | 4,368,947 | |
Hillsborough County Port District, Revenue Bonds (Tampa Port
Authority Project) Ser. B | | 5.00 | | 6/1/2046 | | 3,500,000 | | 3,558,592 | |
Lee Memorial Health
System, Revenue Bonds, Refunding, Ser. A1 | | 4.00 | | 4/1/2049 | | 1,650,000 | | 1,556,484 | |
Miami-Dade County, Revenue Bonds | | 0.00 | | 10/1/2045 | | 3,000,000 | f | 1,133,080 | |
Miami-Dade County Water & Sewer System, Revenue Bonds
(Insured; Build America Mutual) | | 4.00 | | 10/1/2051 | | 1,550,000 | | 1,504,923 | |
Palm Beach County Health
Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) | | 5.00 | | 11/15/2045 | | 2,850,000 | | 2,935,050 | |
Palm Beach County Health
Facilities Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) Ser. B | | 5.00 | | 11/15/2042 | | 735,000 | | 771,239 | |
9
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Florida
- 10.5% (continued) | | | | | |
Palm Beach County Health
Facilities Authority, Revenue Bonds (Lifespace Communities Obligated Group) Ser. B | | 4.00 | | 5/15/2053 | | 2,600,000 | | 1,882,547 | |
Palm Beach County Health Facilities Authority, Revenue Bonds,
Refunding (Lifespace Communities Obligated Group) Ser. C | | 7.63 | | 5/15/2058 | | 1,000,000 | | 1,104,091 | |
Pinellas County Industrial Development Authority, Revenue
Bonds (Foundation for Global Understanding) | | 5.00 | | 7/1/2029 | | 700,000 | | 719,293 | |
Seminole County Industrial Development Authority, Revenue
Bonds, Refunding (Legacy Pointe at UCF Project) | | 5.75 | | 11/15/2054 | | 2,500,000 | | 2,104,914 | |
Tender Option Bond Trust Receipts (Series 2023-XM1122), (Miami-Dade
FL County Water & Sewer System, Revenue Bonds, Refunding, Ser. B) Recourse, Underlying Coupon Rate
4.00% | | 2.10 | | 10/1/2049 | | 12,750,000 | b,d,e | 12,277,071 | |
| 45,946,722 | |
Georgia - 7.4% | | | | | |
Atlanta
Water & Wastewater, Revenue Bonds (Proctor Creek Watershed) Ser. D | | 3.50 | | 11/1/2028 | | 880,000 | b | 870,740 | |
Georgia Municipal Electric Authority, Revenue Bonds (Plant
Vogtle Units 3&4 Project) Ser. A | | 5.00 | | 7/1/2052 | | 3,250,000 | | 3,378,983 | |
Main Street Natural Gas, Revenue Bonds, Ser. A | | 5.00 | | 6/1/2030 | | 1,500,000 | a | 1,580,894 | |
Main Street Natural Gas, Revenue Bonds, Ser. A | | 5.00 | | 9/1/2031 | | 3,500,000 | a | 3,751,813 | |
Tender Option Bond Trust Receipts (Series 2016-XM0435), (Private
Colleges & Universities Authority, Revenue Bonds, Refunding (Emory University)) Recourse, Underlying
Coupon Rate 5.00% | | 4.70 | | 10/1/2043 | | 10,000,000 | b,d,e | 9,943,199 | |
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% | | 2.55 | | 7/1/2044 | | 6,340,000 | b,d,e | 6,716,188 | |
10
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Georgia
- 7.4% (continued) | | | | | |
Tender Option Bond
Trust Receipts (Series 2023-XF3183), (Municipal Electric Authority of Georgia, Revenue Bonds (Plant
Vogtle Units 3 & 4 Project) Ser. A) Recourse, Underlying Coupon Rate 5.00% | | 4.55 | | 1/1/2059 | | 3,600,000 | b,d,e | 3,609,571 | |
The Burke County Development Authority, Revenue Bonds, Refunding
(Oglethorpe Power Corp.) Ser. D | | 4.13 | | 11/1/2045 | | 2,400,000 | | 2,232,233 | |
| 32,083,621 | |
Hawaii
- .5% | | | | | |
Hawaii Airports System, Revenue Bonds, Ser. A | | 5.00 | | 7/1/2047 | | 1,000,000 | | 1,055,207 | |
Hawaii Department of
Budget & Finance, Revenue Bonds, Refunding (Hawaiian Electric Co.) | | 4.00 | | 3/1/2037 | | 1,500,000 | | 1,026,582 | |
| 2,081,789 | |
Idaho
- 1.5% | | | | | |
Power County Industrial Development Corp., Revenue Bonds
(FMC Corp. Project) | | 6.45 | | 8/1/2032 | | 5,000,000 | | 5,015,920 | |
Spring Valley Community
Infrastructure District No. 1, Special Assessment Bonds | | 3.75 | | 9/1/2051 | | 2,000,000 | b | 1,564,808 | |
| 6,580,728 | |
Illinois
- 10.5% | | | | | |
Chicago Board of Education, GO, Refunding, Ser. A | | 5.00 | | 12/1/2034 | | 1,400,000 | | 1,451,283 | |
Chicago Board of Education, GO,
Ser. D | | 5.00 | | 12/1/2046 | | 2,000,000 | | 2,006,462 | |
Chicago Board of Education, GO,
Ser. H | | 5.00 | | 12/1/2036 | | 2,000,000 | | 2,038,820 | |
Chicago II, GO, Refunding,
Ser. A | | 6.00 | | 1/1/2038 | | 3,000,000 | | 3,143,271 | |
Chicago II, GO, Ser.
A | | 5.00 | | 1/1/2044 | | 4,000,000 | | 4,121,404 | |
Chicago II, GO, Ser.
A | | 5.50 | | 1/1/2049 | | 1,000,000 | | 1,042,605 | |
Chicago Midway International
Airport, Revenue Bonds, Refunding, Ser. C | | 5.00 | | 1/1/2041 | | 1,550,000 | | 1,666,512 | |
Illinois, GO, Refunding, Ser. A | | 5.00 | | 10/1/2029 | | 1,100,000 | | 1,189,590 | |
Illinois, GO, Ser. A | | 5.00 | | 5/1/2038 | | 3,400,000 | | 3,555,003 | |
Illinois, GO, Ser. C | | 5.00 | | 11/1/2029 | | 1,120,000 | | 1,187,787 | |
Illinois, GO, Ser. D | | 5.00 | | 11/1/2028 | | 2,825,000 | | 2,995,776 | |
Illinois, Revenue Bonds (Auxiliary Facilities System) Ser.
A | | 5.00 | | 4/1/2044 | | 1,000,000 | | 990,681 | |
11
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Illinois
- 10.5% (continued) | | | | | |
Illinois Finance Authority, Revenue
Bonds (Plymouth Place Obligated Group) Ser. A | | 6.63 | | 5/15/2052 | | 1,000,000 | | 1,031,997 | |
Illinois Finance Authority, Revenue Bonds, Refunding (Lutheran
Life Communities Obligated Group) Ser. A | | 5.00 | | 11/1/2049 | | 1,750,000 | | 1,322,492 | |
Metropolitan Pier & Exposition Authority, Revenue Bonds
(McCormick Place Expansion Project) | | 5.00 | | 6/15/2057 | | 2,000,000 | | 2,029,043 | |
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 | 1,554,635 | |
Metropolitan Pier & Exposition Authority, Revenue Bonds,
Refunding (McCormick Place Expansion Project) | | 0.00 | | 12/15/2054 | | 21,800,000 | f | 4,497,830 | |
Sales Tax Securitization Corp., Revenue Bonds, Refunding,
Ser. A | | 4.00 | | 1/1/2038 | | 2,000,000 | | 2,013,568 | |
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% | | 7.23 | | 4/1/2025 | | 4,920,000 | b,d,e | 4,970,234 | |
Tender Option Bond Trust Receipts (Series 2023-XF1623), (Regional
Transportation Authority Illinois, Revenue Bonds, Ser. B) Non-recourse, Underlying Coupon Rate 4.00% | | 3.73 | | 6/1/2048 | | 3,000,000 | b,d,e | 2,897,163 | |
| 45,706,156 | |
Indiana - 1.5% | | | | | |
Indiana
Finance Authority, Revenue Bonds (Ohio Valley Electric Project) Ser. B | | 3.00 | | 11/1/2030 | | 1,000,000 | | 930,439 | |
Indiana Finance Authority, Revenue Bonds (Sustainable Bond) | | 7.00 | | 3/1/2039 | | 5,525,000 | b | 3,860,248 | |
Indianapolis Local Public Improvement Bond Bank, Revenue
Bonds (City Moral Obligation) (Insured; Build America Mutual) Ser. F1 | | 5.25 | | 3/1/2067 | | 1,750,000 | | 1,881,716 | |
| 6,672,403 | |
12
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Iowa
- 1.4% | | | | | |
Iowa Finance Authority, Revenue Bonds, Refunding (Iowa Fertilizer
Co. Project) | | 5.00 | | 12/1/2050 | | 2,515,000 | | 2,655,980 | |
Iowa Finance Authority, Revenue
Bonds, Refunding (Lifespace Communities Obligated Group) Ser. A | | 4.00 | | 5/15/2053 | | 1,000,000 | | 724,057 | |
Iowa Finance Authority, Revenue Bonds, Refunding (Lifespace
Communities Obligated Group) Ser. A | | 4.00 | | 5/15/2046 | | 500,000 | | 385,503 | |
Iowa Student Loan Liquidity Corp., Revenue Bonds, Ser. B | | 5.00 | | 12/1/2031 | | 2,000,000 | | 2,154,552 | |
| 5,920,092 | |
Kentucky
- 1.2% | | | | | |
Henderson, Revenue Bonds (Pratt Paper Project) Ser. A | | 4.70 | | 1/1/2052 | | 1,000,000 | b | 995,322 | |
Kentucky Public Energy Authority, Revenue Bonds, Ser. A | | 5.00 | | 5/1/2055 | | 1,750,000 | a | 1,852,815 | |
Kentucky Public Energy Authority, Revenue Bonds, Ser. A1 | | 4.00 | | 8/1/2030 | | 2,270,000 | a | 2,269,958 | |
| 5,118,095 | |
Louisiana - 3.4% | | | | | |
Louisiana
Local Government Environmental Facilities & Community Development Authority, Revenue Bonds, Refunding
(Westlake Chemical Project) | | 3.50 | | 11/1/2032 | | 3,100,000 | | 2,994,850 | |
Louisiana Public Facilities
Authority, Revenue Bonds, Refunding (Tulane University) Ser. A | | 4.00 | | 4/1/2030 | | 115,000 | g | 122,753 | |
New Orleans Aviation Board, Revenue Bonds (General Airport-N
Terminal Project) Ser. A | | 5.00 | | 1/1/2048 | | 1,000,000 | | 1,024,065 | |
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% | | 4.41 | | 7/1/2047 | | 10,755,000 | b,d,e | 10,905,777 | |
| 15,047,445 | |
Maryland - 2.2% | | | | | |
Maryland
Economic Development Corp., Revenue Bonds (Sustainable Bond) (Purple Line Transit Partners) Ser. B | | 5.25 | | 6/30/2055 | | 3,120,000 | | 3,260,391 | |
13
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Maryland
- 2.2% (continued) | | | | | |
Maryland Economic Development
Corp., Tax Allocation Bonds (Port Covington Project) | | 4.00 | | 9/1/2050 | | 1,000,000 | | 824,445 | |
Maryland Health & Higher Educational Facilities Authority, Revenue
Bonds (Adventist Healthcare Obligated Group) Ser. A | | 5.50 | | 1/1/2046 | | 3,250,000 | | 3,294,923 | |
Maryland State Transportation Authority, Revenue Bonds, Refunding,
Ser. A | | 4.00 | | 7/1/2037 | | 2,000,000 | | 2,076,125 | |
| 9,455,884 | |
Massachusetts
- 4.9% | | | | | |
Lowell Collegiate Charter School, Revenue Bonds | | 5.00 | | 6/15/2054 | | 1,620,000 | | 1,563,612 | |
Massachusetts Development
Finance Agency, Revenue Bonds, Refunding (Boston Medical Center Corp. Obligated Group) | | 5.25 | | 7/1/2052 | | 1,500,000 | | 1,611,292 | |
Massachusetts Development
Finance Agency, Revenue Bonds, Refunding (NewBridge Charles Obligated Group) | | 5.00 | | 10/1/2057 | | 1,000,000 | b | 995,164 | |
Massachusetts Development Finance Agency, Revenue Bonds,
Refunding, Ser. A | | 5.00 | | 7/1/2025 | | 1,400,000 | | 1,411,044 | |
Massachusetts Development
Finance Agency, Revenue Bonds, Ser. T | | 4.00 | | 3/1/2054 | | 1,000,000 | | 966,799 | |
Tender Option Bond Trust Receipts (Series 2023-XF1604), (Massachusetts
State Transportation Fund, Revenue Bonds, Ser. B) Non-recourse, Underlying Coupon Rate 5.00% | | 7.64 | | 6/1/2053 | | 14,000,000 | b,d,e | 15,022,494 | |
| 21,570,405 | |
Michigan - 5.1% | | | | | |
Great
Lakes Water Authority Sewage Disposal System, Revenue Bonds, Refunding, Ser. C | | 5.00 | | 7/1/2036 | | 3,000,000 | | 3,099,291 | |
Michigan Finance Authority, Revenue Bonds (Sustainable Bond)
(Henry Ford) | | 5.50 | | 2/28/2057 | | 2,700,000 | | 2,945,959 | |
Michigan Finance Authority, Revenue
Bonds, Refunding (Beaumont Health Credit Group) | | 5.00 | | 11/1/2044 | | 5,165,000 | | 5,239,380 | |
14
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Michigan
- 5.1% (continued) | | | | | |
Michigan Finance Authority, Revenue
Bonds, Refunding (Beaumont-Spectrum) | | 4.00 | | 4/15/2042 | | 1,500,000 | | 1,475,790 | |
Michigan Finance Authority, Revenue Bonds, Refunding (Great
Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | | 5.00 | | 7/1/2031 | | 1,000,000 | | 1,002,249 | |
Michigan Finance Authority, Revenue Bonds, Refunding (Insured;
National Public Finance Guarantee Corp.) Ser. D6 | | 5.00 | | 7/1/2036 | | 2,000,000 | | 2,002,712 | |
Michigan Finance Authority, Revenue Bonds, Refunding, Ser.
A2 | | 5.00 | | 6/1/2040 | | 4,435,000 | | 4,657,533 | |
Michigan Finance Authority, Revenue
Bonds, Refunding, Ser. D2 | | 5.00 | | 7/1/2034 | | 2,000,000 | | 2,018,011 | |
| 22,440,925 | |
Minnesota
- .7% | | | | | |
Duluth Economic Development Authority, Revenue Bonds, Refunding
(Essentia Health Obligated Group) Ser. A | | 5.00 | | 2/15/2058 | | 3,000,000 | | 3,018,973 | |
Missouri - 4.0% | | | | | |
Missouri
Housing Development Commission, Revenue Bonds (First Place HomeOwenership Loan) (Insured; GNMA, FNMA,
FHLMC) Ser. A | | 4.60 | | 11/1/2049 | | 1,750,000 | | 1,735,666 | |
St. Louis County Industrial
Development Authority, Revenue Bonds (Friendship Village St. Louis Obligated Group) Ser. A | | 5.13 | | 9/1/2049 | | 2,975,000 | | 2,874,428 | |
St. Louis County Industrial
Development Authority, Revenue Bonds (Friendship Village St. Louis Obligated Group) Ser. A | | 5.13 | | 9/1/2048 | | 2,025,000 | | 1,968,582 | |
St. Louis Land Clearance
for Redevelopment Authority, Revenue Bonds (National Geospatial Intelligence) | | 5.13 | | 6/1/2046 | | 4,580,000 | | 4,610,546 | |
15
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Missouri
- 4.0% (continued) | | | | | |
Tender Option Bond
Trust Receipts (Series 2023-XM1116), (Jackson County Missouri Special Obligation, Revenue Bonds, Refunding,
Ser. A) Non-recourse, Underlying Coupon Rate 4.25% | | 3.72 | | 12/1/2053 | | 3,000,000 | b,d,e | 2,904,262 | |
The St. Louis Missouri Industrial Development Authority, Tax
Allocation Bonds (St. Louis Innovation District Project) | | 4.38 | | 5/15/2036 | | 3,365,000 | | 3,287,359 | |
| 17,380,843 | |
Nebraska
- .2% | | | | | |
Omaha Public Power District, Revenue Bonds, Ser. A | | 4.00 | | 2/1/2051 | | 1,000,000 | | 959,539 | |
Nevada
- 1.5% | | | | | |
Clark County School District, GO (Insured; Assured Guaranty
Municipal Corp.) Ser. A | | 4.25 | | 6/15/2041 | | 3,745,000 | | 3,837,581 | |
Reno, Revenue Bonds,
Refunding (Insured; Assured Guaranty Municipal Corp.) | | 4.00 | | 6/1/2058 | | 2,750,000 | | 2,494,549 | |
| 6,332,130 | |
New
Hampshire - .2% | | | | | |
New Hampshire Business Finance Authority, Revenue Bonds,
Refunding (Sustainable Bond) Ser. B | | 3.75 | | 7/2/2040 | | 1,000,000 | a,b | 788,757 | |
New Jersey - 5.4% | | | | | |
New
Jersey, GO (COVID-19 Emergency Bonds) Ser. A | | 4.00 | | 6/1/2031 | | 1,000,000 | | 1,082,624 | |
New Jersey Economic Development Authority, Revenue Bonds,
Refunding, Ser. XX | | 5.25 | | 6/15/2027 | | 1,855,000 | | 1,893,048 | |
New Jersey Economic
Development Authority, Revenue Bonds, Refunding, Ser. XX | | 5.25 | | 6/15/2025 | | 695,000 | g | 711,320 | |
New Jersey Health Care Facilities Financing Authority, Revenue
Bonds (RWJ Barnabas Health Obligated Group) | | 4.00 | | 7/1/2051 | | 1,500,000 | | 1,448,320 | |
New Jersey Higher Education Student Assistance Authority, Revenue
Bonds, Refunding, Ser. A | | 5.00 | | 12/1/2032 | | 1,275,000 | | 1,387,790 | |
New Jersey Housing
& Mortgage Finance Agency, Revenue Bonds, Refunding, Ser. D | | 4.00 | | 4/1/2025 | | 1,560,000 | | 1,552,248 | |
New Jersey Transportation Trust Fund Authority, Revenue Bonds | | 5.00 | | 6/15/2044 | | 2,000,000 | | 2,175,592 | |
16
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
New Jersey
- 5.4% (continued) | | | | | |
New Jersey Transportation
Trust Fund Authority, Revenue Bonds | | 5.25 | | 6/15/2043 | | 2,000,000 | | 2,105,600 | |
New Jersey Transportation Trust Fund Authority, Revenue Bonds | | 5.50 | | 6/15/2050 | | 2,700,000 | | 2,992,632 | |
New Jersey Transportation
Trust Fund Authority, Revenue Bonds, Ser. AA | | 5.25 | | 6/15/2033 | | 1,500,000 | | 1,531,871 | |
Tender Option Bond Trust Receipts (Series 2018-XF2538), (New
Jersey Economic Development Authority, Revenue Bonds) Recourse, Underlying Coupon Rate 5.25% | | 5.13 | | 6/15/2040 | | 3,250,000 | b,d,e | 3,323,175 | |
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding,
Ser. B | | 5.00 | | 6/1/2046 | | 3,180,000 | | 3,234,737 | |
| 23,438,957 | |
New York
- 7.8% | | | | | |
New York Convention Center Development Corp., Revenue Bonds
(Hotel Unit Fee) (Insured; Assured Guaranty Municipal Corp.) Ser. B | | 0.00 | | 11/15/2052 | | 7,825,000 | f | 1,969,132 | |
New York Liberty Development Corp., Revenue Bonds, Refunding
(Class 1-3 World Trade Center Project) | | 5.00 | | 11/15/2044 | | 7,000,000 | b | 7,003,411 | |
New York State Dormitory Authority, Revenue Bonds, Refunding
(Montefiore Obligated Group) Ser. A | | 4.00 | | 9/1/2050 | | 1,000,000 | | 884,545 | |
New York Transportation Development Corp., Revenue Bonds
(Delta Air Lines) | | 4.00 | | 1/1/2036 | | 1,000,000 | | 1,000,986 | |
New York Transportation
Development Corp., Revenue Bonds (JFK International Airport Terminal) | | 5.00 | | 12/1/2040 | | 3,535,000 | | 3,779,406 | |
New York Transportation Development Corp., Revenue Bonds
(LaGuardia Airport Terminal B Redevelopment Project) Ser. A | | 5.00 | | 7/1/2046 | | 3,500,000 | | 3,452,407 | |
New York Transportation Development Corp., Revenue Bonds
(LaGuradia Airport Terminal) | | 5.63 | | 4/1/2040 | | 1,000,000 | | 1,092,791 | |
17
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
New York
- 7.8% (continued) | | | | | |
New York Transportation
Development Corp., Revenue Bonds (Sustainable Bond) (JFK International Airport Terminal One Project)
(Insured; Assured Guaranty Municipal Corp.) | | 5.13 | | 6/30/2060 | | 1,000,000 | | 1,046,558 | |
Niagara Area Development Corp., Revenue Bonds, Refunding
(Covanta Project) Ser. A | | 4.75 | | 11/1/2042 | | 2,000,000 | b | 1,769,223 | |
Tender Option Bond Trust Receipts (Series 2022-XM1004), (Metropolitan
Transportation Authority, Revenue Bonds, Refunding (Sustainable Bond) (Insured; Assured Guaranty Municipal
Corp.) Ser. C) Non-recourse, Underlying Coupon Rate 4.00% | | 3.82 | | 11/15/2047 | | 6,300,000 | b,d,e | 6,045,118 | |
Triborough Bridge & Tunnel Authority, Revenue Bonds,
Ser. A1 | | 4.13 | | 5/15/2064 | | 3,000,000 | | 2,895,903 | |
TSASC, Revenue Bonds,
Refunding, Ser. B | | 5.00 | | 6/1/2045 | | 1,165,000 | | 1,080,235 | |
Westchester County
Local Development Corp., Revenue Bonds, Refunding (Purchase Senior Learning Community Obligated Group) | | 5.00 | | 7/1/2046 | | 2,150,000 | b | 2,085,257 | |
| 34,104,972 | |
North Carolina - 3.3% | | | | | |
North
Carolina Medical Care Commission, Revenue Bonds (The United Methodist Retirement Homes Obligated Group)
Ser. A | | 5.13 | | 10/1/2054 | | 1,250,000 | | 1,287,221 | |
North Carolina Medical
Care Commission, Revenue Bonds, Refunding (Lutheran Services for the Aging Obligated Group) | | 4.00 | | 3/1/2051 | | 3,000,000 | | 2,262,045 | |
18
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
North
Carolina - 3.3% (continued) | | | | | |
North
Carolina Medical Care Commission, Revenue Bonds, Refunding (Pennybyrn at Maryfield) | | 5.00 | | 10/1/2035 | | 1,005,000 | | 992,040 | |
Tender Option Bond Trust Receipts (Series 2022-XF1352), (North
Carolina State Medical Care Commission Health Care Facilities, Revenue Bonds (Novant Health Obligated
Group, Ser. A)) Non-recourse, Underlying Coupon Rate 4.00% | | 3.92 | | 11/1/2052 | | 10,000,000 | b,d,e | 9,676,402 | |
| 14,217,708 | |
Ohio
- 5.5% | | | | | |
Buckeye Tobacco Settlement Financing Authority, Revenue Bonds,
Refunding, Ser. B2 | | 5.00 | | 6/1/2055 | | 12,850,000 | | 12,170,423 | |
Canal Winchester Local
School District, GO, Refunding (Insured; National Public Finance Guarantee Corp.) | | 0.00 | | 12/1/2031 | | 3,955,000 | f | 3,048,401 | |
Canal Winchester Local School District, GO, Refunding (Insured;
National Public Finance Guarantee Corp.) | | 0.00 | | 12/1/2029 | | 3,955,000 | f | 3,277,720 | |
Cuyahoga County, Revenue Bonds, Refunding (The MetroHealth
System) | | 5.00 | | 2/15/2052 | | 2,000,000 | | 2,005,202 | |
Franklin County Convention
Facilities Authority, Revenue Bonds (GRTR Columbus Convention Center) | | 5.00 | | 12/1/2044 | | 1,250,000 | | 1,239,625 | |
Ohio Air Quality Development Authority, Revenue Bonds (Pratt
Paper OH Project) | | 4.50 | | 1/15/2048 | | 2,250,000 | b | 2,188,965 | |
| 23,930,336 | |
Oklahoma - .4% | | | | | |
Oklahoma
Development Finance Authority, Revenue Bonds (OU Medicine Project) Ser. B | | 5.50 | | 8/15/2057 | | 1,500,000 | | 1,544,589 | |
19
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Oregon
- .6% | | | | | |
Clackamas County Hospital Facility Authority, Revenue Bonds,
Refunding (Willamette View Obligated Group) Ser. A | | 5.00 | | 11/15/2047 | | 1,500,000 | | 1,422,277 | |
Yamhill County Hospital Authority, Revenue Bonds, Refunding
(Friendsview Retirement Community) Ser. A | | 5.00 | | 11/15/2046 | | 1,250,000 | | 1,033,174 | |
| 2,455,451 | |
Pennsylvania
- 5.6% | | | | | |
Crawford County Hospital Authority, Revenue Bonds, Refunding
(Meadville Medical Center Project) Ser. A | | 6.00 | | 6/1/2046 | | 1,175,000 | | 1,190,972 | |
Pennsylvania Economic Development Financing Authority, Revenue
Bonds (The Penndot Major Bridges) | | 6.00 | | 6/30/2061 | | 3,000,000 | | 3,375,130 | |
Pennsylvania Higher Educational Facilities Authority, Revenue
Bonds, Refunding (University of Sciences in Philadelphia) | | 5.00 | | 11/1/2036 | | 3,675,000 | | 3,699,932 | |
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. A | | 4.00 | | 12/1/2050 | | 1,500,000 | | 1,433,536 | |
Philadelphia Airport, Revenue
Bonds, Refunding (Private Activity) | | 5.00 | | 7/1/2027 | | 4,300,000 | | 4,492,512 | |
Tender Option Bond Trust Receipts (Series 2022-XF1525), (Pennsylvania
Economic Development Financing Authority UPMC, Revenue Bonds, Ser. A) Recourse, Underlying Coupon Rate
4.00% | | 3.76 | | 5/15/2053 | | 4,000,000 | b,d,e | 3,762,001 | |
Tender Option Bond Trust Receipts (Series 2023-XM1133), (Philadelphia
Water & Wastewater, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. B)
Non-recourse, Underlying Coupon Rate 5.50% | | 9.46 | | 9/1/2053 | | 5,820,000 | b,d,e | 6,567,687 | |
| 24,521,770 | |
20
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Rhode
Island - 1.4% | | | | | |
Tender Option Bond Trust Receipts (Series 2023-XM1117), (Rhode
Island Infrastructure Bank State Revolving Fund, Revenue Bonds) Ser. A) Non-recourse, Underlying Coupon
Rate 4.13% | | 3.57 | | 10/1/2048 | | 6,000,000 | b,d,e | 5,942,760 | |
South
Carolina - 4.9% | | | | | |
South Carolina Jobs-Economic Development Authority, Revenue
Bonds (Bishop Gadsden Episcopal Retirement Community Obligated Group) | | 5.00 | | 4/1/2054 | | 1,000,000 | | 939,494 | |
South Carolina Jobs-Economic Development Authority, Revenue
Bonds, Refunding (Bon Secours Mercy Health) | | 4.00 | | 12/1/2044 | | 2,810,000 | | 2,741,881 | |
South Carolina Public Service Authority, Revenue Bonds, Refunding
(Santee Cooper) Ser. A | | 4.00 | | 12/1/2055 | | 3,000,000 | | 2,680,544 | |
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% | | 6.35 | | 12/1/2043 | | 15,000,000 | b,d,e | 14,897,559 | |
| 21,259,478 | |
South
Dakota - 1.1% | | | | | |
Tender Option Bond Trust Receipts (Series 2022-XF1409), (South
Dakota Heath & Educational Facilities Authority, Revenue Bonds, Refunding (Avera Health Obligated
Group)) Non-recourse, Underlying Coupon Rate 5.00% | | 7.85 | | 7/1/2046 | | 4,720,000 | b,d,e | 4,741,272 | |
Texas - 13.4% | | | | | |
Arlington
Higher Education Finance Corp., Revenue Bonds (Uplift Education) (Insured; Permanent School Fund Guarantee
Program) Ser. A | | 4.25 | | 12/1/2053 | | 1,500,000 | | 1,401,500 | |
Central Texas Regional
Mobility Authority, Revenue Bonds | | 5.00 | | 1/1/2048 | | 2,500,000 | | 2,573,507 | |
Clifton Higher Education Finance Corp., Revenue Bonds (IDEA
Public Schools) Ser. A | | 4.00 | | 8/15/2047 | | 3,100,000 | | 2,725,908 | |
21
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Texas
- 13.4% (continued) | | | | | |
Clifton Higher Education
Finance Corp., Revenue Bonds (International Leadership of Texas) Ser. A | | 5.75 | | 8/15/2045 | | 4,500,000 | | 4,592,273 | |
Clifton Higher Education Finance Corp., Revenue Bonds (International
Leadership of Texas) Ser. D | | 5.75 | | 8/15/2033 | | 1,000,000 | | 1,027,527 | |
Clifton Higher Education
Finance Corp., Revenue Bonds (International Leadership of Texas) Ser. D | | 6.13 | | 8/15/2048 | | 6,000,000 | | 6,130,675 | |
Clifton Higher Education Finance Corp., Revenue Bonds (Uplift
Education) Ser. A | | 4.50 | | 12/1/2044 | | 2,500,000 | | 2,369,357 | |
Clifton Higher Education
Finance Corp., Revenue Bonds, Refunding (International Leadership of Texas) (Insured; Permanent School
Fund Guarantee Program) Ser. A | | 4.25 | | 8/15/2053 | | 1,000,000 | | 971,460 | |
Dallas Independent
School District, GO, Refunding (Insured; Permanent School Fund Guarantee Program) | | 4.00 | | 2/15/2054 | | 2,250,000 | | 2,131,591 | |
Grand Parkway Transportation Corp., Revenue Bonds, Refunding | | 4.00 | | 10/1/2049 | | 1,000,000 | | 958,391 | |
Harris County-Houston
Sports Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 0.00 | | 11/15/2050 | | 6,500,000 | f | 1,813,391 | |
Houston Airport System, Revenue Bonds, Refunding (Insured;
Assured Guaranty Municipal Corp.) Ser. A | | 4.50 | | 7/1/2053 | | 2,400,000 | | 2,378,155 | |
Houston Airport System, Revenue Bonds, Refunding, Ser. A | | 4.00 | | 7/1/2046 | | 1,610,000 | | 1,520,803 | |
Lamar Consolidated
Independent School District, GO | | 4.00 | | 2/15/2053 | | 1,235,000 | | 1,173,388 | |
Mission Economic Development Corp., Revenue Bonds, Refunding
(Natgasoline Project) | | 4.63 | | 10/1/2031 | | 2,000,000 | b | 2,000,697 | |
Tarrant County Cultural Education Facilities Finance Corp., Revenue
Bonds (Baylor Scott & White Health Project) | | 5.00 | | 11/15/2051 | | 2,000,000 | | 2,092,283 | |
22
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Texas
- 13.4% (continued) | | | | | |
Tarrant County Cultural
Education Facilities Finance Corp., Revenue Bonds, Refunding (MRC Stevenson Oaks Project) | | 6.75 | | 11/15/2051 | | 1,000,000 | | 933,828 | |
Tender Option Bond
Trust Receipts (Series 2023-XM1125), (Medina Valley Independent School District, GO (Insured; Permanent
School Fund Guarantee Program)) Non-recourse, Underlying Coupon Rate 4.00% | | 3.67 | | 2/15/2053 | | 7,500,000 | b,d,e | 7,173,381 | |
Texas Municipal Gas Acquisition & Supply Corp. IV, Revenue
Bonds, Ser. B | | 5.50 | | 1/1/2034 | | 4,000,000 | a | 4,480,322 | |
Texas Private Activity Bond Surface Transportation Corp., Revenue
Bonds (Blueridge Transportation Group) | | 5.00 | | 12/31/2050 | | 1,300,000 | | 1,289,771 | |
Texas Private Activity Bond Surface Transportation Corp., Revenue
Bonds (Segment 3C Project) | | 5.00 | | 6/30/2058 | | 6,930,000 | | 7,018,716 | |
Waxahachie Independent
School District, GO (Insured; Permanent School Fund Guarantee Program) | | 4.25 | | 2/15/2053 | | 1,500,000 | | 1,496,664 | |
| 58,253,588 | |
U.S.
Related - 1.4% | | | | | |
Guam Housing Corp., Revenue Bonds (Insured; Federal Home
Loan Mortgage Corp.) Ser. A | | 5.75 | | 9/1/2031 | | 770,000 | | 773,144 | |
Puerto Rico, GO,
Ser. A | | 0.00 | | 7/1/2033 | | 381,733 | f | 250,973 | |
Puerto Rico, GO, Ser. A | | 0.00 | | 7/1/2024 | | 48,128 | f | 47,653 | |
Puerto Rico, GO, Ser. A1 | | 4.00 | | 7/1/2033 | | 296,629 | | 296,160 | |
Puerto Rico, GO, Ser. A1 | | 4.00 | | 7/1/2041 | | 311,133 | | 293,663 | |
Puerto Rico, GO, Ser. A1 | | 4.00 | | 7/1/2046 | | 323,574 | | 297,967 | |
Puerto Rico, GO, Ser. A1 | | 4.00 | | 7/1/2035 | | 266,630 | | 262,110 | |
Puerto Rico, GO, Ser. A1 | | 4.00 | | 7/1/2037 | | 228,839 | | 221,499 | |
Puerto Rico, GO, Ser. A1 | | 5.38 | | 7/1/2025 | | 330,362 | | 337,059 | |
Puerto Rico, GO, Ser. A1 | | 5.63 | | 7/1/2029 | | 2,356,059 | | 2,581,009 | |
Puerto Rico, GO, Ser. A1 | | 5.63 | | 7/1/2027 | | 327,370 | | 348,425 | |
Puerto Rico, GO, Ser. A1 | | 5.75 | | 7/1/2031 | | 312,813 | | 353,020 | |
| 6,062,682 | |
23
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Utah
- .8% | | | | | |
Utah Charter School Finance Authority, Revenue Bonds, Refunding
(Summit Academy) Ser. A | | 5.00 | | 4/15/2049 | | 1,190,000 | | 1,225,446 | |
Utah Infrastructure
Agency, Revenue Bonds, Refunding, Ser. A | | 5.00 | | 10/15/2037 | | 2,345,000 | | 2,382,615 | |
| 3,608,061 | |
Virginia
- 4.4% | | | | | |
Tender Option Bond Trust Receipts (Series 2018-XM0593), (Hampton
Roads Transportation Accountability Commission, Revenue Bonds) Non-recourse, Underlying Coupon Rate 5.50% | | 9.43 | | 7/1/2057 | | 7,500,000 | b,d,e | 8,235,294 | |
Virginia Housing Development Authority, Revenue Bonds, Ser.
A | | 4.80 | | 9/1/2059 | | 4,900,000 | | 4,934,045 | |
Virginia Small Business
Financing Authority, Revenue Bonds (Transform 66 P3 Project) | | 5.00 | | 12/31/2052 | | 4,620,000 | | 4,655,395 | |
Williamsburg Economic Development Authority, Revenue Bonds
(William & Mary Project) (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 4.13 | | 7/1/2058 | | 1,250,000 | | 1,229,136 | |
| 19,053,870 | |
Washington
- .6% | | | | | |
Washington Housing Finance Commission, Revenue Bonds, Refunding
(Presbyterian Retirement Communities Northwest Obligated Group) Ser. A | | 5.00 | | 1/1/2051 | | 3,200,000 | b | 2,520,429 | |
Wisconsin - 4.2% | | | | | |
Public
Finance Authority, Revenue Bonds (ACTS Retirement-Life Communities Obligated Group) Ser. A | | 5.00 | | 11/15/2041 | | 1,000,000 | | 1,052,261 | |
Public Finance Authority, Revenue
Bonds (Cone Health) Ser. A | | 5.00 | | 10/1/2052 | | 1,500,000 | | 1,595,696 | |
Public Finance Authority, Revenue
Bonds (EMU Campus Living) (Insured; Build America Mutual) Ser. A1 | | 5.50 | | 7/1/2052 | | 2,500,000 | | 2,729,943 | |
Public Finance Authority, Revenue Bonds (EMU Campus Living)
(Insured; Build America Mutual) Ser. A1 | | 5.63 | | 7/1/2055 | | 2,035,000 | | 2,240,108 | |
24
| | | | | | | | | |
|
Description | Coupon
Rate (%) | | Maturity Date | | Principal Amount ($) | | Value
($) | |
Long-Term
Municipal Investments - 141.5% (continued) | | | | | |
Wisconsin
- 4.2% (continued) | | | | | |
Public Finance Authority, Revenue
Bonds (Roseman University of Health Sciences) | | 5.00 | | 4/1/2030 | | 45,000 | b,g | 50,504 | |
Public Finance Authority, Revenue Bonds (Southminster Obligated
Group) | | 5.00 | | 10/1/2053 | | 2,015,000 | b | 1,804,158 | |
Public Finance Authority, Revenue Bonds, Refunding (Mary's
Woods at Marylhurst Project) | | 5.25 | | 5/15/2047 | | 750,000 | b | 705,054 | |
Public Finance Authority, Revenue Bonds, Ser. 1 | | 5.75 | | 7/1/2062 | | 4,875,000 | | 5,248,576 | |
Wisconsin Health &
Educational Facilities Authority, Revenue Bonds (Bellin Memorial Hospital Obligated Group) | | 5.50 | | 12/1/2052 | | 1,250,000 | | 1,367,154 | |
Wisconsin Health &
Educational Facilities Authority, Revenue Bonds, Refunding (St. Camillus Health System Obligated Group) | | 5.00 | | 11/1/2046 | | 2,000,000 | | 1,727,713 | |
| 18,521,167 | |
Total Long-Term Municipal Investments
(cost $620,633,054) | | 616,966,871 | |
Total
Investments (cost $623,032,609) | | 142.1% | 619,457,151 | |
Liabilities, Less Cash and Receivables | | (42.1%) | (183,518,217) | |
Net Assets Applicable
to Common Stockholders | | 100.0% | 435,938,934 | |
a These securities have a put feature; the date shown represents
the put date and the bond holder can take a specific action to retain the bond after the put date.
b Security
exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may
be resold in transactions exempt from registration, normally to qualified institutional buyers. At March
31, 2024, these securities were valued at $218,603,832 or 50.15% of net assets.
c Non-income producing—security in default.
d The Variable Rate is determined by the Remarketing Agent in
its sole discretion based on prevailing market conditions and may, but need not, be established by reference
to one or more financial indices.
e Collateral for floating rate borrowings. The coupon rate given
represents the current interest rate for the inverse floating rate security.
f Security issued with a zero coupon. Income is recognized through
the accretion of discount.
g 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.
25
STATEMENT
OF INVESTMENTS (Unaudited) (continued)
| |
Portfolio Summary (Unaudited) † | Value
(%) |
Medical | 20.0 |
General | 17.6 |
Education | 17.2 |
Transportation | 14.4 |
Nursing Homes | 12.3 |
Development | 11.4 |
Water | 10.0 |
Airport | 8.7 |
Power | 6.4 |
School District | 6.3 |
Tobacco Settlement | 6.2 |
General Obligation | 5.4 |
Multifamily Housing | 1.7 |
Single Family Housing | 1.6 |
Housing | 1.1 |
Student
Loan | .8 |
Bond Bank | .4 |
Special
Tax | .4 |
Prerefunded | .2 |
| 142.1 |
† Based on net assets.
See notes to financial statements.
26
| | | |
|
Summary
of Abbreviations (Unaudited) |
|
ABAG | Association
of Bay Area Governments | AGC | ACE Guaranty Corporation |
AGIC | Asset Guaranty Insurance Company | AMBAC | American Municipal Bond Assurance Corporation |
BAN | Bond Anticipation Notes | BSBY | Bloomberg
Short-Term Bank Yield Index |
CIFG | CDC
Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative
Inverse Tax-Exempt Receipts |
EFFR | Effective
Federal Funds Rate | FGIC | Financial Guaranty Insurance Company |
FHA | Federal Housing Administration | FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation | FNMA | Federal National Mortgage Association |
GAN | Grant Anticipation Notes | GIC | Guaranteed
Investment Contract |
GNMA | Government National Mortgage Association | GO | General Obligation |
IDC | Industrial
Development Corporation | LOC | Letter of Credit |
LR | Lease
Revenue | NAN | Note Anticipation Notes |
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue |
MUNIPSA | Securities Industry and Financial Markets
Association Municipal Swap Index Yield | OBFR | Overnight
Bank Funding Rate |
PILOT | Payment in Lieu of Taxes | PRIME | Prime
Lending Rate |
PUTTERS | Puttable Tax-Exempt Receipts | RAC | Revenue Anticipation Certificates |
RAN | Revenue Anticipation Notes | RIB | Residual Interest Bonds |
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue |
SOFR | Secured Overnight Financing Rate | TAN | Tax Anticipation Notes |
TRAN | Tax and Revenue Anticipation Notes | TSFR | Term Secured Overnight
Financing Rate |
USBMMY | U.S. Treasury Bill Money Market Yield | U.S. T-BILL | U.S. Treasury Bill |
XLCA | XL Capital Assurance | VMTPS | Variable
Rate MuniFund Term Preferred Shares |
| | | |
See
notes to financial statements.
27
STATEMENT
OF ASSETS AND LIABILITIES
March 31, 2024 (Unaudited)
| | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | 623,032,609 | | 619,457,151 | |
Cash | | | | | 1,016,997 | |
Interest
receivable | | 8,475,951 | |
Receivable for investment securities sold | | 2,101,373 | |
Prepaid
expenses | | | | | 55,601 | |
| | | | |
631,107,073 | |
Liabilities ($): | | | | |
Due to BNY Mellon Investment Adviser, Inc.
and affiliates—Note 2(b) | | 293,287 | |
Payable for inverse floater notes issued—Note
3 | | 110,625,000 | |
VMTPS
at liquidation value—Note 1 ($78,900,000 face amount, respectively,
report net of unamortized VMTPS deferred offering cost of $219,921)—Note 1(g) | | 78,680,079 | |
Payable
for investment securities purchased | | 2,925,099
| |
Interest
and expense payable related to inverse floater notes issued—Note 3 | | 1,320,653 | |
Dividends
payable to Common Stockholders | | 1,183,526 | |
Directors’ fees and expenses payable | | 1,125 | |
Other
accrued expenses | | | | | 139,370 | |
| | | | |
195,168,139 | |
Net Assets Applicable
to Common Stockholders ($) | | | 435,938,934 | |
Composition
of Net Assets ($): | | | | |
Common Stock, par value, $.001 per share (62,290,854
shares issued and outstanding) | | | | | 62,291 | |
Paid-in
capital | | | | | 492,991,198 | |
Total distributable earnings
(loss) | | | | | (57,114,555) | |
Net
Assets Applicable to Common Stockholders ($) | | | 435,938,934 | |
| | | | |
Shares Outstanding | | |
(500 million shares authorized) | 62,290,854 | |
Net
Asset Value Per Share of Common Stock ($) | | 7.00 | |
| | | | |
See notes to financial statements. | | | | |
28
STATEMENT
OF OPERATIONS
Six
Months Ended March 31, 2024 (Unaudited)
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 14,214,293 | |
Expenses: | | | | |
Management
fee—Note 2(a) | | | 1,870,048 | |
Interest
and expense related to inverse floater notes issued—Note 3 | | | 2,291,609 | |
VMTPS
interest expense and amortization of offering costs—Note1(g) | | | 1,837,487 | |
Professional
fees | | | 71,599 | |
Directors’
fees and expenses—Note 2(c) | | | 43,016 | |
Registration
fees | | | 35,382 | |
Shareholders’
reports | | | 26,452 | |
Shareholder
servicing costs | | | 22,882 | |
Custodian
fees—Note 2(b) | | | 5,367 | |
Chief
Compliance Officer fees—Note 2(b) | | | 5,190 | |
Redemption and Paying Agent fees—Note 2(b) | | | 5,000 | |
Miscellaneous | | | 24,169 | |
Total
Expenses | | |
6,238,201 | |
Less—reduction in expenses
due to undertaking—Note 2(a) | | | (249,386) | |
Less—reduction
in fees due to earnings credits—Note 2(b) | | | (5,367) | |
Net Expenses | | | 5,983,448 | |
Net
Investment Income | | | 8,230,845 | |
Realized
and Unrealized Gain (Loss) on Investments—Note 3 ($): | | |
Net realized gain (loss) on
investments | (6,902,149) | |
Net change in unrealized appreciation
(depreciation) on investments |
49,352,761 | |
Net Realized and Unrealized Gain (Loss) on
Investments | | | 42,450,612 | |
Net
Increase in Net Assets Applicable to Common Stockholders Resulting from Operations | | 50,681,457 | |
| | | | | | |
See notes to financial statements. | | | | | |
29
STATEMENT
OF CASH FLOWS
Six
Months Ended March 31, 2024 (Unaudited)
| | | | | | |
| | | | | |
| | | | | | |
Cash Flows from Operating Activities ($): | | | | | |
Purchases of portfolio securities | |
(93,051,877) | | | |
Proceeds
from sales of portfolio securities |
117,536,579 | | | |
Interest
income received | | 14,593,424 | | | |
Interest and expense related to inverse floater
notes issued | | (2,699,271) | | | |
VMTPS interest expense and amortization
of offering costs paid | | (1,791,024) | | | |
Expenses
paid to BNY Mellon Investment Adviser, Inc. and affiliates | | (1,612,645) | | | |
Operating expenses paid | | (225,007) | | | |
Net Cash Provided (or Used) in Operating Activities | | | | 32,750,179 | |
Cash
Flows from Financing Activities ($): | | | | | |
Dividends paid to Common Stockholders | | (7,101,157) | | | |
Decrease in payable for inverse floater notes
issued | | (30,862,907) | | | |
Net
Cash Provided (or Used) in Financing Activities | | (37,964,064) | |
Net Increase (Decrease) in Cash | | (5,213,885) | |
Cash
at beginning of period | | 6,230,882 | |
Cash
at End of Period | |
1,016,997 | |
Reconciliation
of Net Increase (Decrease) in Net Assets Applicable to | | | |
| Common Stockholders Resulting from Operations to | | | |
| Net Cash Provided (or Used) in Operating Activities ($): | | | |
Net
Increase in Net Assets Resulting From Operations | | 50,681,457 | |
Adjustments to Reconcile Net Increase (Decrease) in Net Assets | | | |
| Applicable to Common Stockholders Resulting from | | | |
| Operations to Net Cash Provided (or Used) in Operating Activities
($): | | | |
Decrease in investments in securities at cost | | 36,737,904 | |
Decrease
in interest receivable | | 379,131 | |
Increase in receivable for investment securities sold | | (75,614) | |
Decrease
in unamortized VMTPS offering costs | | 46,463
| |
Increase in prepaid expenses | | (25,273) | |
Increase
in Due to BNY Mellon Investment Adviser, Inc. and affiliates | | 18,207 | |
Decrease
in payable for investment securities purchased | | (5,275,439) | |
Decrease in interest and expense payable
related to inverse floater notes issued | | (407,662) | |
Increase in Directors' fees and expenses
payable | | 1,125 | |
Increase in other accrued expenses | | 22,641
| |
Net change in unrealized (appreciation) depreciation
on investments | | (49,352,761) | |
Net Cash Provided (or Used) in Operating Activities | | 32,750,179 | |
See
notes to financial statements. | | | | | |
30
STATEMENT
OF CHANGES IN NET ASSETS
| | | | | | | | | |
| | | | | | | | | |
| | | | Six
Months Ended March 31, 2024 (Unaudited) | | Year Ended September 30, 2023 | |
Operations ($): | | | | | | | | |
Net investment income | | | 8,230,845 | | | | 18,497,056 | |
Net
realized gain (loss) on investments | | (6,902,149) | | | | (12,831,234) | |
Net
change in unrealized appreciation
(depreciation) on investments | | 49,352,761
| | | | (544,708) | |
Dividends
to Preferred Stockholders | | | - | | | | (3,321,457) | |
Net Increase
(Decrease) in Net Assets Applicable to Common Stockholders Resulting from
Operations | 50,681,457 | | | | 1,799,657 | |
Distributions
($): | |
Distributions to stockholders | | | (7,101,157) | | | | (17,129,985) | |
Distributions
to Common Stockholders | | | (7,101,157) | | | | (17,129,985) | |
Net
proceeds from VMTPS sold | -
| | | | 78,900,000 | |
Cost
of Auction Preferred Stock shares redeemed |
- | | | | (78,900,000) | |
Total
Increase (Decrease) in Net Assets Applicable to Common Stockholders | 43,580,300 | | | | (15,330,328) | |
Net Assets
Applicable to Common Stockholders ($): | |
Beginning
of Period | | | 392,358,634 | | | | 407,688,962 | |
End
of Period | | | 435,938,934 | | | | 392,358,634 | |
| | | | | | | | | |
See notes to financial statements. | | | | | | | | |
31
FINANCIAL
HIGHLIGHTS
The following table describes the performance
for the fiscal periods indicated. Market price total return is calculated assuming an initial investment
made at the market price at the beginning of the period, reinvestment of all dividends and distributions
at market price during the period, and sale at the market price on the last day of the period. These
figures have been derived from the fund’s financial statements and, with respect to common stock, market
price data for the fund’s common shares.
| | | | | | |
| Six
Months Ended | |
| March
31, 2024 | Year Ended September 30, |
| (Unaudited) | 2023a | 2022b | 2021c | 2020d | 2019e |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 6.30 | 6.54 | 8.71 | 8.37 | 8.68 | 8.28 |
Investment
Operations: | | | | | | |
Net
investment incomef | .13 | .30 | .38 | .41 | .43 | .45 |
Net
realized and unrealized gain (loss) on investments | .68 | (.21) | (2.17) | .35 | (.30) | .40 |
Dividends
to Preferred Stockholders from net investment income | - | (.05) | (.01) | (.00)g | (.02) | (.03) |
Total from Investment Operations | .81 | .04 | (1.80) | .76 | .11 | .82 |
Distributions
to Common Stockholders: | | | | | | |
Dividends from net
investment income | (.11) | (.28) | (.37) | (.42) | (.42) | (.42) |
Net asset value, end of period | 7.00 | 6.30 | 6.54 | 8.71 | 8.37 | 8.68 |
Market value, end of
period | 6.10 | 5.33 | 6.08 | 8.70 | 8.28 | 8.58 |
Market Price Total Return (%) | 16.71h | (8.29) | (26.54) | 10.29 | 1.58 | 20.59 |
32
| | | | | | |
| Six Months Ended | |
| March 31, 2024 | Year Ended September 30, |
| (Unaudited) | 2023a | 2022b | 2021c | 2020d | 2019e |
Ratios/Supplemental
Data (%): | | | | | | |
Ratio of total expenses to average net
assets | 2.97i | 2.51 | 1.47 | 1.24 | 1.70 | 1.88 |
Ratio of net expenses to average net
assets | 2.85i | 2.39 | 1.35 | 1.12 | 1.58 | 1.77 |
Ratio of interest and expense related
to inverse floater notes issued, VMTPS interest expense
to average net assets | 1.97i,j | 1.49 | .47 | .26 | .73 | .91 |
Ratio of net investment income to
average net assets | 3.92i | 4.37 | 4.81 | 4.71 | 5.11 | 5.41 |
Portfolio Turnover Rate | 16.64h | 21.29 | 25.44 | 11.05 | 36.52 | 33.21 |
Asset Coverage of VMTPS and Preferred
Stock, end of period | 653 | 597 | 617 | 787 | 760 | 784 |
Net Assets applicable to Common
Stockholders, end of period ($ x 1,000) | 435,939 | 392,359 | 407,689 | 542,342 | 520,677 | 539,930 |
VMTPS
and Preferred Stock Outstanding,end of period ($
x 1,000) | 78,900 | 78,900 | 78,900 | 78,900 | 78,900 | 78,900 |
Floating Rate Notes Outstanding, end
of period ($ x 1,000) | 110,625 | 141,488 | 174,781 | 195,856 | 222,556 | 246,228 |
a The
ratios based on total average net assets including dividends to Preferred Stockholders are as follows:
total expense ratio of
2.18%, a net expense ratio of 2.08%, an
interest expense related to floating rate notes issued ratio of 1.30% and a net investment income of
3.80%.
b The
ratios based on total average net assets including dividends to Preferred Stockholders are as follows:
total expense ratio of
1.26%, a net expense ratio of 1.16%, an
interest expense related to floating rate notes issued ratio of .41% and a net investment income of 4.14%.
c The
ratios based on total average net assets including dividends to Preferred Stockholders are as follows:
total expense ratio of 1.08%, a net expense ratio of .98%, an interest expense related to floating rate
notes issued ratio of .23% and a net investment income of 4.11%.
d The ratios based on total average net assets including dividends
to Preferred Stockholders are as follows: total expense ratio of 1.48%, a net expense ratio of 1.37%,
an interest expense related to floating rate notes issued ratio of .63% and a net investment income of
4.44%.
e The
ratios based on total average net assets including dividends to Preferred Stockholders are as follows:
total expense ratio of 1.64%, a net expense ratio of 1.54%, an interest expense related to floating rate
notes issued ratio of .79% and a net investment income of 4.70%.
f Based on average common shares outstanding.
g Amount
represents less than $.01 per share.
h Not annualized.
i Annualized.
j Amount inclusive of VMTPS amortization of offering cost.
See notes to financial statements.
33
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY
Mellon Strategic Municipals, Inc. (the “fund”), which is registered under the Investment Company
Act of 1940, as amended (the “Act”), is a diversified closed-end management investment company.
The fund’s investment objective is to maximize current income exempt from federal income tax to the
extent consistent with the preservation of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”),
a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the
fund’s investment adviser. Insight North America LLC (the “Sub-Adviser”), an indirect wholly-owned
subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-adviser. The fund’s
Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol LEO.
The fund has outstanding 3,156 shares of Variable Rate MuniFund Term Preferred
Shares (“VMTPS”). The fund is subject to certain restrictions relating to the VMTPS. Failure to comply
with these restrictions could preclude the fund from declaring any distributions to shareholders of the
fund’s Common Stock (“Common Stockholders”) or repurchasing shares of Common Stock and/or could
trigger the mandatory redemption of VMTPS at their liquidation value (i.e., $25,000 per share). Thus,
redemptions of VMTPS may be deemed to be outside of the control of the fund.
The
VMTPS have a mandatory redemption date of July 14, 2053, and are subject to an initial early redemption
date of July 13, 2026, subject to the option of the shareholders to retain the VMTPS. VMTPS that are
neither retained by the shareholder nor successfully remarketed by the early redemption date will be
redeemed by the fund.
The shareholders of VMTPS, voting as a separate class, have
the right to elect at least two directors. The shareholders of VMTPS will vote as a separate class on
certain other matters, as required by law. The fund’s Board of Directors (the “Board”) has designated
Robin A. Melvin and Benaree Pratt Wiley as directors to be elected by the holders of VMTPS.
Dividends on VMTPS are
normally declared daily and paid monthly. The Dividend Rate on the VMTPS is, except as otherwise provided,
equal to the rate per annum that results from the sum of (1) the Index Rate plus (2) the Applicable Spread
as determined for the VMTPS on the Rate Determination Date immediately preceding such Subsequent Rate
Period plus (3) the Failed Remarketing Spread (all defined terms as defined in the fund’s articles
supplementary).
34
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also
sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the
accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies.
The fund’s financial statements are prepared in accordance with GAAP, which may require the use of
management estimates and assumptions. Actual results could differ from those estimates.
The 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).
35
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (continued)
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:
The Board has designated
the Adviser as the fund’s valuation designee to make all fair value determinations with respect to
the fund’s portfolio investments, subject to the Board’s oversight and pursuant to Rule 2a-5 under
the Act.
Investments in municipal securities, excluding short-term investment (other than
U.S. Treasury Bills), are valued each business day by an independent pricing service (the “Service”)
approved by the Board. Investments for which quoted bid prices are readily available and are representative
of the bid side of the market in the judgment of the Service are valued at the mean between the quoted
bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities). Municipal 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. The Service is engaged under the general oversight of the Board. All of the preceding
securities are generally categorized within Level 2 of the fair value hierarchy.
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.
36
For securities where observable inputs are limited, assumptions about market activity
and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The
following is a summary of the inputs used as of March 31, 2024 in valuing the fund’s
investments:
| | | | | | |
| Level
1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | | Level
3-Significant Unobservable Inputs | Total | |
Assets ($) | | |
Investments
in Securities:† | | |
Collateralized Municipal-Backed Securities | - | 2,490,280 | | - | 2,490,280 | |
Municipal Securities | - | 616,966,871 | | - | 616,966,871 | |
Liabilities ($) | | |
Other Financial Instruments: | | |
Inverse
Floater Notes†† | - | (110,625,000) | | - | (110,625,000) | |
VMTPS†† | - | (78,900,000) | | - | (78,900,000) | |
† See
Statement of Investments for additional detailed categorizations, if any.
†† Certain of the fund’s liabilities are held at carrying amount,
which approximates fair value for financial reporting purposes.
(b) Securities transactions
and investment income: Securities transactions are recorded on a trade date basis. Realized gains and
losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted
for accretion of discount and amortization of premium on investments, is earned from settlement date
and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed delivery
basis may be settled a month or more after the trade date.
(c) Market Risk: The value of the securities
in which the fund invests may be affected by political, regulatory, economic and social developments,
and developments that impact specific economic sectors, industries or segments of the market. The value
of a security may also decline due to general market conditions that are not specifically related to
a particular company or industry, such as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or currency rates, changes to inflation,
adverse changes to credit markets or adverse investor sentiment generally.
37
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Additional Information section within the annual report dated September 30,
2023, provides more details about the fund’s principal risk factors.
(d) Dividends and distributions
to Common Stockholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from
net investment income are normally declared and paid monthly. Dividends from net realized capital gains,
if any, are normally declared and paid annually, but the fund may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the
“Code”). To the extent that net realized capital gains can be offset by capital loss carryovers,
it is the policy of the fund not to distribute such gains. Income and capital gain distributions are
determined in accordance with income tax regulations, which may differ from GAAP.
Common
Stockholders will have their distributions reinvested in additional shares of the fund, unless such Common
Stockholders elect to receive cash, at the lower of the market price or net asset value per share (but
not less than 95% of the market price). If market price is equal to or exceeds net asset value, shares
will be issued at net asset value. If net asset value exceeds market price, Computershare Inc., the transfer
agent for the fund’s Common Stock, will buy fund shares in the open market and reinvest those shares
accordingly.
On March 27, 2024, the Board declared a cash dividend of $.019
per share from net investment income, payable on April 30, 2024 to Common Stockholders of record as of
the close of business on April 12, 2024. The ex-dividend date was April 11, 2024.
(e) Dividends to stockholders
of VMTPS: The Dividend Rate on the VMTPS is, except as otherwise provided, equal to the
rate per annum that results from the sum of (1) the Index Rate plus (2) the Applicable Spread as determined
for the VMTPS on the Rate Determination Date immediately preceding such Subsequent Rate Period plus (3)
the Failed Remarketing Spread. The Applicable Rate of the VMTPS was equal to the sum of 1.05% per annum
plus the Securities Industry and Financial Markets Association Municipal Swap Index rate of 3.64% on
March 31, 2024. The dividend rate as of March 31, 2024 for the VMTPS was 4.69% (all terms as defined
in the fund’s articles supplementary).
(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
38
Code, and to make distributions of income and net realized capital gain sufficient
to relieve it from substantially all federal income and excise taxes.
As
of and during the period ended March 31, 2024, the fund did not have any liabilities for any uncertain
tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions
as income tax expense in the Statement of Operations. During the period ended March 31, 2024, the fund
did not incur any interest or penalties.
Each tax year in the three-year period
ended September 30, 2023 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 $47,638,545
available for federal income tax purposes to be applied against future net realized capital gains, if
any, realized subsequent to September 30, 2023. The fund has $21,084,810 of short-term capital losses
and $26,553,735 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year
ended September 30, 2023 was as follows: tax-exempt income of $20,451,442. The tax character of current
year distributions will be determined at the end of the current fiscal year.
(g) VMTPS: The
fund’s VMTPS aggregate liquidation preference is shown as a liability since they have a stated mandatory
redemption date of July 14, 2053. Dividends paid on VMTPS are treated as interest expense and recorded
on the accrual basis. Costs directly related to the issuance of the VMTPS are considered debt issuance
costs which have been deferred and are being amortized into expense over 36 months from July 12, 2023.
During the period ended March 31, 2024, total interest expenses and amortized
offering costs with respect to VMTPS amounted to $1,837,487 inclusive of $1,788,852 of interest expense
and $48,635 amortized deferred cost fees. These fees are included in VMTPS interest expense and amortization
of offering costs in the Statement of Operations.
The average amount of borrowings outstanding
for the VMTPS from October 1, 2023 through March 31, 2024 was approximately $78,900,000, with a related
weighted average annualized interest rate of 4.53%.
39
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE
2—Management Fee, Sub-Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management
agreement (the “Agreement”) with the Adviser, the management fee is computed at the annual rate of
..75% of the value of the fund’s average weekly net assets (including net assets representing VMTPS
outstanding) and is payable monthly. The Agreement provides for an expense reimbursement from the Adviser
should the fund’s aggregate expenses (excluding taxes, interest on borrowings, brokerage fees and extraordinary
expenses) in any full fiscal year exceed the lesser of (1) the expense limitation of any state having
jurisdiction over the fund or (2) 2% of the first $10 million, 1½%
of the next $20 million and 1% of the excess over $30 million of the average weekly value of the fund’s
net assets. During the period ended March 31, 2024, there was no expense reimbursement pursuant to the
Agreement.
The Adviser has agreed, from October 1, 2023 through November 29, 2024, to waive
receipt of a portion of the fund’s management fee, in the amount of .10% of the value of the fund’s
average weekly net assets (including net assets representing VMTPS outstanding). The reduction in expenses,
pursuant to the undertaking, amounted to $249,386 during the period ended March 31, 2024.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser,
the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .36% of the value of the fund’s
average weekly net assets (including net assets representing VMTPS outstanding).
(b) The
fund has an arrangement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon
and an affiliate of the Adviser, whereby the fund may receive earnings credits when
positive cash balances are maintained, which are used to offset Custodian fees. For financial reporting
purposes, the fund includes custody net earnings credits as an expense offset in the Statement of Operations.
The
fund compensates the Custodian, under a custody agreement, for providing custodial services for the fund.
These fees are determined based on net assets, geographic region and transaction activity. During the
period ended March 31, 2024, the fund was charged $5,367 pursuant to
the custody agreement. These fees were offset by earnings credits of $5,367.
The fund compensates
The Bank of New York Mellon under a Redemption and Paying Agent Agreement for providing certain transfer
agency and payment services with respect to the VMTPS. During the period ended March 31, 2024,
the
fund was charged $5,000 for the services
40
provided by the Redemption and Paying Agent (the “Redemption and Payment Agent”).
During the period ended March 31, 2024, the fund was charged $5,190 for services
performed by the fund’s Chief Compliance Officer and his staff. These fees are included in Chief Compliance
Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon
Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management
fee of $327,691, Custodian fees of $2,436, the Redemption and Paying Agent fees of $5,000 and Chief Compliance
Officer fees of $1,893, which are offset against an expense reimbursement currently in effect in the
amount of $43,733.
(c) Each board member of the fund also serves as a board member
of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and meeting attendance
fees are allocated to each fund based on net assets.
NOTE 3—Securities Transactions:
The
aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term
securities, during the period ended March 31, 2024, amounted to $83,627,440 and $81,923,004, respectively.
Inverse
Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate,
tax-exempt municipal bonds are transferred to a trust (the “Inverse Floater Trust”). The Inverse
Floater Trust typically issues two variable rate securities that are collateralized by the cash flows
of the fixed-rate, tax-exempt municipal bonds. One of these variable rate securities pays interest based
on a short-term floating rate set by a remarketing agent at predetermined intervals (“Trust Certificates”).
A residual interest tax-exempt security is also created by the Inverse Floater Trust, which is transferred
to the fund, and is paid interest based on the remaining cash flows of the Inverse Floater Trust, after
payment of interest on the other securities and various expenses of the Inverse Floater Trust. An Inverse
Floater Trust may be collapsed without the consent of the fund due to certain termination events such
as bankruptcy, default or other credit event.
The fund accounts for
the transfer of bonds to the Inverse Floater Trust as secured borrowings, with the securities transferred
remaining in the fund’s investments, and the Trust Certificates reflected as fund liabilities in the
Statement of Assets and Liabilities.
41
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund may invest in inverse floater securities on either a non-recourse or
recourse basis. These securities are typically supported by a liquidity facility provided by a bank or
other financial institution (the “Liquidity Provider”) that allows the holders of the Trust Certificates
to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued
interest on any business day prior to a termination event. When the fund invests in inverse floater securities
on a non-recourse basis, the Liquidity Provider is required to make a payment under the liquidity facility
due to a termination event to the holders of the Trust Certificates. When this occurs, the Liquidity
Provider typically liquidates all or a portion of the municipal securities held in the Inverse Floater
Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the
bonds in the Inverse Floater Trust (“Liquidation Shortfall”). When a fund invests in inverse floater
securities on a recourse basis, the fund typically enters into a reimbursement agreement with the Liquidity
Provider where the fund is required to repay the Liquidity Provider the amount of any Liquidation Shortfall.
As a result, a fund investing in a recourse inverse floater security bears the risk of loss with respect
to any Liquidation Shortfall.
The average amount of borrowings outstanding under the inverse
floater structure during the period ended March 31, 2024 was approximately $121,021,620 with a related
weighted average annualized interest rate of 3.79%.
At March 31, 2024,
accumulated net unrealized depreciation on investments was $3,575,458, consisting of $17,771,865 gross
unrealized appreciation and $21,347,323 gross unrealized depreciation.
At
March 31, 2024, 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).
42
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Directors (the “Board”)
held on October 30-31, 2023, the Board considered the renewal of the fund’s Management Agreement, pursuant
to which the Adviser provides the fund with investment advisory and administrative services, and the
Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant
to which Insight North America LLC (the “Sub-Adviser”) provides day-to-day management of the fund’s
investments. The Board members, none of whom are “interested persons” (as defined in the Investment
Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel
and met with counsel in executive session separate from representatives of the Adviser and the Sub-Adviser.
In considering the renewal of the Agreements, the Board considered several factors that it believed to
be relevant, including those discussed below. The Board did not identify any one factor as dispositive,
and each Board member may have attributed different weights to the factors considered.
Analysis of Nature,
Extent, and Quality of Services Provided to the Fund. The Board considered information provided
to it at the meeting and in previous presentations from representatives of the Adviser regarding the
nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including
the fund. Representatives of the Adviser noted that the fund is a closed-end fund without daily inflows
and outflows of capital and provided the fund’s asset size.
The Board also considered
research support available to, and portfolio management capabilities of, the fund’s portfolio management
personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund
accounting and administration and assistance in meeting legal and regulatory requirements. The Board
also considered the Adviser’s extensive administrative, accounting and compliance infrastructures,
as well as the Adviser’s supervisory activities over the Sub-Adviser.
Comparative Analysis
of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed
reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider
of investment company data based on classifications provided by Thomson Reuters Lipper (“Lipper”),
which included information comparing (1) the fund’s performance with the performance of a group of
leveraged closed-end general and insured municipal debt funds selected by Broadridge as comparable to
the fund (the “Performance Group”) and with a broader group of funds consisting of all leveraged
closed-end general and insured municipal debt funds (the “Performance Universe”), all for various
periods ended August 31, 2023, and (2) the fund’s actual and contractual management fees and total
expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and
with a broader group of funds consisting of all leveraged closed-end general and insured municipal debt
funds, excluding outliers (the “Expense Universe”), the information for which was derived in part
from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously
had furnished the Board with a
43
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
description of the methodology Broadridge used to select the Performance Group
and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of
the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors,
including different investment limitations and policies and the extent and manner in which leverage is
employed that may be applicable to the fund and comparison funds and the end date selected. They considered
that performance generally should be considered over longer periods of time, although it is possible
that long-term performance can be adversely affected by even one period of significant underperformance
so that a single investment decision or theme has the ability to affect disproportionately long-term
performance. The Board also considered the fund’s performance in light of overall financial market
conditions. The Board discussed with representatives of the Adviser and the Sub-Adviser the results of
the comparisons and considered that the fund’s total return performance, on a net asset value basis,
was below the Performance Group and Performance Universe medians for all periods, except the three-year
period when the fund’s total return performance was above the Performance Group and Performance Universe
medians. The Board also considered that the fund’s total return performance, on a market price basis,
was below the Performance Group and Performance Universe medians for all periods, except the three-year
period when the fund’s total return performance was above the Performance Group median. The Board also
considered that the fund’s yield performance, on a net asset value basis, was at or above the Performance
Group median for eight of the ten one-year periods ended August 31st,
and was above the Performance Universe median for nine of the ten one-year periods ended August 31st,
and, on a market price basis, the fund’s yield performance was at or above the Performance Group median
for eight of the ten one-year periods ended August 31st and was above the Performance
Universe median for nine of the ten one-year periods ended August 31st.
The Board discussed with representatives of the Adviser and the Sub-Adviser the reasons for the fund’s
underperformance versus the Performance Group and Performance Universe during certain periods under review
and noted that the portfolio managers are very experienced with an impressive long-term track record
and continued to apply a consistent investment strategy. The Adviser also provided a comparison of the
fund’s calendar year total returns (on a net asset value basis) to the returns of the fund’s benchmark
index, and it was noted that the fund’s returns were above the returns of the index in six of the ten
calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed
and considered the contractual management fee rate payable by the fund to the Adviser in light of the
nature, extent and quality of the management services and the sub-advisory services provided by the Adviser
and the Sub-Adviser, respectively. In addition, the Board reviewed and considered the actual management
fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver
arrangement in place that reduced the management fee paid to the Adviser. The Board also reviewed the
range of actual and contractual management fees and total expenses as a percentage of average net assets
of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
44
The Board considered that, based on common assets alone, the fund’s contractual
management fee was higher than the Expense Group median contractual management fee, the fund’s actual
management fee was lower than the Expense Group median and Expense Universe median actual management
fee and the fund’s total expenses were slightly higher than the Expense Group median and higher than
the Expense Universe median total expenses, and that, based on common assets and leveraged assets together
the fund’s contractual management fee was higher than the Expense Group median contractual management
fee, the fund’s actual management fee was higher than the Expense Group median and the Expense Universe
median actual management fee, and the fund’s total expenses were higher than the Expense Group median
and higher than the Expense Universe median total expenses.
Representatives of
the Adviser stated that the Adviser has agreed, until November 29, 2024, to waive receipt of a portion
of its management fee from the fund, in the amount of .10% of the value of the fund’s average weekly
net assets.
Representatives of the Adviser reviewed with the Board the management or investment
advisory fees paid by funds advised by the Adviser that are in the same Lipper category as the fund (the
“Similar Funds”), and explained the nature of the Similar Funds. They discussed differences in fees
paid and the relationship of the fees paid in light of any differences in the services provided and other
relevant factors, noting that the fund is a closed-end fund. The Board considered the relevance of the
fee information provided for the Similar Funds to evaluate the appropriateness of the fund’s management
fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of
client portfolios advised by the Adviser or the Sub-Adviser that are considered to have similar investment
strategies and policies as the fund.
The
Board considered the fee payable to the Sub-Adviser in relation to the fee payable to the Adviser by
the fund and the respective services provided by the Sub-Adviser and the Adviser. The Board also took
into consideration that the Sub-Adviser’s fee is paid by the Adviser, out of its fee from the fund,
and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of
the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and
the resulting profitability percentage for managing the fund and the aggregate profitability percentage
to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method
used to determine the expenses and profit. The Board concluded that the profitability results were not
excessive, given the services rendered and service levels provided by the Adviser and its affiliates.
The Board also considered the fee waiver arrangement and its effect on the profitability of the Adviser
and its affiliates. The Board also had been provided with information prepared by an independent consulting
firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of,
individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where
any economies of scale might emerge in connection with the management of a fund.
45
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
The Board considered, on the advice of its counsel, the profitability analysis
(1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the
mix of services provided by the Adviser and the Sub-Adviser, including the nature, extent and quality
of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances
for the fund and the extent to which economies of scale would be realized if the fund grows and whether
fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of
the Adviser stated that, because the fund is a closed-end fund without daily inflows and outflows of
capital, there were not significant economies of scale at this time to be realized by the Adviser in
managing the fund’s assets. Representatives of the Adviser also stated that, as a result of shared
and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could
depend substantially on the level of assets in the complex as a whole, so that increases and decreases
in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to,
or even in the opposite direction from, changes in the fund’s asset level. The Board also considered
potential benefits to the Adviser and the Sub-Adviser from acting as investment adviser and sub-investment
adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect
for trading the fund’s investments.
At the conclusion of these discussions,
the Board agreed that it had been furnished with sufficient information to make an informed business
decision with respect to the renewal of the Agreements. Based on the discussions and considerations as
described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of
the services provided by the Adviser and the Sub-Adviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s long-term
relative performance compared to the fund’s benchmark index and determined to continue to monitor the
fund’s performance.
· The
Board concluded that the fees paid to the Adviser and the Sub-Adviser continued to be appropriate under
the circumstances and in light of the factors and the totality of the services provided as discussed
above.
· The
Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection
with the management of the fund had been adequately considered by the Adviser in connection with the
fee rate charged to the fund pursuant to the Management Agreement and Administration Agreement and that,
to the extent in the future it were determined that material economies of scale had not been shared with
the fund, the Board would seek to have those economies of scale shared with the fund.
In
evaluating the Agreements, the Board considered these conclusions and determinations and also relied
on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates
and the Sub-Adviser, of the Adviser and the Sub-Adviser and the services provided to the fund by the
Adviser and the
46
Sub-Adviser. The Board also relied on information received on a routine and regular
basis throughout the year relating to the operations of the fund and the investment management and other
services provided under the Agreements, including information on the investment performance of the fund
in comparison to similar funds and benchmark performance indices; general market outlook as applicable
to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee
arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund,
or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which
lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects
of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions
may be based, in part, on its consideration of the fund’s arrangements, or substantially similar arrangements
for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the
Agreements.
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48
OFFICERS
AND DIRECTORS
BNY Mellon Strategic Municipals, Inc.
240 Greenwich Street
New York, NY 10286
| | | |
Directors | | Chief
Compliance Officer | |
Joseph S. DiMartino, Chairman | | Joseph W. Connolly | |
Joan Gulley | | Portfolio Managers | |
Alan H. Howard | | Daniel A. Rabasco | |
Robin A. Melvin† | | Jeffrey
B. Burger | |
Burton N. Wallack | | | |
Benaree
Pratt Wiley† | | | |
Gordon Davis†† | | Adviser | |
†
Elected by VMTPS Holders | | BNY
Mellon Investment Adviser, Inc. | |
†† Advisory Board Member | | Sub-Adviser | |
Officers | | Insight North America
LLC | |
President | | |