The accompanying notes are an integral part of these financial statements.
The concentration of investments as a percentage of total investments
by type of obligation/market sector is as follows:
Purchases and sales of securities (excluding short-term investments)
for the year ended April 30, 2022, aggregated $49,689,070 and $47,170,225, respectively.
The Fund is permitted to engage in purchase and sale transactions
(“cross trades”) with certain funds and accounts for which the Amundi Asset Management US, Inc. (the “Adviser”)
serves as the Fund’s investment adviser, as set forth in Rule 17a-7 under the Investment Company Act of 1940, pursuant to procedures
adopted by the Board of Directors. Under these procedures, cross trades are effected at current market prices. During the year ended April
30, 2022, the Fund did not engage in any cross trade activity.
At April 30, 2022, the net unrealized depreciation on investments
based on cost for federal tax purposes of $413,289,090 was as follows:
The accompanying notes are an integral part of these financial statements.
Various inputs are used in determining the value of the Fund’s
investments. These inputs are summarized in the three broad levels below.
Level 1 – unadjusted quoted prices in active markets for identical
securities.
Level 2 – other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). See Notes to Financial Statements — Note
1A.
Level 3 – significant unobservable inputs (including the Fund’s
own assumptions in determining fair value of investments). See Notes to Financial Statements — Note 1A.
The following is a summary of the inputs used as of April 30, 2022,
in valuing the Fund’s investments:
During the year ended April 30, 2022, there were no transfers in
or out of Level 3.
The accompanying notes are an integral part of these financial statements.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities
of Pioneer Municipal High Income Fund, Inc. (the “Fund”), including the schedule of investments, as of April 30, 2022, and
the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of Pioneer Municipal High Income Fund, Inc. at April 30, 2022, the results of its operations and its cash flows
for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights
for each of the five years in the period then ended in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to
be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an
audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s
internal control over financial reporting. Accordingly, we express no such opinion.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 45
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of April 30, 2022, by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
![](https://content.edgar-online.com/edgar_conv_img/2022/07/01/0001821268-22-000147_a19384-160622_840578x48x1.gif)
We have served as the auditor of one or more investment companies
in the Pioneer family of funds since 2017.
Boston, Massachusetts
June 29, 2022
46 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
Additional Information (unaudited)
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase, from time to time, its shares in the open market.
The percentages of the Fund’s ordinary income distributions
that are exempt from nonresident alien (NRA) tax withholding resulting from qualified interest income was 99.62%.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 47
Investment Objectives, Principal
Investment Strategies and Principal Risks (unaudited)
CHANGES OCCURRING DURING MOST RECENT FISCAL YEAR
The following information in this annual report is a summary of
certain changes during the most recent fiscal year. This information may not reflect all of the changes that have occurred since you purchased
shares of the Fund. The following principal risk disclosure has been revised:
Market risk. The market prices of securities or other assets
held by the Fund may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse
economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the
bond markets, the spread of infectious illness or other public health issues, armed conflict, market disruptions caused by tariffs, trade
disputes, sanctions or other government actions, or other factors or adverse investor sentiment. Changes in market conditions may not
have the same impact on all types of securities. The value of securities may also fall due to specific conditions that affect a particular
sector of the securities market or a particular issuer. If the market prices of the fund’s securities and assets fall, the value
of your investment will go down. A change in financial condition or other event affecting a single issuer or market may adversely impact
securities markets as a whole. Rates of inflation have recently risen. The value of assets or income from an investment may be worth less
in the future as inflation decreases the value of money. As inflation increases, the real value of the fund’s assets can decline
as can the value of the fund’s distributions.
In the past decade, financial markets throughout the world have
experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. Governmental and non-governmental
issuers have defaulted on, or been forced to restructure, their debts. These conditions may continue, recur, worsen or spread. Events
that have contributed to these market conditions include, but are not limited to, major cybersecurity events; geopolitical events (including
wars, terror attacks and economic sanctions); measures to address budget deficits; downgrading of sovereign debt; changes in oil and commodity
prices; changes in currency exchange rates; global pandemics; and public sentiment. The global pandemic of the novel coronavirus respiratory
disease designated COVID-19 has resulted in major disruption to economies and markets around the world, including the United States. Global
financial markets have experienced extreme volatility and severe losses, and trading in many instruments has been disrupted. Liquidity
for many instruments has been
48 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
greatly reduced for periods of time. Some sectors of the economy
and individual issuers have experienced particularly large losses. These circumstances may continue for an extended period of time, and
may continue to affect adversely the value and liquidity of the Fund’s investments. Following Russia’s recent invasion of
Ukraine, Russian securities have lost all, or nearly all, their market value. Other securities or markets could be similarly affected
by past or future geopolitical or other events or conditions.
Governments and central banks, including the U.S. Federal Reserve,
have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. These actions have
resulted in significant expansion of public debt, including in the U.S. The consequences of high public debt, including its future impact
on the economy and securities markets, may not be known for some time. Interest rates are very low, which means there is more risk that
they may go up. In some cases yields are negative. U.S. Federal Reserve or other U.S. or non-U.S. governmental or central bank actions,
including increases or decreases in interest rates, or contrary actions by different governments, could negatively affect financial markets
generally, increase market volatility and reduce the value and liquidity of securities in which the Fund invests. Policy and legislative
changes in the U.S. and in other countries are affecting many aspects of financial regulation, and these and other events affecting global
markets, such as the United Kingdom’s exit from the European Union (or Brexit), potential trade imbalances with China or other countries,
or sanctions or other government actions against Russia, other nations or individuals or companies (or their countermeasures), may contribute
to decreased liquidity and increased volatility in the financial markets. The impact of these changes on the markets, and the implications
for market participants, may not be fully known for some time.
Economies and financial markets throughout the world are increasingly
interconnected. Economic, financial or political events, trading and tariff arrangements, armed conflict including Russia’s military
invasion of Ukraine, terrorism, natural disasters, infectious illness or public health issues, cybersecurity events, supply chain disruptions,
sanctions against Russia, other nations or individuals or companies and possible countermeasures, and other circumstances in one country
or region could have profound impacts on other countries or regions and on global economies or markets. As a result, whether or not the
Fund invests in securities of issuers located in or with significant exposure to the countries or regions directly affected, the value
and liquidity of the Fund’s investments may be negatively affected. The Fund may experience a substantial or complete loss on any
security or derivative position.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 49
Anti-takeover provisions. The Fund’s Charter and Bylaws
include provisions that are designed to limit the ability of other entities or persons to acquire control of the Fund for short-term objectives,
including by converting the Fund to open-end status or changing the composition of the Board, that may be detrimental to the Fund’s
ability to achieve its primary investment objective of seeking to provide its common shareholders with a high level of current income
exempt from regular federal income tax. The Fund’s Bylaws also contain a provision providing that the Board of Directors has adopted
a resolution to opt in the Fund to the provisions of the Maryland Control Share Acquisition Act (“MCSAA”). Such provisions
may limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund. There can be no assurance, however, that such provisions will be sufficient to deter activist investors
that seek to cause the Fund to take actions that may not be aligned with the interests of long-term shareholders.
INVESTMENT OBJECTIVES
The Fund’s primary investment objective is to provide its
common shareholders with a high level of current income exempt from regular federal income tax. Distributions of interest income from
the Fund’s portfolio of municipal securities generally will be exempt from regular federal income tax. As a secondary investment
objective, the Fund also may seek capital appreciation to the extent consistent with its primary objective. Distributions from sources
other than interest income from the Fund’s portfolio of municipal securities, including capital gain distributions, are not exempt
from regular federal income tax.
The Fund’s investment objectives and its policy with respect
to investment in municipal securities are fundamental policies and may not be changed without the approval of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund. There can be no assurance that the Fund will achieve its investment objectives.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially
all (at least 80%) of its assets (net assets plus borrowings for investment purposes) in debt securities and other obligations issued
by or on behalf of states, territories and possessions of the United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities, the interest on which is exempt from regular federal income tax (“municipal securities”).
Municipal securities are often issued to obtain funds for various public purposes, including the construction of a wide range of public
facilities such as bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Municipal
50 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
securities include private activity bonds, pre-refunded municipal
securities and auction rate securities. The municipal securities in which the Fund invests may have fixed or variable principal payments
and all types of interest rate payments and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment
in kind and auction rate features.
Although distributions of interest income from the Fund’s
municipal securities generally are exempt from regular federal income tax, distributions from other sources, including capital gain distributions,
are not. Up to 25% of the Fund’s total assets may be invested in municipal securities the interest income on which is a preference
item for purposes of the alternative minimum tax for individuals or entities that are subject to such tax. All interest on municipal securities
may result in or increase a corporate shareholder’s liability for federal alternative minimum tax. Shareholders should consult a
tax adviser about whether an alternative minimum tax applies to them and about state and local taxes on their distributions from the Fund.
The Fund may invest in municipal securities with a broad range
of maturities and credit ratings, including both investment grade and below investment grade municipal securities. In managing the Fund’s
portfolio, the Adviser adjusts the portfolio’s duration and overall credit quality in light of changing market and economic conditions.
In making decisions with respect to specific municipal securities for the Fund’s portfolio, the Adviser employs a disciplined approach,
driven primarily by proprietary research regarding prevailing interest rates, economic fundamentals at both the national and state levels
and in-depth credit research conducted by the Adviser’s investment staff.
The Fund may invest in securities of issuers that are in default
or that are in bankruptcy.
Security selection
The Adviser anticipates that the Fund’s investments in revenue
obligations will emphasize municipal securities backed by revenue from essential services, such as hospitals and healthcare, power generation,
transportation, education and housing. The Adviser considers both broad economic and issuer specific factors in selecting a portfolio
designed to achieve the Fund’s investment objectives. In assessing the appropriate maturity, rating and sector weightings of the
Fund’s portfolio, the Adviser considers a variety of factors that are expected to influence economic activity and interest rates.
These factors include fundamental economic indicators such as the rates of economic growth and inflation, Federal Reserve monetary policy
and the relative value of the U.S. dollar compared
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 51
to other currencies. Once the Adviser determines the preferable
portfolio characteristics, the Adviser selects individual securities based upon the terms of the securities (such as yields compared to
U.S. Treasuries or comparable issues), liquidity and rating, sector and issuer diversification.
The Adviser attempts to identify investment grade and below investment
grade municipal securities that are trading at attractive valuations relative to the Adviser’s evaluation of the issuer’s
credit worthiness and, with respect to private activity bonds, the profit potential of the corporation from which the revenue supporting
the bonds is derived. The Adviser’s overall investment approach is both top-down and bottom-up. The Adviser first seeks to identify
the sectors or regions of the municipal bond market that present the best relative value opportunities, and then bases the Fund’s
overall sector and regional weightings on that determination. Once the Adviser establishes the overall regional and sector weightings,
the Adviser focuses on selecting those securities within each sector or region that meet its fundamental criteria. In determining sector
weightings, the Fund’s portfolio management team also maintains frequent contact with the Adviser’s investment professionals
who follow U.S. equities and those who focus on corporate fixed income investments. In many cases, the Adviser will augment its municipal
bond credit research and security selection processes with equity research analysis. The Adviser has a fundamental bias towards long-term
security selection, rather than engaging in frequent “market timing” or short-term trading. There can be no assurance that
this process will be successful.
Duration management
The Adviser actively manages the duration of the Fund’s portfolio
of municipal securities based primarily on the Adviser’s outlook for interest rates. The Adviser considers economic trends, Federal
Reserve Board actions and capital markets activity, among other factors, in developing its outlook for interest rates. The Adviser believes
that maintaining duration at an appropriate level offers the potential for above-average returns while limiting the risks of interest
rate volatility. Duration seeks to measure the price sensitivity of a fixed income security to changes in interest rates. Unlike maturity,
duration takes into account interest payments that occur throughout the course of holding the bond. The longer a portfolio’s duration,
the more sensitive it will be to changes in interest rates. For example, if the Fund has a two year duration, then all other things being
equal, the Fund will decrease in value by two percent if interest rates rise one percent. The Adviser modifies the average duration of
the Fund’s portfolio in response to market conditions. The Adviser may employ certain
52 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
strategies to reduce the Fund’s interest rate sensitivity,
including investments in interest rate swap or cap transactions. There is no assurance that the Adviser will do so or that such strategies
will be successful.
Credit management
The Fund may invest in municipal securities with a broad range
of credit ratings, including both investment grade and below investment grade municipal securities. At least 40% of the Fund’s portfolio
of municipal securities will be rated investment grade at the time of acquisition (that is, at least Baa by Moody’s or BBB by S&P)
or, if unrated, determined by the Adviser to be of comparable credit quality. No more than 60% of the Fund’s portfolio of municipal
securities will be rated below investment grade at the time of acquisition (that is, Ba or lower by Moody’s or BB or lower by S&P
or, if unrated, determined by the Adviser to be of comparable credit quality). Municipal securities of below investment grade quality
are regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay
principal, and are commonly referred to as “junk bonds” or “high yield securities.” They involve greater risk
of loss, are subject to greater price volatility and are less liquid, especially during periods of economic uncertainty or change, than
higher rated municipal securities. Municipal securities rated Ba or BB may face significant ongoing uncertainties or exposure to adverse
business, financial or economic conditions that could lead to the issuer being unable to meet its financial commitments. The protection
of interest and principal payments may be moderate and not well-safeguarded during both good and bad times. Municipal securities rated
B generally lack the characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be low, and such municipal securities are more vulnerable to nonpayment than obligations
rated BB. Adverse business, financial or economic conditions will likely impair the issuer’s capacity or willingness to meet its
financial commitment on municipal securities. Municipal securities rated CCC, CC, C, Caa, Ca or C are generally speculative to a high
degree. These municipal securities may be in default or there may be present elements of danger with respect to principal or interest.
Generally, issuers are dependent upon favorable business, financial and economic conditions to meet their financial commitment on such
municipal securities. The Fund may invest in high yield municipal securities of any rating, including securities that are in default at
the time of purchase.
The Adviser determines the allocation of the Fund’s assets
among securities with different credit ratings depending upon the Adviser’s evaluation of factors such as the spread between the
yields on municipal securities of different ratings, changes in default rates, general economic conditions and
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 53
the outlook for fiscal issues facing municipal issuers. Generally,
as the spread between the yield on investment grade and non-investment grade securities widens, the Adviser will allocate a greater portion
of the Fund’s assets to non-investment grade municipal securities. If the spread based on relative credit quality narrows, the Adviser
may determine that high yield municipal securities no longer offer a sufficient risk premium and increase the average credit quality of
the Fund’s portfolio. As the economy strengthens and the default risk lessens, the Adviser may increase the Fund’s investment
in lower quality non-investment grade securities. The Adviser also seeks to mitigate the risks of investing in below investment grade
securities through a disciplined approach, driven primarily by fundamental research to assess an issuer’s credit quality and the
relative value of its securities. Moreover, with respect to below investment grade securities that are private activity bonds, the Adviser
intends to emphasize securities that are backed by revenue from publicly traded companies. The Adviser believes that this focus offers
the potential for an informational advantage due to the substantial reporting requirements of public companies. With respect to investments
in below investment grade private activity bonds, the Adviser also seeks to leverage its corporate credit research capabilities by selecting
securities for the Fund payable by revenue derived from issuers followed by its staff focusing on below investment grade corporate issuers.
The Adviser believes that a prudent blend of investment grade and non-investment grade municipal securities offers investors the opportunity
for high current yield while managing credit risk. High yield municipal securities have also shown low correlation to other asset classes,
including corporate bonds and U.S. Treasury securities, providing potential diversification to an investment portfolio.
Portfolio Contents
Municipal securities. Municipal securities are often issued
to obtain funds for various public purposes, including refunding outstanding obligations, funding for general operating expenses and lending
to other public institutions and facilities. Municipal securities also include certain “private activity bonds” or industrial
development bonds, which are issued by or on behalf of public authorities to provide financing aid to acquire sites or construct or equip
facilities within a municipality for privately or publicly owned corporations. The two principal classifications of municipal securities
are “general obligations” and “revenue obligations.” General obligations are secured by the issuer’s pledge
of its full faith and credit for the payment of principal and interest, although the characteristics and enforcement of general obligations
may vary according to the law applicable to the particular issuer. Revenue obligations, which include, but are not limited to, private
activity bonds, certificates of participation and certain municipal
54 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
notes, are not backed by the credit and taxing authority of the
issuer and are payable solely from the revenues derived from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. The obligations of the issuer of a revenue obligation may, in addition,
be backed by a letter of credit from a bank, a guarantee from another issuer or insurance. The credit rating assigned to municipal securities
may reflect the existence of these guarantees, letters of credit or other credit enhancement features. General obligations and revenue
obligations may be issued in a variety of forms, including commercial paper, fixed, variable and floating rate securities, tender option
bonds, auction rate bonds, zero coupon bonds, deferred interest bonds and capital appreciation bonds. In addition to general obligations
and revenue obligations, there are a variety of hybrid and special types of municipal securities.
One or a small number of institutional investors such as the Fund
may purchase an entire issue of municipal securities. Thus, the issue may not be said to be publicly offered. Unlike some securities that
are not publicly offered, a secondary market exists for many municipal securities that were not publicly offered initially and such securities
may be readily marketable.
Although distributions of interest income from the Fund’s
municipal securities are generally exempt from regular federal income tax, distributions from other sources, including capital gain distributions,
and any gains on the sale of your common shares are not. You should consult your tax adviser as to whether the alternative minimum tax
applies to you and as to whether you will be subject to state and local taxes on your distributions from the Fund.
From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income tax exemption for interest on municipal securities. The Fund cannot predict
what legislation, if any, may be proposed in the future in Congress regarding the federal income tax status of interest on municipal securities.
Such proposals, if enacted, might materially and adversely affect the Fund.
The Fund may invest 25% or more of the value of its total assets
in municipal securities of issuers located in the same state or territory or in the same economic sector. The Fund will not invest more
than 25% of its total assets in issuers in a single industry. Governmental issuers of municipal securities are not considered part of
any industry.
The Fund may invest in municipal securities that are collateralized
by the proceeds from class action or other litigation against the tobacco industry. Payment by tobacco industry participants of such proceeds
is spread over several years, and the collection and distribution of such proceeds to the issuers of municipal securities is dependent
upon the financial health of
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 55
such tobacco industry participants, which cannot be assured. Additional
litigation, government regulation or prohibition on the sales of tobacco products, or the seeking of protection under the bankruptcy laws,
could adversely affect the tobacco industry which, in turn, could have an adverse affect on tobacco-related municipal securities. Under
normal market conditions, the Fund intends to limit its investment in tobacco settlement bonds to approximately 10% of the Fund’s
total assets.
Municipal Leases and Certificates of Participation. The
Fund may invest in municipal leases and certificates of participation in such leases. A municipal lease is an obligation in the form of
a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations
is generally exempt from state and local taxes in the state of issuance. Municipal leases frequently involve special risks not normally
associated with general obligations or revenue obligations. Leases and installment purchase or conditional sale contracts (which normally
provide for title to the leased asset to pass eventually to the governmental issuer) have evolved as a means for governmental issuers
to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt issuance
limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation” clauses
that relieve the governmental issuer of any obligation to make future payments under the lease or contract unless money is appropriated
for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be
subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises
or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition of the
property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering
or the failure fully to recover the Fund’s original investment. To the extent that the Fund invests in unrated municipal leases
or participates in such leases, the credit quality and risk of cancellation of such unrated leases will be monitored on an ongoing basis.
A certificate of participation represents an undivided interest
in an unmanaged pool of municipal leases, installment purchase agreements or other instruments. The certificates are typically issued
by a municipal agency, a trust or other entity that has received an assignment of the payments to be made by the state or political subdivision
under such leases or installment purchase agreements. Such certificates provide the Fund with the right to a pro rata undivided interest
in the underlying municipal securities. In addition, such participations generally provide the Fund with
56 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
the right to demand payment, on not more than seven days’
notice, of all or any part of the Fund’s participation interest in the underlying municipal securities, plus accrued interest.
Certain municipal lease obligations and certificates of participation
may be deemed to be illiquid for the purpose of the Fund’s limitation on investments in illiquid securities. Other municipal lease
obligations and certificates of participation acquired by the Fund may be determined by the Adviser, pursuant to guidelines adopted by
the Board of Directors, to be liquid securities for the purpose of such limitation. In determining the liquidity of municipal lease obligations
and certificates of participation, the Adviser will consider a variety of factors, including: (i) the willingness of dealers to bid for
the obligation; (ii) the number of dealers willing to purchase or sell the obligation and the number of other potential buyers; (iii)
the frequency of trades or quotes for the obligation; and (iv) the nature of the marketplace trades. In addition, the Adviser will consider
factors unique to particular lease obligations and certificates of participation affecting the marketability thereof. These include the
general creditworthiness of the issuer, the importance to the issuer of the property covered by the lease and the likelihood that the
marketability of the obligation will be maintained throughout the time the obligation is held by the Fund.
Municipal Notes. Municipal securities in the form of notes
generally are used to provide for short-term capital needs, in anticipation of an issuer’s receipt of other revenues or financing,
and typically have maturities of up to three years. Such instruments may include tax anticipation notes, revenue anticipation notes, bond
anticipation notes, tax and revenue anticipation notes and construction loan notes. Tax anticipation notes are issued to finance the working
capital needs of governments. Generally, they are issued in anticipation of various tax revenues, such as income, sales, property, use
and business taxes, and are payable from these specific future taxes. Revenue anticipation notes are issued in expectation of receipt
of other kinds of revenue, such as federal revenues available under federal revenue sharing programs. Bond anticipation notes are issued
to provide interim financing until long-term bond financing can be arranged. In most cases, the long-term bonds then provide the funds
needed for repayment of the notes. Tax and revenue anticipation notes combine the funding sources of both tax anticipation notes and revenue
anticipation notes. Construction loan notes are sold to provide construction financing. Mortgage notes insured by the Federal Housing
Authority secure these notes; however, the proceeds from the insurance may be less than the economic equivalent of the payment of principal
and interest on the mortgage note if there has been a default. The anticipated revenues from taxes, grants or bond financing generally
secure the obligations of an issuer of municipal notes.
Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22 57
An investment in such instruments, however, presents a risk that
the anticipated revenues will not be received or that such revenues will be insufficient to satisfy the issuer’s payment obligations
under the notes or that refinancing will be otherwise unavailable.
Tax-exempt commercial paper. Issues of commercial paper
typically represent short-term, unsecured, negotiable promissory notes. These obligations are issued by state and local governments and
their agencies to finance the working capital needs of municipalities or to provide interim construction financing and are paid from general
revenues of municipalities or are refinanced with long-term debt. In most cases, tax-exempt commercial paper is backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility agreements offered by banks or other institutions.
Pre-refunded municipal securities. The principal of and
interest on pre-refunded municipal securities are no longer paid from the original revenue source for the securities. Instead, the source
of such payments is typically an escrow fund consisting of U.S. government securities. The assets in the escrow fund are derived from
the proceeds of refunding bonds issued by the same issuer as the pre-refunded municipal securities. Issuers of municipal securities use
this advance refunding technique to obtain more favorable terms with respect to securities that are not yet subject to call or redemption
by the issuer. For example, advance refunding enables an issuer to refinance debt at lower market interest rates, restructure debt to
improve cash flow or eliminate restrictive covenants in the indenture or other governing instrument for the pre-refunded municipal securities.
However, except for a change in the revenue source from which principal and interest payments are made, the pre-refunded municipal securities
remain outstanding on their original terms until they mature or are redeemed by the issuer.
Private activity bonds. Private activity bonds, formerly
referred to as industrial development bonds, are issued by or on behalf of public authorities to obtain funds to provide privately operated
housing facilities, airport, mass transit or port facilities, sewage disposal, solid waste disposal or hazardous waste treatment or disposal
facilities and certain local facilities for water supply, gas or electricity. Other types of private activity bonds, the proceeds of which
are used for the construction, equipment, repair or improvement of privately operated industrial or commercial facilities, may constitute
municipal securities, although the current federal tax laws place substantial limitations on the size of such issues. The Fund’s
distributions of its interest income from private activity bonds may subject certain investors to the federal alternative minimum tax.
58 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
Tender option bonds. A tender option bond is a municipal
security (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term, tax-exempt rates. The bond is typically issued with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, which grants the security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for providing the option, the financial institution receives periodic
fees equal to the difference between the bond’s fixed coupon rate and the rate, as determined by a remarketing or similar agent
at or near the commencement of such period, that would cause the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest
at the prevailing short-term, tax-exempt rate. However, an institution will not be obligated to accept tendered bonds in the event of
certain defaults or a significant downgrade in the credit rating assigned to the issuer of the bond. The liquidity of a tender option
bond is a function of the credit quality of both the bond issuer and the financial institution providing liquidity. Tender option bonds
are deemed to be liquid unless, in the opinion of the Adviser, the credit quality of the bond issuer and the financial institution is
deemed, in light of the Fund’s credit quality requirements, to be inadequate and the bond would not otherwise be readily marketable.
The Fund intends to invest in tender option bonds the interest on which will, in the opinion of bond counsel, counsel for the issuer of
interests therein or counsel selected by the Adviser, be exempt from regular federal income tax. However, because there can be no assurance
that the Internal Revenue Service (the “IRS”) will agree with such counsel’s opinion in any particular case, there is
a risk that the Fund will not be considered the owner of such tender option bonds and thus will not be entitled to treat such interest
as exempt from such tax. Additionally, the federal income tax treatment of certain other aspects of these investments, including the proper
tax treatment of tender option bonds and the associated fees in relation to various regulated investment company tax provisions, is unclear.
The Fund intends to manage its portfolio in a manner designed to eliminate or minimize any adverse impact from the tax rules applicable
to these investments.
Auction rate securities. The Fund may invest in auction
rate securities. Auction rate securities include auction rate municipal securities and auction rate preferred securities issued by closed-end
investment companies that invest primarily in municipal securities (collectively, “auction rate securities”). Provided that
the auction mechanism is successful, auction rate securities usually permit the holder to sell the securities in an auction
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 59
at par value at specified intervals. The dividend is reset by “Dutch”
auction in which bids are made by broker-dealers and other institutions for a certain amount of securities at a specified minimum yield.
The dividend rate set by the auction is the lowest interest or dividend rate that covers all securities offered for sale. While this process
is designed to permit auction rate securities to be traded at par value, there is some risk that an auction will fail due to insufficient
demand for the securities. The Fund will take the time remaining until the next scheduled auction date into account for purpose of determining
the securities’ duration. The Fund’s investments in auction rate securities of closed-end funds are subject to the limitations
prescribed by the 1940 Act.
Illiquid securities. The Fund may invest in bonds or other
municipal securities that lack a secondary trading market or are otherwise considered illiquid. Liquidity of a security relates to the
ability easily to dispose of the security and the price to be obtained upon disposition of the security, which may be less than would
be obtained for a comparable, more liquid security. The Fund may invest up to 20% of its total assets in illiquid investments. Such investments
may affect the Fund’s ability to realize its net asset value in the event of a voluntary or involuntary liquidation of its assets.
Structured securities. The Fund may invest in structured
securities. The value of the principal and/or interest on such securities is determined by reference to changes in the value of specific
currencies, interest rates, commodities, indices or other financial indicators (“reference”) or the relative change in two
or more references. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending
upon changes in the reference. The terms of the structured securities may provide, in certain circumstances, that no principal is due
at maturity and, therefore, may result in a loss of the Fund’s investment. Changes in the interest rate or principal payable at
maturity may be a multiple of the changes in the value of the reference. Consequently, structured securities may entail a greater degree
of market risk than other types of fixed income securities.
Insured municipal securities. The Fund may invest in “insured”
municipal securities, which are securities for which scheduled payments of interest and principal are guaranteed by a private (non-governmental)
insurance company. The insurance only entitles the Fund to receive at maturity the face or par value of the securities held by the Fund.
The insurance does not guarantee the market value of the municipal securities or the value of the shares of the Fund. The Fund may utilize
new issue or secondary market insurance. A bond issuer who wishes to increase the credit rating of a security purchases a new issue insurance
policy. By paying a premium and meeting the insurer’s underwriting standards, the bond issuer is able to
60 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
obtain a high credit rating (usually, Aaa from Moody’s or
AAA from S&P) for the issued security. Such insurance is likely to increase the purchase price and resale value of the security. New
issue insurance policies are noncancelable and continue in force as long as the bonds are outstanding. A secondary market insurance policy
is purchased by an investor subsequent to a bond’s original issuance and generally insures a particular bond for the remainder of
its term.
Standby commitments. In order to enhance the liquidity of
municipal securities, the Fund may acquire the right to sell a security to another party at a guaranteed price and date. Such a right
to resell may be referred to as a “standby commitment” or “liquidity put,” depending on its characteristics. The
aggregate price which the Fund pays for securities with standby commitments may be higher than the price which otherwise would be paid
for the securities. Standby commitments may not be available or may not be available on satisfactory terms. Standby commitments may involve
letters of credit issued by domestic or foreign banks supporting the other party’s ability to purchase the security. The right to
sell may be exercisable on demand or at specified intervals and may form part of a security or be acquired separately by the Fund.
Because the period prior to the put date is generally less than
365 days, the Fund generally values the municipal securities subject to standby commitments at amortized cost. The Board of Directors
has adopted procedures pursuant to which the Adviser may determine that amortized cost represents the fair value of these securities.
The exercise price of the standby commitments is expected to approximate such amortized cost. Consequently, no separate value is assigned
to standby commitments for purposes of determining the Fund’s net asset value. The cost of a standby commitment is carried as unrealized
depreciation from the time of purchase until it is exercised or expires. Since the value of a standby commitment is dependent on the ability
of the standby commitment writer to meet its obligation to repurchase, the Fund’s policy is to enter into standby commitment transactions
only with banks, brokers or dealers that present a minimal risk of default. However, this policy reduces, but does not eliminate, the
risk of default by the standby commitment writer.
Use of leverage by the Fund. The Fund may use financial
leverage on an ongoing basis for investment purposes. The Fund currently uses leverage through the issuance of Variable Rate MuniFund
Term Preferred Shares (“VMTP Shares”). VMTP Shares are issued via private placement and are not publicly available. Leverage
creates special risks not associated with unleveraged funds having a similar investment objectives and policies. These include the possibility
of higher volatility of both the net asset value of the Fund and the value of assets serving as asset coverage for the
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 61
borrowing. The fees and expenses attributed to leverage, including
any increase in the management fees, will be borne by holders of common shares. The Adviser intends only to leverage the Fund when it
believes that the potential total return on additional investments purchased with the proceeds of leverage is likely to exceed the costs
incurred in connection with the leverage. The Fund may not be leveraged at all times, and the amount of leverage, if any, may vary depending
on a variety of factors, including the Adviser’s outlook for interest rates and credit markets and the costs that the Fund would
incur as a result of such leverage. The Fund’s leveraging strategy may not be successful.
Except for the Fund’s investment objectives and the Fund’s
policy to invest at least 80% of its assets in municipal securities, the Fund’s investment strategies and policies may be changed
from time to time without shareholder approval, unless specifically stated otherwise.
Other Investments. Normally, the Fund will invest substantially
all of its assets to meet its investment objectives. The Fund may invest the remainder of its assets in securities with remaining maturities
of less than one year or cash equivalents, or it may hold cash. For temporary defensive purposes, the Fund may depart from its principal
investment strategies and invest part or all of its assets in securities with remaining maturities of less than one year or cash equivalents,
or it may hold cash. During such periods, the Fund may not be able to achieve its investment objectives.
Zero Coupon Securities. The Fund may invest in zero coupon
securities. Zero coupon securities are debt instruments that do not pay interest during the life of the security but are issued at a discount
from the amount the investor will receive when the issuer repays the amount borrowed (the face value). The discount approximates the total
amount of interest that would be paid at an assumed interest rate.
Derivatives. The Fund may, but is not required to, use futures
and options on securities, indices and currencies, forward foreign currency exchange contracts, swaps, credit-linked notes and other derivatives.
The Fund also may enter into credit default swaps, which can be used to acquire or to transfer the credit risk of a security or index
of securities without buying or selling the security or securities comprising the relevant index. A derivative is a security or instrument
whose value is determined by reference to the value or the change in value of one or more securities, currencies, indices or other financial
instruments. The Fund may use derivatives for a variety of purposes, including:
• | | In an attempt to hedge against adverse changes in the market prices of securities, interest
rates or currency exchange rates |
• | | As a substitute for purchasing or selling securities |
62 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
• | | To attempt to increase the Fund’s return as a non-hedging strategy that may be considered
speculative |
• | | To manage portfolio characteristics (for example, the duration or credit quality of the Fund’s
portfolio) |
• | | As a cash flow management technique |
The Fund may choose not to make use of derivatives for a variety
of reasons, and any use may be limited by applicable law and regulations.
Other investment companies. The Fund may invest in the securities
of other investment companies to the extent that such investments are consistent with the Fund’s investment objectives and principal
investment strategies and permissible under the 1940 Act. Subject to the limitations on investment in other investment companies, the
Fund may invest in “ETFs.”
Repurchase agreements. In a repurchase agreement, the Fund
purchases securities from a broker/dealer or a bank, called the counterparty, upon the agreement of the counterparty to repurchase the
securities from the Fund at a later date, and at a specified price, which is typically higher than the purchase price paid by the Fund.
The securities purchased serve as the Fund’s collateral for the obligation of the counterparty to repurchase the securities. If
the counterparty does not repurchase the securities, the Fund is entitled to sell the securities, but the Fund may not be able to sell
them for the price at which they were purchased, thus causing a loss. Additionally, if the counterparty becomes insolvent, there is some
risk that the Fund will not have a right to the securities, or the immediate right to sell the securities.
PRINCIPAL RISKS
General. The Fund is a closed-end management investment
company designed primarily as a long-term investment and not as a trading tool. The Fund is not a complete investment program and should
be considered only as an addition to an investor’s existing portfolio of investments. Because the Fund may invest substantially
in high yield debt securities, an investment in the Fund’s shares is speculative in that it involves a high degree of risk. Due
to uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objective. Instruments
in which the Fund invests may only have limited liquidity, or may be illiquid.
Market price of shares. Common shares of closed-end funds
frequently trade at a price lower than their net asset value. This is commonly referred to as “trading at a discount.” This
characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the Fund’s net asset
Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22 63
value may decrease. Both long and short-term investors, including
investors who sell their shares within a relatively short period after completion of the initial public offering, will be exposed to this
risk. The Fund is designed primarily for long-term investors and should not be considered a vehicle for trading purposes.
Whether investors will realize a gain or loss upon the sale of
the Fund’s common shares will depend upon whether the market value of the shares at the time of sale is above or below the price
the investor paid, taking into account transaction costs, for the shares and is not directly dependent upon the Fund’s net asset
value. Because the market value of the Fund’s shares will be determined by factors such as the relative demand for and supply of
the shares in the market, general market conditions and other factors beyond the control of the Fund, the Fund cannot predict whether
its common shares will trade at, below or above net asset value, or below or above the initial offering price for the shares.
Market risk. The market prices of securities or other assets
held by the Fund may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse
economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the
bond markets, the spread of infectious illness or other public health issues, armed conflict, market disruptions caused by tariffs, trade
disputes, sanctions or other government actions, or other factors or adverse investor sentiment. Changes in market conditions may not
have the same impact on all types of securities. The value of securities may also fall due to specific conditions that affect a particular
sector of the securities market or a particular issuer. If the market prices of the Fund’s securities and assets fall, the value
of your investment will go down. A change in financial condition or other event affecting a single issuer or market may adversely impact
securities markets as a whole. Rates of inflation have recently risen. The value of assets or income from an investment may be worth less
in the future as inflation decreases the value of money. As inflation increases, the real value of the Fund’s assets can decline
as can the value of the Fund’s distributions.
In the past decade, financial markets throughout the world have
experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. Governmental and non-governmental
issuers have defaulted on, or been forced to restructure, their debts. These conditions may continue, recur, worsen or spread. Events
that have contributed to these market conditions include, but are not limited to, major cybersecurity events; geopolitical events (including
wars, terror attacks and economic sanctions); measures to address budget deficits; downgrading of sovereign debt; changes in oil and commodity
prices; changes in currency
64 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
exchange rates; global pandemics; and public sentiment. The global
pandemic of the novel coronavirus respiratory disease designated COVID-19 has resulted in major disruption to economies and markets around
the world, including the United States. Global financial markets have experienced extreme volatility and severe losses, and trading in
many instruments has been disrupted. Liquidity for many instruments has been greatly reduced for periods of time. Some sectors of the
economy and individual issuers have experienced particularly large losses. These circumstances may continue for an extended period of
time, and may continue to affect adversely the value and liquidity of the Fund’s investments. Following Russia’s recent invasion
of Ukraine, Russian securities have lost all, or nearly all, their market value. Other securities or markets could be similarly affected
by past or future geopolitical or other events or conditions.
Governments and central banks, including the U.S. Federal Reserve,
have taken extraordinary and unprecedented actions to support local and global economies and the financial markets. These actions have
resulted in significant expansion of public debt, including in the U.S. The consequences of high public debt, including its future impact
on the economy and securities markets, may not be known for some time. Interest rates are very low, which means there is more risk that
they may go up. In some cases yields are negative. U.S. Federal Reserve or other U.S. or non-U.S. governmental or central bank actions,
including increases or decreases in interest rates, or contrary actions by different governments, could negatively affect financial markets
generally, increase market volatility and reduce the value and liquidity of securities in which the Fund invests. Policy and legislative
changes in the U.S. and in other countries are affecting many aspects of financial regulation, and these and other events affecting global
markets, such as the United Kingdom’s exit from the European Union (or Brexit), potential trade imbalances with China or other countries,
or sanctions or other government actions against Russia, other nations or individuals or companies (or their countermeasures), may contribute
to decreased liquidity and increased volatility in the financial markets. The impact of these changes on the markets, and the implications
for market participants, may not be fully known for some time.
Economies and financial markets throughout the world are increasingly
interconnected. Economic, financial or political events, trading and tariff arrangements, armed conflict including Russia’s military
invasion of Ukraine, terrorism, natural disasters, infectious illness or public health issues, cybersecurity events, supply chain disruptions,
sanctions against Russia, other nations or individuals or companies and possible countermeasures, and other circumstances in one country
or region could have profound impacts on global economies or markets. As a result,
Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22 65
whether or not the Fund invests in securities of issuers located
in or with significant exposure to the countries or regions directly affected, the value and liquidity of the Fund’s investments
may be negatively affected. The Fund may experience a substantial or complete loss on any security or derivative position.
LIBOR risk. LIBOR (London Interbank Offered Rate) is used
extensively in the U.S. and globally as a “benchmark” or “reference rate” for various commercial and financial
contracts, including corporate and municipal bonds, bank loans, asset-backed and mortgage-related securities, and interest rate swaps
and other derivatives. ICE Benchmark Administration, the administrator of LIBOR, ceased publication of most LIBOR settings on a representative
basis at the end of 2021 and is expected to cease publication of a majority of U.S. dollar LIBOR settings on a representative basis after
June 30, 2023. In addition, global regulators have announced that, with limited exceptions, no new LIBOR-based contracts should be entered
into after 2021. Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies.
Markets are developing in response to these new rates, but questions around liquidity in these rates and how to appropriately adjust these
rates to eliminate any economic value transfer at the time of transition remain a significant concern. The effect of any changes to -
or discontinuation of - LIBOR on the Fund will vary depending on, among other things, existing fallback provisions in individual contracts
and whether, how, and when industry participants develop and widely adopt new reference rates and fallbacks for both legacy and new products
and instruments. The transition process may involve, among other things, increased volatility or illiquidity in markets for instruments
that rely on LIBOR. The transition may also result in a reduction in the value of certain LIBOR-based investments held by the Fund or
reduce the effectiveness of related transactions such as hedges. Any such effects of the transition away from LIBOR, as well as other
unforeseen effects, could result in losses for the Fund. Because the usefulness of LIBOR as a benchmark may deteriorate during the transition
period, these effects could occur at any time.
High yield or “junk” bond risk. Debt securities
that are below investment grade, called “junk bonds,” are speculative, have a higher risk of default or are already in default,
tend to be less liquid and are more difficult to value than higher grade securities. Junk bonds tend to be volatile and more susceptible
to adverse events and negative sentiments. These risks are more pronounced for securities that are already in default.
Interest rate risk. The market prices of the Fund’s
fixed income securities may fluctuate significantly when interest rates change. The value of your investment will generally go down when
interest rates rise. A rise in rates
66 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
tends to have a greater impact on the prices of longer term or
duration securities. For example, if interest rates increase by 1%, the value of a Fund’s portfolio with a portfolio duration of
ten years would be expected to decrease by 10%, all other things being equal. In recent years interest rates and credit spreads in the
U.S. have been at historical lows, which means there is more risk that they may go up. The U.S. Federal Reserve has recently started to
raise certain interest rates. A general rise in interest rates could adversely affect the price and liquidity of fixed income securities.
The maturity of a security may be significantly longer than its effective duration. A security’s maturity and other features may
be more relevant than its effective duration in determining the security’s sensitivity to other factors affecting the issuer or
markets generally, such as changes in credit quality or in the yield premium that the market may establish for certain types of securities
(sometimes called “credit spread”). In general, the longer its maturity the more a security may be susceptible to these factors.
When the credit spread for a fixed income security goes up, or “widens,” the value of the security will generally go down.
Rising interest rates can lead to increased default rates, as issuers
of floating rate securities find themselves faced with higher payments. Unlike fixed rate securities, floating rate securities generally
will not increase in value if interest rates decline. Changes in interest rates also will affect the amount of interest income the Fund
earns on its floating rate investments
Credit risk. If an issuer or guarantor of a security held
by the Fund or a counterparty to a financial contract with the Fund defaults on its obligation to pay principal and/or interest, has its
credit rating downgraded or is perceived to be less creditworthy, or the credit quality or value of any underlying assets declines, the
value of your investment will typically decline. Changes in actual or perceived creditworthiness may occur quickly. The Fund could be
delayed or hindered in its enforcement of rights against an issuer, guarantor or counterparty.
Prepayment or call risk. Many issuers have a right to prepay
their securities. If interest rates fall, an issuer may exercise this right. If this happens, the Fund will not benefit from the rise
in market price that normally accompanies a decline in interest rates, and will be forced to reinvest prepayment proceeds at a time when
yields on securities available in the market are lower than the yield on the prepaid security. The Fund also may lose any premium it paid
on the security.
Extension risk. During periods of rising interest rates,
the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a
below market interest rate, increase the security’s duration and reduce the value of the security.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 67
Risk of illiquid investments. Certain securities and derivatives
held by the Fund may be impossible or difficult to purchase, sell or unwind. Illiquid securities and derivatives also may be difficult
to value. Liquidity risk may be magnified in an environment of rising interest rates or widening credit spreads. During times of market
turmoil, there have been, and may be, no buyers or sellers for securities in entire asset classes. If the Fund is forced to sell an illiquid
asset or unwind a derivatives position, the Fund may suffer a substantial loss or may not be able to sell at all.
Portfolio selection risk. The Adviser’s judgment about
the quality, relative yield, relative value or market trends affecting a particular sector or region, market segment, security or about
interest rates generally may prove to be incorrect, or there may be imperfections, errors or limitations in the models, tools and information
used by the Adviser.
Municipal securities risk. The municipal bond market can
be susceptible to unusual volatility, particularly for lower-rated and unrated securities. Liquidity can be reduced unpredictably in response
to overall economic conditions or credit tightening. Issuers of municipal securities tend to derive a significant portion of their revenue
from taxes, particularly property and income taxes, and decreases in personal income levels and property values and other unfavorable
economic factors, such as a general economic recession, adversely affect municipal securities. Municipal issuers may also be adversely
affected by rising health care costs, increasing unfunded pension liabilities and by the phasing out of federal programs providing financial
support. Where municipal securities are issued to finance particular projects, especially those relating to education, health care, transportation,
housing, water or sewer and utilities, issuers often depend on revenues from those projects to make principal and interest payments. Adverse
conditions and developments in those sectors can result in lower revenues to issuers of municipal securities, potentially resulting in
defaults, and can also have an adverse effect on the broader municipal securities market. To the extent the Fund invests significantly
in a single state, or in securities the payments on which are dependent upon a single project or source of revenues, or that relate to
a sector or industry, including health care facilities, education, special revenues and housing, the Fund will be more susceptible to
associated risks and developments.
There may be less public information available on municipal issuers
or projects than other issuers, and valuing municipal securities may be more difficult. In addition, the secondary market for municipal
securities is less well developed and liquid than other markets, and dealers may be less willing to offer and sell municipal securities
in times of market turbulence. Changes in the financial condition of one or more individual municipal issuers (or one or more insurers
of municipal issuers), or one or more
68 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
defaults by municipal issuers or insurers, can adversely affect
liquidity and valuations in the overall market for municipal securities. The value of municipal securities can also be adversely affected
by regulatory and political developments affecting the ability of municipal issuers to pay interest or repay principal, actual or anticipated
tax law changes or other legislative actions, and by uncertainties and public perceptions concerning these and other factors. Municipal
securities may be more susceptible to downgrades or defaults during recessions or similar periods of economic stress. Financial difficulties
of municipal issuers may continue or get worse.
The rate of interest paid on municipal securities normally is lower
than the rate of interest paid on fully taxable securities. Some municipal securities, such as general obligation issues, are backed by
the issuer’s taxing authority, while other municipal securities, such as revenue issues, are backed only by revenues from certain
facilities or other sources and not by the issuer itself. The payment of principal and interest on private activity and industrial development
revenue bonds is solely dependent on the ability of the facility’s user to meet its financial obligations and the pledge, if any,
of the facility or other property as security for payment. The municipal market can be susceptible to unusual volatility, particularly
for lower-rated and unrated securities.
Taxable investment risk. Although distributions of interest
income from the Fund’s tax-exempt securities are generally exempt from regular federal income tax, distributions from other sources,
including capital gain distributions, and any gains on the sale of your shares are not. In addition, the interest on the Fund’s
municipal securities could become subject to regular federal income tax or the AMT due to noncompliant conduct by issuers, unfavorable
legislation or litigation, or adverse interpretations by regulatory authorities. You should consult a tax adviser about whether the AMT
applies to you and about state and local taxes on your Fund distributions.
Risks of subordinated securities. A holder of securities
that are subordinated or “junior” to more senior securities of an issuer is entitled to payment after holders of more senior
securities of the issuer. Subordinated securities are more likely to suffer a credit loss than non-subordinated securities of the same
issuer, any loss incurred by the subordinated securities is likely to be proportionately greater, and any recovery of interest or principal
may take more time. As a result, even a perceived decline in creditworthiness of the issuer is likely to have a greater impact on subordinated
securities than more senior securities.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 69
U.S. Treasury obligations risk. The market value of direct
obligations of the U.S. Treasury may vary due to changes in interest rates. In addition, changes to the financial condition or credit
rating of the U.S. government may cause the value of the Fund’s investments in obligations issued by the U.S. Treasury to decline.
U.S. government agency obligations risk. The Fund invests
in obligations issued by agencies and instrumentalities of the U.S. government. Government-sponsored entities such as the Federal National
Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Banks (FHLBs), although chartered
or sponsored by Congress, are not funded by congressional appropriations and the debt and mortgage-backed securities issued by them are
neither guaranteed nor issued by the U.S. government. The maximum potential liability of the issuers of some U.S. government obligations
may greatly exceed their current resources, including any legal right to support from the U.S. government. Such debt and mortgage-backed
securities are subject to the risk of default on the payment of interest and/or principal, similar to debt of private issuers. Although
the U.S. government has provided financial support to FNMA and FHLMC in the past, there can be no assurance that it will support these
or other government-sponsored entities in the future.
Mortgage-related and asset-backed securities risk. The value
of mortgage-related securities, including commercial mortgage-backed securities, collateralized mortgage-backed securities, credit risk
transfer securities, and asset-backed securities, will be influenced by factors affecting the assets underlying such securities. As a
result, during periods of declining asset value, difficult or frozen credit markets, swings in interest rates, or deteriorating economic
conditions, mortgage-related and asset-backed securities may decline in value, face valuation difficulties, become more volatile and/or
become illiquid. Mortgage-backed securities tend to be more sensitive to changes in interest rate than other types of debt securities.
These securities are also subject to prepayment and extension risks. Some of these securities may receive little or no collateral protection
from the underlying assets and are thus subject to the risk of default. The risk of such defaults is generally higher in the case of mortgage-backed
investments offered by non-governmental issuers and those that include so-called “sub-prime” mortgages. The structure of some
of these securities may be complex and there may be less available information than for other types of debt securities. Upon the occurrence
of certain triggering events or defaults, the Fund may become the holder of underlying assets at a time when those assets may be difficult
to sell or may be sold only at a loss.
70 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
Risks of investing in collateralized debt obligations. Investment
in a collateralized debt obligation (CDO) is subject to the credit, subordination, interest rate, valuation, prepayment, extension and
other risks of the obligations underlying the CDO and the tranche of the CDO in which the Fund invests. CDOs are subject to liquidity
risk. Synthetic CDOs are also subject to the risks of investing in derivatives, such as credit default swaps, and leverage risk.
Risks of instruments that allow for balloon payments or negative
amortization payments. Certain debt instruments allow for balloon payments or negative amortization payments. Such instruments permit
the borrower to avoid paying currently a portion of the interest accruing on the instrument. While these features make the debt instrument
more affordable to the borrower in the near term, they increase the risk that the borrower will be unable to make the resulting higher
payment or payments that become due at the maturity of the loan.
Risks of zero coupon bonds, payment in kind, deferred and contingent
payment securities. These securities may be more speculative and may fluctuate more in value than securities which pay income periodically
and in cash. In addition, although the Fund receives no periodic cash payments on such securities, the Fund is deemed for tax purposes
to receive income from such securities, which applicable tax rules require the Fund to distribute to shareholders. Such distributions
may be taxable when distributed to shareholders
Derivatives risk. Using swaps, forward foreign currency
exchange contracts, bond and interest rate futures and other derivatives can increase Fund losses and reduce opportunities for gains when
market prices, interest rates or the derivative instruments themselves behave in a way not anticipated by the Fund. Using derivatives
may increase the volatility of the Fund’s net asset value and may not provide the result intended. Derivatives may have a leveraging
effect on the Fund. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.
Derivatives are generally subject to the risks applicable to the assets, rates, indices or other indicators underlying the derivative.
Changes in a derivative’s value may not correlate well with the referenced asset or metric. The Fund also may have to sell assets
at inopportune times to satisfy its obligations. Derivatives may be difficult to sell, unwind or value, and the counterparty may default
on its obligations to the Fund. Use of derivatives may have different tax consequences for the Fund than an investment in the underlying
security, and such differences may affect the amount, timing and character of income distributed to shareholders. The U.S. government
and foreign governments are in the process of adopting and implementing regulations governing derivatives markets, including
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 71
mandatory clearing of certain derivatives, margin and reporting
requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make them more costly,
limit their availability or utility, otherwise adversely affect their performance or disrupt markets.
Synthetic municipal securities risk. The tax-exempt character
of the interest paid on tender option bonds, bond receipts and similar synthetic municipal securities, a type of derivative instrument,
is based on the tax-exempt income stream from the collateral. In addition to the risks of investing in municipal securities and in derivatives
generally, investments in synthetic municipal securities are subject to the risk that income derived from such securities is deemed to
be taxable.
Risks of investing in inverse floating rate obligations. The
interest rate on inverse floating rate obligations will generally decrease as short-term interest rates increase, and increase as short-term
rates decrease. Due to their leveraged structure, the sensitivity of the market value of an inverse floating rate obligation to changes
in interest rates is generally greater than a comparable long-term bond issued by the same issuer and with similar credit quality, redemption
and maturity provisions. Inverse floating rate obligations may be volatile and involve leverage risk.
Credit default swap risk. Credit default swap contracts,
a type of derivative instrument, involve special risks and may result in losses to the Fund. Credit default swaps may in some cases be
illiquid, and they increase credit risk since the Fund has exposure to the issuer of the referenced obligation and either the counterparty
to the credit default swap or, if it is a cleared transaction, the brokerage firm through which the trade was cleared and the clearing
organization that is the counterparty to that trade.
Structured securities risk. Structured securities may behave
in ways not anticipated by the Fund, or they may not receive the tax, accounting or regulatory treatment anticipated by the Fund.
Leveraging risk. The value of your investment may be more
volatile and other risks tend to be compounded if the Fund borrows or uses derivatives or other investments, such as ETFs, that have embedded
leverage. Leverage generally magnifies the effect of any increase or decrease in the value of the Fund’s underlying assets and creates
a risk of loss of value on a larger pool of assets than the Fund would otherwise have, potentially resulting in the loss of all assets.
Engaging in such transactions may cause the Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations
or meet segregation requirements.
72 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
The Fund may use financial leverage on an ongoing basis for investment
purposes by issuing preferred shares. The fees and expenses attributed to leverage, including any increase in the management fees, will
be borne by holders of common shares. Since the Adviser’s fee is based on a percentage of the Fund’s managed assets, its fee
will be higher if the Fund is leveraged, and the Adviser will thus have an incentive to leverage the Fund.
Repurchase agreement risk. In the event that the other party
to a repurchase agreement defaults on its obligations, the Fund may encounter delay and incur costs before being able to sell the security.
Such a delay may involve loss of interest or a decline in price of the security. In addition, if the Fund is characterized by a court
as an unsecured creditor, it would be at risk of losing some or all of the principal and interest involved in the transaction.
Market segment risk. To the extent the Fund emphasizes,
from time to time, investments in a market segment, the Fund will be subject to a greater degree to the risks particular to that segment,
and may experience greater market fluctuation than a fund without the same focus.
Valuation risk. The sales price the Fund could receive for
any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for illiquid securities
and securities that trade in thin or volatile markets or that are valued using a fair value methodology. These differences may increase
significantly and affect Fund investments more broadly during periods of market volatility. The Fund’s ability to value its investments
may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
Cybersecurity risk. Cybersecurity failures by and breaches
of the Fund’s Adviser, transfer agent, custodian, Fund accounting agent or other service providers may disrupt Fund operations,
interfere with the Fund’s ability to calculate its NAV, prevent Fund shareholders from receiving distributions, cause loss of or
unauthorized access to private shareholder information, and result in financial losses to the Fund and its shareholders, regulatory fines,
penalties, reputational damage, or additional compliance costs.
Cash management risk. The value of the investments held
by the Fund for cash management or temporary defensive purposes may be affected by market risks, changing interest rates and by changes
in credit ratings of the investments. To the extent that the Fund has any uninvested cash, the Fund would be subject to credit risk with
respect to the depository institution holding the cash. If the Fund holds cash uninvested, the Fund will not earn income on the cash and
the Fund’s yield will go down. During such periods, it may be more difficult for the Fund to achieve its investment objective.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 73
Anti-takeover provisions. The Fund’s Charter and Bylaws
include provisions that are designed to limit the ability of other entities or persons to acquire control of the Fund for short-term objectives,
including by converting the Fund to open-end status or changing the composition of the Board, that may be detrimental to the Fund’s
ability to achieve its primary investment objective of seeking to provide its common shareholders with a high level of current income
exempt from regular federal income tax. The Fund’s Bylaws also contain a provision providing that the Board of Directors has adopted
a resolution to opt in the Fund to the provisions of the Maryland Control Share Acquisition Act (“MCSAA”). Such provisions
may limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund. There can be no assurance, however, that such provisions will be sufficient to deter activist investors
that seek to cause the Fund to take actions that may not be aligned with the interests of long-term shareholders.
Please note that there are many other factors that could adversely
affect your investment and that could prevent the Fund from achieving its goals.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
INVESTMENT RESTRICTIONS
The following are the Fund’s fundamental investment restrictions.
These restrictions, along with the Fund’s investment objectives, may not be changed without the approval of the holders of a majority
of the Fund’s outstanding voting securities (which for this purpose and under the 1940 Act means the lesser of (i) 67% of the common
shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding
common shares).
The Fund may not:
(1) | | Issue senior securities, except as permitted by applicable law, as amended and interpreted
or modified from time to time by any regulatory authority jurisdiction. |
(2) | | Borrow money, except as permitted by applicable law, as amended and interpreted or modified
from time to time by any regulatory authority jurisdiction. |
(3) | | Invest in real estate, except the Fund may invest in securities of issuers that invest in
real estate or interests therein, securities that are secured by real estate or interests therein, securities of real estate investment
trusts, mortgage-backed securities and other securities |
74 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
that represent a similar indirect interest in real estate, and
the Fund may acquire real estate or interests therein through exercising rights or remedies with regard to an instrument.
(4) | | Make loans, except that the Fund may (i) lend portfolio securities in accordance with the
Fund’s investment policies, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of publicly distributed
debt securities, bank loan participation interests, bank certificates of deposit, acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the securities, (iv) participate in a credit facility whereby the Fund may
directly lend to and borrow money from other affiliated funds to the extent permitted under the 1940 Act or an exemption therefrom and
(v) make loans in any other manner consistent with applicable law, as amended and interpreted or modified from time to time by any regulatory
authority having jurisdiction. |
(5) | | Invest in commodities or commodity contracts, except that the Fund may invest in currency
instruments and contracts and financial instruments and contracts that might be deemed to be commodities and commodity contracts. |
(6) | | Act as an underwriter, except insofar as the Fund technically may be deemed to be an underwriter
in connection with the purchase or sale of its portfolio securities. |
(7) | | Make any investment inconsistent with its classification as a diversified closed-end investment
company (or series thereof) under the 1940 Act. |
(8) | | Invest 25% or more of the value of its total assets in any one industry, provided that this
limitation does not apply to municipal securities other than those municipal securities backed only by assets and revenues of non-governmental
issuers. |
(9) | | Under normal market conditions, the Fund will invest substantially all (at least 80%) of
its assets (net assets plus borrowings for investment purposes) in debt securities and other obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities,
the interest on which is exempt from regular federal income tax. |
All other investment policies of the Fund are considered non-fundamental
and may be changed by the Board of Directors without prior approval of the Fund’s outstanding voting shares.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 75
Effects of Leverage
The following table is furnished in response to requirements of
the Securities and Exchange Commission. It is designed to illustrate the effects of leverage on common share total return, assuming investment
portfolio total returns (consisting of income and changes in the value of investments held in the Fund’s portfolio) of -10%, -5%,
0%, 5% and 10%. The table below reflects the Fund’s issuance of preferred shares as a percentage of the Fund’s total assets
(which includes the amounts of leverage obtained through such issuance of preferred shares), the annual dividend rate on the preferred
shares as of April 30, 2022, and the annual return that the Fund’s portfolio must experience (net of expenses) in order to cover
such costs. The information below does not reflect the Fund’s use of certain other forms of economic leverage achieved through the
use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as covered credit default swaps
or other derivative instruments.
The assumed investment portfolio returns in the table below are
hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced
by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual expenses associated with preferred
shares by the Fund may vary frequently and may be significantly higher or lower than the rate used for the example below.
Preferred shares as a percentage of total managed assets |
|
(including assets attributable to preferred shares) |
36.87% |
Annual effective interest rate payable by Fund on preferred shares |
0.91% |
Annual return Fund portfolio must experience (net of expenses) to cover interest |
|
rate on preferred shares |
0.34% |
Common share total return for (10.00)% assumed portfolio total return |
(16.37)% |
Common share total return for (5.00)% assumed portfolio total return |
(8.45)% |
Common share total return for 0.00% assumed portfolio total return |
(0.53)% |
Common share total return for 5.00% assumed portfolio total return |
7.39% |
Common share total return for 10.00% assumed portfolio total return |
15.31% |
Common share total return is composed of two elements - investment
income net of the Fund’s expenses, including any interest/dividends on assets resulting from leverage, and gains or losses on the
value of the securities the Fund owns. As required by Securities and Exchange Commission rules, the table assumes that the Fund is more
likely to suffer capital losses than to enjoy capital appreciation. For example, to assume a total return of 0%, the Fund must assume
that the income it receives on its investments is entirely offset by losses in the value of those investments.
76 Pioneer Municipal High Income Fund, Inc. | Annual Report
| 4/30/22
This table reflects hypothetical performance of the Fund’s
portfolio and not the performance of the Fund’s common shares, the value of which will be determined by market forces and other
factors.
Should the Fund elect to add additional leverage to its portfolio,
the potential benefits of leveraging the Fund’s shares cannot be fully achieved until the proceeds resulting from the use of leverage
have been received by the Fund and invested in accordance with the Fund’s investment objective and principal investment strategies.
The Fund’s willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors,
including, among other things, the Adviser’s assessment of the yield curve environment, interest rate trends, market conditions
and other factors.
Pioneer Municipal High Income Fund, Inc.
| Annual Report | 4/30/22 77