Notes
to Financial Statements | 5/31/22
(unaudited)
1. Organization and
Significant Accounting Policies
Pioneer Floating Rate Fund, Inc. (the
“Fund”) is organized as a Maryland corporation. Prior to April 21, 2021, the Fund was organized as a Delaware statutory trust.
On April 21, 2021, the Fund redomiciled to a Maryland corporation through a statutory merger of the predecessor Delaware statutory trust
with and into a newly-established Maryland corporation formed for the purpose of effecting the redomiciling. The Fund was originally
organized on October 6, 2004. Prior to commencing operations on December 28, 2004, the Fund had no operations other than matters relating
to its organization and registration as a diversified, closed-end management investment company under the Investment Company Act of 1940,
as amended. The investment objective of the Fund is to seek a high level of current income and the Fund may, as a secondary objective,
also seek capital appreciation to the extent that it is consistent with its investment objective.
Amundi Asset Management US, Inc., an
indirect, wholly owned subsidiary of Amundi and Amundi’s wholly owned subsidiary, Amundi USA, Inc., serves as the Fund’s
investment adviser (the “Adviser”).
In March 2020, FASB issued an Accounting
Standard Update, ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial
Reporting (“ASU 2020-04”), which provides optional, temporary relief with respect to the financial reporting of contracts
subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”)
and other LIBOR-based reference rates at the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference
rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2023. Management is evaluating
the impact of ASU 2020-04 on the Fund's investments, derivatives, debt and other contracts, if applicable, that will undergo reference
rate-related modifications as a result of the reference rate reform.
The Fund is an investment company and
follows investment company accounting and reporting guidance under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
U.S. GAAP requires the management of the Fund to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income, expenses
and gain or loss on investments during the reporting period. Actual results could differ from those estimates.
44 Pioneer Floating Rate Fund, Inc.
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The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial statements:
The net asset value of the Fund is
computed once daily, on each day the New York Stock Exchange (“NYSE”) is open, as of the close of regular trading on the
NYSE.
Loan interests are valued at the mean
between the last available bid and asked prices from one or more brokers or dealers as obtained from Loan Pricing Corporation, an independent
third party pricing service. If price information is not available from Loan Pricing Corporation, or if the price information is deemed
to be unreliable, price information will be obtained from an alternative loan interest pricing service. If no reliable price quotes are
available from either the primary or alternative pricing service, broker quotes will be solicited.
Fixed-income securities are valued
by using prices supplied by independent pricing services, which consider such factors as market prices, market events, quotations from
one or more brokers, Treasury spreads, yields, maturities and ratings, or may use a pricing matrix or other fair value methods or techniques
to provide an estimated value of the security or instrument. A pricing matrix is a means of valuing a debt security on the basis of current
market prices for other debt securities, historical trading patterns in the market for fixed-income securities and/or other factors.
Non-U.S. debt securities that are listed on an exchange will be valued at the bid price obtained from an independent third party pricing
service. When independent third party pricing services are unable to supply prices, or when prices or market quotations are considered
to be unreliable, the value of that security may be determined using quotations from one or more broker-dealers.
Event-linked bonds are valued at the
bid price obtained from an independent third party pricing service. Other insurance-linked securities (including reinsurance sidecars,
collateralized reinsurance and industry loss warranties) may be valued at the bid price obtained from an independent pricing service,
or through a third party using a pricing matrix or an insurance industry valuation model to provide an estimated value of the instrument.
Equity securities that have traded
on an exchange are valued by using the last sale price on the principal exchange where they are traded. Equity securities that have not
traded on the date of valuation, or securities for which sale prices are not available, generally are valued using the mean between the
last bid and asked prices or, if both last bid and asked prices are not available, at the last quoted bid price. Last sale and bid and
asked
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 45
prices are provided by independent
third party pricing services. In the case of equity securities not traded on an exchange, prices are typically determined by independent
third party pricing services using a variety of techniques and methods.
Forward foreign currency exchange contracts
are valued daily using the foreign exchange rate or, for longer term forward contract positions, the spot currency rate and the forward
points on a daily basis, in each case provided by a third party pricing service. Contracts whose forward settlement date falls between
two quoted days are valued by interpolation.
Shares of open-end registered investment
companies (including money market mutual funds) are valued at such funds’ net asset value.
Securities or loan interests for which
independent pricing services or broker-dealers are unable to supply prices or for which market prices and/or quotations are not readily
available or are considered to be unreliable are valued by a fair valuation team comprised of certain personnel of the Adviser. The Adviser’s
fair valuation team is responsible for monitoring developments that may impact fair valued securities.
Inputs used when applying fair value
methods to value a security may include credit ratings, the financial condition of the company, current market conditions and comparable
securities. The Fund may use fair value methods if it is determined that a significant event has occurred after the close of the exchange
or market on which the security trades and prior to the determination of the Fund's net asset value. Examples of a significant event
might include political or economic news, corporate restructurings, natural disasters, terrorist activity or trading halts. Thus, the
valuation of the Fund's securities may differ significantly from exchange prices, and such differences could be material.
At May 31, 2022, one security was valued
using fair value methods (in addition to securities valued using prices supplied by independent pricing services, broker-dealers or using
a third party insurance industry broker valuation model) representing 0.09% of net assets. The value of these fair valued securities
was $112,355.
| B. | | Investment Income and Transactions |
Dividend income is recorded on the
ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon
as the Fund becomes aware of the ex-dividend data in the exercise of reasonable diligence.
46 Pioneer Floating Rate Fund, Inc.
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Interest income, including interest
on income-bearing cash accounts, is recorded on the accrual basis. Dividend and interest income are reported net of unrecoverable foreign
taxes withheld at the applicable country rates and net of income accrued on defaulted securities.
Interest and dividend income payable
by delivery of additional shares is reclassified as PIK (payment-in-kind) income upon receipt and is included in interest and dividend
income, respectively.
Principal amounts of mortgage-backed
securities are adjusted for monthly paydowns. Premiums and discounts related to certain mortgage-backed securities are amortized or accreted
in proportion to the monthly paydowns. All discounts/premiums on purchase prices of debt securities are accreted/amortized for financial
reporting purposes over the life of the respective securities, and such accretion/amortization is included in interest income.
Security transactions are recorded
as of trade date. Gains and losses on sales of investments are calculated on the identified cost method for both financial reporting
and federal income tax purposes.
C. Foreign Currency Translation
The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars using current exchange rates.
Net realized gains and losses on foreign
currency transactions, if any, represent, among other things, the net realized gains and losses on foreign currency exchange contracts,
disposition of foreign currencies and the difference between the amount of income accrued and the U.S. dollars actually received. Further,
the effects of changes in foreign currency exchange rates on investments are not segregated on the Statement of Operations from the effects
of changes in the market prices of those securities, but are included with the net realized and unrealized gain or loss on investments.
D. Federal Income Taxes
It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net taxable income
and net realized capital gains, if any, to its shareowners. Therefore, no provision for federal income taxes is required. As of November
30, 2021, the Fund did not accrue any interest or penalties with respect to uncertain tax positions, which, if applicable, would be recorded
as an income tax expense on the Statement of Operations. Tax returns filed within the prior three years remain subject to examination
by federal and state tax authorities.
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 47
The amount and character of income
and capital gain distributions to shareowners are determined in accordance with federal income tax rules, which may differ from U.S.
GAAP. Distributions in excess of net investment income or net realized gains are temporary over distributions for financial statement
purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.
Capital accounts within the financial statements are adjusted for permanent book/tax differences to reflect tax character, but are not
adjusted for temporary differences.
The tax character of current year distributions
payable will be determined at the end of the current taxable year. The tax character of distributions paid during the year ended November
30, 2021 was as follows:
| |
|
2021 |
| Distributions
paid from: |
|
|
| Ordinary
income |
$ |
9,446,022 |
| Tax
return of capital |
|
356,890 |
| Total |
$ |
9,802,912 |
The following shows the components
of distributable earnings (losses) on a federal income tax basis at November 30, 2021:
| |
|
2021 |
|
| Distributable
earnings/(losses): |
|
|
|
| Capital
loss carryforward |
$ |
(66,998,801 |
) |
| Other
book/tax temporary differences |
|
(711,354 |
) |
| Net
unrealized appreciation |
|
3,160,092 |
|
| Total |
$ |
(64,550,063 |
) |
The difference between book basis and
tax basis unrealized appreciation is attributable to the tax treatment of premium and amortization, adjustments relating to insurance
linked securities, the tax adjustments relating to credit default swaps and partnerships.
E. Risks
The value of securities 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, the spread of infectious illness or other public health issues, inflation, changes in
interest rates, armed conflict including Russia's military invasion of Ukraine, sanctions against Russia, other nations or individuals
or companies and possible countermeasures, lack of liquidity in the bond markets or adverse investor sentiment. In the past several years,
financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These
conditions may
48 Pioneer Floating Rate Fund, Inc.
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continue, recur, worsen or spread.
Interest rates are very low, 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. 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.
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.
At times, the Fund’s investments
may represent industries or industry sectors that are interrelated or have common risks, making the Fund more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries and sectors.
The Fund’s investments in foreign
markets and countries with limited developing markets may subject the Fund to a greater degree of risk than investments in a developed
market. These risks include disruptive political or economic conditions, military conflicts and sanctions, terrorism, sustained economic
downturns, financial instability, reduction of government or central bank support, inadequate accounting standards, tariffs, tax disputes
or other tax burdens, nationalization or expropriation of assets, and the imposition of adverse governmental laws, arbitrary application
of laws and regulations or lack of rule of law, or currency exchange restrictions. Lack of information and less market regulation also
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 49
may affect the value of these securities.
Withholding and other non-U.S. taxes may decrease the Fund's return. Non-U.S. issuers may be located in parts of the world that have
historically been prone to natural disasters. Investing in depositary receipts is subject to many of the same risks as investing directly
in non-U.S. issuers. Depositary receipts may involve higher expenses and may trade at a discount (or premium) to the underlying security.
Russia launched a large-scale invasion
of Ukraine on February 24, 2022. In response to the military action by Russia, various countries, including the U.S., the United Kingdom,
and European Union issued broad-ranging economic sanctions against Russia and Belarus and certain companies and individuals. Since then,
Russian securities have lost all, or nearly all, their market value, and many other issuers, securities and markets have been adversely
affected. The United States and other countries may impose sanctions on other countries, companies and individuals in light of Russia’s
military invasion. The extent and duration of the military action or future escalation of such hostilities, the extent and impact of
existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted.
These and any related events could have a significant impact on the value and liquidity of certain Fund investments, on Fund performance
and the value of an investment in the Fund, particularly with respect to securities and commodities, such as oil and natural gas, as
well as other sectors with exposure to Russian issuers or issuers in other countries affected by the invasion, and are likely to have
collateral impacts on market sectors globally.
The Fund invests primarily in floating
rate loans and other floating rate investments. Floating rate loans typically are rated below investment grade. Debt securities rated
below-investment-grade are commonly referred to as “junk bonds” and are considered speculative with respect to the issuer’s
capacity to pay interest and repay principal. Below investment grade securities, including floating rate loans, involve greater risk
of loss, are subject to greater price volatility, and may be less liquid and more difficult to value, especially during periods of economic
uncertainty or change, than higher rated debt securities.
Under normal market conditions, the
Fund seeks to achieve its investment objectives by investing at least 80% of its assets (net assets plus borrowings for investment purposes)
in senior floating rate loans. For purposes of the Fund’s investment policies, senior floating rate loans include funds that invest
primarily in senior floating rate loans. Floating rate loans and similar investments may be illiquid or less liquid than other investments
and difficult to value. Market quotations for these securities may be volatile and/or subject to large spreads between bid and ask prices.
50 Pioneer Floating Rate Fund, Inc.
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Certain securities in which the Fund
invests, including floating rate loans, once sold, may not settle for an extended period (for example, several weeks or even longer).
The Fund will not receive its sale proceeds until that time, which may constrain the Fund’s ability to meet its obligations. The
Fund may invest in securities of issuers that are in default or that are in bankruptcy. The value of collateral, if any, securing a floating
rate loan can decline or may be insufficient to meet the issuer’s obligations or may be difficult to liquidate. No active trading
market may exist for many floating rate loans, and many loans are subject to restrictions on resale. Any secondary market may be subject
to irregular trading activity and extended settlement periods. There is less readily available, reliable information about most floating
rate loans than is the case for many other types of securities. Normally, the Adviser will seek to avoid receiving material, nonpublic
information about the issuer of a loan either held by, or considered for investment by, the Fund, and this decision could adversely affect
the Fund’s investment performance. Loans may not be considered “securities,” and purchasers, such as the Fund, therefore
may not be entitled to rely on the anti-fraud protections afforded by federal securities laws.
The Fund's investments, payment obligations
and financing terms may be based on floating rates, such as LIBOR (London Interbank Offered Rate) or SOFR (Secured Overnight Financing
Rate). 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. In March 2022, the U.S. federal government enacted legislation to establish a process for replacing
LIBOR in existing contracts that do not already provide for the use of a clearly defined or practicable replacement benchmark rate as
described in the legislation. Generally speaking, for contracts that do not contain a fallback provision as described in the legislation,
a benchmark replacement recommended by
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 51
the Federal Reserve Board will effectively
automatically replace the USD LIBOR benchmark in the contract after June 30, 2023. The recommended benchmark replacement will be based
on the SOFR published by the Federal Reserve Bank of New York, including any recommended spread adjustment and benchmark replacement
conforming changes. The process of transitioning from LIBOR 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.
The Fund is not limited in the percentage
of its assets that may be invested in illiquid securities. Illiquid securities are securities that the Fund reasonably expects cannot
be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing
the market value of the securities.
With the increased use of technologies
such as the Internet to conduct business, the Fund is susceptible to operational, information security and related risks. While the Fund’s
Adviser has established business continuity plans in the event of, and risk management systems to prevent, limit or mitigate, such cyber-attacks,
there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified. Furthermore,
the Fund cannot control the cybersecurity plans and systems put in place by service providers to the Fund such as the Fund’s custodian
and accounting agent, and the Fund’s transfer agent. In addition, many beneficial owners of Fund shares hold them through accounts
at broker-dealers, retirement platforms and other financial market participants over which neither the Fund nor the Adviser exercises
control. Each of these may in turn rely on service providers to them, which are also subject to the risk of cyberattacks. Cybersecurity
failures or breaches at the Adviser or the Fund’s service providers or intermediaries have the ability to cause disruptions and
impact business operations, potentially resulting in financial losses, interference with the Fund’s ability to calculate its net
asset value, impediments to trading, the inability of Fund shareowners to effect share purchases or sales or receive distributions, loss
of or unauthorized access to private shareowner information and violations of applicable privacy and other laws, regulatory fines, penalties,
reputational damage, or additional compliance costs. Such costs and losses may not be covered under any insurance. In addition, maintaining
vigilance against cyber-attacks may involve substantial costs over time, and system enhancements may themselves be subject to cyber-attacks.
52 Pioneer Floating Rate Fund, Inc.
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F. Restricted Securities
Restricted Securities are subject to
legal or contractual restrictions on resale. Restricted securities generally are resold in transactions exempt from registration under
the Securities Act of 1933. Private placement securities are generally considered to be restricted except for those securities traded
between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933.
Disposal of restricted investments
may involve negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted investments held
by the Fund at May 31, 2022 are listed in the Schedule of Investments.
G. Insurance-Linked Securities (“ILS”)
The Fund invests in ILS. The Fund could
lose a portion or all of the principal it has invested in an ILS, and the right to additional interest or dividend payments with respect
to the security, upon the occurrence of one or more trigger events, as defined within the terms of an insurance-linked security. Trigger
events, generally, are hurricanes, earthquakes, or other natural events of a specific size or magnitude that occur in a designated geographic
region during a specified time period, and/or that involve losses or other metrics that exceed a specific amount. There is no way to
accurately predict whether a trigger event will occur, and accordingly, ILS carry significant risk. The Fund is entitled to receive principal,
and interest and/or dividend payments so long as no trigger event occurs of the description and magnitude specified by the instrument.
In addition to the specified trigger events, ILS may expose the Fund to other risks, including but not limited to issuer (credit) default,
adverse regulatory or jurisdictional interpretations and adverse tax consequences.
The Fund’s investments in ILS
may include event-linked bonds. ILS also may include special purpose vehicles (“SPVs”) or similar instruments structured
to comprise a portion of a reinsurer’s catastrophe-oriented business, known as quota share instruments (sometimes referred to as
reinsurance sidecars), or to provide reinsurance relating to specific risks to insurance or reinsurance companies through a collateralized
instrument, known as collateralized reinsurance. Structured reinsurance investments also may include industry loss warranties (“ILWs”).
A traditional ILW takes the form of a bilateral reinsurance contract, but there are also products that take the form of derivatives,
collateralized structures, or exchange-traded instruments.
Where the ILS are based on the performance
of underlying reinsurance contracts, the Fund has limited transparency into the individual underlying contracts, and therefore must rely
upon the risk assessment and sound
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 53
underwriting practices of the issuer.
Accordingly, it may be more difficult for the Adviser to fully evaluate the underlying risk profile of the Fund's structured reinsurance
investments, and therefore the Fund's assets are placed at greater risk of loss than if the Adviser had more complete information. Structured
reinsurance instruments generally will be considered illiquid securities by the Fund. These securities may be difficult to purchase,
sell or unwind. Illiquid securities also may be difficult to value. If the Fund is forced to sell an illiquid asset, the Fund may be
forced to sell at a loss.
H. Automatic Dividend Reinvestment
Plan
All shareowners whose shares are registered
in their own names automatically participate in the Automatic Dividend Reinvestment Plan (the "Plan"), under which participants
receive all dividends and capital gain distributions (collectively, dividends) in full and fractional shares of the Fund in lieu of cash.
Shareowners may elect not to participate in the Plan. Shareowners not participating in the Plan receive all dividends and capital gain
distributions in cash. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty
by notifying American Stock Transfer & Trust Company, the agent for shareowners in administering the Plan (the "Plan Agent"),
in writing prior to any dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently
declared dividend or other distribution.
If a shareowner's shares are held in
the name of a brokerage firm, bank or other nominee, the shareowner can ask the firm or nominee to participate in the Plan on the shareowner's
behalf. If the firm or nominee does not offer the Plan, dividends will be paid in cash to the shareowner of record. A firm or nominee
may reinvest a shareowner's cash dividends in shares of the Fund on terms that differ from the terms of the Plan.
Whenever the Fund declares a dividend
on shares payable in cash, participants in the Plan will receive the equivalent in shares acquired by the Plan Agent either (i) through
receipt of additional unissued but authorized shares from the Fund or (ii) by purchase of outstanding shares on the NYSE or elsewhere.
If, on the payment date for any dividend, the net asset value per share is equal to or less than the market price per share plus estimated
brokerage trading fees (market premium), the Plan Agent will invest the dividend amount in newly issued shares. The number of newly issued
shares to be credited to each account will be determined by dividing the dollar amount of the dividend by the net asset value per share
on the date the shares are issued, provided that the maximum discount from the then current market price per share on the date of issuance
does not exceed 5%. If, on the payment date for any dividend, the net asset value per share is
54 Pioneer Floating Rate Fund, Inc.
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greater than the market value (market
discount), the Plan Agent will invest the dividend amount in shares acquired in open-market purchases. There are no brokerage charges
with respect to newly issued shares. However, each participant will pay a pro rata share of brokerage trading fees incurred with respect
to the Plan Agent's open-market purchases. Participating in the Plan does not relieve shareowners from any federal, state or local taxes
which may be due on dividends paid in any taxable year. Shareowners holding Plan shares in a brokerage account may be able to transfer
the shares to another broker and continue to participate in the Plan.
I. Statement of Cash Flows
Information on financial transactions
which have been settled through the receipt or disbursement of cash or restricted cash is presented in the Statement of Cash Flows. Cash
as presented in the Fund's Statement of Assets and Liabilities includes cash on hand at the Fund's custodian bank and does not include
any short-term investments. As of and for the six months ended May 31, 2022, the Fund had no restricted cash presented on the Statement
of Assets and Liabilities.
J. Forward Foreign Currency Exchange
Contracts
The Fund may enter into forward foreign
currency exchange contracts ("contracts") for the purchase or sale of a specific foreign currency at a fixed price on a future
date. All contracts are marked-to-market daily at the applicable exchange rates, and any resulting unrealized appreciation or depreciation
is recorded in the Fund's financial statements. The Fund records realized gains and losses at the time a contract is offset by entry
into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative
to the U.S. dollar (see Note 6).
During the six months ended May 31,
2022, the Fund had entered into various forward foreign currency exchange contracts that obligated the Fund to deliver or take delivery
of currencies at specified future maturity dates. Alternatively, prior to the settlement date of a forward foreign currency exchange
contract, the Fund may close out such contract by entering into an offsetting contract.
The average market value of forward
foreign currency exchange contracts open during the six months ended May 31, 2022, was $0 and $234,188 for buys and sells, respectively.
Open forward foreign currency exchange contracts outstanding at May 31, 2022, are listed in the Schedule of Investments.
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 55
2. Management Agreement
The Adviser manages the Fund’s
portfolio. Management fees payable under the Fund’s Investment Management Agreement with the Adviser are calculated daily and paid
monthly at the annual rate of 0.70% of the Fund’s average daily managed assets. “Managed assets” means (a) the total
assets of the Fund, including any form of investment leverage, minus (b) all accrued liabilities incurred in the normal course of operations,
which shall not include any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type
(including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred
stock or other similar preference securities, and/or (iii) any other means. For the six months ended May 31, 2022, the net management
fee was 0.70% (annualized) of the Fund’s average daily managed assets, which was equivalent to 1.04% (annualized) of the Fund’s
average daily net assets.
The Adviser has contractually agreed
to limit ordinary operating expenses (ordinary operating expenses means all fund expenses other than taxes, brokerage commissions, interest
expense, acquired fund fees and expenses, and extraordinary expenses, such as litigation costs or extraordinary proxy costs) to the extent
required to reduce fund expenses to 1.94% of the average daily net assets of the Fund’s common shares. This expense limitation
is in effect through September 15, 2022. There can be no assurance that the Adviser will extend the expense limitation agreement beyond
the date referred to above.
In addition, under the management and
administration agreements, certain other services and costs, including accounting, regulatory reporting and insurance premiums, are paid
by the Fund as administrative reimbursements. Included in “Due to affiliates” reflected on the Statement of Assets and Liabilities
is $37,679 in management fees, administrative costs and certain other reimbursements payable to the Adviser at May 31, 2022.
3. Compensation of
Directors and Officers
The Fund pays an annual fee to its
Directors. The Adviser reimburses the Fund for fees paid to the Interested Directors. The Fund does not pay any salary or other compensation
to its officers. For the six months ended May 31, 2022, the Fund paid $4,468 in Directors’ compensation, which is reflected
on the Statement of Operations as Directors’ fees. At May 31, 2022, the Fund had a payable for Directors’ fees on its Statement
of Assets and Liabilities of $1,520.
56 Pioneer Floating Rate Fund, Inc.
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4. Transfer Agent
American Stock Transfer & Trust
Company (“AST”) serves as the transfer agent with respect to the Fund’s common shares. The Fund pays AST an annual
fee as is agreed to from time to time by the Fund and AST for providing such services.
In addition, the Fund reimbursed the
transfer agent for out-of-pocket expenses incurred by the transfer agent related to shareowner communications activities such as proxy
and statement mailings and outgoing phone calls.
5. Master Netting
Agreements
The Fund has entered into an International
Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with substantially
all of its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs
the trading of certain Over the Counter (“OTC”) derivatives and typically contains, among other things, close-out and set-off
provisions which apply upon the occurrence of an event of default and/or a termination event as defined under the relevant ISDA Master
Agreement. The ISDA Master Agreement may also give a party the right to terminate all transactions traded under such agreement if, among
other things, there is deterioration in the credit quality of the other party.
Upon an event of default or a termination
of the ISDA Master Agreement, the non-defaulting party has the right to close-out all transactions under such agreement and to net amounts
owed under each transaction to determine one net amount payable by one party to the other. The right to close out and net payments across
all transactions under the ISDA Master Agreement could result in a reduction of the Fund’s credit risk to its counterparty equal
to any amounts payable by the Fund under the applicable transactions, if any. However, the Fund’s right to set-off may be restricted
or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which each specific ISDA Master Agreement of each
counterparty is subject.
The collateral requirements for derivatives
transactions under an ISDA Master Agreement are governed by a credit support annex to the ISDA Master Agreement. Collateral requirements
are generally determined at the close of business each day and are typically based on changes in market values for each transaction under
an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral due from or to a counterparty
is subject to threshold (a “minimum transfer amount”) before a transfer is required, which may vary by counterparty.
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 57
Collateral pledged for the benefit
of the Fund and/or counterparty is held in segregated accounts by the Fund’s custodian and cannot be sold, re-pledged, assigned
or otherwise used while pledged. Cash that has been segregated to cover the Fund’s collateral obligations, if any, will be reported
separately on the Statement of Assets and Liabilities as “Swaps collateral”. Securities pledged by the Fund as collateral,
if any, are identified as such in the Schedule of Investments.
Financial instruments subject to an
enforceable master netting agreement, such as an ISDA Master Agreement, have been offset on the Statement of Assets and Liabilities.
The following charts show gross assets and liabilities of the Fund as of May 31, 2022.
| |
|
Derivative |
|
|
|
|
|
|
|
| |
|
Assets |
|
|
|
|
|
|
|
| |
|
Subject
to |
|
Derivatives |
Non-Cash |
Cash |
|
Net
Amount |
|
| |
|
Master
Netting |
|
Available |
Collateral |
Collateral |
|
of
Derivative |
|
| Counterparty |
|
Agreement |
|
for
Offset |
Pledged
(a) |
Pledged
(a) |
|
Assets
(b) |
|
| State
Street |
|
|
|
|
|
|
|
|
|
| Bank
& Trust Co. |
$ |
— |
|
$
— |
$
— |
$
— |
$ |
— |
|
| Total |
$ |
— |
|
$— |
$— |
$— |
$ |
— |
|
| |
| |
|
Derivative |
|
|
|
|
|
|
|
| |
|
Liabilities |
|
|
|
|
|
|
|
| |
|
Subject
to |
|
Derivatives |
Non-Cash |
Cash |
|
Net
Amount |
|
| |
|
Master
Netting |
|
Available |
Collateral |
Collateral |
|
of
Derivative |
|
| Counterparty |
|
Agreement |
|
for
Offset |
Pledged
(a) |
Pledged
(a) |
|
Liabilities
(b) |
|
| State
Street |
|
|
|
|
|
|
|
|
|
| Bank
& Trust Co. |
$ |
(17,657 |
) |
$
— |
$
— |
$
— |
$ |
(17,657 |
) |
| Total |
$ |
(17,657 |
) |
$— |
$— |
$— |
$ |
(17,657 |
) |
| (a) | | The amount presented here may be less than the total amount of
collateral received/pledged as the net amount of derivative assets and liabilities cannot be less than $0. |
| (b) | | Represents the net amount payable to the counterparty in the event
of default. |
6. Additional Disclosures
about Derivative Instruments and Hedging Activities
The Fund’s use of derivatives
may enhance or mitigate the Fund’s exposure to the following risks:
Interest rate risk relates to the fluctuations
in the value of interest-bearing securities due to changes in the prevailing levels of market interest rates.
Credit risk relates to the ability
of the issuer of a financial instrument to make further principal or interest payments on an obligation or commitment that it has to
the Fund.
Foreign exchange rate risk relates
to fluctuations in the value of an asset or liability due to changes in currency exchange rates.
58 Pioneer Floating Rate Fund, Inc.
| Semiannual Report | 5/31/22
Equity risk relates to the fluctuations
in the value of financial instruments as a result of changes in market prices (other than those arising from interest rate risk or foreign
exchange rate risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments
traded in a market or market segment.
Commodity risk relates to the risk
that the value of a commodity or commodity index will fluctuate based on increases or decreases in the commodities market and factors
specific to a particular industry or commodity.
The fair value of open derivative instruments
(not considered to be hedging instruments for accounting disclosure purposes) by risk exposure at May 31, 2022, was as follows:
| Statement
of Assets and Liabilities |
|
|
|
|
| |
|
|
Foreign |
|
|
| |
Interest |
Credit |
Exchange |
Equity |
Commodity |
| |
Rate
Risk |
Risk |
Rate
Risk |
Risk |
Risk |
| Liabilities |
|
|
|
|
|
| Net
unrealized |
|
|
|
|
|
| depreciation
on |
|
|
|
|
|
| forward
foreign |
|
|
|
|
|
| currency
exchange |
|
|
|
|
|
| contracts |
$
— |
$
— |
$ 17,657 |
$
— |
$
— |
| Total
Value |
$
— |
$
— |
$ 17,657 |
$
— |
$
— |
The effect of derivative instruments
(not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations by risk exposure at May
31, 2022 was as follows:
| |
|
|
|
|
|
|
|
| Statement
of Operations |
|
|
|
|
|
|
|
| |
|
|
|
Foreign |
|
|
|
| |
Interest |
Credit |
|
Exchange |
|
Equity |
Commodity |
| |
Rate
Risk |
Risk |
|
Rate
Risk |
|
Risk |
Risk |
| Net
Realized |
|
|
|
|
|
|
|
| Gain
(Loss) on |
|
|
|
|
|
|
|
| Forward
foreign |
|
|
|
|
|
|
|
| currency
exchange |
|
|
|
|
|
|
|
| contracts |
$
— |
$
— |
$ |
(1,245 |
) |
$
— |
$
— |
| Total
Value |
$
— |
$
— |
$ |
(1,245 |
) |
$
— |
$
— |
| |
| Change
in Net |
|
|
|
|
|
|
|
| Unrealized
Appreciation |
|
|
|
|
|
|
| (Depreciation)
on |
|
|
|
|
|
|
|
| Forward
foreign |
|
|
|
|
|
|
|
| currency
exchange |
|
|
|
|
|
|
|
| contracts |
$
— |
$
— |
$ |
(17,657 |
) |
$
— |
$
— |
| Total
Value |
$
— |
$
— |
$ |
(17,657 |
) |
$
— |
$
— |
Pioneer Floating Rate Fund, Inc.
| Semiannual Report | 5/31/22 59
7. Unfunded Loan
Commitments
The Fund may enter into unfunded loan
commitments. Unfunded loan commitments may be partially or wholly unfunded. During the contractual period, the Fund is obliged to provide
funding to the borrower upon demand. A fee is earned by the Fund on the unfunded loan commitment and is recorded as interest income on
the Statement of Operations. Unfunded loan commitments are fair valued in accordance with the valuation policy described in Footnote
1A and unrealized appreciation or depreciation, if any, is recorded on the Statement of Assets and Liabilities.
As of May 31, 2022, the Fund had the
following unfunded loan commitments outstanding:
| |
|
|
|
|
|
|
|
Unrealized |
|
| Loan |
|
Principal |
|
Cost |
|
Value |
|
(Depreciation) |
|
| athenahealth,
Inc. |
$ |
130,435 |
$ |
130,435 |
$ |
124,851 |
$ |
(5,584 |
) |
| East
West |
|
|
|
|
|
|
|
|
|
| Manufacturing
LLC |
|
114,285 |
|
113,179 |
|
108,571 |
|
(4,608 |
) |
| Medical
Solutions |
|
|
|
|
|
|
|
|
|
| Holdings,
Inc. |
|
80,000 |
|
79,627 |
|
76,600 |
|
(3,027 |
) |
| Project
Watson |
|
|
|
|
|
|
|
|
|
| Bridge
Loan |
|
1,003,200 |
|
1,003,200 |
|
1,003,200 |
|
— |
|
| Service
Logic |
|
|
|
|
|
|
|
|
|
| Acquisition,
Inc. |
|
61,194 |
|
61,653 |
|
58,746 |
|
(2,907 |
) |
| Trident
TPI Holdings, Inc. |
|
32,348 |
|
32,348 |
|
31,037 |
|
(1,311 |
) |
| Total
Value |
$ |
1,421,462 |
$ |
1,420,442 |
$ |
1,403,005 |
$ |
(17,437 |
) |
8. Fund Shares
There are 1,000,000,000 shares of common
stock of the Fund (“common shares”), $0.001 par value per share authorized.
Transactions in common shares for the
six months ended May 31, 2022 and the year ended November 30, 2021, were as follows:
| |
|
|
| |
5/31/22 |
11/30/21 |
| Shares
outstanding at beginning of period |
12,371,383 |
24,738,174 |
| Shares
outstanding at end of period |
12,374,933 |
12,371,383 |
9. Tender Offer
The Fund announced a tender offer on
August 31, 2020, and commenced the tender offer on November 23, 2020, pursuant to which the Fund offered to purchase up to 50% of the
Fund’s outstanding common shares (the “Shares”) at a price per Share equal to 98.5% of the net asset value per Share
as of the close of regular trading on the New York Stock Exchange (“NYSE”) on the business day immediately following the
expiration date of
60 Pioneer Floating Rate Fund, Inc.
| Semiannual Report | 5/31/22
the tender offer. The tender offer
expired on December 22, 2020. The tender offer was commenced pursuant to a settlement agreement made by the Board with Saba Capital Management,
L.P. and certain associated parties.
The Fund accepted 12,369,087 duly tendered
and not withdrawn Shares, representing approximately 50% of the Fund’s outstanding Shares. The Shares accepted for tender were
repurchased at a price of $11.0616, equal to 98.5% of the net asset value per Share of $11.23 as of the close of regular trading on the
New York Stock Exchange on December 23, 2020, the pricing date stated in the Offer to Purchase. Because the total number of Shares tendered
exceeded the number of Shares offered to purchase, all tendered Shares were subject to pro-ration in accordance with the terms of the
Offer to Purchase. Under final pro-ration, 86.4% of the Shares tendered were accepted for payment, subject to adjustment for fractional
shares. Payment for the accepted Shares was made on December 28, 2020. Following the purchase of the tendered Shares, the Fund had approximately
12,369,087 Shares outstanding.
At December 29, 2020, following the
completion of the Fund’s tender offer, Saba Capital Management, L.P. and certain associated parties beneficially owned approximately
6.3% of the Fund’s outstanding Common Shares (based on a Form 13G filed by Saba Capital Management, L.P., Saba Capital Management
GP, LLC and Mr. Boaz R. Weinstein on December 29, 2020). As of December 31, 2021, Saba Capital Management, L.P. and associated parties
did not own Shares of the Fund (based on a Form 13G filed by Saba Capital Management, L.P., Saba Capital Management GP, LLC and Mr. Boaz
R. Weinstein on December 29, 2020).
10. Credit Agreement
The Fund has entered into a Revolving
Credit Facility (the “Credit Agreement”) with the Bank of Nova Scotia in the amount of $150,000,000. The credit agreement
is an “evergreen” facility that renews on a daily basis in perpetuity. Either party may elect to terminate its commitment
under the credit agreement upon 179-days written notice.
Interest on borrowings is payable at
the London Interbank Offered Rate (LIBOR) plus 0.95% on an annualized basis, or the Alternate Base Rate, which is the greater of (a)
the facility's administrative agent's daily announced prime rate on the borrowing date, (b) 2% plus the Federal Funds Rate on the borrowing
date or (c) 2% plus the overnight Eurodollar rate on the borrowing date.
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 61
At May 31, 2022, the Fund had a borrowing
outstanding under the credit agreement totaling $64,200,000. The interest rate charged at May 31, 2022 was 1.82%. During the six months
ended May 31, 2022, the average daily balance was $68,532,418 at an average interest rate of 1.24%. Interest expense of $427,980 in connection
with the credit agreement is included on the Statement of Operations.
The Fund is required to maintain 300%
asset coverage with respect to amounts outstanding under the Credit Agreement. Asset coverage is calculated by subtracting the Fund’s
total liabilities not including any bank loans and senior securities, from the Fund’s total assets and dividing such amount by
the principal amount of the borrowing outstanding.
11. Subsequent Events
A monthly distribution was declared
on June 3, 2022 of $0.0600 per share payable June 30, 2022 to share owners of record on June 16, 2022.
62 Pioneer Floating Rate Fund, Inc.
| Semiannual Report | 5/31/22
Additional Information
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.
Pioneer Floating
Rate Fund, Inc. | Semiannual Report | 5/31/22 63