Form N-CSRS Pioneer Floating Rate For: May 31

Pioneer Floating Rate Fund, Inc.

Semiannual Report | May 31, 2021

Ticker Symbol: PHD

On April 21, 2021, the Fund redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer Floating Rate Fund, Inc.

Paper copies of the Fund’s shareholder reports are no longer sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer, bank or insurance company. Instead, the reports are available on the Fund’s website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held within the Pioneer Fund complex if you invest directly.

 

visit us: www.amundi.com/us

 

 

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Table of Contents

President’s Letter


Dear Shareholders,

With the first half of 2021 now behind us, we have seen some better news on the COVID-19 pandemic front. In the US, widespread distribution of the COVID-19 vaccines approved for emergency use late last year, and a general decline in both virus cases and related hospitalizations, have had a positive effect on overall market sentiment, even as the emergence of highly infectious variants of the virus in certain areas has led to increased volatility.

While there may finally be a light visible at the end of the pandemic tunnel, the long-term impact on the global economy from COVID-19, while currently unknown, is likely to be considerable. It is clear that several industries have already felt greater effects than others, and the markets, which do not thrive on uncertainty, have been volatile.

With that said, so far during 2021, we have seen investments typically associated with a higher degree of risk, such as equities and high-yield bonds, outperform investments regarded as less risky, such as government debt. In addition, cyclical stocks, or stocks of companies with greater exposure to the ebbs and flows of the economic cycle, have rallied this year after slumping during the height of the pandemic, as investors have appeared to embrace the potential for a more widespread reopening of the economy in the coming months. Additional fiscal stimulus from the US government in recent months has also helped provide some market momentum.

Despite the strong rebound from the March 2020 lows and positive market performance so far this year, several factors that could lead to increased volatility and weaker performance bear watching. These include: public-health issues such as potential surges in COVID-19 cases, particularly as “variants” of the virus have continued to arise; macroeconomic concerns (inflation, energy prices, sluggish employment figures); and changes to the US government’s fiscal policies, particularly the possibility of higher income and capital gains tax rates on both individuals and businesses.

After leaving our offices in March of 2020 due to COVID-19, we have re-opened our US locations and have invited our employees to slowly return to the office. I am proud of the careful planning that has taken place. Our business has continued to operate without any disruption and we all look forward to regaining a bit of normalcy after 15 months of remote working.

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Since 1928, Amundi US’s investment process has been built on a foundation of fundamental research and active management, principles which have guided our investment decisions for more than 90 years. We believe active management – that is, making active investment decisions – can help mitigate the risks during periods of market volatility.

At Amundi US, active management begins with our own fundamental, bottom-up research process. Our team of dedicated research analysts and portfolio managers analyzes each security under consideration, communicating directly with the management teams of the companies issuing the securities and working together to identify those securities that best meet our investment criteria for our family of funds. Our risk management approach begins with each and every security, as we strive to carefully understand the potential opportunity, while considering potential risk factors.

Today, as investors, we have many options. It is our view that active management can serve shareholders well, not only when markets are thriving, but also during periods of market stress.

As you consider your long-term investment goals, we encourage you to work with your financial professional to develop an investment plan that paves the way for you to pursue both your short-term and long-term goals.

We greatly appreciate the trust you have placed in us and look forward to continuing to serve you in the future.

Sincerely,

Lisa M. Jones

Head of the Americas, President and CEO of US

Amundi Asset Management US, Inc.

July 2021

Any information in this shareowner report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. Past performance is no guarantee of future results.

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Portfolio Management Discussion | 5/31/21

Note to Shareholders: On April 21, 2021, Pioneer Floating Rate Trust redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer Floating Rate Fund, Inc. The redomiciling did not result in any change to the investment adviser, investment objective and strategies, portfolio management team, policies and procedures or the members of the Board overseeing the Fund. Please see Note 10. Redomiciling, for more information regarding the redomiciling.

In the following interview, Jonathan Sharkey discusses the factors that influenced the performance of Pioneer Floating Rate Fund, Inc. during the six-month period ended May 31, 2021. Mr. Sharkey, a senior vice president and a portfolio manager at Amundi Asset Management US, Inc.(Amundi US), is responsible for the day-to-day management of the Fund.

Q How did the Fund perform during the six-month period ended May 31, 2021?

A Pioneer Floating Rate Fund, Inc. returned 8.41% at net asset value (NAV) and 8.90% at market price during the six-month period ended May 31, 2021. During the same six-month period, the Fund’s benchmark, the Standard & Poor’s/Loan Syndications & Trading Association Leveraged Loan Index (the S&P/LSTA Index), returned 4.28% at NAV. Unlike the Fund, the S&P/LSTA Index does not use leverage. While the use of leverage increases investment opportunity, it also increases investment risk.

During the same six-month period, the average return at NAV of the 59 closed end funds in Morningstar’s Bank Loan Closed End Funds category (which may or may not be leveraged), was 8.53%, and the average return at market price of the closed end funds in the same Morningstar category was 17.95%.

The shares of the Fund were selling at a 3.5% discount to NAV on May 31, 2021. Comparatively, the shares of the Fund were selling 3.9% discount to NAV on November 30, 2020.

Please note that the Fund announced a tender offer that commenced on November 23, 2020, and expired on December 22, 2020. The tender offer may have affected the Fund’s return at market price and discount to NAV for the six-month period (see Note 8. Tender Offer).

The Fund’s standardized, 30-day SEC yield was 5.02% on May 31, 2021*.

*   The 30-day SEC yield is a standardized formula that is based on the hypothetical annualized earning power (investment income only) of the Fund’s portfolio securities during the period indicated.

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Q How would you describe the investment environment for investing in bank loans during the six-month period ended May 31, 2021?

Entering the period in December 2020, markets had been focused on heightened risks revolving around three key areas: the continuing COVID-19 pandemic, the need for additional fiscal stimulus, and political risks. After enacting two stimulus packages earlier in the year, another US government COVID-19 relief bill that had been passed in the House of Representatives became stalled in the US Senate. At the same time, a notable uptick in European COVID-19 cases reignited fears that the US remained at risk for a “second wave” of cases and a new round of potentially harmful economic lockdowns. Finally, concerns mounted over the potential for a protracted dispute over the previous month’s presidential election results.

Later in December, however, the confirmation of November’s US election results helped reduce uncertainty and boosted market sentiment. That same month, the US economic outlook received two “shots in the arm,” as a pair of COVID-19 vaccines received emergency-use authorization, and Congress finally reached agreement on a $900 billion COVID-19 relief package. Markets viewed the vaccines as the proverbial “light at the end of the tunnel” for the pandemic, betting that widespread vaccinations would help alleviate public-health uncertainty and bring forward the timing of a return to economic normalcy. The additional fiscal stimulus measures were viewed as offering much needed support for many individuals and businesses.

As 2021 got underway, investors elected to focus their attention on those positive developments and looked beyond regional “surges” in COVID-19 cases, as well as select data that suggested a slowing in the rate of economic recovery. By late January, remaining political uncertainty had been removed as a new administration and Democrat-controlled House and Senate took office and almost immediately began discussions about even more fiscal stimulus, which resulted in passage of another $1.9 trillion COVID-19 relief package soon after. Expectations that the COVID-19 vaccines would soon lead to a full economic reopening also drove positive market momentum. In response, riskier assets rallied and Treasury yields moved higher in the first quarter of 2021.

Bank loans finished the six-month period well into positive territory. Technical conditions in the loan market were supportive, with strong collateralized loan obligation (CLO) activity and notably positive flows

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into mutual funds that invest primarily in bank loans. While new-issue loan supply became elevated in the last few months of the period, loan paydowns largely offset the effects of increased supply.

Q What factors had the biggest effects on the Fund’s performance relative to the benchmark during the six-month period ended May 31, 2021?

A At the sector level, selection results within the business equipment & services, automotive, air transport, and utilities sectors weighed on the Fund’s relative performance, as did an underweight to pharmaceuticals. Positive contributions to relative returns were highlighted by selection results within, and overweights to, the health care, lodging, and aerospace/defense segments, all of which benefited during the period from the prospective economic reopening. A significant underweight to the technology sector also aided the Fund’s performance. Overall, however, security selection results were the major driver of the Fund’s benchmark-relative outperformance over the six-month period, more so than sector allocations.

In terms of individual loan names, an overweight position in utility Eastern Power weighed on the Fund’s performance for the period, as investors grew concerned that electricity demand from New York City would not recover fully from the pandemic. Another portfolio position that detracted from relative performance was Endo Pharmaceuticals. Investor sentiment towards Endo turned negative due to unfavorable headlines suggesting the company’s potential liability regarding its opioid sales practices. Exposure to Allied Universal (an on-premise security company) also had a negative effect on the Fund’s relative returns, as the loan had been trading at a premium until it was refinanced at a lower interest rate.

Positions that aided the Fund’s relative performance for the six-month period included the loan for Team Health, as market sentiment towards the investment rebounded on easing concerns about the physician-staffing company’s potential legal issues regarding its billing practices. Outside of the loan market, the Fund’s 10% out-of-benchmark exposure to high-yield corporate bonds contributed positively to benchmark-relative performance, especially early in the six-month period, as high-yield securities rallied in a “risk-on” market environment buoyed by hopes for a post-COVID recovery. The Fund’s large equity stake in FTS International (an oilfield services, hydraulic pumping/fracking company), acquired as the result of a prior restructuring, had detracted from relative performance in previous reporting periods; however, the FTS position aided relative returns over the most recent six-month period as the stock

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price, and the company’s prospects, both rebounded significantly with the increase in oil prices. Finally, a significant position in a credit-risk-transfer (CRT) security, or a securitized bond encompassing thousands of residential mortgages, benefited relative returns, as the mortgage sector has continued to rally from the spate of delinquencies experienced in the early days of the COVID-19-driven economic crisis.

Q How did the level of leverage in the Fund change over the six-month period ended May 31, 2021?

A The Fund employs leverage through a revolving credit facility.

As of May 31, 2021, 32.4% of the Fund’s total managed assets were financed by leverage (or borrowed funds), compared with 27.6% of the Fund’s total managed assets financed by leverage at the start of the period on November 30, 2020. During the six-month period, the Fund decreased the absolute amount of funds borrowed by a total of $36 million, to $69 million as of May 31, 2021, in connection with the decrease in the Fund’s net assets as a result of the completion of the Fund’s tender offer (see Note 8). The percentage of the Fund’s managed assets financed by leverage increased during the six-month period due to the decrease in the total managed assets of the Fund relative to the decrease in the amount of funds borrowed.

Q Did the Fund have any investments in any derivative securities during the six-month period ended May 31, 2021? If so, did the derivatives have any material effect on results?

A The Fund invested in some index-based credit-default-swap contracts (CDX) for a short time in December 2020, during the Fund’s tender offer.

We used the CDX as an overlay on the Fund’s cash position that had amassed while we were liquidating some portfolio positions to meet the tender offer. The CDX had minimal impact on the Funds’ performance over the six-month period, but did augment the Fund’s dividend**.

Q Did the Fund’s distributions** to shareholders change during the six-month period ended May 31, 2021?

A No, the Fund’s distribution rate remained unchanged during the six-month period, at 0.06250 cents per share/per month.

** Distributions and dividends are not guaranteed.

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Q Could you share some thoughts about the Fund’s recent tender and its effect on the portfolio’s overall structure?

A As noted earlier, 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 the tender offer. The tender offer expired on December 22, 2020. In the tender offer, the Fund accepted Shares tendered representing approximately 50% of the Fund’s outstanding Shares. As a result, the Fund is now approximately 50% smaller than it was prior to the tender offer.

Leading up to the tender offer, we had conducted a review of how the portfolio should be structured with regard to optimizing individual position weightings and industry segmentations, given the overall reduction in the size of the Fund. We took the tender offer as an opportunity to cull out lower-yielding loan credits from the portfolio; and, where appropriate, we retained higher-yielding names, which effectively doubled the size of the Fund’s allocation to higher-yielding loans.

Additionally, we fully utilized the Fund’s holdings in the non-senior secured loan basket (topping out at 20% of the portfolio’s invested assets), given that many of those positions had been added at high book yields. Overall, the portfolio’s industry segmentation remained consistent. We reduced allocations to some sectors that had provided the Fund with a measure of protection during the pandemic, and shifted the portfolio’s holdings towards sectors that we felt could potentially benefit more from a broader economic reopening once the public-health threat of COVID-19 becomes less severe. The underlying portfolio became slightly lower in quality as a result of the sector reallocations, given our outlook for a declining default rate, and that lower-rated single “B” loans have accounted for 80% of the new issuance so far in 2021.

Q What is your investment outlook?

A We have a constructive view of the prospects for leveraged loans. The asset class has essentially been trading at a discount, with the bulk of the market priced below par (face) value. Loans have been providing strong income, and may also provide a degree of protection against rising interest rates should the Federal Reserve System (Fed) be insufficiently nimble in managing inflation.

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As COVID-19 vaccine distributions have continued and vaccinated individuals appear to have become less susceptible to the worst effects of the virus, many states have begun relaxing their social-distancing requirements. In addition, in the past year, a large number of US consumers have saved more than they typically would have under more “normal” conditions, and so we think we could see some aggressive spending due to pent-up demand as the economy continues to reopen. As economic activity accelerates, we believe investors might begin to question the Fed’s commitment to maintaining its policy of near-zero interest rates implemented last year in reaction to the market turmoil caused by the onset of COVID-19, and may in turn shift their preference from fixed-rate bonds to floating-rate loans.

The default rate on loans for the 12 months ended May 31, 2021, was 1.73% by loan volume, below the historical average of slightly under 3%. That figure represented the lowest level of loan defaults since December 2019, as the number of bankruptcies since the first half of 2020 have fallen off, while the economic backdrop has improved significantly. The loan default rate by number of issuers was 1.99% as of May 31, 2021, also below the long-term average. In addition, during the period, loans continued to maintain recovery rates that exceeded the recovery rates for their high-yield corporate counterparts. The default rate on loans held in the Fund has remained below that of the market, given our bias towards investing in higher-quality loans compared with the benchmark.

Given the improving economic backdrop over the six-month period, we took advantage of attractive new-issue concessions to modestly increase the Fund’s exposure to loans in the “B” rating category, while lowering exposure to higher-rated “BB” and “BBB” loans.

Given our view of a benign credit environment and lower default forecasts, we expect to continue maintaining a focus on pursuing a solid yield when looking at the valuations of individual loans.

Please refer to the Schedule of Investments on pages 14–32 for a full listing of Fund securities.

All investments are subject to risk, including the possible loss of principal. In the past several years, financial markets have experienced increased volatility and heightened uncertainty. The market prices of securities 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,

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inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. These conditions may continue, recur, worsen or spread.

The Fund may use derivatives, which may include futures and options, for a variety of purposes, including: in an attempt to hedge against adverse changes in the marketplace of securities, interest rates or currency exchange rates; as a substitute for purchasing or selling securities; to attempt to increase the Fund’s return as a non-hedging strategy that may be considered speculative; and to manage portfolio characteristics. Using derivatives can increase fund losses and reduce opportunities for gains when the market prices, interest rates or the derivative instruments themselves behave in a way not anticipated by the Fund. These types of instruments can increase price fluctuation.

The Fund is not limited in the percentage of its assets that may be invested in illiquid securities. Illiquid securities may be difficult to sell at a price reflective of their value at times when the Fund believes it is desirable to do so and the market price of illiquid securities is generally more volatile than that of more liquid securities. Illiquid securities may be difficult to value, and investment of the Fund’s assets in illiquid securities may restrict the Fund’s ability to take advantage of market opportunities.

The Fund employs leverage through a revolving credit facility. Leverage creates significant risks, including the risk that the Fund’s income or capital appreciation from investments purchased with the proceeds of leverage will not be sufficient to cover the cost of leverage, which may adversely affect the return for shareowners.

The Fund is required to maintain certain regulatory and other asset coverage requirements in connection with the Fund’s use of leverage. In order to maintain required asset coverage levels, the Fund may be required to reduce the amount of leverage employed by the Fund, alter the composition of the Fund’s investment portfolio or take other actions at what might be inopportune times in the market. Such actions could reduce the net earnings or returns to shareowners over time, which is likely to result in a decrease in the market value of the Fund’s shares.

Investments in high-yield or lower-rated securities are subject to greater-than-average risk. The Fund may invest in securities of issuers that are in default or that are in bankruptcy.

Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates and economic and political conditions.

The Fund invests in insurance-linked securities (ILS). The return of principal and the payment of interest on ILS are contingent on the non-occurrence of a pre-defined “trigger” event, such as a hurricane or an earthquake of a specific magnitude.

These risks may increase share price volatility.

Any information in this shareowner report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. Past performance is no guarantee of future results.

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Portfolio Summary | 5/31/21

Portfolio Diversification

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(As a percentage of total investments)*

 

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Prices and Distributions | 5/31/21

Market Value per Share^

 

Net Asset Value per Share^

 

Distributions per Share*:

 

Yields

 

The data shown above represents past performance, which is no guarantee of future results.

^ Net asset value and market value are published in Barron’s on Saturday, The Wall Street Journal on Monday and The New York Times on Monday and Saturday. Net asset value and market value are published daily on the Fund’s website at www.amundi.com/us.

* The amount of distributions made to shareowners during the year was in excess of the net investment income earned by the Fund during the year.

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Performance Update | 5/31/21

Investment Returns

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The mountain chart on the right shows the change in market value, including reinvestment of dividends and distributions, of a $10,000 investment made in shares of Pioneer Floating Rate Fund, Inc. during the periods shown, compared with the value of the S&P/LSTA Leveraged Loan Index, which provides broad and comprehensive total return metrics of the U.S. universe of syndicated term loans.

 

Call 1-800-710-0935 or visit www.amundi.com/us for the most recent month-end performance results. Current performance may be lower or higher than the performance data quoted.

Performance data shown represents past performance. Past performance is no guarantee of future results. Investment return and market price will fluctuate, and your shares may trade below NAV, due to such factors as interest rate changes, and the perceived credit quality of borrowers.

Total investment return does not reflect broker sales charges or commissions. All performance is for shares of the Fund.

Shares of closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are bought and sold in the open market through a stock exchange and frequently trade at prices lower than their NAV. NAV per share is total assets less total liabilities, which include preferred shares, or borrowings, as applicable, divided by the number of shares outstanding.

When NAV is lower than market price, dividends are assumed to be reinvested at the greater of NAV or 95% of the market price. When NAV is higher, dividends are assumed to be reinvested at prices obtained through open-market purchases under the Fund’s dividend reinvestment plan.

The performance table and graph do not reflect the deduction of fees and taxes that a shareowner would pay on Fund distributions or the sale of Fund shares. Had these fees and taxes been reflected, performance would have been lower.

Index returns are calculated monthly, assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees, expenses or sales charges. The index does not use leverage. You cannot invest directly in an index.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 13

 

Schedule of Investments | 5/31/21

(unaudited)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

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Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 17

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 19

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 21

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 23

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 25

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 27

 

Schedule of Investments | 5/31/21

(unaudited)(continued)

 

The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

Pioneer Floating Rate Fund, Inc. | Semiannual Report | 5/31/21 29

 

Schedule of Investments | 5/31/21

(unaudited)(continued)