DEFC14A: Pioneer Municipal High Income Funds Seek Stockholder Approval for New Investment Advisory Agreement Following Amundi-Victory Capital Deal

Pioneer Municipal High Income Funds are seeking stockholder approval for a new investment advisory agreement with Victory Capital Management Inc. following Amundi's agreement to combine with Victory Capital.

Summary

• Pioneer Municipal High Income Fund, Inc., Pioneer Municipal High Income Advantage Fund, Inc., and Pioneer Municipal High Income Opportunities Fund, Inc. are seeking stockholder approval for a new investment advisory agreement with Victory Capital Management Inc.
• This is due to Amundi Asset Management US, Inc., the current investment advisor, becoming a wholly-owned subsidiary of Victory Capital through a transaction between Amundi and Victory Capital Holdings, Inc.
• The special meeting of stockholders is scheduled for March 26, 2025, to vote on the proposal.
• The Board of Directors recommends voting FOR the new agreement.
• The advisory fee rate under the new agreement will be the same as the current agreement.
• Victory Capital has agreed to waive advisory fees and/or reimburse expenses for at least three years to maintain the Funds' total net annual operating expenses at or below current levels.
• Saba Capital Management, L.P., is expected to launch a campaign against the approval of the new investment advisory agreement.
• The Board believes Saba Capital is attempting to disrupt the Funds' operations for short-term profit.
• The transaction is expected to close at the end of the first quarter of 2025, subject to regulatory approvals and other conditions.
• Amundi will become a strategic shareholder of Victory Capital, holding 26.1% of Victory Holdings' fully diluted shares.
• Victory Capital will become the supplier of US-manufactured active asset management products for Amundi's distribution outside of the US, and the distributor of Amundi's non-US manufactured products in the US.

Sentiment

Score: 7

Explanation: The document is generally positive, emphasizing the continuity of management and fee structure. However, the potential disruption from Saba Capital and the need for stockholder approval introduce some uncertainty.

Positives

• The advisory fee rate will remain the same under the new agreement.
• Victory Capital will waive fees and/or reimburse expenses for at least three years to maintain current net operating expenses.
• The current portfolio managers are expected to continue managing the Funds.
• The transaction is not expected to result in any significant changes to the day-to-day management of the Funds, affect the Funds' investment objectives or investment strategies, or impact the investment philosophy or process of the Funds' portfolio management team.

Negatives

• Saba Capital Management, L.P., is expected to campaign against the new agreement, potentially disrupting Fund operations.
• If the new investment advisory agreement with Victory Capital is not approved by stockholders, it could potentially leave the Fund without an investment adviser.

Risks

• Saba Capital's campaign against the new agreement could disrupt Fund operations.
• Failure to approve the new agreement could leave the Fund without an investment adviser.
• The completion of the Transaction may not occur if certain conditions are not met.
• There can be no assurance that the MCSAA will be enforceable with respect to the Funds.
• The exercise of the provisions of the MCSAA may create exposure to liability for the Funds.

Future Outlook

The transaction is expected to close at the end of the first quarter of 2025, subject to regulatory approvals and other conditions. Victory Capital will waive fees and/or reimburse expenses for at least three years to maintain current net operating expenses.

Management Comments

• The Board of Directors recommends that you vote FOR the proposal to approve a new investment advisory agreement with Victory Capital for your Fund.
• Victory Capital has advised the Board that it does not anticipate that having Victory Capital provide investment advisory services would result in any reduction in the level or quality of services now provided to your Fund, and that Victory Capital is not aware of any circumstances that may have any adverse effect on its ability to fulfill its obligations to your Fund.
• The consummation of the Transaction is not expected to (1) result in any significant changes to the day-to-day management of your Fund, (2) affect your Funds investment objective(s) or investment strategies, or (3) impact the investment philosophy or process of your Funds portfolio management team.

Industry Context

The consolidation of asset management firms is a continuing trend in the industry, driven by the desire to achieve greater scale, reduce costs, and expand product offerings. This transaction reflects that trend, with Amundi and Victory Capital seeking to create a stronger combined entity.

Comparison to Industry Standards

• Victory Capital's acquisition of Amundi US is similar to other asset management mergers, such as Janus Henderson's merger in 2017, where two firms combined to create a larger entity with broader capabilities.
• The advisory fee rates for the Pioneer Municipal High Income Funds are within the range of fees charged by other closed-end municipal bond funds.
• The expense ratios of the Funds are compared to a peer group of funds selected by Strategic Insight Mutual Fund Research and Consulting, LLC, providing a benchmark for assessing their relative cost-effectiveness.

Management Changes

Stakeholder Impact

• Shareholders will vote on the new investment advisory agreement.
• Portfolio managers will continue to manage the funds.
• Customers will experience continuity in investment strategy.
• Service providers may change as Victory Capital integrates the Funds.

Next Steps

• Stockholders need to vote on the new investment advisory agreement.
• The transaction between Amundi and Victory Capital needs to close.
• Regulatory approvals need to be obtained.
• The Funds will transition to Victory Capital's service providers.

Key Dates

Keywords

Victory Capital, Amundi, Investment Advisory Agreement, Closed-End Funds, Saba Capital, Proxy Vote, Municipal Bonds, Investment Management, Merger, Acquisition