Pioneer High
Income Trust*

Annual Report | March 31, 2021

Ticker Symbol: PHT

* On April 21, 2021, the Trust redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer High Income Fund, Inc.

Paper copies of the Trust’s shareholder reports are no longer sent by mail, unless you specifically request paper copies of the reports from the Trust or from your financial intermediary, such as a broker-dealer, bank or insurance company. Instead, the reports are available on the Trust’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

 

 

Pioneer High Income Trust | Annual Report | 3/31/21 1

President’s Letter

Dear Shareholders,

The first few months of 2021 have brought some better news on the COVID-19 global pandemic front, as the deployment of the first approved COVID-19 vaccines is well underway, with expectations for widespread vaccine distribution by the middle of the year. In general, COVID-19 cases and related hospitalizations have been on the decline in the US, despite a few problematic “hot spots” in some states, and that has had a positive effect on overall market sentiment.

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, in the first few months of 2021, equity markets and other so-called “riskier” assets, such as high-yield bonds, have outperformed investments regarded as less risky, such as government debt. In addition, we’ve witnessed the long-awaited rebound in the performance of cyclical stocks, or stocks of companies with greater exposure to the ebbs and flows of the economic cycle, 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.

However, despite the dramatic market rebound since its March 2020 low point, volatility has remained elevated, with momentum rising and falling on seemingly every bit of positive or negative news about the virus. In addition, the recent US Presidential and Congressional elections have resulted in a power shift in Washington, DC, and that most likely portends some changes in fiscal policy above and beyond just additional pandemic-related stimulus. That, too, could lead to increased market volatility as investors analyze the various tax and spending plans, and wait to see what proposed policy alterations actually become law.

With the advent of COVID-19 in early 2020, we implemented our business continuity plan according to the new COVID-19 guidelines, and most of our employees have been working remotely since March 2020. To date, our operating environment has faced no interruption. I am proud of the careful planning that has taken place and confident we can maintain this environment for as long as is prudent. History in the making for a company that first opened its doors way back in 1928.

 

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. As 2020 has reminded us, investment risk can arise from a number of factors in today’s global economy, including slower or stagnating growth, changing U.S. Federal Reserve policy, oil price shocks, political and geopolitical factors and, unfortunately, major public health concerns such as a viral pandemic.

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 any and all 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 remain confident that the current crisis, like others in human history, will pass, and 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.
May 2021

Any information in this shareowner report regarding market or economic trends or the factors influencing the Trust’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 | 3/31/21

Note to Shareholders: On April 21, 2021, Pioneer High Income Trust redomiciled from a Delaware statutory trust to a Maryland corporation and was renamed Pioneer High Income 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 Trust. Please see Note 10 –Subsequent Events, for more information regarding the redomiciling.

In the following interview, Andrew Feltus discusses the factors that affected the performance of Pioneer High Income Trust during the 12-month period ended March 31, 2021. Mr. Feltus, Co-Director of High Yield and a portfolio manager at Amundi Asset Management US, Inc. (Amundi US), is responsible for the day-to-day management of the Trust, along with Matthew Shulkin, a vice president and a portfolio manager at Amundi US, and Kenneth Monaghan, Co-Director of High Yield and a portfolio manager at Amundi US.

Q How did the Trust perform during the 12-month period ended March 31, 2021?

A Pioneer High Income Trust returned 46.08% at net asset value (NAV) and 61.52% at market price during the 12-month period ended March 31, 2021.During the same 12-month period, the Trust’s benchmark, the ICE Bank of America US High Yield Index (the ICE BofA Index), returned 23.31%. The ICE BofA Index is an unmanaged, commonly accepted measure of the performance of high-yield securities. Unlike the Trust, the ICE BofA Index does not use leverage. While the use of leverage increases investment opportunity, it also increases investment risk.

During the same 12-month period, the average return at NAV of the 46 closed end funds in Morningstar’s High Yield Bond Closed End Funds category (which may or may not be leveraged) was 31.23%, while the same closed end fund Morningstar category’s average return at market price was 42.72%.

The shares of the Trust were selling at a 2.1% discount to NAV as of March 31, 2021. Comparatively, the shares of the Trust were selling at an 11.4% discount to NAV on March 31, 2020.

On March 31, 2021, the standardized 30-day SEC yield of the Trust’s shares was 6.40%*.

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

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Q How would you describe the investment environment for high-yield debt during the 12-month period ended March 31, 2021?

A March of 2020, just before the onset of the 12-month period, had been a disaster for investors in riskier assets, including high-yield debt, as attempts by governments around the globe to rein-in the spread of the COVID-19 virus accelerated and led to widespread economic shutdowns as well as to falling prices in credit-sensitive debt markets, and to liquidity concerns. The Trust’s benchmark, the ICE BofA Index, sold off significantly at that time, losing 11.8%, and pushing credit spreads to 877 basis points (bps) over US Treasuries as fears about the state of the economy and of increased defaults rose. (Credit spreads are commonly defined as the differences in yield between Treasuries and other types of fixed-income securities with similar maturities; a basis point is equal to 1/100th of a percentage point.)

However, the collapse in March of 2020 set-up the market for a strong rebound entering the Trust’s fiscal year, which began on April 1, 2020, as US authorities moved quickly to shore-up the domestic economy and tried to boost investors’ confidence by implementing extraordinary easing measures on both the fiscal and monetary policy fronts. The US Federal Reserve System (Fed) lowered the target range of the federal funds rate to zero and initiated multiple support programs aimed at stabilizing the markets, including bond purchases. Meanwhile, the US government passed two fiscal-stimulus bills between March and June of 2020, which helped many businesses and individuals weather the worst of the pandemic-related economic slump.

Investors met the unprecedented support from policy makers in the wake of the pandemic with enthusiasm entering the second calendar quarter of 2020. Market participants sought to put money to work at the now much-wider spreads, estimating that the compensation available was more than sufficient for taking on increased default risk. As the second quarter progressed, initial steps taken towards reopening the economy increased optimism for something resembling a “V-shaped” recovery (a sharp, quick rise). As a result, sentiment for investments in riskier assets rebounded strongly and allowed credit-sensitive areas of the bond market to recover much of their earlier losses, even as rising numbers of COVID-19 cases in multiple US states raised concerns.

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The market rally continued strongly through the summer of 2020, pausing temporarily in September as worries about economic growth returned to the forefront. Macroeconomic uncertainty in the markets at that time focused on heightened risks revolving around three key areas: negotiations over further US fiscal stimulus legislation, the ongoing COVID-19 situation, and the November US elections. A partisan divide over when to appoint Supreme Court Justice Ginsburg’s replacement further hardened both political parties’ negotiating positions and lowered the odds of passage of a broad fiscal-support package in Washington prior to the November election. At the same time, a notable uptick in European COVID-19 cases reignited fears that the US remained at risk for another wave of infections and a corresponding round of renewed or expanded economic lockdowns in response. Finally, investors’ concerns mounted over the potential for a protracted dispute over the presidential election results.

The market experienced a small sell-off in September; however, the continued effects of the government’s first two stimulus packages, in addition to decreasing default risk, helped to reverse that minor damage. The finalization of the election results further reduced uncertainty. Then, in December, the US economic outlook received two “shots in the arm,” as a pair of COVID-19 vaccines received emergency-use authorization from the US Food and Drug Administration (FDA), and lawmakers in Washington finally reached agreement on a $900 billion fiscal assistance package, the third US-government stimulus effort since the onset of the pandemic. Market participants viewed the rollout of the vaccines as the proverbial “light at the end of the tunnel” for the pandemic, betting that distribution of the vaccines would help alleviate the public-health uncertainty and bring forward the timing of a return to what might be regarded as economic normalcy. The additional stimulus measures from the government 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 a $1.9 trillion COVID-19 relief package soon after. Meanwhile, increased vaccine distributions and a gradual decline in COVID-19 cases and hospitalizations

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in the final weeks of the 12-month period also boosted market sentiment. In response, riskier assets rallied and Treasury yields moved higher into the end of March.

Returns for high-yield corporate bonds were well into double digits for the 12-month period, given the rebound in positive market sentiment for riskier assets. A recovery in oil prices from historical lows experienced in early 2020 – back up to the $60 per-barrel range – also supported high-yield returns, as energy issuers have typically represented a significant component within the benchmark ICE BofA Index. In the high-yield market, lower-rated issues generally outperformed higher-rated credits, with CCC-rated bonds outperforming BBs for the 12-month period.

Q What factors affected the Trust’s performance relative to the benchmark ICE BofA Index during the 12-month period ended March 31, 2021?

A In broad terms, the Trust carried leveraged exposure to the high-yield market, which boosted relative returns as high-yield securities posted strong performance over the 12-month period. In addition, the portfolio’s holdings had been weighted towards cyclical and consumer-oriented sectors. (Cyclical sectors are comprised of companies and industries that typically have had more exposure to the ebbs and flows of economic cycles.)

While the positioning within the Trust’s portfolio had had a negative effect on returns in the immediate wake of the COVID-19 crisis, the positioning began to benefit benchmark-relative performance as riskier assets rebounded in the second quarter of 2020. The sectors featuring the strongest returns, and that contributed positively to the Trust’s relative results, were those that had suffered the most severe setbacks in the immediate wake of the COVID-19 crisis, particularly energy, retail, airlines, and other leisure-oriented sectors, all of which experienced positive reversals of fortune after the initial pandemic-induced market sell-off. More broadly, our preference within energy for investments in the midstream pipeline segment, and minimal portfolio exposure to exploration & production companies that had been most directly affected by short-term changes in the price of oil, proved additive for the Trust’s relative returns over the full 12-month period. In fact, during the first quarter of 2021, the Trust’s energy positioning made the biggest positive contribution to benchmark-relative performance, both at the sector and security selection levels, as the price of crude oil rebounded above $60 (as we discussed earlier), and access to financing improved for the energy issuers whose debt we held in the portfolio.

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In terms of individual holdings, the leading positive contributors to the Trust’s benchmark-relative performance for the 12-month period included a portfolio overweight to the debt of Scientific Games, a provider of gambling and lottery products and services. While the pandemic-related shutdowns weighed heavily on market sentiment with respect to Scientific Games, the company’s bond prices recovered strongly as gaming activity began to resume in May of 2020. Surgery Center Holdings (SCH) was another strong performer for the Trust during the period. The company’s debt had been downgraded in late-March 2020 when the vast majority of elective surgical procedures were put on hold as medical resources were reallocated to help fight the COVID-19 outbreak. However, SCH, an ambulatory (or “day”) surgery center operator, was able to shift some of its centers to deal with COVID-19 patients, and was therefore well positioned to benefit when discretionary surgical procedures were allowed to resume. Arts & crafts retailer Michaels Stores was another notable positive contributor to the Trust’s relative returns for the period. While we have not had a positive view on the retail segment in general, we believe Michaels’ relatively sound capital structure and leading market position helped support a rebound in the bond price as market sentiment for riskier assets improved. Ultimately, the company agreed to be acquired, causing the portfolio’s bond holdings to appreciate further.

On the negative side, security selection within energy was a modest constraint on the Trust’s benchmark-relative performance for the 12-month period, despite the first-quarter 2021 outperformance we noted previously. In particular, exposure to Chesapeake Energy weighed on the Trust’s returns as the shale-based exploration & production firm filed for Chapter 11 bankruptcy protection from its creditors, against the backdrop of plummeting demand for oil and gas. In addition, a position in offshore drilling contractor Transocean detracted from the Trust’s relative performance, given a pullback in capital spending in the energy sector as oil prices faltered in early 2020.

Detractors outside of energy included a portfolio position in Diamond Sports, a regional sports network. Diamond saw the outlook for its debt deteriorate with the absence of sports-related content for several months during 2020, as live sporting events in general had been canceled as part of the initial COVID-19 containment measures. While helped by the resumption of professional sports leagues’ activities a few months into

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the pandemic, Diamond’s owners have pushed for a bond swap in order to reduce the company’s debt load, which has suppressed enthusiasm for the extant bonds.

Q Did the Trust’s yield, or dividend distributions** to shareholders change during the 12-month period ended March 31, 2021?

A The Trust’s dividend increased from 6.75 cents per share to 7.25 cents per share in November of 2020, based on management’s assessment of a sustainable level of income-generation, which reflected both the lower cost of funding and stronger book yields.

Q How did the level of leverage in the Trust change during the 12-month period ended March 31, 2021?

A The Trust employs leverage through a credit agreement.

As of March 31, 2021, 30.5% of the Trust’s total managed assets were financed by leverage, or borrowed funds, compared with 31.8% of the Trust’s total managed assets financed by leverage at the start of the 12-month period on April 1, 2020. During the 12-month period, the Trust increased the absolute amount of funds borrowed by a total of $24 million, to $123 million as of March 31, 2021. The percentage of the Trust’s total managed assets financed by leverage decreased during the 12-month period due to an increase in the total managed assets of the Trust.

Q Did the Trust have any exposure to derivative securities during the 12-month period ended March 31, 2021? If so, did the investments have a material effect on the Trust’s performance?

A Yes, the Trust had investments in forward foreign currency transactions during the period, which had a slight positive impact on relative performance. The Trust also had a position in CDX, an index-based credit default swap contract, which rose in value in line with the high-yield market during the 12-month period. The Trust also held currency call and put options during the period.

Q What is your investment outlook?

A The Fed has continued to message that it is willing to keep monetary policy accommodative for an extended period of time. While “an extended period of time” seems to be a purposefully vague duration,

** Dividends/distributions are not guaranteed.

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public comments from members of the Federal Open Market Committee (FOMC) have suggested that they could be thinking the “extended period” equals at least one year. Since the Fed has indicated that it will ignore this year’s expected rise in inflation as merely transitory, the attention of both investors and policy makers could turn to 2022 inflation measures. If the FOMC, as suggested, waits for a full year with Core PCE (personal consumption) inflation at more than 2% before tightening monetary policy, rate hikes could be off the table until 2023, in our opinion. That would be consistent with the Fed’s own “dot” projections. (The Fed’s “dot” plot/projection is a quarterly chart summarizing the outlook for the federal funds rate for each of the FOMC’s members.)

Market pricing, however, has reflected a somewhat faster pace for rate hikes, due in part to the possibility that the markets may not “buy” the Fed’s new operating framework. However, we feel it is important to understand that actual market pricing has reflected a combination of possible outcomes rather than single-point forecasts.

While we believe inflation is likely to be lower in 2022 than in 2021, the balance of inflation risks has been skewed to the upside, given massive debt-financed US fiscal stimulus and the prospect of government policies –such as a minimum wage hike, easier unionization, and generous unemployment benefits – that could potentially boost wage growth.

Given the additional fiscal stimulus package and a more-rapid US economic reopening, we have revised our 2021 US gross domestic product (GDP) growth forecast upward. The demand-driven growth dynamic could be positive for corporate fundamentals and consumer balance sheets. In turn, solid issuer fundamentals and still-elevated investor cash balances (earning close to 0% yield) may support further spread-asset performance.

We believe higher US Treasury yields present a risk to broad-market performance, to the extent that tighter financial conditions could start to weigh on economic activity. By our estimates, a 10-year US Treasury yield in the 2.50% to 3.00% area may likely become problematic for certain market segments and for economic growth. We currently regard

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the risk of such a move as remote; however, we have been monitoring the situation closely, as strong monthly economic data further out on the horizon may push yields marginally higher in the coming months.

The medium-term concern, in our view, is rising inflation, as we believe inflation will rise due to “base effects” (reflecting the very weak economic conditions seen last summer returning to normal, or at least closer to normal). The issue is the extent to which inflation increases might become sustained. If labor and commodities continue to be in short supply, we could see accelerations in wages and prices, which the Fed may ultimately feel compelled to address. As we noted earlier, for the short term, the Fed has signaled a willingness to “let the economy run hot.” This could be a positive for economic growth (and for high-yield issuers), but if the Fed reverses course at some point by raising the target range of the federal funds rate in an attempt to slow down the pace of growth, that, in all likelihood, would be a negative for the performance of riskier assets such as high-yield securities.

All in all, we believe we are currently seeing a very strong backdrop for high-yield fundamentals. Strong growth and corporate profits have led to falling default rates; markets have been reopening; and companies have had good access to financing in both loan and bond markets. Our main concern is valuations. High-yield spreads were in the lower quartile of historical ranges as of period-end, but they still look attractive, in our opinion, relative to other “spread assets” such as investment-grade corporate bonds and government-backed mortgage bonds.

Our base-case scenario is that default losses will be low, but that the level of valuations as well as rising Treasury yields could constrain total returns, even if high-yield securities continue to outperform other segments of the bond market.

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Please refer to the Schedule of Investments on pages 17–39 for a full listing of Trust 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, 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.

Investments in high-yield or lower-rated securities are subject to greater-than-average risk.

The Trust may invest in securities of issuers that are in default or that are in bankruptcy.

The Trust may invest in insurance-linked securities. The return of principal and the payment of interest and/or dividends on insurance linked securities are contingent on the non-occurrence of a pre-defined “trigger” event, such as a hurricane or an earthquake of a specific magnitude.

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

When interest rates rise, the prices of fixed-income securities held by the Trust will generally fall. Conversely, when interest rates fall the prices of fixed-income securities held by the Trust will generally rise.

Investments in the Trust are subject to possible loss due to the financial failure of the issuers of the underlying securities and their inability to meet their debt obligations.

The Trust may invest up to 50% of its total assets in illiquid securities. Illiquid securities may be difficult to dispose of at a price reflective of their value at the times when the Trust 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 are also more difficult to value and investment of the Trust’s assets in illiquid securities may restrict the Trust’s ability to take advantage of market opportunities.

The Trust employs leverage through a credit agreement. Leverage creates significant risks, including the risk that the Trust’s incremental income or capital appreciation for 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.

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The Trust is required to meet certain regulatory and other asset coverage requirements in connection with its use of leverage. In order to maintain required asset coverage levels, the Trust may be required to reduce the amount of leverage employed by the Trust, alter the composition of its 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 Trust’s shares.

These risks may increase share price volatility.

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