SEC Form N-CSR filed by Invesco High Income 2023 Target Term Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

 

(a) The Registrant’s annual report transmitted to shareholders pursuant to Rule 30e‑1 under the Investment Company Act of 1940 is as follows:

 

 

Invesco High Income 2023 Target Term Fund

NYSE: IHIT

 

 

 

    

 

Management’s Discussion of Fund Performance

 

Performance summary
For the fiscal year ended February 28, 2023, Invesco High Income 2023 Target Term Fund (the Fund), at net asset value (NAV), outperformed its benchmark, the Bloomberg U.S. CMBS Investment Grade Index. The Fund’s return can be calculated based on either the market price or the NAV of its shares. NAV per share is determined by dividing the value of the Fund’s portfolio securities, cash and other assets, less all liabilities and preferred shares, by the total number of common shares outstanding. Market price reflects the supply and demand for Fund shares. As a result, the two returns can differ, as they did during the fiscal year.
Performance
Total returns, 2/28/22 to 2/28/23
Fund at NAV			-2.67%
Fund at Market Value			-1.88
Bloomberg U.S. CMBS Investment Grade Indexq (Broad Market/Style-Specific Index)			-7.77
Market Price Discount to NAV as of 2/28/23			-2.62
Source(s): qBloomberg LP
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Investment return, NAV and common share market price will fluctuate so that you may have a gain or loss when you sell shares. Please visit invesco.com/us for the most recent month‑end performance. Performance figures reflect Fund expenses, the reinvestment of distributions (if any) and changes in NAV for performance based on NAV and changes in market price for performance based on market price.     Since the Fund is a closed‑end management investment company, shares of the Fund may trade at a discount or premium from the NAV. This characteristic is separate and distinct from the risk that NAV could decrease as a result of investment activities and may be a greater risk to investors expecting to sell their shares after a short time. The Fund cannot predict whether shares will trade at, above or below NAV. The Fund should not be viewed as a vehicle for trading purposes. It is designed primarily for risk-tolerant long-term investors.

 

 

2                    Invesco High Income 2023 Target Term Fund

 

 

3                    Invesco High Income 2023 Target Term Fund

 

Your Fund’s Long-Term Performance

Results of a $10,000 Investment

Fund and index data from 11/28/16

 

1 Source: Bloomberg LP

 

 

4                    Invesco High Income 2023 Target Term Fund

Average Annual Total Returns
As of 2/28/23
		NAV				Market
Inception (11/28/16)			3.55	%			2.82	%
5 Years			2.74				2.43
1 Year			-2.67				-1.88

 

 

5                    Invesco High Income 2023 Target Term Fund

 

Supplemental Information

 

 

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The Bloomberg U.S. CMBS Investment Grade Index consists of publicly issued, fixed rate, nonconvertible, investment grade debt securities.

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The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).

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A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.

 

 

 

Changes to the Trust’s Governing Documents

At a meeting held on September 19‑20, 2022, the Trust’s Board of Trustees (the “Board”) approved changes to the Trust’s Amended and Restated Agreement and Declaration of Trust (the “Declaration of Trust”) and the Trust’s Amended and Restated Bylaws (the “Bylaws”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Declaration of Trust or Bylaws, as applicable. The following is a summary of certain of these changes. This information may not reflect all of the changes that have occurred since you purchased the Trust.

 

 

Declaration of Trust

The Trust’s Declaration of Trust was amended to provide as follows:

 

 

 

6                    Invesco High Income 2023 Target Term Fund

 

 

Bylaws

The Trust’s Bylaws were amended to provide as follows:

– information required by the Bylaws with respect to any Proposed Nominee Associated Person;

– information to establish to the satisfaction of the Board of Trustees that the Proposed Nominee satisfies the trustee qualifications as set out in the Declaration of Trust;

– any other information relating to such Proposed Nominee or Proposed Nominee Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of trustees in an election contest pursuant to Section 14 of the Exchange Act (even if an election contest is not involved); and

– written and signed certification of each Proposed Nominee that (i) all information regarding such Proposed Nominee included in and/or accompanying the shareholder notice is true, complete and accurate, (ii) such Proposed Nominee is not, and will not become a party to, any agreement, arrangement or understanding (whether written or oral) with any person other than the Trust in connection with service or action as a Trustee of the Trust that has not been disclosed to the Trust, (iii) the Proposed Nominee satisfies the qualifications of persons nominated or seated as trustees as set forth in the Declaration of Trust at the time of their nomination, and (iv) such Proposed Nominee will continue to satisfy the qualifications of persons nominated or seated as trustees as set forth in the Declaration of Trust at the time of their election, if elected.

– any other information relating to such Shareholder, such beneficial owner, or any Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such Person with respect to the proposed business to be brought by such Person before the annual meeting pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, whether or not such Person intends to deliver a proxy statement or solicit proxies;

– a statement in writing with respect to the Shareholder and the beneficial owner, if any, on whose behalf the proposal is being made setting forth, among other requirements, the name and address of such Shareholder, as they appear on the Trust’s books, and of such beneficial owner and of any Shareholder Associated Person; the number and class of Shares with respect to such Shares, which

 

7                    Invesco High Income 2023 Target Term Fund

are owned beneficially and of record by such Shareholder, such beneficial owner, and any Shareholder Associated Person; the name of each nominee holder of Shares owned beneficially but not of record by such Shareholder, beneficial owner, or any Shareholder Associated Person, and the number and class of such Shares; and other information related to the foregoing as required by the Bylaws;

– a description of any agreement, arrangement or understanding, whether written or oral (including any derivative or short positions, profit interests, options or similar rights and borrowed or loaned shares) that has been entered into as of the date of the Shareholder Notice by, or on behalf of, such Shareholder, such beneficial owners, or any Shareholder Associated Person (i) the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power or pecuniary or economic interest of such Shareholder or, such beneficial owner, or any Shareholder Associated Person; or (ii) related to such proposal; and

– a description of all agreements, arrangements, or understandings (whether written or oral) between or among such Shareholder, such beneficial owners, or any Shareholder Associated Person, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such person or any Shareholder Associated Person, in such business, including any anticipated benefit therefrom to such person, or any Shareholder Associated Person.

For the purposes of the foregoing changes, a “Proposed Nominee Associated Person” of any Proposed Nominee shall mean (A) any person acting in concert with such Proposed Nominee, (B) any direct or indirect beneficial owner of Shares owned of record or beneficially by such Proposed Nominee or person acting in concert with the Proposed Nominee and (C) any person controlling, controlled by or under common control with such Proposed Nominee or a Proposed Nominee Associated Person.

For the purposes of the foregoing changes, a “Shareholder Associated Person” of any beneficial or record shareholder shall mean (A) any person acting in concert with such shareholder, (B) any direct or indirect beneficial owner of Shares owned of record or beneficially by such shareholder or any person acting in concert with such shareholder, (C) any person controlling, controlled by or under common control with such shareholder or a Shareholder Associated Person and (D) any member of the immediate family of such shareholder or Shareholder Associated Person.

The Trust’s Declaration of Trust and Bylaws contain other provisions, including all requirements for the conduct of shareholder meetings, and are available in their entirety upon request to the Trust’s Secretary, c/o Invesco Advisers, Inc., 11 Greenway Plaza, Suite 1000 Houston, TX 77046.

 

 

Application of Control Share Provisions

Effective August 1, 2022, the Trust became automatically subject to newly enacted control share acquisition provisions within the Delaware Statutory Trust Act (the “Control Share Provisions”). In general, the Control Share Provisions limit the ability of holders of “control beneficial interests” to vote their shares of a fund above various threshold levels that start at 10% unless the other shareholders of such fund vote to reinstate those rights. “Control beneficial interests” are aggregated to include the holdings of related parties and shares acquired before the effective date of the Control Share Provisions. A fund’s board of trustees may exempt acquisitions from the application of the Control Share Provisions.

The Control Share Provisions require shareholders to disclose any control share acquisition to the Trust within 10 days of such acquisition and, upon request, to provide any related information that the Trust’s Board reasonably believes is necessary or desirable.

The foregoing is only a summary of certain aspects of the Control Share Provisions. Shareholders should consult their own legal counsel with respect to the application of the Control Share Provisions to their beneficial interests of the Trust and any subsequent acquisitions of beneficial interests.

 

8                    Invesco High Income 2023 Target Term Fund

 

Dividend Reinvestment Plan

The dividend reinvestment plan (the Plan) offers you a prompt and simple way to reinvest your dividends and capital gains distributions (Distributions) into additional shares of your Invesco closed‑end Fund (the Fund). Under the Plan, the money you earn from Distributions will be reinvested automatically in more shares of the Fund, allowing you to potentially increase your investment over time. All shareholders in the Fund are automatically enrolled in the Plan when shares are purchased.

 

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Add to your account:

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Low transaction costs:

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Convenience:

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Safekeeping:

1.

Premium: If the Fund is trading at a premium - a market price that is higher than its NAV ‑you’ll pay either the NAV or 95 percent of

the market price, whichever is greater. When the Fund trades at a premium, you may pay less for your reinvested shares than an investor purchasing shares on the stock exchange. Keep in mind, a portion of your price reduction may be taxable because you are receiving shares at less than market price.

2.

Discount: If the Fund is trading at a discount - a market price that is lower than its NAV ‑ you’ll pay the market price for your reinvested shares.

1.

If you opt to continue to hold your non‑certificated whole shares (Investment Plan Book Shares), they will be held by the Agent electronically as Direct Registration Book-Shares (Book-Entry Shares) and fractional shares will be sold at the then-current market price. Proceeds will be sent via check to your address of record after deducting applicable fees, including per share fees such as any applicable brokerage commissions the Agent is required to pay.

2.

If you opt to sell your shares through the Agent, we will sell all full and fractional shares and send the proceeds via check to your address of record after deducting a $2.50 service fee and per share fees. Per share fees include any applicable brokerage commissions the Agent is required to pay.

3.

You may sell your shares through your financial adviser through the Direct Registration System (DRS). DRS is a service within the securities industry that allows Fund shares to be held in your name in electronic format. You retain full ownership of your shares, without having to hold a share certificate. You should contact your financial adviser to learn more about any restrictions or fees that may apply.

 

 

9                    Invesco High Income 2023 Target Term Fund

By credit quality		% of total investments
AAA		2.10%
AA+		2.30
AA		0.70
AA-		0.30
A		8.00
A-		5.10
BBB+		1.60
BBB		11.70
BBB-		31.50
BB+		3.90
BB		11.40
BB-		4.10
B+		3.40
B-		0.90
CCC		2.10
CCC-		0.30
Non‑Rated		10.20
Cash		0.40

				% of total net assets
1.		Commercial Mortgage Trust		34.29%
2.		WFRBS Commercial Mortgage Trust		22.61
3.		JP Morgan Chase Commercial Mortgage Securities Trust		20.75
4.		Morgan Stanley Bank of America Merrill Lynch Trust		12.07
5.		Citigroup Commercial Mortgage Trust		11.00

 

 

10                    Invesco High Income 2023 Target Term Fund

Schedule of Investments

February 28, 2023

 

		Principal Amount				Value
Asset-Backed Securities–122.09%(a)
BX Commercial Mortgage Trust, Series 2021-VOLT, Class D, 6.24% (1 mo. USD LIBOR + 1.65%), 09/15/2023(b)(c)		$	1,000,000			$	966,737
Citigroup Commercial Mortgage Trust,
Series 2013-GC11, Class D, 4.26%, 04/10/2023(b)(d)(e)			14,500,000				14,291,214
Series 2013-GC15, Class A4, 4.37%, 09/10/2023(e)			3,111,450				3,087,041
Series 2013-GC17, Class D, 5.10%, 11/10/2023(b)(e)			4,000,000				3,527,748
Series 2014-GC19, Class D, 5.09%, 02/10/2024(b)(d)(e)			1,500,000				1,409,640
Commercial Mortgage Trust,
Series 2012‑CR2, Class E, 5.07%, 05/15/2023(b)(d)(e)			1,500,000				1,255,319
Series 2013-CR11, Class D, 5.28%, 09/10/2023(b)(d)(e)			14,523,000				13,961,089
Series 2013‑CR6, Class D, 4.23%, 03/10/2023(b)(e)			3,375,000				2,621,757
Series 2013‑CR8, Class D, 4.03%, 05/10/2023(b)(d)(e)			6,000,000				5,610,493
Series 2013‑CR8, Class E, 4.00%, 05/10/2023(b)(e)			7,000,000				6,510,832
Series 2014-CR14, Class D, 4.73%, 01/10/2024(b)(d)(e)			12,267,000				10,871,576
Series 2014-CR16, Class D, 5.08%, 04/10/2024(b)(d)(e)			12,680,000				10,928,158
Series 2014-LC15, Class D, 5.17%, 03/10/2024(b)(d)(e)			9,010,000				8,326,568
Series 2014-UBS3, Class C, 4.90%, 05/10/2024(d)(e)			10,250,000				9,468,175
DBUBS Mortgage Trust, Series 2011- LC3A, Class E, 3.75%, 08/10/2026(b)(e)			500,000				385,394
FREMF Mortgage Trust,
Series 2014‑K36, Class B, 1.11%, 10/25/2023(b)(e)			1,025,000				1,013,736
Series 2015-KF12, Class B, 10.90% (1 mo. USD LIBOR + 7.10%), 03/25/2023(b)(c)			837,496				836,395
GS Mortgage Securities Corp. Trust, Series 2018‑TWR, Class G, 8.76% (1 mo. USD LIBOR + 4.17%), 07/15/2023(b)(c)			1,000,000				719,750
GS Mortgage Securities Trust,
Series 2013-GC10, Class D, 4.56%, 12/10/2024(b)(e)			6,625,000				5,574,473
Series 2013-GC12, Class B, 3.78%, 05/10/2023(e)			1,865,000				1,852,019
Series 2013-GC13, Class D, 4.21%, 06/10/2025(b)(d)(e)			11,546,000				5,259,145
Hilton USA Trust, Series 2016‑SFP, Class E, 5.52%, 11/05/2023(b)(d)			8,500,000				7,914,722
Series 2016‑SFP, Class F, 6.16%, 11/05/2023(b)			2,000,000				1,846,370

		Principal Amount				Value
JP Morgan Chase Commercial Mortgage Securities Trust,
Series 2013‑C10, Class D, 4.35%, 03/15/2023(d)(e)		$	19,348,000			$	16,825,419
Series 2013‑C10, Class E, 3.50%, 03/15/2023(b)(e)			860,000				696,319
Series 2013‑C13, Class XA, IO, 0.19%, 06/15/2023(d)(f)			46,485,264				428
Series 2013‑C13, Class XC, IO, 0.23%, 07/15/2023(b)(f)			69,684,664				43,922
Series 2013‑C16, Class D, 5.17%, 11/15/2023(b)(d)(e)			13,875,000				12,748,486
Series 2013-LC11, Class D, 4.37%, 05/15/2023(d)(e)			10,248,000				7,759,981
Series 2018‑PHH, Class E, 7.30% (1 mo. USD LIBOR + 2.71%), 06/15/2023(b)(c)(d)			3,000,000				1,028,576
Series 2018‑PHH, Class F, 7.90% (1 mo. USD LIBOR + 3.31%), 06/15/2023(b)(c)			2,500,000				492,035
Series 2018‑WPT, Class FFX, 5.54%, 07/05/2023(b)(e)			3,500,000				2,535,750
JPMBB Commercial Mortgage Securities Trust,
Series 2013‑C12, Class D, 4.22%, 06/15/2023(d)(e)			3,191,933				3,069,630
Series 2014‑C19, Class B, 4.39%, 04/15/2024(e)			6,500,000				6,279,748
Series 2014‑C19, Class D, 4.80%, 04/15/2024(b)(d)(e)			2,500,000				2,334,763
Morgan Stanley Bank of America Merrill Lynch Trust,
Series 2013‑C10, Class D, 4.21%, 06/15/2028(b)(d)(e)			3,426,000				1,665,919
Series 2013‑C13, Class XA, IO, 1.10%, 11/15/2023(d)(f)			33,287,952				98,289
Series 2014‑C14, Class D, 5.23%, 02/15/2024(b)(d)(e)			7,579,400				7,280,438
Series 2014‑C15, Class D, 5.05%, 04/15/2024(b)(d)(e)			16,500,000				15,444,596
UBS‑Barclays Commercial Mortgage Trust, Series 2013‑C5, Class D, 4.29%, 03/10/2023(b)(d)(e)			8,090,000				5,298,798

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

11                    Invesco High Income 2023 Target Term Fund

		Principal Amount				Value
WFRBS Commercial Mortgage Trust,
Series 2012‑C9, Class D, 4.88%, 03/15/2023(b)(d)(e)		$	1,876,923			$	1,753,515
Series 2013‑C12, Class E, 3.50%, 03/15/2023(b)			776,000				767,419
Series 2013‑C12, Class XA, IO, 1.18%, 03/15/2023(f)			211,447				0
Series 2013‑C13, Class XA, IO, 1.30%, 04/15/2023(b)(d)(f)			7,460,718				637
Series 2013‑C14, Class D, 4.09%, 06/15/2023(b)(d)(e)			3,400,000				2,154,101
Series 2013‑C16, Class E, 3.85%, 10/15/2023(b)			9,450,000				8,185,345
Series 2013‑C17, Class D, 5.20%, 11/15/2023(b)(d)(e)			20,419,000				18,949,089
Series 2013-UBS1, Class D, 5.19%, 12/15/2023(b)(d)(e)			5,000,000				4,884,395
Series 2014‑C19, Class D, 4.23%, 03/15/2024(b)(d)			10,000,000				9,186,372
Total Asset-Backed Securities (Cost $284,937,760)							247,722,321
U.S. Treasury Securities–7.62%
U.S. Treasury Notes–7.62%
0.50%, 11/30/2023 (Cost $15,472,641)			16,000,000				15,463,065
		Shares
Preferred Stocks–6.38%
Mortgage REITs–6.38%
Chimera Investment Corp., 8.00%, Series D, Pfd.(g)			167,800				3,557,360
Dynex Capital, Inc., 6.90%, Series C, Pfd.(g)			65,000				1,470,300
PennyMac Mortgage Investment Trust, 8.00%, Series B, Pfd.(g)			102,181				2,438,039

		Shares				Value
Mortgage REITs–(continued)
Rithm Capital Corp., 7.00%, Series D, Pfd.(g)			80,000			$	1,729,600
Two Harbors Investment Corp., 7.25%, Series C, Pfd.(g)			173,200				3,758,440
Total Preferred Stocks (Cost $14,655,620)							12,953,739
		Principal Amount
U.S. Dollar Denominated Bonds & Notes–1.60%
Homebuilding–1.60%
Taylor Morrison Communities, Inc./Taylor Morrison Holdings II, Inc., 5.63%, 03/01/2024(b) (Cost $3,263,811)		$	3,250,000				3,237,878
		Shares
Money Market Funds–0.56%
Invesco Government & Agency Portfolio, Institutional Class, 4.51%(h)(i)			395,652				395,652
Invesco Liquid Assets Portfolio, Institutional Class, 4.64%(h)(i)			283,041				283,097
Invesco Treasury Portfolio, Institutional Class, 4.50%(h)(i)			452,173				452,174
Total Money Market Funds (Cost $1,130,895)							1,130,923
TOTAL INVESTMENTS IN SECURITIES–138.25% (Cost $319,460,727)							280,507,926
REVERSE REPURCHASE AGREEMENTS–(39.43)%							(80,000,000	)
OTHER ASSETS LESS LIABILITIES–1.18%							2,394,581
NET ASSETS APPLICABLE TO COMMON SHARES–100.00%						$	202,902,507

 

 

Notes to Schedule of Investments:

 

 

Counterparty		Reverse Repurchase Agreements				Value of Non‑cash Collateral Pledged*				Net Amount
Wells Fargo Bank, N.A.		$80,000,000				$(80,000,000)				$–

* Amount does not include excess collateral pledged.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

12                    Invesco High Income 2023 Target Term Fund

 

		Value February 28, 2022				Purchases at Cost				Proceeds from Sales				Change in Unrealized Appreciation				Realized Gain				Value February 28, 2023				Dividend Income
Investments in Affiliated Money Market Funds:
Invesco Government & Agency Portfolio, Institutional Class			$   386,992			$	13,701,191			$	(13,692,531	)			$  -				$    -				$   395,652				$15,826
Invesco Liquid Assets Portfolio, Institutional Class			276,387				9,786,565				(9,780,328	)			9				464				283,097				14,862
Invesco Treasury Portfolio, Institutional Class			442,277				15,658,505				(15,648,608	)			-				-				452,174				22,800
Total			$1,105,656			$	39,146,261			$	(39,121,467	)			$  9				$464				$1,130,923				$53,488

 

Open Centrally Cleared Interest Rate Swap Agreements^(a)

 

Abbreviations:

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

13                    Invesco High Income 2023 Target Term Fund

Statement of Assets and Liabilities

 

Assets:
Investments in unaffiliated securities, at value (Cost $ 318,329,832)		$	279,377,003
Investments in affiliated money market funds, at value (Cost $ 1,130,895)			1,130,923
Other investments:
Variation margin receivable–centrally cleared swap agreements			439,247
Deposits with brokers:
Cash collateral – centrally cleared swap agreements			286,751
Cash			575,122
Receivable for:
Dividends			143,114
Interest			1,259,764
Investment for trustee deferred compensation and retirement plans			22,648
Other assets			1,106
Total assets			283,235,678
Liabilities:
Payable for:
Reverse repurchase agreements			80,000,000
Dividends			47,963
Accrued fees to affiliates			20,747
Accrued interest expense			26,155
Accrued trustees’ and officers’ fees and benefits			1,542
Accrued other operating expenses			214,116
Trustee deferred compensation and retirement plans			22,648
Total liabilities			80,333,171
Net assets applicable to common shares		$	202,902,507

Net assets applicable to common shares consist of:
Shares of beneficial interest – common shares		$	236,445,744
Distributable earnings (loss)			(33,543,237	)
		$	202,902,507
Common shares outstanding, no par value, with an unlimited number of common shares authorized:
Shares outstanding			24,145,611
Net asset value per common share		$	8.40
Market value per common share		$	8.18

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

14                    Invesco High Income 2023 Target Term Fund

Statement of Operations

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

15                    Invesco High Income 2023 Target Term Fund

Statement of Changes in Net Assets

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

16                    Invesco High Income 2023 Target Term Fund

Statement of Cash Flows

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

17                    Invesco High Income 2023 Target Term Fund

Financial Highlights

The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

18                    Invesco High Income 2023 Target Term Fund

Notes to Financial Statements

NOTE 1–Significant Accounting Policies

Invesco High Income 2023 Target Term Fund (the “Fund”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a closed‑end management investment company. The Fund is classified as diversified.

The Fund’s investment objectives are to provide a high level of current income and to return $9.835 per share (the original net asset value (the “NAV”) per common share before deducting offering costs of $0.02 per share) (“Original NAV”) to common shareholders on or about December 1, 2023 (the “Termination Date”). The objective to return the Fund’s Original NAV is not an express or implied guarantee obligation of the Fund or any other entity. The Fund intends, on or about the Termination Date, to cease its investment operations, liquidate its portfolio (to the extent possible), retire or redeem its leverage facilities, if any, and distribute all its liquidated net assets to common shareholders of record unless the term is extended for one period of up to six months by a vote of the Fund’s Board of Trustees. The Fund’s ability to successfully return the Original NAV to holders of common shares on or about the Termination Date will depend on market conditions at that time and the success of various portfolio and cash flow management techniques. Based on current market conditions as of the date of this report, management anticipates that the Fund’s objective of returning the Original NAV to common shareholders on or about the Termination Date will not be met.

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services – Investment Companies.

The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.

Fixed income securities (including convertible debt securities) generally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution‑size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots, and their value may be adjusted accordingly. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.

A security listed or traded on an exchange is generally valued at its trade price or official closing price that day as of the close of the exchange where the security is principally traded, or lacking any trades or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over‑the‑counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued using prices provided by an independent pricing service they may be considered fair valued. Futures contracts are valued at the daily settlement price set by an exchange on which they are principally traded. U.S. exchange-traded options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Non‑U.S. exchange-traded options are valued at the final settlement price set by the exchange on which they trade. Options not listed on an exchange and swaps generally are valued using pricing provided from independent pricing services.

Securities of investment companies that are not exchange-traded (e.g., open‑end mutual funds) are valued using such company’s end‑of‑business‑day net asset value per share.

Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end‑of‑day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.

Deposits, other obligations of U.S. and non‑U.S. banks and financial institutions are valued at their daily account value.

Foreign securities’ (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the New York Stock Exchange (“NYSE”). If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Invesco Advisers, Inc. (the “Adviser” or “Invesco”) may use various pricing services to obtain market quotations as well as fair value prices. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become not representative of market value in the Adviser’s judgment (“unreliable”). If, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, a significant event occurs that makes the closing price of the security unreliable, the Adviser may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith in accordance with Board- approved policies and related Adviser procedures (“Valuation Procedures”). Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.

Unlisted securities will be valued using prices provided by independent pricing services or by another method that the Adviser, in its judgment, believes better reflects the security’s fair value in accordance with the Valuation Procedures.

Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices may be used to value debt obligations, including corporate loans.

Securities for which market quotations are not readily available are fair valued by the Adviser in accordance with the Valuation Procedures. If a fair value price provided by a pricing service is unreliable, the Adviser will fair value the security using the Valuation Procedures. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.

The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.

Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general market conditions which are not specifically related to the particular issuer, such as real or perceived adverse economic conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, regional or global instability, natural or environmental disasters, widespread disease or other public health issues, war, acts of terrorism, significant governmental actions or adverse investor sentiment generally and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

The price the Fund could receive upon the sale of any investment may differ from the Adviser’s valuation of the investment, particularly for securities that are valued using a fair valuation technique. When fair valuation techniques are applied, the Adviser uses available information, including both observable and unobservable inputs and assumptions, to determine a methodology that will result in a valuation that the Adviser believes approximates market value. Fund

 

19                    Invesco High Income 2023 Target Term Fund

securities that are fair valued may be subject to greater fluctuation in their value from one day to the next than would be the case if market quotations were used. Because of the inherent uncertainties of valuation, and the degree of subjectivity in such decisions, the Fund could realize a greater or lesser than expected gain or loss upon the sale of the investment.

The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.

Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s net asset value and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.

 

The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.

 

Management estimates future expected cash flows at the time of purchase based on the anticipated repayment dates on the CMBS. Subsequent changes in expected cash flow projection may result in a prospective change in the timing or character of income recognized on these securities, or the amortized cost of these securities. The Fund amortizes premiums and/or accretes discounts based on the projected cash flows. Realized and unrealized gains and losses on CMBS are included in the Statement of Operations as Net realized gain (loss) from unaffiliated investment securities and Change in net unrealized appreciation (depreciation) of unaffiliated investment securities, respectively.

 

 

20                    Invesco High Income 2023 Target Term Fund

Interest rate, total return, index, and currency swap agreements are two‑party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a “basket” of securities representing a particular index.

In a centrally cleared swap, the Fund’s ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a Fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a “variation margin” amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.

An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.

Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements. Additionally, an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) includes credit related contingent features which allow Counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event that, for example, the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA master agreements, which would cause the Fund to accelerate payment of any net liability owed to the Counterparty. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Fund’s exposure is unlimited.

 

21                    Invesco High Income 2023 Target Term Fund

NOTE 2–Advisory Fees and Other Fees Paid to Affiliates

The Fund has entered into a master investment advisory agreement with the Adviser. Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of 0.70% of the Fund’s average daily managed assets. Managed assets for this purpose means the Fund’s net assets, plus assets attributable to outstanding preferred shares and the amount of any borrowings incurred for the purpose of leverage (whether or not such borrowed amounts are reflected in the Fund’s financial statements for purposes of generally accepted accounting principles).

Further, the Adviser has contractually agreed, through at least June 30, 2024, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.

For the year ended February 28, 2023, the Adviser waived advisory fees of $2,050.

The Fund has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year ended February 28, 2023, expenses incurred under this agreement are shown in the Statement of Operations as Administrative services fees. Invesco has entered into a sub‑administration agreement whereby State Street Bank and Trust Company (“SSB”) serves as fund accountant and provides certain administrative services to the Fund. Pursuant to a custody agreement with the Fund, SSB also serves as the Fund’s custodian.

Certain officers and trustees of the Trust are officers and directors of Invesco.

NOTE 3–Additional Valuation Information

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:

The following is a summary of the tiered valuation input levels, as of February 28, 2023. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

 

 

NOTE 4–Derivative Investments

The Fund may enter into an ISDA Master Agreement under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close‑out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.

For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.

 

22                    Invesco High Income 2023 Target Term Fund

Value of Derivative Investments at Period‑End

The table below summarizes the value of the Fund’s derivative investments, detailed by primary risk exposure, held as of February 28, 2023:

 

 

Effect of Derivative Investments for the year ended February 28, 2023

The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:

 

The table below summarizes the average notional value of derivatives held during the period.

 

NOTE 5–Trustees’ and Officers’ Fees and Benefits

Trustees’ and Officers’ Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and “Trustees’ and Officers’ Fees and Benefits” includes amounts accrued by the Fund to fund such deferred compensation amounts.

NOTE 6–Cash Balances and Borrowings

The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. Such balances, if any, at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.

The Fund has entered into a $80 million Master Repurchase and Securities Contract, which will mature on December 31, 2023. During the year ended February 28, 2023, the average daily balance of borrowings under the reverse repurchase agreements was $80,000,000, with an average interest rate of 3.67% and interest expense of $2,984,949. Interest is accrued daily and paid monthly. As of the year ended February 28, 2023, the pricing rate is equal to the 1 month LIBOR plus a pricing margin of 1.25%. The carrying amount of the Fund’s payable for borrowings as reported on the Statement of Assets and Liabilities approximates its fair value.

Reverse repurchase agreements outstanding as of February 28, 2023 were as follows:

 

NOTE 7–Distributions to Shareholders and Tax Components of Net Assets

Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended February 28, 2023 and 2022:

 

 

 

23                    Invesco High Income 2023 Target Term Fund

Tax Components of Net Assets at Period‑End:

 

The difference between book-basis and tax‑basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to lower-rated debt securities.

The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.

Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.

The Fund does not have a capital loss carryforward as of February 28, 2023.

NOTE 8–Investment Transactions

The aggregate amount of investment securities (other than short-term securities, U.S. Government obligations and money market funds, if any) purchased and sold by the Fund during the year ended February 28, 2023 was $5,920,427 and $18,824,159, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period‑end.

 

Cost of investments for tax purposes is $318,927,400.

NOTE 9–Reclassification of Permanent Differences

Primarily as a result of differing book/tax treatment of lower-rated debt securities, excise taxes, paydowns and derivative instruments, on February 28, 2023, undistributed net investment income was increased by $195,263, undistributed net realized gain was decreased by $73,681 and shares of beneficial interest was decreased by $121,582. This reclassification had no effect on the net assets of the Fund.

NOTE 10–Common Shares of Beneficial Interest

Transactions in common shares of beneficial interest were as follows:

 

The Fund may, when appropriate, purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase.

NOTE 11–Dividends

The Fund declared the following dividends to common shareholders from net investment income subsequent to February 28, 2023:

 

 

24                    Invesco High Income 2023 Target Term Fund

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Invesco High Income 2023 Target Term Fund

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco High Income 2023 Target Term Fund (the “Fund”) as of February 28, 2023, the related statements of operations and cash flows for the year ended February 28, 2023, the statement of changes in net assets for each of the two years in the period ended February 28, 2023, including the related notes, and the financial highlights for each of the five years in the period ended February 28, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of February 28, 2023, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended February 28, 2023 and the financial highlights for each of the five years in the period ended February 28, 2023 in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of February 28, 2023 by correspondence with the custodian, transfer agent and broker; when replies were not received from the broker, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

April 21, 2023

We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

25                    Invesco High Income 2023 Target Term Fund

Tax Information

Form 1099‑DIV, Form 1042‑S and other year‑end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisers.

The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.

The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended February 28, 2023:

 

 

 

 

 

26                    Invesco High Income 2023 Target Term Fund

Additional Information

Investment Objective, Policies and Principal Risks of the Fund

 

Recent Changes

During the Fund’s most recent fiscal year, there were no material changes in the Fund’s investment objectives or policies that have not been approved by shareholders or in the principal risk factors associated with investment in the Fund. This information may not reflect all of the changes that have occurred since you purchased the Fund.

Investment Objectives

The Fund’s investment objectives are to provide a high level of current income and to return $9.835 per share (the original net asset value (“NAV”) per Common Share before deducting offering costs of $0.02 per share) (“Original NAV”) to common shareholders on or about December 1, 2023 (the “Termination Date”).

The objective to return the Fund’s Original NAV is not an express or implied guarantee obligation of the Fund. There can be no assurance that the Fund will be able to return Original NAV to common shareholders, and such return is not backed by Invesco or any other entity. The Fund will attempt to strike a balance between the two objectives, seeking to provide as high a level of current income as is consistent with the Fund’s overall credit strategy, the declining average maturity of its portfolio strategy and its objective of returning the Original NAV on or about the Termination Date. However, as the Fund approaches the Termination Date, its monthly distributions are likely to decline, and there can be no assurance that the Fund will achieve either of its investment objectives or that the Fund’s investment strategies will be successful. Based on current market conditions as of the date of this report, management anticipates that the Fund’s objective of returning the Original NAV to common shareholders on or about the Termination Date will not be met.

Investment Policies of the Fund

The Fund seeks to achieve its investment objectives by primarily investing in securities collateralized by loans secured by real properties. To construct and manage the portfolio the Adviser employs a bottom‑up approach that focuses on fundamental analysis of the underlying loans. The Fund generally invests in a portfolio of real estate debt designed to generate high levels of current income through opportunistic deployment of capital. This includes investment grade commercial mortgage-backed securities (“CMBS”), non‑investment grade CMBS and other

non‑rated CMBS, as well as debt and preferred securities issued by real estate investment trusts (“REITs”).

Under normal circumstances:

∎ The Fund expects to invest at least 80% of its Managed Assets in real estate debt securities including CMBS;

∎ The Fund invests no more than 30% of its Managed Assets in securities rated below investment grade (BB+/Ba1 or lower), or are unrated but judged by the Adviser to be of comparable quality, at the time of investment;¹

∎ The Fund may invest no more than 10% of its Managed Assets in securities of non‑U.S. issuers, including securities of emerging markets issuers;

∎ The Fund may invest up to 10% of its Managed Assets in non‑U.S. dollar denominated securities. The Fund expects to use derivative instruments in an effort to hedge substantially all of the currency risk associated with non‑U.S. dollar denominated investments;

∎ The Fund will not invest in securities (other than perpetual preferred securities) with an expected maturity date extending beyond June 1, 2024. Perpetual preferred securities are not included in this restriction because they do not typically have a maturity date; and

∎ The Fund does not invest in common equity securities. This policy does not apply to shares of other investment companies.

“Managed Assets” means the average daily total asset value of the Fund minus the sum of accrued liabilities other than the aggregate liquidation preference of any preferred shares and/or the aggregate amount of any borrowings for investment purposes. The foregoing policies apply only at the time of any new investment.

The Fund concentrates its investments in the real estate finance industry, including, without limitation, investments in CMBS, REITs, other real estate-related securities, loans and other instruments that are secured by or otherwise have exposure to, real estate. The policy stated in the foregoing sentence is a fundamental policy of the Fund and may not be changed without approval of a majority of the Fund’s outstanding voting securities, as defined in the 1940 Act.

The Fund also may invest in other real estate debt and loan instruments, including senior secured bank loans, mortgage-backed securities (“MBS”), including residential mortgage-backed securities (“RMBS”), mortgage-backed securities not issued or guaranteed by a U.S. government agency (“Non‑Agency MBS”), collateralized loan obligations (“CLOs”), including commercial real estate CLOs (“CRE CLOs”), mezzanine loans, credit risk transfers, and real estate mortgage investment conduits (“REMICs”).

The Fund may use derivative instruments to attempt to hedge some of the risk of the Fund’s investments or its leverage, to enhance returns, to serve as a substitute for a position in an underlying asset, to reduce transaction costs, to manage the Fund’s effective interest rate exposure, to maintain full market exposure, to manage cash flows or to preserve capital. Such instruments may include financial futures contracts, swap contracts (including interest rate and currency swaps), options on securities, and options on securities indices, options on financial futures, structured notes or other derivative instruments.

The Fund may utilize the following forms of leverage: (a) borrowings from a financial institution, (b) reverse repurchase agreements and (c) the issuance of preferred shares of beneficial interest. The amount and sources of leverage will vary depending on market conditions. The Fund currently uses a CMBS repurchase facility as a form of leverage to seek to enhance its potential to produce a high level of current income and to return the Original NAV on or around the Termination Date.

The Fund may invest without limitation in instruments for which there is no readily available trading market or which are otherwise illiquid.

The Fund may invest in obligations of U.S. and non‑U.S. issuers and such obligations may be U.S. dollar denominated as well as non‑U.S. dollar denominated. To address foreign currency risks, the Fund may enter into foreign currency swaps and other hedging transactions.

Under normal market conditions, the Fund expects to invest a portion of its assets in issuers located anywhere in the world and, although under current market conditions the Fund does not intend to invest in obligations of issuers located in emerging market countries, the Fund may do so if it determines that such investments are appropriate for the Fund. The Fund considers emerging market countries to be those countries that are not included in the MSCI World Index.

The Fund may invest in debt securities of any duration. Although the Fund is not managed to a specific duration, given the nature of the Fund’s portfolio, the Fund’s portfolio generally has an intermediate average duration which is expected to decline over time as the Fund approaches the Termination Date.

The Fund may also invest in investment grade corporate debt securities, non‑investment grade corporate debt securities, and convertible securities.

The Fund does not invest in privately issued debt. For purposes of this limitation, securities issued pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and bank loans are not considered privately issued debt.

In seeking to return the Original NAV on or about the Termination Date, the Fund utilizes various portfolio and cash flow management techniques, including setting aside a portion of its net investment income, possibly retaining gains, utilization of various leverage techniques including participation in a CMBS repurchase facility, and limiting the longest expected maturity of any holding (other than perpetual preferred securities) to no later than June 1, 2024. Perpetual preferred securities are not included in this restriction because they do not typically have a maturity date. As a result, the average maturity of the Fund’s holdings is generally expected to shorten as the Fund approaches its Termination Date. Through its overall strategy, the Fund seeks to capitalize on the opportunity for attractive yields on securities collateralized by loans originated in 2013 and 2014 and that benefit from underlying property appreciation and, to a lesser extent, newly originated securities collateralized by loans benefitting from improved underwriting standards.

On or about the Termination Date, the Fund intends to cease its investment operations, liquidate its portfolio (to the extent possible), retire or redeem its leverage facilities, and seeks to return the Original NAV to common shareholders, unless the Fund’s term is extended for one period of up to six months by a vote of the Fund’s Board of Trustees. The amount distributed to common shareholders at the termination of the Fund will be based on the Fund’s NAV at that time, and depending upon a variety of factors, including the performance of the Fund’s

 

 

27                    Invesco High Income 2023 Target Term Fund

portfolio over the life of the Fund, may be less, and potentially significantly less, than the Original NAV, or a shareholder’s original investment. The Fund’s ability to return Original NAV to common shareholders on or about the Termination Date will depend on market conditions and the success of various portfolio and cash flow management techniques.

During temporary defensive periods, the Fund may deviate from its investment policies and objectives. During such periods, the Fund may invest up to 100% of its assets in short-term investments, including high quality, short-term securities, or may invest in short-, intermediate-, or long-term U.S. Treasury securities or cash equivalents. There can be no assurance that such techniques will be successful. Accordingly, during such periods, the Fund may not achieve its investment objectives.

Principal Risks of Investing in the Fund

As with any fund investment, loss of money is a risk of investing. The risks associated with an investment in the Fund can increase during times of significant market volatility. The principal risks of investing in the Fund are:

Market Risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. The value of the Fund’s investments may go up or down due to general market conditions that are not specifically related to the particular issuer, such as real or perceived adverse economic conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, regional or global instability, or adverse investor sentiment generally. The value of the Fund’s investments may also go up or down due to factors that affect an individual issuer or a particular industry or sector, such as changes in production costs and competitive conditions within an industry. In addition, natural or environmental disasters, widespread disease or other public health issues, war, military conflict, acts of terrorism, economic crisis or other events may have a significant impact on the value of the Fund’s investments, as well as the financial markets and global economy generally. Such circumstances may also impact the ability of the Adviser to effectively implement the Fund’s investment strategy. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.

COVID‑19. The “COVID‑19” strain of coronavirus has led to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets in general. COVID‑19 may adversely impact the Fund’s ability to achieve its investment objective. The COVID‑19 pandemic is likely to impact the financial stability of mortgage loans and mortgage loan borrowers underlying the CMBS, REITs and related real estate investments owned by the Fund. Potentially elevated levels of default would have an adverse impact on the Fund’s income, the value of its assets and distributions to its shareholders. The Fund’s ability to return the Original NAV to shareholders on or about the Termination Date may be impacted by current market conditions and will also depend on market conditions on or about the Termination Date, the presence or absence of defaulted or distressed securities in the Fund’s

portfolio that may prevent those securities from being sold in a timely manner at a reasonable price and various portfolio and cash flow management techniques. The full economic impact and ongoing effects of COVID‑19 (or other future epidemics or pandemics) at the macro-level and on individual businesses are unpredictable and may result in significant and prolonged effects on the Fund’s performance.

Market Disruption Risks Related to Russia-Ukraine Conflict. Following Russia’s invasion of Ukraine in late February 2022, various countries, including the United States, as well as North Atlantic Treaty Organization (NATO) member countries and the European Union, issued broad-ranging economic sanctions against Russia. The war in Ukraine (and the potential for further sanctions in response to Russia’s continued military activity) may escalate. These and other corresponding events, have had, and could continue to have, severe negative effects on regional and global economic and financial markets, including increased volatility, reduced liquidity, and overall uncertainty. The negative impacts may be particularly acute in certain sectors including, but not limited to, energy and financials. Russia may take additional countermeasures or retaliatory actions (including cyberattacks), which could exacerbate negative consequences on global financial markets. The duration of the conflict and corresponding sanctions and related events cannot be predicted. The foregoing may result in a negative impact on Fund performance and the value of an investment in the Fund, even beyond any direct investment exposure the Fund may have to Russian issuers or the adjoining geographic regions.

Risks Associated with Investment in Commercial Real Estate Loans. Investments in CMBS are subject to the various risks which relate to the pool of underlying assets in which the CMBS represents an interest. In addition to general market and economic condition risks, these risks include: declines in the value of real estate; declines in rental or occupancy rates; dependency on management skills of the borrower or third- party property management firm; risk depending on the timing of cash flows from the underlying mortgage properties; possible lack of available mortgage funds to refinance the mortgage loans at maturity; overbuilding; extended vacancies in properties; increases in property taxes and operating expenses, including energy costs; changes in zoning laws and other governmental rules, regulations and fiscal policies and compliance with existing legal and regulatory requirements, including environmental controls and regulations; risks related to the ability of a property to attract and retain tenants; expenses incurred in the cleanup of environmental problems; costs and delays involved in enforcing rights of a property owner against tenants that default or seek protection of bankruptcy laws; risks related to the type and use of a particular commercial property, e.g., hospitals, nursing homes, hospitality properties and other property types; casualty or condemnation losses, including where liability and casualty insurance does not provide full protection.

The above factors may impact the ability of a borrower to meet its obligations on the loan. Certain loans may default which could result in either a foreclosure of the property or a restructure of the loan. Such actions may impact the amount of proceeds ultimately derived from the loan, and the timing of receipt of such proceeds may be shorter or

longer than the original term of the loan. The occurrence of defaults and losses on the loans may result in downgrades of the CMBS by the NRSROs. Default risks with respect to CMBS investments may be further pronounced to the extent that the Fund invests heavily with a particular sponsor of CMBS, single-issuer CMBS, CMBS secured by a small or less diverse collateral pool or CMBS secured by a particular asset class.

CMBS and MBS Risk. CMBS and MBS, including collateralized debt obligations and collateralized mortgage obligations, differ from conventional debt securities because principal is paid back over the life of the security rather than at maturity. CMBS and MBS are subject to prepayment or call risk, as well as extension risk. An unexpected rise in interest rates could reduce the rate of prepayments and extend the life of the CMBS and MBS, causing the price of the CMBS and MBS and the Fund’s share price to fall and would make the CMBS and MBS more sensitive to interest rate changes. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool will adversely affect the value of CMBS and MBS and will result in losses to the Fund. Privately issued mortgage-related securities are not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have government or government-sponsored entity guarantee. As a result, the mortgage loans underlying privately issued mortgage-related securities may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored mortgage-related securities and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics.

Changing Fixed Income Market Conditions Risk. Increases in the federal funds and equivalent foreign rates or other changes to monetary policy or regulatory actions may expose fixed income markets to heightened volatility and reduced liquidity for certain fixed income investments, particularly those with longer maturities. It is difficult to predict the impact of interest rate changes on various markets. In addition, decreases in fixed income dealer market-making capacity may persist in the future, potentially leading to heightened volatility and reduced liquidity in the fixed income markets. As a result, the value of the Fund’s investments and share price may decline. Changes in central bank policies could also result in higher than normal redemptions by shareholders, which could potentially increase the Fund’s portfolio turnover rate and transaction costs and potentially lower the Fund’s performance returns.

Limited Term Risk. It is anticipated that the Fund will terminate and liquidate its assets and return the proceeds to its shareholders on or before a specific date, although it could terminate sooner or later under certain conditions. The Fund’s limited term may cause it to sell securities when it otherwise would not, including at times when market conditions are not favorable, or at a time when a particular security is in default or bankruptcy, or otherwise in severe distress, or when an instrument has extended beyond its original maturity date due to underlying loan extensions, which may cause the Fund to lose money.

Earnings Risk. The Fund’s limited term may cause it to invest in lower yielding securities or hold the proceeds of securities sold near the end of its term in cash or cash equivalents, which may adversely affect

 

 

28                    Invesco High Income 2023 Target Term Fund

the performance of the Fund or the Fund’s ability to maintain its dividend.

Market Discount from Net Asset Value Risk. Shares of closed‑end investment companies like the Fund frequently trade at prices lower than their net asset value. Because the market price of the Fund’s common shares is determined by factors such as relative market supply and demand, general market and economic circumstances, and other factors beyond the control of the Fund, the Fund cannot predict whether its shares of common stock will trade at, below or above net asset value. This characteristic is a risk separate and distinct from the risk that the Fund’s net asset value could decrease as a result of investment activities. Common shareholders bear a risk of loss to the extent that the price at which they sell their shares is lower than at the time of purchase.

Leverage Risk. The Fund’s anticipated use of leverage creates special risks for common shareholders, including potential interest rate risks and the likelihood of greater volatility of NAV and market price of, and distributions on, the Common Shares. In shorter investment horizons or in periods of economic downturn or higher volatility, leverage will typically magnify downside outcomes. There is no assurance that the Fund will utilize leverage or that the Fund’s use of leverage will be successful.

CLO and CRE CLO Risk. CLOs, including CRE CLOs, are subject to the risks of substantial losses due to actual defaults by underlying borrowers, which will be greater during periods of economic or financial stress. CLOs may be adversely impacted due to collateral defaults of subordinate tranches, market anticipation of defaults, and investor aversion to CLO securities as a class. The risks of CLOs are greater to the extent the Fund invests in CLOs that hold loans of uncreditworthy borrowers or if the Fund holds subordinate tranches of the CLO that absorbs losses from the defaults before senior tranches. In addition, CLOs are subject to interest rate risk and credit risk.

Credit Risk Transfer Securities Risk. Credit risk transfer securities are unguaranteed and unsecured debt securities issued by the government sponsored entity and therefore are not directly linked to or backed by the underlying mortgage loans. As a result, in the event that a government sponsored entity fails to pay principal or interest on its credit risk transfer securities or goes through a bankruptcy, insolvency or similar proceeding, holders of such credit risk transfer securities have no direct recourse to the underlying mortgage loans and will generally receive recovery on par with other unsecured note holders in such a scenario. The risks associated with an investment in credit risk transfer securities are different than the risks associated with an investment in mortgage-backed securities issued by Fannie Mae and Freddie Mac, or other government sponsored entities or issued by a private issuer, because some or all of the mortgage default or credit risk associated with the underlying mortgage loans is transferred to investors. As a result, investors in these securities could lose some or all of their investment in these securities if the underlying mortgage loans default.

Defaulted Securities Risk. Defaulted securities pose a greater risk that principal will not be repaid than non‑defaulted securities. Defaulted securities and any securities received in an exchange for such securities may be subject to restrictions on resale.

Due Diligence Risk. Before making any investment, the Adviser assesses the factors that it believes will determine the success of that investment. This

process is particularly important and subjective because there may be little information publicly available about CMBS and other real estate debt investments, other than what is available in the prospectuses, offering memoranda or similar disclosure documentation associated with the CMBS and other investments. The Fund cannot provide any assurances that these due diligence processes will uncover all relevant facts of the underlying commercial real estate loans or that any investment in CMBS and other investments will be successful.

High Yield Debt Securities (Junk Bond) Risk. The Fund’s investments in high yield debt securities (commonly referred to as “junk bonds”) and other lower-rated securities will subject the Fund to substantial risk of loss. These securities are considered to be speculative with respect to the issuer’s ability to pay interest and principal when due and are more susceptible to default or decline in market value due to adverse economic, regulatory, political or company developments than higher rated or investment grade securities. Prices of high yield debt securities tend to be very volatile. These securities are less liquid than investment grade debt securities and may be difficult to sell at a desirable time or price, particularly in times of negative sentiment toward high yield securities.

Debt Securities Risk. The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. If an issuer seeks to restructure the terms of its borrowings or the Fund is required to seek recovery upon a default in the payment of interest or the repayment of principal, the Fund may incur additional expenses. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.

Interest Rate Risk. Interest rate risk is the risk that rising interest rates, or an expectation of rising interest rates in the near future, will cause the values of the Fund’s investments in debt securities to decline. The values of debt securities usually change when prevailing interest rates change. When interest rates rise, the values of outstanding debt securities generally fall, and those securities may sell at a discount from their face amount. Additionally, when interest rates rise, the decrease in values of outstanding debt securities may not be offset by higher income from new investments. When interest rates fall, the values of already-issued debt securities generally rise and the Fund’s investments in new securities may be at lower yields and may reduce the Fund’s income. The values of longer-term debt

securities usually change more than the values of shorter-term debt securities when interest rates change; thus, interest rate risk is usually greater for securities with longer maturities or durations. Interest rate changes may have different effects on the values of mortgage-related securities because of prepayment and extension risks.

Credit Risk. Issuers of securities in which the Fund may invest may default on their obligations to pay dividends, principal or interest when due. This non‑payment would result in a reduction of income to the Fund, a reduction in the value of a convertible or debt security experiencing non‑payment and, potentially, a decrease in the NAV of the Fund. With respect to the Fund’s investments in securities that are secured, there can be no assurance that liquidation of collateral would satisfy the issuer’s obligation in the event of non‑payment of scheduled dividend, interest or principal or that such collateral could be readily liquidated. In the event of bankruptcy of an issuer, the Fund could experience delays or limitations with respect to its ability to realize the benefits of any collateral securing a security. To the extent that the credit rating assigned to a security in the Fund’s portfolio is downgraded, the market price and liquidity of such security may be adversely affected.

Credit Spread Risk. Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market expects lower grade bonds to default more frequently. Widening credit spreads may quickly reduce the market values of the Fund’s lower-rated and unrated securities. Some unrated securities may not have an active trading market or may trade less actively than rated securities, which means that the Fund might have difficulty selling them promptly at an acceptable price.

Duration Risk. Duration is a measure of the price sensitivity of a debt security or portfolio to interest rate changes. Duration risk is the risk that longer-duration debt securities are more volatile and thus more likely to decline in price, and to a greater extent, than shorter-duration debt securities, in a rising interest-rate environment. “Effective duration” attempts to measure the expected percentage change in the value of a bond or portfolio resulting from a change in prevailing interest rates. The change in the value of a bond or portfolio can be approximated by multiplying its duration by a change in interest rates. For example, if a bond has an effective duration of three years, a 1% increase in general interest rates would be expected to cause the bond’s value to decline about 3% while a 1% decrease in general interest rates would be expected to cause the bond’s value to increase 3%. The duration of a debt security may be equal to or shorter than the full maturity of a debt security.

Risks Associated with Underlying Obligations of Re‑REMICs. Re‑securitizations of Real Estate Mortgage Investment Conduits Securities (“Re‑REMICs”) bear the risks associated with their investments in the underlying collateralized mortgage obligation (“CMO”) or REMIC class and vary substantially depending on the combination of rights associated with that class. An investment in the most subordinated classes of a CMO or REMIC bears a disproportionate share of the risks associated with a mortgage-backed security generally, including prepayment and/or extension risk, interest rate risk, income risk, market risk, liquidity risk and any other

 

 

29                    Invesco High Income 2023 Target Term Fund

risk associated with a debt or equity instrument with similar features to the relevant class. As a result, an investment in the most subordinated classes of a CMO or REMIC is often riskier than an investment in other types of mortgage- backed securities. Re‑REMICs are typically exempt from registration with the SEC under Rule 144A and are often rated by only one NRSRO. These factors can limit liquidity on Re‑ REMIC securities compared to SEC‑registered securities.

Risks Associated with Interest Shortfalls. The Fund’s CMBS investments may be subject to interest shortfalls due to interest collected from the underlying loans not being sufficient to pay accrued interest to all of the CMBS. Interest shortfalls will occur when the servicer does not advance full interest payments on defaulted loans to the CMBS trust issuer.

Extension Risk. The Fund’s CMBS and other investments may be subject to extension, resulting in the term of the securities being longer than expected. Extensions are affected by a number of factors, including the general availability of financing in the market, the value of the related mortgaged property, the borrower’s equity in the mortgaged property, the financial circumstances of the borrower, fluctuations in the business operated by the borrower on the mortgaged property, competition, general economic conditions and other factors. Such extensions may also be made without the Adviser’s consent.

Reinvestment Risk. Reinvestment risk is the risk that when interest rates fall, the Fund may be required to reinvest the proceeds from a security’s sale or redemption at a lower interest rate. Callable bonds are generally subject to greater reinvestment risk than non‑callable bonds. As the average maturity of the Fund’s portfolio shortens, the Fund will reinvest in shorter maturity securities at market interest rates that may be lower than at the Fund’s inception. As a result, the Fund’s income and distributions may decline over the term of the Fund. The likelihood of this risk may increase as the Fund approaches its Termination Date.

Call Risk. If interest rates fall, it is possible that issuers of securities with high interest rates will prepay or call their securities before their maturity dates. In this event, the proceeds from the called securities would likely be reinvested by the Fund in securities bearing the new, lower interest rates, resulting in a possible decline in the Fund’s income and distributions to shareholders.

Subordinated Investment Risk. To the extent the Fund invests in subordinated debt or other similar debt instruments that are junior in an issuer’s capital structure, such investments would be subordinate to senior indebtedness and expose the Fund to greater risk of loss.

Mezzanine Loan Risk. Mezzanine loans are not secured by interests in the underlying commercial properties, and are also subject to risk of subordination and share certain characteristics of subordinate loan interests described herein. As with commercial mortgage loans, repayment of a mezzanine loan is dependent on the successful operation of the underlying commercial properties and, therefore, is subject to similar considerations and risks, including certain of the considerations and risks described herein. Mezzanine loans may also be affected by the successful operation of other properties, the interests in which are not pledged to secure the mezzanine loan.

Derivatives Risk. The value of a derivative instrument depends largely on (and is derived from)

the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by holding a position in the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative or the anticipated value of the underlying asset, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Derivatives strategies may not always be successful. For example, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.

Foreign Securities Risk. The value of the Fund’s foreign investments may be adversely affected by political and social instability in the home countries of the issuers of the investments, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Foreign companies generally may be subject to less stringent regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls, and may therefore be more susceptible to fraud or corruption. Also, there may be less publicly available information about companies in certain foreign countries than about U.S. companies making it more difficult for the Adviser to evaluate those companies. The laws of certain countries may put limits on the Fund’s ability to recover its assets held at a foreign bank if the foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. Trading in many foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors. Unless the Fund has hedged its foreign currency risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful. For instance, the use of currency forward contracts, if used by the Fund, could reduce

performance if there are unanticipated changes in currency exchange rates.

Emerging Markets Securities Risk. Emerging markets (also referred to as developing markets) are generally subject to greater market volatility, political, social and economic instability, uncertain trading markets and more governmental limitations on foreign investment than more developed markets. Such countries’ economies may be more dependent on relatively few industries or investors that may be highly vulnerable to local and global changes. In addition, companies operating in emerging markets may be subject to lower trading volume and greater price fluctuations than companies in more developed markets. Companies in emerging market countries generally may be subject to less stringent regulatory, disclosure, financial reporting, accounting, auditing and recordkeeping standards than companies in more developed countries. As a result, information, including financial information, about such companies may be less available and reliable which can impede the Fund’s ability to evaluate such companies. Securities law and the enforcement of systems of taxation in many emerging market countries may change quickly and unpredictably, and the ability to bring and enforce actions (including bankruptcy, confiscatory taxation, expropriation, nationalization of a company’s assets, restrictions on foreign ownership of local companies, restrictions on withdrawing assets from the country, protectionist measures and practices such as share blocking), or to obtain information needed to pursue or enforce such actions, may be limited. In addition, the ability of foreign entities to participate in privatization programs of certain developing or emerging market countries may be limited by local law. Investments in emerging markets securities may be subject to additional transaction costs, delays in settlement procedures, unexpected market closures, and lack of timely information.

Preferred Securities Risk. Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. Preferred securities also may be subordinated to bonds or other debt instruments in an issuer’s capital structure, subjecting them to a greater risk of non‑payment than these more senior securities. For this reason, the value of preferred securities will usually react more strongly than bonds and other debt securities to actual or perceived changes in the company’s financial condition or prospects. Preferred securities may be less liquid than many other securities, such as common stocks, and generally offer no voting rights with respect to the issuer.

REIT Risk/Real Estate Risk. Investments in real estate related instruments may be adversely affected by economic, legal, cultural, environmental or technological factors that affect property values, rents or occupancies. Shares of real estate related companies, which tend to be mall- and mid‑cap companies, may be more volatile and less liquid than larger companies. If a real estate related company defaults on certain types of debt obligations held by the Fund the Fund may acquire real estate directly, which involves additional risks such as environmental liabilities; difficulty in valuing and selling the real estate; and economic or regulatory changes.

Senior Loan Risk. Senior loans that the Fund in which the Fund invests are usually rated below investment grade, and share the same risks of other below investment grade debt instruments. Although the Fund may invest in senior loans that are secured

 

 

30                    Invesco High Income 2023 Target Term Fund

by specific collateral, there can be no assurance the liquidation of such collateral would satisfy an issuer’s obligation to the Fund in the event of issuer default or that such collateral could be readily liquidated under such circumstances. If the terms of a senior loan do not require the issuer to pledge additional collateral in the event of a decline in the value of the already pledged collateral, the Fund will be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the issuer’s obligations under the senior loan.

In the event of bankruptcy of an issuer, the Fund could also experience delays or limitations with respect to its ability to realize the benefits of any collateral securing a senior loan. Some senior loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the senior loans to presently existing or future indebtedness of the issuer or take other action detrimental to lenders, including the Fund. Such court action could under certain circumstances include invalidation of senior loans.

Reverse Repurchase Agreement Risk. If the market value of securities to be repurchased declines below the repurchase price, or the other party defaults on its obligation, the Fund may be delayed or prevented from completing the transaction. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds from the sale of the securities may be restricted. When the Fund engages in reverse repurchase agreements, changes in the value of the Fund’s investments will have a larger effect on its share price than if it did not engage in these transactions due to the effect of leverage, which will make the Fund’s returns more volatile and increase the risk of loss. Additionally, interest expenses related to reverse repurchase agreements could exceed the rate of return on other investments held by the Fund, thereby reducing returns to shareholders.

Forward Foreign Currency Contracts Risk. Forward foreign currency contracts are used to lock in the US dollar price of a security denominated in a foreign currency or protect against possible losses from changes in the relative value of the US dollar against a foreign currency. They are subject to the risk that anticipated currency movements will not be accurately predicted or do not correspond accurately to changes in the value of the Fund’s holdings, which could result in losses and additional transaction costs. The use of forward contracts could reduce performance if there are unanticipated changes in currency prices. A contract to sell a foreign currency would limit any potential gain that might be realized if the value of the currency increases. A forward foreign currency contract may also result in losses in the event of a default or bankruptcy of the counterparty.

Liquidity Risk. The Fund may be unable to sell illiquid investments at the time or price it desires and, as a result, could lose its entire investment in such investments. An investment may be illiquid due to a lack of trading volume in the investment or if the investment is privately placed and not traded in any public market or is otherwise restricted from trading. Certain restricted securities require special registration and pose valuation difficulties. Liquid securities can become illiquid during periods of market stress. If a significant amount of the Fund’s securities become illiquid, the Fund may not be able to timely pay redemption proceeds and may need to sell securities at significantly reduced prices.

Restricted Securities Risk. Limitations on the resale of restricted securities may have an adverse effect on their marketability, and may prevent the Fund from disposing of them promptly at reasonable prices. There can be no assurance that a trading market will exist at any time for any particular restricted security. Transaction costs may be higher for restricted securities. Also, restricted securities may be difficult to value because market quotations may not be readily available, and the securities may have significant volatility. In addition, the Fund may get only limited information about the issuer of a restricted security and therefore may be less able to predict a loss.

Rule 144A Securities and Other Exempt Securities Risk. The Fund may invest in Rule 144A securities and other types of exempt securities, which are not registered for sale pursuant to an exemption from registration under the Securities Act of 1933, as amended. These securities are also known as privately issued securities, and typically may be resold only to qualified institutional buyers, or in a privately negotiated transaction, or to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met for an exemption from registration. If there are an insufficient number of qualified institutional buyers interested in purchasing such securities at a particular time, the Fund may have difficulty selling such securities at a desirable time or price. As a result, the Fund’s investment in such securities may be subject to increased liquidity risk. In addition, the issuers of Rule 144A securities may require their qualified institutional buyers (such as the Fund) to keep certain offering information confidential, which could adversely affect the ability of the Fund to sell such securities.

LIBOR Transition Risk. The Fund may have investments in financial instruments that utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. LIBOR is intended to measure the rate generally at which banks can lend and borrow from one another in the relevant currency on an unsecured basis. In the years following the 2008 financial crisis, the integrity of LIBOR was increasingly questioned because several banks contributing to its calculation were accused of rate manipulation and because of a general contraction in the unsecured interbank lending market. As a result, regulators and financial industry working groups in several jurisdictions have worked over the past several years to identify alternative reference rates (“ARRs”) to replace LIBOR and to assist with the transition to the new ARRs. For example, the Federal Reserve Bank of New York has identified the Secured Overnight Financing Rate (“SOFR”) as the intended replacement to USD LIBOR and foreign regulators have proposed other interbank offered rates, such as the Sterling Overnight Index Average (“SONIA”) and other replacement rates, which could also be adopted. Consequently, the publication of most LIBOR rates ceased at the end of 2021, but a selection of widely used USD LIBOR rates continues to be published until June 2023 to allow for an orderly transition away from these rates. Additionally, key regulators have instructed banking institutions to cease entering into new contracts that reference these USD LIBOR settings after December 31, 2021, subject to certain limited exceptions.

There remains uncertainty and risks relating to the continuing LIBOR transition and its effects on the

Fund and the instruments in which the Fund invests. For example, there can be no assurance that the composition or characteristics of any ARRs or financial instruments in which the Fund invests that utilize ARRs will be similar to or produce the same value or economic equivalence as LIBOR or that these instruments will have the same volume or liquidity. Additionally, although regulators have generally prohibited banking institutions from entering into new contracts that reference those USD LIBOR settings that continue to exist, there remains uncertainty and risks relating to certain “legacy” USD LIBOR instruments that were issued or entered into before December 31, 2021 and the process by which a replacement interest rate will be identified and implemented into these instruments when USD LIBOR is ultimately discontinued. The effects of such uncertainty and risks in “legacy” USD LIBOR instruments held by the Fund could result in losses to the Fund.

Management Risk. The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. There can be no guarantee that the Adviser’s investment techniques or investment decisions will produce the desired results. Additionally, legislative, regulatory, or tax developments may affect the investments or investment strategies available to the Adviser in connection with managing the Fund, which may also adversely affect the ability of the Fund to achieve its investment objective.

1

Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. Ratings are based upon using Moody’s Investor Services, Inc. (“Moody’s”), Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“Standard & Poor’s” or “S&P”), Fitch Ratings, a part of the Fitch Group (“Fitch”), Kroll Bond Rating Agency, Inc. (“Kroll”), DBRS Limited (“DBRS”) and Morningstar Credit Ratings, LLC (“Morningstar”) if any such nationally recognized statistical rating organizations (“NRSROs”) rate the security. If securities are rated differently by the ratings agencies, the highest rating is applied. For more information on rating methodology, please visit www.standardandpoors.com and select “Understanding Ratings” under Rating Resources on the homepage; www.fitchratings.com and select “Understanding Credit Ratings” from the drop-down menu on the homepage; and www.moodys.com and select “Methodology,” then “Rating Methodologies” under Research Type on the left-hand side.

 

 

31                    Invesco High Income 2023 Target Term Fund

Trustees and Officers

The address of each trustee and officer is 1331 Spring Street NW, Suite 2500, Atlanta, Georgia 30309. Generally, each trustee serves for a three year term or until his or her successor has been duly elected and qualified, and each officer serves for a one year term or until his or her successor has been duly elected and qualified. Column two below includes length of time served with predecessor entities, if any.

 

 

 

T-1                    Invesco High Income 2023 Target Term Fund

 

 

T-2                    Invesco High Income 2023 Target Term Fund

 

 

T-3                    Invesco High Income 2023 Target Term Fund

 

 

T-4                    Invesco High Income 2023 Target Term Fund

 

 

T-5                    Invesco High Income 2023 Target Term Fund

 

 

 

T-6                    Invesco High Income 2023 Target Term Fund