UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-23186
Invesco High Income 2023 Target Term Fund | ||
(Exact name of registrant as specified in charter) | ||
1555 Peachtree Street, N.E., Suite 1800 Atlanta, Georgia 30309 | ||
(Address of principal executive offices) (Zip code) | ||
Sheri Morris 1555 Peachtree Street, N.E., Suite 1800 Atlanta, Georgia 30309 | ||
(Name and address of agent for service) |
Registrant’s telephone number, including area code: (713) 626-1919
Date of fiscal year end: 2/28
Date of reporting period: 8/31/2019
Item 1. Reports to Stockholders.
Semiannual Report to Shareholders | August 31, 2019 |
Bruce Crockett |
Andrew Schlossberg |
2 | Invesco High Income 2023 Target Term Fund |
Fund at NAV | 6.76% |
Fund at Market Value | 5.97 |
Bloomberg Barclays U.S. Corporate MBS Investment Grade Index▼ | 7.69 |
Market Price Discount to NAV as of 8/31/19 | –1.23 |
Source:▼Bloomberg L.P. | |
3 | Invesco High Income 2023 Target Term Fund |
■ | Add to your account: |
You may increase your shares in your Fund easily and automatically with the Plan. | |
■ | Low transaction costs: |
Shareholders who participate in the Plan may be able to buy shares at below-market prices when the Fund is trading at a premium to its net asset value (NAV). In addition , transaction costs are low because when new shares are issued by the Fund, there is no brokerage fee, and when shares are bought in blocks on the open market, the per share fee is shared among all participants. | |
■ | Convenience: |
You will receive a detailed account statement from Computershare Trust Company, N.A. (the Agent), which administers the Plan. The statement shows your total Distributions, date of investment, shares acquired, and price per share, as well as the total number of shares in your reinvestment account. You can also access your account at invesco.com/closed-end. | |
■ | Safekeeping: |
The Agent will hold the shares it has acquired for you in 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. |
4 | Invesco High Income 2023 Target Term Fund |
Principal Amount | Value | ||
Asset-Backed Securities–114.41%(a) | |||
CFCRE Commercial Mortgage Trust, Series 2018-TAN, Class E, 6.45%, 02/15/2023(b) | $5,000,000 | $5,365,681 | |
Citigroup Commercial Mortgage Trust, | |||
Series 2013-GC11, Class D, 4.57%, 04/10/2023(b)(c)(d) | 12,500,000 | 13,020,719 | |
Series 2014-GC19, Class D, 5.26%, 02/10/2024(b)(d) | 1,500,000 | 1,625,783 | |
Commercial Mortgage Trust, | |||
Series 2012-CR2, Class E, 4.99%, 08/15/2022(b)(d) | 1,500,000 | 1,484,979 | |
Series 2013-CR11, Class D, 5.29%, 09/10/2023(b)(c)(d) | 14,523,000 | 14,936,142 | |
Series 2013-CR6, Class D, 4.22%, 02/10/2023(b)(d) | 250,000 | 255,469 | |
Series 2013-CR8, Class D, 4.09%, 06/10/2023(b)(d) | 6,000,000 | 6,162,090 | |
Series 2013-CR8, Class E, 4.00%, 06/10/2023(b)(d) | 7,000,000 | 6,848,781 | |
Series 2014-CR14, Class D, 4.79%, 01/10/2024(b)(c)(d) | 12,267,000 | 12,295,680 | |
Series 2014-CR16, Class D, 5.09%, 04/10/2024(b)(c)(d) | 12,680,000 | 12,580,058 | |
Series 2014-LC15, Class D, 5.15%, 03/10/2024(b)(d) | 9,010,000 | 9,252,707 | |
Series 2014-UBS3, Class C, 4.91%, 05/10/2024(c)(d) | 10,250,000 | 10,793,434 | |
DBUBS Mortgage Trust, Series 2011-LC3A, Class E, 3.75%, 08/10/2021(b)(d) | 500,000 | 491,878 | |
FREMF Mortgage Trust, | |||
Series 2014-K36, Class B, 4.50%, 10/25/2023(b)(d) | 1,025,000 | 1,108,083 | |
Series 2015-KF12, Class B, 9.32% (1 mo. USD LIBOR + 7.10%), 09/25/2022(b)(e) | 1,027,670 | 1,091,398 | |
GS Mortgage Securities Corp. II, | |||
Series 2013-GC10, Class D, 4.54% (1 mo. USD LIBOR), 01/10/2023(b)(c)(e) | 6,625,000 | 6,717,085 | |
Series 2013-GC10, Class XA, IO, 1.65%, 01/10/2023(c)(d) | 25,828,782 | 1,125,923 | |
GS Mortgage Securities Corp. Trust, Series 2018-TWR, Class G, 6.12% (1 mo. USD LIBOR + 3.92%), 07/15/2021(b)(e) | 1,000,000 | 1,009,537 | |
GS Mortgage Securities Trust, Series 2013-GC13, Class D, 4.22%, 07/10/2023(b)(c)(d) | 11,546,000 | 11,429,135 | |
Hilton USA Trust, | |||
Series 2016-SFP, Class E, 5.52%, 11/05/2023(b)(c) | 8,500,000 | 8,601,604 | |
Series 2016-SFP, Class F, 6.16%, 11/05/2023(b) | 2,000,000 | 2,028,537 |
Principal Amount | Value | ||
JP Morgan Chase Commercial Mortgage Securities Trust, | |||
Series 2012-C8, Class E, 4.81%, 09/15/2022(b)(c)(d) | $4,834,001 | $4,814,107 | |
Series 2013-C10, Class D, 4.25%, 02/15/2023(c)(d) | 19,348,000 | 20,039,012 | |
Series 2013-C10, Class E, 3.50%, 02/15/2023(b)(d) | 860,000 | 827,652 | |
Series 2013-C13, Class XA, IO, 0.24%, 07/15/2023(c)(d) | 86,055,045 | 393,994 | |
Series 2013-C13, Class XC, IO, 0.22%, 06/15/2023(b)(d) | 69,684,664 | 350,932 | |
Series 2013-C16, Class D, 5.20%, 11/15/2023(b)(c)(d) | 13,875,000 | 14,740,561 | |
Series 2013-LC11, Class D, 4.31%, 05/15/2023(c)(d) | 10,248,000 | 9,415,461 | |
Series 2018-PHH, Class E, 4.61% (1 mo. USD LIBOR + 2.41%), 06/15/2020(b)(e) | 3,000,000 | 3,009,585 | |
Series 2018-PHH, Class F, 5.21% (1 mo. USD LIBOR + 3.01%), 06/15/2020(b)(e) | 2,500,000 | 2,511,411 | |
JPMBB Commercial Mortgage Securities Trust, | |||
Series 2013-C12, Class D, 4.24%, 06/15/2023(d) | 3,191,933 | 3,213,172 | |
Series 2014-C19, Class D, 4.85%, 04/15/2024(b)(c)(d) | 2,500,000 | 2,581,052 | |
Morgan Stanley Bank of America Merrill Lynch Trust, | |||
Series 2012-C6, Class XA, IO, 1.77%, 06/15/2022(b)(c)(d) | 9,087,384 | 365,681 | |
Series 2013-C10, Class D, 4.22%, 06/15/2023(b)(c)(d) | 3,426,000 | 3,413,302 | |
Series 2013-C13, Class XA, IO, 1.15%, 11/15/2023(c)(d) | 39,993,093 | 1,403,462 | |
Series 2014-C14, Class D, 5.10%, 02/15/2024(b)(c)(d) | 7,579,400 | 7,819,665 | |
Series 2014-C15, Class D, 5.07%, 04/15/2024(b)(c)(d) | 16,500,000 | 17,542,749 | |
Morgan Stanley Capital I Trust, Series 2017-JWDR, Class E, 5.25% (1 mo. USD LIBOR + 3.05%), 11/15/2019(b)(e) | 2,000,000 | 2,008,171 | |
Stonemont Portfolio Trust, Series 2017-MONT, Class F, 5.77% (1 mo. USD LIBOR + 3.60%), 08/20/2020(b)(e) | 4,831,475 | 4,850,344 | |
UBS-Barclays Commercial Mortgage Trust, Series 2013-C5, Class D, 4.21%, 02/10/2023(b)(c)(d) | 8,090,000 | 7,832,452 |
5 | Invesco High Income 2023 Target Term Fund |
Principal Amount | Value | ||
WFRBS Commercial Mortgage Trust, | |||
Series 2012-C9, Class D, 4.97%, 10/15/2022(b)(c)(d) | $5,768,000 | $5,867,115 | |
Series 2013-C12, Class E, 3.50%, 03/15/2023(b) | 776,000 | 698,414 | |
Series 2013-C12, Class XA, IO, 1.38%, 03/15/2023(b)(c)(d) | 16,827,352 | 579,364 | |
Series 2013-C13, Class XA, IO, 1.34%, 04/15/2023(b)(c)(d) | 21,881,063 | 810,000 | |
Series 2013-C14, Class D, 4.11%, 06/15/2023(b)(d) | 3,000,000 | 2,903,945 | |
Series 2013-C16, Class E, 3.85%, 10/15/2023(b) | 9,450,000 | 7,912,898 | |
Series 2013-C17, Class D, 5.23%, 11/15/2023(b)(c)(d) | 20,419,000 | 21,766,029 | |
Series 2013-UBS1, Class D, 4.90%, 12/15/2023(b)(c)(d) | 5,000,000 | 5,137,312 | |
Series 2014-C19, Class D, 4.23%, 03/15/2024(b)(c) | 10,000,000 | 9,553,811 | |
Total Asset-Backed Securities (Cost $271,448,697) | 290,586,356 | ||
U.S. Dollar Denominated Bonds & Notes–8.07% | |||
Homebuilding–2.69% | |||
Beazer Homes USA, Inc., 8.75%, 03/15/2022 | 3,250,000 | 3,404,375 | |
Taylor Morrison Communities, Inc./Taylor Morrison Holdings II, Inc., 5.63%, 03/01/2024(b) | 3,250,000 | 3,428,750 | |
6,833,125 | |||
Industrial REITs–5.38% | |||
Duke Realty L.P., 3.63%, 04/17/2023 | 5,800,000 | 6,076,678 | |
Prologis L.P., 4.25%, 08/15/2023 | 7,000,000 | 7,582,740 | |
13,659,418 | |||
Total U.S. Dollar Denominated Bonds & Notes (Cost $19,903,720) | 20,492,543 |
Shares | Value | ||
Preferred Stocks–7.13% | |||
Mortgage REITs–7.13% | |||
Chimera Investment Corp., 8.00%, Series D, Pfd. | 167,800 | $4,329,240 | |
Dynex Capital Inc., 7.63%, Series B, Pfd. | 120,000 | 2,991,600 | |
New York Mortgage Trust, Inc., 7.88%, Series C, Pfd. | 150,000 | 3,745,500 | |
PennyMac Mortgage Investment Trust, 8.00%, Series B, Pfd. | 102,181 | 2,635,248 | |
Two Harbors Investment Corp., 7.25%, Series C, Pfd. | 173,200 | 4,425,260 | |
Total Preferred Stocks (Cost $18,198,622) | 18,126,848 | ||
Principal Amount | |||
U.S. Treasury Securities–0.43% | |||
U.S. Treasury Bills–0.43% | |||
1.80% - 2.03%, 12/19/2019 (Cost $1,095,330)(f)(g) | $1,102,000 | 1,095,806 | |
Shares | |||
Money Market Funds–0.64% | |||
Invesco Government & Agency Portfolio, Institutional Class, 2.02%(h) | 567,707 | 567,707 | |
Invesco Liquid Assets Portfolio, Institutional Class, 2.14%(h) | 405,343 | 405,504 | |
Invesco Treasury Portfolio, Institutional Class, 1.98%(h) | 648,808 | 648,808 | |
Total Money Market Funds (Cost $1,622,019) | 1,622,019 | ||
TOTAL INVESTMENTS IN SECURITIES–130.68% (Cost $312,268,388) | 331,923,572 | ||
REVERSE REPURCHASE AGREEMENTS– (31.50)% | (80,000,000) | ||
OTHER ASSETS LESS LIABILITIES—0.82% | 2,064,332 | ||
NET ASSETS APPLICABLE TO COMMON SHARES–100.00% | $253,987,904 |
IO | – Interest Only |
LIBOR | – London Interbank Offered Rate |
Pfd. | – Preferred |
USD | – U.S. Dollar |
(a) | Maturity date reflects the anticipated repayment date. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at August 31, 2019 was $247,630,648, which represented 97.50% of the Fund’s Net Assets. |
(c) | All or a portion of the security is pledged as collateral for open reverse repurchase agreeements. See Note 1J. |
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. |
6 | Invesco High Income 2023 Target Term Fund |
(d) | Interest rate is redetermined periodically based on the cash flows generated by the pool of assets backing the security, less any applicable fees. The rate shown is the rate in effect on August 31, 2019. |
(e) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on August 31, 2019. |
(f) | All or a portion of the value was designated as collateral to cover margin requirements for swap agreements. See Note 1K. |
(g) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(h) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of August 31, 2019. |
as of August 31, 2019
Cash | 0.84% |
AAA | 1.41 |
A+ | 0.33 |
A | 3.25 |
A- | 2.29 |
BBB+ | 5.22 |
BBB | 19.86 |
BBB- | 46.33 |
BB+ | 5.04 |
BB | 2.09 |
BB- | 3.28 |
B+ | 0.61 |
B | 2.22 |
B- | 1.02 |
Non-Rated | 6.21 |
Open Centrally Cleared Interest Rate Swap Agreements | ||||||||||
Pay/ Receive Floating Rate | Floating Rate Index | Payment Frequency | (Pay)/ Receive Fixed Rate | Payment Frequency | Maturity Date | Notional Value | Upfront Payments Paid (Received) | Value | Unrealized Appreciation (Depreciation) | |
Interest Rate Risk | ||||||||||
Receive | 3 Month USD LIBOR | Quarterly | (2.817)% | Semi - Annual | 12/01/2023 | USD | (8,000,000) | $— | $(490,210) | $(490,210) |
Receive | 1 Month USD LIBOR | Monthly | (2.116) | Semi - Annual | 12/01/2023 | USD | (50,000,000) | — | (1,847,919) | (1,847,919) |
Total Centrally Cleared Interest Rate Swap Agreements | $— | $(2,338,129) | $(2,338,129) |
Abbreviations: | |
LIBOR | —London Interbank Offered Rate |
USD | —U.S. Dollar |
7 | Invesco High Income 2023 Target Term Fund |
Assets: | |
Investments in securities, at value (Cost $310,646,369) | $330,301,553 |
Investments in affiliated money market funds, at value (Cost $1,622,019) | 1,622,019 |
Cash | 564,986 |
Receivable for: | |
Dividends | 137,776 |
Interest | 1,569,860 |
Investment for trustee deferred compensation and retirement plans | 8,534 |
Total assets | 334,204,728 |
Liabilities: | |
Other investments: | |
Variation margin payable — centrally cleared swap agreements | 66,724 |
Payable for: | |
Reverse repurchase agreements | 80,000,000 |
Dividends | 69,467 |
Accrued fees to affiliates | 3,028 |
Accrued interest expense | 16,070 |
Accrued trustees’ and officers’ fees and benefits | 2,792 |
Accrued other operating expenses | 50,209 |
Trustee deferred compensation and retirement plans | 8,534 |
Total liabilities | 80,216,824 |
Net assets applicable to common shares | $253,987,904 |
Net assets applicable to common shares consist of: | |
Shares of beneficial interest — common shares | $235,639,213 |
Distributable earnings | 18,348,691 |
$253,987,904 | |
Shares outstanding, no par value, with an unlimited number of common shares authorized: | |
Shares outstanding | 24,011,193 |
Net asset value per common share | $10.58 |
Market value per common share | $10.45 |
8 | Invesco High Income 2023 Target Term Fund |
Investment income: | |
Interest | $9,488,470 |
Dividends | 756,959 |
Dividends from affiliated money market funds | 17,218 |
Total investment income | 10,262,647 |
Expenses: | |
Advisory fees | 1,161,475 |
Administrative services fees | 17,579 |
Custodian fees | 6,498 |
Interest, facilities and maintenance fees | 1,624,108 |
Transfer agent fees | 7,505 |
Trustees’ and officers’ fees and benefits | 12,749 |
Registration and filing fees | 10,651 |
Reports to shareholders | 11,832 |
Professional services fees | 90,967 |
Taxes | 34,525 |
Other | 1,996 |
Total expenses | 2,979,885 |
Less: Fees waived | (749) |
Net expenses | 2,979,136 |
Net investment income | 7,283,511 |
Realized and unrealized gain (loss) from: | |
Net realized gain (loss) from: | |
Investment securities | (280,117) |
Swap agreements | 84,517 |
(195,600) | |
Change in net unrealized appreciation (depreciation) of: | |
Investment securities | 12,105,965 |
Swap agreements | (3,033,950) |
9,072,015 | |
Net realized and unrealized gain | 8,876,415 |
Net increase in net assets resulting from operations applicable to common shares | $16,159,926 |
9 | Invesco High Income 2023 Target Term Fund |
August 31, 2019 | February 28, 2019 | |
Operations: | ||
Net investment income | $7,283,511 | $15,176,718 |
Net realized gain (loss) | (195,600) | (109,870) |
Change in net unrealized appreciation | 9,072,015 | 5,335,844 |
Net increase in net assets resulting from operations applicable to common shares | 16,159,926 | 20,402,692 |
Distributions to common shareholders from distributable earnings | (7,202,993) | (14,395,357) |
Net increase in common shares of beneficial interest | 77,035 | 143,792 |
Net increase in net assets applicable to common shares | 9,033,968 | 6,151,127 |
Net assets applicable to common shares: | ||
Beginning of period | 244,953,936 | 238,802,809 |
End of period | $253,987,904 | $244,953,936 |
10 | Invesco High Income 2023 Target Term Fund |
Cash provided by operating activities: | |
Net increase in net assets resulting from operations applicable to common shares | $16,159,926 |
Adjustments to reconcile the change in net assets applicable to common shares from operations to net cash provided by operating activities: | |
Purchases of investments | (37,604,251) |
Proceeds from sales of investments | 44,800,160 |
Purchases of short-term investments, net | (1,813,596) |
Amortization of premium on investment securities | 856,390 |
Accretion of discount on investment securities | (1,858,905) |
Decrease in receivables and other assets | 41,551 |
Decrease in accrued expenses and other payables | (102,534) |
Net realized loss from investment securities | 280,117 |
Net change in unrealized appreciation on investment securities | (12,105,965) |
Net change in transactions in swap agreements | 106,098 |
Net cash provided by operating activities | 8,758,991 |
Cash provided by (used in) financing activities: | |
Dividends paid to common shareholders from distributable earnings | (7,132,322) |
Net cash provided by (used in) financing activities | (7,132,322) |
Net increase in cash and cash equivalents | 1,626,669 |
Cash and cash equivalents at beginning of period | 560,336 |
Cash and cash equivalents at end of period | $2,187,005 |
Non-cash financing activities: | |
Value of shares of beneficial interest issued in reinvestment of dividends paid to shareholders | $77,035 |
Supplemental disclosure of cash flow information: | |
Cash paid during the period for interest, facilities and maintenance fees | $1,643,408 |
11 | Invesco High Income 2023 Target Term Fund |
Six Months Ended August 31, 2019 | Years Ended February 28, | |||
2019 | 2018 | 2017(a) | ||
Net asset value per common share, beginning of period | $10.20 | $9.95 | $9.97 | $9.82 |
Net investment income(b) | 0.30 | 0.63 | 0.61 | 0.12 |
Net gains (losses) on securities (both realized and unrealized) | 0.38 | 0.22 | (0.03) | 0.13 |
Total from investment operations | 0.68 | 0.85 | 0.58 | 0.25 |
Dividends paid to common shareholders from net investment income | (0.30) | (0.60) | (0.60) | (0.10) |
Net asset value per common share, end of period | $10.58 | $10.20 | $9.95 | $9.97 |
Market value per common share, end of period | $10.45 | $10.15 | $9.84 | $9.99 |
Total return at net asset value(c) | 6.76% | 8.84% | 5.95% | 2.54% |
Total return at market value(d) | 5.97% | 9.52% | 4.57% | 0.90% |
Net assets applicable to common shares, end of period (000’s omitted) | $253,988 | $244,954 | $238,803 | $238,756 |
Portfolio turnover rate(e) | 12% | 5% | 6% | 0% |
Ratios/supplemental data based on average net assets: | ||||
Ratio of expenses: | ||||
With fee waivers and/or expense reimbursements | 2.37%(f) | 2.32% | 1.92% | 1.12%(g) |
With fee waivers and/or expense reimbursements excluding interest, facilities and maintenance fees | 1.08%(f) | 1.06% | 1.01% | 1.12%(g) |
Without fee waivers and/or expense reimbursements | 2.37%(f) | 2.32% | 1.92% | 1.13%(g) |
Without fee waivers and/or expense reimbursements excluding interest, facilities and maintenance fees | 1.08%(f) | 1.06% | 1.01% | 1.13%(g) |
Ratio of net investment income to average net assets | 5.79%(f) | 6.30% | 6.05% | 4.89%(g) |
(a) | Commencement date of November 28, 2016. |
(b) | Calculated using average shares outstanding. |
(c) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year, if applicable. |
(d) | Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Fund’s dividend reinvestment plan, and sale of all shares at the closing common share market price at the end of the period indicated. Not annualized for periods less than one year, if applicable. |
(e) | Portfolio turnover is not annualized for periods less than one year, if applicable. |
(f) | Ratios are annualized and based on average daily net assets applicable to common shares (000’s omitted) of $250,047. |
(g) | Annualized. |
12 | Invesco High Income 2023 Target Term Fund |
A. | Security Valuations – Securities, including restricted securities, are valued according to the following policy. |
13 | Invesco High Income 2023 Target Term Fund |
B. | Securities Transactions and Investment Income – Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
C. | Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions— The Trust declares and pays monthly dividends from net investment income to common shareholders. Distributions from net realized capital gain, if any, are generally declared and paid annually and are distributed on a pro rata basis to common and preferred shareholders. |
E. | Cash and Cash Equivalents – For the purposes of the Statement of Cash Flows, the Fund defines Cash and Cash Equivalents as cash (including foreign currency), money market funds and other investments held in lieu of cash and excludes investments made with cash collateral received. |
F. | Federal Income Taxes –The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund’s taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
G. | Accounting Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications – Under the Trust’s organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Fund’s servicing agreements, that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Commercial Mortgage-Backed Securities– The Fund may invest in both single and multi-issuer Commercial Mortgage-Backed Securities (“CMBS”). This includes both investment grade and non-investment grade CMBS as well as other non-rated CMBS. A CMBS is a type of mortgage-backed security that is secured by one or more mortgage loans on interests in commercial real estate property. CMBS differ from conventional debt securities because principal is paid back over the life of the security rather than at maturity. Investments in CMBS are subject to the various risks which relate to the pool of underlying assets in which the CMBS represents an interest. Securities backed by commercial real estate assets are subject to securities market risks as well as risks similar to those of direct ownership of commercial real estate loans. Risks include the ability of a borrower to meet its obligations on the loan which could lead to default or foreclosure of the property. Such actions may impact the amount of proceeds ultimately derived from the loan, and the timing of receipt of such proceeds. |
14 | Invesco High Income 2023 Target Term Fund |
J. | Reverse Repurchase Agreements – The Fund may enter into reverse repurchase agreements. Reverse repurchase agreements involve the sale of securities held by the Fund, with an agreement that the Fund will repurchase such securities at an agreed upon price and date. The Fund will use the proceeds of a reverse repurchase agreement (which are considered to be borrowings under the 1940 Act) to purchase other permitted securities either maturing, or under an agreement to resell, at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. The agreements are collateralized by the underlying securities and are carried at the amount at which the securities subsequently will be repurchased as specified in the agreements. Expenses under the Reverse Repurchase Agreements are shown in the Statement of Operations asInterest, facilities and maintenance fees. |
K. | Swap Agreements — The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (“CDS”) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between two parties (“Counterparties”). A swap agreement may be negotiated bilaterally and traded over-the-counter (“OTC”) between two parties (“uncleared/OTC”) or, in some instances, must be transacted through a future commission merchant (“FCM”) and cleared through a clearinghouse that serves as a central Counterparty (“centrally cleared swap”). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Fund’s NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
L. | Other Risks – The Fund is non-diversified and may invest in securities of fewer issuers than if it were diversified. Thus, the value of the Fund’s shares may vary more widely and the Fund may be subject to greater market and credit risk than if the Fund invested more broadly. |
M. | Leverage Risk — The Fund may utilize leverage to seek to enhance the yield of the Fund by borrowing. There are risks associated with borrowing in an effort to increase the yield and distributions on the common shares, including that the costs of the financial leverage may exceed the income from investments purchased with such leverage proceeds, the higher volatility of the NAV of the shares, and that fluctuations in the interest rates on the borrowing may affect the yield and distributions to the common shareholders. There can be no assurance that the Fund’s leverage strategy will be successful. |
N. | Collateral—To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Fund’s practice to replace such collateral no later than the next business day. |
15 | Invesco High Income 2023 Target Term Fund |
Level 1 | Level 2 | Level 3 | Total | |
Investments in Securities | ||||
Asset-Backed Securities | $— | $290,586,356 | $— | $290,586,356 |
U.S. Dollar Denominated Bonds & Notes | — | 20,492,543 | — | 20,492,543 |
Preferred Stocks | 18,126,848 | — | — | 18,126,848 |
U.S. Treasury Securities | — | 1,095,806 | — | 1,095,806 |
Money Market Funds | 1,622,019 | — | — | 1,622,019 |
Total Investments in Securities | 19,748,867 | 312,174,705 | — | 331,923,572 |
Other Investments - Liabilities* | ||||
Swap Agreements | — | (2,338,129) | — | (2,338,129) |
Total Other Investments | — | (2,338,129) | — | (2,338,129) |
Reverse Repurchase Agreements | — | (80,000,000) | — | (80,000,000) |
Total Investments | $19,748,867 | $229,836,576 | $— | $249,585,443 |
* | Unrealized appreciation (depreciation). |
16 | Invesco High Income 2023 Target Term Fund |
Value | |
Derivative Liabilities | Interest Rate Risk |
Unrealized depreciation on swap agreements — Centrally Cleared(a) | $(2,338,129) |
Derivatives not subject to master netting agreements | 2,338,129 |
Total Derivative Liabilities subject to master netting agreements | $- |
(a) | The daily variation margin receivable (payable) at period-end is recorded in the Statement of Assets and Liabilities. |
Location of Gain (Loss) on Statement of Operations | |
Interest Rate Risk | |
Realized Gain: | |
Swap agreements | $84,517 |
Change in Net Unrealized Appreciation (Depreciation): | |
Swap agreements | (3,033,950) |
Total | $(2,949,433) |
Swap Agreements | |
Average notional value | $58,000,000 |
Counterparty | Interest Rate | Maturity date | Face Value | Face Value Including Accrued Interest |
Well Fargo Bank, N.A. | 3.74% | 03/17/2020 | $80,000,000 | $80,016,070 |
17 | Invesco High Income 2023 Target Term Fund |
Capital Loss Carryforward* | |||
Expiration | Short-Term | Long-Term | Total |
Not subject to expiration | $213,623 | $36,737 | $250,360 |
* | Capital loss carryforwards as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | |
Aggregate unrealized appreciation of investments | $20,371,603 |
Aggregate unrealized (depreciation) of investments | (3,048,873) |
Net unrealized appreciation of investments | $17,322,730 |
Six Months Ended August 31, 2019 | Year Ended February 28, 2019 | |
Beginning shares | 24,003,693 | 23,989,227 |
Shares issued through dividend reinvestment | 7,500 | 14,466 |
Ending shares | 24,011,193 | 24,003,693 |
Declaration Date | Amount per Share | Record Date | Payable Date |
September 3, 2019 | $0.0500 | September 18, 2019 | September 30, 2019 |
October 1, 2019 | $0.0500 | October 16, 2019 | October 31, 2019 |
18 | Invesco High Income 2023 Target Term Fund |
Approval of Investment Advisory Agreement
At meetings held on June 10, 2019, the Board of Trustees (the Board or the Trustees) of Invesco High Income 2023 Target Term Fund (the Fund) as a whole, and the independent Trustees, who comprise over 75% of the Board, voting separately, approved the continuance of the Fund’s Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) for another year effective July 1, 2019. After evaluating the factors discussed below, among others, the Board approved the renewal of the Fund’s investment advisory agreement and determined that the compensation payable by the Fund to Invesco Advisers is fair and reasonable.
The Board’s Evaluation Process
The Board’s Investments Committee has established threeSub-Committees, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). As part of a regularly scheduled basis ofin-person Board meetings, theSub-Committees meet with portfolio managers for their assigned Invesco Funds and other members of management to review detailed information about investment performance and portfolio attributes of these funds. The Board took into account evaluations and reports that it received from the Investments Committee andSub-Committees, as well as the information provided to such committees and the Board throughout the year, in considering whether to approve each Invesco Fund’s investment advisory agreement andsub-advisory contracts.
As part of the contract renewal process, the Board reviews and considers information provided in response to detailed requests for information submitted to management by the independent Trustees with assistance from legal counsel to the independent Trustees. The Board receives comparative investment performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent mutual fund data provider. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. The Senior Officer’s evaluation is prepared as part of his responsibility to manage the process by which the Invesco Funds’ proposed management fees are negotiated during the annual contract renewal process to ensure they are negotiated in a manner that is at arms’ length and reasonable. In addition to meetings with Invesco Advisers and fund counsel throughout the year, the independent Trustees also discuss the continuance of the investment advisory agreement andsub-advisory contracts in separate sessions with the Senior Officer and with independent legal counsel.
The discussion below is a summary of the Senior Officer’s independent written evaluation with respect to the Fund’s investment advisory agreement, as well as a discussion of the material factors and related conclusions that formed the basis for the Board’s approval of the Fund’s investment advisory agreement. The Trustees’ review and conclusions are based on the comprehensive consideration of all information presented to them during the course of the year and in prior years and are not the result of any single determinative factor. Moreover, one Trustee may have weighed a particular piece of information or factor differently than another Trustee. This information is current as of June 10, 2019.
Factors and Conclusions and Summary of Evaluation of Investment Advisory Agreement
A. | Nature, Extent and Quality of Services Provided by Invesco Advisers |
The Board reviewed the nature, extent and quality of the advisory services provided to the Fund by Invesco Advisers under the Fund’s investment advisory agreement, and the credentials and experience of the officers and employees of Invesco Advisers who provide these services, including the Fund’s portfolio manager(s). The Board’s review included consideration of Invesco Advisers’ investment process, oversight and structure, credit analysis and investment risk management. The Board also considerednon-advisory services that Invesco Advisers and its affiliates provide to the Invesco Funds such as various back office support functions, third party oversight, internal audit, valuation, portfolio trading and legal and compliance. The Board also reviewed and considered the benefits to shareholders of investing in a fund that is part of the Invesco family of funds under the umbrella of Invesco Ltd., Invesco Advisers’ parent company, and noted Invesco Ltd.’s depth and experience in conducting an investment management business, as well as its commitment of financial and other resources to such business. The Board reviewed and considered information about the resources that Invesco Advisers intends to continue to commit to managing the Invesco family of funds following Invesco Ltd.’s acquisition of OppenheimerFunds, Inc. and its subsidiaries. The Board concluded that the nature, extent and quality of the services provided to the Fund by Invesco Advisers are appropriate and satisfactory.
B. | Fund Investment Performance |
The Board considered Fund investment performance as a relevant factor in considering whether to approve the investment advisory agreement.
The Board compared the Fund’s investment performance over the one and two year periods ending December 31, 2018 to the performance
of funds in the Broadridge performance universe. The Board noted that the Fund’s performance was in the second quintile of its performance universe for the one year period and the third quintile for the two year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that the Fund’s performance was above the performance of the median for the one year period and reasonably comparable to the performance of the median for the two year period. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions. The Board also reviewed supplementally historic premium and discount levels of the Fund as provided to the Board at meetings throughout the year.
C. | Advisory Fees and Fund Expenses |
The Board compared the Fund’s contractual management fee rate to the median contractual management fee rate of the Fund’s Broadridge expense group. The Board noted that the contractual management fee rate for shares of the Fund was below the median contractual management fee rate of funds in its expense group. The Board noted that there were only four funds (including the fund) in the expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain non-portfolio management administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board also reviewed the methodology used by Broadridge in providing expense group information, which includes using each fund’s contractual management fee schedule (including any applicable breakpoints) as reported in the most recent audited annual reports for each fund in the expense group. The Board also considered comparative information regarding the Fund’s total expense ratio and its various components.
The Board noted that Invesco Advisers does not manage other similarly managed mutual funds or client accounts.
D. | Economies of Scale and Breakpoints |
The Board noted that mostclosed-end funds do not have fund level breakpoints becauseclosed-end funds generally do not experience substantial asset growth after the initial public offering. The Board noted that the Fund does not benefit from economies of scale through contractual breakpoints, but does share in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds. The Board considered Invesco’s reinvestment in its business, including investments in business infrastructure and cybersecurity. The Board noted that the Fund may also benefit from
19 Invesco High Income 2023 Target Term Fund
economies of scale through initial fee setting, fee waivers and expense reimbursements.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board considered the methodology used for calculating profitability and noted the periodic review of such methodology by an independent consultant. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. The Board did not deem the level of profits realized by Invesco Advisers and its affiliates from providing services to the Fund to be excessive given the nature, extent and quality of the services provided. The Board received information from Invesco Advisers demonstrating that Invesco Advisers is financially sound and has the resources necessary to perform its obligations under the investment advisory agreement.
F. | Collateral Benefits to Invesco Advisers and its Affiliates |
The Board considered various other benefits received by Invesco Advisers and its affiliates from the relationship with the Fund. The Board considered the organizational structure employed to provide additional services to the Fund.
The Board considered that the Fund’s uninvested cash may be invested in money market funds advised by Invesco Advisers pursuant to procedures approved by the Board. The Board considered information regarding the returns of the affiliated money market funds relative to comparable overnight investments, as well as the costs to the Fund of such investments. The Board noted that Invesco Advisers receives advisory fees from these affiliated money market funds attributable to such investments, although Invesco Advisers has contractually agreed to waive through varying periods the advisory fees payable by the Invesco Funds with respect to investments in the affiliated money market funds. The waiver is in an amount equal to 100% of the net advisory fee Invesco Advisers receives from the affiliated money market funds with respect to the Fund’s investment in the affiliated money market funds of uninvested cash.
20 Invesco High Income 2023 Target Term Fund
Proxy Results
A Joint Annual Meeting (“Meeting”) of Shareholders of Invesco High Income 2023 Target Term Fund (the “Fund”) was held on August 9, 2019. The Meeting was held for the following purpose:
(1). | Election of Trustees by Common Shareholders. |
The results of the voting on the above matter was as follows:
Matter | Votes For | Votes Withheld | ||||||||
(1). | Cynthia Hostetler | 22,810,841.46 | 158,071.34 | |||||||
Eli Jones | 22,780,139.57 | 188,773.24 | ||||||||
Prema Mathai-Davis | 22,802,573.47 | 166,339.34 | ||||||||
Ann Barnett Stern | 22,808,466.77 | 160,446.03 | ||||||||
Raymond Stickel, Jr. | 22,784,201.12 | 184,711.69 |
21 Invesco High Income 2023 Target Term Fund
SEC file number: 811-23186 | CE-HIN2023TT-SAR-1 |
ITEM 2. | CODE OF ETHICS. |
Not applicable for a semi-annual report.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
During the reporting period, PricewaterhouseCoopers LLC (“PwC”) advised the Audit Committee of the following matters for consideration under the SEC’s auditor independence rules. PwC advised the Audit Committee that a PwC Manager and a PwC Senior Associate each held financial interests in investment companies within the Invesco Fund Complex that were inconsistent with the requirements of Rule2-01(c)(1) of RegulationS-X. PwC noted, among other things, that during the time of its audit, the engagement team was not aware of the investments, (or with respect to the PwC Senior Associate was not aware until after the investments were confirmed as SEC exceptions), the individuals were not in the chain of command of the audit or the audit partners of Invesco or the affiliate of the Registrant, the services each individual provided were not relied upon by the audit engagement team with respect to the audit of the Registrant or its affiliates (or with respect to the PwC Senior Associate, the services were performed by an individual who did not have decision-making responsibility for matters that materially affected the audit and were reviewed by team members at least two levels higher than the PwC Senior Associate), and the investments were not material to the net worth of each individual or their respective immediate family members which they considered in reaching their conclusion. PwC advised the Audit Committee that it believes its objectivity and impartiality had not been adversely affected by these matters as they related to the audit of the Registrant.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OFCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable
ITEM 9. | PURCHASES OF EQUITY SECURITIES BYCLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
None
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | As of October 16, 2019, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”), as amended. Based on that evaluation, the Registrant’s officers, including the PEO and PFO, concluded that, as of October 16, 2019, the Registrant’s disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. |
(b) | There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
ITEM 13. | EXHIBITS. |
13(a) (1) | Not applicable. |
13(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2(a) under the Investment Company Act of 1940. |
13(a) (3) | Not applicable. |
13(a) (4) | Not applicable. |
13(b) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2(b) under the Investment Company Act of 1940. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Invesco High Income 2023 Target Term Fund
By: | /s/ Sheri Morris | |||
Sheri Morris | ||||
Principal Executive Officer | ||||
Date: | November 7, 2019 |
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Sheri Morris | |||
Sheri Morris | ||||
Principal Executive Officer | ||||
Date: | November 7, 2019 | |||
By: | /s/ Kelli Gallegos | |||
Kelli Gallegos | ||||
Principal Financial Officer | ||||
Date: | November 7, 2019 |