UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05769
Invesco High Income Trust II
(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: 02/28
Date of reporting period: 08/31/19
Item 1. Reports to Stockholders.
| Semiannual Report to Shareholders | August 31, 2019 |
Invesco High Income Trust
II
NYSE: VLT
Beginning on January 1, 2021, as permitted by
regulations adopted by the Securities and Exchange Commission, paper copies of the Trust’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Trust or from your financial
intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Trust’s website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder
reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Trust electronically by contacting your financial intermediary (such as
a broker-dealer or bank).
You may elect to
receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly
with the Trust, you can call 800 341 2929 to let the Trust know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with your financial intermediary or all
funds held with the fund complex if you invest directly with the Trust.
Unless otherwise noted, all data provided by
Invesco.
NOT FDIC
INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
MANAGED DISTRIBUTION PLAN DISCLOSURE
| 2 | Invesco High Income Trust II |
Letters to Shareholders
 Bruce Crockett
|
Dear Fellow Shareholders:
As independent chair of the Invesco Funds Board, I can
assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds
receive and other matters important to your investment. This includes but is not limited to: monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each
portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your
funds receive.
We believe one of the most important
services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature
and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of
independent sources, such as performance and fee data prepared by Lipper Inc. (a subsidiary of Broadridge Financial Solutions, Inc.), an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent
legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
On behalf of the Board, we look forward to continuing to
represent your interests and serving your needs.
Sincerely,
Bruce L. Crockett
Independent Chair
Invesco Funds Board of Trustees
 Andrew Schlossberg
|
Dear
Shareholders:
This semiannual report includes
information about your Trust, including performance data and a complete list of its investments as of the close of the reporting period.
Invesco’ s efforts to help
investors achieve their financial objectives include providing timely information about the markets, the economy and investing. Our website, invesco.com/us, offers a wide range of market insights and investment perspectives. On the website,
you’ll find detailed information about our Trusts, including performance and holdings.
In addition to the resources accessible
on our website, you can obtain timely updates to help you stay informed by connecting with Invesco on Twitter, LinkedIn or Facebook. You can access our blog at blog.invesco.us.com. Our goal is to provide you with information you want, when and where
you want it.
Finally, I’m pleased to share with
you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, feel free to contact an
Invesco client services representative at 800 341 2929.
All of us at Invesco look forward to serving your
investment management needs. Thank you for investing with us.
Sincerely,
Andrew Schlossberg
Head of the Americas,
Senior Managing Director, Invesco Ltd.
| 3 | Invesco High Income Trust II |
Trust Performance
Important Notice Regarding Share Repurchase Program
| 4 | Invesco High Income Trust II |
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 Trust (the Trust). Under the Plan, the money you earn from Distributions will be reinvested automatically in more shares of
the Trust, allowing you to potentially increase your investment over time. All shareholders in the Trust are automatically enrolled in the Plan when shares are purchased.
| 5 | Invesco High Income Trust II |
Schedule of Investments(a)
August 31, 2019
(Unaudited)
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 6 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 7 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 8 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 9 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 10 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 11 | Invesco High Income Trust II |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 12 | Invesco High Income Trust II |
Investment Abbreviations:
| Conv. | – Convertible |
| EUR | – Euro |
| GBP | – British Pound Sterling |
| PIK | – Pay-in-Kind |
| REGS | – Regulation S |
Notes to
Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
| (b) | Calculated as a percentage of net assets. Amounts in excess of 100% are due to the Trust’s use of leverage. |
| (c) | 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 $77,662,905, which represented 61.74% of the Trust’s Net Assets. |
| (d) | Defaulted security. Currently, the issuer is partially or fully in default with respect to principal and/or interest payments. The value of this security at August 31, 2019 represented less than 1% of the Trust’s Net Assets. |
| (e) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
| (f) | Perpetual bond with no specified maturity date. |
| (g) | All or a portion of this security is Pay-in-Kind. Pay-in-Kind securities pay interest income in the form of securities. |
| (h) | Foreign denominated security. Principal amount is denominated in the currency indicated. |
| (i) | The money market fund and the Trust are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of August 31, 2019. |
See accompanying
Notes to Financial Statements which are an integral part of the financial statements.
| 13 | Invesco High Income Trust II |
Portfolio Composition†
By credit quality, based on total investments
as of August 31, 2019
as of August 31, 2019
| BBB | 10.67% |
| BB | 47.76 |
| B | 33.41 |
| CCC | 7.42 |
| CC | 0.02 |
| Non-Rated | 0.72 |
†
Source: Standard & Poor’s. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities,
money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. “Non-Rated” indicates the debtor was not rated, and should not
be interpreted as indicating low quality. For more information on Standard & Poor’s rating methodology, please visit standardandpoors.com and select “Understanding Ratings” under Rating Resources on the homepage.
| Open Forward Foreign Currency Contracts | ||||||
| Settlement
Date |
Counterparty | Contract to | Unrealized
Appreciation | |||
| Deliver | Receive | |||||
| Currency Risk | ||||||
| 11/29/2019 | Goldman Sachs International | EUR | 1,325,731 | USD | 1,482,323 | $15,746 |
| 11/29/2019 | Goldman Sachs International | GBP | 257,250 | USD | 315,523 | 1,440 |
| Total Forward Foreign Currency Contracts | $17,186 | |||||
| Abbreviations: | |
| EUR | —Euro |
| GBP | —British Pound Sterling |
| USD | —U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
| 14 | Invesco High Income Trust II |
Statement of Assets and Liabilities
August 31, 2019
(Unaudited)
See accompanying Notes to Financial Statements which are
an integral part of the financial statements.
| 15 | Invesco High Income Trust II |
Statement of Operations
For the six months ended August 31, 2019
(Unaudited)
| Investment income: | |
| Interest | $5,130,918 |
| Dividends from affiliated money market funds | 41,384 |
| Total investment income | 5,172,302 |
| Expenses: | |
| Advisory fees | 610,918 |
| Administrative services fees | 8,865 |
| Custodian fees | 3,668 |
| Interest, facilities and maintenance fees | 807,368 |
| Transfer agent fees | 20,082 |
| Trustees’ and officers’ fees and benefits | 11,576 |
| Registration and filing fees | 11,250 |
| Reports to shareholders | 18,743 |
| Professional services fees | 118,917 |
| Other | 12,332 |
| Total expenses | 1,623,719 |
| Less: Fees waived | (1,908) |
| Net expenses | 1,621,811 |
| Net investment income | 3,550,491 |
| Realized and unrealized gain (loss) from: | |
| Net realized gain (loss) from: | |
| Investment securities | 298,010 |
| Foreign currencies | (28,948) |
| Forward foreign currency contracts | 76,394 |
| 345,456 | |
| Change in net unrealized appreciation (depreciation) of: | |
| Investment securities | 1,064,795 |
| Foreign currencies | (200) |
| Forward foreign currency contracts | 28,735 |
| 1,093,330 | |
| Net realized and unrealized gain | 1,438,786 |
| Net increase in net assets resulting from operations applicable to common shares | $4,989,277 |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 16 | Invesco High Income Trust II |
Statement of Changes in Net Assets
For the six months ended August 31, 2019 and the year ended
February 28, 2019
(Unaudited)
| August
31, 2019 |
February
28, 2019 | |
| Operations: | ||
| Net investment income | $ 3,550,491 | $ 7,487,345 |
| Net realized gain (loss) | 345,456 | (250,406) |
| Change in net unrealized appreciation (depreciation) | 1,093,330 | (2,465,586) |
| Net increase in net assets resulting from operations applicable to common shares | 4,989,277 | 4,771,353 |
| Distributions to common shareholders from distributable earnings | (4,695,700) | (8,320,593) |
| Return of capital applicable to common shares | — | (466,795) |
| Total distributions | (4,695,700) | (8,787,388) |
| Net increase (decrease) in net assets applicable to common shares | 293,577 | (4,016,035) |
| Net assets applicable to common shares: | ||
| Beginning of period | 125,499,778 | 129,515,813 |
| End of period | $125,793,355 | $125,499,778 |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 17 | Invesco High Income Trust II |
Statement of Cash Flows
For the six months ended August 31, 2019
(Unaudited)
| Cash provided by operating activities: | |
| Net increase in net assets resulting from operations applicable to common shares | $ 4,989,277 |
| Adjustments to reconcile the change in net assets applicable to common shares from operations to net cash provided by operating activities: | |
| Purchases of investments | (29,986,701) |
| Proceeds from sales of investments | 35,094,552 |
| Amortization of premium on investment securities | 483,423 |
| Accretion of discount on investment securities | (163,174) |
| Increase in receivables and other assets | (41,624) |
| Increase in accrued expenses and other payables | 37,810 |
| Net realized gain from investment securities | (298,010) |
| Net change in unrealized appreciation on investment securities | (1,064,795) |
| Net change in unrealized appreciation of forward foreign currency contracts | (28,735) |
| Net cash provided by operating activities | 9,022,023 |
| Cash provided by (used in) financing activities: | |
| Dividends paid to common shareholders from distributable earnings | (4,693,426) |
| Increase in payable for amount due custodian | 101,843 |
| Net cash provided by (used in) financing activities | (4,591,583) |
| Net increase in cash and cash equivalents | 4,430,440 |
| Cash and cash equivalents at beginning of period | 1,281,770 |
| Cash and cash equivalents at end of period | $ 5,712,210 |
| Supplemental disclosure of cash flow information: | |
| Cash paid during the period for interest, facilities and maintenance fees | $ 806,166 |
See accompanying Notes to Financial Statements which are an
integral part of the financial statements.
| 18 | Invesco High Income Trust II |
Financial Highlights
August 31, 2019
(Unaudited)
The following schedule presents financial highlights for a
share of the Trust outstanding throughout the periods indicated.
| Six
Months Ended August 31, 2019 |
Years
Ended February 28, |
Year
Ended February 29, 2016 |
Year
Ended February 28, 2015 | |||
| 2019 | 2018 | 2017 | ||||
| Net asset value per common share, beginning of period | $ 15.46 | $ 15.95 | $ 16.36 | $ 14.37 | $ 17.11 | $ 17.88 |
| Net investment income(a) | 0.44 | 0.92 | 0.93 | 1.08 | 1.14 | 1.18 |
| Net gains (losses) on securities (both realized and unrealized) | 0.17 | (0.33) | (0.33) | 2.04 | (2.64) | (0.66) |
| Total from investment operations | 0.61 | 0.59 | 0.60 | 3.12 | (1.50) | 0.52 |
| Less: | ||||||
| Dividends paid to common shareholders from net investment income | (0.58) | (1.03) | (1.01) | (1.07) | (1.15) | (1.29) |
| Return of capital | — | (0.05) | — | (0.06) | (0.09) | — |
| Total distributions | (0.58) | (1.08) | (1.01) | (1.13) | (1.24) | (1.29) |
| Net asset value per common share, end of period | $ 15.49 | $ 15.46 | $ 15.95 | $ 16.36 | $ 14.37 | $ 17.11 |
| Market value per common share, end of period | $ 14.26 | $ 14.26 | $ 14.04 | $ 14.66 | $ 12.61 | $ 15.29 |
| Total return at net asset value(b) | 4.28% | 4.92% | 4.42% | 23.29% | (8.09)% | 3.73% |
| Total return at market value(c) | 4.07% | 9.94% | 2.57% | 25.90% | (9.74)% | (0.46)% |
| Net assets applicable to common shares, end of period (000’s omitted) | $125,793 | $125,500 | $129,516 | $132,783 | $116,643 | $138,940 |
| Portfolio turnover rate(d) | 17% | 38% | 38% | 91% | 87% | 99% |
| Ratios/supplemental data based on average net assets: | ||||||
| Ratio of expenses: | ||||||
| With fee waivers and/or expense reimbursements | 2.56% (e) | 2.37% | 1.95% | 1.71% | 1.67% | 1.49% |
| With fee waivers and/or expense reimbursements excluding interest, facilities and maintenance fees | 1.29% (e) | 1.23% | 1.15% | 1.14% | 1.21% | 1.11% |
| Without fee waivers and/or expense reimbursements | 2.56% (e) | 2.37% | 1.95% | 1.72% | 1.67% | 1.53% |
| Ratio of net investment income to average net assets | 5.60% (e) | 5.97% | 5.73% | 6.85% (f) | 7.13% | 6.81% |
| Senior securities: | ||||||
| Asset coverage per $1,000 unit of senior indebtedness(g) | $ 3,645 | $ 3,639 | $ 3,724 | $ 3,792 | $ 3,453 | $ 3,749 |
| Total borrowings (000’s omitted) | $ 47,550 | $ 47,550 | $ 47,550 | $ 47,550 | $ 47,550 | $ 50,550 |
| (a) | Calculated using average shares outstanding. |
| (b) | 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. |
| (c) | 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 Trust’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. |
| (d) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
| (e) | Ratios are annualized and based on average daily net assets applicable to common shares (000’s omitted) of $126,049. |
| (f) | Amount includes the effect of insurance settlement proceeds received related to ARPS previously issued by the Trust. The ratio of net investment income excluding these payments would have been 6.66%. |
| (g) | Calculated by subtracting the Trust’s total liabilities (not including the Borrowings) from the Trust’s total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness. |
See accompanying Notes to Financial Statements which are an integral part of
the financial statements.
| 19 | Invesco High Income Trust II |
Notes to Financial Statements
August 31, 2019
(Unaudited)
NOTE 1—Significant Accounting Policies
Invesco High Income Trust II (the “Trust”) is a
Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company.
The Trust’s investment objective is to provide its
common shareholders high current income, while seeking to preserve shareholders’ capital, through investment in a professionally managed, diversified portfolio of high-income producing fixed-income securities.
The Trust 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 Trust in the preparation of its financial statements.
| A. | Security Valuations – Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible
securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 trust may hold or
transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. 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.
Variable rate senior loan interests are
fair valued using quotes provided by an independent pricing service. Quotes provided by the pricing service may reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics,
institution-size trading in similar groups of securities and other market data.
A security listed or traded on an
exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales 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 by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the
last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value
("NAV") per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end
registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales
price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
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 NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities
will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close
of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Trust 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 using procedures approved by the Board of Trustees. 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
approved 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.
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 is used to value debt obligations,
including corporate loans.
Securities for which market quotations
are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust’s officers following procedures approved by the Board of Trustees. 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 Trust 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 Trust 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 economic conditions, interest rates, investor perceptions 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.
| 20 | Invesco High Income Trust II |
| 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. |
The Trust may periodically participate
in litigation related to Trust investments. As such, the Trust 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 Trust’s net asset value and, accordingly, they reduce the Trust’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 Trust and the investment adviser.
| 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 has adopted a Managed Distribution Plan (the “Plan”) whereby the Trust will pay a monthly dividend to common shareholders at a stated fixed monthly distribution amount based on a distribution rate of 8.5% of the market price per share on August 1, 2018. The Plan is intended to provide shareholders with a consistent, but not guaranteed, periodic cash payment from the Trust, regardless of when or whether income is earned or capital gains are realized. If sufficient income is not available for a monthly distribution, the Trust will distribute long-term capital gains and/or return of capital in order to maintain its managed distribution level under the Plan. Distributions from net investment income are declared and paid monthly, and recorded on the ex-dividend date. The Plan may be amended or terminated at any time by the Board. |
| E. | Cash and Cash Equivalents – For the purposes of the Statement of Cash Flows, the Trust 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 Trust 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 Trust’s taxable earnings to shareholders. As such, the Trust 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. |
The Trust recognizes the tax benefits of
uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Trust’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.
In addition, the Trust intends to invest
in such municipal securities to allow it to qualify to pay shareholders “exempt dividends”, as defined in the Internal Revenue Code.
The Trust files tax returns in the U.S.
Federal jurisdiction and certain other jurisdictions. Generally, the Trust is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
| G. | Interest, Facilities and Maintenance Fees — Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees and other expenses associated with lines of credit and interest and administrative expenses related to establishing and maintaining the credit agreement. |
| H. | 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 Trust 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. |
| I. | 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 Trust. Additionally, in the normal course of business, the Trust enters into contracts, including the Trust’s servicing agreements, that contain a variety of indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
| J. | Securities Purchased on a When-Issued and Delayed Delivery Basis — The Trust may purchase and sell interests in corporate loans and corporate debt securities and other portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Trust on such interests or securities in connection with such transactions prior to the date the Trust actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Trust will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. |
| 21 | Invesco High Income Trust II |
| K. | Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Trust’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Trust may invest in foreign
securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign
markets in which the Trust invests and are shown in the Statement of Operations.
| L. | Forward Foreign Currency Contracts — The Trust may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Trust may also enter into forward
foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Trust may also enter into forward foreign currency contracts that do
not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount
(non-deliverable forwards). The Trust will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is
an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the
underlying securities the Trust owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are
recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of
Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the
amounts reflected in the Statement of Assets and Liabilities.
| M. | Bank Loan Risk — Although the resale, or secondary market for floating rate loans has grown substantially over the past decade, both in overall size and number of market participants, there is no organized exchange or board of trade on which floating rate loans are traded. Instead, the secondary market for floating rate loans is a private, unregulated interdealer or interbank resale market. Such a market may therefore be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may impair the Trust’s ability to sell bank loans within its desired time frame or at an acceptable price and its ability to accurately value existing and prospective investments. Extended trade settlement periods may result in cash not being immediately available to the Trust. As a result, the Trust may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations. Similar to other asset classes, bank loan funds may be exposed to counterparty credit risk, or the risk that an entity with which the Trust has unsettled or open transactions may fail to or be unable to perform on its commitments. The Trust seeks to manage counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. |
| N. | Other Risks – The Trust may invest in lower-quality debt securities, i.e., “junk bonds”. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. Junk bonds involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors’ claim. |
| O. | Leverage Risk – The Trust may utilize leverage to seek to enhance the yield of the Trust by borrowing. There are risks associated with borrowing in an effort to increase the yield and distributions on the 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 net asset value of the shares, and that fluctuations in the interest rates on the borrowing may affect the yield and distributions to the shareholders. There can be no assurance that the Trust’s leverage strategy will be successful. |
NOTE 2—Advisory Fees and Other Fees Paid to
Affiliates
The Trust has entered into a master
investment advisory agreement with Invesco Advisers, Inc. (the "Adviser" or "Invesco"). Under the terms of the investment advisory agreement, the Trust accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of 0.70%
of the Trust’s average daily managed assets. Managed assets for this purpose means the Trust’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 Trust’s financial statements for purposes of GAAP).
Under the terms of a master sub-advisory agreement between
the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively,
the "Affiliated Sub-Advisers") the Adviser, not the Trust, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Trust based on the percentage of assets
allocated to such Affiliated Sub-Adviser(s).
The
Adviser has contractually agreed, through at least June 30, 2021, to waive the advisory fee payable by the Trust in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the
Trust of uninvested cash in such affiliated money market funds.
For the six months ended August 31, 2019, the Adviser
waived advisory fees of $1,908.
| 22 | Invesco High Income Trust II |
The Trust has entered into a master administrative services
agreement with Invesco pursuant to which the Trust has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Trust. For the six months ended August 31, 2019, expenses incurred under this agreement
are shown in the Statement of Operations as Administrative services fees. Also, Invesco has entered into a sub-administration agreement whereby State Street Bank and Trust Company (“SSB”) serves as
custodian and fund accountant and provides certain administrative services to the Trust.
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 or are unreliable. 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:
Level 1 – Prices are determined using
quoted prices in an active market for identical assets.
Level 2 – Prices are
determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk,
yield curves, loss severities, default rates, discount rates, volatilities and others.
Level 3 – Prices are
determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be
used. Unobservable inputs reflect the Trust’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.
The following is a summary of the tiered
valuation input levels, as of August 31, 2019. 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.
| Level 1 | Level 2 | Level 3 | Total | |
| Investments in Securities | ||||
| U.S. Dollar Denominated Bonds & Notes | $ — | $164,057,892 | $0 | $164,057,892 |
| Non-U.S. Dollar Denominated Bonds & Notes | — | 675,126 | — | 675,126 |
| Money Market Funds | 4,481,171 | — | — | 4,481,171 |
| Total Investments in Securities | 4,481,171 | 164,733,018 | 0 | 169,214,189 |
| Other Investments - Assets* | ||||
| Forward Foreign Currency Contracts | — | 17,186 | — | 17,186 |
| Total Investments | $4,481,171 | $164,750,204 | $0 | $169,231,375 |
| * | Unrealized appreciation. |
NOTE 4—Derivative
Investments
The Trust may enter into an International
Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a trust 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 Trust does not offset
OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Trust’s
derivative investments, detailed by primary risk exposure, held as of August 31, 2019:
| Value | |
| Derivative Assets | Currency
Risk |
| Unrealized appreciation on forward foreign currency contracts outstanding | $17,186 |
| Derivatives not subject to master netting agreements | - |
| Total Derivative Assets subject to master netting agreements | $17,186 |
The table
below reflects the Trust’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of August 31, 2019.
| 23 | Invesco High Income Trust II |
Offsetting Assets and Liabilities
| Financial
Derivative Assets |
Financial
Derivative Liabilities |
Collateral
(Received)/Pledged |
|||||
| Counterparty | Forward
Foreign Currency Contracts |
Forward
Foreign Currency Contracts |
Net
Value of Derivatives |
Non-Cash | Cash | Net
Amount | |
| Goldman Sachs International | $17,186 | $– | $17,186 | $– | $– | $17,186 | |
Effect of Derivative Investments for
the six months ended August 31, 2019
The table
below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
| Location
of Gain on Statement of Operations | |
| Currency
Risk | |
| Realized Gain: | |
| Forward foreign currency contracts | $ 76,394 |
| Change in Net Unrealized Appreciation: | |
| Forward foreign currency contracts | 28,735 |
| Total | $105,129 |
The table
below summarizes the average notional value of derivatives held during the period.
| Forward
Foreign Currency Contracts | |
| Average notional value | $1,813,576 |
NOTE 5—Trustees’ and
Officers’ Fees and Benefits
Trustees’ and
Officers’ Fees and Benefits include amounts accrued by the Trust to pay remuneration to certain Trustees and Officers of the Trust. Trustees have the option to defer compensation payable by the Trust,
and "Trustees’ and Officers’ Fees and Benefits" includes amounts accrued by the Trust to fund such deferred compensation amounts.
NOTE 6—Cash Balances and Borrowings
The Trust entered into a $60 million Credit Agreement, which
will expire on November 15, 2019. This Credit Agreement is secured by the assets of the Trust.
During the six months ended August 31, 2019, the average
daily balance of borrowing under the Credit Agreement was $47,550,000 with a weighted interest rate of 2.37%. The carrying amount of the Trust’s payable for borrowings as reported on the Statement of Assets and Liabilities approximates its
fair value. Expenses under the Credit Agreement are shown in the Statement of Operations as Interest, facilities and maintenance fees.
Additionally, the Trust 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 Trust 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 Trust may not purchase additional securities when any borrowings from banks or broker-dealers
exceed 5% of the Fund’s total assets, or when any borrowings from an Invesco Fund are outstanding
NOTE 7—Tax Information
The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Trust’s capital accounts to reflect income and gains available for distribution (or available capital loss carryforward)
under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Trust’s fiscal year-end.
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 Trust to utilize. Capital losses generated in years beginning after December 22, 2010 can be
carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized.
Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the
future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
| 24 | Invesco High Income Trust II |
The Trust had a capital loss carryforward as of February
28, 2019, as follows:
| Capital Loss Carryforward* | |||
| Expiration | Short-Term | Long-Term | Total |
| Not subject to expiration | $5,066,974 | $5,730,255 | $10,797,229 |
| * | 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. |
NOTE
8—Investment Transactions
The aggregate amount
of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Trust during the six months ended August 31, 2019 was $28,381,166 and $34,795,348, 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.
| Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | |
| Aggregate unrealized appreciation of investments | $ 5,987,170 |
| Aggregate unrealized (depreciation) of investments | (7,534,337) |
| Net unrealized appreciation (depreciation) of investments | $ (1,547,167) |
Cost of investments for tax purposes is $170,778,542.
NOTE 9—Common Shares of Beneficial Interest
Transactions in common shares of beneficial interest were as
follows:
| Six
Months Ended August 31, 2019 |
Year
Ended February 28, 2019 | |
| Beginning shares | 8,118,429 | 8,118,429 |
| Shares issued through dividend reinvestment | — | — |
| Ending shares | 8,118,429 | 8,118,429 |
The Trust 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 10—Dividends
The Trust declared the following dividends to common
shareholders from net investment income subsequent to August 31, 2019:
| Declaration Date | Amount per Share | Record Date | Payable Date |
| September 3, 2019 | $0.0964 | September 18, 2019 | September 30, 2019 |
| October 1, 2019 | $0.0964 | October 16, 2019 | October 31, 2019 |
| 25 | Invesco High Income Trust II |
Approval of Investment Advisory and Sub-Advisory Contracts
26 Invesco High Income Trust II
27 Invesco High Income Trust II
September 2019
INVESCO HIGH INCOME TRUST II—Common Shares—Cusip: 46131F101
Distribution Notice
Form 1099-DIV for the calendar year will report distributions for US federal income tax purposes. The Trust’s annual report to shareholders will include information regarding the tax character of Trust distributions for the fiscal year. This Notice is sent to comply with certain US Securities and Exchange Commission requirements.
On August 1, 2018, Invesco Advisers, Inc. (Invesco) announced that the Board of Trustees of the Trust approved a managed distribution plan (the “Plan”) for the Trust, whereby the Trust will pay common shareholders a stable monthly distribution. Under the Plan, the Trust increased its dividend to a stated fixed monthly amount based on a distribution of 8.5% of market price per share as of August 1, 2018, which is the date the Plan became effective. The Trust’s distributions may include net investment income, long-term capital gains, short-term capital gains and/or return of capital. In order to make multiple long-term capital gains distributions over the course of the year, the Trust will rely on an exemptive order granted by the US Securities and Exchange Commission.
The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year to date from the sources indicated. You should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the terms of the Plan. All amounts are expressed per common share. The Trust estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Trust is paid back to you. A return of capital distribution does not necessarily reflect the Trust’s investment performance and should not be confused with “yield” or “income.” The amounts and sources of distributions reported in this 19(a) Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend on the Trust’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Trust will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
| DISTRIBUTION ESTIMATES | September 2019 | CUMULATIVE FISCAL YEAR-TO-DATE (YTD) August 31, 2019* |
||||||||||||||
| Source | Per Share Amount |
% of Current Distribution |
Per Share Amount |
% of 2019 Distributions |
||||||||||||
| Net Investment Income |
$ | 0.0774 | 80.29 | % | $ | 0.4580 | 79.18 | % | ||||||||
| Net Realized Short-Term Capital Gains |
$ | 0.0000 | 0.00 | % | $ | 0.0000 | 0.00 | % | ||||||||
| Net Realized Long-Term Capital Gains |
$ | 0.0000 | 0.00 | % | $ | 0.0000 | 0.00 | % | ||||||||
| Return of Capital (or Other Capital Source) |
$ | 0.0190 | 19.71 | % | $ | 0.1204 | 20.82 | % | ||||||||
| Total Current Distribution (per common share) |
$ | 0.0964 | 100.00 | % | $ | 0.5784 | 100.00 | % | ||||||||
| * | Form 1099-DIV for the calendar year will report distributions for federal income tax purposes. The Trust’s annual report to shareholders will include information regarding the tax character of Trust distributions for the fiscal year. The final determination of the source and tax characteristics of all distributions in 2019 will be made after the end of the year. |
The monthly distributions are based on estimates and terms of the Trust’s Plan. Monthly distribution amounts may vary from these estimates based on a multitude of factors. Changes in portfolio and market conditions may cause deviations from estimates. These estimates should not be taken as indication of the Trust’s earnings and performance. The actual amounts and its sources may be subject to additional adjustments and will be reported after year end.
The Trust’s Performance and Distribution Rate Information disclosed in the table below is based on the Trust’s net asset value per share (NAV). Shareholders should take note of the relationship between the Fiscal Year-to-date Cumulative Total Return with the Trust’s Cumulative Distribution Rate and the Average Annual Total Return with the Trust’s Current Annualized Distribution Rate. The Trust’s NAV is calculated as the total market value of all the securities and other assets held by the Trust minus the total liabilities, divided by the total number of shares outstanding. NAV performance may be indicative of the Trust’s investment performance. The value of a shareholder’s investment in the Trust is determined by the Trust’s market price, which is based on the supply and demand for the Trust’s shares in the open market.
28 Invesco High Income Trust II
Trust Performance and Distribution Rate Information:
|
Fiscal Year-to-date March 1, 2019 to August 31, 2019 |
| |||
| Fiscal Year-to-date Cumulative Total Return1 |
4.07 | % | ||
| Cumulative Distribution Rate2 |
3.73 | % | ||
| Current Annualized Distribution Rate3 |
7.47 | % | ||
|
Five-year period ending August 31, 2019 |
| |||
| Average Annual Total Return4 |
5.22 | % | ||
| 1 | Fiscal year-to-date Cumulative Total Return assumes reinvestment of distributions. This is calculated as the percentage change in the Trust’s NAV over the fiscal year-to-date time period including distributions paid and reinvested. |
| 2 | Cumulative Distribution Rate for the Trust’s current fiscal period (March 1, 2019 through August 31, 2019) is calculated as the dollar value of distributions in the fiscal year-to-date period as a percentage of the Trust’s NAV as of August 31, 2019. |
| 3 | The Current Annualized Distribution Rate is the current fiscal period’s distribution rate annualized as a percentage of the Trust’s NAV as of August 31, 2019. |
| 4 | Average Annual Total Return represents the compound average of the annual NAV Total Returns of the Trust for the five-year period ending August 31, 2019. Annual NAV Total Return is the percentage change in the Trust’s NAV over a year including distributions paid and reinvested. |
The Plan may be amended or terminated at any time by the Trust’s Board of Trustees and as a result, the amount of dividends paid by the Trust may vary from time to time. Past amounts of dividends are no guarantee of future dividend payment amounts.
The amount of dividends paid by the Trust may vary from time to time. Past amounts of dividends are no guarantee of future payment amounts.
Investing involves risk and it is possible to lose money on any investment in the Trust.
Visit www.invesco.com for more details. If you have any questions, please contact our Client Services Department at 1-800-341-2929 between the hours of 8:00 am – 5:00 pm CT, Monday through Friday.
About Invesco Ltd.
Invesco is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our 13 distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in 25 countries, Invesco managed $1.1 trillion in assets on behalf of clients worldwide as of August 31, 2019. For more information, visit www.Invesco.com.
Invesco Distributors, Inc. is the US distributor for Invesco Ltd. It is an indirect, wholly owned subsidiary of Invesco Ltd.
Note: There is no assurance that a closed-end Trust will achieve its investment objective. Shares are bought on the secondary market and may trade at a discount or premium to NAV. Regular brokerage commissions apply.
NOT FDIC INSURED l MAY LOSE VALUE l NO BANK GUARANTEE
—Invesco—
29 Invesco High Income Trust II
Proxy Results
A Joint Annual Meeting (“Meeting”) of Shareholders of Invesco High Income Trust II (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 | 7,263,031.06 | 384,859.49 | |||||||
| Eli Jones | 7,256,457.49 | 391,433.06 | ||||||||
| Prema Mathai-Davis | 7,250,984.32 | 396,906.23 | ||||||||
| Ann Barnett Stern | 7,244,842.66 | 403,047.89 | ||||||||
| Raymond Stickel, Jr. | 7,266,622.36 | 381,268.19 | ||||||||
30 Invesco High Income Trust II
Correspondence information
Send general correspondence to Computershare Trust Company,
N.A., P.O. Box 505000, Louisville, KY 40233-5000.
Trust holdings and proxy voting information
The Trust provides a complete list of its holdings four times
in each fiscal year, at the quarter ends. For the second and fourth quarters, the lists appear in the Trust’s semiannual and annual reports to shareholders. For the first and third quarters, the Trust files the lists with the Securities and
Exchange Commission (SEC) as an exhibit to its reports on Form N-PORT. The most recent list of portfolio holdings is available at invesco.com/us. Shareholders can also look up the Trust’s Form N-PORT filings on the SEC website at sec.gov. The
SEC file number for the Trust is shown below.
A
description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 341 2929 or at
invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov.
Information regarding how the Trust voted proxies related
to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov.
| SEC file number: 811-05769 | VK-CE-HINC2-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 Rule 2-01(c)(1) of Regulation S-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 FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-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 Principal Executive Officer (“PEO”) and Principal Financial Officer (“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 the report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-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 Rule 30a-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 Rule 30a-2(b) under the Investment Company Act of 1940. |
| 13(c) | Pursuant to the Securities and Exchange Commission’s Order granting relief from Section 19(b) of the Investment Company Act of 1940, the Section 19(a) notices to shareholders are attached hereto |
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 Trust II
| 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 | |