The Board of Trustees (the “Board”) of Invesco Dynamic Credit Opportunities Fund (the “Fund”) approved a Managed Distribution Plan (the “Plan”) whereby the Fund will pay its monthly dividend to common shareholders at a stated fixed monthly distribution amount of $0.075

The Plan is intended to provide shareholders with a consistent, but not guaranteed, periodic cash payment from the Fund, regardless of when or whether income is earned or capital gains are realized. If sufficient investment income is not available for a monthly distribution, the Fund will distribute long-term capital gains and/or return of capital in order to maintain its managed distribution level under the Plan. A return of capital may occur, for example, when some or all of the money

 

that shareholders invested in the Fund is paid back to them. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” No conclusions should be drawn about the Fund’s investment performance from the amount of the Fund’s distributions or from the terms of the Plan. The Plan will be subject to periodic review by the Board, and the Board may amend the terms of the Plan or terminate the Plan at any time without prior notice to the Fund’s shareholders. The amendment or termination of the Plan could have an adverse effect on the market price of the Fund’s common shares. 

The Fund will provide its shareholders of record on each distribution record date with a Section 19 Notice disclosing the sources of its

 

dividend payment when a distribution includes anything other than net investment income. The amounts and sources of distributions reported in Section 19 Notices 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 upon the Fund’s investment experience during its full fiscal year and may be subject to changes based on tax regulations. The Fund will send shareholders a Form 1099-DIV for the calendar year that will tell them how to report these distributions for federal income tax purposes. Please refer to “Distributions” under Note 1 of the Notes to Financial Statements for information regarding the tax character of the Fund’s distributions.

2	Invesco Dynamic Credit Opportunities Fund

 

 

Performance summary 

For the year ended February 28, 2021, Invesco Dynamic Credit Opportunities Fund (the Fund), at net asset value (NAV), outperformed its benchmark, the Credit Suisse Leveraged Loan Index. The Fund’s return can be calculated based on either the market price or the NAV of its shares. NAV per share is determined by dividing the value of the Fund’s portfolio securities, cash and other assets, less all liabilities and preferred shares, by the total number of common shares outstanding. Market price reflects the supply and demand for Fund shares. As a result, the two returns can differ, as they did during the year.

 

Performance
Total returns, 2/29/20 to 2/28/21
Fund at NAV	6.84%
Fund at Market Value	11.77
Credit Suisse Leveraged Loan Index▼	5.65
Market Price Discount to NAV as of 2/28/21	-8.26
Source(s): ▼Bloomberg L.P.

  

The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Investment return, NAV and common share market price will fluctuate so that you may have a gain or loss when you sell shares. Please visit invesco.com/us for the most recent month-end performance. Performance figures reflect Fund expenses, the reinvestment of distributions (if any) and changes in NAV for performance based on NAV and changes in market price for performance based on market price. 

Since the Fund is a closed-end management investment company, shares of the Fund may trade at a discount or premium from the NAV. This characteristic is separate and distinct from the risk that NAV could decrease as a result of investment activities and may be a greater risk to investors expecting to sell their shares after a short time. The Fund cannot predict whether shares will trade at, above or below NAV. The Fund should not be viewed as a vehicle for trading purposes. It is designed primarily for risk-tolerant long-term investors.

 

 

 

stands at 2.94%. Going forward, we expect fundamentals to continue to improve as COVID-19 comes under greater control, social distancing measures are reduced, and the global economy continues to reopen during 2021. 

At the close of the fiscal year, we believe that senior loans are well positioned for the current environment. With the continued firming of macroeconomic backdrop, fundamentals for the asset class are expected to continue to improve – which is undoubtedly a positive for risk assets. Additionally, we believe that the senior loans’ floating rate feature will provide investors with protection from rising interest rates or inflation, which has regained the focus of investors given the unprecedented monetary and fiscal stimulus enacted by governments around the globe in response to COVID-19. 

During the fiscal year, the Fund used leverage, which allowed us to enhance the Fund’s yield while keeping credit standards high relative to the benchmark. As of the close of the fiscal year, leverage accounted for 22% of the Fund’s NAV plus borrowings. Leverage involves borrowing at a floating short-term rate and reinvesting the proceeds at a higher rate. Unlike other fixed income asset classes, using leverage in conjunction with senior loans does not involve the same degree of risk from rising short-term interest rates since the income from senior loans generally adjusts to changes in interest rates, as do the rates which determine the Fund’s borrowing costs. Similarly, should short-term rates fall, borrowing costs also would decline. For more information about the Fund’s use of leverage, see the Notes to Financial Statements later in this report. 

At the end of the fiscal year, the Fund’s holdings in Monitronics International, Intel-sat Jackson Holdings, and Kantar were the largest overweight allocations relative to the benchmark. Conversely, Charter Communications Operating, Ultimate Software Group, and Asurion were the largest underweight allocations compared to the benchmark. We exited our position in Asurion during the year. 

The senior loan asset class behaves differently from many traditional fixed-income investments. The interest income generated by a portfolio of senior loans is usually determined by a fixed credit spread over LIBOR. Because senior loans generally have a very short duration and the coupons or interest rates are usually adjusted every 30 to 90 days as LIBOR changes, the yield on the portfolio adjusts. Interest rate risk refers to the tendency for traditional fixed income prices to decline when interest rates rise. For senior loans, however, interest rates and income are variable and the prices of senior loans are therefore less sensitive to interest rate changes than traditional fixed-income bonds. We are monitoring interest rates, the market and economic and geopolitical factors

3	Invesco Dynamic Credit Opportunities Fund

 

 

that may impact the direction, speed and magnitude of changes to interest rates across the maturity spectrum, including the potential impact of monetary policy changes by the Fed and certain central banks. If interest rates rise or fall faster than expected, markets may experience increased volatility, which may affect the value and/or liquidity of certain of the Fund’s investments or the market price of the Fund’s shares. 

During the year, the Fund’s managed distribution plan resulted in distributions consisting of return of capital and had a $0.16 per share impact on the Fund’s NAV, as shown in the Financial Highlights section of this report. The Fund’s managed distribution plan did not materially impact the Fund’s investment strategies during the reporting period. 

As always, we appreciate your continued participation in Invesco Dynamic Credit Opportunities Fund.

 

1

Source: Credit Suisse

2

Source: Standard & Poor’s Leveraged Loan Index

 

Portfolio manager(s):

Scott Baskind

Nuno Caetano

Phillip Yarrow

 

The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

 

See important Fund and, if applicable, index disclosures later in this report.

 

 

 

 

4	Invesco Dynamic Credit Opportunities Fund

 

 

Past performance cannot guarantee future results. 

Performance shown in the chart does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.

 

 

 

 

5	Invesco Dynamic Credit Opportunities Fund

 

 

Average Annual Total Returns
As of 2/28/21
		NAV			Market
10 Years		6.86	%		6.31	%
5 Years		9.12			10.38
1 Year		6.84			11.77

 

The performance data quoted represent past performance and cannot guarantee future results; current performance may be lower or higher. Please visit invesco.com/ performance for the most recent month-end performance. 

Performance figures do not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.

 

 

 

 

6	Invesco Dynamic Credit Opportunities Fund

 

 

About indexes used in this report 

■

The Credit Suisse Leveraged Loan Index represents tradable, senior-secured, US dollar-denominated, non-investment grade loans.

■

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

■

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

 

 

 

 

 

7	Invesco Dynamic Credit Opportunities Fund

 

 

8	Invesco Dynamic Credit Opportunities Fund

 

 

9	Invesco Dynamic Credit Opportunities Fund

 

 

Plan benefits 

■

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.

 

Who can participate in the Plan 

If you own shares in your own name, your purchase will automatically enroll you in the Plan. If your shares are held in “street name” — in the name of your brokerage firm, bank, or other financial institution — you must instruct that entity to participate on your behalf. If they are unable to participate on your behalf, you may request that they reregister your shares in your own name so that you may enroll in the Plan.

 

How to enroll 

If you haven’t participated in the Plan in the past or chose to opt out, you are still eligible to participate. Enroll by visiting invesco.com/closed-end, by calling toll-free 800 341 2929 or by notifying us in writing at Invesco Closed-End Funds, Computer-share Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233-5000. If you are writing to us, please include the Fund name and account number and ensure that all shareholders listed on the account sign these written instructions. Your participation in the Plan will begin with the next Distribution payable after the Agent receives your authorization, as long as they receive it before the “record date,” which is generally 10 business days before the Distribution is paid. If your authorization arrives after such record date, your participation in the Plan will begin with the following Distribution.

 

How the Plan works 

If you choose to participate in the Plan, your Distributions will be promptly reinvested for you, automatically increasing your shares. If the Fund is trading at a share price that is equal to its NAV, you’ll pay that amount for your reinvested shares. However, if the Fund is trading above or below NAV, the price is determined by one of two ways:

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.

 

Costs of the Plan 

There is no direct charge to you for reinvesting Distributions because the Plan’s fees are paid by the Fund. If the Fund is trading at or above its NAV, your new shares are issued directly by the Fund and there are no brokerage charges or fees. However, if the Fund is trading at a discount , the shares are purchased on the open market, and you will pay your portion of any per share fees. These per share fees are typically less than the standard brokerage charges for individual transactions because shares are purchased for all participants in blocks, resulting in lower fees for each individual participant. Any service or per share fees are added to the purchase price. Per share fees include any applicable brokerage commissions the Agent is required to pay.

 

Tax implications 

The automatic reinvestment of Distributions does not relieve you of any income tax that may be due on Distributions. You will receive tax information annually to help you prepare your federal income tax return. 

Invesco does not offer tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be used, and it cannot be used, by any taxpayer for avoiding penalties that may be imposed on the taxpayer under US federal tax laws. Federal and state tax laws are complex and constantly changing. Shareholders should always consult a legal or tax adviser for information concerning their individual situation.

 

How to withdraw from the Plan 

You may withdraw from the Plan at any time by calling 800 341 2929, by visiting invesco.com/ closed-end or by writing to Invesco Closed-End Funds, Computershare Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233-5000. Simply indicate that you would like to withdraw from the Plan, and be sure to include your Fund name and account number. Also, ensure that all shareholders listed on the account sign these written instructions. If you withdraw, you have three options with regard to the shares held in the Plan:

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.

 

The Fund and Computershare Trust Company, N.A. may amend or terminate the Plan at any time. Participants will receive at least 30 days written notice before the effective date of any amendment. In the case of termination, Participants will receive at least 30 days written notice before the record date for the payment of any such Distributions by the Fund. In the case of amendment or termination necessary or appropriate to comply with applicable law or the rules and policies of the Securities and Exchange Commission or any other regulatory authority, such written notice will not be required. 

To obtain a complete copy of the current Dividend Reinvestment Plan, please call our Client Services department at 800 341 2929 or visit invesco.com/closed-end.

10	Invesco Dynamic Credit Opportunities Fund

 

 

Portfolio Composition†*
By credit quality		% of total investments
BBB			0.62	%
BBB-			3.26
BB+			5.60
BB			2.63
BB-			7.43
B+			9.72
B			19.93
B-			16.87
CCC+			6.09
CCC			1.90
CCC-			0.26
D			1.12
Non-Rated			20.46
Equity			4.11

 

^†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.

 

Top Five Debt Issuers*
					% of total net assets
1.		Groundworks LLC			3.12	%
2.		Newday Bondco PLC			2.91
3.		PrimeFlight Aviation Services, Inc.			2.91
4.		Muth Mirror Systems, LLC			2.71
5.		Teasdale Foods, Inc.			2.35

 

The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. 

* Excluding money market fund holdings, if any.

Data presented here are as of February 28, 2021.

 

11	Invesco Dynamic Credit Opportunities Fund

 

 

12	Invesco Dynamic Credit Opportunities Fund

 

 

13	Invesco Dynamic Credit Opportunities Fund

 

 

14	Invesco Dynamic Credit Opportunities Fund

 

 

15	Invesco Dynamic Credit Opportunities Fund