Angel Oak Financial Strategies Income Term Trust

N-CSRS 1 d398026dncsrs.htm ANGEL OAK FINANCIAL STRATEGIES INCOME TERM TRUST Angel Oak Financial Strategies Income Term Trust

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 811-23358

Angel Oak Financial Strategies Income Term Trust

(Exact name of registrant as specified in charter)

3344 Peachtree Rd. NE, Suite 1725

Atlanta, Georgia 30326

(Address of principal executive offices) (Zip code)

Dory S. Black, Esq., President

3344 Peachtree Rd. NE, Suite 1725

Atlanta, Georgia 30326

(Name and address of agent for service)

Copy to:

Douglas P. Dick

Stephen T. Cohen

Dechert LLP

1900 K Street NW

Washington, DC 20006

404-953-4900

Registrant’s telephone number, including area code

Date of fiscal year end: January 31

Date of reporting period: July 31, 2021

Item 1. Reports to Stockholders.

(a)

LOGO

Semi-Annual Report

July 31, 2021

Angel Oak Financial Strategies Income Term Trust

Angel Oak Capital Advisors, LLC

3344 Peachtree Road NE

Suite 1725

Atlanta, GA 30326

(404) 953-4900

Table of Contents



Investment Results			3

Portfolio Holdings			4

Statement of Assets and Liabilities			5

Statement of Operations			6

Statement of Cash Flows			7

Statements of Changes in Net Assets			8

Financial Highlights			9

Schedule of Investments			10

Notes to the Financial Statements			15

Additional Information			27

Investment Results – (Unaudited)

Angel Oak Financial Strategies Income Term Trust

Fund Information (as of July 31, 2021)


Market Price	$	18.19
Net Asset Value (“NAV”)	$	19.11
Premium (Discount) to NAV		(4.81%	)
Market Price Distribution Rate⁽¹⁾		7.16%
NAV Distribution Rate⁽¹⁾		6.81%

(1) Distribution rates are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (“ROC”) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice.

Total Returns⁽²⁾

(For the Period Ended July 31, 2021)


	Average Annual Returns
	One Year			Since Inception⁽³⁾
Angel Oak Financial Strategies Income Term Trust – NAV		10.56	%		4.53	%
Angel Oak Financial Strategies Income Term Trust – Market Price		22.70	%		2.53	%
Bloomberg Barclays U.S. Aggregate Bond Index⁽⁴⁾		(0.70	%)		4.92	%

(2) Return figures reflect any change in price per share and assume the reinvestment of all distributions under the Fund’s dividend reinvestment plan. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total return would be reduced. Past performance is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when repurchased, may be worth more or less than the original cost. Index returns do not reflect the effects of fees or expenses. It is not possible to invest directly in an index.

(3) Inception date is May 31, 2019.

(4) The Bloomberg Barclays U. S. Aggregate Bond Index measures the performance of the investment-grade, fixed-rate bond market, including government and credit securities, agency pass-through securities, asset-backed securities and commercial mortgage-backed securities. Performance figures include the change in value of the bonds in the index and the reinvestment of interest. The index return does not reflect expenses, which have been deducted from the Fund’s return. You cannot invest directly in an index; however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index.

Portfolio Holdings – (Unaudited)

The investment objective of Angel Oak Financial Strategies Income Fund is to seek current income with a secondary objective of total return.

LOGO

*	As a percentage of total investments. The percentages presented in the table above may differ from those in the Schedule of Investments because the percentages in the Schedule of Investments are calculated based on net assets.

Statement of Assets and Liabilities

July 31, 2021 (Unaudited)


	Financial Strategies Income Term Trust
Assets
Investments in unaffiliated securities at fair value*		$	413,080,313
Investments in affiliated securities at fair value*			360,900
Receivable for investments sold			3,147,771
Dividends and interest receivable			4,065,120
Prepaid expenses			35,836

Total Assets			420,689,940


Liabilities
Payable for reverse repurchase agreements			44,758,000
Payable for senior notes (net of unamortized deferred issuance costs of $ 940,325)			84,059,675
Payable to distributions to shareholders			11,359
Interest payable for credit and reverse repurchase agreements			183,942
Payable to Adviser			476,148
Payable to administrator, fund accountant, and transfer agent			37,592
Payable to custodian			3,794
Other accrued expenses			162,502

Total Liabilities			129,693,012

Net Assets		$	290,996,928


Net Assets consist of:
Paid-in capital		$	290,708,200
Total distributable earnings (accumulated deficit)			288,728

Net Assets		$	290,996,928


Shares outstanding (unlimted number of shares authorized, no par value)			15,228,998

Net asset value (“NAV”) per share		$	19.11


*Identified Cost:
Investments in unaffiliated securities		$	396,666,605
Investments in affiliated securities			350,506

See accompanying notes which are an integral part of these financial statements.

Statement of Operations

For the Period Ended July 31, 2021 (Unaudited)


	Financial Strategies Income Term Trust
Investment Income
Interest		$	9,866,935
Dividends from unaffiliated investments			1,001,751
Dividends from affiliated investments			13,262

Total Investment Income			10,881,948


Expenses
Investment Advisory (See Note 5)			2,729,858
Interest & commissions (See Note 10/11)			1,392,442
Service Fees (See Note 5)			202,385
Legal			97,440
Fund accounting			45,661
Administration			39,944
Trustee			24,857
Printing			20,101
Transfer agent			17,454
Audit & tax			14,664
Registration			13,154
Custodian			10,464
Compliance			5,981
Insurance			5,068
Miscellaneous			24,868

Total Expenses			4,644,341

Fees contractually waived by Adviser (See Note 5)			(18,412	)
Fees contractually recouped by Adviser (See Note 5)			2,334

Net expenses			4,628,263

Net Investment Income (Loss)			6,253,685


Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on investments			1,351,543
Net change in unrealized appreciation (depreciation) on unaffiliated investments			8,690,751
Net change in unrealized appreciation (depreciation) on affiliated investments			35,405

Net realized and unrealized gain (loss) on investments			10,077,699

Net increase (decrease) in net assets resulting from operations		$	16,331,384

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Statement of Cash Flows

For the Period Ended July 31, 2021 (Unaudited)


CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations	$	16,331,384
Net adjustments to reconcile net increase in net assets from operations to net cash provided by (used in) operating activities:
Net amortization and accretion of premium and discount		236,924
Purchases of short-term investments, net		(9,200,526	)
Purchases of investments		(28,747,165	)
Proceeds from sales of long-term investments		27,054,269
Return of capital distributions received from underlying investments		313,905
Net change in unrealized appreciation (depreciation) on investments		(8,726,156	)
Net realized gain (loss) on investments		(1,351,543	)
(Increase) Decrease in:
Receivable for investments sold		1,056,210
Dividends and interest receivable		235,938
Prepaid expenses		50,372
(Increase) Decrease in:
Interest payable for senior notes and reverse repurchase agreements		18,019
Payable to Adviser		29,808
Payable to administrator, fund accountant and transfer agent		8,608
Payable to custodian		392
Other accrued expenses		57,485

Net cash provided by (used in) operating activities		(2,632,076	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to shareholders		(9,922,599	)
Purchases of reverse repurchase agreements		44,758,000
Proceeds from reverse repurchase agreements		(86,363,000	)
Purchases of senior notes		84,059,675
Increase (decrease) in borrowings		(30,000,000	)

Net cash provided by (used in) financing activities		2,532,076

Net change in cash		(100,000	)


CASH:
Beginning balance		100,000

Ending balance	$	—

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	1,374,423

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Statements of Changes in Net Assets


	For the Period Ended July 31, 2021 (Unaudited)				For the Year Ended January 31, 2021
Increase (Decrease) in Net Assets due to:
Operations
Net investment income (loss)		$	6,253,685			$	10,958,010
Net realized gain (loss) on investment transactions and futures contracts			1,351,543				(13,378,368	)
Net change in unrealized appreciation (depreciation) on investments and futures contracts			8,726,156				(137,401	)

Net increase (decrease) in net assets resulting from operations			16,331,384				(2,557,759	)

Distributions to Shareholders
Total distributions			(6,332,329	)			(11,280,742	)
Return of capital			(3,581,749	)			(6,149,847	)

Total distributions to shareholders			(9,914,078	)			(17,430,589	)

Capital Transactions
Proceeds from shares sold			—				68,105,827	(a)

Net increase (decrease) in net assets resulting from capital transactions			—				68,105,827

Total Increase (Decrease) in Net Assets			6,417,306				48,117,479

Net Assets
Beginning of period			284,579,622				236,462,143

End of period		$	290,996,928			$	284,579,622

Share Transactions
Shares sold			—				3,709,064

Net increase (decrease) in share transactions			—				3,709,064

(a)	Includes proceeds from reorganization (see Note 1).

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Financial Highlights

(For a share outstanding during each period)


	For the Period Ended July 31, 2021 (Unaudited)				For the Period Ended January 31, 2020				For the Period Ended January 31, 2020 (a)
Selected Per Share Data:
Net asset value, beginning of period		$	18.69			$	20.53			$	20.00


Income from investment operations:
Net investment income (loss)			0.41	(g)			0.82				0.55
Net realized and unrealized gain (loss) on investments			0.66				(1.41	)			0.80

Total from investment operations			1.07				(0.59	)			1.35

Less distributions to shareholders:
From net investment income			(0.42	)			(0.79	)			(0.67	)
Return of capital			(0.23	)			(0.46	)			(0.15	)

Total distributions			(0.65	)			(1.25	)			(0.82	)


Net asset value, end of period		$	19.11			$	18.69			$	20.53


Total return on net asset value (b)(c)			5.84%				-2.71%				6.89%
Total return on market value (b)(d)			9.06%				-12.70%				10.86%

Ratios and Supplemental Data:
Net assets, end of period (000’s omitted)		$	290,997			$	284,580			$	236,462
Ratio of expenses to average net assets before waiver and reimbursement (e)			3.26%				3.34%				2.41%
Ratio of expenses to average net assets before waiver and reimbursement excluding interest expense (e)			2.26%				2.25%				1.93%
Ratio of expenses to average net assets after waiver and reimbursement (e)			3.25%				3.20%				1.91%
Ratio of expenses to average net assets after waiver and reimbursement excluding interest expense (e)			2.25%				2.11%				1.43%
Ratio of expenses to average managed assets after waiver and reinvestment excluding interest expense. Average managed assets represent the total assets of the fund, including the assets attributable to the proceeds from any forms of financial leverage, less liabilities, other than liabilities related to any form of leverage (e)			1.59%				1.50%				1.25%
Ratio of net investment income (loss) to average net assets before waiver and reimbursement (e)			4.38%				4.05%				3.58%
Ratio of net investment income (loss) to average net assets after waiver and reimbursement (e)			4.39%				4.19%				4.08%
Portfolio turnover rate (b)			6.81%				24.55%				21.14%
Credit facility and reverse repurchase agreements, end of period (000s)		$	128,818			$	116,363			$	81,514
Asset coverage per $1,000 unit of senior indebtedness (f)		$	3,259			$	3,446			$	3,901

(a)

Fund commenced operations on May 31, 2019.

(b)

Not annualized for periods less than one year.

(c)

Total return on net asset value is computed based upon the net asset value of common stock on the first business day and the closing net asset value on the last business day of the period. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan.

(d)

Total return on market value is computed based upon the New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan.

(e)

Annualized for periods less than one year.

(f)

Calculated by subtracting the Fund’s total liabilities (not including borrowings) from the Fund’s total assets and dividing by the total number of senior indebtedness units, where one unit equals $1,000 of senior indebtedness.

(g)

Net investment income/(loss) per share has been calculated based on average shares outstanding during the period.

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Schedule of Investments

July 31, 2021 (Unaudited)


	Principal Amount		Value
Bank Loans – 1.10%
BJ Services LLC, 0.000%, 1/3/2023 (a)	$	1,900,000	$	1,843,000
JUUL Term Loan, 9.500%, (3 Month LIBOR USD + 9.000%), 8/2/2023 (b)		938,500		915,037
Premier Brands, 8.135%, (3 Month LIBOR USD + 8.250%), 3/20/2024 (b)		472,568		434,763


TOTAL BANK LOANS (Cost – $3,299,348)			$	3,192,800


Investment Companies – 0.12%	Shares
Affiliated Closed-End Funds – 0.12%
Angel Oak Dynamic Financial Strategies Income Term Trust		18,000	$	360,900


TOTAL INVESTMENT COMPANIES (Cost – $350,506)			$	360,900

	Principal Amount
Collateralized Debt Obligations – 0.70%
Financial Institution Note Securitization Ltd., Series 2019-1A, Class A, 3.900%, 7/17/2034 (c)(d)(e)	$	2,000,000	$	2,025,000


TOTAL COLLATERALIZED DEBT OBLIGATIONS (Cost – $1,966,848)			$	2,025,000


Common Stocks – 0.72%	Shares
Financial – 0.72%
AGNC Investment Corp.		30,500	$	484,035
Annaly Capital Management, Inc.		60,000		509,400
Ellington Financial, Inc.		15,750		286,335
New Residential Investment Corp.		25,000		244,000
PennyMac Mortgage Investment Trust		13,000		256,360
Redwood Trust, Inc.		25,750		305,652


TOTAL COMMON STOCKS (Cost – $2,020,603)			$	2,085,782


Convertible Obligations – 0.34%	Principal Amount
Financial – 0.34%
FedNat Holding Co., 5.000%, 4/19/2026 (d)	$	1,000,000	$	1,000,000


TOTAL CONVERTIBLE OBLIGATIONS (Cost – $1,000,000)			$	1,000,000


Corporate Obligations – 131.44%
Financial – 131.44%
Allegiance Bancshares, Inc., 4.700% (SOFR + 3.392%), 10/1/2029 (b)		1,750,000		1,842,110
Alpine Banks of Colorado, 5.875% (SOFR + 5.690%), 6/15/2030 (b)(d)		4,000,000		4,336,261
Ameris Bancorp, 4.250% (SOFR + 2.940%), 12/15/2029 (b)		2,250,000		2,343,641
Amur Equipment Finance, Inc., 6.125%, 3/15/2026 (d)		1,500,000		1,525,823
ANB Corp., 4.000% (SOFR + 3.875%), 9/30/2030 (b)(d)		1,500,000		1,544,725

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Schedule of Investments – (continued)

July 31, 2021 (Unaudited)


	Principal Amount		Value
Corporate Obligations – (continued)
Financial – (continued)
Arbor Realty Trust, Inc., 5.000%, 4/30/2026 (d)	$	1,000,000	$	1,004,645
Arbor Realty Trust, Inc., 4.500%, 3/15/2027 (d)		1,500,000		1,483,809
Avidbank Holdings, Inc., 5.000% (SOFR + 3.595%), 12/30/2029 (b)(d)(e)		6,000,000		6,213,749
B. Riley Financial, Inc., 6.500%, 9/30/2026 (f)		298,650		315,016
B. Riley Financial, Inc., 5.500%, 3/31/2026 (f)		500,000		512,000
B. Riley Financial, Inc., 6.000%, 1/31/2028 (f)		3,000,000		3,190,800
Banc of California, Inc., 5.250%, 4/15/2025 (e)		3,000,000		3,191,212
BancPlus Corp., 6.000% (SOFR + 5.860%), 6/15/2030 (b)(d)(e)		5,000,000		5,504,238
Bank of Commerce Holdings, 5.499% (3 Month LIBOR USD + 5.260%), 12/10/2025 (b)(d)		6,500,000		6,511,594
BankGuam Holding Co., 6.350% (3 Month LIBOR USD + 4.660%), 6/30/2029 (b)		9,000,000		9,411,470
BankGuam Holding Co., 4.750% (SOFR + 4.130%), 7/1/2031 (b)(d)		1,500,000		1,511,102
Banksouth Holding Co., 5.875% (3 Month LIBOR USD + 4.020%), 7/30/2029 (b)(d)		5,000,000		5,176,198
Banterra Bank, 6.000% (3 Month LIBOR USD + 4.120%), 6/7/2029 (b)		7,500,000		7,784,206
Bar Harbor Bankshares, 4.625% (SOFR + 3.270%), 12/1/2029 (b)(e)		6,000,000		6,300,743
Beal Trust I, 3.779%, (6 Month LIBOR USD + 3.625%), 7/30/2037 (b)(g)(h)		5,000,000		4,208,878
Big Poppy Holdings, Inc., 6.500%, 7/1/2027		1,500,000		1,552,500
Business Development Corp. of America, 4.850%, 12/15/2024 (d)(e)		2,000,000		2,131,670
Byline Bancorp, Inc., 6.000% (SOFR + 5.880%), 7/1/2030 (b)(e)		5,000,000		5,447,113
Cadence Bancorp, 4.750% (3 Month LIBOR USD + 3.030%), 6/30/2029 (b)		2,000,000		2,139,442
Capstar Financial Holdings, Inc., 5.250% (SOFR + 5.130%), 6/30/2030 (b)(e)		3,000,000		3,144,392
CB&T Holding Corp., 6.250% (SOFR + 6.015%), 12/15/2030 (b)(d)		2,500,000		2,650,000
CenterState Bank Corp., 5.750% (SOFR + 5.617%), 6/1/2030 (b)		1,000,000		1,099,344
Central Bancshares, Inc., 5.750% (3 Month LIBOR USD + 3.870%), 6/30/2029 (b)(d)		5,000,000		5,156,249
Clear Blue Financial Holdings LLC, 7.000%, 4/15/2025 (d)		3,000,000		3,054,030
Clear Street Capital LLC, 6.000%, 10/15/2025 (d)(e)		2,500,000		2,572,241
CoastalSouth Bancshares, Inc., 5.950% (SOFR + 5.820%), 9/15/2030 (b)(d)		1,000,000		1,021,877
Commercial Credit Group, Inc., 4.875%, 5/30/2026 (d)		500,000		502,101
Community Financial Corp., 4.750% (SOFR + 4.580%), 10/15/2030 (b)		1,000,000		1,039,188
Community Heritage Financial, Inc., 5.750% (3 Month LIBOR USD + 4.395%), 10/30/2029 (b)(d)		4,500,000		4,674,373
Congressional Bancshares, Inc., 5.750% (SOFR + 4.390%), 12/1/2029 (b)(d)		2,000,000		2,066,457
ConnectOne Bancorp, Inc., 5.200% (3 Month LIBOR USD + 2.840%), 2/1/2028 (b)		500,000		515,619
ConnectOne Bancorp, Inc., 5.750% (SOFR + 5.605%), 6/15/2030 (b)		2,000,000		2,172,279
Cowen, Inc., 7.250%, 5/6/2024 (d)		4,000,000		4,356,559
CRB Group, Inc., 6.500% (SOFR + 6.380%), 9/1/2030 (b)(d)		1,750,000		1,928,049
Customers Bank, 6.125% (3 Month LIBOR USD + 3.443%), 6/26/2029 (b)(d)		2,000,000		2,162,402
Empire Bancorp, Inc., 7.375%, 12/17/2025 (d)		3,000,000		3,083,902
Enterprise Bancorp, Inc., 5.250% (SOFR + 5.175%), 7/15/2030 (b)		1,500,000		1,590,683
Equity Bancshares, Inc., 7.000% (SOFR + 6.880%), 6/30/2030 (b)		6,000,000		6,436,576
Evans Bancorp, Inc., 6.000% (SOFR + 5.900%), 7/15/2030 (b)		2,000,000		2,134,712
FedNat Holding Co., 7.750%, 3/15/2029		5,000,000		5,350,000
Fidelity Bank, 5.875% (3 Month LIBOR USD + 3.630%), 5/31/2030 (b)(e)		12,000,000		12,945,091
Fidelity Federal Bancorp, 6.000% (SOFR + 4.650%), 11/1/2029 (b)(d)(e)		2,000,000		2,104,871
Financial Institutions, Inc., 4.375% (SOFR + 4.265%), 10/15/2030 (b)		2,000,000		2,038,071
FineMark Holdings, Inc., 5.875% (3 Month LIBOR USD + 2.970%), 6/30/2028 (b)		2,000,000		2,096,858
First Bancshares, Inc., 4.250% (SOFR + 4.126%), 10/1/2030 (b)		1,000,000		1,049,269
First Bank, 5.500% (SOFR + 5.380%), 6/1/2030 (b)		1,500,000		1,592,871
First Busey Corp., 5.250% (SOFR + 5.110%), 6/1/2030 (b)		1,000,000		1,053,892

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Schedule of Investments – (continued)

July 31, 2021 (Unaudited)


	Principal Amount		Value
Corporate Obligations – (continued)
Financial – (continued)
First Business Financial Services, Inc., 5.500% (SOFR + 4.332%), 8/15/2029 (b)(d)	$	11,000,000	$	11,355,485
First Internet Bancorp, 6.000% (3 Month LIBOR USD + 4.114%), 6/30/2029 (b)(f)		7,427,800		7,817,017
First Midwest Capital Trust I, 6.950%, 12/1/2033		1,761,000		1,910,685
First Northwest Bancorp, 3.750% (SOFR + 3.000%), 3/30/2031 (b)		1,000,000		1,012,252
First Paragould Bankshares, Inc., 5.250% (3 Month LIBOR USD + 3.095%), 12/15/2027 (b)(d)		2,250,000		2,306,951
First Southwest Corp., 6.350% (3 Month LIBOR USD + 4.080%), 6/1/2029 (b)(d)		7,000,000		7,318,167
FirstBank, 4.500% (SOFR + 4.390%), 9/1/2030 (b)		2,500,000		2,600,946
Firstsun Capital Bancorp, 6.000% (SOFR + 5.890%), 7/1/2030 (b)(d)(e)		4,000,000		4,322,594
Georgia Banking Co., Inc., 4.125% (SOFR + 3.400%), 6/15/2031 (b)(d)		1,000,000		1,006,446
Hallmark Financial Services, Inc., 6.250%, 8/15/2029		7,382,000		7,086,720
Hanmi Financial Corp., 5.450% (3 Month LIBOR USD + 3.315%), 3/30/2027 (b)		3,500,000		3,599,445
Happy Bancshares, Inc., 5.500% (SOFR + 5.345%), 7/31/2030 (b)(d)		4,500,000		4,826,934
HBT Financial, Inc., 4.500% (SOFR + 4.370%), 9/15/2030 (b)(d)(e)		3,000,000		3,075,762
Heritage Southeast BanCorp, Inc., 6.000% (SOFR + 5.630%), 6/30/2030 (b)(d)		2,000,000		2,249,889
Horizon Bancorp, Inc., 5.625% (SOFR + 5.490%), 7/1/2030 (b)		2,000,000		2,208,872
Independent Bank Corp., 5.950% (SOFR + 5.825%), 5/31/2030 (b)(d)		1,000,000		1,096,080
Independent Bank Group, Inc., 4.000% (SOFR + 3.885%), 9/15/2030 (b)		2,000,000		2,075,931
Investar Holding Corp., 5.125% (SOFR + 3.752%), 12/30/2029 (b)(d)		4,000,000		4,154,904
Jeff Davis Bancshares, Inc., 6.750% (3 Month LIBOR USD + 4.690%), 1/15/2027 (b)(d)		3,000,000		3,038,106
Kingstone Cos, Inc., 5.500%, 12/30/2022		2,995,000		2,952,427
Level One Bancorp, Inc., 4.750% (SOFR + 3.110%), 12/18/2029 (b)		2,000,000		2,126,268
Limestone Bancorp, Inc., 5.750% (3 Month LIBOR USD + 3.950%), 7/31/2029 (b)(d)		5,000,000		5,156,049
Luther Burbank Corp., 6.500%, 9/30/2024 (d)(e)		5,000,000		5,755,202
Maple Financial Holdings, Inc., 5.000% (SOFR + 4.670%), 2/15/2031 (b)(d)		1,000,000		1,015,053
Meridian Corp., 5.375% (SOFR + 3.950%), 12/30/2029 (b)		4,000,000		4,184,220
MidWestOne Financial Group, Inc., 5.750% (SOFR + 5.680%), 7/30/2030 (b)		2,500,000		2,761,444
Nano Financial Holdings, Inc., 7.000%, 7/1/2024 (d)		5,000,000		5,093,765
National Bank of Indianapolis Corp., 5.500% (3 Month LIBOR USD + 4.209%), 9/15/2029 (b)(d)		7,000,000		7,231,786
NexBank Capital, Inc., 4.474% (3 Month LIBOR USD + 4.355%), 3/16/2026 (b)(d)		1,000,000		1,001,237
Northern Bancorp, Inc., 4.750% (SOFR + 3.275%), 12/30/2029 (b)(d)		4,000,000		4,234,875
Northpointe Bancshares, Inc., 6.000% (SOFR + 4.905%), 9/30/2029 (b)(d)(e)		4,000,000		4,156,580
Northwest Bancshares, Inc., 4.000% (SOFR + 3.890%), 9/15/2030 (b)		1,000,000		1,036,988
Oakstar Bancshares, Inc., 4.250% (SOFR + 3.516%), 4/15/2031 (b)(d)		1,000,000		1,029,979
Obsidian Insurance Holdings, Inc., 6.500%, 12/30/2025 (d)		2,000,000		2,030,000
Ohio National Financial Services, Inc., 6.625%, 5/1/2031 (d)		3,500,000		4,238,168
Olney Bancshares of Texas, Inc., 4.000% (SOFR + 3.320%), 3/15/2031 (b)(d)		1,000,000		1,011,947
Origin Bank, 4.250% (3 Month LIBOR USD + 2.820%), 2/15/2030 (b)		2,500,000		2,652,901
Pacific Premier Bancorp, Inc., 5.375% (SOFR + 5.170%), 6/15/2030 (b)		5,000,000		5,410,320
Pacific Western Bank, 3.250% (SOFR + 2.520%), 5/1/2031 (b)		2,000,000		2,044,701
Premia Holdings Ltd., 6.900%, 9/23/2030 (d)(g)		6,000,000		6,097,500
Queensborough Co., 6.000% (SOFR + 5.880%), 10/15/2030 (b)(d)		2,000,000		2,104,078
RBB Bancorp, 4.000% (SOFR + 3.290%), 4/1/2031 (b)		1,500,000		1,534,186
Ready Capital Corp., 6.200%, 7/30/2026 (f)		5,000,000		5,300,000
Reliant Bancorp, Inc., 5.125% (SOFR + 3.765%), 12/15/2029 (b)		4,000,000		4,153,737
River Financial Corp., 4.000% (SOFR + 3.420%), 3/15/2031 (b)(d)		1,000,000		1,044,459
Sandy Spring Bancorp, Inc., 4.250% (SOFR + 2.882%), 11/15/2029 (b)		1,000,000		1,040,911
Signature Bank, 4.125% (3 Month LIBOR USD + 2.559%), 11/1/2029 (b)		250,000		263,902

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Schedule of Investments – (continued)

July 31, 2021 (Unaudited)


	Principal Amount		Value
Corporate Obligations – (continued)
Financial - (continued)
Silver Queen Financial Services, Inc., 5.500% (3 Month LIBOR USD + 3.338%), 12/1/2027 (b)(d)(e)	$	3,800,000	$	3,899,234
SmartFinancial, Inc., 5.625% (3 Month LIBOR USD + 2.550%), 10/2/2028 (b)(d)(e)		2,190,000		2,293,113
Spirit of Texas Bancshares, Inc., 6.000% (SOFR + 5.920%), 7/31/2030 (b)(d)		2,500,000		2,723,299
Sterling Bancorp, 4.000% (SOFR + 2.530%), 12/30/2029 (b)		200,000		208,247
Sterling Bancorp, Inc., 5.946% (3 Month LIBOR USD + 5.820%), 4/15/2026 (b)(d)		2,700,000		2,705,153
Texas State Bankshares, Inc., 5.750% (3 Month LIBOR USD + 3.550%), 6/15/2029 (b)(d)		4,000,000		4,127,353
Tri-County Financial Group, Inc., 7.000% (3 Month LIBOR USD + 5.862%), 10/15/2026 (b)		3,000,000		3,018,652
Trinitas Capital Management LLC, 6.000%, 7/30/2026 (d)(e)		4,000,000		4,010,493
Trinity Cap, Inc., 7.000%, 1/16/2025 (f)		2,000,000		2,108,000
Triumph Bancorp, Inc., 4.875% (SOFR + 3.592%), 11/27/2029 (b)		8,000,000		8,502,447
Tulsa Valley Bancshares Corp., 5.000% (SOFR + 4.210%), 4/15/2031 (b)(d)		1,250,000		1,262,202
United Insurance Holdings Corp., 6.250%, 12/15/2027		4,500,000		4,622,386
US Metro Bancorp, Inc., 5.650% (SOFR + 5.430%), 11/1/2030 (b)(d)		1,000,000		1,059,672
Veritex Holdings, Inc., 4.750% (SOFR + 3.470%), 11/15/2029 (b)		1,750,000		1,845,345
Volunteer State Bancshares, Inc., 5.750% (SOFR + 4.365%), 11/15/2029 (b)(d)		2,000,000		2,083,854
White River Bancshares Co., 5.875% (SOFR + 4.420%), 12/31/2029 (b)(d)		5,000,000		5,196,032
Wintrust Financial Corp., 4.850%, 6/6/2029		5,000,000		5,526,225
WT Holdings, Inc., 7.000%, 4/30/2023 (d)		2,700,000		2,808,331


TOTAL CORPORATE OBLIGATIONS (Cost – $367,153,851)			$	382,500,808


Preferred Stocks – 3.11%	Shares
Financial – 2.40%
CNB Financial Corp., 7.125%		20,000	$	552,300
First Citizens BancShares, Inc., 5.375%		140,000		3,830,400
Level One Bancorp, Inc., 7.500%		20,000		534,600
Northpointe Bancshares, Inc., 8.250% (SOFR + 7.990%) (b)(d)		40,000		1,072,600
TriState Capital Holdings, Inc., 6.750% (3 Month LIBOR USD + 3.985%) (b)		37,374		981,441

				6,971,341

Real Estate Investment Trust – 0.71%
Dynex Capital, Inc., 6.900% (3 Month LIBOR USD + 5.461%) (b)		40,000		1,038,400
Lument Finance Trust, Inc., 7.875%		40,000		1,016,000

				2,054,400


TOTAL PREFERRED STOCKS (Cost – $8,414,280)			$	9,025,741

Private Investment – 0.05%
Whitebox Asymmetric Opportunities Fund, LP (g)		N/A		149,234


TOTAL PRIVATE INVESTMENT (Cost – $136,127)			$	149,234

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Schedule of Investments – (continued)

July 31, 2021 (Unaudited)


	Shares		Value
Short-Term Investments – 4.50%
Money Market Funds – 4.50%
First American Government Obligations Fund, Class U, 0.026% (i)		13,100,948	$	13,100,948


TOTAL SHORT-TERM INVESTMENTS (Cost – $13,100,948)			$	13,100,948


TOTAL INVESTMENTS – 142.08% (Cost – $397,442,511)			$	413,441,213
Liabilities in Excess of Other Assets – (42.08%)				(122,444,285	)

NET ASSETS – 100.00%			$	290,996,928

LIBOR:

London Inter-Bank Offered Rate

SOFR:

Secured Overnight Financing Rate

(a)	Non-income producing security. Item identified as in default as to the payment of interest.

(b)	Variable or floating rate security based on a reference index and spread. Certain securities are fixed to variable and are currently in the fixed phase. Rate disclosed is the rate in effect as of July 31, 2021.

(c)	Variable rate security. The coupon is based on an underlying pool of community bank subordinated debt. The rate reported is the rate in effect as of July 31, 2021.

(d)

Security exempt from registration under Rule 144A or Section 4(g)(2) of the Securities Act of 1933. The security may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities are determined to be liquid by the Adviser, under the procedures established by the Fund’s Board of Trustees, unless otherwise denoted. At July 31, 2021, the value of these securities amounted to $204,495,257 or 70.27% of net assets.

(e)	All or a portion of the security has been pledged as collateral in connection with open reverse repurchase agreements. At July 31, 2021, the value of securities pledged amounted to $79,093,298.

(f)	Security issued as a “Baby Bond”, with a par value of $25 per bond. The principal balance disclosed above represents the issuer’s outstanding principal that corresponds to the bonds held in the Fund.

(g)	As of July 31, 2021, the Fund has fair valued these securities. The value of these securities amounted to $10,455,612 or 3.59% of net assets.

(h)	Security issued as a “Trust Preferred Security”, with a par value of $1,000 per bond. The principal balance disclosed above represents the issuer’s outstanding principal that corresponds to the bonds held in the Fund.

(i)	Rate disclosed is the seven-day yield as of July 31, 2021.

Schedule of Open Reverse Repurchase Agreements


Counterparty	Interest Rate			Trade Date		Maturity Date		Net Closing Amount		Face Value
Lucid Management and Capital Partners LP		1.843	%		7/15/2021		8/12/2021	$	15,163,707	$	15,142,000
Lucid Management and Capital Partners LP		1.876	%		7/15/2021		10/14/2021		24,593,081		24,477,000
Lucid Management and Capital Partners LP		1.876	%		7/23/2021		10/14/2021		5,161,229		5 ,139,000

										$	44,758,000

A reverse repurchase agreement, although structured as a sale and repurchase obligation, acts as a financing transaction under which the Fund will effectively pledge certain assets as collateral to secure a short-term loan. Generally, the other party to the agreement makes the loan in an amount less than the fair value of the pledged collateral. At the maturity of the reverse repurchase agreement, the Fund will be required to repay the loan and interest and correspondingly receive back its collateral. While used as collateral, the pledged assets continue to pay principal and interest which are for the benefit of the Fund.

See accompanying notes which are an integral part of these financial statements.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements

July 31, 2021 (Unaudited)

NOTE 1. ORGANIZATION

Angel Oak Financial Strategies Income Term Trust (“FINS”) (the “Trust” or the “Fund”) is organized as Delaware statutory trust under a Declaration of Trust dated June 14, 2018. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified closed-end management investment company listed on the New York Stock Exchange (“NYSE”). Please see the table below for a summary of Fund specific information:


Ticker	Investment Objective	Commencement of Operations
FINS	Current Income & Total Return	05/31/19

The Fund will terminate on or before May 31, 2031 (the “Termination Date”); provided, that if the Board of Trustees (the “Board”) believes that, under then-current market conditions, it is in the best interest of the Fund to do so, the Fund may extend the Termination Date: (i) once for up to one year (i.e., up to May 31, 2032), and (ii) once for up to an additional six months (i.e., up to November 30, 2032), in each case upon the affirmative vote of a majority of the Board and without Shareholder approval. In determining whether to extend the Termination Date, the Board may consider the inability to sell the Fund’s assets in a time frame consistent with termination due to lack of market liquidity or other extenuating circumstances. Additionally, the Board may determine that market conditions are such that it is reasonable to believe that, with an extension, the Fund’s remaining assets will appreciate and generate income in an amount that, in the aggregate, is meaningful relative to the cost and expense of continuing the operation of the Fund.

At a special meeting of the Board on January 21, 2020, the Board approved an Agreement and Plan of Reorganization (the “Plan”) providing for the transfer of all of the assets of the Vivaldi Opportunities Fund (“VAM”) in exchange solely for newly issued common shares of beneficial interest of the Fund and the assumption by the Fund of the liabilities of VAM and the distribution of the common shares of beneficial interest of the Fund to the shareholders of VAM and complete liquidation of VAM (the “Reorganization”). The Plan was approved at a meeting of shareholders held on May 26, 2020.

The Reorganization closed as of the close of business June 5, 2020 as a taxable event. The expenses relating to the Reorganization were borne by the Adviser and VAM’s investment adviser. Under the terms of the Plan, shareholders of VAM received shares of the Fund equal in U.S. dollar value to the interests of such shareholders in VAM as of June 5, 2020. For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Codification Topic 946 “Financial Services-Investment Companies.”

Securities Valuation and Fair Value Measurements: The Fund records its investments at fair value and is in accordance with fair valuation accounting standards. The Fund has adopted fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. In addition, these standards require expanded disclosure for each major category of assets. These inputs are summarized in the three broad levels listed below:

•

Level 1: quoted prices in active markets for identical securities

•

Level 2: other significant observable inputs (including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

•

Level 3: significant unobservable inputs (including the Fund’s own assumptions in determining fair value of investments based on the best information available)

The inputs or methodology used for valuing securities are not an indication of the risks associated with investing in those securities.

Investments in registered open-end management investment companies, including money market funds, will be valued based upon the net asset value (“NAV”) of such investments and are categorized as Level 1 of the fair value hierarchy.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

Fair values for long-term debt securities, including asset-backed securities, collateralized loan obligations, corporate obligations and trust preferred securities are normally determined on the basis of valuations provided by independent pricing services. Vendors typically value such securities based on one or more inputs, including but not limited to, benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and pricing models such as yield measurers calculated using factors such as cash flows, financial or collateral performance and other reference data. In addition to these inputs, asset-backed obligations may utilize cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information. Securities that use similar valuation techniques and inputs are categorized as Level 2 of the fair value hierarchy. To the extent the significant inputs are unobservable; the values generally would be categorized as Level 3.

Equity securities, including preferred stocks, that are traded on a national securities exchange, except those listed on the Nasdaq Global Market^®, Nasdaq Global Select Market^®, and the Nasdaq Capital Market^® exchanges (collectively, “Nasdaq”), are valued at the last sale price at the close of that exchange. Securities traded on Nasdaq will be valued at the Nasdaq Official Closing Price (“NOCP”). If, on a particular day, an exchange-listed or Nasdaq security does not trade, then: (i) the security shall be valued at the mean between the most recent quoted bid and asked prices at the close of the exchange; or (ii) the security shall be valued at the latest sales price on the Composite Market (defined below) for the day such security is being valued. “Composite Market” means a consolidation of the trade information provided by national securities and foreign exchanges and over-the-counter markets (“OTC”) as published by a pricing service. In the event market quotations or Composite Market pricing are not readily available, Fair Value will be determined in accordance with the procedures adopted by the Board. All equity securities that are not traded on a listed exchange are valued at the last sale price at the close of the over-the counter market. If a non-exchange listed security does not trade on a particular day, then the mean between the last quoted bid and asked price will be used as long as it continues to reflect the value of the security. If the mean is not available, then bid price can be used as long as the bid price continues to reflect the value of the security. Otherwise Fair Value will be determined in accordance with the procedures adopted by the Board. These securities will generally be categorized as Level 3 securities. When using the market quotations or close prices provided by the pricing service and when the market is considered active, the security will be classified as a Level 1 security. Sometimes, an equity security owned by the Fund will be valued by the pricing service with factors other than market quotations or when the market is considered inactive. When this happens, the security will be classified as a Level 2 security.

Short term debt securities having a maturity of 60 days or less are generally valued at amortized cost, which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy. Reverse repurchase agreements and repurchase agreements are priced at their acquisition cost, and assessed for credit adjustments, which represents fair value. These securities will generally be categorized as Level 2 securities.

Financial derivative instruments, such as futures contracts, that are traded on a national securities or commodities exchange are typically valued at the settlement price determined by the relevant exchange. Swaps, such as credit default swaps, interest-rate swaps and currency swaps are valued by a pricing service. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Over-the-counter financial derivative instruments, such as certain futures contracts or swap agreements, derive their values from underlying asset prices, indices, reference rates, other inputs or a combination of these factors. These instruments are normally valued on the basis of evaluations provided by independent pricing services or broker dealer quotations. Derivatives that use similar valuation techniques as described above are typically categorized as Level 2 of the fair value hierarchy.

Participation Loans are priced by a third-party pricing service. These firms primarily obtain their market color from model inputs based on business, economic, market, and other conditions. The principal sources of information used to conduct valuation include historical and projected financial information, governing legal documents, discussions with related personnel, remittance data and various other documents and schedules available from public or private sources. These securities will be categorized as Level 2 securities.

Securities may be fair valued in accordance with the fair valuation procedures approved by the Board. The Valuation and Risk Management Oversight Committee is generally responsible for overseeing the Fund’s valuation processes and reports quarterly

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

to the Board. The Valuation and Risk Management Oversight Committee has delegated to the Valuation Committee of Angel Oak Capital Advisors, LLC (the “Adviser”) the day to day responsibilities for making all necessary determinations of the fair value of portfolio securities and other assets for which market quotations are not readily available or if the prices obtained from brokers and dealers or independent pricing services are deemed to be unreliable indicators of market or fair value. Representatives of the Adviser’s Valuation Committee report quarterly to the Valuation and Risk Management Oversight Committee.

The following is a summary of the inputs used to value the Fund’s net assets as of July 31, 2021:


Assets	Level 1		Level 2		Level 3		Total
Bank Loans	$	–	$	3,192,800	$	–	$	3,192,800
Investment Companies		360,900		–		–		360,900
Collateralized Debt Obligations		–		2,025,000		–		2,025,000
Common Stocks		2,085,782		–		–		2,085,782
Convertible Obligations		–		1,000,000		–		1,000,000
Corporate Obligations		–		372,194,430		10,306,378		382,500,808
Preferred Stocks		9,025,741		–		–		9,025,741
Short-Term Investments		13,100,948		–		–		13,100,948
Private Investment Fund^		–		–		–		149,234
Total	$	24,573,371	$	378,412,230	$	10,306,378	$	413,441,213
Other Financial Instruments
Liabilities
Reverse Repurchase Agreements	$	–	$	44,758,000	$	–	$	44,758,000

The private investment measured at fair value using the net asset value (or its equivalent) has not been classified in the fair value levels. The fair value amount presented in the table is intended to permit reconciliation to the amount presented in the Schedule of Investments. The Fund’s interest in the fund can be redeemed without penalty over five quarters. As of July 31, 2021, the Fund has received liquidating distributions that represent 97.4% of its initial investment.

See the Schedule of Investments for further disaggregation of investment categories. During the period ended July 31, 2021, the Fund recognized $6,097,500 of transfers from Level 2 to Level 3 for securities lacking observable market data due to a decrease in relevant market activity. During the period ended July 31, 2021, the Fund recognized $7,086,720 of transfers from Level 3 to Level 2. See the summary of quantitative information about Level 3 Fair Value Measurements for more information.

The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

Balance as of
01/31/21

Discounts/

Premiums/

Distributions

Net
Realized
Gain
(Loss)

Change in Net
Unrealized
Appreciation
(Depreciation)

Purchases

Sales

Transfers Into
Level 3

Transfers
Out of
Level 3

Balance as of
07/31/21

Corporate Obligations

10,488,506

1,232

–

805,860

–

6,097,500

(7,086,720

)

10,306,378

The total change in unrealized appreciation (depreciation) included in the Statement of Operations attributable to Level 3 investments still held at July 31, 2021 is ($23,069).

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

The following is a summary of quantitative information about Level 3 Fair Value Measurements:


	Fair Value as of 07/31/21	Valuation Techniques	Unobservable Input	Range/Weighted Average Unobservable Input*
Corporate Obligations	$4,208,878	Model Valuation	Fundamentals, external credit rating, and internal BankSURF ratings	$841.78
Corporate Obligations	$6,097,500	Broker Quote	Third Party	$101.63

*	Input presents information for one security and reflects the value as of July 31, 2021.

Federal Income Taxes: The Fund intends to elect and continue to qualify to be taxed as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended. If so qualified, the Fund generally will not be subject to federal income tax to the extent they distribute substantially all of their net investment income and capital gains to shareholders. The Fund generally intends to operate in a manner such that they will not be liable for federal income or excise taxes.

The Fund has adopted financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the Statement of Operations. During the period ended July 31, 2021, the Fund did not incur any interest or penalties. The Fund has reviewed all open tax years and major jurisdictions and concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s Federal and state income and Federal excise tax returns for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Security Transactions and Income Recognition: Investment security transactions are accounted for on trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Interest income and expense is recorded on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized using the effective yield method, based on each security’s estimated life and recoverable principal and recorded in interest income on the Statement of Operations. Dividend income and corporate transactions, if any, are recorded on the ex-date. Paydown gains and losses on mortgage related and other asset-backed securities are recorded as components of interest income on the Statement of Operations. Payments received from certain investments held by the Fund may be comprised of dividends, capital gains and return of capital. The Fund originally estimates the expected classification of such payments. The amounts may subsequently be reclassified upon receipt of the information from the issuer. The actual character of distributions to the Fund’s shareholders will be reflected in the Form 1099 received by shareholders after the end of the calendar year.

Distributions to Shareholders: Distributions from the Fund’s net investment income are declared and paid monthly. The Fund intends to distribute their net realized long term capital gains and net realized short term capital gains, if any, at least annually. Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The treatment for financial reporting purposes of distributions made to shareholders during the period from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. For the year ended January 31, 2021, there were no reclassifications.

Share Valuation: The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

outstanding, rounded to the nearest cent. The Fund’s NAV will not be calculated on the days on which the New York Stock Exchange is closed for trading.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Indemnifications: Under the Fund’s organizational documents, the Fund will indemnify its officers and trustees for certain liabilities that may arise from performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representatives and warranties which provide general indemnifications. 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.

Cash and Cash Equivalents: Cash and cash equivalents are highly liquid assets including coin, currency and short-term investments that typically mature in 30-90 days. Short-term investments can include U.S. government and government agency securities, investment grade money market instruments, investment grade fixed-income securities, repurchase agreements, commercial paper and cash equivalents. Cash equivalents are extremely low risk assets that are liquid and easily converted into cash. These investments are only considered equivalents if they are readily available and are not restricted by some agreement. When the Adviser believes market, economic or political conditions are unfavorable for investors, the Adviser may invest up to 100% of a Fund’s net assets in cash, cash equivalents or other short-term investments. Unfavorable market or economic conditions may include excessive volatility or a prolonged general decline in the securities markets, or the U.S. economy. The Adviser also may invest in these types of securities or hold cash while looking for suitable investment opportunities or to maintain liquidity.

Reverse Repurchase Agreements: A reverse repurchase agreement is the sale by the Fund of a security to a party for a specified price, with the simultaneous agreement by the Fund to repurchase that security from that party on a future date at a higher price. Securities sold under reverse repurchase agreements are reflected as a liability on the Statement of Assets and Liabilities. Interest payments made are recorded as a component of interest expense on the Statement of Operations. Reverse repurchase agreements involve the risk that the counterparty will become subject to bankruptcy or other insolvency proceedings or fail to return a security to the Fund. In such situations, the Fund may incur losses as a result of a possible decline in the value of the underlying security during the period while the Fund seeks to enforce their rights, a possible lack of access to income on the underlying security during this period, or expenses of enforcing its rights. The Fund will segregate assets determined to be liquid by the Adviser or otherwise cover its obligations under reverse repurchase agreements.

The gross obligations for secured borrowing by the type of collateral pledged and remaining time to maturity on reverse repurchase contracts is as follows:


Reverse Repurchase Agreements	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Collateralized Debt Obligation	$	–	$	1,209,000	$	–	$	–	$	1,209,000
Corporate Obligations	$	–	$	13,933,000	$	29,616,000	$	–	$	43,549,000
Total	$	–	$	15,142,000	$	29,616,000	$	–	$	44,758,000
Gross amount of reverse repurchase agreements in Balance Sheet Offsetting Information Table									$	44,758,000
Amounts related to agreements not included in offsetting disclosure in Balance Sheet Offsetting Information Table									$	–

Subordinated Debt of Banks and Diversified Financial Companies: The Fund may invest in subordinated debt securities, sometimes also called “junior debt,” which are debt securities for which the issuer’s obligations to make principal and interest payment are secondary to the issuer’s payment obligations to more senior debt securities. Such investments will consist primarily of debt issued by community banks or savings intuitions (or their holding companies), which are subordinated to senior debt issued by the banks and deposits held by the bank, but are senior to trust preferred obligations, preferred stock and common stock issued by the bank.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

High Yield Securities: The Fund may invest in below investment grade securities, including certain securities issued by U.S. community banks and other financial institutions. These “high-yield” securities, also known as “junk bonds,” will generally be rated BB or lower by S&P or will be of equivalent quality rating from another Nationally Recognized Statistical Ratings Organization, or if unrated, considered by the Adviser to be of comparable quality.

Structured Products: The Fund may invest in certain structured products, including community bank debt securitizations. Normally, structured products are privately offered and sold (that is, they are not registered under the securities laws); however, an active dealer market may exist for structured products that qualify for Rule 144A transactions. The risks of an investment in a structured product depend largely on the type of the collateral securities and the class of the structured product in which the Fund invest. In addition to the normal interest rate, default and other risks of fixed income securities, structured products carry additional risks, including the possibility that distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or default, the Fund may invest in Structured Products that are subordinate to other classes, values may be volatile and disputes with the issuer may produce unexpected investment results.

Common and Preferred Stocks: The Fund may invest in common and preferred stock. Common stock represents an equity (ownership) interest in a company, and usually possesses voting rights and earns dividends. Dividends on common stock are not fixed but are declared at the discretion of the issuer. Common stock generally represents the riskiest investment in a company. In addition, common stock generally has the greatest appreciation and depreciation potential because increases and decreases in earnings are usually reflected in a company’s stock price. The Fund may also invest in preferred stock. Preferred stock is a class of stock having a preference over common stock as to the payment of dividends and the recovery of investment should a company be liquidated, although preferred stock is usually junior to the debt securities of the issuer. Preferred stock typically does not possess voting rights and its market value may change based on changes in interest rates.

The fundamental risk of investing in preferred stock is the risk that the value of the stock might decrease. Stock values fluctuate in response to the activities an individual company or in response to general market and/or economic conditions. Historically, common stocks have provided greater long-term returns and have entailed greater short-term risks than preferred stocks, fixed income, and money market investments. The market values of all securities, including common and preferred stocks, is based upon the market’s perception of value and not necessarily the book value of an issuer or other objective measures of a company’s worth. If you invest in the Fund, you should be willing to accept the risks of the stock market (to the extent that a Fund invests in common stock) and should consider an investment in the Fund only as a part of your overall investment portfolio.

Trust Preferred Securities: The Fund may invest in trust preferred securities, or “TruPS,” which are securities that are typically issued by banks and other financial institutions that combine the features of corporate debt securities and preferred securities as well as certain features of equity securities. TruPS are typically issued in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. Many TruPS are issued by trusts or other special purpose entities established by banks and other financial institutions and are not a direct obligation of those banks and other financial institutions. The TruPS market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. TruPS are typically issued with a final maturity date, although some (usually those of foreign issuers) are perpetual in nature. TruPS are typically junior and fully subordinated liabilities of an issuer and benefit from a guarantee that is junior and fully subordinated to the other liabilities of the guarantor. In addition, TruPS typically permit an issuer to defer the payment of income for five years or more without triggering an event of default. Because of their subordinated position in the capital structure of an issuer the ability to defer payments for extended periods of time without default consequences to the issuer, and certain other features (such as restrictions on common dividend payments by the issuer or ultimate guarantor when full cumulative payments on the TruPS have not been made), TruPS are often deemed to be a close substitute for traditional preferred securities. TruPS also possess many of the typical characteristics of equity securities due to their subordinated position in an issuer’s capital structure and because their quality and value are heavily dependent on the issuer’s profitability as opposed to any legal claims to specific assets or cash flows.

Bank Loans and Participations: The Fund may invest in bank loans and participations, including first-lien, second-lien and unitranche loans of any credit quality, maturity or duration. The bank loans and participations in which the Fund will invest may

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – (continued)

have fixed or floating interest rates, may be senior or subordinated, may be levered loans, and may be rated below investment grade or unrated. The Fund may invest in bank loans through assignments (whereby the Fund assumes the position of the lender to the borrower) or loan participation (whereby the Fund purchases all or a portion of the economic interest in a loan). “Unitranche” loans are loans that combine both senior and subordinate debt into a single loan under which the borrower pays an interest rate intended to reflect the relative risk of the secured and unsecured components of the loan.

Private Investment: The Fund may invest in private investment funds (i.e., investment funds that would be investment companies but for the exemptions under Section 3(c)(1) or 3(c)(7) of the Investment Company Act) that invest or trade in a wide range of securities. When the Fund invests in securities issued by private investment funds, it will bear its pro rata portion of the private funds’ expenses. These expenses are in addition to the direct expenses of the Fund’s own operations, thereby increasing indirect costs potentially reducing returns to shareholders. A private investment fund in which the Fund invests has its own investment risks, and those risks can affect the value of the private investment fund’s shares and, therefore, the value of the Fund’s investments. There can be no assurance that the investment objective of a private investment fund will be achieved.

NOTE 3. FUND CERTIFICATION

The Fund is listed for trading on the NYSE and has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Fund filed with the SEC the certification of its chief executive officer and principal financial officer required by Section 302 of the Sarbanes-Oxley Act.

NOTE 4. DERIVATIVE TRANSACTIONS

Balance Sheet Offsetting Information

During the ordinary course of business, the Fund may enter into transactions subject to enforceable netting agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset any exposure to a specific counterparty with any collateral received or delivered to that counterparty based on the terms of the agreement. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis. As of July 31, 2021, the Fund was not subject to any netting agreements.

The following table provides a summary of offsetting financial liabilities and derivatives and the effect of derivative instruments on the Statement of Assets and Liabilities as of July 31, 2021.

Gross Amounts Not Offset in

Statement of Assets and Liabilities

Gross

Amounts of

Recognized

Liabilities

Gross Amounts Offset in

Statement of

Assets and Liabilities

Net Amounts of

Liabilities Presented in

Statement of

Assets and Liabilities

Financial
Instruments

Cash

Collateral

Pledged

Net

Amount

Reverse Repurchase Agreements

$44,758,000

$ –

$44,758,000

$ –

In some instances, the collateral amounts disclosed in the tables were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received/pledged may be more than the amounts disclosed herein.

NOTE 5. FEES AND OTHER RELATED PARTY TRANSACTIONS

Under the terms of the investment advisory agreement, on behalf of the Fund (the “Agreement”), the Adviser manages the Fund’s investments subject to oversight of the Trustees. As compensation for its management services, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.35% of the average daily Managed Assets (as defined below) of the Fund. Managed Assets includes total assets (including any assets attributable to borrowing for investment purposes) minus the sum of the Fund’s accrued liabilities (other than liabilities representing borrowings for investment purposes) (“Managed Assets”). The Adviser voluntarily agreed to waive its management fee to 1.00% of the Fund’s Managed Assets for the first year of the Fund’s operation. This arrangement was discontinued after the close of business May 31, 2020. The Adviser may not recoup from the Fund any waived amount or reimbursed expenses pursuant to this arrangement.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 5. FEES AND OTHER RELATED PARTY TRANSACTIONS – (continued)

The Adviser has also contractually agreed to waive its fees and/or reimburse certain expenses (exclusive of any management fees, taxes, interest on borrowings, dividends on securities sold short, brokerage commissions, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization and extraordinary expenses) to limit the Fund’s Total Annual Fund Operating Expenses to 0.25% of the Fund’s Managed Assets through at least May 31, 2022 (the “Limitation Period”). Separately, the Adviser has contractually agreed to waive its fees and/or reimburse certain expenses (exclusive of any front-end sales loads, taxes, interest on borrowings, dividends on securities sold short, brokerage commissions, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization and extraordinary expenses) to limit the Fund’s Total Annual Fund Operating Expenses to 2.50% of the Fund’s net assets (together with the 0.25% expense limitation, the “Expense Limits”) through at least June 5, 2022. The Expense Limit may be eliminated at any time by the Board, on behalf of the Funds, upon 60 days’ written notice to the Adviser. Prior to the end of the Limitation Period, the Expense Limits may not be terminated by the Adviser without the consent of the Board of Trustees. Each Expense Limit is subject to repayment by the Fund within 36 months following the month in which that particular waiver and/or reimbursement occurred, provided that the Fund is able to make the repayment without exceeding the expense limitations described above or the expense limitation in effect at the time of the reimbursement (whichever is lower). During the period ended July 31, 2021, the Fund waived $18,412 of expenses and repaid $2,334 of previously waived expenses to the Adviser. The amounts subject to repayment by the Fund, pursuant to the aforementioned conditions at July 31, 2021 are included in the table below.

Recoverable

through

January 31, 2023

Recoverable

through

January 31, 2024

Recoverable

through

January 31, 2025

$104,417

$58,931

$18,412

In addition, the Adviser has contractually agreed to waive the amount of the Fund’s management fee to the extent necessary to offset the proportionate share of the management fees incurred by the Fund through its investment in underlying funds for which the Adviser also serves as investment adviser (affiliated investments). This contractual waiver is not subject to recoupment by the Adviser. This arrangement may only be changed or eliminated by the Board of Trustees upon 60 days’ written notice to the Adviser. During the period ended July 31, 2021, the Fund waived $2,343 of management fees of underlying funds.

Destra Capital Investments LLC (“Destra”) provides investor support services in connection with the ongoing operation of the Fund. Such services include providing ongoing contact with respect to the Fund and its performance with financial advisors that are representatives of financial intermediaries, and communicating with the NYSE specialist for the Shares, and with the closed-end fund analyst community regarding the Fund on a regular basis. The Fund paid Destra 0.10% of the average daily value of the Fund’s Managed Assets from the end of the Fund’s first year of operations through the applicable termination date.

U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Fund’s Administrator (“Administrator”) and, in that capacity, performs various administrative and accounting services for the Fund. Fund Services also serves as the Fund’s fund accountant and transfer agent. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian; coordinates the preparation and payment of the Fund’s expenses and reviews the Fund’s expense accruals. As compensation for its services, the Administrator is entitled to a monthly fee at an annual rate based upon the average daily net assets of the Fund. U.S. Bank, N.A. (the “Custodian”) serves as custodian to the Fund.

Certain officers, Trustees and shareholders of the Fund are also owners or employees of the Adviser.

NOTE 6. ORGANIZATIONAL AND OFFERING COSTS

Organization costs consist of costs incurred to establish the Fund and enable them to legally do business. Offering costs include state registration fees and legal fees regarding the preparation of the initial registration statement. These organization and offering expenses were paid by the Adviser and are not be subject to reimbursement by the Fund.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 7. INVESTMENT TRANSACTIONS

For the period ended July 31, 2021, purchases and sales of investment securities, other than short-term investments and short- term U.S. Government securities, were as follows:


Purchases		Sales
$28,747,166		$27,054,269

For the period ended July 31, 2021, there were no long-term purchases or long-term sales of U.S. Government securities for the Fund.

During the period ended July 31, 2021, the Fund sold securities to an affiliated fund sponsored by the Adviser, in accordance with the Rule 17a-7 procedures adopted by the Trust at a value of $261,995. The Fund experienced a gain of $30,467 on the sale of these securities.

NOTE 8. INVESTMENTS IN AFFILIATES

The Fund’s ownership of shares of affiliates represent holdings for which the Fund and the underlying investee fund have the same investment adviser or where the investee fund’s investment adviser is under common control with the Fund’s investment adviser.

The Fund had the following investments in affiliates during the period ended July 31, 2021:


					Period Ended July 31, 2021
Security Name	Value as of February 1, 2021	Purchases	Sales/Return of Capital	Net Change in Unrealized Appreciation (Depreciation) on Investments in Affiliates	Value as of July 31, 2021	Share Balance	Dividend Income	Net Realized Gain (Loss) on Investments in Affiliates
DYFN	$329,400	$ –	$(3,905)	$35,405	$360,900	18,000	$13,262	$ –
Total	$329,400	$	$(3,905)	$35,405	$360,900	18,000	$13,262	$ –

NOTE 9. FEDERAL TAX INFORMATION

The tax characterization of distributions paid for the year or period ended January 31, 2021 and January 31, 2020, were as follows:


	2021		2020 (a)
Distributions paid from:
Ordinary Income	$	11,280,742	$	7,742,570
Net Long-Term Capital Gain		–		2,281
Return of Capital		6,149,847		1,646,732
Total	$	17,430,589	$	9,391,583

(a)	Fund commenced operations on May 31, 2019.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 9. FEDERAL TAX INFORMATION – (continued)

At January 31, 2021, the components of distributable earnings (accumulated deficit) on a tax basis were as follows:



Tax Cost of Investments	$	385,704,607
Unrealized Appreciation*		10,200,427
Unrealized Depreciation*		(2,884,113	)
Net Unrealized Appreciation (Depreciation)*	$	7,316,314
Undistributed Ordinary Income		–
Undistributed Long-Term Gain (Loss)		–
Accumulated Gain (Loss)	$	–
Other Accumulated Gain (Loss)		(13,444,892	)
Distributable Earnings (Accumulated Deficit)	$	(6,128,578	)

*	Represents aggregated amounts of investments and reverse repurchase agreements in the Fund.

The temporary differences between book basis and tax basis in the Fund are primarily attributable to amortization of callable bonds.

As of January 31, 2021, the Fund had available for federal tax purposes an unused capital loss carryforward of $13,425,012.

To the extent these carryforwards are used to offset future gains, it is probable that the amount offset will not be distributed to shareholders. The carryforward expires as follows:



No expiration short-term	$	13,316,178
No expiration long-term	$	108,834
Total	$	13,425,012

Certain capital losses incurred after October 31 and within the current taxable year, are deemed to arise on the first business day of the Fund’s following taxable year. For the tax year ended January 31, 2021, the Fund did not defer any post-October losses.

NOTE 10. CREDIT AGREEMENTS

On September 17, 2019, the Fund entered into a $30 million line of credit agreement (the “Facility”) with First Horizon Bank, which matures September 17, 2022. Under the Facility, interest is charged on a floating rate based on one-month LIBOR plus 2.40% and is payable on the last day of the interest period, which was 2.49% as of July 31, 2021. For the period ended July 31, 2021, the average principal balance and interest rate was $1,712,707 and 2.52%. The Fund is required to pay First Horizon Bank a commitment fee of 0.50% on the unused portion of the Facility if the Fund does not achieve a 75% utilization rate in each year. For the period ended July 31, 2021, these expense and commitment fees, amounted to $22,545 and are included in the Interest and Commissions expense line item that is reflected in the Statement of Operations. The Fund paid an origination fee of $120,000 and other expenses on September 17, 2019, which were paid upfront and are being accrued for daily over the life of the loan. The maximum loan outstanding during the year was $30,000,000 from February 1, 2021, through February 10, 2021. As of July 7, 2021, the Fund has exited its agreement with the Facility.

NOTE 11. SENIOR NOTES

On July 8, 2021, the Fund authorized the issue and sale of $85,000,000 aggregate principal amount of unsecured senior notes (the “Notes”). The Notes consisted of $40,000,000 aggregate principal amount of Series A Senior Notes due July 8, 2026 and $45,000,000 aggregate principal amount of Series B Senior Notes due July 8, 2028. The Series A and Series B Notes bear interest at a rate of 2.35% and 2.80%, respectively, per year payable semi-annually on June 30 and December 31, of each year, commencing December 31, 2021.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 11. SENIOR NOTES – (continued)

The aggregate accrued interest payable on the Notes as of July 31, 2021 was $146,667 and is included in the Interest Payable for Senior Notes and Reverse Repurchase Agreements line item in the Statement of Assets and Liabilities. The Fund paid an origination fee of $854,000 and other expenses on July 13, 2021, which was paid upfront and is being accrued for daily over the life of the Notes. During the reporting period ended July 31, 2021, $27,246 of these expense and origination fees were included in the Interest and Commissions expense line item that is reflected in the Statement of Operations.

NOTE 12. ACCOUNTING PRONOUNCEMENTS

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The main objective of the new guidance is to provide relief to companies that will be impacted by the expected change in benchmark interest rates at the end of 2021, when participating banks will no longer be required to submit London Interbank Offered Rate (“LIBOR”) quotes by the UK Financial Conduct Authority. The new guidance allows companies to, provided the only change to existing contracts are a change to an approved benchmark interest rate, account for modifications as a continuance of the existing contract without additional analysis. In addition, derivative contracts that qualified for hedge accounting prior to modification, will be allowed to continue to receive such treatment, even if critical terms change due to a change in the benchmark interest rate. For new and existing contracts, the Fund may elect to apply the amendments as of March 12, 2020 through December 31, 2022. The Adviser is currently assessing the impact of the ASU’s adoption to the Fund’s financial statements and various filings.

In October 2020, the SEC adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). Rule 18f-4 will impose limits on the amount of derivatives a Fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and require funds whose use of derivatives is greater than a limited specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. Funds will be required to comply with Rule 18f-4 by August 19, 2022. It is not currently clear what impact, if any, Rule 18f-4 will have on the availability, liquidity or performance of derivatives. Management is currently evaluating the potential impact of Rule 18f-4 on the Fund. When fully implemented, Rule 18f-4 may require changes in how a Fund uses derivatives, adversely affect the Fund’s performance and increase costs related to the Fund’s use of derivatives.

In October 2020, the SEC adopted new Rule 12d1-4 under the 1940 Act and other regulatory changes which are expected to be effective on or about January 19, 2022. Those changes are intended to streamline and enhance the regulatory framework for investments by one fund into another fund or ‘fund-of-funds arrangements.’ These regulatory changes may limit a Fund’s ability to pursue its principal investment strategies by investing in other investment companies or pooled investment vehicles or to invest in those investment companies or pooled investment vehicles it believes are most desirable. Management is currently assessing the potential impact of the new rule on the Fund’s financial statements.

In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Fund will be required to comply with the rules by September 8, 2022. Management is currently assessing the potential impact of the new rules on the Fund’s financial statements.

NOTE 13. COVID-19 RISK

The global outbreak of COVID-19 has disrupted economic markets and the prolonged economic impact is uncertain. The operational and financial performance of the issuers of securities in which the Fund invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn impact the value of the Fund’s investments.

Angel Oak Financial Strategies Income Term Trust

Notes to the Financial Statements - (continued)

July 31, 2021 (Unaudited)

NOTE 14. SUBSEQUENT EVENT

Management of the Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date these financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments other than the following:

On September 20, 2021, the Fund commenced a rights offering and issued transferable subscription rights to holders of common shares of the Fund as of the close of business on September 20, 2021, to purchase additional common shares of the Fund. 5,076,333 common shares of the Fund will be issued if all rights are exercised. The offer will expire at 5:00 p.m., New York City time, on October 14, 2021, unless the offer is extended.

Additional Information (Unaudited)

1. Shareholder Notification of Federal Tax Status

For the taxable year or period ended January 31, 2021, certain dividends paid by the Fund may be subject to a maximum tax rate of 20% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate the maximum amount allowable as taxed at a maximum rate of 20%.

For the taxable year ended January 31, 2021, the Fund paid qualified dividend income of 0.00%.

For the taxable year ended January 31, 2021, the percentage of ordinary income dividends paid by the Fund that qualifies for the dividends received deduction available to corporations was 0.00%.

For the taxable year ended January 31, 2021, the percentage of ordinary income distributions paid by the Fund that is designated as short-term capital gain distributions under Internal Revenue Section 871(k)2(c) was 0.00%.

For the taxable year ended January 31, 2021, the percentage of taxable ordinary income distributions for the Fund that is designated as interest related dividends under Internal Revenue 871(k)1(c) was 85.82%.

2. Disclosure of Portfolio Holdings

The Fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Part F of Form N-PORT. The Fund’s Part F of Form N-PORT is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0230.

3. Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio securities and information regarding how the Fund voted those proxies during the most recent twelve month period ended June 30, is available without charge upon request by (1) calling the Funds at (855) 751-4324 and (2) from Fund documents filed with the SEC on the SEC’s website at www.sec.gov.

4. Annual Meeting of Shareholders

At the Annual Meeting of Shareholders held on June 1, 2021, shareholders approved the election of Alvin Able, Jr. as a Class I Trustee to the Board of Trustees to serve a three-year term expiring in 2024 based on the following results:


	For	Against	Abstain
To Elect Alvin Able, Jr.	9,826,397	256,363	77,664

5. Dividend Reinvestment Plan

Pursuant to the Fund’s Dividend Reinvestment Plan (the “Plan”), distributions of dividends and capital gains are automatically reinvested in Shares of the Fund by Fund Services, as Plan Agent. Unless a Shareholder indicates another option on the account application or otherwise opts-out, Shareholders holding at least one full Share of the Fund will be automatically enrolled in the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash.

If the Fund declares a dividend or distribution payable either in cash or in Shares of the Fund and the market price of Shares on the payment date for the distribution or dividend equals or exceeds the Fund’s NAV per Share, the Fund will issue Shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are payable only in cash, then participants will receive Shares purchased by the Plan Agent on participants’ behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per Share purchase price may exceed NAV, resulting in fewer Shares being acquired than if the Fund had issued new Shares.

There are no brokerage charges with respect to Shares issued directly by the Fund. However, whenever Shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees. Currently, dividend reinvestment plan participants that direct the sale of Shares through the Plan Agent are subject to a $25.00 fee plus a sales commission of $4.95.

The reinvestment of dividends and net capital gains distributions does not relieve participants of any income tax that may be payable on such dividends or distributions.

Purchases of additional Shares of the Fund will be made on the open market. There is no transaction fee, and each participant will pay a pro rata share of brokerage commissions incurred in connection with purchases made on the open market. Shareholders can also sell Fund Shares held in the Plan account at any time by contacting the Plan Agent by telephone or in writing. The Plan Agent will mail a check to you (less applicable brokerage trading fees) on the settlement date, which is three business days after your Shares have been sold. If you choose to sell your Shares through your broker, you will need to request that the Plan Agent electronically transfer your Shares to your broker through the Direct Registration System.

Shareholders participating in the Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone or in writing. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If you withdraw, your Shares will be credited to your account; or, if you wish, the Plan Agent will sell your full and fractional Shares and send you the proceeds, less a fee currently set at $25.00 and less a sales commission currently set at $4.95. If a Shareholder does not maintain at least one whole Share in the Plan account, the Plan Agent may terminate such Shareholder’s participation in the Plan after written notice. Upon termination, Shareholders will be sent a check for the cash value of any fractional Share in the Plan account, less any applicable broker commissions and taxes. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 60 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 60 days before the record date for the payment of any dividend or distribution by the Funds.

All correspondence or additional information about the Plan should be directed to Fund Services in writing at 615 East Michigan Street, Milwaukee, Wisconsin 53202.

6. Compensation of Trustees

Each Trustee who is not an “interested person” (i.e., an “Independent Trustee”) of the Fund Complex (which includes affiliated registrants not discussed in this report) receives an annual retainer of $58,000 (pro-rated for any periods less than one year), paid quarterly as well as $12,000 for attending each regularly scheduled meeting in person in connection with his or her service on the Board of the Fund Complex. In addition, each Committee Chairman receives additional annual compensation of $12,000 (pro-rated for any periods less than one year). Independent Trustees are permitted for reimbursement of out-of-pocket expenses incurred in connection with attendance at meetings. The Fund’s Statement of Additional Information includes additional information about the Trustees and is available upon request by calling toll free (855) 751-4324.

7. Trustees and Officers

The business of the Fund is managed under the direction of the Board. The Board formulates the general policies of the Fund and meets periodically to review the Fund’s performance, monitor investment activities and practices, and discuss other matters affecting the Fund. The Trustees are fiduciaries for the Fund’s shareholders and are governed by the laws of the State of Delaware in this regard. The names and addresses of the Trustees and officers of the Trusts are listed below along with a description of their principal occupations over at least the last five years. The address of each Trustee and Officer of the Trusts is c/o Angel Oak Capital Advisors, LLC, 3344 Peachtree Road NE, Suite 1725, Atlanta, GA 30326. The Fund’s Statement of Additional Information includes additional information about the Trustees and is available upon request by calling toll free (855) 751-4324.


Name and Year of Birth	Position with the Trusts	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex⁽¹⁾ Overseen by Trustee	Other Directorships Held During the Past 5 Years
Independent Trustees⁽²⁾
Ira P. Cohen 1959	Independent Trustee, Chairman	Trustee since 2018, Chairman since 2019; indefinite term	Executive Vice President, Recognos Financial (investment industry data analysis provider) (2015-2021); Independent financial services consultant (since 2005).	9	Trustee, Valued Advisers Trust (since 2010); Trustee, Griffin Institutional Access Credit Fund (since 2017); Trustee, Griffin Institutional Access Real Estate Access Fund (since 2014); Trustee, Angel Oak Funds Trust (since 2014); Trustee, Angel Oak Strategic Credit Fund (since 2017); Trustee, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2018); Trustee, U.S. Fixed Income Trust (since 2019); Angel Oak Credit Opportunities Term Trust (since 2021).
Alvin R. Albe, Jr. 1953	Independent Trustee	Since 2018; indefinite term	Retired.	9	Trustee, Angel Oak Funds Trust (since 2014); Trustee, Angel Oak Strategic Credit Fund (since 2017); Trustee, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2018); Angel Oak Credit Opportunities Term Trust (since 2021).


Name and Year of Birth	Position with the Trusts	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex⁽¹⁾ Overseen by Trustee	Other Directorships Held During the Past 5 Years
Keith M. Schappert 1951	Independent Trustee	Since 2018; indefinite term	President, Schappert Consulting LLC (investment industry consulting) (since 2008).	9	Trustee, Mirae Asset Discovery Funds (since 2010); Director, Commonfund Capital, Inc. (since 2015); Director, The Commonfund (since 2012); Director, Calamos Asset Management, Inc. (2012 – 2017); Trustee, Angel Oak Funds Trust (since 2014); Trustee, Angel Oak Strategic Credit Fund (since 2017); Trustee, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2018); Angel Oak Credit Opportunities Term Trust (since 2021).
Andrea N. Mullins 1967	Independent Trustee	Since 2019; indefinite term	Private Investor; Independent Contractor, SWM Advisors (since 2014).	9	Trustee, Valued Advisors Trust (since 2013, Chairperson since 2017); Trustee, Angel Oak Funds Trust (since 2019); Trustee, Angel Oak Strategic Credit Fund (since 2019); Trustee, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2019); Angel Oak Credit Opportunities Term Trust (since 2021).


Name and Year of Birth	Position with the Trusts	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex⁽¹⁾ Overseen by Trustee	Other Directorships Held During the Past 5 Years
Interested Trustees
Sreeniwas (Sreeni) V. Prabhu 1974	Interested Trustee	Since 2018; indefinite term	Co-CEO and Group Chief Investment Officer, Angel Oak Capital Advisors, LLC (investment management) (since 2009).	9	Trustee, Angel Oak Funds Trust (since 2014); Trustee, Angel Oak Strategic Credit Fund (since 2017); Trustee, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2019); Angel Oak Credit Opportunities Term Trust (since 2021).

(1)	The Fund Complex includes the Fund, each series of Angel Oak Funds Trust, Angel Oak Strategic Credit Fund, Angel Oak Dynamic Financial Strategies Income Term Trust and Angel Oak Credit Opportunities Term Trust.

(2)	The Trustees of the Trust who are not “interested persons” of the Trust as defined in the 1940 Act (“Independent Trustees”).


Name and Year of Birth	Position with the Trusts	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years
Officers
Dory S. Black, Esq. 1975	President	Since 2019; indefinite term	General Counsel, Angel Oak Companies (since 2014).
Adam Langley 1967	Chief Compliance Officer	Since 2019; indefinite term	Chief Compliance Officer, Angel Oak Capital Advisors, LLC (since 2015);Chief Compliance Officer, Buckhead One Financial Opportunities, LLC (since 2015); Chief Compliance Officer, Angel Oak Capital Partners II, LLC (since 2016); Chief Compliance Officer of Falcons I, LLC (since 2018); Chief Compliance Officer, Hawks I, LLC (since 2018); Chief Compliance Officer, Angel Oak Commercial Real Estate Solutions (since 2021); Chief Compliance Officer, Angel Oak Funds Trust (since 2015); Chief Compliance Officer, Angel Oak Strategic Credit Fund (since 2017); Chief Compliance Officer, Angel Oak Dynamic Financial Strategies Income Term Trust (since 2019); Chief Compliance Officer, Angel Oak Credit Opportunities Fund (since 2021).
John Hsu 1965	Secretary	Since 2020; indefinite term	Chief Risk Officer, Angel Oak Capital Advisors, LLC (since 2020), Head of Treasury Strategies, Angel Oak Capital Advisors, LLC (since 2018), Head of Capital Markets, Angel Oak Capital Advisors, LLC (2014-2018).
Daniel Fazioli 1981	Treasurer	Since 2019; indefinite term	Chief Accounting Officer, Angel Oak Capital Advisors, LLC (since 2015).

Each Trustee holds office for an indefinite term and until the earlier of: the Trusts’ next meeting of shareholders and the election and qualification of his/her successor; or until the date a trustee dies, resigns or is removed in accordance with the Trusts’ Declaration of Trust and By-laws. Each Trustee shall serve during the lifetime of the Trusts until he or she: (a) dies; (b) resigns; (c) has reached the mandatory retirement age, if any, as set by the Trustees; (d) is declared incompetent by a court of appropriate jurisdiction; or (e) is removed, or, if sooner, until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor. Each officer holds office at the pleasure of the Board.

INVESTMENT ADVISER

Angel Oak Capital Advisors, LLC

3344 Peachtree Road NE, Suite 1725

Atlanta, GA 30326

SHAREHOLDER SERVICER

Destra Capital Advisors LLC

444 West Lake Street, Suite 1700

Chicago, IL 60606

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Cohen & Company, Ltd.

1350 Euclid Avenue, Suite 800

Cleveland, OH 44115

LEGAL COUNSEL

Dechert LLP

1900 K Street NW

Washington, DC 20006

CUSTODIAN

U.S. Bank National Association

1555 North Rivercenter Drive, Suite 302

Milwaukee, WI 53202

ADMINISTRATOR, TRANSFER AGENT, AND FUND ACCOUNTANT

U.S Bancorp Fund Services, LLC

615 East Michigan Street

Milwaukee, WI 53202

This report is intended only for the information of shareholders or those who have received the Fund’s prospectus which contains information about the Fund’s management fee and expenses. Please read the prospectus carefully before investing.

SAR-FINS

(b) Not applicable.

Item 2. Code of Ethics.

Not applicable for semi-annual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semi-annual reports.

Item 4. Principal Accountant Fees and Services.

Not applicable for semi-annual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semi-annual reports.

Item 6. Investments.

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable for semi-annual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable for semi-annual reports.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

There were no purchases made by or on behalf of the Registrant or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of shares of the Registrant’s equity securities that are registered by the Registrant pursuant to Section 12 of the Exchange Act made in the period covered by this report.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

Item 11. Controls and Procedures.

(a)

The Registrant’s Principal Executive Officer and Principal Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.

(b)

There were 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 for Closed-End Management Investment Companies

The registrant did not engage in securities lending activities during the fiscal period reported on this Form N-CSR.

Item 13. Exhibits.

(a)

(1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable.

(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not Applicable.

(4)

Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.

(b)

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

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) Angel Oak Financial Strategies Income Term Trust

By (Signature and Title)* /s/ Dory S. Black

Dory S. Black, President (Principal Executive Officer)

Date 9/22/2021

Pursuant to the requirements of the Securities 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 (Signature and Title)* /s/ Dory S. Black

Dory S. Black, President (Principal Executive Officer)

Date 9/22/2021

By (Signature and Title)* /s/ Daniel Fazioli

Daniel Fazioli, Treasurer (Principal Financial Officer)

Date 9/22/2021

* Print the name and title of each signing officer under his or her signature.