Annual Report by Investment Company (Form N-CSR)

N-CSR

811-23358

Item 1. Reports to Stockholders.

Annual Report

Suite 1725

Atlanta, GA 30326

(404)

Table of Contents

HOW DID THE FUND PERFORM DURING THE PERIOD?

The Fund returned 20.02% based on market price and 12.03% based on net asset value (NAV) for the 12-month period ending January 31, 2025. The Fund outperformed the Bloomberg U.S. Aggregate Bond Index, the Fund's benchmark, by approximately 18 percentage points based on market price and approximately 10 percentage points based on NAV, as the benchmark returned 2.07% over the same period.

WHAT FACTORS INFLUENCED PERFORMANCE?

Sentiment around the banking sector and pricing on the underlying bonds recovered in 2024 as the regional bank failures of spring 2023 moved further into the rearview mirror. Bank debt spreads normalized toward historical averages, and the primary issuance reopened in the second half of the year. Banks have strengthened their balance sheets over the past couple of years with a host of strategic actions, including diversifying funding sources; reducing reliance on uninsured deposits; repositioning securities portfolios; selling loan portfolios, non-core assets, and securities; and engaging in other capital-optimizing activities. Fourth-quarter bank earnings saw net interest margins expand and credit costs remain low. Banking sector consolidation, an alpha generator for the strategy, has also begun to reaccelerate.

HOW WAS THE FUND POSITIONED DURING THE PERIOD?

The Fund remained focused on the financial sector, with key overweights to community bank debt and nonbank financials debt.

Top Contributors

Bank debt; insurance debt; financial sector common equities

Top Detractors

Real estate investment trusts debt; business development companies debt

Past performance is not a guarantee of future results.

Investing involves risk; principal loss is possible. An investment in the Fund includes, but is not limited to, risks and considerations related to: banks and diversified financial companies, business development companies, closed-end funds, conflicts of interest, convertible securities, credit, derivatives, distributions, equity, extensions, fixed income instruments, floating or variable rate securities, foreign securities, high-yield securities, illiquid securities, industry concentration, interest rate, large investors, leverage, limited investment opportunities, limited term, liquidity and valuation, management, market, market discounts, maturity and duration, portfolio turnover, prepayments, rating agencies, real estate investment trusts, registered investment companies, regulatory and legal, repurchase agreements, reverse repurchase agreements, senior debt, subordinated debt, preferred securities of banks and diversified financial companies, structured products, trust preferred securities, uncertain tax treatment, unrated securities, U.S. government securities, and other risks.

For more information on these risks and other risks of the Fund, please see "Principal Risks of Investing in the Fund," below, and the Prospectus.

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Investment Results - (Unaudited)

Total RetuBased on a $10,000 Investment

The chart above assumes an initial investment of $10,000 made on May 31, 2019 (commencement of operations). Returns shown include the reinvestment of all dividends. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares. In the absence of fee waivers and reimbursements, when they are necessary to keep expenses at the expense cap, total retuwould be reduced. Past performance is not predictive of future performance. Investment retuand principal value will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Performance data current to the most recent month-end can be obtained by calling (855) 751-4324. Index returns do not reflect the effects of fees or expenses. It is not possible to invest directly in an index.

(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 retuof 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.

The amount of the Fund's distributions during the last fiscal year exceeded the amount of the Fund's income and gains. As a result, some of the Fund's distributions constituted a ROC to shareholders.

Total Returns

(For the year ended January 31, 2025)

(1) Retufigures reflect any change in price per share and assume the reinvestment of all distributions under the Fund's dividend reinvestment plan.

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Investment Results - (Unaudited) (continued)

(2) Inception date is May 31, 2019.

(3) The Bloomberg 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 retudoes not reflect expenses. 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.

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Portfolio Holdings - (Unaudited)

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

4

Statement of Assets and Liabilities

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

5

Statement of Operations

For the Year Ended January 31, 2025

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

6

Statement of Cash Flows

For the Year Ended January 31, 2025

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

7

Statements of Changes in Net Assets

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

8

Financial Highlights

(For a share outstanding during each year or period)

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

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The following table sets forth information regarding the Fund's outstanding senior securities as of the end of each of the Fund's last fiscal years. The Fund's senior securities during this time period are comprised of borrowings which constitutes a "senior security" as defined in the 1940 Act. The information in this table has been audited by Cohen & Company, Ltd., an independent registered public accounting firm. The Fund's audited financial statements, including the report of Cohen & Company, Ltd. thereon, and accompanying notes thereto, are included in this Annual Report.

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

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Schedule of Investments

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

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Schedule of Investments - (continued)

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

12

Schedule of Investments - (continued)

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

13

Schedule of Investments - (continued)

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

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Schedule of Investments - (continued)

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

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Schedule of Investments - (continued)

Percentages are stated as a percent of net assets.

CMT-Constant Maturity Treasury

LIBOR-London Interbank Offered Rate

SOFR-Secured Overnight Financing Rate

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

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Schedule of Investments - (continued)

Schedule of Open Reverse Repurchase Agreements

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.

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Notes to the Financial Statements

NOTE 1. ORGANIZATION

Angel Oak Financial Strategies Income Term Trust (the "Fund") is organized as a Delaware statutory trust under a Declaration of Trust dated June 14, 2018. The Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act") and is listed on the New York Stock Exchange ("NYSE"). Since May 31, 2022, the Fund has operated as a diversified

management investment company. Please see the table below for a summary of Fund specific information:

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 approval of the Fund's shareholders. 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.

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,

: The Fund records its investments at fair value in accordance with 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:

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

Investments in registered

management investment companies, including money market funds, will be valued based upon the NAV of such investments and are categorized as Level 1 of the fair value hierarchy.

Fair values for long-term debt securities, including corporate and convertible obligations, 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, cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information may be utilized. 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.

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Notes to the Financial Statements - (continued)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - (continued)

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. 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 ("OTC") markets 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 OTC market. If a

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.

Fair values for bank loans 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, 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. Securities that use similar valuation techniques and inputs are categorized as Level 2 of the fair value hierarchy. In the absence of a valuation from an independent pricing service, fair value will be determined in accordance with the procedures adopted by the Board. To the extent the significant inputs are unobservable; the values generally would be categorized as Level 3.

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 to the Board. The Board has selected Angel Oak Capital Advisors, LLC (the "Adviser") as the Valuation Designee. As such, the Valuation Committee of the Adviser has been delegated the

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 independent pricing services are deemed to be unreliable indicators of market or fair value. Representatives of the Valuation Designee's Valuation Committee report quarterly to the Valuation and Risk Management Oversight Committee.

The following is a summary of the investments by their inputs used to value the Fund's net assets as of January 31, 2025:

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Notes to the Financial Statements - (continued)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - (continued)

See the Schedule of Investments for further disaggregation of investment categories. During the year ended January 31, 2025, the Fund recognized $12,925,248 of transfers from Level 3 to Level 2 due to an increase in relevant market activity. Level 3 holdings as of January 31, 2025, are immaterial and no further quantitative information about Level 3 Fair Value Measurements has been included.

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 it distributes substantially all of its net investment income and capital gains to shareholders. The Fund generally intends to operate in a manner such that it 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 year ended January 31, 2025, 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 tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Investment security transactions are accounted for on the 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

Paydown gains and losses on mortgage related and other ABS 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 retuof 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 from the Fund's net investment income are declared and paid monthly. The Fund intends to distribute its 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

date. The treatment for financial reporting purposes of distributions made to shareholders during the year 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, 2025, there were no reclassifications.

: 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 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.

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 income and expenses during the period. Actual results could differ from those estimates.

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

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Notes to the Financial Statements - (continued)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - (continued)

enters into contracts that contain a variety of representations 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 are highly liquid assets including coin, currency and short-term investments that typically mature in

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. Included in Investments in unaffiliated securities at fair value on the Statement of Assets and Liabilities are investments in First American money market funds held at major financial institutions totaling $8,631,466.