Notes
to Financial Statements
NOTE
1–Significant Accounting Policies
Invesco
California Value Municipal Income Trust (the “Trust”) is a Delaware statutory
trust registered under the Investment Company Act of 1940, as amended (the “1940
Act”), as a
closed-end
management
investment company.
The Trust’s
investment objective is to seek to provide common shareholders with a high level
of current income exempt from federal and California income taxes, consistent
with preservation of capital.
The
Trust is an investment company and accordingly follows the investment company
accounting and reporting guidance in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification Topic 946,
Financial Services – Investment
Companies
.
The
following is a summary of the significant accounting policies followed by the
Trust in the preparation of its financial statements.
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– Securities, including restricted securities, are valued
according to the following policy. |
Securities
generally are valued on the basis of prices provided by independent pricing
services. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such as
institution-size
trading
in similar groups of securities, developments related to specific securities,
dividend rate (for unlisted equities), yield (for debt obligations), quality,
type of issue, coupon rate (for debt obligations), maturity (for debt
obligations), individual trading characteristics and other market data. Pricing
services generally value debt obligations assuming orderly transactions of
institutional round lot size, but a trust may hold or transact in the same
securities in smaller, odd lot sizes. Odd lots often trade at lower prices than
institutional round lots, and their value may be adjusted accordingly. Debt
obligations are subject to interest rate and credit risks. In addition, all debt
obligations involve some risk of default with respect to interest and/or
principal payments.
Securities
for which market quotations are not readily available are fair valued by Invesco
Advisers, Inc. (the “Adviser” or “Invesco”) in accordance with Board-approved
policies and related Adviser procedures (“Valuation Procedures”). If a fair
value price provided by a pricing service is not representative of market value
in the Adviser’s judgment (“unreliable”), the Adviser will fair value the
security using the Valuation Procedures. Issuer specific events, market trends,
bid/ask quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security’s fair
value.
The
Trust may invest in securities that are subject to interest rate risk, meaning
the risk that the prices will generally fall as interest rates rise and,
conversely, the prices will generally rise as interest rates fall. Specific
securities differ in their sensitivity to changes in interest rates depending on
their individual characteristics. Changes in interest rates may result in
increased market volatility, which may affect the value and/or liquidity of
certain Trust investments.
Valuations
change in response to many factors including the historical and prospective
earnings of the issuer, the value of the issuer’s assets, general market
conditions which are not specifically related to the particular issuer, such as
real or perceived adverse economic conditions, changes in the general outlook
for revenues or corporate earnings, changes in interest or currency rates,
regional or global instability, natural or environmental disasters, widespread
disease or other public health issues, war, military conflicts, acts of
terrorism, economic crises, economic sanctions and tariffs, significant
governmental actions or adverse investor sentiment generally and market
liquidity. Because of the inherent uncertainties of valuation, the values
reflected in the financial statements may materially differ from the value
received upon actual sale of those investments.
The
price the Trust could receive upon the sale of any investment may differ from
the Adviser’s valuation of the investment, particularly for securities that are
valued using a fair valuation technique. When fair valuation techniques are
applied, the Adviser uses available information, including both observable and
unobservable inputs and assumptions, to determine a methodology that will result
in a valuation that the Adviser believes approximates market value. Trust
securities that are fair valued may be subject to greater fluctuation in their
value from one day to the next than would be the case if market quotations were
used. Because of the inherent uncertainties of valuation, and the degree of
subjectivity in such decisions, the Trust could realize a greater or lesser than
expected gain or loss upon the sale of the investment.
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Securities Transactions
and Investment Income – Securities transactions are accounted
for on a trade date basis. Realized gains or losses on sales are computed
on the basis of specific identification of the securities sold. Interest
income (net of withholding tax, if any) is recorded on an accrual basis
from settlement date and includes coupon interest and amortization of
premium and accretion of discount on debt securities as applicable.
interest
income and
non-cash dividend
income received in the form of securities in lieu of cash are recorded at
the fair value of the securities received. Dividend income (net of
withholding tax, if any) is recorded on the
ex-dividend date.
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The
Trust may periodically participate in litigation related to Trust investments.
As such, the Trust may receive proceeds from litigation settlements. Any
proceeds received are included in the Statement of Operations as realized gain
(loss) for investments no longer held and as unrealized gain (loss) for
investments still held.
Brokerage
commissions and mark ups are considered transaction costs and are recorded as an
increase to the cost basis of securities purchased and/or a reduction of
proceeds on a sale of securities. Such transaction costs are included in the
determination of net realized and unrealized gain (loss) from investment
securities reported in the Statement of Operations and the Statement of Changes
in Net Assets and the net realized and unrealized gains (losses) on securities
per share in the Financial Highlights. Transaction costs are included in the
calculation of the Trust’s net asset value and, accordingly, they reduce the
Trust’s total returns. These transaction costs are not considered operating
expenses and are not reflected in net investment income reported in the
Statement of Operations and the Statement of Changes in Net Assets, or the net
investment income per share and the ratios of expenses and net investment income
reported in the Financial Highlights, nor are they limited by any expense
limitation arrangements between the Trust and the investment adviser.
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– For the purposes of making investment selection decisions
and presentation in the Schedule of Investments, the investment adviser
may determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues, the country that has the primary market for the
issuer’s securities and its “country of risk” as determined by a third
party service provider, as well as other criteria. Among the other
criteria that may be evaluated for making this determination are the
country in which the issuer maintains 50% or more of its assets, the type
of security, financial guarantees and enhancements, the nature of the
collateral and the sponsor organization. Country of issuer and/or credit
risk exposure has been determined to be the United States of America,
unless otherwise noted. |
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– The Trust declares and pays monthly dividends from net
investment income to common shareholders. Distributions from net realized
capital gain, if any, are generally declared and paid annually and are
distributed on a pro rata basis to common and preferred shareholders.
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The Trust intends to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”), necessary to qualify as a regulated investment
company and to distribute substantially all of the Trust’s taxable
earnings to shareholders. As such, the Trust will not be subject to
federal income taxes on otherwise taxable income (including net realized
capital gain) that is distributed to shareholders. Therefore, no provision
for federal income taxes is recorded in the financial statements.
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The
Trust recognizes the tax benefits of uncertain tax positions only when the
position is more likely than not to be sustained. Management has analyzed the
Trust’s uncertain tax positions and concluded that no liability for unrecognized
tax benefits should be recorded related to uncertain tax positions. Management
is not aware of any tax positions for which it is reasonably possible that the
total amounts of unrecognized tax benefits will change materially in the next 12
months.
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Invesco California Value
Municipal Income Trust |
In
addition, the Trust intends to invest in such municipal securities to allow it
to qualify to pay shareholders “exempt dividends”, as defined in the Internal
Revenue Code.
The
Trust files tax returns in the U.S. Federal jurisdiction and certain other
jurisdictions. Generally, the Trust is subject to examinations by such taxing
authorities for up to three years after the filing of the return for the tax
period.
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Interest, Facilities and
Maintenance Fees – Interest, Facilities and Maintenance Fees
include interest and related borrowing costs such as commitment fees,
rating and bank agent fees, administrative expenses and other expenses
associated with establishing and maintaining the line of credit and
Variable Rate Muni Term Preferred Shares (“VMTP Shares”). In addition,
interest and administrative expenses related to establishing and
maintaining floating rate note obligations, if any, are included.
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– The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
(“GAAP”) requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period including estimates and assumptions related to
taxation. Actual results could differ from those estimates by a
significant amount. In addition, the Trust monitors for material events or
transactions that may occur or become known after the
period-end date
and before the date the financial statements are released to print.
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– Under the Trust’s organizational documents, each Trustee,
officer, employee or other agent of the Trust is indemnified against
certain liabilities that may arise out of the performance of their duties
to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts, including the Trust’s servicing agreements, that
contain a variety of indemnification clauses. The Trust’s maximum exposure
under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. The risk of
material loss as a result of such indemnification claims is considered
remote. |
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– The Trust represents a single operating segment, in
accordance with ASC 280, Segment Reporting. Subject to the oversight and,
when applicable, approval of the Board of Trustees, the Adviser acts as
the Trust’s chief operating decision maker (“CODM”), assessing performance
and making decisions about resource allocation within the Trust. The CODM
monitors the operating results as a whole, and the Trust’s long-term
strategic asset allocation is determined in accordance with the terms of
its prospectus based on a defined investment strategy. The financial
information provided to and reviewed by the CODM is consistent with that
presented in the Trust’s financial statements. |
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Cash and Cash
Equivalents – For the purposes of the Statement of Cash Flows,
the Trust defines Cash and Cash Equivalents as cash (including foreign
currency), restricted cash, money market funds and other investments held
in lieu of cash and excludes investments made with cash collateral
received. |
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Floating Rate Note
Obligations – The Trust invests in inverse floating rate
securities, such as Tender Option Bonds (“TOBs”), for investment purposes
and to enhance the yield of the Trust. Such securities may be purchased in
the secondary market without first owning an underlying bond but generally
are created through the sale of fixed rate bonds by the Trust to special
purpose trusts established by a broker dealer or by the Trust (“TOB
Trusts”) in exchange for cash and residual interests in the TOB Trusts’
assets and cash flows, which are in the form of inverse floating rate
securities. The TOB Trusts finance the purchases of the fixed rate bonds
by issuing floating rate notes to third parties and allowing the Trust to
retain residual interests in the bonds. The floating rate notes issued by
the TOB Trusts have interest rates that reset weekly and the floating rate
note holders have the option to tender their notes to the TOB Trusts for
redemption at par at each reset date. The residual interests held by the
Trust (inverse floating rate securities) include the right of the Trust
(1) to cause the holders of the floating rate notes to tender their
notes at par at the next interest rate reset date, and (2) to
transfer the municipal bond from the TOB Trust to the Trust, thereby
collapsing the TOB Trust. Inverse floating rate securities tend to
underperform the market for fixed rate bonds in a rising interest rate
environment, but tend to outperform the market for fixed rate bonds when
interest rates decline or remain relatively stable.
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The
Trust generally invests in inverse floating rate securities that include
embedded leverage, thus exposing the Trust to greater risks and increased costs.
The primary risks associated with inverse floating rate securities are varying
degrees of liquidity and decreases in the value of such securities in response
to changes in interest rates to a greater extent than fixed rate securities
having similar credit quality, redemption provisions and maturity, which may
cause the Trust’s net asset value to be more volatile than if it had not
invested in inverse floating rate securities. In certain instances, the
short-term floating rate notes created by the TOB Trust may not be able to be
sold to third parties or, in the case of holders tendering (or putting) such
notes for repayment of principal, may not be able to be remarketed to third
parties. In such cases, the TOB Trust holding the fixed rate bonds may be
collapsed with the entity that contributed the fixed rate bonds to the TOB
Trust. In the case where a TOB Trust is collapsed with the Trust, the Trust will
be required to repay the principal amount of the tendered securities, which may
require the Trust to sell other portfolio holdings to raise cash to meet that
obligation. The Trust could therefore be required to sell other portfolio
holdings at a disadvantageous time or price to raise cash to meet this
obligation, which risk will be heightened during times of market volatility,
illiquidity or uncertainty. The embedded leverage in the TOB Trust could cause
the Trust to lose more money than the value of the asset it has contributed to
the TOB Trust and greater levels of leverage create the potential for greater
losses. In addition, a Trust may enter into reimbursement agreements with the
liquidity provider of certain TOB transactions in connection with certain
residuals held by the Trust. These agreements commit a Trust to reimburse the
liquidity provider to the extent that the liquidity provider must provide cash
to a TOB Trust, including following the termination of a TOB Trust resulting
from a mandatory tender event (“liquidity shortfall”). The reimbursement
agreement will effectively make the Trust liable for the amount of the negative
difference, if any, between the liquidation value of the underlying security and
the purchase price of the floating rate notes issued by the TOB Trust.
The
Trust accounts for the transfer of fixed rate bonds to the TOB Trusts as secured
borrowings, with the securities transferred remaining in the Trust’s investment
assets, and the related floating rate notes reflected as Trust liabilities under
the caption
Floating rate note
obligations
on the Statement of Assets and Liabilities. The carrying
amount of the Trust’s floating rate note obligations as reported on the
Statement of Assets and Liabilities approximates its fair value. The Trust
records the interest income from the fixed rate bonds under the caption Interest
and records the expenses related to floating rate obligations and any
administrative expenses of the TOB Trusts as a component of
Interest, facilities and
maintenance fees
on the Statement of Operations.
Final
rules implementing section 619 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Volcker Rule”) prohibit banking entities and their
affiliates from sponsoring and/or providing certain services for existing TOB
Trusts, which constitute “covered funds” under the Volcker Rule. As a result of
the Volcker Rule, the Trust, as holder of inverse floating rate securities, is
required to perform certain duties in connection with TOB financing transactions
previously performed by banking entities. These duties may alternatively be
performed by a
non-bank
third-party
service provider. The Trust’s expanded role may increase its operational and
regulatory risk.
Further,
the SEC and various banking agencies have adopted rules implementing credit risk
retention requirements for asset-backed securities (the “Risk Retention Rules”),
which apply to TOB financing transactions and TOB Trusts. The Risk Retention
Rules require the sponsor of a TOB Trust to retain at least 5% of the credit
risk of the underlying security held by the TOB Trust. The Trust has adopted
policies intended to comply with the Risk Retention Rules. The Risk Retention
Rules may adversely affect the Trust’s ability to engage in TOB financing
transactions or increase the costs of such transactions in certain
circumstances.
There
can be no assurances that TOB financing transactions will continue to be a
viable or cost-effective form of leverage. The unavailability of TOB financing
transactions or an increase in the cost of financing provided by TOB
transactions may adversely affect the Trust’s net asset value, distribution rate
and ability to achieve its investment objective.
TOBs
are presently classified as private placement securities. Private placement
securities are subject to restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the “1933 Act”), or are
otherwise not readily marketable. As a result of the absence of a public trading
market for these securities, they may be less liquid than publicly traded
securities. Although atypical, these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those originally paid by the Trust or less than what may be considered the fair
value of such securities.
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Invesco California Value
Municipal Income Trust |
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– The risk of a municipal obligation generally depends on the
financial and credit status of the issuer. Constitutional amendments,
legislative enactments, executive orders, administrative regulations,
voter initiatives, and the issuer’s regional economic conditions may
affect the municipal security’s value, interest payments, repayment of
principal and the Trust’s ability to sell the security. Failure of a
municipal security issuer to comply with applicable tax requirements may
make income paid thereon taxable, resulting in a decline in the security’s
value. In addition, there could be changes in applicable tax laws or tax
treatments that reduce or eliminate the current federal income tax
exemption on municipal securities or otherwise adversely affect the
current federal or state tax status of municipal securities.
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There
is a possibility that the credit rating of a municipal security may be
downgraded after purchase, which may occur quickly and without advanced warning
following sudden market downturns or unexpected developments involving an
issuer, and which may adversely affect the liquidity and value of the security.
Fluctuations
in the federal funds and equivalent foreign rates or other changes to monetary
policy or regulatory actions may expose fixed income markets to heightened
volatility, perhaps suddenly and to a significant degree, and to reduced
liquidity for certain fixed income investments, particularly those with longer
maturities. Such changes and resulting increased volatility may adversely impact
the Trust, including its operations, universe of potential investment options,
and return potential. It is difficult to predict the impact of interest rate
changes on various markets. In addition, decreases in fixed income dealer
market-making capacity may also potentially lead to heightened volatility and
reduced liquidity in the fixed income markets. As a result, the value of the
Trust’s investments and share price may decline. Changes in central bank
policies and other governmental actions and political events within the U.S. and
abroad may also, among other things, affect investor and consumer expectations
and confidence in the financial markets. This could result in higher than normal
redemptions by shareholders, which could potentially increase the Trust’s
portfolio turnover rate and transaction costs.
The
municipal issuers in which the Trust invests may be located in the same
geographic area or may pay their interest obligations from revenue of similar
projects, such as hospitals, airports, utility systems and housing finance
agencies. This may make the Trust’s investments more susceptible to similar
social, economic, political or regulatory occurrences, making the Trust more
susceptible to experience a drop in its share price than if the Trust had been
more diversified across issuers that did not have similar characteristics.
Investments
in high yield debt securities (“junk bonds”) and other lower-rated securities
will subject the Trust to substantial risk of loss. These securities are
considered to be speculative with respect to the issuer’s ability to pay
interest and principal when due, are more susceptible to default or decline in
market value and are less liquid than investment grade debt securities. Prices
of high yield debt securities tend to be very volatile. The values of high yield
debt securities often fluctuate more in response to company, political,
regulatory or economic developments than higher quality bonds, and their values
can decline significantly over short periods of time or during periods of
economic difficulty when the bonds could be difficult to value or sell at a fair
price, thus subjecting the Fund to a substantial risk of loss.
NOTE
2–Advisory Fees and Other Fees Paid to Affiliates
The
Trust has entered into a master investment advisory agreement with the Adviser.
Under the terms of the investment advisory agreement, the Trust accrues daily
and pays monthly an advisory fee to the Adviser based on the annual rate of
0.55% of the Trust’s average daily managed assets. Managed assets for this
purpose means the Trust’s net assets, plus assets attributable to any
outstanding preferred shares and the amount of any borrowings incurred for the
purpose of leverage (whether or not such borrowed amounts are reflected in the
Trust’s financial statements for purposes of GAAP).
Under
the terms of a master
sub-advisory
agreement
between the Adviser and each of Invesco Asset Management Limited, Invesco Asset
Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Management S.A.,
Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively,
the “Affiliated
Sub-Advisers”)
the
Adviser, not the Trust, will pay 40% of the fees paid to the Adviser to any such
Affiliated
Sub-Adviser(s)
that
provide(s) discretionary investment management services to the Trust based on
the percentage of assets allocated to such Affiliated
Sub-Adviser(s).
The
Trust has entered into a master administrative services agreement with Invesco
pursuant to which the Trust has agreed to pay Invesco for certain administrative
costs incurred in providing accounting services to the Trust. For the six months
ended August 31, 2025, expenses incurred under this agreement are shown in
the Statement of Operations as
Administrative services
fees
. Invesco has entered into a
sub-administration
agreement
whereby State Street Bank and Trust Company (“SSB”) serves as fund accountant
and provides certain administrative services to the Trust. Pursuant to a custody
agreement with the Trust, SSB also serves as the Trust’s custodian.
Certain
officers and trustees of the Trust are officers and directors of Invesco.
NOTE
3–Additional Valuation Information
GAAP
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date, under current market conditions. GAAP establishes a
hierarchy that prioritizes the inputs to valuation methods, giving the highest
priority to readily available unadjusted quoted prices in an active market for
identical assets (Level 1) and the lowest priority to significant unobservable
inputs (Level 3), generally when market prices are not readily available. Based
on the valuation inputs, the securities or other investments are tiered into one
of three levels. Changes in valuation methods may result in transfers in or out
of an investment’s assigned level:
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| Level 1 – |
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Prices are determined using quoted prices
in an active market for identical assets. |
| Level 2 – |
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Prices are determined using other
significant observable inputs. Observable inputs are inputs that other
market participants may use in pricing a security. These may include
quoted prices for similar securities, interest rates, prepayment speeds,
credit risk, yield curves, loss severities, default rates, discount rates,
volatilities and others. When market movements occur after the close of
the relevant foreign securities markets, foreign securities may be fair
valued utilizing an independent pricing service. |
| Level 3 – |
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Prices are determined using significant
unobservable inputs. In situations where quoted prices or observable
inputs are unavailable (for example, when there is little or no market
activity for an investment at the end of the period), unobservable inputs
may be used. Unobservable inputs reflect the Adviser’s assumptions about
the factors market participants would use in determining fair value of the
securities or instruments and would be based on the best available
information. |
As
of August 31, 2025, all of the securities in this Trust were valued based
on Level 2 inputs (see the Schedule of Investments for security
categories). The level assigned to the securities valuations may not be an
indication of the risk or liquidity associated with investing in those
securities. Because of the inherent uncertainties of valuation, the values
reflected in the financial statements may materially differ from the value
received upon actual sale of those investments.
NOTE
4–Security Transactions with Affiliated Funds
The
Trust is permitted to purchase securities from or sell securities to certain
other affiliated funds under specified conditions outlined in procedures adopted
by the Board of Trustees of the Trust. The procedures have been designed to
ensure that any purchase or sale of securities by the Trust from or to another
fund that is or could be considered an “affiliated person” by virtue of having a
common investment adviser (or affiliated investment advisers), common Trustees
and/or common officers is made in reliance on Rule
17a-7
of
the 1940 Act and, to the extent applicable, related SEC staff positions. Each
such transaction is effected at the security’s “current market price”, as
provided for in these procedures and Rule
17a-7.
Pursuant
to these procedures, for the six months ended August 31, 2025, the Trust
engaged in securities purchases of $21,494,978 and securities sales of
$14,251,747, which resulted in net realized gains (losses) of $(339,519).
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Invesco California Value
Municipal Income Trust |
NOTE
5–Trustees’ and Officers’ Fees and Benefits
’
s
include amounts accrued by the Trust to pay remuneration to certain Trustees and
Officers of the Trust. Trustees have the option to defer compensation payable by
the Trust, and “
’
”
includes amounts accrued by the Trust to fund such deferred compensation
amounts.
–
Cash Balances and Borrowings
The
Trust is permitted to temporarily carry a negative or overdrawn balance in its
account with SSB, the custodian bank. Such balances, if any at
period-end,
are
shown in the Statement of Assets and Liabilities under the payable caption
. To compensate the custodian bank for such overdrafts, the
overdrawn Trust may either (1) leave funds as a compensating balance in the
account so the custodian bank can be compensated by earning the additional
interest; or (2) compensate by paying the custodian bank at a rate agreed
upon by the custodian bank and Invesco, not to exceed the contractually agreed
upon rate.
Inverse
floating rate obligations resulting from the transfer of bonds to TOB Trusts are
accounted for as secured borrowings. The average floating rate notes outstanding
and average annual interest and fee rate related to inverse floating rate note
obligations during the six months ended August 31, 2025 were $145,530,000
and 3.88%, respectively.
The
amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from GAAP.
Reclassifications
are made to the Trust’s capital accounts to reflect income and gains available
for distribution (or available capital loss carryforward) under income tax
regulations. The tax character of distributions paid during the year and the tax
components of net assets will be reported at the Trust’s fiscal
year-end.
Capital
loss carryforward is calculated and reported as of a specific date. Results of
transactions and other activity after that date may affect the amount of capital
loss carryforward actually available for the Trust to utilize. The ability to
utilize capital loss carryforward in the future may be limited under the
Internal Revenue Code and related regulations based on the results of future
transactions.
The
Trust had a capital loss carryforward as of February 28, 2025, as follows:
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Capital Loss
Carryforward* |
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Not
subject to expiration |
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$23,228,083 |
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$28,393,095 |
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$51,621,178 |
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Capital
loss carryforward is reduced for limitations, if any, to the extent
required by the Internal Revenue Code and may be further limited depending
upon a variety of factors, including the realization of net unrealized
gains or losses as of the date of any reorganization.
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The
aggregate amount of investment securities (other than short-term securities,
U.S. Government obligations and money market funds, if any) purchased and sold
by the Trust during the six months ended August 31, 2025 was $72,045,146
and $102,234,217, respectively. As of August 31, 2025, the aggregate cost
of investments, including any derivatives, on a tax basis listed below includes
the adjustments for financial reporting purposes as of the most recently
completed federal income tax reporting
period-end:
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Unrealized
Appreciation (Depreciation) of Investments on a Tax Basis |
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Aggregate
unrealized appreciation of investments |
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$ |
14,417,536 |
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Aggregate
unrealized (depreciation) of investments |
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(45,869,397 |
) |
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Net
unrealized appreciation (depreciation) of investments |
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$ |
(31,451,861 |
) |
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Cost
of investments for tax purposes is $811,071,630.
–
Common Shares of Beneficial
Interest
Transactions
in common shares of beneficial interest were as follows:
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Six Months Ended
August 31, |
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Beginning
shares |
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47,890,525 |
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47,890,525 |
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Shares
issued through dividend reinvestment |
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114,214 |
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– |
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Ending
shares |
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48,004,739 |
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47,890,525 |
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The
Trust may, when appropriate, purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase.
–
Variable Rate Muni Term
Preferred Shares
The
Trust issued Series
2015/6-VCV
VMTP
Shares, with a liquidation preference of $100,000 per share, pursuant to an
offering exempt from registration under the 1933 Act. As of August 31, 2025
the VMTP Shares outstanding were as follows:
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05/15/2012 |
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1,570 |
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12/02/2027 |
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06/01/2024 |
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06/01/2017 |
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200 |
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12/02/2027 |
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06/01/2024 |
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VMTP
Shares are a variable-rate form of preferred shares with a mandatory redemption
date, unless earlier redeemed, repurchased or extended, and are considered debt
for financial reporting purposes. VMTP Shares are subject to optional and
mandatory redemption in certain circumstances. The redemption price per share is
equal to the sum of the liquidation preference per share plus any accumulated
but unpaid dividends and a redemption premium, if any. Starting six months prior
to the term redemption date, the Trust will be required to earmark assets having
a value equal to 110% of the redemption amount.
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Invesco California Value
Municipal Income Trust |
The
Trust incurs costs in connection with the issuance and/or the extension of the
VMTP Shares. These costs are recorded as a deferred charge and are amortized
over the term life of the VMTP Shares. Amortization of these costs is included
in
Interest, facilities and
maintenance fees
on the Statement of Operations, and the unamortized
balance is included in the value of
Variable rate muni term
preferred shares
on the Statement of Assets and Liabilities.
Dividends
paid on the VMTP Shares (which are treated as interest expense for financial
reporting purposes) are declared daily and paid monthly. The initial rate for
dividends was equal to the sum of 1.10% per annum plus the Securities Industry
and Financial Markets Association Municipal Swap Index (the “SIFMA” Index). As
of August 31, 2025, the dividend rate is equal to the SIFMA Index plus a
spread of 1.23%, which is based on the long term preferred share ratings
assigned to the VMTP Shares by a ratings agency. The average aggregate
liquidation preference outstanding and the average annualized dividend rate of
the VMTP Shares during the six months ended August 31, 2025 were
$177,000,000 and 3.90%, respectively.
The
Trust utilizes the VMTP Shares as leverage in order to enhance the yield of its
common shares. The primary risk associated with VMTP Shares is exposing the net
asset value of the common shares and total return to increased volatility if the
value of the Trust decreases while the value of the VMTP Shares remains
unchanged. Fluctuations in the dividend rates on the VMTP Shares can also impact
the Trust’s yield or its distributions to common shareholders. The Trust is
subject to certain restrictions relating to the VMTP Shares, such as maintaining
certain asset coverage and leverage ratio requirements. Failure to comply with
these restrictions could preclude the Trust from declaring any distributions to
common shareholders or purchasing common shares and/or could trigger an
increased rate which, if not cured, could cause the mandatory redemption of VMTP
Shares at the liquidation preference plus any accumulated but unpaid dividends.
The
liquidation preference of VMTP Shares, which approximates fair value, is
recorded as a liability under the caption
Variable rate muni term
preferred shares
on the Statement of Assets and Liabilities. The fair
value of VMTP Shares is expected to be approximately their liquidation
preference so long as the credit rating on the VMTP Shares, and therefore the
“spread” on the VMTP Shares (determined in accordance with the VMTP Shares’
governing document) remains unchanged. At
period-end,
the
Trust’s Adviser has determined that fair value of VMTP Shares is approximately
their liquidation preference. Fair value could vary if market conditions change
materially. Unpaid dividends on VMTP Shares are recognized as
on the Statement of Assets and Liabilities. Dividends paid on
VMTP Shares are recognized as a component of
Interest, facilities and
maintenance fees
on the Statement of Operations.
The
Trust declared the following dividends to common shareholders from net
investment income subsequent to August 31, 2025:
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September 2,
2025 |
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$0.0646 |
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September 16, 2025 |
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September 30, 2025 |
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October 1,
2025 |
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$0.0646 |
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October 16,
2025 |
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October 31,
2025 |
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Invesco California Value
Municipal Income Trust |
Approval
of Investment Advisory and
Sub-Advisory
Contracts
At
meetings held on June 16, 2025, the Board of Trustees (the Board or the
Trustees) of Invesco California Value Municipal Income Trust (the Fund) as a
whole, and the independent Trustees, who comprise over 75% of the Board, voting
separately, approved the continuance of the Fund’s Master Investment Advisory
Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment
advisory agreement) and the Master Intergroup
Sub-Advisory
Contract
for Mutual Funds with Invesco Asset Management Deutschland GmbH*, Invesco Asset
Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong
Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd.
(collectively, the Affiliated
Sub-Advisers
and
the
sub-advisory
contracts)
for another year, effective July 1, 2025. After evaluating the factors
discussed below, among others, the Board approved the renewal of the Fund’s
investment advisory agreement and the
sub-advisory
contracts
and determined that the compensation payable thereunder by the Fund to Invesco
Advisers and by Invesco Advisers to the Affiliated
Sub-Advisers
is
fair and reasonable.
The
Board’s Evaluation Process
The
Board has established an Investments Committee, which in turn has established
Sub-Committees.
The
Sub-Committees
meet
regularly throughout the year with portfolio managers and other members of
management to review information about the investment performance and portfolio
attributes for those funds advised by Invesco Advisers (Invesco Funds) assigned
to them. The Board has established additional standing and ad hoc committees
that meet throughout the year to review matters within their purview, including
a working group focused on opportunities to make ongoing and continuous
improvements to the Board’s annual review process for the Invesco Funds’
investment advisory agreement and
sub-advisory
contracts
(the annual review process). In considering whether to approve each Invesco
Fund’s investment advisory agreement and
sub-advisory
contracts,
the Board took into account evaluations and reports that it received from its
committees and
sub-committees,
as
well as the information provided to the Board and its committees and
sub-committees
throughout
the year.
As
part of the annual review process, the Board reviews and considers information
provided in response to requests for information submitted to management by the
independent Trustees with assistance from legal counsel to the independent
Trustees (independent legal counsel) and the Senior Officer, an officer of the
Invesco Funds who reports directly to the independent Trustees. The Board
receives comparative investment performance and fee and expense data regarding
the Invesco Funds prepared by Broadridge Financial Solutions, Inc. (Broadridge),
an independent provider of investment company data, as well as information on
the composition of the peer groups and its methodology for determining peer
groups. The Board also receives an independent written evaluation from the
Senior Officer. The Senior Officer’s evaluation is prepared as part of his
responsibility to manage the process by which the Invesco Funds’ proposed
management fees are negotiated during the annual review process to
ensure
they are negotiated in a manner that is at arms’ length and reasonable in
accordance with certain negotiated regulatory requirements. In addition to
meetings with Invesco Advisers and fund counsel throughout the year and as part
of meetings convened on May 6, 2025 and June
16-18,
2025,
the independent Trustees also discussed the continuance of the investment
advisory agreement and
sub-advisory
contracts
in separate sessions with the Senior Officer and with independent legal counsel.
The
discussion below includes summary information drawn in part from the Senior
Officer’s independent written evaluation with respect to the Fund’s investment
advisory agreement and
sub-advisory
contracts,
as well as a discussion of the material factors and related conclusions that
formed the basis for the Board’s approval of the Fund’s investment advisory
agreement and
sub-advisory
contracts.
The Trustees’ review and conclusions are based on the comprehensive
consideration of all information presented to them during the course of the year
and are not the result of any single determinative factor. Moreover, one Trustee
may have weighed a particular piece of information or factor differently than
another Trustee.
Factors
and Conclusions and Summary of Independent Written Fee Evaluation
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Nature, Extent and
Quality of Services Provided by Invesco Advisers and the Affiliated
Sub-Advisers |
The
Board reviewed the nature, extent and quality of the advisory services provided
to the Fund by Invesco Advisers under the Fund’s investment advisory agreement
and the credentials and experience of the officers and employees of Invesco
Advisers who provide these services, including the Fund’s portfolio manager(s).
The Board’s review included consideration of Invesco Advisers’ investment
process and oversight, credit analysis and research capabilities. The Board
considered information regarding Invesco Advisers’ programs for and resources
devoted to risk management, including management of investment, enterprise,
operational, liquidity, derivatives, valuation and compliance risks, and
technology used to manage such risks. The Board received information regarding
Invesco’s methodology for compensating its investment professionals and the
incentives and accountability it creates, as well as how it impacts Invesco’s
ability to attract and retain talent. The Board considered that Invesco Advisers
has shown the willingness to commit resources to support investment in the
business and to remain well-positioned to serve Fund shareholders including with
regard to attracting and retaining qualified personnel on its investment teams
and investing in technology. The Board considered the additional services
provided to the Fund due to the fact that the Fund is a
closed-end
fund,
including, but not limited to, leverage management and monitoring, evaluating,
and, where appropriate, making recommendations with respect to the Fund’s
trading discount, share repurchase program, and distribution rates, as well as
shareholder relations activities including with respect to investors focused on
short-term profits. The Board received a description of, and reports related to,
Invesco Advisers’ global security program and business continuity plans and of
its
approach to data privacy and cybersecurity, including related testing. The Board
also considered
non-advisory
services
that Invesco Advisers and its affiliates provide to the Invesco Funds, such as
various middle office and back office support functions, third party oversight,
internal audit, valuation, portfolio trading and legal and compliance. The Board
considered Invesco Advisers’ systems preparedness and ongoing investment to seek
to manage, operate and oversee the Invesco Funds with minimal impact or
disruption through challenging environments. The Board reviewed and considered
the benefits to shareholders of investing in a Fund that is part of the family
of funds under the umbrella of Invesco Ltd., Invesco Advisers’ parent company,
and noted Invesco Ltd.’s depth and experience in running an investment
management business, as well as its commitment of financial and other resources
to such business. The Board concluded that the nature, extent and quality of the
services provided to the Fund by Invesco Advisers supported the renewal of the
investment advisory agreement.
The
Board reviewed the services that may be provided to the Fund by the Affiliated
Sub-Advisers
under
the
sub-advisory
contracts
and the credentials and experience of the officers and employees of the
Affiliated
Sub-Advisers
who
provide these services. The Board noted the Affiliated
Sub-Advisers’
expertise
with respect to certain asset classes and that the Affiliated
Sub-Advisers
have
offices and personnel that are located in financial centers around the world. As
a result, the Board noted that the Affiliated
Sub-Advisers
can
provide research and investment analysis on the markets and economies of various
countries and territories in which the Fund may invest, make recommendations
regarding securities and assist with portfolio trading. The Board concluded that
the
sub-advisory
contracts
may benefit the Fund and its shareholders by permitting Invesco Advisers to use
the resources and talents of the Affiliated
Sub-Advisers
in
managing the Fund. The Board concluded that the nature, extent and quality of
the services that may be provided to the Fund by the Affiliated
Sub-Advisers
supported
the renewal of the
sub-advisory
contracts.
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Fund Investment
Performance |
The
Board considered Fund investment performance as a relevant factor in considering
whether to approve the investment advisory agreement. The Board did not view
Fund investment performance as a relevant factor in considering whether to
approve the
sub-advisory
contracts
for the Fund, as no Affiliated
Sub-Adviser
currently
manages assets of the Fund.
The
Board compared the Fund’s investment performance over multiple time periods
ending December 31, 2024 to the performance of funds in the Broadridge
performance universe and against the S&P Municipal Bond California 5+ Year
Investment Grade Index (Index). The Board noted that the Fund’s performance was
in the second quintile for the one year period and the first quintile for the
three and five year periods (the first quintile being the best performing funds
on a relative basis and the fifth quintile being the worst performing funds on a
relative basis). The Board noted that the Fund’s performance was above the
performance of the Index for the one year period and below the performance of
the Index for the three and five year periods. The
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Invesco California Value
Municipal Income Trust |
Board
recognized that the performance data reflects a snapshot in time as of a
particular date and that selecting a different performance period could produce
different results. The Board also reviewed more recent Fund performance as well
as other performance metrics, which did not change its conclusions. The Board
also reviewed supplementally historic premium and discount levels of the Fund as
provided to the Board at meetings throughout the year.
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Advisory and
Sub-Advisory Fees
and Fund Expenses |
The
Board received information regarding Invesco Advisers’ approach with respect to
contractual management fee schedules and compared the Fund’s contractual
management fee rate to the contractual management fee rates of funds in the
Fund’s Broadridge expense group. The Board noted that the contractual management
and actual management fee rates for shares of the Fund were each reasonably
comparable to the median contractual management and actual management fee rates
of funds in its expense group. The Board noted that there were only five funds
(including the Fund) in the expense group, therefore, Broadridge did not provide
quintile rankings. The Board noted that the term “contractual management fee”
and “actual management fee” for funds in the expense group may include both
advisory and certain
non-portfolio
management
administrative services fees, but that Broadridge is not able to provide
information on a
basis
as to what is included. The Board also reviewed the methodology used by
Broadridge in calculating expense group information, which includes using each
fund’s contractual management fee schedule (including any applicable
breakpoints) as reported in the most recent audited annual reports for each fund
in the expense group. The Board also considered comparative information
regarding the Fund’s total expense ratio and its various components. The
independent Trustees reviewed and considered information provided in response to
follow-up
requests
for information submitted by the independent Trustees to management regarding
the Fund’s limited peer group.
The
Board noted that Invesco Advisers and the Affiliated
Sub-Advisers
do
not manage other similarly managed mutual funds or client accounts.
The
Board also considered the services that may be provided by the Affiliated
Sub-Advisers
pursuant
to the
sub-advisory
contracts,
as well as the fees payable by Invesco Advisers to the Affiliated
Sub-Advisers
pursuant
to the
sub-advisory
contracts.
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Economies of Scale and
Breakpoints |
The
Board noted that most
closed-end
funds
do not have fund level breakpoints because
closed-end
funds
generally do not experience substantial asset growth after the initial public
offering. The Board acknowledged the limitations in calculating and measuring
economies of scale at the individual fund level, noting that only indicative and
estimated measures are available at the individual fund level and that such
measures are subject to uncertainty. The Board noted that the Fund does not
benefit from economies of scale through contractual breakpoints, but does share
in economies of scale through Invesco Advisers’ ability to negotiate lower fee
arrangements with third party service providers. The Board noted that the Fund
may also benefit from economies of scale through initial fee setting, as well as
Invesco Advisers’ management of significant assets and investment in its
business, including investments in
business
infrastructure, technology and cybersecurity.
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Profitability and
Financial Resources |
The
Board reviewed information from Invesco Advisers concerning the costs of the
advisory and other services that Invesco Advisers and its affiliates provide to
the Fund and the Invesco Funds and the profitability of Invesco Advisers and its
affiliates in providing these services in the aggregate and on an individual
basis.
The Board considered the methodology used for calculating profitability and the
periodic review and enhancement of such methodology. The Board noted that
Invesco Advisers continues to operate at a net profit from services Invesco
Advisers and its affiliates provide to the Invesco Funds in the aggregate and to
most Invesco Funds individually. The Board considered that profits to Invesco
Advisers can vary significantly depending on the particular Invesco Fund, with
some Invesco Funds showing indicative losses to Invesco Advisers and others
showing indicative profits at healthy levels, and that Invesco Advisers’ support
for and commitment to an Invesco Fund are not, however, solely dependent on the
profits attributed to such Fund. The Board did not deem the level of profits
realized by Invesco Advisers and its affiliates from providing such services to
be excessive, given the nature, extent and quality of the services provided. The
Board noted that Invesco Advisers provided information demonstrating that
Invesco Advisers is financially sound and has the resources necessary to perform
its obligations under the investment advisory agreement, and provided
representations indicating that the Affiliated
Sub-Advisers
are
financially sound and have the resources necessary to perform their obligations
under the
sub-advisory
contracts.
The Board noted the cyclical and competitive nature of the global asset
management industry.
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Collateral Benefits to
Invesco Advisers and its Affiliates |
The
Board considered various other benefits received by Invesco Advisers and its
affiliates from the relationship with the Fund. The Board considered the
organizational structure employed to provide these services.
The
Board considered that the Fund’s uninvested cash may be invested in registered
money market funds advised by Invesco Advisers. The Board considered information
regarding the returns of the affiliated money market funds relative to
comparable overnight investments, as well as the fees paid by the affiliated
money market funds to Invesco Advisers and its affiliates. In this regard, the
Board noted that Invesco Advisers receives advisory fees from these affiliated
money market funds attributable to the Fund’s investments. The Board also noted
that Invesco Advisers has contractually agreed to waive through varying periods
an amount equal to 100% of the net advisory fee Invesco Advisers receives from
the affiliated money market funds with respect to the Fund’s investment in the
affiliated money market funds of uninvested cash.
*Effective
as of August 29, 2025, Invesco Asset Management Deutschland GmbH merged
into Invesco Management S.A.
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Invesco California Value
Municipal Income Trust |
