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- 5979
John Hancock California Tax-Free Income Fund
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4497
Date of fiscal year end: | May 31 |
Date of reporting period: | November 30, 2016 |
ITEM 1. REPORT TO SHAREHOLDERS.
A message to shareholders
Dear shareholder,
From the U.K.'s Brexit vote in June to Donald Trump's presidential election victory in November, the past six months have been marked by significant geopolitical changes. Longer-term interest rates in the United States generally rose during this time, especially in the final weeks of the period, making for a challenging environment for many segments of the fixed-income markets, particularly municipal bonds. The same was true of short-term rates, as the U.S. Federal Reserve decided in December to raise short-term lending rates for the first time in 2016.
The reality of higher interest rates is no surprise; rates around the world had for some time been hovering near historic lows, and in Japan and parts of Europe, central banks have been experimenting with pushing rates into negative territory. It's a trend that couldn't last forever, and the recent rise has been in the making for some time.
That said, fixed income still has a valuable role to play in diversified portfolios. At John Hancock Investments, we believe one of the best ways to navigate today's interest-rate volatility is by casting a wider net; your financial advisor can make sure that your fixed-income allocations are appropriate for your investment goals, and that they aren't overly reliant on interest rates as the primary driver of returns.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to thank you for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and Chief Executive Officer
John Hancock Investments
This commentary reflects the CEO's views, which are subject to change at any time. All investments entail risks, including the possible loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
California Tax-Free Income Fund
INVESTMENT OBJECTIVE
The fund seeks a high level of current income, consistent with preservation of capital, that is exempt from federal and California personal income taxes.
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/16 (%)
The Bloomberg Barclays California Municipal Bond Index is an unmanaged index comprising California investment-grade municipal bonds.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Figures from Morningstar, Inc. include reinvested distributions and do not take into account sales charges. Actual load-adjusted performance is lower.
The past performance shown here reflects reinvested distributions and the beneficial effect of any expense reductions, and does not guarantee future results. Returns for periods shorter than one year are cumulative. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Municipal bonds declined
Increased supply and slowing investor demand contributed to a broad decline in municipal bonds over the last two months of the reporting period, erasing gains from earlier in the period.
The fund underperformed its benchmark
The fund declined for the period and trailed the return of the Bloomberg Barclays California Municipal Bond Index.
Longer duration detracted
The fund's greater interest-rate sensitivity compared with the index was the key factor behind its overall underperformance.
PORTFOLIO COMPOSITION AS OF 11/30/16 (%)
A note about risks
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if a creditor, grantor, or counterparty is unable or unwilling to make principal, interest, or settlement payments. Investments in higher-yielding, lower-rated securities are subject to a higher risk of default. Municipal bond prices can decline due to fiscal mismanagement or tax shortfalls, or if related projects become unprofitable. A portfolio concentrated in one sector or that holds a limited number of securities may fluctuate more than a fund that invests in a wider variety of sectors. Investing heavily in any one state or region increases exposure to losses in that state or region. Factors that may affect performance include economic or political changes, tax base erosion, state constitutional limits on tax increases, budget deficits and other financial difficulties, and changes in credit ratings. This risk is magnified for a fund that invests mainly in bonds from a single state. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Adverse events affecting a particular issuer may magnify losses for non-diversified funds. Hedging, derivatives, and other strategic transactions may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Please see the fund's prospectus for additional risks.
An interview with Portfolio Manager Cynthia M. Brown, John Hancock Asset Management a division of Manulife Asset Management (US) LLC
Cynthia M. Brown
Portfolio Manager
John Hancock Asset Management
Can you discuss the market environment for municipal bonds over the six months ended November 30, 2016?
For the first four months of the period, municipal bonds enjoyed a steady rally as substantial investor demand outpaced new supply. As an illustration of the robust level of demand, municipal bond mutual funds enjoyed 54 consecutive weeks of net inflows from September 2015 to October 2016, according to Thomson Reuters Lipper.
That inflow streak ended as investors grew concerned that an improving U.S. economy would lead the U.S. Federal Reserve (Fed) to raise short-term interest rates before the end of year. At the same time, new issuance of municipal securities increased as municipalities looked to take advantage of relatively low interest rates. As a result, the supply-and-demand equation reversed, leading to a sell-off in the municipal bond market. The surprising outcome of the U.S. presidential election in November accelerated this trend as yields rose broadly across all sectors of the bond market, and municipal bonds were no exception.
The end result was negative overall returns for municipal bonds during the six-month period as the Bloomberg Barclays Municipal Bond Index declined by 3.52%. By comparison, the Bloomberg Barclays U.S. Aggregate Bond Index, a broad taxable bond market measure, lost 0.92%. California municipal bonds underperformed the broad municipal market as the fund's benchmark, the Bloomberg Barclays California Municipal Bond Index, declined by 3.86%.
Were there any credit issues in California during the reporting period?
Overall credit quality in the state was stable as the California economy remained robust, generating a budget surplus of approximately $1 billion for the 2016 fiscal year that ended in June. Both the governor and the state legislature have refrained from major new spending programs to sustain the state's positive financial position.
In November, California voters approved Proposition 55, which extends a temporary personal income tax increase—which was due to expire in January 2019—through 2030. This development should establish a solid cash-flow base for the state over the next decade. As of June 30, California had more than $7 billion in its rainy-day reserve fund, which is designed to support the state's
What factors affected fund performance compared with the benchmark?
The fund had a longer duration (a measure of interest-rate sensitivity) than the index during the six-month period. This positioning was beneficial for fund performance when the municipal bond market rallied early in the period, but it was a drag on relative results when the market reversed course over the last two months. On balance, the fund's duration positioning detracted from performance versus the benchmark.
On the positive side, the fund benefited from relatively higher exposure in lower-quality municipal bonds, which outperformed during the reporting period as investors sought out higher-yielding securities in a low interest-rate environment. Although higher-rated bonds benefited from a flight to quality during the sell-off late in the period, lower-quality securities held up better for the full six months.
QUALITY COMPOSITION AS OF 11/30/16 (%)
From a sector perspective, a position in California tobacco bonds added value during the period as they benefited from strong investor demand for their relatively high yields. Exposure to the healthcare sector detracted from results as uncertainty about the future of the Affordable Care Act (ACA) in the wake of the U.S. presidential election put downward pressure on this segment of the municipal market.
What themes do you see developing in the municipal bond market as we move into 2017?
One major theme will be the Trump administration's policy initiatives regarding tax reform, infrastructure spending, and healthcare. A plan to lower income-tax rates in the highest tax brackets could make municipal bonds less attractive to investors in these tax brackets. Increased spending on infrastructure could be financed via a substantial increase in municipal bond issuance, which would put downward pressure on municipal bond prices. Healthcare is a sizable component of the municipal bond market, and any changes to the ACA will have an impact on this segment of the market. Until we get more clarity on the Trump
SECTOR COMPOSITION AS OF 11/30/16 (%)
administration's policies, there will likely be some volatility and a tendency toward risk aversion within the municipal market.
The other significant theme is pension liabilities for state and local governments. As a recent example, the city of Dallas saw its credit rating downgraded because of concerns about an underfunded pension plan for its public safety employees. For this reason, we have limited the fund's exposure to general obligation bonds issued by local governments. California has been a leader in addressing its pension issues, but it will require a long time horizon before the state's pension situation is fully resolved.
As of August 2016, the state of California carried a credit rating of AA from all three major rating agencies—its highest credit rating since 2002. The solid investment-grade rating allows the state to borrow at lower interest rates, reducing its overall borrowing costs. It also signals that California has taken a fiscally responsible path that includes less short-term borrowing, a reduction of outstanding debt, and a plan to meet its pension obligations. These developments should strengthen investor confidence in California's municipal bonds.
MANAGED BY
Cynthia M. Brown On the fund since 2015 Investing since 1984 |
TOTAL RETURNS FOR THE PERIOD ENDED NOVEMBER 30, 2016
Average annual total returns (%) with maximum sales charge | Cumulative total returns (%) with maximum sales charge | SEC 30-day yield (%) subsidized | SEC 30-day yield (%) unsubsidized1 | Tax- equivalent subsidized yield (%)2 | |||||||||
1-year | 5-year | 10-year | 6-month | 5-year | 10-year | as of 11-30-16 | as of 11-30-16 | as of 11-30-16 | |||||
Class A | -4.33 | 3.48 | 3.53 | -8.19 | 18.65 | 41.44 | 2.12 | 2.11 | 4.32 | ||||
Class B | -5.79 | 3.21 | 3.29 | -9.40 | 17.13 | 38.23 | 1.45 | 1.34 | 2.95 | ||||
Class C | -2.03 | 3.54 | 3.13 | -5.65 | 19.02 | 36.07 | 1.45 | 1.34 | 2.95 | ||||
Index 1† | -0.55 | 4.04 | 4.28 | -3.86 | 21.89 | 52.02 | — | — | |||||
Index 2† | -0.22 | 3.43 | 4.09 | -3.52 | 18.35 | 49.29 | — | — |
Performance figures assume all distributions have been reinvested. Figures reflect maximum sales charges on Class A shares of 4.0% and the applicable contingent deferred sales charge (CDSC) on Class B and Class C shares. The returns for Class A shares have been adjusted to reflect the reduction in the maximum sales charge from 4.5% to 4.0%, effective 2-3-14. The Class B shares' CDSC declines annually between years 1 to 6 according to the following schedule: 5%, 4%, 3%, 3%, 2%, 1%. No sales charge will be assessed after the sixth year. Class C shares sold within one year of purchase are subject to a 1% CDSC.
The expense ratios of the fund, both net (including any fee waivers and/or expense limitations) and gross (excluding any fee waivers and/or expense limitations), are set forth according to the most recent publicly available prospectus for the fund and may differ from those disclosed in the Financial highlights tables in this report. Had the fee waivers and expense limitations not been in place, gross expenses would apply. The expense ratios are as follows:
Class A | Class B | Class C | |
Gross (%) | 0.84 | 1.69 | 1.69 |
Net (%) | 0.84 | 1.59 | 1.59 |
Please refer to the most recent prospectus and annual or semiannual report for more information on expenses and any expense limitation arrangements for each class.
The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility and other factors, the fund's current performance may be higher or lower than the performance shown. For current to the most recent month-end performance data, please call 800-225-5291 or visit the fund's website at jhinvestments.com.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
† | Index 1 is the Bloomberg Barclays California Municipal Bond Index; Index 2 is the Bloomberg Barclays Municipal Bond Index. |
See the following page for footnotes.
This chart and table show what happened to a hypothetical $10,000 investment in John Hancock California Tax-Free Income Fund for the share classes and periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two separate indexes.
Start date | With maximum sales charge ($) | Without sales charge ($) | Index 1 ($) | Index 2 ($) | |
Class B3 | 11-30-06 | 13,823 | 13,823 | 15,202 | 14,929 |
Class C3 | 11-30-06 | 13,607 | 13,607 | 15,202 | 14,929 |
The values shown in the chart for Class A shares with maximum sales charge have been adjusted to reflect the reduction in the Class A shares' maximum sales charge from 4.5% to 4.0%, which became effective on 2-3-14.
The Bloomberg Barclays California Municipal Bond Index is an unmanaged index composed of California investment-grade municipal bonds.
The Bloomberg Barclays Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, which would result in lower returns.
Footnotes related to performance pages
1 | Unsubsidized yield reflects what the yield would have been without the effect of reimbursements and waivers. |
2 | Tax-equivalent yield is based on the maximum federal income tax rate of 43.4% and a state tax rate of 13.3%. |
3 | The contingent deferred sales charge is not applicable. |
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
• | Transaction costs, which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc. |
• | Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses. |
We are presenting only your ongoing operating expenses here.
Actual expenses/actual returns
The table on the following page is intended to provide information about the fund's actual ongoing operating expenses, and is based on the fund's actual return. It assumes an account value of $1,000.00 on June 1, 2016, with the same investment held until November 30, 2016.
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 2016, by $1,000.00, then multiply it by the "expenses paid" for your share class from the table. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Hypothetical example for comparison purposes
The second table on the following page allows you to compare the fund's ongoing operating expenses with those of any other fund. It provides an example of the fund's hypothetical account values and hypothetical expenses based on each class's actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund's actual return). It assumes an account value of $1,000.00 on June 1, 2016, with the same investment held until November 30, 2016. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.
Actual expenses/actual returns
Account value on 6-1-2016 | Ending value on 11-30-2016 | Expenses paid during period ended 11-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $956.50 | $4.02 | 0.82% |
Class B | 1,000.00 | 953.00 | 7.69 | 1.57% |
Class C | 1,000.00 | 952.90 | 7.69 | 1.57% |
Hypothetical example for comparison purposes
Account value on 6-1-2016 | Ending value on 11-30-2016 | Expenses paid during period ended 11-30-20161 | Annualized expense ratio | |
Class A | $1,000.00 | $1,021.00 | $4.15 | 0.82% |
Class B | 1,000.00 | 1,017.20 | 7.94 | 1.57% |
Class C | 1,000.00 | 1,017.20 | 7.94 | 1.57% |
1 | Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
Fund's investments
As of 11-30-16 (unaudited) | ||||||||||||||||||||
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
Municipal bonds 97.1% | $256,302,203 | |||||||||||||||||||
(Cost $246,585,924) | ||||||||||||||||||||
California 96.9% | 255,884,860 | |||||||||||||||||||
ABAG Finance Authority for Nonprofit Corps. Institute on Aging (D) | 5.650 | 08-15-38 | 1,000,000 | 1,058,325 | ||||||||||||||||
ABAG Finance Authority for Nonprofit Corps. Sharp Healthcare | 6.250 | 08-01-39 | 1,000,000 | 1,103,310 | ||||||||||||||||
ABAG Finance Authority for Nonprofit Corps. Sharp HealthCare, Series A | 5.000 | 08-01-43 | 2,000,000 | 2,181,940 | ||||||||||||||||
Anaheim Community Facilities District Platinum Triangle | 4.000 | 09-01-46 | 2,000,000 | 1,839,860 | ||||||||||||||||
Anaheim Public Financing Authority Public Improvement Project, Series C (D) | 1.653 (Z | ) | 09-01-18 | 3,000,000 | 2,913,810 | |||||||||||||||
Anaheim Public Financing Authority Series A | 5.000 | 05-01-46 | 1,000,000 | 1,085,000 | ||||||||||||||||
California County Tobacco Securitization Agency Fresno County Funding Corp. | 6.000 | 06-01-35 | 1,765,000 | 1,765,018 | ||||||||||||||||
California County Tobacco Securitization Agency Kern County Tobacco Funding Corp., Series 2014 | 5.000 | 06-01-40 | 1,500,000 | 1,585,440 | ||||||||||||||||
California County Tobacco Securitization Agency Public Improvements | 5.250 | 06-01-21 | 3,215,000 | 3,236,412 | ||||||||||||||||
California County Tobacco Securitization Agency Stanislaus Funding, Series A | 5.500 | 06-01-33 | 345,000 | 346,829 | ||||||||||||||||
California Educational Facilities Authority College and University Funding Program, Prerefunded | 5.000 | 02-01-26 | 1,130,000 | 1,138,046 | ||||||||||||||||
California Educational Facilities Authority Pepperdine University | 5.000 | 10-01-49 | 2,550,000 | 2,847,432 | ||||||||||||||||
California Educational Facilities Authority Stanford University | 5.000 | 06-01-46 | 1,000,000 | 1,228,100 | ||||||||||||||||
California Educational Facilities Authority University of Redlands | 5.000 | 10-01-35 | 1,000,000 | 1,080,620 | ||||||||||||||||
California Health Facilities Financing Authority Cedars Sinai Medical Control, Series B | 4.000 | 08-15-39 | 3,000,000 | 2,951,430 | ||||||||||||||||
California Health Facilities Financing Authority Lucile Packard Stanford Hospital, Series B | 5.000 | 08-15-55 | 1,000,000 | 1,088,890 | ||||||||||||||||
California Health Facilities Financing Authority Lucile Salter Packard Children | 5.000 | 08-15-43 | 1,000,000 | 1,075,330 | ||||||||||||||||
California Health Facilities Financing Authority Scripps Health, Series A | 5.000 | 11-15-36 | 1,000,000 | 1,078,870 | ||||||||||||||||
California Health Facilities Financing Authority Sutter Health, Series A | 5.000 | 08-15-43 | 3,000,000 | 3,241,500 | ||||||||||||||||
California Municipal Finance Authority Wineville School Project, Series A (D) | 5.000 | 10-01-42 | 2,000,000 | 2,162,580 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
California (continued) | ||||||||||||||||||||
California Pollution Control Financing Authority Waste Management Inc., Series A3, AMT | 4.300 | 07-01-40 | 1,500,000 | $1,496,205 | ||||||||||||||||
California School Finance Authority Aspire Public Schools (S) | 5.000 | 08-01-41 | 1,700,000 | 1,758,990 | ||||||||||||||||
California School Finance Authority Aspire Public Schools (S) | 5.000 | 08-01-46 | 1,025,000 | 1,056,939 | ||||||||||||||||
California State Public Works Board Department of Corrections, Series A (D) | 5.000 | 12-01-19 | 3,870,000 | 4,081,612 | ||||||||||||||||
California State Public Works Board Trustees California State University, Series D | 6.250 | 04-01-34 | 2,000,000 | 2,223,840 | ||||||||||||||||
California State Public Works Board Various Capital Projects, Series A | 5.000 | 04-01-37 | 1,000,000 | 1,099,450 | ||||||||||||||||
California State Public Works Board Various Correctional Facilities, Series A | 5.000 | 09-01-39 | 2,500,000 | 2,766,875 | ||||||||||||||||
California State University College and University Revenue, Series A | 5.000 | 11-01-44 | 2,000,000 | 2,200,080 | ||||||||||||||||
California Statewide Communities Development Authority American Baptist Homes West | 6.250 | 10-01-39 | 2,000,000 | 2,187,340 | ||||||||||||||||
California Statewide Communities Development Authority CHF Irvine LLC | 5.000 | 05-15-40 | 2,880,000 | 3,021,552 | ||||||||||||||||
California Statewide Communities Development Authority Enloe Medical Center (D) | 4.000 | 08-15-38 | 400,000 | 387,548 | ||||||||||||||||
California Statewide Communities Development Authority Infrastructure Program Revenue, Series B | 5.000 | 09-02-44 | 1,000,000 | 1,031,920 | ||||||||||||||||
California Statewide Communities Development Authority Kaiser Permanente, Series A | 5.000 | 04-01-42 | 3,500,000 | 3,822,805 | ||||||||||||||||
California Statewide Communities Development Authority Los Angeles Jewish Homes, Series S (D) | 5.000 | 08-01-44 | 2,625,000 | 2,914,853 | ||||||||||||||||
California Statewide Communities Development Authority Redlands Community Hospital OB | 5.000 | 10-01-46 | 1,000,000 | 1,047,430 | ||||||||||||||||
California Statewide Communities Development Authority Redwoods Project (D) | 5.375 | 11-15-44 | 1,500,000 | 1,712,595 | ||||||||||||||||
California Statewide Communities Development Authority Senior Living of Southern California (S) | 7.250 | 11-15-41 | 1,700,000 | 1,885,725 | ||||||||||||||||
California Statewide Communities Development Authority The Culinary Institute of America Project, Series B | 5.000 | 07-01-46 | 425,000 | 444,078 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
California (continued) | ||||||||||||||||||||
California Statewide Financing Authority Tobacco Settlement, Series A | 6.000 | 05-01-37 | 2,500,000 | $2,528,550 | ||||||||||||||||
California Statewide Financing Authority Tobacco Settlement, Series B | 6.000 | 05-01-37 | 3,000,000 | 3,032,400 | ||||||||||||||||
City of Belmont Library Project, Series A (D) | 5.750 | 08-01-24 | 1,000,000 | 1,208,750 | ||||||||||||||||
City of Irvine Community Facilities District | 5.000 | 09-01-49 | 2,000,000 | 2,075,460 | ||||||||||||||||
City of La Verne Brethren Hillcrest Homes | 5.000 | 05-15-36 | 750,000 | 776,783 | ||||||||||||||||
City of Long Beach Alamitos Bay Marina Project, Series 2015 | 5.000 | 05-15-45 | 1,000,000 | 1,052,080 | ||||||||||||||||
City of Pasadena Old Pasadena Parking Facility Project | 6.250 | 01-01-18 | 230,000 | 236,113 | ||||||||||||||||
City of San Clemente Community Facilities District | 5.000 | 09-01-46 | 2,000,000 | 2,089,220 | ||||||||||||||||
City of San Francisco Public Utilities Commission Water Revenue, Series A | 5.000 | 11-01-45 | 1,500,000 | 1,619,640 | ||||||||||||||||
City of San Mateo Community Facilities District | 5.500 | 09-01-44 | 2,000,000 | 2,127,320 | ||||||||||||||||
East Side Union High School District-Santa Clara County 2012 Crossover, GO (D) | 5.250 | 09-01-24 | 2,500,000 | 2,966,800 | ||||||||||||||||
Eastern Municipal Water District Series A | 5.000 | 07-01-45 | 3,000,000 | 3,330,150 | ||||||||||||||||
Folsom Public Financing Authority Series B | 5.125 | 09-01-26 | 965,000 | 978,394 | ||||||||||||||||
Foothill-Eastern Transportation Corridor Agency Highway Revenue Tolls, Series A | 5.750 | 01-15-46 | 5,000,000 | 5,494,650 | ||||||||||||||||
Golden State Tobacco Securitization Corp. Series A | 5.000 | 06-01-40 | 8,250,000 | 8,976,083 | ||||||||||||||||
Inland Valley Development Agency Series A | 5.000 | 09-01-44 | 7,500,000 | 8,050,650 | ||||||||||||||||
Kern County Capital Improvements Project, Series A (D) | 5.750 | 08-01-35 | 1,000,000 | 1,074,800 | ||||||||||||||||
Laguna Salada Union School District Series C, GO (D) | 3.306 (Z | ) | 08-01-26 | 1,000,000 | 726,860 | |||||||||||||||
Lancaster School District School Improvements (D) | 1.725 (Z | ) | 04-01-19 | 1,730,000 | 1,661,388 | |||||||||||||||
Lancaster School District School Improvements (D) | 6.081 (Z | ) | 04-01-22 | 1,380,000 | 1,225,192 | |||||||||||||||
Long Beach Harbor Revenue Series A, AMT (D) | 6.000 | 05-15-18 | 2,660,000 | 2,834,230 | ||||||||||||||||
Long Beach Special Tax Community Facilities District 6-Pike Project | 6.250 | 10-01-26 | 2,480,000 | 2,485,729 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
California (continued) | ||||||||||||||||||||
Los Angeles Community College District 2008 Election, Series A, GO | 6.000 | 08-01-33 | 4,000,000 | $4,471,760 | ||||||||||||||||
Los Angeles Community Facilities District No: 3 Cascades Business Park | 6.400 | 09-01-22 | 440,000 | 444,008 | ||||||||||||||||
Los Angeles County Public Works Financing Authority Series D | 5.000 | 12-01-45 | 3,000,000 | 3,320,520 | ||||||||||||||||
Los Angeles County Regional Financing Authority Montecedro Incorporated Project, Series A (D) | 5.000 | 11-15-44 | 1,355,000 | 1,487,885 | ||||||||||||||||
Los Angeles Department of Water & Power Power Systems, Series D | 5.000 | 07-01-44 | 1,000,000 | 1,103,360 | ||||||||||||||||
Los Angeles Unified School District Election 2008, Series A, GO | 4.000 | 07-01-40 | 1,000,000 | 990,920 | ||||||||||||||||
M-S-R Energy Authority Natural Gas Revenue, Series B | 6.500 | 11-01-39 | 3,500,000 | 4,500,370 | ||||||||||||||||
Marin Healthcare District Election of 2013, Series B, GO | 4.000 | 08-01-45 | 2,000,000 | 1,953,160 | ||||||||||||||||
Metropolitan Water District of Southern California Authorization, Series A | 5.000 | 07-01-40 | 1,745,000 | 1,965,184 | ||||||||||||||||
Morgan Hill Redevelopment Agency Successor Agency Series A | 5.000 | 09-01-33 | 1,750,000 | 1,946,595 | ||||||||||||||||
Oakland Unified School District/Alameda County Election of 2012, GO | 6.625 | 08-01-38 | 1,000,000 | 1,189,270 | ||||||||||||||||
Oakland Unified School District/Alameda County Series A, GO | 5.000 | 08-01-40 | 1,500,000 | 1,643,415 | ||||||||||||||||
Orange County Improvement Bond Act 1915 Series B | 5.750 | 09-02-33 | 1,365,000 | 1,371,443 | ||||||||||||||||
Paramount Unified School District Series B, GO (D) | 3.339 (Z | ) | 09-01-25 | 4,735,000 | 3,537,140 | |||||||||||||||
Port of Los Angeles Series A, AMT | 5.000 | 08-01-44 | 2,000,000 | 2,159,660 | ||||||||||||||||
River Islands Public Financing Authority Community Facilities District, 2003-1 | 5.500 | 09-01-45 | 2,000,000 | 2,104,660 | ||||||||||||||||
Riverside County Transportation Commission Senior Lien, Series A | 5.750 | 06-01-48 | 1,000,000 | 1,105,960 | ||||||||||||||||
Sacramento Area Flood Control Agency Consol Capital Assessment District | 5.000 | 10-01-41 | 1,000,000 | 1,103,540 | ||||||||||||||||
San Bernardino County Capital Facilities Project, Escrowed to Maturity, Series B | 6.875 | 08-01-24 | 350,000 | 437,350 | ||||||||||||||||
San Bernardino County Medical Center Financing Project, Series B (D) | 5.500 | 08-01-17 | 1,315,000 | 1,354,213 | ||||||||||||||||
San Bruno Park Elementary School District School Improvements, Series B, GO (D) | 2.388 (Z | ) | 08-01-21 | 1,015,000 | 907,684 | |||||||||||||||
San Diego County Regional Airport Authority Consol Rental Car Facilities, Seriies A | 5.000 | 07-01-44 | 4,925,000 | 5,321,315 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
California (continued) | ||||||||||||||||||||
San Diego County Regional Transportation Commission Sales & Use Tax, Series A | 5.000 | 04-01-44 | 3,000,000 | $3,321,510 | ||||||||||||||||
San Diego Public Facilities Financing Authority Lease Revenue | 5.250 | 03-01-40 | 1,000,000 | 1,092,870 | ||||||||||||||||
San Diego Public Facilities Financing Authority Series A | 5.000 | 10-15-44 | 1,000,000 | 1,091,220 | ||||||||||||||||
San Diego Unified School District Series I, GO | 4.159 (Z | ) | 07-01-39 | 1,250,000 | 491,438 | |||||||||||||||
San Diego Unified School District, Election of 1998 Series A, GO (D) | 2.455 (Z | ) | 07-01-21 | 2,500,000 | 2,233,300 | |||||||||||||||
San Francisco City & County Airports Commission San Francisco International Airport, Series B | 5.000 | 05-01-44 | 7,890,000 | 8,518,044 | ||||||||||||||||
San Francisco City & County Redevelopment Agency Department of General Services Lease, No. 6, Mission Bay South, Series A | 5.150 | 08-01-35 | 1,250,000 | 1,252,100 | ||||||||||||||||
San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series B (D) | 5.000 | 08-01-43 | 570,000 | 627,798 | ||||||||||||||||
San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series C (D) | 5.000 | 08-01-41 | 500,000 | 551,555 | ||||||||||||||||
San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series D | 6.625 | 08-01-39 | 1,000,000 | 1,134,240 | ||||||||||||||||
San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment, Series D | 7.000 | 08-01-41 | 1,000,000 | 1,209,350 | ||||||||||||||||
San Francisco City & County Redevelopment Agency San Francisco Redevelopment Projects, Series B | 6.625 | 08-01-39 | 700,000 | 781,235 | ||||||||||||||||
San Joaquin Hills Transportation Corridor Agency Highway Revenue Tolls, Escrowed to Maturity | 2.170 (Z | ) | 01-01-22 | 6,500,000 | 5,818,410 | |||||||||||||||
San Joaquin Hills Transportation Corridor Agency Series A | 5.000 | 01-15-44 | 2,500,000 | 2,613,400 | ||||||||||||||||
San Jose Redevelopment Agency Merged Area Redevelopment PJ Tax Allocation | 4.250 | 08-01-36 | 1,750,000 | 1,728,843 | ||||||||||||||||
San Mateo Foster City School District Election 2015, Series A, GO | 4.000 | 08-01-40 | 1,405,000 | 1,426,567 | ||||||||||||||||
San Mateo Foster City School District Election 2015, Series A, GO | 4.000 | 08-01-45 | 1,875,000 | 1,892,719 | ||||||||||||||||
San Mateo Joint Powers Financing Authority Capital Projects Program (D) | 5.000 | 07-01-21 | 1,815,000 | 2,041,421 | ||||||||||||||||
Santa Ana Financing Authority Police Administration & Holding Facility (D) | 6.250 | 07-01-19 | 895,000 | 993,020 | ||||||||||||||||
Santa Ana Financing Authority Police Administration & Holding Facility (D) | 6.250 | 07-01-24 | 5,000,000 | 6,042,950 |
Rate (%) | Maturity date | Par value^ | Value | |||||||||||||||||
California (continued) | ||||||||||||||||||||
Santa Ana Financing Authority Police Administration & Holding Facility, Prerefunded (D) | 6.250 | 07-01-24 | 5,000,000 | $6,009,250 | ||||||||||||||||
Santa Clara Valley Water District Series A | 5.000 | 06-01-46 | 2,000,000 | 2,236,520 | ||||||||||||||||
Santa Fe Springs Community Development Commission Construction Redevelopment Project, Series A (D) | 2.339 (Z | ) | 09-01-20 | 1,275,000 | 1,167,530 | |||||||||||||||
Santa Margarita Water District Community Facilities District | 5.625 | 09-01-43 | 775,000 | 845,161 | ||||||||||||||||
South Orange County Public Financing Authority Series A | 5.000 | 08-15-33 | 1,000,000 | 1,085,630 | ||||||||||||||||
South Orange County Public Financing Authority Series A | 5.000 | 08-15-34 | 450,000 | 487,098 | ||||||||||||||||
Southern California Public Power Authority Natural Gas Revenue, Series A | 5.250 | 11-01-26 | 2,000,000 | 2,251,840 | ||||||||||||||||
Southern California Public Power Authority Series A | 5.000 | 07-01-38 | 1,000,000 | 1,111,110 | ||||||||||||||||
State of California, GO | 5.000 | 04-01-43 | 6,500,000 | 7,126,860 | ||||||||||||||||
State of California, GO | 5.000 | 03-01-45 | 1,000,000 | 1,101,390 | ||||||||||||||||
State of California, GO | 6.500 | 04-01-33 | 2,000,000 | 2,214,300 | ||||||||||||||||
Stockton Public Financing Authority Delta Water Supply Project, Series A | 6.250 | 10-01-40 | 1,150,000 | 1,352,573 | ||||||||||||||||
Sweetwater Union High School District Election of 2006, Series 2016 B, GO | 4.000 | 08-01-42 | 500,000 | 496,010 | ||||||||||||||||
The San Francisco City & County Redevelopment Agency Mission Bay Project, Series A | 5.000 | 08-01-43 | 1,000,000 | 1,075,000 | ||||||||||||||||
Torrance Hospital Revenue Torrance Memorial Medical Center, Series A | 5.500 | 06-01-31 | 2,000,000 | 2,030,320 | ||||||||||||||||
Tuolumne Wind Project Authority Tuolumne County Project, Series A | 5.625 | 01-01-29 | 1,000,000 | 1,088,070 | ||||||||||||||||
University of California Series AM | 5.000 | 05-15-44 | 4,000,000 | 4,407,360 | ||||||||||||||||
West Covina Redevelopment Agency Fashion Plaza | 6.000 | 09-01-22 | 3,390,000 | 3,817,615 | ||||||||||||||||
Puerto Rico 0.2% | 417,343 | |||||||||||||||||||
Puerto Rico Industrial Tourist Education Medical & Environment Authority Hospital de la Concepcion | 6.500 | 11-15-20 | 410,000 | 417,343 |
Yield* (%) | Maturity date | Par value^ | Value | |||||||||||||||||
Short-term investments 1.4% | $3,607,000 | |||||||||||||||||||
(Cost $3,607,000) | ||||||||||||||||||||
U.S. Government Agency 0.7% | 1,914,000 | |||||||||||||||||||
Federal Home Loan Bank Discount Note | 0.100 | 12-01-16 | 1,914,000 | 1,914,000 | ||||||||||||||||
Par value^ | Value | |||||||||||||||||||
Repurchase agreement 0.7% | 1,693,000 | |||||||||||||||||||
Barclays Tri-Party Repurchase Agreement dated 11-30-16 at 0.260% to be repurchased at $1,232,009 on 12-1-16, collateralized by $914,800 U.S. Treasury Inflatiion Indexed Bonds, 2.500%-3.875% due 1-15-29 to 4-15-29 (valued at $1,256,530, including interest) and by $200 U.S. Treasury Inflatiion Indexed Notes, 0.375% due 7-15-25 (valued at $203, including interest) | 1,232,000 | 1,232,000 | ||||||||||||||||||
Repurchase Agreement with State Street Corp. dated 11-30-16 at 0.030% to be repurchased at $461,000 on 12-1-16, collateralized by $450,000 U.S. Treasury Notes, 2.750% due 2-15-24 (valued at $470,250, including interest) | 461,000 | 461,000 | ||||||||||||||||||
Total investments (Cost $250,192,924)† 98.5% | $259,909,203 | |||||||||||||||||||
Other assets and liabilities, net 1.5% | $4,025,932 | |||||||||||||||||||
Total net assets 100.0% | $263,935,135 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. | ||||||||||||||||||||
^All par values are denominated in U.S. dollars unless otherwise indicated. | ||||||||||||||||||||
Key to Security Abbreviations and Legend | ||||||||||||||||||||
AMT | Interest earned from these securities may be considered a tax preference item for purpose of the Federal Alternative Minimum Tax. | |||||||||||||||||||
GO | General Obligation | |||||||||||||||||||
(D) | Bond is insured by one or more of the companies listed in the insurance coverage table below. | |||||||||||||||||||
Insurance coverage | As a % of total investments | |||||||||||||||||||
National Public Finance Guarantee Corp. | 9.8 | |||||||||||||||||||
Assured Guaranty Municipal Corp. | 4.7 | |||||||||||||||||||
California Mortgage Insurance | 2.9 | |||||||||||||||||||
Ambac Financial Group, Inc. | 2.0 | |||||||||||||||||||
Build America Mutual Assurance Company | 0.8 | |||||||||||||||||||
Assured Guaranty Corp. | 0.4 | |||||||||||||||||||
Total | 20.6 | |||||||||||||||||||
(S) | These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. | |||||||||||||||||||
(Z) | Zero coupon bonds are issued at a discount from their principal amount in lieu of paying interest periodically. Rate shown is the effective yield at period end. | |||||||||||||||||||
* | Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end. | |||||||||||||||||||
† | At 11-30-16, the aggregate cost of investment securities for federal income tax purposes was $248,492,932. Net unrealized appreciation aggregated to $11,416,271, of which $14,537,650 related to appreciated investment securities and $3,121,379 related to depreciated investment securities. |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 11-30-16 (unaudited)
Assets | ||||||||||||||||||||||||||||||
Investments, at value (Cost $250,192,924) | $259,909,203 | |||||||||||||||||||||||||||||
Cash | 26 | |||||||||||||||||||||||||||||
Receivable for investments sold | 4,435,206 | |||||||||||||||||||||||||||||
Receivable for fund shares sold | 68,351 | |||||||||||||||||||||||||||||
Interest receivable | 3,167,593 | |||||||||||||||||||||||||||||
Other receivables and prepaid expenses | 8,997 | |||||||||||||||||||||||||||||
Total assets | 267,589,376 | |||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||
Payable for investments purchased | 2,897,768 | |||||||||||||||||||||||||||||
Payable for fund shares repurchased | 416,559 | |||||||||||||||||||||||||||||
Distributions payable | 115,467 | |||||||||||||||||||||||||||||
Payable to affiliates | ||||||||||||||||||||||||||||||
Accounting and legal services fees | 9,743 | |||||||||||||||||||||||||||||
Transfer agent fees | 12,610 | |||||||||||||||||||||||||||||
Distribution and service fees | 29,483 | |||||||||||||||||||||||||||||
Investment management fees | 124,405 | |||||||||||||||||||||||||||||
Other liabilities and accrued expenses | 48,206 | |||||||||||||||||||||||||||||
Total liabilities | 3,654,241 | |||||||||||||||||||||||||||||
Net assets | $263,935,135 | |||||||||||||||||||||||||||||
Net assets consist of | ||||||||||||||||||||||||||||||
Paid-in capital | $256,188,476 | |||||||||||||||||||||||||||||
Undistributed net investment income | 92,144 | |||||||||||||||||||||||||||||
Accumulated net realized gain (loss) on investments | (2,061,764 | ) | ||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments | 9,716,279 | |||||||||||||||||||||||||||||
Net assets | $263,935,135 | |||||||||||||||||||||||||||||
Net asset value per share | ||||||||||||||||||||||||||||||
Based on net asset values and shares outstanding-the fund has an unlimited number of shares authorized with no par value | ||||||||||||||||||||||||||||||
Class A ($228,913,074 ÷ 21,690,897 shares)1 | $10.55 | |||||||||||||||||||||||||||||
Class B ($1,419,210 ÷ 134,412 shares)1 | $10.56 | |||||||||||||||||||||||||||||
Class C ($33,602,851 ÷ 3,184,000 shares)1 | $10.55 | |||||||||||||||||||||||||||||
Maximum offering price per share | ||||||||||||||||||||||||||||||
Class A (net asset value per share ÷ 96%)2 | $10.99 |
1 | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. | ||||||||||||||||
2 | On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced. |
STATEMENT OF OPERATIONS For the six months ended 11-30-16 (unaudited)
Investment income | ||||||||||||||||||||||||
Interest | $5,891,704 | |||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Investment management fees | 798,267 | |||||||||||||||||||||||
Distribution and service fees | 377,553 | |||||||||||||||||||||||
Accounting and legal services fees | 33,402 | |||||||||||||||||||||||
Transfer agent fees | 79,846 | |||||||||||||||||||||||
Trustees' fees | 2,433 | |||||||||||||||||||||||
State registration fees | 7,508 | |||||||||||||||||||||||
Printing and postage | 11,860 | |||||||||||||||||||||||
Professional fees | 29,569 | |||||||||||||||||||||||
Custodian fees | 17,852 | |||||||||||||||||||||||
Other | 4,753 | |||||||||||||||||||||||
Total expenses | 1,363,043 | |||||||||||||||||||||||
Less expense reductions | (29,750 | ) | ||||||||||||||||||||||
Net expenses | 1,333,293 | |||||||||||||||||||||||
Net investment income | 4,558,411 | |||||||||||||||||||||||
Realized and unrealized gain (loss) | ||||||||||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||||||||||
Investments | 308,649 | |||||||||||||||||||||||
308,649 | ||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
Investments | (17,061,254 | ) | ||||||||||||||||||||||
(17,061,254 | ) | |||||||||||||||||||||||
Net realized and unrealized loss | (16,752,605 | ) | ||||||||||||||||||||||
Decrease in net assets from operations | ($12,194,194 | ) |
STATEMENTS OF CHANGES IN NET ASSETS
Six months ended 11-30-16 | Year ended 5-31-16 | ||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets | |||||||||||||||||||||||||||||||||||||||||||||
From operations | |||||||||||||||||||||||||||||||||||||||||||||
Net investment income | $4,558,411 | $9,495,933 | |||||||||||||||||||||||||||||||||||||||||||
Net realized gain | 308,649 | 788,481 | |||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) | (17,061,254 | ) | 7,506,532 | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) in net assets resulting from operations | (12,194,194 | ) | 17,790,946 | ||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||
From net investment income | |||||||||||||||||||||||||||||||||||||||||||||
Class A | (4,297,995 | ) | (8,698,763 | ) | |||||||||||||||||||||||||||||||||||||||||
Class B | (20,262 | ) | (45,971 | ) | |||||||||||||||||||||||||||||||||||||||||
Class C | (478,433 | ) | (1,012,198 | ) | |||||||||||||||||||||||||||||||||||||||||
Total distributions | (4,796,690 | ) | (9,756,932 | ) | |||||||||||||||||||||||||||||||||||||||||
From fund share transactions | (11,307,692 | ) | 13,446,719 | ||||||||||||||||||||||||||||||||||||||||||
Total increase (decrease) | (28,298,576 | ) | 21,480,733 | ||||||||||||||||||||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||||||||||||||||||||||
Beginning of period | 292,233,711 | 270,752,978 | |||||||||||||||||||||||||||||||||||||||||||
End of period | $263,935,135 | $292,233,711 | |||||||||||||||||||||||||||||||||||||||||||
Undistributed net investment income | $92,144 | $330,423 |
Financial highlights
Class A Shares Period ended | 11-30-16 | 1 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | 5-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | $10.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.18 | 0.39 | 0.42 | 0.46 | 0.46 | 0.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | 0.32 | (0.04 | ) | (0.11 | ) | 0.04 | 0.94 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.48 | ) | 0.71 | �� | 0.38 | 0.35 | 0.50 | 1.42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.40 | ) | (0.42 | ) | (0.46 | ) | (0.46 | ) | (0.47 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.55 | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | (4.35 | ) 5 | 6.63 | 3.53 | 3.46 | 4.55 | 14.43 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $229 | $254 | $235 | $214 | $241 | $243 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 0.83 | 6 | 0.84 | 0.83 | 0.86 | 0.84 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 0.82 | 6 | 0.83 | 0.82 | 0.86 | 0.84 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 3.19 | 6 | 3.53 | 3.78 | 4.40 | 4.15 | 4.56 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 8 | 20 | 19 | 19 | 7 | 9 |
1 | Six months ended 11-30-16. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class B Shares Period ended | 11-30-16 | 1 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | 5-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.23 | $10.91 | $10.95 | $11.07 | $11.03 | $10.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.14 | 0.31 | 0.34 | 0.39 | 0.38 | 0.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | 0.33 | (0.04 | ) | (0.12 | ) | 0.03 | 0.95 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.52 | ) | 0.64 | 0.30 | 0.27 | 0.41 | 1.35 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | (0.39 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.56 | $11.23 | $10.91 | $10.95 | $11.07 | $11.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | (4.70 | ) 5 | 5.93 | 2.76 | 2.60 | 3.76 | 13.67 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $1 | $2 | $2 | $2 | $3 | $2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.68 | 6 | 1.69 | 1.68 | 1.71 | 1.69 | 1.71 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.57 | 6 | 1.58 | 1.58 | 1.61 | 1.59 | 1.62 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.44 | 6 | 2.78 | 3.04 | 3.65 | 3.40 | 3.79 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 8 | 20 | 19 | 19 | 7 | 9 |
1 | Six months ended 11-30-16. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Class C Shares Period ended | 11-30-16 | 1 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | 5-31-12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | $10.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income2 | 0.14 | 0.31 | 0.33 | 0.39 | 0.38 | 0.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | 0.32 | (0.03 | ) | (0.11 | ) | 0.03 | 0.94 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | (0.52 | ) | 0.63 | 0.30 | 0.28 | 0.41 | 1.34 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | (0.39 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $10.55 | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return (%)3,4 | (4.71 | ) 5 | 5.83 | 2.76 | 2.69 | 3.77 | 13.56 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $34 | $36 | $34 | $31 | $33 | $29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses before reductions | 1.68 | 6 | 1.69 | 1.68 | 1.71 | 1.69 | 1.71 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses including reductions | 1.57 | 6 | 1.58 | 1.57 | 1.61 | 1.59 | 1.62 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 2.44 | 6 | 2.78 | 3.03 | 3.65 | 3.40 | 3.79 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio turnover (%) | 8 | 20 | 19 | 19 | 7 | 9 |
1 | Six months ended 11-30-16. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | Annualized. |
Note 1 — Organization
John Hancock California Tax-Free Income Fund (the fund) is the sole series of John Hancock California Tax-Free Income Fund (the Trust), an open-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the fund is to seek a high level of current income, consistent with preservation of capital, that is exempt from federal and California personal income taxes.
The fund may offer multiple classes of shares. The shares currently offered are detailed in the Statement of assets and liabilities. Class A and Class C shares are offered to all investors. Class B shares are closed to new investors. Shareholders of each class have exclusive voting rights to matters that affect that class. The distribution and service fees, if any, and transfer agent fees for each class may differ. Class B shares convert to Class A shares eight years after purchase.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission and applicable regulations.
In order to value the securities, the fund uses the following valuation techniques: Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of November 30, 2016, all investments are categorized as Level 2 under the hierarchy described above.
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian, or for tri-party repurchase agreements, collateral is
held at a third-party custodian bank in a segregated account for the benefit of the fund. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, assets and liabilities resulting from repurchase agreements are not offset in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Line of credit. The fund may borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund's custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the extent of any overdraft, and to the maximum extent permitted by law.
Effective June 30, 2016, the fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $1 billion unsecured committed line of credit. Excluding commitments designated for certain funds, the fund can borrow up to an aggregate commitment amount of $750 million, subject to asset coverage and other limitations as specified in the agreement. A commitment fee payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. Prior to June 30, 2016, the fund had a similar agreement that enabled it to participate in a $750 million unsecured committed line of credit. For the six months ended November 30, 2016, the fund had no borrowings under either line of credit. Commitment fees for the six months ended November 30, 2016 were $1,339.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Class allocations. Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the net assets of the class. Class-specific expenses, such as distribution and service fees, if any, and transfer agent fees, for all classes, are calculated daily at the class level based on the net assets of each class and the specific expense rates applicable to each class.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are
carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
For federal income tax purposes, as of May 31, 2016, the fund has a capital loss carryforward of $4,203,981 available to offset future net realized capital gains.
The following table details the capital loss carryforward available as of May 31, 2016:
Capital loss carryforward expiring at May 31 | No expiration date | ||
2017 | 2018 | Short-term | Long-term |
$731,359 | $206,417 | $1,833,295 | $1,432,910 |
As of May 31, 2016, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are distributed annually.
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to accretion on debt securities.
Note 3 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. 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. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a monthly management fee to the Advisor, equivalent on an annual basis, to the sum of: (a) 0.550% of the first $500 million of the fund's average daily net assets, (b) 0.500% of the next $500 million of the fund's average daily net assets, (c) 0.475% of the next $1 billion of the fund's average daily net assets; and (d) 0.450% of the fund's average daily net assets in excess of $2 billion. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the six months ended November 30, 2016, this waiver amounted to 0.01% of the fund's average net assets. This arrangement may be amended or terminated at any time by the Advisor upon notice to the fund and with the approval of the Board of Trustees.
The expense reductions described above amounted to the following for the six months ended November 30, 2016:
Class | Expense reduction | Class | Expense reduction | |
Class A | $9,526 | Class C | $1,361 | |
Class B | 58 | Total | $10,945 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended November 30, 2016 were equivalent to a net annual effective rate of 0.54% of the fund's average daily net assets.
Accounting and legal services. Pursuant to the Accounting and Legal Services Agreement the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended November 30, 2016, amounted to an annual rate of 0.02% of the fund's average daily net assets.
Distribution and service plans. The fund has a distribution agreement with the Distributor. The fund has adopted distribution and service plans with respect to Class A, Class B and Class C shares pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for services provided as the distributor of shares of the fund. The fund may pay up to the following contractual rates of distribution and service fees under these arrangements, expressed as an annual percentage of average daily net assets for each class of the fund's shares.
Class | Rule 12b-1 fee |
Class A | 0.15% |
Class B | 1.00% |
Class C | 1.00% |
The fund's Distributor has contractually agreed to waive 0.10% of Rule12b-1 fees for Class B and Class C shares. The current waiver agreement expires on September 30, 2017, unless renewed by mutual agreement of the fund and the Distributor based upon a determination that this is appropriate under the circumstances at the time. This contractual waiver amounted to $764 and $18,041 for Class B and Class C shares, respectively, for the six months ended November 30, 2016.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $149,727 for the six months ended November 30, 2016. Of this amount, $18,727 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $103,562 was paid as sales commissions to broker-dealers and $27,438 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the six months ended November 30, 2016, CDSCs received by the Distributor amounted to $109, $24 and $1,269 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small
accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Share Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended November 30, 2016 were:
Class | Distribution and service fees | Transfer agent fees |
Class A | $189,501 | $69,499 |
Class B | 7,641 | 421 |
Class C | 180,411 | 9,926 |
Total | $377,553 | $79,846 |
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended November 30, 2016 and for the year ended May 31, 2016 were as follows:
Six months ended 11-30-16 | Year ended 5-31-16 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Class A shares | ||||||||||||||||||||||||||
Sold | 1,174,862 | $13,254,001 | 3,220,855 | $35,491,892 | ||||||||||||||||||||||
Distributions reinvested | 328,238 | 3,666,928 | 665,582 | 7,327,789 | ||||||||||||||||||||||
Repurchased | (2,484,961 | ) | (27,736,723 | ) | (2,713,642 | ) | (29,817,036 | ) | ||||||||||||||||||
Net increase (decrease) | (981,861 | ) | ($10,815,794 | ) | 1,172,795 | $13,002,645 | ||||||||||||||||||||
Class B shares | ||||||||||||||||||||||||||
Sold | — | — | 13,085 | $145,178 | ||||||||||||||||||||||
Distributions reinvested | 1,427 | $15,948 | 3,310 | 36,420 | ||||||||||||||||||||||
Repurchased | (7,958 | ) | (90,686 | ) | (40,414 | ) | (441,340 | ) | ||||||||||||||||||
Net decrease | (6,531 | ) | ($74,738 | ) | (24,019 | ) | ($259,742 | ) | ||||||||||||||||||
Class C shares | ||||||||||||||||||||||||||
Sold | 203,685 | $2,284,465 | 816,453 | $9,001,543 | ||||||||||||||||||||||
Distributions reinvested | 33,125 | 369,893 | 64,307 | 708,123 | ||||||||||||||||||||||
Repurchased | (274,665 | ) | (3,071,518 | ) | (816,677 | ) | (9,005,850 | ) | ||||||||||||||||||
Net increase (decrease) | (37,855 | ) | ($417,160 | ) | 64,083 | $703,816 | ||||||||||||||||||||
Total net increase (decrease) | (1,026,247 | ) | ($11,307,692 | ) | 1,212,859 | $13,446,719 |
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $21,115,908 and $29,260,562, respectively, for the six months ended November 30, 2016.
Note 7 — State or region risk
To the extent that the fund invests heavily in bonds from any given state or region, its performance could be disproportionately affected by factors particular to that state or region. These factors may include economic or political changes, tax-base erosion, possible state constitutional limits on tax increases, detrimental budget deficits and other financial difficulties, and changes to the credit ratings assigned to those states' municipal issuers.
Note 8 — New rule issuance
In October 2016, the SEC issued Final Rule Release No. 33-10231, Investment Company Reporting Modernization (the Release). The Release calls for the adoption of new rules and forms as well as amendments to its rules and forms to modernize the reporting and disclosure of information by registered investment companies. The SEC is adopting amendments to Regulation S-X, which will require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. Management is in the process of reviewing the impact to the financial statements.
Continuation of Investment Advisory and Subadvisory Agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock California Tax-Free Income Fund (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor), for John Hancock California Tax-Free Income Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 21-23, 2016 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 24-25, 2016.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 21-23, 2016, the Board, including the Trustees who are not considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of mutual fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and does not treat any single factor as determinative, and each Trustee may attribute different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the Advisor's risk management processes. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and mutual fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that the fund underperformed its benchmark index for the one-year period ended December 31, 2015 and outperformed its benchmark index for the three- and five-year periods ended December 31, 2015. The Board noted that the
fund underperformed its peer group average for the one-year period ended December 31, 2015 and outperformed its peer group average for the three-and five-year periods ended December 31, 2015. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index and peer group for the three- and five-year periods. The Board concluded that the fund's performance has generally outperformed the historical performance of comparable funds and the fund's benchmark index.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of mutual fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees for the fund are higher than the peer group median and total expenses for the fund are equal to the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the advisory/subadvisory fee structure, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduces management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable.
Profitability/indirect benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data; | |||||||
(e) | considered that the John Hancock insurance companies that are affiliates of the Advisor, as shareholders of the Trust directly or through their separate accounts, receive certain tax credits or deductions relating to foreign taxes paid and dividends received by certain funds of the Trust and noted that these tax benefits, which are not available to participants in qualified retirement plans under applicable income tax law, are reflected in the profitability information reviewed by the Board; | |||||||
(f) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; | |||||||
(g) | noted that affiliates of the Advisor provide transfer agency services and distribution services to the fund, and that the fund's distributor also receives Rule 12b-1 payments to support distribution of the fund; | |||||||
(h) | noted that the fund's Subadvisor is an affiliate of the Advisor; |
(i) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; | |||||||
(j) | noted that the subdvisory fees for the fund is paid by the Advisor; and | |||||||
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the entrepreneurial risk that it assumes as Advisor. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
(a) | considered that the Advisor has contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund; | |
(b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and | |
(c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock Fund Complex); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with
the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the performance of the fund has generally outperformed the historical performance of comparable funds and the fund's benchmark index; | |
(3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided; and | |
(4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
Trustees James M. Oates, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (US) LLC Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
The fund's proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund's complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund's Form N-Q is available on our website and the SEC's website, sec.gov, and can be reviewed and copied (for a fee) at the SEC's Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | |||
800-225-5291 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Balanced Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value New Opportunities Small Cap Value Small Company Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Global Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Financial Industries Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Global Real Estate Natural Resources Redwood Regional Bank Seaport Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Income Allocation Fund Lifestyle Aggressive Portfolio Lifestyle Balanced Portfolio Lifestyle Conservative Portfolio Lifestyle Growth Portfolio Lifestyle Moderate Portfolio Retirement Choices Portfolios Retirement Living Portfolios Retirement Living II Portfolios EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Developed International ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Core Bond ESG International Equity ESG Large Cap Core CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We build funds based on investor needs, then search the world to find proven
portfolio teams with specialized expertise in those strategies. As a manager of
managers, we apply vigorous oversight to ensure that they continue to meet
our uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, along with strong
risk-adjusted returns across asset classes.
| John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
This report is for the information of the shareholders of John Hancock California Tax-Free Income Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | ||
MF336776 | 53SA 11/16 1/17 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) | Not applicable. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating and Governance Committee Charter”.
(c)(2) Contact person at the registrant.
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.
John Hancock California Tax-Free Income Fund
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | January 17, 2017 |
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: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | January 17, 2017 |
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | January 17, 2017 |