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: | May 31, 2017 |
ITEM 1. REPORT TO STOCKHOLDERS.
A message to shareholders
Dear shareholder,
Bond markets were a study in contrasts over the past 12 months, with credit-sensitive segments enjoying solid gains while rate-sensitive areas posted much more muted returns. Generally, the global macroeconomic picture continued to improve, with corporate earnings in both the United States and abroad showing signs of strength.
In the United States, the steady drumbeat of economic growth convinced the U.S. Federal Reserve (Fed) to raise short-term interest rates by a quarter of a percentage point twice during your fund's fiscal year and once more shortly after the period ended, and continued to hint at one more rate hike in the back half of this year. The Fed also began laying out plans for shrinking its $4.5 trillion balance sheet, a potentially delicate operation that investors will be watching closely.
There are a number of potential headwinds and uncertainties facing bond investors today. At John Hancock Investments, we believe one of the best ways to navigate these challenges is by talking with your financial advisor, who can make sure that your fixed-income allocations are suitable for your investment goals and that they appropriately balance the need for income with market risks.
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. Investing involves risks, including the potential loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. For more up-to-date information, please 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 5/31/17 (%)
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. 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 TWELVE MONTHS
Municipal bonds edged higher
Municipal bonds overcame a mid-period decline to post modestly positive overall returns, benefiting from strong investor demand and limited new issuance.
The fund trailed its benchmark
The fund advanced for the period but underperformed its benchmark, the Bloomberg Barclays California Municipal Bond Index.
Security selection detracted, while sector allocation added value
Individual security selection detracted from relative results, but sector allocation contributed positively to performance compared with the benchmark.
PORTFOLIO COMPOSITION AS OF 5/31/17 (%)
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
How did the municipal bond market perform during the 12 months ended May 31, 2017?
Municipal bonds posted modestly positive returns, overcoming some meaningful volatility. The municipal market rallied early in the period as strong investor demand and limited new issuance provided a tailwind for performance. However, the market reversed course in late 2016 as improving economic conditions led to concerns about a short-term interest-rate increase from the U.S. Federal Reserve (Fed).
The results of the U.S. presidential election in November put additional downward pressure on municipal bonds as investors anticipated a pro-growth agenda from the Trump administration, which could lead to a stronger economy and higher interest rates. Potential tax policy changes from the new administration also weighed on the municipal market.
Despite two Fed rate hikes in December 2016 and March 2017, municipal bonds rebounded during the last few months of the reporting period as favorable supply-and-demand trends returned. Prudent spending levels from many state and local governments led to low levels of new issuance, while demand increased amid weaker economic data. Uncertainty about the Trump administration's ability to implement its policy agenda in a timely manner also added to the pressure.
For the period, the fund's benchmark, the Bloomberg Barclays California Municipal Bond Index, returned 1.15%. By comparison, the Bloomberg Barclays U.S. Aggregate Bond Index, a broad taxable bond market measure, returned 1.58%. California municipal bonds underperformed the broad municipal market as the Bloomberg Barclays Municipal Bond Index returned 1.46%.
How was credit quality in California during the reporting period?
The state of California is in solid financial shape, resulting in stable-to-improving credit quality for the state's municipal bonds. The state has taken steps to address its long-term pension obligations, set aside funds in a reserve account to backstop any future budget shortfalls, and received approval from voters to extend a temporary personal income-tax increase. The credit rating agencies have recognized this progress and rewarded the state with multiple credit upgrades in the past few years.
A positive development for the California economy was the heavy rains that swept through the state during the most recent winter and spring. Five years of severe drought conditions had a deleterious effect on California's agricultural industry and prompted Governor Jerry Brown to implement a 25% reduction in urban water consumption in 2016. However, thanks to unusually wet weather in late 2016 and early 2017, the governor declared the drought emergency over in April, and which we believe will aid overall economic growth in the state.
What factors affected fund performance compared with the benchmark?
The fund had a longer duration (a measure of interest-rate sensitivity) than the index for much of the period. Its duration averaged 7.01, compared with 5.90 for the index. This positioning was beneficial for fund performance during the municipal market rallies early and late in the period, but it was a drag on relative results when the market sold off in late 2016 and early 2017. On balance, the fund's duration positioning detracted slightly from performance versus the benchmark.
On a sector basis, the fund benefited from its holdings of special tax bonds and land development securities. In particular, land development bonds rebounded after a sharp postelection decline. The fund also had several bonds that were pre-refunded, which means they were refinanced with newly
QUALITY COMPOSITION AS OF 5/31/17 (%)
Credit positioning was positive for performance, especially a relatively higher position in lower-quality municipal bonds, which outperformed during the reporting period as investors sought higher-yielding securities in a low interest-rate environment.
On the downside, a number of the fund's holdings were called during the reporting period, and we had to redeploy the proceeds into lower-yielding investments. Individual security selection also detracted from relative results, but the fund's broad diversification helped limit the negative impact.
As we move into the second half of 2017, what are the important themes affecting the municipal bond market?
The U.S. economy remains a key influence on the fixed-income markets in general, and that includes
SECTOR COMPOSITION AS OF 5/31/17 (%)
the municipal bond market. We expect a continuation of the current moderate economic expansion as the Fed remains on a path toward interest-rate normalization. That said, it has been about eight years since the last recession, so an emphasis on individual credit selection will be increasingly important going forward.
We remain cognizant of the ongoing pension liability issues facing many state and local governments. These issues will take a long time to play out and will remain a key part of our investment analysis. At the state level, California is ahead of the curve with regard to addressing its pension obligations, and we hope to see local governments follow suit.
We are also looking ahead to 2018, when tax reform will likely be a major undertaking by the federal government. In addition, the midterm elections could have an impact on fiscal policies, both at the federal level and in state and local governments.
MANAGED BY
| | Cynthia M. Brown On the fund since 2015 Investing since 1984 |
TOTAL RETURNS FOR THE PERIOD ENDED MAY 31, 2017
| 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 | 5-year | 10-year | as of 5-31-17 | as of 5-31-17 | as of 5-31-17 | ||||||
| Class A | -3.42 | 2.89 | 4.04 | 15.34 | 48.64 | 2.10 | 2.10 | 4.28 | |||||
| Class B | -4.98 | 2.61 | 3.81 | 13.76 | 45.34 | 1.45 | 1.35 | 2.95 | |||||
| Class C | -1.10 | 2.97 | 3.65 | 15.74 | 43.06 | 1.45 | 1.35 | 2.95 | |||||
| Class I3,4 | 0.75 | 3.77 | 4.48 | 20.30 | 55.02 | 2.33 | 2.32 | 4.75 | |||||
| Index 1† | 1.15 | 3.79 | 4.77 | 20.44 | 59.35 | — | — | — | |||||
| Index 2† | 1.46 | 3.31 | 4.58 | 17.69 | 56.52 | — | — | — | |||||
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. Sales charges are not applicable to Class I shares.
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 contractual 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 | Class I* | |
| Gross (%) | 0.84 | 1.69 | 1.69 | 0.70 |
| Net (%) | 0.84 | 1.59 | 1.59 | 0.70 |
* Expenses have been estimated for the first year of operations of Class I shares.
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 B5 | 5-31-07 | 14,534 | 14,534 | 15,935 | 15,652 |
| Class C5 | 5-31-07 | 14,306 | 14,306 | 15,935 | 15,652 |
| Class I3,4 | 5-31-07 | 15,502 | 15,502 | 15,935 | 15,652 |
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 | Class I shares were first offered on February 13, 2017. Returns prior to this date are those of Class A shares except they do not include sales charges. |
| 4 | For certain type of investors, as described in the fund's prospectus. |
| 5 | 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 first line of each share class in 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 December 1, 2016, with the same investment held until May 31, 2017.
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 May 31, 2017, 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 line of each share class in the 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 December 1, 2016, with the same investment held until May 31, 2017. 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.
SHAREHOLDER EXPENSE EXAMPLE CHART
| Account value on 12-1-2016 | Ending value on 5-31-2017 | Expenses paid during period ended 5-31-20171 | Annualized expense ratio | ||
| Class A | Actual expenses/actual returns | $1,000.00 | $1,052.00 | $4.25 | 0.83% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,020.80 | 4.18 | 0.83% | |
| Class B | Actual expenses/actual returns | 1,000.00 | 1,048.00 | 8.07 | 1.58% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,017.10 | 7.95 | 1.58% | |
| Class C | Actual expenses/actual returns | 1,000.00 | 1,048.10 | 8.07 | 1.58% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,017.10 | 7.95 | 1.58% | |
| Class I2 | Actual expenses/actual returns | 1,000.00 | 1,030.90 | 1.96 | 0.66% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,021.60 | 3.33 | 0.66% | |
| 1 | Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
| 2 | The inception date for Class I shares is 2-13-17. Actual expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 107/365 (to reflect the period). |
Fund's investments
| As of 5-31-17 | |||||||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| Municipal bonds 99.9% | $248,831,807 | ||||||||||||||||||||||
| (Cost $230,380,694) | |||||||||||||||||||||||
| California 99.9% | 248,831,807 | ||||||||||||||||||||||
| ABAG Finance Authority for Nonprofit Corps. Institute on Aging (D) | 5.650 | 08-15-38 | 1,000,000 | 1,058,660 | |||||||||||||||||||
| ABAG Finance Authority for Nonprofit Corps. Sharp Healthcare | 6.250 | 08-01-39 | 1,000,000 | 1,105,850 | |||||||||||||||||||
| ABAG Finance Authority for Nonprofit Corps. Sharp HealthCare, Series A | 5.000 | 08-01-43 | 2,000,000 | 2,248,740 | |||||||||||||||||||
| Anaheim Public Financing Authority Series A | 5.000 | 05-01-46 | 1,000,000 | 1,133,410 | |||||||||||||||||||
| California County Tobacco Securitization Agency Fresno County Funding Corp. | 6.000 | 06-01-35 | 1,765,000 | 1,784,680 | |||||||||||||||||||
| California County Tobacco Securitization Agency Kern County Tobacco Funding Corp., Series 2014 | 5.000 | 06-01-40 | 1,500,000 | 1,640,565 | |||||||||||||||||||
| California County Tobacco Securitization Agency Public Improvements | 5.250 | 06-01-21 | 3,215,000 | 3,253,516 | |||||||||||||||||||
| California County Tobacco Securitization Agency Stanislaus Funding, Series A | 5.500 | 06-01-33 | 345,000 | 346,403 | |||||||||||||||||||
| California Educational Facilities Authority Pepperdine University | 5.000 | 10-01-49 | 2,550,000 | 2,967,282 | |||||||||||||||||||
| California Educational Facilities Authority University of Redlands | 5.000 | 10-01-35 | 1,000,000 | 1,137,790 | |||||||||||||||||||
| California Health Facilities Financing Authority Childrens Hospital, Series A | 5.000 | 08-15-47 | 1,000,000 | 1,128,350 | |||||||||||||||||||
| California Health Facilities Financing Authority El Camino Hospital | 5.000 | 02-01-42 | 1,000,000 | 1,134,360 | |||||||||||||||||||
| California Health Facilities Financing Authority El Camino Hospital | 5.000 | 02-01-47 | 1,425,000 | 1,608,896 | |||||||||||||||||||
| California Health Facilities Financing Authority Kaiser Permanente Hospital, Series A | 5.000 | 11-01-47 | 1,000,000 | 1,283,810 | |||||||||||||||||||
| California Health Facilities Financing Authority Lucile Packard Stanford Hospital, Series B | 5.000 | 08-15-55 | 1,000,000 | 1,131,330 | |||||||||||||||||||
| California Health Facilities Financing Authority Lucile Salter Packard Children | 5.000 | 08-15-43 | 1,000,000 | 1,122,490 | |||||||||||||||||||
| California Health Facilities Financing Authority Scripps Health, Series A | 5.000 | 11-15-36 | 1,000,000 | 1,090,400 | |||||||||||||||||||
| California Health Facilities Financing Authority Sutter Health, Series A | 5.000 | 08-15-43 | 3,000,000 | 3,400,740 | |||||||||||||||||||
| California Municipal Finance Authority Channing House Project, Series A (D) | 4.000 | 05-15-40 | 1,500,000 | 1,567,710 | |||||||||||||||||||
| California Municipal Finance Authority Eisenhower Medical Center, Series A | 4.000 | 07-01-42 | 1,750,000 | 1,775,935 | |||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| California (continued) | |||||||||||||||||||||||
| California Municipal Finance Authority Eisenhower Medical Center, Series A | 5.000 | 07-01-47 | 1,200,000 | $1,351,512 | |||||||||||||||||||
| California Municipal Finance Authority Wineville School Project, Series A (D) | 5.000 | 10-01-42 | 2,000,000 | 2,266,860 | |||||||||||||||||||
| California Pollution Control Financing Authority Calplant I Project, AMT (S) | 7.500 | 07-01-32 | 1,000,000 | 1,039,990 | |||||||||||||||||||
| California Pollution Control Financing Authority Waste Management Inc., Series A3, AMT | 4.300 | 07-01-40 | 4,500,000 | 4,623,660 | |||||||||||||||||||
| California Public Finance Authority Henry Mayo Newhall Hospital | 5.000 | 10-15-47 | 2,000,000 | 2,174,520 | |||||||||||||||||||
| California School Finance Authority Aspire Public Schools (S) | 5.000 | 08-01-41 | 1,700,000 | 1,828,384 | |||||||||||||||||||
| California School Finance Authority Aspire Public Schools (S) | 5.000 | 08-01-46 | 1,025,000 | 1,098,708 | |||||||||||||||||||
| California State Public Works Board Trustees California State University, Series D | 6.250 | 04-01-34 | 2,000,000 | 2,194,680 | |||||||||||||||||||
| California State Public Works Board Various Capital Projects, Series A | 5.000 | 04-01-37 | 1,000,000 | 1,126,710 | |||||||||||||||||||
| California State Public Works Board Various Correctional Facilities, Series A | 5.000 | 09-01-39 | 2,500,000 | 2,870,900 | |||||||||||||||||||
| California State University College and University Revenue, Series A | 5.000 | 11-01-44 | 2,000,000 | 2,298,560 | |||||||||||||||||||
| California Statewide Communities Development Authority American Baptist Homes West | 6.250 | 10-01-39 | 2,000,000 | 2,185,080 | |||||||||||||||||||
| California Statewide Communities Development Authority CHF Irvine LLC | 5.000 | 05-15-40 | 1,380,000 | 1,545,821 | |||||||||||||||||||
| California Statewide Communities Development Authority Infrastructure Program Revenue, Series B | 5.000 | 09-02-44 | 1,000,000 | 1,059,340 | |||||||||||||||||||
| California Statewide Communities Development Authority Kaiser Permanente, Series A | 5.000 | 04-01-42 | 3,500,000 | 3,899,280 | |||||||||||||||||||
| California Statewide Communities Development Authority Los Angeles Jewish Homes, Series S (D) | 5.000 | 08-01-44 | 2,625,000 | 2,992,815 | |||||||||||||||||||
| California Statewide Communities Development Authority Redlands Community Hospital OB | 5.000 | 10-01-46 | 1,000,000 | 1,100,930 | |||||||||||||||||||
| California Statewide Communities Development Authority Redwoods Project (D) | 5.375 | 11-15-44 | 1,500,000 | 1,767,840 | |||||||||||||||||||
| California Statewide Communities Development Authority Senior Living of Southern California (S) | 7.250 | 11-15-41 | 1,700,000 | 1,888,122 | |||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| California (continued) | |||||||||||||||||||||||
| California Statewide Financing Authority Tobacco Settlement, Series A | 6.000 | 05-01-37 | 2,500,000 | $2,516,250 | |||||||||||||||||||
| California Statewide Financing Authority Tobacco Settlement, Series B | 6.000 | 05-01-37 | 3,000,000 | 3,018,600 | |||||||||||||||||||
| City of Belmont Library Project, Series A (D) | 5.750 | 08-01-24 | 1,000,000 | 1,252,540 | |||||||||||||||||||
| City of Irvine Community Facilities District | 5.000 | 09-01-49 | 2,000,000 | 2,172,220 | |||||||||||||||||||
| City of La Verne Brethren Hillcrest Homes | 5.000 | 05-15-36 | 750,000 | 794,768 | |||||||||||||||||||
| City of Long Beach Alamitos Bay Marina Project, Series 2015 | 5.000 | 05-15-45 | 1,000,000 | 1,095,360 | |||||||||||||||||||
| City of San Clemente Community Facilities District | 5.000 | 09-01-46 | 1,995,000 | 2,158,670 | |||||||||||||||||||
| City of San Francisco Public Utilities Commission Water Revenue, Series A | 5.000 | 11-01-45 | 1,500,000 | 1,690,815 | |||||||||||||||||||
| City of San Mateo Community Facilities District | 5.500 | 09-01-44 | 2,000,000 | 2,165,260 | |||||||||||||||||||
| East Side Union High School District-Santa Clara County 2012 Crossover, GO (D) | 5.250 | 09-01-24 | 2,500,000 | 3,109,275 | |||||||||||||||||||
| Folsom Public Financing Authority Series B | 5.125 | 09-01-26 | 965,000 | 970,848 | |||||||||||||||||||
| Foothill-Eastern Transportation Corridor Agency Highway Revenue Tolls, Series A | 5.750 | 01-15-46 | 5,000,000 | 5,757,500 | |||||||||||||||||||
| Golden State Tobacco Securitization Corp. Series A | 5.000 | 06-01-40 | 8,250,000 | 9,409,538 | |||||||||||||||||||
| Inland Valley Development Agency Series A | 5.000 | 09-01-44 | 7,500,000 | 8,366,400 | |||||||||||||||||||
| Kern County Capital Improvements Project, Series A (D) | 5.750 | 08-01-35 | 1,000,000 | 1,080,360 | |||||||||||||||||||
| Laguna Salada Union School District Series C, GO (D) | 2.447 (Z | ) | 08-01-26 | 1,000,000 | 798,620 | ||||||||||||||||||
| Lancaster School District School Improvements (D) | 0.992 (Z | ) | 04-01-19 | 1,730,000 | 1,698,497 | ||||||||||||||||||
| Lancaster School District School Improvements (D) | 1.351 (Z | ) | 04-01-22 | 1,380,000 | 1,292,053 | ||||||||||||||||||
| Long Beach Special Tax Community Facilities District 6-Pike Project | 6.250 | 10-01-26 | 2,480,000 | 2,486,969 | |||||||||||||||||||
| Los Angeles Community College District 2008 Election, Series A, GO | 6.000 | 08-01-33 | 4,000,000 | 4,437,000 | |||||||||||||||||||
| Los Angeles Community Facilities District No: 3 Cascades Business Park | 6.400 | 09-01-22 | 440,000 | 444,673 | |||||||||||||||||||
| Los Angeles County Public Works Financing Authority Series D | 5.000 | 12-01-45 | 3,000,000 | 3,466,710 | |||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| California (continued) | |||||||||||||||||||||||
| Los Angeles County Regional Financing Authority Montecedro Incorporated Project, Series A (D) | 5.000 | 11-15-44 | 1,355,000 | $1,529,687 | |||||||||||||||||||
| Los Angeles Department of Water & Power Power Systems, Series D | 5.000 | 07-01-44 | 1,000,000 | 1,149,450 | |||||||||||||||||||
| Los Angeles Unified School District Election 2008, Series A, GO | 4.000 | 07-01-40 | 1,000,000 | 1,047,840 | |||||||||||||||||||
| M-S-R Energy Authority Natural Gas Revenue, Series B | 6.500 | 11-01-39 | 3,500,000 | 5,004,405 | |||||||||||||||||||
| Marin Healthcare District Election of 2013, Series B, GO | 4.000 | 08-01-45 | 1,000,000 | 1,043,160 | |||||||||||||||||||
| Morgan Hill Redevelopment Agency Successor Agency Series A | 5.000 | 09-01-33 | 1,750,000 | 2,020,235 | |||||||||||||||||||
| Norman Y Mineta San Jose International Airport SJC Series A, AMT | 5.000 | 03-01-47 | 3,000,000 | 3,430,170 | |||||||||||||||||||
| Northern California Transmission Agency California-Oregon Transmission Project | 5.000 | 05-01-36 | 2,500,000 | 2,926,975 | |||||||||||||||||||
| Oakland Unified School District/Alameda County Election of 2012, GO | 6.625 | 08-01-38 | 1,000,000 | 1,224,080 | |||||||||||||||||||
| Oakland Unified School District/Alameda County Series A, GO | 5.000 | 08-01-40 | 1,500,000 | 1,734,615 | |||||||||||||||||||
| Orange County Improvement Bond Act 1915 Series B | 5.750 | 09-02-33 | 1,365,000 | 1,373,258 | |||||||||||||||||||
| Paramount Unified School District Series B, GO (D) | 2.332 (Z | ) | 09-01-25 | 4,735,000 | 3,903,818 | ||||||||||||||||||
| Port of Los Angeles Series A, AMT | 5.000 | 08-01-44 | 2,000,000 | 2,230,200 | |||||||||||||||||||
| River Islands Public Financing Authority Community Facilities District, 2003-1 | 5.500 | 09-01-45 | 2,000,000 | 2,137,120 | |||||||||||||||||||
| Riverside County Transportation Commission Senior Lien, Series A | 5.750 | 06-01-48 | 1,000,000 | 1,133,420 | |||||||||||||||||||
| San Bernardino County Capital Facilities Project, Escrowed to Maturity, Series B | 6.875 | 08-01-24 | 350,000 | 445,830 | |||||||||||||||||||
| San Bruno Park Elementary School District School Improvements, Series B, GO (D) | 1.523 (Z | ) | 08-01-21 | 1,015,000 | 952,141 | ||||||||||||||||||
| San Diego County Regional Airport Authority Consol Rental Car Facilities, Seriies A | 5.000 | 07-01-44 | 4,925,000 | 5,492,656 | |||||||||||||||||||
| San Diego County Regional Transportation Commission Sales & Use Tax, Series A | 5.000 | 04-01-44 | 3,000,000 | 3,433,860 | |||||||||||||||||||
| San Diego Public Facilities Financing Authority Lease Revenue | 5.250 | 03-01-40 | 1,000,000 | 1,103,730 | |||||||||||||||||||
| San Diego Public Facilities Financing Authority Series A | 5.000 | 10-15-44 | 1,000,000 | 1,144,680 | |||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| California (continued) | |||||||||||||||||||||||
| San Diego Unified School District Series I, GO | 4.028 (Z | ) | 07-01-39 | 1,250,000 | $516,025 | ||||||||||||||||||
| San Diego Unified School District, Election of 1998 Series A, GO (D) | 1.513 (Z | ) | 07-01-21 | 2,500,000 | 2,349,150 | ||||||||||||||||||
| San Francisco City & County Airports Commission San Francisco International Airport, Series B | 5.000 | 05-01-44 | 5,390,000 | 6,127,190 | |||||||||||||||||||
| 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 | 1,253,188 | |||||||||||||||||||
| San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series B (D) | 5.000 | 08-01-43 | 570,000 | 654,839 | |||||||||||||||||||
| San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series C (D) | 5.000 | 08-01-41 | 500,000 | 577,870 | |||||||||||||||||||
| San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment Project, Series D | 6.625 | 08-01-39 | 1,000,000 | 1,122,050 | |||||||||||||||||||
| San Francisco City & County Redevelopment Agency Mission Bay South Redevelopment, Series D | 7.000 | 08-01-41 | 1,000,000 | 1,213,770 | |||||||||||||||||||
| San Francisco City & County Redevelopment Agency San Francisco Redevelopment Projects, Series B | 6.625 | 08-01-39 | 700,000 | 777,175 | |||||||||||||||||||
| San Joaquin Hills Transportation Corridor Agency Highway Revenue Tolls, Escrowed to Maturity | 1.324 (Z | ) | 01-01-22 | 6,500,000 | 6,114,030 | ||||||||||||||||||
| San Joaquin Hills Transportation Corridor Agency Series A | 5.000 | 01-15-44 | 2,500,000 | 2,762,800 | |||||||||||||||||||
| San Mateo Foster City School District Election 2015, Series A, GO | 4.000 | 08-01-40 | 1,405,000 | 1,482,064 | |||||||||||||||||||
| San Mateo Foster City School District Election 2015, Series A, GO | 4.000 | 08-01-45 | 1,875,000 | 1,968,225 | |||||||||||||||||||
| San Mateo Joint Powers Financing Authority Capital Projects Program (D) | 5.000 | 07-01-21 | 1,815,000 | 2,082,767 | |||||||||||||||||||
| Santa Ana Financing Authority Police Administration & Holding Facility (D) | 6.250 | 07-01-24 | 5,000,000 | 6,175,150 | |||||||||||||||||||
| Santa Ana Financing Authority Police Administration & Holding Facility, Prerefunded (D) | 6.250 | 07-01-24 | 5,000,000 | 6,137,900 | |||||||||||||||||||
| Santa Fe Springs Community Development Commission Construction Redevelopment Project, Series A (D) | 1.455 (Z | ) | 09-01-20 | 1,275,000 | 1,215,598 | ||||||||||||||||||
| Santa Margarita Water District Community Facilities District | 5.625 | 09-01-43 | 775,000 | 862,699 | |||||||||||||||||||
| South Orange County Public Financing Authority Series A | 5.000 | 08-15-33 | 1,000,000 | 1,104,460 | |||||||||||||||||||
| South Orange County Public Financing Authority Series A | 5.000 | 08-15-34 | 450,000 | 496,062 | |||||||||||||||||||
| Rate (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| California (continued) | |||||||||||||||||||||||
| Southern California Public Power Authority Natural Gas Revenue, Series A | 5.250 | 11-01-26 | 2,000,000 | $2,428,940 | |||||||||||||||||||
| Southern California Public Power Authority Series A | 5.000 | 07-01-38 | 1,000,000 | 1,162,050 | |||||||||||||||||||
| State of California, GO | 5.000 | 04-01-43 | 6,500,000 | 7,384,260 | |||||||||||||||||||
| State of California, GO | 5.000 | 03-01-45 | 1,000,000 | 1,152,270 | |||||||||||||||||||
| State of California, GO | 6.500 | 04-01-33 | 2,000,000 | 2,203,280 | |||||||||||||||||||
| Stockton Public Financing Authority Delta Water Supply Project, Series A | 6.250 | 10-01-40 | 1,150,000 | 1,403,932 | |||||||||||||||||||
| Sweetwater Union High School District Election of 2006, Series 2016 B, GO | 4.000 | 08-01-42 | 500,000 | 520,050 | |||||||||||||||||||
| The San Francisco City & County Redevelopment Agency Mission Bay Project, Series A | 5.000 | 08-01-43 | 1,000,000 | 1,121,900 | |||||||||||||||||||
| Tuolumne Wind Project Authority Tuolumne County Project, Series A | 5.625 | 01-01-29 | 1,000,000 | 1,074,440 | |||||||||||||||||||
| University of California Series AM | 5.000 | 05-15-44 | 4,000,000 | 4,577,080 | |||||||||||||||||||
| West Covina Redevelopment Agency Fashion Plaza | 6.000 | 09-01-22 | 3,390,000 | 3,842,328 | |||||||||||||||||||
| William S Hart Union High School District Community Facilities District | 5.000 | 09-01-47 | 1,000,000 | 1,089,380 | |||||||||||||||||||
| Yield* (%) | Maturity date | Par value^ | Value | ||||||||||||||||||||
| Short-term investments 1.9% | $4,756,000 | ||||||||||||||||||||||
| (Cost $4,756,000) | |||||||||||||||||||||||
| U.S. Government Agency 1.2% | 2,892,000 | ||||||||||||||||||||||
| Federal Home Loan Bank Discount Note | 0.680 | 06-01-17 | 2,892,000 | 2,892,000 | |||||||||||||||||||
| Par value^ | Value | ||||||||||||||||||||||
| Repurchase agreement 0.7% | 1,864,000 | ||||||||||||||||||||||
| Barclays Tri-Party Repurchase Agreement dated 5-31-17 at 0.780% to be repurchased at $1,659,036 on 6-1-17, collateralized by $1,720,800 U.S. Treasury Notes, 1.130% due 6-30-21 (valued at $1,692,308, including interest) | 1,659,000 | 1,659,000 | |||||||||||||||||||||
| Repurchase Agreement with State Street Corp. dated 5-31-17 at 0.220% to be repurchased at $205,001 on 6-1-17, collateralized by $215,000 U.S. Treasury Notes, 1.125% due 8-31-21 (valued at $210,685, including interest) | 205,000 | 205,000 | |||||||||||||||||||||
| Total investments (Cost $235,136,694)† 101.8% | $253,587,807 | ||||||||||||||||||||||
| Other assets and liabilities, net (1.8%) | ($4,573,993 | ) | |||||||||||||||||||||
| Total net assets 100.0% | $249,013,814 | ||||||||||||||||||||||
| 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. | |||||||||||||||||||||||
| 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. | 8.3 | ||||||||||||||||||||||
| Assured Guaranty Municipal Corp. | 3.9 | ||||||||||||||||||||||
| California Mortgage Insurance | 3.5 | ||||||||||||||||||||||
| Build America Mutual Assurance Company | 2.5 | ||||||||||||||||||||||
| Ambac Financial Group, Inc. | 0.5 | ||||||||||||||||||||||
| Assured Guaranty Corp. | 0.4 | ||||||||||||||||||||||
| Total | 19.1 | ||||||||||||||||||||||
| (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 5-31-17, the aggregate cost of investment securities for federal income tax purposes was $233,556,488. Net unrealized appreciation aggregated to $20,031,319, of which $20,172,083 related to appreciated investment securities and $140,764 related to depreciated investment securities. | ||||||||||||||||||||||
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 5-31-17
| Assets | ||||||||||||||||||||||||||||||
| Investments, at value (Cost $235,136,694) | $253,587,807 | |||||||||||||||||||||||||||||
| Cash | 789 | |||||||||||||||||||||||||||||
| Receivable for fund shares sold | 76,223 | |||||||||||||||||||||||||||||
| Interest receivable | 2,777,249 | |||||||||||||||||||||||||||||
| Other receivables and prepaid expenses | 20,998 | |||||||||||||||||||||||||||||
| Total assets | 256,463,066 | |||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||
| Payable for investments purchased | 5,224,864 | |||||||||||||||||||||||||||||
| Payable for fund shares repurchased | 1,903,718 | |||||||||||||||||||||||||||||
| Distributions payable | 93,748 | |||||||||||||||||||||||||||||
| Payable to affiliates | ||||||||||||||||||||||||||||||
| Accounting and legal services fees | 14,456 | |||||||||||||||||||||||||||||
| Transfer agent fees | 7,747 | |||||||||||||||||||||||||||||
| Distribution and service fees | 27,126 | |||||||||||||||||||||||||||||
| Investment management fees | 116,334 | |||||||||||||||||||||||||||||
| Other liabilities and accrued expenses | 61,259 | |||||||||||||||||||||||||||||
| Total liabilities | 7,449,252 | |||||||||||||||||||||||||||||
| Net assets | $249,013,814 | |||||||||||||||||||||||||||||
| Net assets consist of | ||||||||||||||||||||||||||||||
| Paid-in capital | $232,321,917 | |||||||||||||||||||||||||||||
| Undistributed net investment income | 106,598 | |||||||||||||||||||||||||||||
| Accumulated net realized gain (loss) on investments | (1,865,814 | ) | ||||||||||||||||||||||||||||
| Net unrealized appreciation (depreciation) on investments | 18,451,113 | |||||||||||||||||||||||||||||
| Net assets | $249,013,814 | |||||||||||||||||||||||||||||
| 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 ($213,058,079 ÷ 19,545,237 shares)1 | $10.90 | |||||||||||||||||||||||||||||
| Class B ($1,090,111 ÷ 99,959 shares)1 | $10.91 | |||||||||||||||||||||||||||||
| Class C ($30,160,010 ÷ 2,766,688 shares)1 | $10.90 | |||||||||||||||||||||||||||||
| Class I ($4,705,614 ÷ 431,396 shares) | $10.91 | |||||||||||||||||||||||||||||
| Maximum offering price per share | ||||||||||||||||||||||||||||||
| Class A (net asset value per share ÷ 96%)2 | $11.35 | |||||||||||||||||||||||||||||
| 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 year ended 5-31-17
| Investment income | ||||||||||||||||||||||||
| Interest | $11,326,570 | |||||||||||||||||||||||
| Total investment income | 11,326,570 | |||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Investment management fees | 1,491,984 | |||||||||||||||||||||||
| Distribution and service fees | 707,477 | |||||||||||||||||||||||
| Accounting and legal services fees | 64,656 | |||||||||||||||||||||||
| Transfer agent fees | 144,491 | |||||||||||||||||||||||
| Trustees' fees | 4,901 | |||||||||||||||||||||||
| State registration fees | 16,300 | |||||||||||||||||||||||
| Printing and postage | 36,175 | |||||||||||||||||||||||
| Professional fees | 56,089 | |||||||||||||||||||||||
| Custodian fees | 33,220 | |||||||||||||||||||||||
| Other | 9,338 | |||||||||||||||||||||||
| Total expenses | 2,564,631 | |||||||||||||||||||||||
| Less expense reductions | (56,251 | ) | ||||||||||||||||||||||
| Net expenses | 2,508,380 | |||||||||||||||||||||||
| Net investment income | 8,818,190 | |||||||||||||||||||||||
| Realized and unrealized gain (loss) | ||||||||||||||||||||||||
| Net realized gain (loss) on | ||||||||||||||||||||||||
| Investments | (13,533 | ) | ||||||||||||||||||||||
| (13,533 | ) | |||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
| Investments | (8,326,420 | ) | ||||||||||||||||||||||
| (8,326,420 | ) | |||||||||||||||||||||||
| Net realized and unrealized loss | (8,339,953 | ) | ||||||||||||||||||||||
| Increase in net assets from operations | $478,237 | |||||||||||||||||||||||
STATEMENTS OF CHANGES IN NET ASSETS
| Year ended 5-31-17 | Year ended 5-31-16 | |||||||||||||||||||||||||||||||||||||||||||||||
| Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| From operations | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | $8,818,190 | $9,495,933 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net realized gain (loss) | (13,533 | ) | 788,481 | |||||||||||||||||||||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) | (8,326,420 | ) | 7,506,532 | |||||||||||||||||||||||||||||||||||||||||||||
| Increase in net assets resulting from operations | 478,237 | 17,790,946 | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | (8,245,073 | ) | (8,698,763 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class B | (37,159 | ) | (45,971 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class C | (943,047 | ) | (1,012,198 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class I1 | (29,963 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||
| Total distributions | (9,255,242 | ) | (9,756,932 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| From fund share transactions | (34,442,892 | ) | 13,446,719 | |||||||||||||||||||||||||||||||||||||||||||||
| Total increase (decrease) | (43,219,897 | ) | 21,480,733 | |||||||||||||||||||||||||||||||||||||||||||||
| Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of year | 292,233,711 | 270,752,978 | ||||||||||||||||||||||||||||||||||||||||||||||
| End of year | $249,013,814 | $292,233,711 | ||||||||||||||||||||||||||||||||||||||||||||||
| Undistributed net investment income | $106,598 | $330,423 | ||||||||||||||||||||||||||||||||||||||||||||||
| 1 | The inception date for Class I shares is 2-13-17. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial highlights
| Class A Shares Period ended | 5-31-17 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income1 | 0.37 | 0.39 | 0.42 | 0.46 | 0.46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.30 | ) | 0.32 | (0.04 | ) | (0.11 | ) | 0.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | 0.07 | 0.71 | 0.38 | 0.35 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.39 | ) | (0.40 | ) | (0.42 | ) | (0.46 | ) | (0.46 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)2,3 | 0.63 | 6.63 | 3.53 | 3.46 | 4.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $213 | $254 | $235 | $214 | $241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 0.83 | 0.84 | 0.83 | 0.86 | 0.84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 0.83 | 0.83 | 0.82 | 0.86 | 0.84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 3.35 | 3.53 | 3.78 | 4.40 | 4.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class B Shares Period ended | 5-31-17 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | $11.23 | $10.91 | $10.95 | $11.07 | $11.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income1 | 0.28 | 0.31 | 0.34 | 0.39 | 0.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.30 | ) | 0.33 | (0.04 | ) | (0.12 | ) | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | (0.02 | ) | 0.64 | 0.30 | 0.27 | 0.41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.91 | $11.23 | $10.91 | $10.95 | $11.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)2,3 | (0.12 | ) | 5.93 | 2.76 | 2.60 | 3.76 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $1 | $2 | $2 | $2 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 1.69 | 1.69 | 1.68 | 1.71 | 1.69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 1.58 | 1.58 | 1.58 | 1.61 | 1.59 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 2.59 | 2.78 | 3.04 | 3.65 | 3.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class C Shares Period ended | 5-31-17 | 5-31-16 | 5-31-15 | 5-31-14 | 5-31-13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Per share operating performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income1 | 0.29 | 0.31 | 0.33 | 0.39 | 0.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.31 | ) | 0.32 | (0.03 | ) | (0.11 | ) | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | (0.02 | ) | 0.63 | 0.30 | 0.28 | 0.41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)2,3 | (0.13 | ) | 5.83 | 2.76 | 2.69 | 3.77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $30 | $36 | $34 | $31 | $33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 1.68 | 1.69 | 1.68 | 1.71 | 1.69 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 1.58 | 1.58 | 1.57 | 1.61 | 1.59 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 2.60 | 2.78 | 3.03 | 3.65 | 3.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class I Shares Period ended | 5-31-171 | ||||||||||||||||||||||||||||
| Per share operating performance | |||||||||||||||||||||||||||||
| Net asset value, beginning of period | $10.70 | ||||||||||||||||||||||||||||
| Net investment income2 | 0.12 | ||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | 0.21 | ||||||||||||||||||||||||||||
| Total from investment operations | 0.33 | ||||||||||||||||||||||||||||
| Less distributions | |||||||||||||||||||||||||||||
| From net investment income | (0.12 | ) | |||||||||||||||||||||||||||
| Net asset value, end of period | $10.91 | ||||||||||||||||||||||||||||
| Total return (%)3 | 3.09 | 4 | |||||||||||||||||||||||||||
| Ratios and supplemental data | |||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $5 | ||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | |||||||||||||||||||||||||||||
| Expenses before reductions | 0.67 | 5 | |||||||||||||||||||||||||||
| Expenses including reductions | 0.66 | 5 | |||||||||||||||||||||||||||
| Net investment income | 3.76 | 5 | |||||||||||||||||||||||||||
| Portfolio turnover (%) | 17 | 6 | |||||||||||||||||||||||||||
| 1 | The inception date for Class I shares is 2-13-17. | |||||||||||||||||||||||||||||||||||||
| 2 | Based on average daily shares outstanding. | |||||||||||||||||||||||||||||||||||||
| 3 | Total returns would have been lower had certain expenses not been reduced during the period. | |||||||||||||||||||||||||||||||||||||
| 4 | Not annualized. | |||||||||||||||||||||||||||||||||||||
| 5 | Annualized. | |||||||||||||||||||||||||||||||||||||
| 6 | The portfolio turnover is shown for the period 6-1-16 to 5-31-17. | |||||||||||||||||||||||||||||||||||||
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. Class I shares are offered to institutions and certain 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.
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 May 31, 2017, 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 a certain fund and subject to the need of other affiliated 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 year ended May 31, 2017, the fund had no borrowings under either line of credit. Commitment fees for the year ended May 31, 2017 were $2,833.
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, 2017, the fund has a capital loss carryforward of $3,446,020 available to offset future net realized capital gains.
The following table details the capital loss carryforward available as of May 31, 2017:
| Capital loss carryforward expiring at May 31 | No expiration date | |
| 2018 | Short-term | |
| $206,417 | $3,239,603 | |
As of May 31, 2017, 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. The tax character of distributions for the years ended May 31, 2017 and 2016 was as follows:
| May 31, 2017 | May 31, 2016 | |
| Ordinary Income | $227,983 | $255,540 |
| Exempt Income | 9,027,259 | 9,501,392 |
| Total | $9,255,242 | $9,756,932 |
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. As of May 31, 2017, the components of distributable earnings on a tax basis consisted of $200,346 of undistributed exempt interest.
Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund's financial statements as a return of capital.
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 amortization and accretion on debt securities and expiration of capital loss carryforwards.
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 year ended May 31, 2017, 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.
For the year ended May 31, 2017, the expense reductions amounted to the following:
| Class | Expense reduction | Class | Expense reduction | |
| Class A | $17,972 | Class I | $64 | |
| Class B | 103 | Total | $20,751 | |
| Class C | 2,612 |
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 year ended May 31, 2017 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 a service 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 year ended May 31, 2017 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 Rule 12b-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 $1,350 and $34,150 for Class B and Class C shares, respectively, for the year ended May 31, 2017.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $213,719 for the year ended May 31, 2017. Of this amount, $28,604 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $150,635 was paid as sales commissions to broker-dealers and $34,480 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 year ended May 31, 2017, CDSCs received by the Distributor amounted to $109, $325 and $3,899 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 year ended May 31, 2017 were:
| Class | Distribution and service fees | Transfer agent fees |
| Class A | $352,474 | $125,280 |
| Class B | 13,502 | 727 |
| Class C | 341,501 | 18,193 |
| Class I | — | 291 |
| Total | $707,477 | $144,491 |
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 years ended May 31, 2017 and 2016 were as follows:
| Year ended 5-31-17 | Year ended 5-31-16 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| Class A shares | ||||||||||||||||||||||||||
| Sold | 2,003,645 | $22,105,805 | 3,220,855 | $35,491,892 | ||||||||||||||||||||||
| Distributions reinvested | 648,585 | 7,103,919 | 665,582 | 7,327,789 | ||||||||||||||||||||||
| Repurchased | (5,779,751 | ) | (62,927,847 | ) | (2,713,642 | ) | (29,817,036 | ) | ||||||||||||||||||
| Net increase (decrease) | (3,127,521 | ) | ($33,718,123 | ) | 1,172,795 | $13,002,645 | ||||||||||||||||||||
| Year ended 5-31-17 | Year ended 5-31-16 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| Class B shares | ||||||||||||||||||||||||||
| Sold | 9 | $95 | 13,085 | $145,178 | ||||||||||||||||||||||
| Distributions reinvested | 2,762 | 30,277 | 3,310 | 36,420 | ||||||||||||||||||||||
| Repurchased | (43,755 | ) | (470,984 | ) | (40,414 | ) | (441,340 | ) | ||||||||||||||||||
| Net decrease | (40,984 | ) | ($440,612 | ) | (24,019 | ) | ($259,742 | ) | ||||||||||||||||||
| Class C shares | ||||||||||||||||||||||||||
| Sold | 306,157 | $3,376,689 | 816,453 | $9,001,543 | ||||||||||||||||||||||
| Distributions reinvested | 66,917 | 732,435 | 64,307 | 708,123 | ||||||||||||||||||||||
| Repurchased | (828,241 | ) | (9,002,553 | ) | (816,677 | ) | (9,005,850 | ) | ||||||||||||||||||
| Net increase (decrease) | (455,167 | ) | ($4,893,429 | ) | 64,083 | $703,816 | ||||||||||||||||||||
| Class I shares1 | ||||||||||||||||||||||||||
| Sold | 441,006 | $4,711,596 | — | — | ||||||||||||||||||||||
| Distributions reinvested | 2,721 | 29,406 | — | — | ||||||||||||||||||||||
| Repurchased | (12,331 | ) | (131,730 | ) | — | — | ||||||||||||||||||||
| Net increase | 431,396 | $4,609,272 | — | — | ||||||||||||||||||||||
| Total net increase (decrease) | (3,192,276 | ) | ($34,442,892 | ) | 1,212,859 | $13,446,719 | ||||||||||||||||||||
1The inception date for Class I shares is 2-13-17.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $44,594,489 and $68,538,122, respectively, for the year ended May 31, 2017.
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. The updates to Regulation S-X are effective August 1, 2017 and may result in additional disclosure relating to the presentation of derivatives and certain other financial instruments. These updates will have no impact on the fund's net assets or results of operations.
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of John Hancock California Tax-Free Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the fund's investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the John Hancock California Tax-Free Income Fund (the "Fund") as of May 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of May 31, 2017 by correspondence with the custodian, brokers, and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 14, 2017
Unaudited
For federal income tax purposes, the following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended May 31, 2017.
97.78% of dividends from net investment income are exempt-interest dividends.
Eligible shareholders will be mailed a 2017 Form 1099-DIV in early 2018. This will reflect the tax character of all distributions paid in calendar year 2017.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees
| Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
| Hassell H. McClellan, Born: 1945 | 2012 | 225 |
| Trustee and Chairperson of the Board Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston College (retired 2013). Trustee (since 2014) and Chairperson of the Board (since 2017), John Hancock Collateral Trust; Trustee (since 2015) and Chairperson of the Board (since 2017), John Hancock Exchange-Traded Fund Trust; Trustee (since 2012) and Chairperson of the Board (since 2017), John Hancock retail funds3; Trustee (2005-2006 and since 2012) and Chairperson of the Board (since 2017), John Hancock Funds III; Trustee (since 2005) and Chairperson of the Board (since 2017), John Hancock Variable Insurance Trust and John Hancock Funds II. | ||
| Charles L. Bardelis,2 Born: 1941 | 2012 | 225 |
| Trustee Director, Island Commuter Corp. (marine transport). Trustee, John Hancock Collateral Trust (since 2014), Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust (since 1988); Trustee, John Hancock Funds II (since 2005). | ||
| Peter S. Burgess,2 Born: 1942 | 2012 | 225 |
| Trustee Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (2010-2016); Director, PMA Capital Corporation (2004-2010). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Funds III (2005-2006 and since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2005). | ||
| William H. Cunningham, Born: 1944 | 1989 | 225 |
| Trustee Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000); former Director, LIN Television (2009-2014). Trustee, John Hancock retail funds3 (since 1986); Trustee, John Hancock Variable Insurance Trust (since 2012); Trustee, John Hancock Funds II (2005-2006 and since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). | ||
| Grace K. Fey, Born: 1946 | 2012 | 225 |
| Trustee Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988-2007); Director, Fiduciary Trust (since 2009). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). | ||
Independent Trustees (continued)
| Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
| Theron S. Hoffman,2 Born: 1947 | 2012 | 225 |
| Trustee Chief Executive Officer, T. Hoffman Associates, LLC (consulting firm) (since 2003); Director, The Todd Organization (consulting firm) (2003-2010); President, Westport Resources Management (investment management consulting firm) (2006-2008); Senior Managing Director, Partner, and Operating Head, Putnam Investments (2000-2003); Executive Vice President, The Thomson Corp. (financial and legal information publishing) (1997-2000). Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (since 2012); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2008). | ||
| Deborah C. Jackson, Born: 1952 | 2008 | 225 |
| Trustee President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, National Association of Corporate Directors/New England (since 2015); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (since 2014); Chief Executive Officer, American Red Cross of Massachusetts Bay (2002-2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of American Student Assistance Corporation (1996-2009); Board of Directors of Boston Stock Exchange (2002-2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007-2011). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); and Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). | ||
| James M. Oates, Born: 1946 | 2012 | 225 |
Trustee | ||
| Steven R. Pruchansky, Born: 1944 | 1994 | 225 |
| Trustee and Vice Chairperson of the Board Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (since 2014); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). Trustee (since 1992) and Chairperson of the Board (2011-2012), John Hancock retail funds3; Trustee and Vice Chairperson of the Board, John Hancock retail funds3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee and Vice Chairperson of the Board, John Hancock Collateral Trust (since 2014); Trustee and Vice Chairperson of the Board, John Hancock Exchange-Traded Fund Trust (since 2015). | ||
Independent Trustees (continued)
| Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
| Gregory A. Russo, Born: 1949 | 2009 | 225 |
| Trustee Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance Committee (since 2011), NCH Healthcare System, Inc. (holding company for multi-entity healthcare system); Director and Member (since 2012) and Finance Committee Chairman (since 2014), The Moorings, Inc. (nonprofit continuing care community); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002-2006); Vice Chairman, Industrial Markets, KPMG (1998-2002); Chairman and Treasurer, Westchester County, New York, Chamber of Commerce (1986-1992); Director, Treasurer, and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989-1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990-1995). Trustee, John Hancock retail funds3 (since 2008); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). | ||
Non-Independent Trustees4
| Name, year of birth Position(s) held with Trust Principal occupation(s) and other directorships during past 5 years | Trustee of the Trust since1 | Number of John Hancock funds overseen by Trustee |
| Andrew G. Arnott, Born: 1971 | 2017 | 225 |
President and Trustee | ||
| James R. Boyle, Born: 1959 | 2015 | 225 |
| Non-Independent Trustee Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (since 2014); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc. (insurance) (January 2014-July 2014); Senior Executive Vice President, Manulife Financial Corporation, President and Chief Executive Officer, John Hancock (1999-2012); Chairman and Director, John Hancock Advisers, LLC, John Hancock Funds, LLC, and John Hancock Investment Management Services, LLC (2005-2010). Trustee, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2015); Trustee, John Hancock retail funds3 (2005-2010; 2012-2014 and since 2015); Trustee, John Hancock Variable Insurance Trust and John Hancock Funds II (2005-2014 and since 2015). | ||
| Warren A. Thomson, Born: 1955 | 2012 | 225 |
| Non-Independent Trustee Senior Executive Vice President and Chief Investment Officer, Manulife Financial Corporation and The Manufacturers Life Insurance Company (since 2009); Chairman, Manulife Asset Management (since 2001, including prior positions); Director and Chairman, Manulife Asset Management Limited (since 2006); Director and Chairman, Hancock Natural Resources Group, Inc. (since 2013). Trustee, John Hancock retail funds,3 John Hancock Variable Insurance Trust, and John Hancock Funds II (since 2012); Trustee, John Hancock Collateral Trust (since 2014); Trustee, John Hancock Exchange-Traded Fund Trust (since 2015). | ||
Principal officers who are not Trustees
| Name, year of birth Position(s) held with Trust Principal occupation(s) during past 5 years | Officer of the Trust since |
| John J. Danello, Born: 1955 | 2006 |
| Senior Vice President, Secretary, and Chief Legal Officer Vice President and Chief Counsel, John Hancock Wealth Management (since 2005); Senior Vice President (since 2007) and Chief Legal Counsel (2007-2010), John Hancock Funds, LLC and The Berkeley Financial Group, LLC; Senior Vice President (since 2006, including prior positions) and Chief Legal Officer and Secretary (since 2014), John Hancock retail funds,3 John Hancock Funds II and John Hancock Variable Insurance Trust; Senior Vice President, Secretary and Chief Legal Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014); Vice President, John Hancock Life & Health Insurance Company (since 2009); Vice President, John Hancock Life Insurance Company (USA) and John Hancock Life Insurance Company of New York (since 2010); and Senior Vice President, Secretary and Chief Legal Counsel (2007-2014, including prior positions) of John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC. | |
| Francis V. Knox, Jr., Born: 1947 | 2005 |
| Chief Compliance Officer Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust, John Hancock Funds II, John Hancock Advisers, LLC, and John Hancock Investment Management Services, LLC (since 2005); Chief Compliance Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). | |
| Charles A. Rizzo, Born: 1957 | 2007 |
| Chief Financial Officer Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2008); Chief Financial Officer, John Hancock retail funds,3 John Hancock Variable Insurance Trust and John Hancock Funds II (since 2007); Chief Financial Officer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). | |
| Salvatore Schiavone, Born: 1965 | 2010 |
| Treasurer Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Advisers, LLC and John Hancock Investment Management Services, LLC (since 2007); Treasurer, John Hancock retail funds3 (since 2007, including prior positions); Treasurer, John Hancock Variable Insurance Trust and John Hancock Funds II (2007-2009 and since 2010, including prior positions); Treasurer, John Hancock Collateral Trust and John Hancock Exchange-Traded Fund Trust (since 2014). | |
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.
The Statement of Additional Information of the fund includes additional information about members of the Board of Trustees of the Trust and is available without charge, upon request, by calling 800-225-5291.
| 1 | Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee's death, retirement, resignation, or removal. Mr. Boyle has served as Trustee at various times prior to the date listed in the table. |
| 2 | Member of the Audit Committee. |
| 3 | "John Hancock retail funds" comprises John Hancock Funds III and 39 other John Hancock funds consisting of 29 series of other John Hancock trusts and 10 closed-end funds. |
| 4 | The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain affiliates. |
Trustees Hassell H. McClellan, 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 Independent registered public accounting firm PricewaterhouseCoopers LLP |
*Member of the Audit Committee
†Non-Independent Trustee
#Effective 1-1-17
##Effective 6-20-17
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 Fundamental Global Franchise 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 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 Multi-Index Lifetime Portfolios Multi-Index Preservation Portfolios Multimanager Lifestyle Portfolios Multimanager Lifetime 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 serve investors globally through a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure 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. | ||
| MF376178 | 53A 5/17 7/17 | |
ITEM 2. CODE OF ETHICS.
As of the end of the year, May 31, 2017, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Covered Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to the following for the fiscal years ended May 31, 2017 and 2016. These fees were billed to the registrant and were approved by the registrant’s audit committee.
| Fund | May 31, 2017 | May 31, 2016 | ||
| John Hancock California Tax-Free Income Fund | $ | 37,926 | $ | 37,041 |
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was affiliated service provider internal controls reviews. Additionally, amounts billed to control affiliates were $106,517 and $103,474 for the fiscal years ended May 31, 2017 and 2016, respectively.
| Fund | May 31, 2017 | May 31, 2016 | ||
| John Hancock California Tax-Free Income Fund | $ | 510 | $ | 525 |
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning (“tax fees”) amounted to the following for the fiscal years ended May 31, 2017 and 2016. The nature of the services comprising the tax fees was the review of the registrant’s tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant’s audit committee.
| Fund | May 31, 2017 | May 31, 2016 | ||
| John Hancock California Tax-Free Income Fund | $ | 3,647 | $ | 3,500 |
(d) All Other Fees
The nature of the services comprising all other fees is attestation services surrounding new class launches. Other fees billed for professional services rendered by the principal accountant to the registrant or to the control affiliates for the fiscal years ended May 31, 2017 and 2016 amounted to the following:
| Fund | May 31, 2017 | May 31, 2016 | ||
| John Hancock California Tax-Free Income Fund | $ | 7,332 | $ | 108 |
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the “Auditor”) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust’s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per year/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per year/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f) According to the registrant’s principal accountant for the fiscal year ended May 31, 2017, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's principal accountant for non- audit services rendered to the registrant and rendered to the registrant's control affiliates for the fiscal years ended May 31, 2017 and 2016 amounted to the following:
| Trust | May 31, 2017 | May 31, 2016 | ||
| John Hancock California Tax-Free Income Fund | $ | 5,979,127 | $ | 5,647,930 |
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman
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.
The registrant has adopted procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter”.
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)(1) Code of Ethics for Covered Officers is attached.
(a)(2) 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)(1) 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, Governance and Administration 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: | July 14, 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: | July 14, 2017 | |
| By: | /s/ Charles A. Rizzo | |
| Charles A. Rizzo | ||
| Chief Financial Officer | ||
| Date: | July 14, 2017 | |