UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5979
John Hancock California Tax-Free Income Fund
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4497
| Date of fiscal year end: | May 31 | |
| Date of reporting period: | November 30, 2017 |
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock
California Tax-Free Income Fund
Semiannual report 11/30/17
A message to shareholders
Dear shareholder,
The divergent performance of bond markets over the latter half of 2017 highlights the need for a diversified approach to fixed income. Credit-sensitive sectors, including high-yield bonds and emerging-market debt, posted gains as investors grew increasingly optimistic about the economic outlook both in the United States and globally, particularly after the passage of sweeping tax reform in the U.S. Segments of the market more sensitive to interest-rate changes, meanwhile, posted muted gains or even losses, as was the case with certain U.S. Treasury securities. The pressures driving these markets could persist for some time: The U.S. Federal Reserve (Fed) continued to gradually normalize interest rates on the back of an improving economy, and that trend is expected to continue into 2018 under new Fed Chairman Jerome Powell.
Environments like these can be challenging for investors: The relative safety offered by high-quality bonds is often tested when rates rise, while the credit segments of the market can be more susceptible to economic volatility. Although there are no easy answers for income-seeking investors, your best resource, as always, is your financial advisor, who can help position your portfolio so that it is sufficiently diversified to meet your long-term objectives and to withstand the inevitable bumps along the road.
On behalf of everyone at John Hancock Investments, I'd like to take this opportunity to welcome new shareholders and to thank existing shareholders 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. It is not possible to invest directly into an index. 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 11/30/17 (%)
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. Returns for periods shorter than one year are cumulative. Performance of the other share classes will vary based on the difference in the fees and expenses of those classes. Shares will fluctuate in value and, when redeemed, may be worth more or less than their original cost. Current month-end performance may be lower or higher than the performance cited, and can be found at jhinvestments.com or by calling 800-225-5291. For further information on the fund's objectives, risks, and strategy, see the fund's prospectus.
PERFORMANCE HIGHLIGHTS OVER THE LAST SIX MONTHS
Municipal bonds advanced
Despite increased volatility sparked by political developments at the federal level, municipal bonds posted modestly positive returns for the reporting period.
The fund outperformed its benchmark
The fund's return outpaced its benchmark, the Bloomberg Barclays California Municipal Bond Index.
Security selection added value
Individual security selection, particularly among transportation and healthcare-related municipal bonds, contributed the most to the fund's outperformance of its benchmark.
PORTFOLIO COMPOSITION AS OF 11/30/17 (%)
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, tax shortfalls, credit downgrades, or if related projects become unprofitable. A fund 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. Derivatives transactions, such as hedging and other strategic transactions, may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Please see the fund's prospectus for additional risks.
An interview with Portfolio Manager Cynthia M. Brown, John Hancock Asset Management a division of Manulife Asset Management (US) LLC
Cynthia M. Brown
Portfolio Manager
John Hancock Asset Management
Can you discuss the municipal bond market's performance during the six months ended November 30, 2017?
Municipal bonds posted modestly positive returns in a period characterized by meaningful day-to-day volatility. Much of the volatility was driven by a changing political landscape as the federal government debated three key initiatives.
First, President Trump campaigned on plans to increase spending on infrastructure improvements, and since the municipal bond market finances much of the country's infrastructure projects, concerns about increased municipal bond issuance weighed on the municipal bond market early in the period. However, a lack of follow-through eased those concerns, allowing municipal bonds to rebound.
Second, uncertainty surrounding the federal government's efforts to repeal all or a portion of the Affordable Care Act (ACA) led to volatility among healthcare-related municipal bonds, such as those funding hospitals and other not-for-profit healthcare facilities.
Finally, the tax reform that President Trump signed into law after period end includes a $10,000 limit on the state and local tax (SALT) deduction, prohibits the advanced refinancing of municipal bonds (known as pre-refunding), and ends the tax exemption for private activity municipal bonds (PABs), which finance projects ranging from healthcare and education facilities to housing and economic development. When Congress approved final legislation after the end of the reporting period, the SALT deduction limitation and the pre-refunding prohibition were included, but ending the tax exemption for PABs did not make it through to the final bill. Nonetheless, the proposed changes led to a substantial increase in municipal bond issuance in November and December as municipalities rushed to issue PABs and pre-refundings before their possible expiration at the end of the year.
Given the market volatility, municipal bond yields finished the period with mixed results. Short-term municipal bond yields rose, reflecting a short-term interest-rate increase by the U.S. Federal Reserve (Fed) in June and again just after the close of the period; long-term municipal bond yields declined amid strong investor demand for the relatively high yields of longer-term securities.
For the six-month period, the broad Bloomberg Barclays Municipal Bond Index returned 0.40%. By comparison, the Bloomberg Barclays U.S. Aggregate Bond Index, a broad taxable bond market measure, returned 0.68%. California municipal bonds slightly outperformed the broad municipal market as the fund's benchmark, the Bloomberg Barclays California Municipal Bond Index, returned 0.48%.
How was credit quality in California during the reporting period?
Despite devastating wildfires in both in the northern and southern parts of the state during the period, California's economy and fiscal health remained solid. Tax revenues continued to exceed budget projections, and the state has taken steps to strengthen its rainy-day reserve account to safeguard against future budget deficits. California has also been more proactive than most states about addressing its long-term pension obligations.
One of the more significant upcoming events in California will be the 2018 gubernatorial election. Incumbent Governor Jerry Brown, who was instrumental in restoring the state's fiscal strength after the 2008-2009 financial crisis, will be ineligible to run for reelection because of term limits.
QUALITY COMPOSITION AS OF 11/30/17 (%)
Turning to the portfolio, what factors contributed to the fund's outperformance of its benchmark?
The fund benefited from an overweight position in transportation-related municipal bonds. Security selection in this sector also contributed positively to relative results, especially an emphasis on bonds that financed toll roads and airports.
Security selection among healthcare-related municipal bonds was another key contributor to relative performance. We focused on higher-quality securities that financed larger projects with strong cash flows in high-demand geographic areas, and these securities held up well amid the uncertainty about the future of the ACA.
What detracted from performance versus the benchmark?
The fund's exposure to short-term pre-refunded municipal bonds detracted from performance. Short-term bonds were adversely affected by the Fed interest-rate hike in June, as well as expectations of additional interest-rate increases.
SECTOR COMPOSITION AS OF 11/30/17 (%)
Speaking of 2018, what are the important themes affecting the municipal bond market as we enter the new year?
In the near term, the consequences of the final tax reform legislation will be the most significant theme in the municipal market. The elimination of municipal bond pre-refundings will likely have a meaningful impact on issuance in 2018, while the reduction in the corporate tax rate could affect demand for municipal bonds from banks and insurance companies.
Beyond tax reform, the economic environment remains a factor influencing the municipal bond market. Although economic growth in California has been robust in 2017, there have been regional disparities, so we believe prudent security selection will continue to be an important differentiator of performance.
On a longer-term basis, municipal pension funding liabilities remain a concern. While California is ahead of the curve at the state level, most local governments have not yet started to address their pension obligations. We continue to monitor the issue, and it remains an important part of our investment analysis.
MANAGED BY
| | Cynthia M. Brown On the fund since 2015 Investing since 1984 |
TOTAL RETURNS FOR THE PERIOD ENDED NOVEMBER 30, 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 | 6-month | 5-year | 10-year | as of 11-30-17 | as of 11-30-17 | as of 11-30-17 | |||||
| Class A | 2.18 | 2.20 | 4.05 | -2.83 | 11.51 | 48.74 | 2.09 | 2.08 | 4.26 | ||||
| Class B | 0.65 | 1.92 | 3.82 | -4.17 | 9.96 | 45.44 | 1.43 | 1.32 | 2.91 | ||||
| Class C | 4.65 | 2.27 | 3.66 | -0.19 | 11.88 | 43.29 | 1.43 | 1.32 | 2.91 | ||||
| Class I3,4 | 6.66 | 3.08 | 4.50 | 1.26 | 16.38 | 55.30 | 2.33 | 2.32 | 4.75 | ||||
| Class R63,4 | 6.49 | 3.05 | 4.48 | 1.23 | 16.20 | 55.06 | 2.37 | 2.36 | 4.83 | ||||
| Index 1† | 5.71 | 2.88 | 4.63 | 0.48 | 15.26 | 57.30 | — | — | |||||
| Index 2† | 5.58 | 2.55 | 4.38 | 0.40 | 13.42 | 53.47 | — | — | |||||
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 and Class R6 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 | Class R6* | |
| Gross (%) | 0.84 | 1.69 | 1.69 | 0.69 | 0.66 |
| Net (%) | 0.84 | 1.59 | 1.59 | 0.69 | 0.66 |
* Expenses have been estimated for the first year of operations of Class R6 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, if any, 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 | 11-30-07 | 14,544 | 14,544 | 15,730 | 15,347 |
| Class C5 | 11-30-07 | 14,329 | 14,329 | 15,730 | 15,347 |
| Class I3,4 | 11-30-07 | 15,530 | 15,530 | 15,730 | 15,347 |
| Class R63,4 | 11-30-07 | 15,506 | 15,506 | 15,730 | 15,347 |
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
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 June 1, 2017, with the same investment held until November 30, 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 November 30, 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 June 1, 2017, with the same investment held until November 30, 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 6-1-2017 | Ending value on 11-30-2017 | Expenses paid during period ended 11-30-20171 | Annualized expense ratio | ||
| Class A | Actual expenses/actual returns | $1,000.00 | $1,011.80 | $4.19 | 0.83% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,020.90 | 4.20 | 0.83% | |
| Class B | Actual expenses/actual returns | 1,000.00 | 1,008.10 | 7.95 | 1.58% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,017.10 | 7.99 | 1.58% | |
| Class C | Actual expenses/actual returns | 1,000.00 | 1,008.10 | 7.95 | 1.58% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,017.10 | 7.99 | 1.58% | |
| Class I | Actual expenses/actual returns | 1,000.00 | 1,012.60 | 3.43 | 0.68% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,021.70 | 3.45 | 0.68% | |
| Class R62 | Actual expenses/actual returns | 1,000.00 | 1,000.10 | 1.66 | 0.66% |
| Hypothetical example for comparison purposes | 1,000.00 | 1,021.80 | 3.35 | 0.66% | |
| 1 | Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
| 2 | The inception date for Class R6 shares is 8-30-17. Actual expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 92/365 (to reflect the period). |
| Fund’s investments |
| AS OF 11-30-17 (unaudited) | ||||||||
| Rate (%) | Maturity date | Par value^ | Value | |||||
| Municipal bonds 96.4% | $222,854,890 | |||||||
| (Cost $207,649,436) | ||||||||
| California 96.4% | 222,854,890 | |||||||
| ABAG Finance Authority for Nonprofit Corps. | ||||||||
| Sharp HealthCare | 6.250 | 08-01-39 | 1,000,000 | 1,081,390 | ||||
| ABAG Finance Authority for Nonprofit Corps. | ||||||||
| Sharp HealthCare, Series A | 5.000 | 08-01-43 | 2,000,000 | 2,236,980 | ||||
| Anaheim Public Financing Authority | ||||||||
| Series A | 5.000 | 05-01-46 | 1,000,000 | 1,129,470 | ||||
| Bay Area Toll Authority | ||||||||
| San Francisco Bay Area | 4.000 | 04-01-42 | 2,000,000 | 2,121,420 | ||||
| California County Tobacco Securitization Agency | ||||||||
| Fresno County Funding Corp. | 6.000 | 06-01-35 | 1,765,000 | 1,765,794 | ||||
| California County Tobacco Securitization Agency | ||||||||
| Kern County Tobacco Funding Corp., Series 2014 | 5.000 | 06-01-40 | 1,500,000 | 1,609,395 | ||||
| California County Tobacco Securitization Agency | ||||||||
| Public Improvements | 5.250 | 06-01-21 | 3,020,000 | 3,072,548 | ||||
| California County Tobacco Securitization Agency | ||||||||
| Stanislaus Funding, Series A | 5.500 | 06-01-33 | 250,000 | 253,423 | ||||
| California Educational Facilities Authority | ||||||||
| Pepperdine University | 5.000 | 10-01-49 | 2,550,000 | 2,965,982 | ||||
| California Educational Facilities Authority | ||||||||
| University of Redlands, Series A | 5.000 | 10-01-35 | 1,000,000 | 1,118,640 | ||||
| California Health Facilities Financing Authority | ||||||||
| Children’s Hospital, Series A | 5.000 | 08-15-47 | 1,000,000 | 1,137,380 | ||||
| California Health Facilities Financing Authority | ||||||||
| El Camino Hospital | 5.000 | 02-01-42 | 1,000,000 | 1,145,480 | ||||
| California Health Facilities Financing Authority | ||||||||
| El Camino Hospital | 5.000 | 02-01-47 | 1,425,000 | 1,626,224 | ||||
| California Health Facilities Financing Authority | ||||||||
| Kaiser Permanente, Series A | 5.000 | 11-01-47 | 1,000,000 | 1,301,120 | ||||
| California Health Facilities Financing Authority | ||||||||
| Lucile Packard Children’s Hospital | 5.000 | 08-15-43 | 1,000,000 | 1,118,770 | ||||
| California Health Facilities Financing Authority | ||||||||
| Lucile Packard Children’s Hospital, Series B | 5.000 | 08-15-55 | 1,000,000 | 1,143,010 | ||||
| California Health Facilities Financing Authority | ||||||||
| Sutter Health, Series A | 5.000 | 08-15-43 | 3,000,000 | 3,445,080 | ||||
| California Municipal Finance Authority | ||||||||
| Channing House Project, Series A (A) | 4.000 | 05-15-40 | 1,500,000 | 1,579,620 | ||||
| California Municipal Finance Authority | ||||||||
| Eisenhower Medical Center, Series A | 4.000 | 07-01-42 | 1,750,000 | 1,833,703 | ||||
| California Municipal Finance Authority | ||||||||
| Eisenhower Medical Center, Series A | 5.000 | 07-01-47 | 1,200,000 | 1,339,140 | ||||
| California Municipal Finance Authority | ||||||||
| Wineville School Project, Series A (A) | 5.000 | 10-01-42 | 2,000,000 | 2,248,620 | ||||
| California Pollution Control Financing Authority | ||||||||
| Calplant I Project, AMT (B) | 7.500 | 07-01-32 | 1,000,000 | 1,073,600 | ||||
| California Pollution Control Financing Authority | ||||||||
| Waste Management Inc., Series A3, AMT | 4.300 | 07-01-40 | 4,500,000 | 4,704,075 |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 12 |
| Rate (%) | Maturity date | Par value^ | Value | |||||
| California (continued) | ||||||||
| California Public Finance Authority | ||||||||
| Henry Mayo Newhall Hospital | 5.000 | 10-15-47 | 2,000,000 | $2,201,220 | ||||
| California School Finance Authority | ||||||||
| Aspire Public Schools (B) | 5.000 | 08-01-46 | 1,025,000 | 1,113,109 | ||||
| California School Finance Authority | ||||||||
| Aspire Public Schools (B) | 5.000 | 08-01-41 | 2,200,000 | 2,412,168 | ||||
| California State Public Works Board | ||||||||
| Various Capital Projects, Series A | 5.000 | 04-01-37 | 1,000,000 | 1,107,910 | ||||
| California State Public Works Board | ||||||||
| Various Correctional Facilities, Series A | 5.000 | 09-01-39 | 2,500,000 | 2,838,950 | ||||
| California State University | ||||||||
| College and University Revenue, Series A | 5.000 | 11-01-44 | 2,000,000 | 2,257,160 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| American Baptist Homes West | 6.250 | 10-01-39 | 2,000,000 | 2,133,280 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| CHF Irvine LLC | 5.000 | 05-15-40 | 1,380,000 | 1,573,531 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Front Porch Communities and Services, Series A | 5.000 | 04-01-47 | 1,500,000 | 1,695,465 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Infrastructure Program Revenue, Series B | 5.000 | 09-02-44 | 1,000,000 | 1,052,500 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Kaiser Permanente, Series A | 5.000 | 04-01-42 | 3,500,000 | 3,935,750 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Los Angeles Jewish Homes, Series S (A) | 5.000 | 08-01-44 | 2,625,000 | 2,956,091 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Redlands Community Hospital OB | 5.000 | 10-01-46 | 2,000,000 | 2,224,840 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Redwoods Project (A) | 5.375 | 11-15-44 | 1,500,000 | 1,740,525 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| Senior Living of Southern California (B) | 7.250 | 11-15-41 | 1,700,000 | 1,858,627 | ||||
| California Statewide Communities Development | ||||||||
| Authority | ||||||||
| University of California, Irvine Campus | 5.000 | 05-15-47 | 1,000,000 | 1,148,370 | ||||
| California Statewide Financing Authority | ||||||||
| Tobacco Settlement, Series A | 6.000 | 05-01-37 | 2,500,000 | 2,501,250 | ||||
| California Statewide Financing Authority | ||||||||
| Tobacco Settlement, Series B | 6.000 | 05-01-37 | 3,000,000 | 3,001,500 | ||||
| City of Atwater Wastewater Revenue | ||||||||
| Series A (A) | 5.000 | 05-01-43 | 1,000,000 | 1,147,840 | ||||
| City of Belmont | ||||||||
| Library Project, Series A (A) | 5.750 | 08-01-24 | 1,000,000 | 1,167,450 | ||||
| City of Irvine | ||||||||
| Community Facilities District | 5.000 | 09-01-49 | 2,000,000 | 2,137,760 |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 13 |
| Rate (%) | Maturity date | Par value^ | Value | |||||
| California (continued) | ||||||||
| City of La Verne | ||||||||
| Brethren Hillcrest Homes | 5.000 | 05-15-36 | 750,000 | $791,888 | ||||
| City of Long Beach | ||||||||
| Alamitos Bay Marina Project, Series 2015 | 5.000 | 05-15-45 | 1,000,000 | 1,099,630 | ||||
| City of Long Beach | ||||||||
| District 6-Pike Project | 6.250 | 10-01-26 | 2,480,000 | 2,482,182 | ||||
| City of San Clemente | ||||||||
| Community Facilities District | 5.000 | 09-01-46 | 1,990,000 | 2,159,866 | ||||
| City of San Francisco Public Utilities Commission | ||||||||
| Green Bonds, Series A | 5.000 | 11-01-45 | 1,500,000 | 1,707,525 | ||||
| City of San Mateo | ||||||||
| Community Facilities District | 5.500 | 09-01-44 | 2,000,000 | 2,178,720 | ||||
| County of Orange | ||||||||
| Series B | 5.750 | 09-02-33 | 1,365,000 | 1,370,651 | ||||
| East Side Union High School District-Santa Clara | ||||||||
| County | ||||||||
| 2012 Crossover, GO (A) | 5.250 | 09-01-24 | 2,500,000 | 3,027,525 | ||||
| Foothill-Eastern Transportation Corridor Agency | ||||||||
| Highway Revenue Tolls, Series A | 5.750 | 01-15-46 | 5,000,000 | 5,844,800 | ||||
| Foothill-Eastern Transportation Corridor Agency | ||||||||
| Highway Revenue Tolls, Series B-1 | 3.950 | 01-15-53 | 2,000,000 | 2,003,100 | ||||
| Golden State Tobacco Securitization Corp. | ||||||||
| Series A | 5.000 | 06-01-40 | 8,250,000 | 9,450,953 | ||||
| Inland Valley Development Agency | ||||||||
| Series A | 5.000 | 09-01-44 | 7,500,000 | 8,213,550 | ||||
| Lancaster School District | ||||||||
| School Improvements (A) | 1.623 | (C) | 04-01-19 | 1,730,000 | 1,692,736 | |||
| Lancaster School District | ||||||||
| School Improvements (A) | 1.838 | (C) | 04-01-22 | 1,380,000 | 1,273,809 | |||
| Los Angeles Community Facilities District No: 3 | ||||||||
| Cascades Business Park | 6.400 | 09-01-22 | 375,000 | 376,005 | ||||
| Los Angeles County Public Works Financing | ||||||||
| Authority | ||||||||
| Series D | 5.000 | 12-01-45 | 3,000,000 | 3,418,950 | ||||
| Los Angeles County Regional Financing Authority | ||||||||
| Montecedro Incorporated Project, Series A (A) | 5.000 | 11-15-44 | 1,355,000 | 1,520,418 | ||||
| Los Angeles Department of Water & Power | ||||||||
| Power Systems, Series D | 5.000 | 07-01-44 | 1,000,000 | 1,146,770 | ||||
| Marin Healthcare District | ||||||||
| Election of 2013 | 4.000 | 08-01-45 | 1,000,000 | 1,053,230 | ||||
| Morgan Hill Redevelopment Agency Successor | ||||||||
| Agency | ||||||||
| Series A | 5.000 | 09-01-33 | 1,750,000 | 1,991,623 | ||||
| M-S-R Energy Authority | ||||||||
| Natural Gas Revenue, Series B | 6.500 | 11-01-39 | 3,500,000 | 4,955,580 | ||||
| Norman Y Mineta San Jose International Airport SJC | ||||||||
| Series A, AMT | 5.000 | 03-01-47 | 3,000,000 | 3,449,640 | ||||
| Northern California Transmission Agency | ||||||||
| California-Oregon Transmission Project | 5.000 | 05-01-36 | 2,500,000 | 2,903,350 | ||||
| Oakland Unified School District/Alameda County | ||||||||
| Election of 2012, GO | 6.625 | 08-01-38 | 1,000,000 | 1,178,620 |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 14 |
| Rate (%) | Maturity date | Par value^ | Value | |||||
| California (continued) | ||||||||
| Oakland Unified School District/Alameda County | ||||||||
| Series A, GO | 5.000 | 08-01-40 | 1,500,000 | $1,714,875 | ||||
| Pacifica School District | ||||||||
| Series C, GO (A) | 2.646 | (C) | 08-01-26 | 1,000,000 | 794,810 | |||
| Paramount Unified School District | ||||||||
| Series B, GO (A) | 2.445 | (C) | 09-01-25 | 4,735,000 | 3,915,466 | |||
| Port of Los Angeles | ||||||||
| Series A, AMT | 5.000 | 08-01-44 | 2,000,000 | 2,228,220 | ||||
| River Islands Public Financing Authority | ||||||||
| Community Facilities District, Series 2003-1 | 5.500 | 09-01-45 | 2,000,000 | 2,139,860 | ||||
| Riverside County Transportation Commission | ||||||||
| Senior Lien, Series A | 5.750 | 06-01-48 | 1,000,000 | 1,118,940 | ||||
| San Bruno Park Elementary School District | ||||||||
| School Improvements, Series B, GO (A) | 1.916 | (C) | 08-01-21 | 1,015,000 | 945,787 | |||
| San Diego County Regional Airport Authority | ||||||||
| Consol Rental Car Facilities, Series A | 5.000 | 07-01-44 | 4,925,000 | 5,577,760 | ||||
| San Diego Public Facilities Financing Authority | ||||||||
| Series A | 5.000 | 10-15-44 | 1,000,000 | 1,145,170 | ||||
| San Diego Unified School District | ||||||||
| Series I, GO | 3.965 | (C) | 07-01-39 | 1,250,000 | 533,438 | |||
| San Diego Unified School District, Election of 1998 | ||||||||
| Series A, GO (A) | 1.926 | (C) | 07-01-21 | 2,500,000 | 2,332,450 | |||
| San Francisco City & County Airports Commission | ||||||||
| San Francisco International Airport, Series B | 5.000 | 05-01-44 | 3,390,000 | 3,863,041 | ||||
| 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 | 1,250,538 | ||||
| San Francisco City & County Redevelopment Agency | ||||||||
| Mission Bay Project, Series A | 5.000 | 08-01-43 | 1,000,000 | 1,134,060 | ||||
| San Francisco City & County Redevelopment Agency | ||||||||
| Mission Bay South Redevelopment, Series D | 6.625 | 08-01-39 | 1,000,000 | 1,084,290 | ||||
| San Francisco City & County Redevelopment Agency | ||||||||
| Mission Bay South Redevelopment, Series D | 7.000 | 08-01-41 | 1,000,000 | 1,168,000 | ||||
| San Francisco City & County Redevelopment Agency | ||||||||
| San Francisco Redevelopment Projects, Series B | 6.625 | 08-01-39 | 700,000 | 758,401 | ||||
| San Joaquin Hills Transportation Corridor Agency | ||||||||
| Highway Revenue Tolls, Escrowed to Maturity | 1.776 | (C) | 01-01-22 | 6,500,000 | 6,042,270 | |||
| San Joaquin Hills Transportation Corridor Agency | ||||||||
| Highway Revenue Tolls, Series A | 5.000 | 01-15-44 | 2,500,000 | 2,794,300 | ||||
| San Mateo Foster City School District | ||||||||
| Election 2015, Series A, GO | 4.000 | 08-01-45 | 1,875,000 | 1,977,413 | ||||
| San Mateo Joint Powers Financing Authority | ||||||||
| Capital Projects Program (A) | 5.000 | 07-01-21 | 1,815,000 | 1,993,306 | ||||
| Santa Ana Financing Authority | ||||||||
| Police Administration & Holding Facility (A) | 6.250 | 07-01-24 | 5,000,000 | 5,990,200 | ||||
| Santa Ana Financing Authority | ||||||||
| Prerefunded, Police Administration & Holding | ||||||||
| Facility (A) | 6.250 | 07-01-24 | 5,000,000 | 5,935,650 | ||||
| Santa Fe Springs Community Development | ||||||||
| Commission | ||||||||
| Construction Redevelopment Project, Series A (A) | 1.932 | (C) | 09-01-20 | 1,275,000 | 1,208,611 |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 15 |
| Rate (%) | Maturity date | Par value^ | Value | |||||
| California (continued) | ||||||||
| Santa Margarita Water District | ||||||||
| Community Facilities District | 5.625 | 09-01-43 | 775,000 | $851,485 | ||||
| South Orange County Public Financing Authority | ||||||||
| Series A | 5.000 | 08-15-33 | 1,000,000 | 1,092,540 | ||||
| South Orange County Public Financing Authority | ||||||||
| Series A | 5.000 | 08-15-34 | 450,000 | 490,811 | ||||
| Southern California Public Power Authority | ||||||||
| Natural Gas Revenue, Series A | 5.250 | 11-01-26 | 2,000,000 | 2,387,400 | ||||
| Southern California Public Power Authority | ||||||||
| Series A | 5.000 | 07-01-38 | 1,000,000 | 1,150,040 | ||||
| State of California, GO | ||||||||
| Various Purpose | 5.000 | 04-01-43 | 3,500,000 | 3,952,235 | ||||
| Stockton Public Financing Authority | ||||||||
| Delta Water Supply Project, Series A | 6.250 | 10-01-40 | 1,150,000 | 1,380,299 | ||||
| Sweetwater Union High School District | ||||||||
| Election of 2006, Series 2016 B, GO | 4.000 | 08-01-42 | 500,000 | 523,380 | ||||
| West Covina Redevelopment Agency | ||||||||
| Fashion Plaza | 6.000 | 09-01-22 | 3,390,000 | 3,738,628 | ||||
| William S Hart Union High School District | ||||||||
| Community Facilities District | 5.000 | 09-01-47 | 1,000,000 | 1,093,935 | ||||
| Yield* (%) | Maturity date | Par value^ | Value | |||||
| Short-term investments 2.7% | $6,268,000 | |||||||
| (Cost $6,268,000) | ||||||||
| U.S. Government Agency 2.0% | 4,627,000 | |||||||
| Federal Agricultural Mortgage Corp. Discount Note | 0.950 | 12-01-17 | 238,000 | 238,000 | ||||
| Federal Farm Credit Bank Discount Note | 0.950 | 12-01-17 | 365,000 | 365,000 | ||||
| Federal Home Loan Bank Discount Note | 0.700 | 12-01-17 | 739,000 | 739,000 | ||||
| Federal Home Loan Bank Discount Note | 0.750 | 12-01-17 | 365,000 | 365,000 | ||||
| Federal Home Loan Bank Discount Note | 0.900 | 12-01-17 | 2,920,000 | 2,920,000 | ||||
| Par value^ | Value | |||||||
| Repurchase agreement 0.7% | 1,641,000 | |||||||
| Barclays Tri-Party Repurchase Agreement dated | ||||||||
| 11-30-17 at 1.02% to be repurchased at | ||||||||
| $1,641,047 on 12-1-17, collateralized by | ||||||||
| $1,679,300 U.S. Treasury Notes, 1.250% due | ||||||||
| 11-15-18 (valued at $1,673,872, including | ||||||||
| interest) | 1,641,000 | 1,641,000 | ||||||
| Total investments (Cost $213,917,436) 99.1% | $229,122,890 | |||||||
| Other assets and liabilities, net 0.9% | 2,169,591 | |||||||
| Total net assets 100.0% | $231,292,481 |
| 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 | |
| (A) | Bond is insured by one or more of the companies listed in the insurance coverage table below. | |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 16 |
| (B) | 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. | |
| (C) | Zero coupon bonds are issued at a discount from their principal amount in lieu of paying interest periodically. Rate shown is the effective yield at period end. | |
| * | Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end. |
At 11-30-17, the aggregate cost of investments for federal income tax purposes was $212,308,135. Net unrealized appreciation aggregated to $16,814,755, of which $16,837,102 related to gross unrealized appreciation and $22,347 related to gross unrealized depreciation.
| As a % of total | |
| Insurance coverage | investments |
| National Public Finance Guarantee Corp. | 8.3 |
| Assured Guaranty Municipal Corp. | 4.8 |
| California Mortgage Insurance | 3.5 |
| Build America Mutual Assurance Company | 1.0 |
| Ambac Financial Group, Inc. | 0.5 |
| TOTAL | 18.1 |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK CALIFORNIA TAX-FREE INCOME FUND 17 |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES 11-30-17 (unaudited)
| Assets | ||||||||||||||||||||||||||||||
| Investments, at value (Cost $213,917,436) | $229,122,890 | |||||||||||||||||||||||||||||
| Receivable for investments sold | 3,403,453 | |||||||||||||||||||||||||||||
| Receivable for fund shares sold | 25,915 | |||||||||||||||||||||||||||||
| Interest receivable | 2,632,238 | |||||||||||||||||||||||||||||
| Other receivables and prepaid expenses | 62,221 | |||||||||||||||||||||||||||||
| Total assets | 235,246,717 | |||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||
| Due to custodian | 3,359,331 | |||||||||||||||||||||||||||||
| Payable for fund shares repurchased | 318,009 | |||||||||||||||||||||||||||||
| Distributions payable | 80,130 | |||||||||||||||||||||||||||||
| Payable to affiliates | ||||||||||||||||||||||||||||||
| Accounting and legal services fees | 7,890 | |||||||||||||||||||||||||||||
| Transfer agent fees | 6,951 | |||||||||||||||||||||||||||||
| Distribution and service fees | 24,357 | |||||||||||||||||||||||||||||
| Trustees' fees | 139 | |||||||||||||||||||||||||||||
| Investment management fees | 105,193 | |||||||||||||||||||||||||||||
| Other liabilities and accrued expenses | 52,236 | |||||||||||||||||||||||||||||
| Total liabilities | 3,954,236 | |||||||||||||||||||||||||||||
| Net assets | $231,292,481 | |||||||||||||||||||||||||||||
| Net assets consist of | ||||||||||||||||||||||||||||||
| Paid-in capital | $215,878,803 | |||||||||||||||||||||||||||||
| Accumulated distributions in excess of net investment income | (1,399 | ) | ||||||||||||||||||||||||||||
| Accumulated net realized gain (loss) on investments | 209,623 | |||||||||||||||||||||||||||||
| Net unrealized appreciation (depreciation) on investments | 15,205,454 | |||||||||||||||||||||||||||||
| Net assets | $231,292,481 | |||||||||||||||||||||||||||||
| 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 ($195,801,460 ÷ 18,062,012 shares)1 | $10.84 | |||||||||||||||||||||||||||||
| Class B ($870,624 ÷ 80,274 shares)1 | $10.85 | |||||||||||||||||||||||||||||
| Class C ($26,739,955 ÷ 2,466,563 shares)1 | $10.84 | |||||||||||||||||||||||||||||
| Class I ($6,035,620 ÷ 556,442 shares) | $10.85 | |||||||||||||||||||||||||||||
| Class R6 ($1,844,822 ÷ 170,037 shares) | $10.85 | |||||||||||||||||||||||||||||
| Maximum offering price per share | ||||||||||||||||||||||||||||||
| Class A (net asset value per share ÷ 96%)2 | $11.29 | |||||||||||||||||||||||||||||
| 1 | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. | ||||||||||||||||
| 2 | On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced. | ||||||||||||||||
STATEMENT OF OPERATIONS For the six months ended 11-30-17 (unaudited)
| Investment income | ||||||||||||||||||||||||
| Interest | $5,025,819 | |||||||||||||||||||||||
| Total investment income | 5,025,819 | |||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Investment management fees | 659,969 | |||||||||||||||||||||||
| Distribution and service fees | 303,020 | |||||||||||||||||||||||
| Accounting and legal services fees | 26,505 | |||||||||||||||||||||||
| Transfer agent fees | 44,015 | |||||||||||||||||||||||
| Trustees' fees | 2,323 | |||||||||||||||||||||||
| State registration fees | 9,716 | |||||||||||||||||||||||
| Printing and postage | 25,880 | |||||||||||||||||||||||
| Professional fees | 37,798 | |||||||||||||||||||||||
| Custodian fees | 14,401 | |||||||||||||||||||||||
| Other | 7,577 | |||||||||||||||||||||||
| Total expenses | 1,131,204 | |||||||||||||||||||||||
| Less expense reductions | (24,809 | ) | ||||||||||||||||||||||
| Net expenses | 1,106,395 | |||||||||||||||||||||||
| Net investment income | 3,919,424 | |||||||||||||||||||||||
| Realized and unrealized gain (loss) | ||||||||||||||||||||||||
| Net realized gain (loss) on | ||||||||||||||||||||||||
| Investments | 2,075,437 | |||||||||||||||||||||||
| 2,075,437 | ||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) of | ||||||||||||||||||||||||
| Investments | (3,245,659 | ) | ||||||||||||||||||||||
| (3,245,659 | ) | |||||||||||||||||||||||
| Net realized and unrealized loss | (1,170,222 | ) | ||||||||||||||||||||||
| Increase in net assets from operations | $2,749,202 | |||||||||||||||||||||||
STATEMENTS OF CHANGES IN NET ASSETS
| Six months ended 11-30-17 | Year ended 5-31-17 | |||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Increase (decrease) in net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| From operations | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | $3,919,424 | $8,818,190 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net realized gain (loss) | 2,075,437 | (13,533 | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) | (3,245,659 | ) | (8,326,420 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Increase in net assets resulting from operations | 2,749,202 | 478,237 | ||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | ||||||||||||||||||||||||||||||||||||||||||||||||
| Class A | (3,528,076 | ) | (8,245,073 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class B | (13,811 | ) | (37,159 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class C | (389,558 | ) | (943,047 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class I1 | (91,686 | ) | (29,963 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Class R62 | (4,290 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||
| Total distributions | (4,027,421 | ) | (9,255,242 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| From fund share transactions | (16,443,114 | ) | (34,442,892 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Total decrease | (17,721,333 | ) | (43,219,897 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Net assets | ||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of period | 249,013,814 | 292,233,711 | ||||||||||||||||||||||||||||||||||||||||||||||
| End of period | $231,292,481 | $249,013,814 | ||||||||||||||||||||||||||||||||||||||||||||||
| Undistributed (accumulated distributions in excess of) net investment income | ($1,399 | ) | $106,598 | |||||||||||||||||||||||||||||||||||||||||||||
| 1 | The inception date for Class I shares is 2-13-17. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | The inception date for Class R6 shares is 8-30-17. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial highlights
| Class A Shares Period ended | 11-30-17 | 1 | 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 | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income2 | 0.18 | 0.37 | 0.39 | 0.42 | 0.46 | 0.46 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.05 | ) | (0.30 | ) | 0.32 | (0.04 | ) | (0.11 | ) | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | 0.13 | 0.07 | 0.71 | 0.38 | 0.35 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.19 | ) | (0.39 | ) | (0.40 | ) | (0.42 | ) | (0.46 | ) | (0.46 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.84 | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)3,4 | 1.18 | 5 | 0.63 | 6.63 | 3.53 | 3.46 | 4.55 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $196 | $213 | $254 | $235 | $214 | $241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 0.84 | 6 | 0.83 | 0.84 | 0.83 | 0.86 | 0.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 0.83 | 6 | 0.83 | 0.83 | 0.82 | 0.86 | 0.84 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 3.36 | 6 | 3.35 | 3.53 | 3.78 | 4.40 | 4.15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 5 | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Six months ended 11-30-17. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class B Shares Period ended | 11-30-17 | 1 | 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 | $10.91 | $11.23 | $10.91 | $10.95 | $11.07 | $11.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income2 | 0.14 | 0.28 | 0.31 | 0.34 | 0.39 | 0.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.05 | ) | (0.30 | ) | 0.33 | (0.04 | ) | (0.12 | ) | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | 0.09 | (0.02 | ) | 0.64 | 0.30 | 0.27 | 0.41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.15 | ) | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.85 | $10.91 | $11.23 | $10.91 | $10.95 | $11.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)3,4 | 0.81 | 5 | (0.12 | ) | 5.93 | 2.76 | 2.60 | 3.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $1 | $1 | $2 | $2 | $2 | $3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 1.69 | 6 | 1.69 | 1.69 | 1.68 | 1.71 | 1.69 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 1.58 | 6 | 1.58 | 1.58 | 1.58 | 1.61 | 1.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 2.60 | 6 | 2.59 | 2.78 | 3.04 | 3.65 | 3.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 5 | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Six months ended 11-30-17. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class C Shares Period ended | 11-30-17 | 1 | 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 | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | $11.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income2 | 0.14 | 0.29 | 0.31 | 0.33 | 0.39 | 0.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.05 | ) | (0.31 | ) | 0.32 | (0.03 | ) | (0.11 | ) | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | 0.09 | (0.02 | ) | 0.63 | 0.30 | 0.28 | 0.41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.15 | ) | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.39 | ) | (0.37 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.84 | $10.90 | $11.22 | $10.91 | $10.95 | $11.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)3,4 | 0.81 | 5 | (0.13 | ) | 5.83 | 2.76 | 2.69 | 3.77 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $27 | $30 | $36 | $34 | $31 | $33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 1.69 | 6 | 1.68 | 1.69 | 1.68 | 1.71 | 1.69 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 1.58 | 6 | 1.58 | 1.58 | 1.57 | 1.61 | 1.59 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 2.61 | 6 | 2.60 | 2.78 | 3.03 | 3.65 | 3.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 5 | 17 | 20 | 19 | 19 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Six months ended 11-30-17. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Does not reflect the effect of sales charges, if any. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class I Shares Period ended | 11-30-17 | 1 | 5-31-17 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||
| Per share operating performance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | $10.91 | $10.70 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income3 | 0.19 | 0.12 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net realized and unrealized gain (loss) on investments | (0.05 | ) | 0.21 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total from investment operations | 0.14 | 0.33 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Less distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||
| From net investment income | (0.20 | ) | (0.12 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net asset value, end of period | $10.85 | $10.91 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total return (%)4 | 1.26 | 5 | 3.09 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ratios and supplemental data | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $6 | $5 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ratios (as a percentage of average net assets): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses before reductions | 0.69 | 6 | 0.67 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
| Expenses including reductions | 0.68 | 6 | 0.66 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net investment income | 3.51 | 6 | 3.76 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio turnover (%) | 5 | 17 | 7 | |||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Six months ended 11-30-17. Unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | The inception date for Class I shares is 2-13-17. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Based on average daily shares outstanding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | Not annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | Annualized. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | The portfolio turnover is shown for the period from 6-1-16 to 5-31-17. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class R6 Shares Period ended | 11-30-17 | 1 | |||||||||||||||||||||||||||
| Per share operating performance | |||||||||||||||||||||||||||||
| Net asset value, beginning of period | $10.95 | ||||||||||||||||||||||||||||
| Net investment income2 | 0.11 | ||||||||||||||||||||||||||||
| Net realized and unrealized loss on investments | (0.11 | ) | |||||||||||||||||||||||||||
| Total from investment operations | — | ||||||||||||||||||||||||||||
| Less distributions | |||||||||||||||||||||||||||||
| From net investment income | (0.10 | ) | |||||||||||||||||||||||||||
| Net asset value, end of period | $10.85 | ||||||||||||||||||||||||||||
| Total return (%)3 | 0.01 | 4 | |||||||||||||||||||||||||||
| Ratios and supplemental data | |||||||||||||||||||||||||||||
| Net assets, end of period (in millions) | $2 | ||||||||||||||||||||||||||||
| 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 (%) | 5 | 6 | |||||||||||||||||||||||||||
| 1 | The inception date for Class R6 shares is 8-30-17. Unaudited. | |||||||||||||||||||||||||||||||||||||
| 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 from 6-1-17 to 11-30-17. | |||||||||||||||||||||||||||||||||||||
Note 1 — Organization
John Hancock California Tax-Free Income Fund (the fund) is a 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. Class R6 shares are available only to certain retirement plans, institutions and other 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 November 30, 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 have the ability to 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. Overdrafts at period end are presented under the caption Due to custodian in the Statement of assets and liabilities.
Effective June 29, 2017, 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 $750 million unsecured committed line of credit. Excluding commitments designated for a certain fund and subject to the needs of all other affiliated funds, the fund can borrow up to an aggregate commitment amount of $500 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 29, 2017, the fund had a similar agreement that enabled it to participate in a $1 billion unsecured committed line of credit. For the six months ended November 30, 2017, the fund had no borrowings under either line of credit. Commitment fees for the six months ended November 30, 2017 were $2,181.
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 charged 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.
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.
Distributions paid by the fund with respect to each class of shares are calculated in the same manner, at the same time and in the same amount, except for the effect of class level expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to 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 fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a monthly management fee to the Advisor, equivalent on an annual basis, to the sum of: (a) 0.550% of the first $500 million of the fund's average daily net assets, (b) 0.500% of the next $500 million of the fund's average daily net assets, (c) 0.475% of the next $1 billion of the fund's average daily net assets; and (d) 0.450% of the fund's average daily net assets in excess of
$2 billion. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the six months ended November 30, 2017, this waiver amounted to 0.01% of the fund's average net assets (on an annualized basis). 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 six months ended November 30, 2017, the expense reductions amounted to the following:
| Class | Expense reduction | Class | Expense reduction | |
| Class A | $8,416 | Class I | $210 | |
| Class B | 42 | Class R6 | 10 | |
| Class C | 1,187 | Total | $9,865 |
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended November 30, 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 six months ended November 30, 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 Rule12b-1 fees for Class B and Class C shares. The current waiver agreement expires on September 30, 2018, 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 $513 and $14,431 for Class B and Class C shares, respectively, for the six months ended November 30, 2017.
Sales charges. Class A shares are assessed up-front sales charges, which resulted in payments to the Distributor amounting to $127,838 for the six months ended November 30, 2017. Of this amount, $20,158 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $91,632 was paid as sales commissions to broker-dealers and $16,048 was paid as sales commissions to sales personnel of Signator Investors, Inc., a broker-dealer affiliate of the Advisor.
Class A, Class B and Class C shares may be subject to contingent deferred sales charges (CDSCs). Certain Class A shares that are acquired through purchases of $1 million or more and are redeemed within one year of purchase are subject to a 1.00% sales charge. Class B shares that are redeemed within six years of purchase are subject to CDSCs, at declining rates, beginning at 5.00%. Class C shares that are redeemed within one year of purchase are subject to a 1.00% CDSC. CDSCs are applied to the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from CDSCs are used to compensate the Distributor for providing distribution-related services in connection with the sale of these shares. During the six months ended November 30, 2017, CDSCs received by the Distributor amounted to $707, $99 and $1,386 for Class A, Class B and Class C shares, respectively.
Transfer agent fees. The John Hancock Group of Funds has a complex-wide transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an affiliate of the Advisor. The transfer agent fees paid to Signature Services are determined based on the cost to Signature Services (Signature Services Cost) of providing recordkeeping services. It also includes out-of-pocket expenses, including payments made to third-parties for recordkeeping services provided to their clients who invest in one or more John Hancock funds. In addition, Signature Services Cost may be reduced by certain fees that Signature Services receives in connection with retirement and small accounts. Signature Services Cost is calculated monthly and allocated, as applicable, to five categories of share classes: Retail Share and Institutional Share Classes of Non-Municipal Bond Funds, Class R6 Shares, Retirement Share Classes and Municipal Bond Share Classes. Within each of these categories, the applicable costs are allocated to the affected John Hancock affiliated funds and/or classes, based on the relative average daily net assets.
Class level expenses. Class level expenses for the six months ended November 30, 2017 were:
| Class | Distribution and service fees | Transfer agent fees |
| Class A | $153,583 | $37,581 |
| Class B | 5,127 | 188 |
| Class C | 144,310 | 5,298 |
| Class I | — | 934 |
| Class R6 | — | 14 |
| Total | $303,020 | $44,015 |
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 the fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Fund share transactions
Transactions in fund shares for the six months ended November 30, 2017 and for the year ended May 31, 2017 were as follows:
| Six months ended 11-30-17 | Year ended 5-31-17 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| Class A shares | ||||||||||||||||||||||||||
| Sold | 514,680 | $5,614,264 | 2,003,645 | $22,105,805 | ||||||||||||||||||||||
| Distributions reinvested | 282,603 | 3,074,748 | 648,585 | 7,103,919 | ||||||||||||||||||||||
| Repurchased | (2,280,508 | ) | (24,867,688 | ) | (5,779,751 | ) | (62,927,847 | ) | ||||||||||||||||||
| Net decrease | (1,483,225 | ) | ($16,178,676 | ) | (3,127,521 | ) | ($33,718,123 | ) | ||||||||||||||||||
| Six months ended 11-30-17 | Year ended 5-31-17 | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||
| Class B shares | ||||||||||||||||||||||||||
| Sold | — | — | 9 | $95 | ||||||||||||||||||||||
| Distributions reinvested | 1,134 | $12,349 | 2,762 | 30,277 | ||||||||||||||||||||||
| Repurchased | (20,819 | ) | (227,161 | ) | (43,755 | ) | (470,984 | ) | ||||||||||||||||||
| Net decrease | (19,685 | ) | ($214,812 | ) | (40,984 | ) | ($440,612 | ) | ||||||||||||||||||
| Class C shares | ||||||||||||||||||||||||||
| Sold | 117,372 | $1,280,970 | 306,157 | $3,376,689 | ||||||||||||||||||||||
| Distributions reinvested | 30,839 | 335,525 | 66,917 | 732,435 | ||||||||||||||||||||||
| Repurchased | (448,336 | ) | (4,891,853 | ) | (828,241 | ) | (9,002,553 | ) | ||||||||||||||||||
| Net decrease | �� | (300,125 | ) | ($3,275,358 | ) | (455,167 | ) | ($4,893,429 | ) | |||||||||||||||||
| Class I shares1 | ||||||||||||||||||||||||||
| Sold | 160,227 | $1,746,446 | 441,006 | $4,711,596 | ||||||||||||||||||||||
| Distributions reinvested | 7,947 | 86,538 | 2,721 | 29,406 | ||||||||||||||||||||||
| Repurchased | (43,128 | ) | (471,582 | ) | (12,331 | ) | (131,730 | ) | ||||||||||||||||||
| Net increase | 125,046 | $1,361,402 | 431,396 | $4,609,272 | ||||||||||||||||||||||
| Class R6 shares2 | ||||||||||||||||||||||||||
| Sold | 173,026 | $1,896,755 | — | — | ||||||||||||||||||||||
| Distributions reinvested | 353 | 3,835 | — | — | ||||||||||||||||||||||
| Repurchased | (3,342 | ) | (36,260 | ) | — | — | ||||||||||||||||||||
| Net increase | 170,037 | $1,864,330 | — | — | ||||||||||||||||||||||
| Total net decrease | (1,507,952 | ) | ($16,443,114 | ) | (3,192,276 | ) | ($34,442,892 | ) | ||||||||||||||||||
1The inception date for Class I shares is 2-13-17.
2The inception date for Class R6 shares is 8-30-17.
Affiliates of the fund owned 3% of Class R6 shares on November 30, 2017. Such concentration of shareholders' capital could have a material effect on the fund if such shareholders redeem from the fund.
Note 6 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $11,306,603 and $36,062,335, respectively, for the six months ended November 30, 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.
Continuation of Investment Advisory and Subadvisory Agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock California Tax-Free Income Fund (the Trust) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor), for John Hancock California Tax-Free Income Fund (the fund). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 19-22, 2017 in-person meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 22-24, 2017.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 19-22, 2017, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the Trust under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the Trust and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of mutual fund data, performance information for an applicable benchmark index; and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates, including distribution services. The Board considered the Advisory Agreement and Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as
determinative, and each Trustee may have attributed different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services . Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the Trust's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and monitoring its own and the fund's compliance programs, risk management programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers. The Board also considered the significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risk with respect to all funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the Trust and of the other trusts in the John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
| (a) | the skills and competency with which the Advisor has in the past managed the Trust's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; |
| (b) | the background, qualifications and skills of the Advisor's personnel; |
| (c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and fund industry developments; |
| (d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund; |
| (e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; |
| (f) | the Advisor's initiatives intended to improve various aspects of the Trust's operations and investor experience with the fund; and |
| (g) | the Advisor's reputation and experience in serving as an investment advisor to the Trust and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance . In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
| (a) | reviewed information prepared by management regarding the fund's performance; |
| (b) | considered the comparative performance of an applicable benchmark index; |
| (c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and |
| (d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the Trust's subadvisory arrangements generally. |
The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that the fund outperformed its benchmark index for the one-, three- and five-year periods and underperformed its benchmark index for the ten-year period ended December 31, 2016. The Board also noted that the fund outperformed its peer group average for the one- and ten-year periods and underperformed its peer group average for the three- and five-year periods ended December 31, 2016. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index for the one-, three- and five-year periods and to the peer group for the one- and ten-year periods. The Board concluded that the fund's performance has generally been in line with or generally outperformed the historical performance of comparable funds and the fund's benchmark index.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the management and advisory and subadvisory services provided by the Advisor and the Subadvisor. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted that net management fees and net total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee, the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, which is discussed further below. The Board also noted actions taken over the past several years to reduce the fund's operating expenses. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduces management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates from the Advisor's relationship with the Trust, the Board:
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates from their relationship with the fund was reasonable and not excessive.
Economies of scale . In considering the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, the Board:
| (a) | considered that the Advisor has contractually agreed to waive a portion of its management fee for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios) or otherwise reimburse the expenses of the participating portfolios (the reimbursement). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund; |
| (b) | reviewed the fund's advisory fee structure and concluded that: (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and |
| (c) | the Board also considered the effect of the fund's growth in size on its performance and fees. The Board also noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
| (1) | information relating to the Subadvisor's business, including current subadvisory services to the Trust (and other funds in the John Hancock Fund Complex); |
| (2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and |
| (3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the Trust's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation . In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also received information and took into account any other potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees . The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays a subadvisory fee to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fees as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fees paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance . As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the
Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
| (1) | the Subadvisor has extensive experience and demonstrated skills as a manager; |
| (2) | the performance of the fund has generally been in line with or generally outperformed the historical performance of comparable funds and the fund's benchmark index; |
| (3) | the subadvisory fee is reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement; and |
| (4) | noted that the subadvisory fees are paid by the Advisor not the fund and that the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit shareholders to benefit from economies of scale if the fund grows. |
* * *
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
Trustees 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 |
*Member of the Audit Committee
†Non-Independent Trustee
#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. | |
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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 Small 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. | ||
| MF418651 | 53SA 11/17 1/18 | |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
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.
(a) 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 and Governance Committee Charter”.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Such disclosure and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Within 90 days prior to the filing date of this Form N-CSR, the registrant had carried out an evaluation, under the supervision and with the participation of the registrant’s management, including the registrant’s principal executive officer and the registrant’s principal financial officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and
procedures relating to information required to be disclosed on Form N-CSR. Based on such evaluation, the registrant’s principal executive officer and principal financial officer concluded that the registrant’s disclosure controls and procedures are operating effectively to ensure that:
(i) information required to be disclosed in this Form N-CSR is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and
(ii) information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) CHANGE IN REGISTRANT’S INTERNAL CONTROL: Not applicable.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) 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 and Governance Committee Charter”.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| John Hancock California Tax-Free Income Fund | |||
| By: | /s/ Andrew Arnott | ||
| Andrew Arnott | |||
| President | |||
| Date: | January 17, 2018 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Andrew Arnott | ||
| Andrew Arnott | |||
| President | |||
| Date: | January 17, 2018 | ||
| By: | /s/ Charles A. Rizzo | ||
| Charles A. Rizzo | |||
| Chief Financial Officer | |||
| Date: | January 17, 2018 | ||