<PAGE> 1
JOHN HANCOCK
CALIFORNIA TAX-FREE
INCOME FUND
ANNUAL REPORT
December 31, 1994
[LOGO]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
[Back Cover]
In upper left corner, return address: John Hancock California Tax-Free Income
Fund, John Hancock Funds Shareholder Services, P.O. Box 9656, Providence, RI
02940-9656. In upper right corner, postage information: Bulk Rate U.S. Postage
Paid Permit No. 6011, Houston, Texas. In lower left corner, 3/8" x 3/8" John
Hancock Funds logo. A box sectioned in quadrants with a triangle in upper
left, a circle in upper right, a cube in lower left and a diamond in lower
right.
<PAGE> 2
Chairman's Message
A 2" x 2 7/16" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, centered at top of page with copy wrapped around photo.
Dear Shareholders,
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became
part of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $13 billion in assets under management and more than 1 million
shareholders. Now with 50 open-end funds, 8 closed-end funds and a full array
of retirement and private account services, John Hancock Funds offers you a
broader selection of investment choices to meet your long-term financial needs.
What's more, the union of the John Hancock and Transamerica investment teams
gives you access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way
we work with you. Not only do we strive to ensure that your investments are
well managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
In mid-May, we anticipate that all of the Transamerica funds will be fully
integrated into John Hancock's internal shareholder service organization, John
Hancock Investor Services. At that time, not only will you gain exchange
privileges into all John Hancock funds, but your account will be handled by one
of the top-rated service organizations in the industry. To show you how
seriously we take our commitment to quality, you will have access to our
service guarantee. If we make an error in processing a transaction in your
account, we will deposit $25 into it. Or, if you have a retirement account, we
will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
John Hancock Funds
1
<PAGE> 3
By The Portfolio Management Team
John Hancock California
Tax-Free Income Fund
Rising Interest Rates And California Credit Problems
Hit Municipal Bonds But Long-Term Outlook Still Positive
Under most circumstances, the combination of a 44% drop in the supply of
municipal bonds and higher tax rates would lead to higher prices for tax-free
bonds. During 1994, however, when the Federal Reserve Board raised short-term
interest rates in an attempt to head off inflation and slow economic growth,
the bond market responded by dramatically raising long-term rates. The yield on
the 30-year Treasury bond climbed from 6.26% at the beginning of 1994 to 7.84%
at the year's end. The increase in Treasury yields led to the worst year for
municipal bonds since 1987. The Bond Buyer 20, a municipal bond index, rose in
yield from 5.28% to 6.74%. Since yields and bond prices move inversely, the
price on municipal bonds dropped accordingly.
A tax provision in the 1993 budget added an extra measure of illiquidity to
the municipal market. Most municipal bonds are originally issued at a discount
to par (face value of the bond). The rise in yields and corresponding drop in
prices caused a further decline in price for these bonds. Under this tax
provision, purchasing bonds at a price significantly lower than the original
issue discount price can create taxable income for buyers when the bonds
appreciate back to the original discount price. As a result, demand dropped
during the reporting period.
In California, continuing budget problems, combined with a national
credit-rating agency's negative outlook for the state's economy and a credit
rating downgrade, added to the downward pressure on municipal bond prices. Late
in the period, the state received another blow when Orange County filed for
bankruptcy because the value of its highly-leveraged investment pool plunged.
This hurt not only Orange County's direct debt obligations, but debt
obligations of the 180 local governments and agencies that were invested in the
pool.
RISING RATES HURT
FUND PERFORMANCE
Few state municipal bond funds escaped the market's downturn, and John Hancock
California Tax-Free Income Fund was no exception. For the 12 months ended
December 31, 1994, Class A and Class B Shares had total returns of -9.31% and
- -9.99%, respectively, at net asset value. The average California municipal bond
fund was down -7.52% according to Lipper Analytical Services.*
Our strategy of maintaining a long maturity caused the Fund to underperform
its peers. A longer maturity allows the Fund to pay a higher yield.
Shareholders who receive dividend checks earn a higher level of income than
they would from funds with shorter maturities; shareholders who reinvest
dividends may experience a higher total return over time. Although there will be
2
<PAGE> 4
John Hancock California Tax-Free Income Fund
times, like the recent reporting period, when we will underperform, we believe
that maintaining a long maturity will help us to outperform over the long-term.
As of December 31, 1994, our average maturity was 24 years.
The Fund continued to offer a competitive yield during the period. According
to Lipper, the 12-month yield for Class A Shares was 6.29% and 5.48% for Class
B Shares, versus a California municipal bond fund category average of 5.87%.*
Yield, as calculated by Securities and Exchange Commission standards was 6.16%
for Class A Shares and 5.70% for Class B Shares for the 30 days ended December
31, 1994.**
During the 12-month period, the Fund paid $0.583 per share distributions for
Class A Shares and $0.508 for Class B Shares. Please remember that a portion of
the Fund's distributions may be subject to federal income taxes, state income
taxes or the alternative minimum tax. In January 1994, the Fund distributed
less than $0.01 per share of taxable gains that were carried over from tax year
1993.
STEADY STRATEGY
We manage the Fund for high tax-free yields and preservation of capital over
the long-term. We maintained that objective, making minor changes in response to
the interest-rate environment.
We reduced the percentage of alternative minimum tax bonds and nonrated
securities during the period. We believe that these bonds will probably not
perform as well as other issues when the municipal bond market rebounds. We
upgraded the credit quality of the Fund for the same reason.
We also increased our call protection. By buying bonds that cannot be called
(redeemed early), we locked in higher yields. As of December 31, 1994, the
portfolio's average call date was May 31, 2004.
We continued our strategy of seeking out the most attractively valued bonds
by moving between credit qualities. We invested in lower-quality issues when we
felt we were being appropriately compensated for the added risk. By the same
token, we sold high-quality bonds that we believed were overvalued.
We increased our exposure to essential service revenue bonds which are
backed by user fees rather than tax revenues.
ORANGE COUNTY EXPOSURE
A small portion of the portfolio was invested in bonds affected by the Orange
County bankruptcy. These holdings are not direct obligations of Orange County
but were issued by entities that invested in the Orange County pool. These
bonds are backed by dedicated, separate revenue streams. We anticipate no loss
of revenue as a result of the Orange County, California bankruptcy. The value
of these holdings decreased slightly on the news of the bankruptcy but
increased in January, tracking the bond market. We anticipate that these
holdings will regain normal trading value as the situation is resolved.
Our portfolio remained well diversified and contained 117 issues in 14 market
sectors as of December 31, 1994.
OUTLOOK
In California, the state's economy shows signs of improvement, including job
growth and stronger home sales. Ultimately this should relieve budget pressures
and improve credit fundamentals which bodes well for municipal bonds. However,
we expect some short-term pressures to remain as the Orange County situation is
resolved.
Looking forward, we remain cautiously optimistic about returns in municipal
bonds. Total issuance in 1995 should be very close to 1994's total of $160
billion. With approximately $300 billion out of the $1.2 trillion municipal
bond market either maturing or being called, there should be periods when
demand will exceed supply. Demand from individuals should remain strong due to
higher after-tax yields. Currently, yields on 30-year, AAA-rated municipals are
approximately 81% of the 30-year Treasury bond, which more than compensates for
the possibility of lower tax rates being discussed by the new Congress.
While demand from trust and insurance buyers should
3
<PAGE> 5
John Hancock California Tax-Free Income Fund
remain moderate due to higher short-term yields, demand from mutual funds could
increase from 1994 levels. If interest rates stabilize or the perception among
investors changes to a stable long-term interest-rate environment, net sales of
mutual funds will once again drive municipal prices higher.
We believe that the economy will slow to its historic norm of between 2.5% to
3.0% annual gross domestic product growth by the middle of 1995. Until that
happens, the Federal Reserve may continue to raise short-term interest rates.
Consumers seem to have satisfied their pent-up demand which, together with
higher short-term rates, should cool the economy. We expect long-term rates to
move lower in 1995 in response to a slower economy. When this happens,
municipal bond fund investors should see the returns on their investments begin
to improve.
* Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance may be
lower. Also, the Fund reimburses expenses. Without expense reimbursement, yield
and total return would have been lower. Total return would have been -13.73%
and -15.12% for Class A and Class B Shares, respectively, at net asset value
for the 12 months ended December 31, 1994.
** The SEC yield reflects net investment income earned by the Fund. Without
expense reimbursement, yields would have been 6.01% and 5.55% for Class A and
Class B Shares, respectively.
A box with heading "Top Five Sectors" following the footnote in the first
(left) column. Box lists the following: 1. Public Facilities, 21%,
2. Redevelopment, 17%, 3. Health, 13%, 4. Community Facilities, 13% 5. Water,
12%. The footnote below states: "As a percentage of total net assets on
December 31, 1994."
Table entitled "Scorecard" following the "Top Five Sectors". The header for
the left column is "Investments;" The header for the right column is "Recent
Performance...And What's Behind The Numbers." The first listing is CA
Department of Water followed by a down arrow and the phrase "Essential service
down on drought concerns." The second listing is California Statewide followed
by a down arrow and the phrase "Credit downgrade."
Bar chart with heading "Fund Performance" at the top of the second (right)
column. Under the heading is the note: "For the year ended December 31, 1994."
The horizontal chart is scaled in increments of -2% from -12% at the left and
12% at the right. Within the chart, there are three solid bars. The first
represents the -9.31% total return for John Hancock California Tax-Free Income
Fund Class A. The second represents the -9.99% total return for John Hancock
California Tax-Free Income Fund Class B. The third represents the -7.52% total
return for the Lipper Average California Municipal Bond Fund. The footnote
below states: "Total returns for John Hancock California Tax-Free Income Fund
are at net asset value with all distributions reinvested. The average
California municipal bond fund is tracked by Lipper Analytical Services.* See
the following page for historical performance information."
4
<PAGE> 6
John Hancock California Tax-Free Income Fund
LONG-TERM PERFORMANCE REVIEW
If you had invested $10,000 in John Hancock California Tax-Free Income Fund on
December 29, 1989 (Class A inception) and reinvested all dividends, your
investment, upon redemption, would have grown to $12,761 as of December 31,
1994.* Class B Shares, which were introduced on December 31, 1991, would have
grown to $10,698.
The chart compares the Fund's performance to the Lehman Brothers Municipal
Bond Index and the Consumer Price Index (CPI). The Lehman Brothers index is an
unmanaged index of municipal securities that are similar, but not identical, to
the bonds in the Fund's portfolio. The CPI is a commonly used gauge of the rate
of inflation.
Returns for Class A Shares (including the Fund's average annual total
returns for the one-year and since inception periods ended December 31, 1994,
as shown in the inset box) reflect the maximum 4.75% sales charge. Returns for
Class B Shares (for one-year and since inception, as shown in the box) reflect
expenses and the applicable contingent deferred sales charge which declines
yearly as follows: 5%, 4%, 3%, 3%, 2%, 1%, 0%. Return for the Lehman index does
not reflect a sales charge. If you were to purchase individual bonds
represented in this index, any sales charges that you would pay would reduce
your return accordingly.
Your investment return will fluctuate so that your shares, when redeemed, may
be worth more or less than the original cost. Performance information
representing past performance is no guarantee of future results.
* Class A Shares' return since inception includes the effect of expense
reimbursement which, if excluded, would have caused performance to be lower.
Without expense reimbursement, Class A return would have been -13.73% for the
one-year period and 4.62% since inception. Class B return would have been
- -15.12% for the one-year period and 2.07% since inception.
Boxed line chart at top right corner of page with heading "John Hancock
California Tax-Free Income Fund A vs. Lehman Brothers Muni Bond Index." Note
below states" "Growth of $10,000 Investment Since Inception, 12/29/89 -
12/31/94." The chart is scaled in $1,000 increments from $9,000 to $17,000 at
the left. The chart is scaled at the bottom from 12/29/89 at the left to 1994
at the right. Within the chart are three lines. The solid line represents the
value of a hypothetical $10,000 investment in the John Hancock California Tax-
Free Income Fund Class A on December 29, 1989 including 4.75% front load sales
charge that is equal to $12,761 on December 31, 1994. The dashed line
represents the value of a hypothetical $10,000 investment in the Lehman
Brothers Muni Bond Index on December 29, 1989 and is equal to $13,895 on
December 31, 1994. The dotted line represents a hypothetical $10,000
investment in the Consumer Price Index on December 29, 1989 and is equal to
$11,871 on December 31, 1994. In the upper left corner of the chart, is a box
with the heading "Average Annual Total Return." Text for the box reads from
left: "1 year, 5 year, Inception" on the first line and from left on the
second line, "-13.61%, 4.99% and 4.99%."
Page 5
Boxed line chart at top right corner of page with heading "Class B Shares."
Note below states" "Growth of $10,000 Investment Since Inception, 12/31/91 -
12/31/94." The chart is scaled in $1,000 increments from $10,000 to $14,000 at
the left. The chart is scaled at the bottom from 12/31/91 at the left to 1994
at the right. Within the chart are three lines. The solid line represents the
value of a hypothetical $10,000 investment in the John Hancock California Tax-
Free Income Fund Class B on December 31, 1991 including the applicable 5.00%
contingent deferred sales charge and expenses and is equal to $10,698 on
December 31, 1994. The dashed line represents the value of a hypothetical
$10,000 investment in the Lehman Brothers Muni Bond Index on December 31, 1991
and is equal to $11,584 on December 31, 1994. The dotted line represents a
hypothetical $10,000 investment in the Consumer Price Index on December 31,
1991 and is equal to $10,855 on December 31, 1994. In the upper left corner of
the chart, is a box with the heading "Average Annual Total Return." Text for
the box reads from left: "1 year, 5 year, Inception" on the first line and
from left on the second line, "-14.99%, N/A and 2.27%."
5
<PAGE> 7
STATEMENT OF NET ASSETS
John Hancock California Tax-Free Income Fund
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ---------- -----------
<S> <C> <C>
LONG-TERM MUNICIPAL
OBLIGATIONS-97.01%
COMMUNITY
FACILITIES-12.62%
Capistrano Unified School
District Community
Facilities District Bonds
7.000% due 09/01/18...................... $ 1,500,000 $ 1,331,250
7.500% due 09/01/07...................... 3,500,000 3,246,250
8.375% due 10/01/20...................... 3,000,000 3,041,250
Fontana Special Tax
Community Facilities
District Bonds
8.375% due 04/01/11...................... 10,000,000 8,262,500
8.400% due 04/01/15...................... 1,000,000 823,750
Fresno Joint Powers
Financing Authority
Revenue Refunding Bonds
6.550% due 09/02/12...................... 2,000,000 1,812,500
Industry Urban Development
Agency Bonds
6.900% due 11/01/16...................... 1,020,000 975,375
7.375% with various
maturities to 05/01/15................ 1,145,000 1,187,937
Los Alamitos Unified
School District Special
Tax Community Facilities
District Bonds
7.150% due 08/15/21...................... 6,005,000 5,359,463
Los Angeles County
Improvement Bonds
8.375% due 09/02/18...................... 3,865,000 3,947,131
Pleasanton Joint Power
Financing Authority
Revenue Bonds
6.600% due 09/02/08...................... 2,940,000 2,730,525
Sacramento Unified School
District Special Tax
Community Facilities
District Bonds
7.300% due 09/01/13...................... 760,000 779,000
Saddleback Valley Unified
School District
Community Facilities
District Bonds
7.750% due 09/01/16...................... 3,200,000 3,124,000
Santa Clarita Community
Facilities District
Special Tax Bonds
7.450% due 11/15/10...................... 3,600,000 3,636,000
-----------
40,256,931
HEALTH-12.92%
California Health Facilities
Financing Authority
Revenue Bonds
5.600% due 05/01/33...................... 3,800,000 2,987,750
5.800% due 12/01/18...................... 3,140,000 2,633,675
6.250% due 07/01/12...................... 1,135,000 1,037,106
7.500% due 04/01/22...................... 2,000,000 2,020,000
California Statewide
Community Development
Authority Revenue
Certificates of
Participation
5.500% due 07/01/23...................... 6,000,000 4,915,000
5.600% due 11/15/17...................... 2,435,000 1,996,700
6.200% due 08/01/12...................... 1,250,000 1,129,687
6.250% due 08/01/22...................... 2,590,000 2,263,012
6.500% due 08/01/22...................... 15,750,000 13,978,125
6.700% due 05/01/11...................... 1,250,000 1,200,000
6.750% due 12/01/21...................... 7,500,000 7,040,625
------------
41,201,680
HOSPITALS-7.93%
Arcadia Hospital
Revenue Bonds
6.625% due 11/15/22...................... 1,205,000 1,051,363
Bakersfield Memorial
Hospital Revenue Bonds
6.500% due 01/01/22...................... 2,000,000 1,792,500
</TABLE>
6
<PAGE> 8
STATEMENT OF NET ASSETS
John HancocK California Tax-Free Income Fund
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
Covina Hospital Revenue
Certificates of
Participation
7.000% due 03/01/17...................... 925,000 857,937
Duarte City of Hope
Medical Center
Certificates of
Participation
6.250% due 04/01/23...................... 13,900,000 11,571,750
Rancho Mirage Joint Powers
Financing Authority
Certificates of
Participation
7.000% due 03/01/22...................... 4,500,000 4,201,875
San Bernardino County
Certificates of
Participation
5.500% due 08/01/17...................... 7,500,000 5,812,500
-----------
25,287,925
HOUSING--0.57%
California Housing Finance
Agency Revenue Bonds
7.375% due 08/01/17...................... 335,000 341,700
Upland Housing Authority
Revenue Bonds
7.500% due 07/01/03...................... 190,000 190,238
7.850% due 07/01/20...................... 1,280,000 1,294,400
-----------
1,826,338
INDUSTRIAL
DEVELOPMENT--0.30%
ABAG Finance Authority
for Nonprofit Corps.
Certificates of
Participation
6.800% due 10/01/11...................... 1,000,000 962,500
MORTGAGE INSURED
BONDS--1.38%
California Housing Finance
Agency Home Mortgage
Revenue Refunding Bonds
7.250% due 08/01/17...................... 3,500,000 3,561,250
Southern California Home
Finance Authority Single
Family Mortgage Revenue
Bonds Series A
6.750% due 09/01/22...................... 850,000 835,125
-----------
4,396,375
MUNICIPAL UTILITY
DISTRICTS--0.92%
Sacramento Municipal
Utility District Electric
Revenue Bonds
5.750% due 05/15/22...................... 2,700,000 2,274,750
Southern California Public
Power Authority
Transmission Project
Revenue Bonds
5.500% due 07/01/20...................... 800,000 655,000
-----------
2,929,750
PUBLIC FACILITIES--21.03%
Anaheim Certificates of
Participation
6.870% due 07/16/23(A)................... 2,000,000 1,690,000
Anaheim Public Finance
Authority Electric Utility
Revenue Bonds
5.750% due 10/01/22..................... 2,750,000 2,354,688
California Public Capital
Improvements Financing
Authority Revenue Bonds
8.125% due 03/01/95...................... 230,000 230,862
</TABLE>
7
<PAGE> 9
STATEMENT OF NET ASSETS
John Hancock California Tax-Free Income Fund
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
California State Public
Works Board Lease
Revenue Bonds
5.000% due 12/01/19 .................... 7,795,000 6,021,638
6.700% due 10/01/17 .................... 1,500,000 1,428,750
Chula Vista Certificates of
Participation
6.000% with various
maturities to 09/01/12 ................. 1,700,000 1,506,875
Concord Joint Powers
Financing Authority
Lease Revenue Bonds
5.250% due 08/01/19 .................... 3,520,000 2,772,000
Cupertino Certificates of
Participation
5.750% due 01/01/16 .................... 2,500,000 2,137,500
Delano Certificates of
Participation
7.000% due 04/01/10 .................... 2,000,000 1,915,000
Encinitas Certificates of
Participation
6.750% due 12/01/11 .................... 1,300,000 1,270,750
Inglewood Certificates of
Participation
7.000% due 08/01/19 .................... 1,000,000 966,250
Los Angeles County
Certificates of Participation
6.250% due 07/01/03 .................... 2,000,000 1,920,000
6.500% due 07/01/08 .................... 4,000,000 3,735,000
Los Angeles County Disney
Parking Certificates of
Participation
6.500% due 03/01/23 .................... 2,000,000 1,820,000
Los Angeles County Public
Works Finance Authority
Revenue Bonds
6.000% due 10/01/15 ................... 3,750,000 3,375,000
Oceanside Certificates of
Participation
6.000% due 04/01/17 .................... 2,875,000 2,461,719
6.375% due 04/01/12 .................... 3,000,000 2,767,500
Orange County Certificates
of Participation
6.700% due 08/01/18 .................... 1,000,000 963,750
San Diego County
Certificates of
Participation
6.750% due 08/01/19 .................... 3,000,000 2,996,250
San Jose Financing
Authority Revenue Bonds
6.400% due 09/01/17 .................... 2,000,000 1,857,500
San Marcus Public Facilities
Authority Revenue
Refunding Bonds
6.200% due 08/01/22 .................... 5,000,000 4,156,250
San Mateo Joint Powers
Financing Authority
Lease Revenue
Refunding Bonds
5.000% due 07/01/21 .................... 1,815,000 1,393,012
5.125% due 07/01/18 .................... 2,500,000 1,978,125
Santa Ana Financing
Authority Lease
Revenue Bonds
6.250% with various
maturities to 07/01/24 ................. 11,790,000 11,041,550
Stanislaus County
Certificates of
Participation
7.550% due 04/01/18 .................... 2,295,000 2,283,525
Vallejo Certificates of
Participation
8.000% due 02/01/06 .................... 2,000,000 2,025,000
-----------
67,068,494
REDEVELOPMENT-
COMMERCIAL--1.22%
Azusa Redevelopment
Agency Tax
Allocation Bonds
7.000% due 08/01/22 .................. 2,000,000 1,875,000
</TABLE>
8
<PAGE> 10
STATEMENT OF NET ASSETS
John Hancock California Tax-Free Income Fund
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ---------- -----------
<S> <C> <C>
BRENTWOOD REDEVELOPMENT
Agency Tax
Allocation Bonds
7.700% due 11/01/08..................... 135,000 135,844
Richmond Joint Powers
Financing Authority
Revenue Bonds
7.700% due 10/01/10..................... 1,835,000 1,880,875
-----------
3,891,719
REDEVELOPMENT-
MIXED USE--15.94%
Avalon Community
Improvement Agency Tax
Allocation Bonds
6.400% due 08/01/22..................... 1,975,000 1,752,813
Bakersfield Central District
Development Agency Tax
Allocation Bonds
6.625% due 04/01/15..................... 4,000,000 3,665,000
Burbank Redevelopment
Agency Tax
Allocation Bonds
6.000% due 12/01/23..................... 2,750,000 2,296,250
Clearlake Redevelopment
Agency Tax
Allocation Bonds
6.400% due 10/01/23..................... 500,000 446,250
Concord Redevelopment
Agency Tax Allocation
General Obligation Bonds
5.750% due 07/01/10..................... 1,145,000 970,387
Davis City Redevelopment
Agency Tax
Allocation Bonds
7.000% due 09/01/24..................... 5,115,000 5,204,513
Huntington Park Public
Financing Authority
Revenue Bonds
7.600% due 09/01/18..................... 5,000,000 4,675,000
Inglewood Redevelopment
Agency Tax
Allocation Bonds
6.125% due 07/01/13..................... 1,000,000 873,750
Lincoln Redevelopment
Agency Tax Allocation
Revenue Bonds
7.650% due 08/01/17..................... 3,350,000 3,379,313
Merced Public Financing
Authority Revenue Bonds
5.500% due 12/01/15..................... 3,630,000 2,958,450
Orange County
Development Agency Tax
Allocation Bonds
6.125% due 09/01/23..................... 3,000,000 2,302,500
Orange Redevelopment
Agency Tax Allocation
Revenue Bonds
5.700% due 10/01/17..................... 3,000,000 2,478,750
Palm Springs Financing
Authority Revenue Bonds
6.400% due 09/01/17..................... 3,000,000 2,737,500
Pittsburg Redevelopment
Agency Tax
Allocation Bonds
7.400% due 08/15/20..................... 3,040,000 2,983,000
Pomona Public Financing
Authority Revenue
Refunding Bonds
5.750% due 02/01/20..................... 10,000,000 7,912,500
Santa Cruz County Public
Financing Authority
Revenue Bonds
6.200% due 09/01/23..................... 2,000,000 1,677,500
Suisun City Redevelopment
Agency Tax
Allocation Bonds
7.250% due 10/01/20..................... 425,000 460,594
</TABLE>
9
<PAGE> 11
STATEMENT OF NET ASSETS
John Hancock California Tax-Free Income Fund
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
Tracy Community
Development Agency Toll
Road Revenue Bonds
6.000% due 03/01/24...................... 5,000,000 4,056,250
-----------
50,830,320
SCHOOLS--5.97%
Beaumont Unified School
District Certificates of
Participation
7.700% due 01/01/21...................... 1,000,000 985,000
Cucamonga School District
Certificates of
Participation
7.600% due 12/01/15...................... 1,000,000 1,022,500
Elk Grove Unified School
District Special
Tax Bonds
7.125% due 12/01/24...................... 1,000,000 1,016,250
Perris Union High School
District Certificates of
Participation
5.900% due 09/01/23...................... 2,000,000 1,667,500
San Gabriel Valley School
Financing Authority
Revenue Refunding Bonds
5.500% due 02/01/19...................... 1,500,000 1,215,000
Saugus Unified School
District Certificates of
Participation
7.500% due 08/01/09...................... 700,000 733,250
Sierra Unified School
District Certificates of
Participation
6.000% due 03/01/12...................... 2,000,000 1,707,500
Simi Valley Unified School
District Certificates of
Participation
6.100% due 08/01/22...................... 3,000,000 2,737,500
University of California
Certificates of Participation
5.500% due 11/01/14...................... 2,000,000 1,642,500
5.600% due 11/01/20...................... 6,180,000 4,990,350
Victor Valley Unified School
District Certificates of
Participation
7.875% due 11/01/12...................... 1,255,000 1,316,181
-----------
19,033,531
TRANSPORTATION--1.09%
San Diego MTDB Authority
Lease Revenue Bonds
5.375% due 06/01/23...................... 2,500,000 2,050,000
San Joaquin Hills
Transportation Corridor
Agency Toll Road
Revenue Bonds
6.750% due 01/01/32...................... 1,750,000 1,448,125
-----------
3,498,125
WASTE--2.98%
California Pollution Control
Financing Authority
Pollution Control
Revenue Bonds
5.850% due 12/01/23...................... 500,000 419,375
California Pollution Control
Financing Authority
Solid Waste Disposal
Revenue Bonds
6.875% due 11/01/27...................... 2,000,000 1,882,500
Stanislaus Waste to Energy
Financing Agency
Revenue Bonds
7.625% due 01/01/10...................... 1,000,000 1,007,500
Vallejo Sanitation and Flood
Control District
Certificates of Participation
5.000% due 07/01/19...................... 8,000,000 6,190,000
-----------
9,499,375
</TABLE>
10
<PAGE> 12
STATEMENT OF NET ASSETS
John Hancock California Tax-Free Income Fund
Continued
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
WATER--12.14%
Apple Valley Water District
Improvement Bonds
7.875% due 09/02/11...................... 2,425,000 2,500,781
California Department of
Water Resources
Central Valley Project
Revenue Bonds
5.500% due 12/01/23...................... 6,000,000 4,942,500
Calleguas-Las Virgines
Public Financing
Authority Revenue Bonds
5.125% due 07/01/21...................... 4,500,000 3,493,125
Central Coast Water
Authority Revenue Bonds
6.600% due 10/01/22...................... 3,200,000 3,132,000
East Bay Municipal Utility
District Water System
Revenue Refunding Bonds
6.000% due 06/01/12...................... 1,000,000 930,000
Metropolitan Water
District Waterworks
Revenue Bonds
5.000% due 07/01/20...................... 7,500,000 5,784,375
5.500% due 07/01/19...................... 5,000,000 4,181,250
Orange Cove Irrigation
District Revenue
Certificates of Participation
7.000% due 02/01/15...................... 2,500,000 2,409,375
7.250% due 02/01/12...................... 2,000,000 2,000,000
San Bernardino Municipal
Water Department
Certificates of Participation
6.250% due 02/01/17...................... 2,510,000 2,365,675
Santa Barbara Water and
Sewer Certificates of
Participation
6.700% due 04/01/27...................... 2,000,000 1,957,500
Turlock Irrigation District
Certificates of
Participation
7.300% due 01/01/11...................... 4,165,000 4,165,000
Turlock Irrigation District
Revenue Refunding
Bonds Series A
5.750% due 01/01/18...................... 1,000,000 873,750
------------
38,735,331
------------
TOTAL LONG-TERM
MUNICIPAL OBLIGATIONS
(Cost $342,717,564).......................... 309,418,394
SHORT-TERM
OBLIGATIONS--0.88%
VARIABLE RATE REVENUE
BONDS--0.88%
INDUSTRIAL
DEVELOPMENT--0.88%
California Pollution Control
Financing Authority
Pollution Control Revenue
Bonds Series A
5.000% due 01/03/95(B)................... 2,800,000 2,808,941
------------
TOTAL SHORT-TERM
OBLIGATIONS
(Cost $2,808,941)............................ 2,808,941
------------
TOTAL INVESTMENTS--97.89%
(Cost $345,526,505).......................... 312,227,335
CASH AND OTHER ASSETS,
LESS LIABILITIES--2.11%...................... 6,720,818
------------
NET ASSETS, at value,
equivalent to $9.28 per
share for 26,034,286
Class A Shares ($.01 par
value) outstanding and
$9.28 per share for
8,339,105 Class B Shares
($.01 par value)
outstanding--100.00%....................... $318,948,153
============
</TABLE>
(A) Floating rate securities.
(B) Interest rate reset date.
See Notes to Financial Statements.
11
<PAGE> 13
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES NET ASSETS
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
- --------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 23,033,267
------------
Expenses
Management fees............................ $ 1,919,101
Distribution expenses
(see Note D)............................. 1,114,370
Transfer agent fees........................ 244,131
Administrative service fees................ 158,594
Custodian fees............................. 100,287
Audit and legal fees....................... 39,491
Registration fees.......................... 36,394
Trustees' fees and expenses................ 27,905
Insurance expense.......................... 25,872
Shareholder reports........................ 23,859
Organization costs......................... 4,619
Miscellaneous.............................. 20,155
Less: Expense
reimbursement............................ (506,921) 3,207,857
----------- ------------
Net Investment Income.................. 19,825,410
------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net realized loss on
investments.............................. (4,180,216)
Net change in unrealized
depreciation of
investments.............................. (51,218,323)
------------
Net realized and unrealized
Loss on Investments.................. (55,398,539)
------------
Decrease in net assets
resulting from operations............ $(35,573,129)
====================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income...................... $ 19,825,410 $ 16,517,620
Net realized gain (loss) on
investments.............................. (4,180,216) 9,880,178
Net change in unrealized
appreciation
(depreciation) of
investments.............................. (51,218,323) 9,798,946
------------ ------------
Increase (decrease) in net
assets resulting from
operations............................... (35,573,129) 36,196,744
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income-
Class A.................................. (15,737,105) (14,358,309)
Class B.................................. (3,992,716) (2,149,913)
Net realized gain on
investments-
Class A.................................. - (8,029,591)
Class B.................................. - (1,848,387)
------------ ------------
Total distributions to
shareholders......................... (19,729,821) (26,386,200)
------------ ------------
SHARE TRANSACTIONS
Increase in shares
outstanding................................ 29,122,142 91,709,279
------------ ------------
Increase (decrease) in
net assets................................. (26,180,808) 101,519,823
NET ASSETS
Beginning of year.......................... 345,128,961 243,609,138
------------ ------------
End of year................................ $318,948,153 $345,128,961
============ ============
Undistributed Net
Investment Income........................ $ 127,227 $ 31,638
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------------------------------- ------------------------------
1994(1) 1993 1992(2) 1991 1990 1994(1) 1993 1992(2)
--------- -------- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital changes
for a share outstanding during
each year:
Net asset value, beginning of year....... $ 10.85 $ 10.41 $ 10.32 $ 9.91 $ 10.00 $ 10.85 $ 10.41 $ 10.32
INCOME FROM
INVESTMENT OPERATIONS
Net investment income................... 0.58 0.62 0.66 0.69 0.74 0.51 0.54 0.58
Net realized and unrealized gain
(loss) on investments................. (1.57) 0.76 0.25 0.47 (0.16) (1.57) 0.76 0.25
--------- -------- -------- ------- -------- -------- -------- -------
Total from Investment Operations.... (0.99) 1.38 0.91 1.16 0.58 (1.06) 1.30 0.83
LESS DISTRIBUTIONS
Dividends from net investment
income................................ (0.58) (0.62) (0.67) (0.70) (0.67) (0.51) (0.54) (0.59)
Distributions from realized gains....... - (0.32) (0.15) (0.05) - - (0.32) (0.15)
--------- -------- -------- ------- -------- -------- -------- -------
Total Distributions................. (0.58) (0.94) (0.82) (0.75) (0.67) (0.51) (0.86) (0.74)
--------- -------- -------- ------- -------- -------- -------- -------
Net asset value, end of year............ $ 9.28 $ 10.85 $ 10.41 $ 10.32 $ 9.91 $ 9.28 $ 10.85 $ 10.41
======== ======== ======== ======= ======= ======== ======== =======
TOTAL RETURN(3)......................... (9.31)% 13.60% 9.15% 12.26% 6.13% (9.99)% 12.76% 8.35%
======== ======== ======== ======= ======= ======== ======== =======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average
net assets............................ 0.89% 0.87% 0.83% 0.80% 0.84% 1.64% 1.62% 1.60%
Ratio of expense reimbursement
to average net assets................. (0.14)% (0.18)% (0.25)% (0.40)% (0.84)% (0.14)% (0.18)% (0.25)%
======== ======== ======== ======= ======= ======== ======== =======
Ratio of net expenses to average
net assets............................ 0.75% 0.69% 0.58% 0.40% 0.00% 1.50% 1.44% 1.35%
======== ======== ======== ======= ======= ======= ======= =======
Ratio of net investment income
to average net assets................. 5.85% 5.69% 6.36% 6.75% 7.11% 5.10% 4.82% 5.43%
Portfolio turnover...................... 62% 51% 34% 45% 62% 62% 51% 34%
Net Assets, end of year
(in thousands)........................ $241,583 $279,692 $217,014 $163,693 $80,200 $77,365 $65,437 $26,595
</TABLE>
(1) December 22, 1994, John Hancock Advisers, Inc. became the Investment
Adviser. Prior to this date, Transamerica Fund Management Company was
the Investment Adviser.
(2) Per share information has been calculated using the average number of
shares outstanding.
(3) Total return does not include the effect of the initial sales charge for
Class A Shares nor the contingent deferred sales charge for Class B
Shares. Total return does include the benefit of a voluntary expense
reimbursement by the Investment Adviser. Without such benefit, total
return would be lower.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock California Tax-Free Income Fund
December 31, 1994
NOTE A--
SIGNIFICANT ACCOUNTING POLICIES
John Hancock California Tax-Free Income Fund (the ``Fund''), formerly
Transamerica California Tax-Free Income Fund, is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. On December 16, 1994, the shareholders of each of the mutual
funds managed by Transamerica Fund Management Company (TFMC) voted to approve
new Investment Advisory contracts with John Hancock Advisers, Inc. Each such
approval was subject to the acquisition of TFMC by The Berkeley Financial Group
(known beginning January 1, 1995 as John Hancock Funds), the parent company of
John Hancock Advisers, Inc. The acquisition became effective December 22, 1994.
The Fund's name change was also effective on this date.
The Fund offers two classes of shares to the public. Class A Shares
are subject to an initial sales charge of up to 4.75% and a 12b-1 distribution
plan. Class B Shares are subject to a contingent deferred sales charge and a
separate 12b-1 distribution plan. The following is a summary of significant
accounting policies consistently followed by the Fund.
(1) The Fund values its investments by using quotations provided by
market makers, estimates of market value, or values received from an
independent pricing service. Securities for which market quotations are not
readily available are valued at a fair value as determined in good faith by the
Fund's Board of Trustees. Short-term investments are valued at amortized cost
(original cost plus amortized discount or accrued interest).
(2) Security transactions are accounted for on the trade date. Interest
income is accrued daily. Debt premiums and original issue discounts are
amortized using the yield-to-maturity method. Discounts other than original
issue are not amortized. Realized gains and losses from security transactions
are determined on the basis of identified cost for both financial reporting and
federal income tax purposes.
(3) Income dividends are declared daily by the Fund and paid to
shareholders or reinvested at net asset value monthly. Other distributions are
recorded on the ex-dividend date and may be reinvested at net asset value.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
Distributions payable to shareholders at December 31, 1994 were $907,182.
(4) No provision for federal income taxes has been made since it is the
Fund's intention to distribute all of its taxable income and profits to its
shareholders and to comply with the requirements applicable to regulated
investment companies and the minimum distribution requirements of the Internal
Revenue Code. At December 31, 1994, the Fund had a realized capital loss
carryforward of approximately $268,000, which will expire in 2002.
(5) The Fund reports custodian fees net of credits and charges
resulting from cash positions in the custodial accounts greater than or less
than the amounts required to settle portfolio transactions. For the year ended
December 31, 1994, these amounts were $11,967 and $26,382, respectively.
(6) On a daily basis, income, unrealized and realized gains and losses,
and expenses which are not class specific are allocated to each class based on
their respective relative net assets. Class specific expenses, such as
distribution expenses, are applied to the class to which they are attributed.
NOTE B--
MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
From January 1, 1994 through December 21, 1994, TFMC acted as the
Investment Adviser to the Fund. On December 22, 1994, John Hancock Advisers,
Inc., a wholly-owned subsidiary of John Hancock Funds, became Investment
Adviser following the approval of the Fund's shareholders. Throughout these
financial statement notes, TFMC and John Hancock Advisers, Inc. are referred to
collectively as the ``Investment Adviser'', as each acted in this capacity
during the time periods noted above. The Investment Adviser has a sub-advisory
agreement with, and pays a fee to, Transamerica Investment Services, Inc. (the
``Sub-Adviser''). TFMC was, prior to December 22, 1994, and the Sub-Adviser is
presently a subsidiary of Transamerica Corporation.
The Fund's management fee is payable monthly and is calculated based on
the monthly average daily net assets of the Fund at an annual rate of 0.55%. At
December 31, 1994, the management fee payable to the Investment Adviser was
$118,703.
The Investment Adviser also provided administrative services to the
Fund pursuant to an administrative service agreement. During the year ended
December 31, 1994, the Fund paid or accrued $109,540 to the Investment Adviser
for these services, of which $13,620 was payable at December 31, 1994.
The Investment Adviser voluntarily agreed to reimburse the Fund for all
normal operating expenses, excluding distribution expenses, in excess of 0.60%,
on an annual basis, of the Fund's average daily net assets through December 31,
1994. For the year ended December 31, 1994, the Investment Adviser reimbursed
the Fund $506,921 pursuant to this agreement.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
Continued
John Hancock California Tax-Free Income Fund
During the year ended December 31, 1994, Transamerica Fund
Distributors, Inc., an affiliate of TFMC and principal underwriter of the Fund
through December 21, 1994, and John Hancock Funds, Inc., an affiliate of John
Hancock Advisers, Inc. and principal underwriter since December 22, 1994,
retained $126,490 as their portion of the commissions charged on sales of Class
A Shares of the Fund. Throughout these financial statement notes, Transamerica
Fund Distributors, Inc. and John Hancock Funds, Inc. are referred to
collectively as the ``Distributor'', as each acted in this capacity during the
time periods noted above. At December 31, 1994, receivables from and payable
to the Distributor for Fund share transactions were $182,622 and $725,576,
respectively.
The Fund paid no compensation directly to any officer. Certain officers
of the Fund are affiliated with the Investment Adviser.
During the year ended December 31, 1994, the Fund paid legal fees of
$6,000 to Baker & Botts. A partner with Baker & Botts was an officer of the
Fund until December 22, 1994.
NOTE C--
COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
During the year ended December 31, 1994, purchases and sales of securities,
other than short-term obligations, aggregated $241,713,463 and $211,597,251,
respectively.
At December 31, 1994, receivables from brokers for securities sold were
$1,028,289. The identified cost of investments owned was the same for both
financial reporting and federal income tax purposes. At December 31, 1994, the
gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes were $1,262,641 and $34,561,811, respectively.
NOTE D--
PLAN OF DISTRIBUTION
Pursuant to Rule 12b-1 of the Investment Company Act of 1940, the Fund is
authorized under separate distribution plans to finance activities related to
the distribution of its Class A and Class B Shares (the ``Class A Plan'' and
the ``Class B Plan,'' respectively). The distribution plans, together with the
initial sales charge on Class A Shares and the contingent deferred sales charge
on Class B Shares, comply with the regulations covering maximum sales charges
assessed by mutual funds distributed through securities dealers that are NASD
members.
The Class A Plan and the Class B Plan permit each class to make
payments to the Distributor up to 0.15% annually of average daily net assets
for certain distribution costs such as service fees paid to dealers, production
and distribution of prospectuses to prospective investors, services provided to
new and existing shareholders and other distribution related activities. During
the year ended December 31, 1994, the Fund made payments to the Distributor of
$405,172 or 0.15% for Class A and $118,200 or 0.15% for Class B, related to the
above activities.
The Class B Plan also permits Class B to reimburse the Distributor up
to 0.75% annually of average daily net assets for costs related to compensation
paid to securities dealers, in place of an initial sales charge to investors,
on the sale of Class B Shares. These costs are based upon a commission payment
charge of 5% of the value of Class B Shares sold (excluding shares acquired
through reinvestment), reduced by the amount of contingent deferred sales
charges (CDSC) that have been received by the Distributor on redemptions of
Class B Shares. These costs also include a charge of interest (carrying charge)
at an annual rate of 1% over the prevailing prime rate to the extent cumulative
commission payment charges, plus any previous carrying charges, less CDSC
received by the Distributor, have not been paid in full by the Fund. For the
year ended December 31, 1994, Class B reimbursed the Distributor $590,998 or
0.75% for such costs. For the year ended December 31, 1994, the Distributor
received $302,402 in CDSC.
At December 31, 1994, Class A had $96,343 and Class B had $77,295
payable to the Distributor pursuant to the above distribution plans.
NOTE E--
ORGANIZATION
The Fund was organized as a Massachusetts business trust on October 17, 1989.
The Fund had no transactions between that date and December 31, 1989, the
date of the Fund's initial offering of shares to the public, other than the
sale at $10.00 per share (net asset value) of 10,000 shares to TFMC.
The organization expenses of the Fund have been deferred and are being
amortized over a period during which it is expected that a benefit will be
realized, but not longer than five years from the date of commencement of
operations.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
Continued
NOTE F--SHARE AND RELATED TRANSACTIONS
A summary of share transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1994 1993
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold-Class A........................................ 5,288,858 $ 54,343,070 6,222,367 $ 67,684,801
Shares sold-Class B........................................ 3,496,364 36,145,744 3,570,391 39,032,830
Shares issued in reinvestment of distributions-Class A..... 669,253 6,642,113 922,955 10,028,581
Shares issued in reinvestment of distributions-Class B..... 200,879 1,988,933 213,817 2,322,382
Shares redeemed-Class A.................................... (5,712,088) (56,313,131) (2,204,763) (24,012,146)
Shares redeemed-Class B.................................... (1,391,946) (13,684,587) (305,683) (3,347,169)
---------- ------------ ---------- ------------
Net increase in shares outstanding......................... 2,551,320 $ 29,122,142 8,419,084 $ 91,709,279
========== ============ ========== ============
</TABLE>
The components of net assets at December 31, 1994, are as follows:
<TABLE>
<S> <C>
Capital paid-in (unlimited number of shares authorized)................................................. $356,244,025
Undistributed net investment income..................................................................... 127,227
Accumulated net realized loss on investments............................................................ (4,123,929)
Net unrealized depreciation of investments.............................................................. (33,299,170)
------------
NET ASSETS.............................................................................................. $318,948,153
============
</TABLE>
16
<PAGE> 18
John Hancock California Tax-Free Income Fund
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
John Hancock California Tax-Free Income Fund
We have audited the accompanying statement of net assets of John Hancock
California Tax-Free Income Fund, formerly Transamerica California Tax-Free
Income Fund, as of December 31, 1994, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of John Hancock California Tax-Free Income Fund at December 31, 1994,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods in conformity with generally
accepted accounting principles.
Houston, Texas
February 3, 1995
17
<PAGE> 19
John Hancock California Tax-Free Income Fund
FUND INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
OFFICERS
Edward J. Boudreau, Jr., Chairman and Chief Executive Officer
Robert G. Freedman, Vice Chairman and Chief Investment Officer
Thomas M. Simmons, President
Anne C. Hodsdon, Executive Vice President
James B. Little, Senior Vice President and Chief Financial Officer
Thomas H. Drohan, Senior Vice President and Secretary
Warren Schmalenberger, Senior Vice President
James K. Ho, Senior Vice President
Andrew F. St. Pierre, Senior Vice President
B.J. Willingham, Senior Vice President
Frank Lucibella, Vice President
James J. Stokowski, Vice President and Treasurer
Susan S. Newton, Vice President and Compliance Officer
John A. Morin, Vice President
Thomas J. Press, Vice President and Assistant Secretary
TRUSTEES
James F. Carlin
William H. Cunningham
Charles L. Ladner
Leo E. Linbeck
Patricia P. McCarter
Steven R. Pruchansky
Norman H. Smith
John P. Toolan
DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
TRANSFER AGENT
The Shareholder Services Group, Inc.
P.O. Box 9656
Providence, RI 02940-9656
1-800-343-6840
This material is not authorized for distribution unless preceded or
accompanied by a current prospectus.
The performance information referred to in this report is historical and does
not represent a guarantee of similar future results. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
No portion of the distributions during the fiscal year qualifies for the
dividend received deduction.
The income dividends paid during the year ended December 31, 1994 were
reported to shareholders on Form 1099 in early 1995. Two percent of dividends
paid were from sources subject to alternative minimum tax (AMT) provisions.
Please consult your tax adviser to determine how this information impacts your
personal tax circumstances.
- --------------------------------------------------------------------------------
18
