When determining tax-exempt status for a mutual fund, which financial aspect is considered under California tax law?

In California tax law, the determination of tax-exempt status for a mutual fund primarily focuses on the percentage of tax-exempt obligations within the fund's portfolio. This aspect is crucial because tax-exempt mutual funds are specifically designed to invest in securities that are exempt from federal or state taxes, such as municipal bonds. The higher the percentage of tax-exempt obligations, the more likely it is for the mutual fund to qualify for tax-exempt status, allowing investors to benefit from tax-free income.

Other financial aspects like Net Asset Value, investment in state bonds, and performance history are significant in their own contexts but do not serve as direct indicators of a mutual fund's tax-exempt status. Net Asset Value reflects the overall value of the fund, while investment in state bonds might contribute positively but is not the primary criterion for tax exemption. Performance history reveals how well the fund has performed over time but does not impact its tax-exempt classification. Therefore, focusing on the percentage of tax-exempt obligations is essential for understanding why a mutual fund may receive tax-exempt status under California tax law.