APRIL 30, 1996
Phoenix California
Tax Exempt Bonds, Inc.
Annual Report
[Phoenix Logo]
PHOENIX
DUFF&PHELPS
PHOENIX
ANNUAL REPORT
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
MARKET AND PORTFOLIO REVIEW
Investment Environment
Over the past year, the tax-exempt bond market has been volatile. After
posting strong gains in 1995, the municipal market has been under pressure in
1996, with tax-exempt rates rising some 55 basis points year-to-date in
response to concerns about renewed domestic economic growth and inflation.
The economic picture in California has also shown signs of improvement.
The state's economy has resumed growth, with employment increasing statewide
in each of the last two years. On the fiscal side, state financial operations
produced a surplus in 1995, and 1996 is also projected to produce an
operating surplus, eliminating the accumulated state budget deficit. In spite
of the improvement on both the economic and fiscal fronts, caution remains
warranted on the credit front, as credit quality spreads remain extremely
narrow by historical standards.
Portfolio Review
The Fund produced solid returns over this reporting period. For the year
ended April 30, 1996, Class A shares provided a total return of 6.92%, while
the Class B shares returned 6.10%. These results were slightly below the
Lehman Brothers Municipal Bond Index, which returned 7.95% over the same
period. All of these returns assume reinvestment of any distributions but
exclude the effect of sales charges.
The primary reason for the Fund's relative underperformance was its
emphasis on higher quality bonds which were the worst performing sector of
the California municipal bond market. As of April 30, 63% of the Fund's
holdings were rated "AAA". We continue to feel this extremely high "AAA"
allocation is prudent, given the previously mentioned environment of
extremely narrow credit quality spreads. We believe investors are not being
sufficiently compensated for taking credit risk in the California municipal
bond market at present.
Outlook
Looking forward, we will continue to focus on quality assets for the
portfolio, particularly given the narrow credit spreads currently available
in the market. Our overall outlook is positive, given the favorable
combination of limited municipal issuance and relatively low inflation. On
the tax- reform front, concern about the flat tax has declined considerably
as Steve Forbes has dropped out of the presidential race, and the Republican
candidate Bob Dole trails Bill Clinton significantly in the polls.
1
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Phoenix California Tax Exempt Bonds, Inc.
===== Lehman Brothers Municipal Bond Index* $21,634
- ----- Phoenix California Tax Exempt Bond-Class A $19,331
4/30/86 10000 9525
4/30/87 10532 10024
4/30/88 11454 10584
4/30/89 12474 11791
4/30/90 13374 12504
4/30/91 14910 13925
4/30/92 16329 15134
4/30/93 18394 16704
4/30/94 18790 17004
4/30/95 20040 18079
4/30/96 21634 19331
Average Annual Total Returns
for Periods Ending 4/30/96
<TABLE>
<CAPTION>
From Inception
1 5 10 7/26/94 to
Year Years Years 4/30/96
- ------------------------------ ----- ------ ------- --------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales charge 1.84% 5.75% 6.81% --
- ------------------------------ --- ---- ----- ------------
Class A at net asset value 6.92% 6.78% 7.34% --
- ------------------------------ --- ---- ----- ------------
Class B with CDSC 1.10% -- -- 3.66%
- ------------------------------ --- ---- ----- ------------
Class B at net asset value 6.10% -- -- 5.80%
- ------------------------------ --- ---- ----- ------------
Lehman Brothers
Municipal Bond Index* 7.95% 7.73% 8.02% 7.11%
- ------------------------------ --- ---- ----- ------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 4/30/86 for
Class A shares. The total return for Class A shares reflects the maximum
sales charge of 4.75% on the initial investment and assumes reinvestment of
dividends and capital gains. Class B share performance will be greater or
less than that shown based on differences in inception date, fees and sales
charges. The total return (since inception 7/26/94) for Class B shares
reflects the 5% contingent deferred sales charge (CDSC), which is applicable
on all shares redeemed during the 1st year after purchase and 4% for all
shares redeemed during the 2nd year after purchase (scaled down to 3%--3rd
year; 2%--4th and 5th year and 0% thereafter). Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate, so that your shares, when redeemed, may
be worth more or less than the original cost.
*The Lehman Brothers Municipal Bond Index is an unmanaged but commonly used
measure of long-term, investment-grade, tax-exempt municipal bond total
return performance. The Lehman Brothers Municipal Bond Index performance does
not reflect sales charges.
2
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Phoenix California Tax Exempt Bonds, Inc.
INVESTMENTS AT APRIL 30, 1996
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
-------- ------- -------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--99.3%
Certificates of Participation/Lease Revenue--7.8%
California Public Works Lease Revenue 5.25%, '06 AAA $ 1,640 $ 1,644,477
California State Public Works 5.375%, '19 AAA 2,500 2,303,875
California Statewide Community 4.90%, '09 AAA 2,200 2,053,238
Modesto Irrigation District 7.25%, '15 A+ 2,000 2,055,460
San Mateo County Revenue 5.125%, '18 AAA 1,000 895,560
-----------
Total Certificates of Participation/Lease Revenue 8,952,610
-----------
General Obligations--5.4%
California State G.O. 5.50%, '08 AAA 1,500 1,526,940
Central School District G.O. 7.05%, '16 A(b) 1,000 1,093,120
East Bay Regional Park District G.O. Series B
5.75%, '15 AA- 2,155 2,069,188
Pomona School District G.O. Series C 5.60%, '12 AAA 1,500 1,477,530
-----------
Total General Obligations 6,166,778
-----------
Healthcare--5.8%
California Health Facilities 7.30%, '20 A+ 1,400 1,479,688
California Health Facilities 6.25%, '22 A+ 1,500 1,471,425
Grass Valley Hospital 7.25%, '19 A+ 2,000 2,091,740
San Bernardino Sisters of Charity Health Care
7%, '21 AA 1,500 1,608,150
-----------
Total Healthcare 6,651,003
-----------
Higher Education--1.5%
University of California Project C 5%, '23 AAA 2,000 1,720,680
-----------
Housing Revenue--3.6%
California Housing Financing Agency 7.25%, '17 A+ 815 847,714
California Housing Financing Agency 7.75%, '17 A+ 415 437,883
Housing Revenue--continued
California Housing Financing Agency Series C
7.20%, '17 A+ 835 862,154
L.A. Community Redevelopment Agency Series A
6.55%, '27 AAA 2,000 2,039,400
-----------
Total Housing Revenue 4,187,151
-----------
Pre-Refunded Revenue--26.2%
Covina Redevelopment Agency 8.80%, '08 NR 1,200 1,432,128
Hayward Hospital Revenue (St. Rose Hosp.) 10%, '04 AAA 550 685,465
Northern California Hydro Electric 7.50%, '23 AAA 195 233,912
Orange County Water District COP 7%, '15 AAA 1,000 1,112,840
Pasadena COP 6.75%, '15 AAA(b) 2,000 2,205,040
Puerto Rico Aqueduct 7%, '19 AAA 1,500 1,618,080
Puerto Rico Electric Power 7%, '21 AAA 2,500 2,818,350
Puerto Rico Hwy. Revenue Series T 6.625%, '18 AAA 200 223,194
Puerto Rico Public Buildings 7%, '19 AAA 500 537,065
Puerto Rico Public Buildings Series L 6.875%, '21 AAA 3,170 3,579,628
Redlands COP Series C 7%, '22 AAA 1,000 1,118,650
Riverside County 8.625%, '16 AAA 700 921,333
Riverside County 7.80%, '21 AAA 4,000 4,861,440
Riverside Public Financing Authority 7.80%, '08 Baa(b) 1,000 1,049,960
San Bernardino COP Series B 7%, '28 AAA 2,200 2,477,992
San Gabriel Valley Schools Financing 7.20%, '19 NR 1,200 1,318,956
San Jose Redevelopment Agency 7.80%, '11 NR 1,000 1,030,460
Stockton COP 7.50%, '16 NR 1,000 1,009,900
Torrance Hospital COP 7.10%, '15 AAA 1,780 1,932,243
-----------
Total Pre-Refunded Revenue 30,166,636
-----------
Puerto Rico--3.8%
Puerto Rico Electric Power Authority Series N 6%, '10 A- 1,500 1,507,545
See Notes to Financial Statements
3
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Phoenix California Tax Exempt Bonds, Inc.
Puerto Rico--continued
Puerto Rico G.O. 5.375%, '06 A $ 2,000 $ 1,990,380
Puerto Rico Highway Authority Series T 6.625%, '18 A 800 888,232
-----------
Total Puerto Rico 4,386,157
-----------
Tax Revenue--11.3%
Culver City Redevelopment Agency 4.60%, '20 AAA 4,500 3,671,235
L.A. County Sales Tax 7%, '19 AA- 2,500 2,674,150
L.A. County Transit Authority Series A 5%, '21 AAA 3,750 3,243,750
San Francisco Redevelopment Agency 4.75%, '18 AAA 1,100 932,074
San Francisco Redevelopment Agency 5.50%, '18 A- 1,500 1,354,020
San Pablo Redevelopment 5%, '13 AAA 1,250 1,133,938
-----------
Total Tax Revenue 13,009,167
-----------
Transportation Revenue--6.5%
Foothill/Eastern Transportation Revenue Series A
6%, '34 BBB- 2,000 1,862,700
Los Angeles County Series B Revenue 5.25%, '23 AAA 3,000 2,699,970
San Diego Transportation Series A 4.75%, '08 AAA 2,000 1,887,640
San Francisco Airport Revenue 6.25%, '10 AAA 1,000 1,034,050
-----------
Total Transportation Revenue 7,484,360
-----------
Utility Revenue--27.4%
Beverly Hills Wastewater 6%, '22 AA 1,500 1,474,770
California State Water Series L 5.75%, '19 AA 4,000 3,840,080
Chino Basin, California 5.90%, '11 AAA 2,000 2,041,760
Contra Costa Water District Series G 5.75%, '14 AAA 4,490 4,414,029
Delta Diablo Sanitation District, CA 0%, '16 AAA 1,070 306,919
Irvine Ranch Water District
7.80%, '08 A+ 1,500 1,562,040
Irvine Ranch Water District
8.25%, '23 A+ 2,000 2,123,720
L.A. Wastewater Series D
4.70%, '17 AAA 7,000 5,870,410
Sacramento Cogeneration Project 6.375%, '10 BBB- 1,000 997,250
Sacramento Municipal Utility District Revenue
5.75%, '11 AAA 5,000 5,000,600
Sacramento Utility District Electric Series G
4.75%, '21 (c) AAA 1,000 832,400
Southern California Public Power Authority
5.50%, '20 A 915 818,330
Southern California Public Power Authority
5.75%, '21 AA- 600 572,352
Southern California Public Power Series A
4.875%, '20 AAA 2,000 1,703,180
-----------
Total Utility Revenue 31,557,840
-----------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $109,492,288) 114,282,382
-----------
TOTAL INVESTMENTS--99.3%
(Identified cost $109,492,288) 114,282,382(a)
Cash and receivables, less liabilities--0.7% 782,003
-----------
NET ASSETS--100.0% $115,064,385
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,920,629 and gross
depreciation of $1,130,535 for income tax purposes. At April 30, 1996,
the aggregate cost of securities for federal income tax purposes was
$109,492,288.
(b) As rated by Moody's and/or Fitch.
(c) Segregated as collateral for initial margin on futures contracts.
See Notes to Financial Statements
4
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
Assets
Investment securities at value
(Identified cost $109,492,288) $114,282,382
Receivables
Variation margin for futures contracts 17,187
Fund shares sold 112,099
Interest 2,201,695
-----------
Total assets 116,613,363
-----------
Liabilities
Payables
Custodian 1,133,363
Fund shares repurchased 126,613
Dividend distributions 100,753
Investment advisory fee 43,097
Distribution fee 24,706
Transfer agent fee 14,326
Directors' fee 7,717
Financial agent fee 2,873
Accrued expenses 95,530
-----------
Total liabilities 1,548,978
-----------
Net Assets $115,064,385
===========
Net Assets Consist of:
Capital paid in on shares of capital stock $110,325,713
Distributions in excess of net investment income (78,322)
Accumulated net realized loss (236,380)
Net unrealized appreciation 5,053,374
-----------
Net Assets $115,064,385
===========
Class A
Shares of capital stock outstanding, $.01 par
value, 250,000,000 shares authorized
(Net Assets $113,806,356) 8,911,363
Net asset value per share $12.77
Offering price per share $12.77/(1-4.75%) $13.41
Class B
Shares of capital stock outstanding, $.01 par
value, 250,000,000 shares authorized
(Net Assets $1,258,029) 98,491
Net asset value and offering price per share $12.77
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
Investment Income
Interest $7,410,713
-----------
Total investment income 7,410,713
-----------
Expenses
Investment advisory fee 542,769
Distribution fee--Class A 299,411
Distribution fee--Class B 8,508
Financial agent fee 36,185
Transfer agent 108,622
Professional 52,016
Registration 51,466
Printing 38,325
Directors 26,777
Custodian 16,146
Miscellaneous 24,631
-----------
Total expenses 1,204,856
-----------
Net investment income 6,205,857
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 1,138,664
Net realized loss on futures contracts (40,344)
Net change in unrealized appreciation
(depreciation) on investments 756,545
-----------
Net gain on investments 1,854,865
-----------
Net increase in net assets resulting from
operations $8,060,722
===========
See Notes to Financial Statements
5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1996 April 30, 1995
-------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 6,205,857 $ 6,880,816
Net realized gain 1,098,320 946,797
Net change in unrealized appreciation (depreciation) 756,545 (797,795)
------------ --------------
Increase in net assets resulting from operations 8,060,722 7,029,818
------------ --------------
From Distributions to Shareholders
Net investment income--Class A (6,135,672) (7,272,931)
Net investment income--Class B (36,045) (9,873)
Net realized gains--Class A (288,116) (2,856,630)
Net realized gains--Class B (1,693) (9,083)
Distributions in excess of net investment income--Class A (77,865) (29,892)
Distributions in excess of net investment income--Class B (457) (41)
Distributions in excess of accumulated net realized gains--Class A (235,000) (811,818)
Distributions in excess of accumulated net realized gains--Class B (1,380) (2,581)
------------ --------------
Decrease in net assets from distributions to shareholders (6,776,228) (10,992,849)
------------ --------------
From Share Transactions
Class A
Proceeds from sales of shares (2,203,421 and 496,574 shares,
respectively) 28,531,594 6,213,919
Net asset value of shares issued from reinvestment of distributions
(218,807 and 447,402 shares, respectively) 2,842,822 5,495,965
Cost of shares repurchased (2,801,630 and 1,731,374 shares,
respectively) (36,234,994) (21,728,823)
------------ --------------
Total (4,860,578) (10,018,939)
------------ --------------
Class B
Proceeds from sales of shares (73,939 and 41,888 shares,
respectively) 962,800 514,453
Net asset value of shares issued from reinvestment of distributions
(1,751 and 1,035, respectively) 22,780 12,543
Cost of shares repurchased (13,644 and 6,478 shares, respectively) (175,468) (79,763)
------------ --------------
Total 810,112 447,233
------------ --------------
Decrease in net assets from share transactions (4,050,466) (9,571,706)
------------ --------------
Net decrease in net assets (2,765,972) (13,534,737)
Net Assets
Beginning of period 117,830,357 131,365,094
------------ --------------
End of period (including distributions in excess of net investment
income of ($78,322) and ($34,140), respectively) $115,064,385 $117,830,357
============ ==============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
Year Ended April 30,
1996 1995 1994 1993 1992
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.63 $13.03 $13.64 $13.20 $13.07
Income from investment operations
Net investment income 0.67 0.71 0.80 0.81 0.87
Net realized and unrealized gain (loss) 0.20 0.05 (0.53) 0.51 0.24
----- ----- ----- ----- -------
Total from investment operations 0.87 0.76 0.27 1.32 1.11
----- ----- ----- ----- -------
Less distributions
Dividends from net investment income (0.67) (0.76) (0.76) (0.80) (0.88)
Distributions in excess of net investment income (0.01) -- -- -- --
Distributions from net realized gains (0.03) (0.31) (0.12) (0.08) (0.10)
Distributions in excess of accumulated net realized
gains (0.02) (0.09) -- -- --
----- ----- ----- ----- -------
Total distributions (0.73) (1.16) (0.88) (0.88) (0.98)
----- ----- ----- ----- -------
Change in net asset value 0.14 (0.40) (0.61) 0.44 0.13
----- ----- ----- ----- -------
Net asset value, end of period $12.77 $12.63 $13.03 $13.64 $13.20
===== ===== ===== ===== =======
Total return (1) 6.92% 6.34% 1.80% 10.38% 8.68%
Ratios/supplemental data:
Net assets, end of period (thousands) $113,806 $117,370 $131,365 $147,760 $139,118
Ratio to average net assets of:
Operating expenses 0.99% 0.93% 0.85% 0.90% 0.68%
Net investment income 5.15% 5.63% 5.82% 6.00% 6.55%
Portfolio turnover 20% 51% 25% 25% 33%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------
From
Year Inception
Ended 7/26/94 to
4/30/96 4/30/95
------ -----------
<S> <C> <C>
Net asset value, beginning of period $12.63 $13.04
Income from investment operations
Net investment income 0.56
(4) 0.48
Net realized and unrealized gain 0.20 0.01
---- ---------
Total from investment operations 0.76 0.49
---- ---------
Less distributions
Dividends from net investment income (0.56) (0.50)
Distributions in excess of net investment income (0.01) --
Distributions from net realized gains (0.03) (0.31)
Distributions in excess of accumulated net realized gains (0.02) (0.09)
---- ---------
Total distributions (0.62) (0.90)
---- ---------
Change in net asset value 0.14 (0.41)
---- ---------
Net asset value, end of period $12.77 $12.63
==== =========
Total return (1) 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $1,258 $460
Ratio to average net assets of:
Operating expenses 1.78% 1.55%(2)
Net investment income 4.32% 4.90%(2)
Portfolio turnover 20% 51%
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
See Notes to Financial Statements
7
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") is organized as a
Maryland corporation and is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company.
The Fund's investment objective is to obtain a high level of current income
exempt from California state and local income taxes, as well as Federal
income tax, consistent with preservation of capital. The Fund offers both
Class A and Class B shares. Class A shares are sold with a front-end sales
charge of up to 4.75%. Class B shares are sold with a contingent deferred
sales charge which declines from 5% to zero depending on the period of time
the shares are held. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Income and expenses of the Fund
are borne pro rata by the holders of both classes of shares, except that each
class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
A. Security valuation:
Municipal bonds are valued at the most recently quoted bid prices or at bid
prices based on a matrix theory which considers such factors as security
prices, yields, maturities, coupons and ratings, furnished by dealers and an
independent pricing service. Short-term investments having a remaining
maturity of less than 61 days are valued at amortized cost which approximates
market. All other securities and assets are valued at their fair value as
determined in good faith by or under the direction of the Directors.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Premiums and discounts are amortized to income
using the effective interest method. Realized gains and losses are determined
on the identified cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of its taxable and tax exempt income to its
shareholders. In addition, the Fund intends to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Code. Therefore, no provision for federal income taxes or excise taxes has
been made.
D. Distributions to shareholders:
Distributions to shareholders are declared and recorded daily. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards, partnerships, and losses deferred due to wash
sales and excise tax regulations. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
paid in capital.
E. Futures contracts:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. The Fund may enter into financial
futures contracts as a hedge against anticipated changes in the market value
of the portfolio securities. Upon entering into a futures contract the Fund
is required to pledge to the broker an amount of cash and/or securities equal
to the "initial margin" requirements of the futures exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation
margin and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The potential risk to the Fund is that
the change in value of the futures contract may not correspond to the change
in value of the hedged instruments.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.45% of the average daily net assets of the
Fund for the first $1 billion.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $17,868 for Class A shares and
deferred sales charges of $819
8
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (Continued)
for Class B shares for the year ended April 30, 1996. In addition, the Fund
pays PEPCO a distribution fee at an annual rate of 0.25% for Class A shares
and 1.00% for Class B shares of the average daily net assets of the Fund. The
Distributor has advised the Fund that of the total amount expensed for the
year ended April 30, 1996, $26,087 was earned by the Distributor and $281,832
was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust as sub-transfer agent. For the year
ended April 30, 1996, transfer agent fees were $108,622 of which PEPCO
retained $28,058, which is net of fees paid to State Street.
At April 30, 1996, PHL and affiliates held 192 Class A shares and 9,037
Class B shares of the Fund with a combined value of $117,854.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1996, aggregated $22,744,147 and
$25,197,046, respectively. There were no purchases or sales of long-term U.S.
Government securities.
At April 30, 1996, the Fund had entered into short futures contracts as
follows:
Value of Market Net
Number of Contracts Value of Unrealized
Description Contracts when Opened Contracts Appreciation
- ------------- ---------- ------------ --------- -------------
U.S. Treasury
June, 96 25 $2,992,187 $2,728,907 $263,280
4. ASSET CONCENTRATION
There are certain risks arising from the Fund's concentration in California
municipal securities. Certain California constitutional amendments,
legislative measures, executive orders, administrative regulations, court
decisions and voter initiatives could result in certain adverse consequences
including impairing the ability of certain issuers of California municipal
securities to pay principal and interest on their obligations.
5. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1995 may be
deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1996, the Fund did not defer any losses;
however, the Fund was able to utilize losses deferred in the prior year
against current year capital gains in the amount of $818,075.
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 97% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
For the fiscal year ended April 30, 1996, the Fund distributed $9,564 of
long-term capital gain dividends.
This report is not authorized for distribution to prospective investors
in the Phoenix California Tax Exempt Bonds, Inc. unless preceded or
accompanied by an effective Prospectus which includes information concerning
the sales charge, Fund's record and other pertinent information.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
To the Board of Directors and Shareholders of
Phoenix California Tax Exempt Bonds, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Phoenix California Tax Exempt Bonds, Inc. (the "Fund") at April
30, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at April
30, 1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
[Price Waterhouse LLP Signature]
Boston, Massachusetts
June 14, 1996
10
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Directors
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Martin J. Gavin, Executive Vice President
Michael E. Haylon, Executive Vice President
James M. Dolan, Vice President
Timothy M. Heaney, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
James D. Wehr, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
National Securities & Research Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Legal Counsel
Dechert, Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
P.O. Box 2200
Enfield, CT 06083-2200
[Phoenix Logo]
PHOENIX
DUFF&PHELPS
PDP 742 (6/96)
Bulk Rate Mail
U.S. Postage
PAID
Springfield, MA
Permit No. 444
[DALBAR LOGO]
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