April 30, 1997
PHOENIX
FUNDS
ANNUAL REPORT
Phoenix California
Tax Exempt Bonds, Inc.
[Logo] PHOENIX
DUFF & PHELPS
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
INVESTOR PROFILE
Phoenix California Tax Exempt Bond Fund is designed for California
residents seeking to minimize federal and California state income taxes. Income
from the Fund may be subject to state and local taxes and the alternative
minimum tax, if applicable. The Fund's focus is on issues that emphasize high
quality and yield.
INVESTMENT ADVISER'S REPORT
For the 12 months ended April 30, 1997, Class A shares returned 5.56% and
the Class B shares earned 4.84%. The Lehman Brothers Municipal Bond Index
returned 6.65% and the Lehman Brothers California Municipal Bond Index, 6.98%.
All performance figures assume reinvestment of dividends and exclude the effect
of sales charges.
Interest rates on municipal bonds basically started the reporting period
and ended it within a range of only 20 basis points. However, rates were very
volatile over the last six months due to mixed economic signals and uncertainty
over possible Fed tightening.
The outlook for California's economy remains positive. The state's
unemployment picture has improved, the housing market is recovering and key
industry segments are expanding. However, a number of municipalities are still
experiencing fiscal difficulties despite financial improvements at the state
level. And as the federal government delegates more responsibility for
entitlement programs to the states, this is likely to put more pressure on some
issuers.
The Fund's emphasis on noncallable bonds and lower-coupon issues
contributed positively to performance. Results were also helped by our holdings
of California government obligation bonds and bonds backed by the state.
However, performance was limited by the Fund's overweighting in "AAA"-rated
issues, which made up 66% of the portfolio. High-quality credits significantly
underperformed California municipal bonds rated "A" or less.
OUTLOOK
Credit quality spreads remain at historically narrow levels, making this
an unfavorable time to assume additional risk, especially given our outlook for
slowing growth in the overall economy. We still believe that the potential for
fiscal problems for some municipalities warrants a high-quality portfolio. Our
current strategy is to emphasize high-quality "essential service" credits, such
as municipal water and sewer issues. These issues have maintained their strong
credit fundamentals despite fiscal problems experienced by some municipalities.
1
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Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
[Tabular Representation of Line Chart]
Lehman Brothers California
Municipal Bond Index* Tax Exempt Bond--Class A
4/30/87 10,000 9,525
4/30/88 10,876 10,060
4/30/89 11,844 11,207
4/30/90 12,698 11,885
4/30/91 14,156 13,217
4/30/92 15,504 14,364
4/30/93 17,465 15,854
4/30/94 17,841 16,139
4/30/95 19,028 17,162
4/30/96 20,541 18,350
4/30/97 21,907 19,370
Average Annual Total Returns
for Periods Ending 4/30/97
<TABLE>
<CAPTION>
From Inception
7/26/94 to
1 Year 5 Years 10 Years 4/30/97
-------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales charge 0.52% 5.13% 6.83% --
- --------------------------------------- ------ ----- ----- --------
Class A at net asset value 5.56% 6.16% 7.35% --
- --------------------------------------- ------- ----- ----- --------
Class B with CDSC 0.85% -- -- 4.48%
- --------------------------------------- -------- ------ ----- --------
Class B at net asset value 4.84% -- -- 5.45%
- --------------------------------------- ------- ----- ----- --------
Lehman Brothers Municipal Bond Index* 6.65% 7.16% 8.16% 7.05%**
- -------------------------------------- ------ ----- ----- --------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 4/30/87 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.
**Index information from 7/31/94 to 4/30/97.
2
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Phoenix California Tax Exempt Bonds, Inc.
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INVESTMENTS AT APRIL 30, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ ------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--95.5%
Certificates of Participation/Lease
Revenue--6.1 %
Anaheim Public Funding
Series C 6%, '16 ............... AAA $2,600 $2,708,914
California Public Works
Lease Revenue 5.25%,
'06 ........................... AAA 1,640 1,658,811
Orange County Recovery
COP 5.80%, '16 ............... AAA 1,500 1,496,265
San Mateo County Revenue
5.125%, '18 .................. AAA 1,000 930,830
-----------
Total Certificates of Participation/Lease
Revenue ................................................... 6,794,820
-----------
General Obligations--5.5%
California State G.O. 5.50%,
'08 ........................... AAA 1,500 1,537,650
Central School District G.O.
7.05 %, '16 .................. A(b) 1,000 1,078,080
Pomona School District G.O.
Series C 5.60%, '12 ............ AAA 1,500 1,528,875
Puerto Rico G.O. 5.375%,
'06 ........................... A 2,000 1,996,620
-----------
Total General Obligations ................................. 6,141,225
-----------
Healthcare--6.1 %
California Health Facilities
7.30 %, '20 .................. A+ 1,400 1,488,396
California Health Facilities
6.25 %, '22 .................. A+ 1,500 1,519,530
Grass Valley Hospital
7.25 %, '19 .................. A+ 2,000 2,092,860
San Bernardino School
Health Care, Sisters of
Charity Series A 7%, '21 AA 1,500 1,647,480
-----------
Total Healthcare .......................................... 6,748,266
-----------
Housing Revenue--3.4%
California Housing
Financing Agency Series
D 7.25%, '17 .................. AA- 625 650,975
California Housing
Financing Agency Series
A 7.75%, '17 .................. AA- 350 366,933
California Housing
Financing Agency Series
C 7.20%, '17 .................. AA- 595 614,195
L.A. Community
Redevelopment Agency
Series A 6.55%, '27 ............ AAA 2,000 2,080,000
-----------
Total Housing Revenue .................................... 3,712,103
-----------
Pre-Refunded Revenue--28.8%
Covina Redevelopment
Agency 8.80%, '08 ............ NR 1,200 1,440,048
Hayward Hospital Revenue
(St. Rose Hosp.) 10%,
'04 ........................... AAA 510 595,910
Huntington Park
Redevelopment Agency
8%, '19 ........................ AAA 2,400 3,092,904
Los Angeles Harbor
Department 7.60%, '18 ......... AAA 1,000 1,216,190
Northern California Hydro
Electric 7.50%, '23 ............ AAA 195 236,073
Orange County Water
District COP 7%, '15 ......... AAA 1,000 1,089,380
Pasadena COP 6.75%, '15 ......... Aaa(b) 2,000 2,162,360
Puerto Rico Aqueduct 7%,
'19 ........................... AAA 1,500 1,579,740
Puerto Rico Electric Power
7%, '21 ........................ BBB+ 2,500 2,760,775
Puerto Rico Highway
Authority Series T
6.625%, '18 .................. A 800 877,232
Puerto Rico Highway
Revenue Series T 6.625%,
'18 ........................... AAA 200 219,308
Puerto Rico Public Buildings
7%, '19 ........................ AAA 500 524,190
Puerto Rico Public Buildings
Series L 6.875%, '21 ......... AAA 3,170 3,511,884
Redlands COP Series C 7%,
'22 ........................... AAA 1,000 1,095,180
Riverside County 8.625%,
'16 ........................... AAA 700 896,287
Riverside County 7.80%,
'21 ........................... AAA 4,000 4,904,360
San Bernardino COP Series
B 7%, '28 ..................... AAA 2,200 2,428,338
San Gabriel Valley Schools
Financing 7.20%, '19 ......... NR 1,200 1,288,836
Torrance Hospital COP
7.10 %, '15 ............ AAA 1,745 1,925,241
-----------
Total Pre-Refunded Revenue ................................ 31,844,236
-----------
Tax Revenue--11.1%
Culver City Redevelopment
Agency 4.60%, '20 ............ AAA 4,500 3,716,055
L.A. County Sales Tax 7%,
'19 ........................... AA- 2,500 2,656,800
L.A. County Transit
Authority Series A 5%,
'21 ........................... AAA 2,750 2,436,280
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
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<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
<S> <C> <C> <C>
---------- ------ ------------
Tax Revenue--continued
San Francisco
Redevelopment Agency
4.75%, '18 ..................... AAA $1,100 $ 942,909
San Francisco
Redevelopment Agency
5.50%, '18 ..................... A- 1,500 1,401,960
San Pablo Redevelopment
Agency 5%, '13 ............... AAA 1,250 1,170,637
----------------
Total Tax Revenue .......................................... 12,324,641
----------------
Transportation Revenue--3.0%
Riverside Public Financing
Authority 7.80%, '08 ......... Baa(b) 360 367,052
San Diego Transportation
Series A 4.75%, '08 ............ AAA 2,000 1,910,360
San Francisco Airport
Revenue 6.25%, '10 ............ AAA 1,000 1,049,200
----------------
Total Transportation Revenue .............................. 3,326,612
----------------
Utility Revenue--31.5%
California Department of
Water 5%, '15 .................. AA 1,375 1,260,614
Chino Basin Funding
Authority Revenue 5.90%,
'11 ........................... AAA 2,000 2,099,840
Contra Costa Water District
Series G 5.75%, '14 (c) ...... AAA 3,100 3,122,785
Delta Diablo Sanitation
District 0%, '16 ............... AAA 1,070 333,166
Irvine Ranch Water District
7.80%, '08 ..................... A+ 1,500 1,537,365
Irvine Ranch Water District
8.25%, '23 (c) ............... A+ 2,000 2,090,880
L.A. Wastewater Series D
4.70%, '17 ..................... AAA 7,000 5,977,720
Metropolitan Water District
Series C 5%, '27 ............... AA 3,500 3,098,830
MSR Public Power Agency
6.75%, '20 ..................... AAA 1,500 1,686,555
Puerto Rico Electric Power
Authority Series N 6%,
'10 ........................... BBB+ 1,500 1,508,865
Sacramento Cogeneration
Project 6.375%, '10 ............ BBB- 1,000 1,030,690
Sacramento Flood Control
Agency 5.375%, '15 ............ AAA 2,370 2,271,953
Sacramento Municipal Utility
District Revenue 5.75%,
'11 ........................... AAA 3,500 3,559,745
Sacramento Utility District
Electric Series G 4.75%,
'21 ........................... AAA 1,000 853,430
San Francisco City & County
Public Utility 5%, '15 ......... AA- 2,000 1,834,100
Southern California Public
Power Authority 5.50%,
'20 ........................... A 915 856,916
Southern California Public
Power Series A 4.875%,
'20 ........................... AAA 2,000 1,733,480
----------------
Total Utility Revenue .................................... 34,856,934
----------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $101,109,679) ........................... 105,748,837
----------------
SHORT-TERM OBLIGATIONS--0.5%
Commercial Paper--0.5%
Anheuser-Busch Cos., Inc.
5.55%, 5-1-97 .................. A-1+ 555 555,000
----------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $555,000) .............................. 555,000
----------------
TOTAL INVESTMENTS--96.0%
(Identified cost $101,664,679) ........................... 106,303,837(a)
Cash and receivables, less 4,413,068
liabilities--4.0% ----------------
NET ASSETS--100.0% ....................................... $ 110,716,905
================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,277,823 and gross
depreciation of $638,665 for income tax purposes. At April 30, 1997, the
aggregate cost of securities for federal income tax purposes was
$101,664,679.
(b) As rated by Moody's, Duff and Phelps or Fitch.
(c) Segregated as collateral for futures contracts.
At April 30, 1997, the concentration of the Fund's investments by state,
determined as a percentage of total investments, is as follows:
California 87%
Puerto Rico 12%
Other 1%
4 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
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STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets
Investment securities at value
(Identified cost $101,664,679) $106,303,837
Cash 2,636,081
Receivables
Variation margin for futures contracts 8,750
Fund shares sold 159,507
Interest 2,075,640
------------
Total assets 111,183,815
------------
Liabilities
Payables
Fund shares repurchased 219,749
Dividend distributions 98,929
Investment advisory fee 40,548
Distribution fee 23,398
Transfer agent fee 10,169
Financial agent fee 6,740
Directors' fee 4,277
Accrued expenses 63,100
------------
Total liabilities 466,910
------------
Net Assets $110,716,905
============
Net Assets Consist of:
Capital paid in on shares of common stock $106,144,515
Distributions in excess of net investment
income (98,929)
Accumulated net realized gain 13,099
Net unrealized appreciation 4,658,220
------------
Net Assets $110,716,905
============
Class A
Shares of common stock outstanding, $0.01
par value, 250,000,000 shares authorized
(Net Assets $109,357,862) 8,594,786
Net asset value per share $ 12.72
Offering price per share
$12.72/(1-4.75%) $ 13.35
Class B
Shares of common stock outstanding, $0.01
par value, 250,000,000 shares authorized
(Net Assets $1,359,043) 106,798
Net asset value and offering price per share $ 12.73
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
Investment Income
Interest $7,022,576
----------
Total investment income 7,022,576
----------
Expenses
Investment advisory fee 521,952
Distribution fee--Class A 286,562
Distribution fee--Class B 13,644
Financial agent fee 50,587
Transfer agent 77,152
Professional 43,850
Printing 30,453
Registration 28,100
Directors 19,230
Custodian 11,200
Miscellaneous 1,948
----------
Total expenses 1,084,678
----------
Net investment income 5,937,898
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 606,865
Net realized gain on futures contracts 430,927
Net change in unrealized appreciation
(depreciation) on investments (395,154)
----------
Net gain on investments 642,638
----------
Net increase in net assets resulting from
operations $6,580,536
==========
See Notes to Financial Statements
5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
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STATEMENT OF CHANGES IN NET ASSETS
Year Year
Ended Ended
April 30, 1997 April 30, 1996
---------------- --------------
From Operations
Net investment income $ 5,937,898 $ 6,205,857
Net realized gain 1,037,792 1,098,320
Net change in unrealized appreciation
(depreciation) (395,154) 756,545
------------ ------------
Increase in net assets resulting from
operations 6,580,536 8,060,722
------------ ------------
From Distributions to Shareholders
Net investment income--Class A (5,878,203) (6,135,672)
Net investment income--Class B (59,695) (36,045)
Net realized gains--Class A (778,981) (288,116)
Net realized gains--Class B (9,332) (1,693)
Distributions in excess of net investment
income--Class A (20,400) (77,865)
Distributions in excess of net investment
income--Class B (207) (457)
Distributions in excess of accumulated net
realized gains--Class A -- (235,000)
Distributions in excess of accumulated net
realized gains--Class B -- (1,380)
------------ ------------
Decrease in net assets from distributions to
shareholders (6,746,818) (6,776,228)
------------ ------------
From Share Transactions
Class A
Proceeds from sales of shares (5,230,522
and 2,203,421 shares, respectively) 67,136,755 28,531,594
Net asset value of shares issued from
reinvestment of distributions
(228,498 and 218,807 shares, respectively) 2,940,319 2,842,822
Cost of shares repurchased (5,775,597 and
2,801,630 shares, respectively) (74,366,195) (36,234,994)
------------ ------------
Total (4,289,121) (4,860,578)
------------ ------------
Class B
Proceeds from sales of shares (32,053 and
73,939 shares, respectively) 412,944 962,800
Net asset value of shares issued from
reinvestment of distributions (2,791 and
1,751, respectively) 35,912 22,780
Cost of shares repurchased (26,537 and
13,644 shares, respectively) (340,933) (175,468)
------------ ------------
Total 107,923 810,112
------------ ------------
Decrease in net assets from share
transactions (4,181,198) (4,050,466)
------------ ------------
Net decrease in net assets (4,347,480) (2,765,972)
Net Assets
Beginning of period 115,064,385 117,830,357
------------ ------------
End of period (including distributions in
excess of net investment of ($98,929) and
($78,322), respectively) $110,716,905 $115,064,385
============ ============
See Notes to Financial Statements
6
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
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FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year Ended April 30,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 12.63 $ 13.03 $ 13.64 $ 13.20
Income from investment operations
Net investment income 0.66 0.67 0.71 0.80 0.81
Net realized and unrealized gain (loss) 0.04 0.20 0.05 (0.53) 0.51
--------- -------- -------- -------- --------
Total from investment operations 0.70 0.87 0.76 0.27 1.32
--------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.66) (0.67) (0.76) (0.76) (0.80)
Distributions in excess of net investment
income -- (0.01) -- -- --
Distributions from net realized gains (0.09) (0.03) (0.31) (0.12) (0.08)
Distributions in excess of accumulated net
realized gains -- (0.02) (0.09) -- --
--------- -------- -------- -------- --------
Total distributions (0.75) (0.73) (1.16) (0.88) (0.88)
--------- -------- -------- -------- --------
Change in net asset value (0.05) 0.14 (0.40) (0.61) 0.44
--------- -------- -------- -------- --------
Net asset value, end of period $ 12.72 $ 12.77 $ 12.63 $ 13.03 $ 13.64
========= ======== ======== ======== ========
Total return(1) 5.56% 6.92% 6.34% 1.80% 10.38%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 109,358 $113,806 $117,370 $131,365 $147,760
Ratio to average net assets of:
Operating expenses 0.93% 0.99% 0.93% 0.85% 0.90%
Net investment income 5.13% 5.15% 5.63% 5.82% 6.00%
Portfolio turnover 17% 20% 51% 25% 25%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------
From
Inception
Year Ended April 30, 7/26/94 to
1997 1996 4/30/95
----------- --------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 12.63 $ 13.04
Income from investment operations
Net investment income 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.05 0.20 0.01
------- ---------- ----------
Total from investment operations 0.61 0.76 0.49
------- ---------- ----------
Less distributions
Dividends from net investment income (0.56) (0.56) (0.50)
Distributions in excess of net investment
income -- (0.01) --
Distributions from net realized gains (0.09) (0.03) (0.31)
Distributions in excess of accumulated net
realized gains -- (0.02) (0.09)
------- ---------- ----------
Total distributions (0.65) (0.62) (0.90)
------- ---------- ----------
Change in net asset value (0.04) 0.14 (0.41)
------- ---------- ----------
Net asset value, end of period $ 12.73 $ 12.77 $ 12.63
======= ========== ==========
Total return(1) 4.84% 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,359 $ 1,258 $ 460
Ratio to average net assets of:
Operating expenses 1.68% 1.78% 1.55%(2)
Net investment income 4.37% 4.32% 4.90%(2)
Portfolio turnover 17% 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, 1997
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. 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:
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service which utilizes information with respect to recent
sales, market transactions in comparable securities, quotations from dealers,
and various relationships between securities in determining value. Short-term
investments having a remaining maturity of 60 days or less 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 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
8
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (Continued)
$10,540 for Class A shares and deferred sales charges of $7,780 for Class B
shares for the year ended April 30, 1997. 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,
1997, $31,613 was earned by the Distributor and $268,593 was earned by
unaffiliated participants.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of the Fund through December 31, 1996, and starting on January
1, 1997, at an annual rate of 0.05% of average daily net assets up to $100
million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Fund's Transfer Agent with State Street Bank and
Trust as sub-transfer agent. For the year ended April 30, 1997, transfer agent
fees were $77,152 of which PEPCO retained $25,031, which is net of fees paid to
State Street.
At April 30, 1997, PHL and affiliates held 204 Class A shares and 9,504
Class B shares of the Fund with a combined value of $123,571.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1997, aggregated $18,805,940 and
$27,932,377, respectively. There were no purchases or sales of long-term U.S.
Government securities.
At April 30, 1997, the Fund had entered into futures contracts as follows:
Value of
Number Contracts Market Net
of when Value of Unrealized
Description Contracts Opened Contracts Appreciation
- --------------- ----------- ------------ ------------ -------------
U.S. Treasury
June, '97 (Long) 10 $1,079,063 $1,092,813 $13,750
U.S. Treasury
Sept., '97 10 1,083,125 1,088,437 5,312
(Long)
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.
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, 1997, the Fund distributed $761,412 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 [Logo]
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, 1997, 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, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 9, 1997
10
<PAGE>
RESULTS OF SHAREHOLDER MEETING (Unaudited)
A special meeting in lieu of the Annual Meeting of shareholders of the Phoenix
California Tax Exempt Bonds, Inc. was held on March 14, 1997 to approve the
following matters:
1. Fix the number of directors at fourteen and elect such number as detailed
below.
2. Ratify selection of Price Waterhouse LLP, independent accountants, as
auditors for the fiscal year ending April 30, 1997.
3. Approve a new Investment Advisory Agreement providing that the Fund pay
the fees of all directors who are not full-time employees of the Adviser
or any of its affiliates; authorizing the Adviser to utilize bunching
procedures; and eliminating the expense cap.
4. Approve a restatement of the Fund's fundamental investment
restrictions.
On the record date for this meeting, there were 8,957,900 shares outstanding
and 66.82% of the shares outstanding and entitled to vote were present by
proxy.
NUMBER OF VOTES:
1. Election of Directors For Withheld
--- --------
C. Duane Blinn 5,813,363 172,739
Robert Chesek 5,813,363 172,739
E. Virgil Conway 5,813,363 172,739
Harry Dalzell-Payne 5,813,363 172,739
Francis E. Jeffries 5,813,363 172,739
Leroy Keith, Jr. 5,813,363 172,739
Philip R. McLoughlin 5,813,363 172,739
Everett L. Morris 5,813,363 172,739
James M. Oates 5,813,363 172,739
Calvin J. Pedersen 5,813,363 172,739
Philip R. Reynolds 5,813,363 172,739
Herbert Roth, Jr. 5,813,363 172,739
Richard E. Segerson 5,813,363 172,739
Lowell P. Weicker, Jr. 5,809,844 176,258
For Against Abstain
--- ------- -------
2. Price Waterhouse LLP 5,591,395 28,352 366,356
3. Advisory Agreement 5,004,913 155,767 658,209
4. Investment Restrictions 4,586,024 87,750 502,169
<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
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
Timothy M. Heaney, Vice President
William E. Keen, III, 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
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[BACK COVER]
-------------------
Phoenix California Tax Exempt Bonds, Inc. BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
--------------------
[LOGOTYPE] PHOENIX
DUFF & PHELPS
PDP 742 (6/97)
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