April 30, 1998
P H O E N I X
ANNUAL REPORT
o PHOENIX CALIFORNIA TAX
EXEMPT BONDS, INC.
[PHOENIX LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
Mutual funds are not insured by the FDIC; are not deposits or
other obligations of a bank and are not guaranteed by a bank; and
are subject to investment risks, including possible loss of the
principal invested.
<PAGE>
Chairman's Message
Dear Phoenix Funds Shareholder:
I'm pleased to make you aware that we recently changed our corporate name
to Phoenix Investment Partners, Ltd. We feel this new name better fits the
growing investment management firm we have been building and reflects our
commitment to partnership and excellence in serving the financial needs of
investors like you.
Over the past year, we have added several of the industry's most
experienced and talented money managers to our team to provide you with a wider
variety of quality investment products. Phoenix Investment Partners offers you
access to the distinct investment styles of independent money managers across
the U.S. and around the world:
Aberdeen Fund Managers, Inc.
Duff & Phelps Investment Management Co.
Phoenix Investment Counsel, Inc.
Roger Engemann & Associates, Inc.
Seneca Capital Management LLC
Classic Value group, led by Chris Bertelsen
Quantitative Value group, led by Steve Colton and Dong Hao Zhang
As always, we are committed to providing you with sound investments and
outstanding service--now with even more choices, including value-style mutual
funds. To learn more about our new partners and their distinctive investment
styles, contact your financial advisor or call a marketing specialist at
1-800-243-4361.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
President, Phoenix Funds
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
INVESTOR PROFILE
Phoenix California Tax Exempt Bonds 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, 1998, Phoenix California Tax Exempt Bonds
Fund Class A shares returned 8.84% and the Class B shares returned 8.10%
compared with 9.43% for the Lehman Brothers California Municipal Bond Index.*
The Lehman Brothers Municipal Bond Index returned 9.30% for the twelve months
ended April 30, 1998.** All performance figures assume reinvestment of dividends
and exclude the effect of sales charges.
The credit outlook for California remains positive as its economy and labor
market continue to experience healthy growth. Personal income levels, which had
experienced growth levels below the national average during the early 1990's,
have rebounded to levels that have surpassed the national average for each of
the past three years. However, as the state and its cities and counties move
forward, issues such as property tax limitations and education demands on the
budget will present fiscal challenges.
After starting the reporting period at a yield of approximately 5.75%, long
municipal yields declined by 40 basis points over the next 12 months as
inflation remained subdued despite a strong U.S. economy as well as a tight U.S.
labor market. The Fund's emphasis on noncallable bonds and lower coupon,
call-protected issues contributed positively to performance during this
declining interest rate environment. However, performance was limited by the
Fund's overweighting in "AAA"-rated issues, which represented 70% of the
portfolio on average during the year. These higher quality bonds underperformed
lower quality "A" rated bonds during the past 12 months as yield spreads between
these credit ratings tightened.
OUTLOOK
Credit quality yield spreads are close to all-time historic narrow levels,
indicating that investors are not being fairly compensated for the risks
inherent in lower-rated bonds. Our current strategy is to continue to emphasize
higher quality "essential service" bonds, such as water and sewer issues, since
these credits generally provide the highest levels of credit protection.
*The Lehman Brothers California Municipal Bond Index is an unmanaged,
commonly used measure of long-term, investment-grade, California tax-exempt
municipal bond total return performance. The Index is not available for direct
investment.
**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 Index is not available for direct investment.
2
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
[Tabular Representation of Line Chart]
Lehman Brothers California Tax Exempt
Municipal Bond Index* Bonds--Class A
--------------------- ---------------------
4/30/88 10000 9525
4/30/89 10890 10613
4/30/90 11676 11255
4/30/91 13017 12516
4/30/92 14255 13602
4/30/93 16059 15013
4/30/94 16405 15283
4/30/95 17496 16252
4/30/96 18887 17377
4/30/97 20143 18343
4/30/98 $22018 $19964
Average Annual Total Returns
for Periods Ending 4/30/98
<TABLE>
<CAPTION>
From Inception
7/26/94 to
1 Year 5 Years 10 Years 4/30/98
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales charge 3.70% 4.84% 7.16% --
- ----------------------------------------------------------------------------------------------------
Class A at net asset value 8.84% 5.87% 7.68% --
- ----------------------------------------------------------------------------------------------------
Class B with CDSC 4.10% -- -- 5.69%
- ----------------------------------------------------------------------------------------------------
Class B at net asset value 8.10% -- -- 6.15%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index* 9.30% 6.51% 8.21% 7.54%**
- ----------------------------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 4/30/88 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 4/30/98.
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--95.6%
CERTIFICATES OF PARTICIPATION/LEASE REVENUE--7.4%
Anaheim Public Funding Series C 6%, 9/1/16 (FSA Insured).. AAA $2,600 $ 2,866,500
Orange County Recovery COP 5.80%, 7/1/16 (MBIA Insured)... AAA 1,500 1,584,375
San Francisco Building Authority Civic Center A 6%,
12/1/09 (AMBAC Insured)................................. AAA 2,000 2,230,000
San Mateo County Revenue 5.125%, 7/1/18 (MBIA Insured).... AAA 1,000 992,500
----------------
TOTAL CERTIFICATES OF PARTICIPATION/LEASE REVENUE................................ 7,673,375
----------------
GENERAL OBLIGATIONS--6.6%
California State G.O. 5.50%, 4/1/08 (MBIA Insured)........ AAA 1,500 1,605,000
Central School District G.O. 7.05%, 5/1/16................ A (c) 1,000 1,077,500
Pomona School District G.O. Series C 5.60%, 8/1/12 (MBIA
Insured)................................................ AAA 1,500 1,618,125
Walnut Valley United School District G.O. 0%, 8/1/19 (MBIA
Insured)................................................ AAA 8,480 2,607,600
----------------
TOTAL GENERAL OBLIGATIONS........................................................ 6,908,225
----------------
HEALTHCARE--6.6%
California Health Facilities 7.30%, 11/1/20 (CA Mortgage
Insurance).............................................. A+ 1,400 1,508,500
California Health Facilities 6.25%, 7/1/22................ A+ 1,500 1,576,875
Grass Valley Hospital 7.25%, 4/1/19 (CA Mortgage
Insurance).............................................. A+ 2,000 2,082,920
San Bernandino School Health Care Series A, Sisters of
Charity 7%, 7/1/21...................................... AA 1,500 1,646,250
----------------
TOTAL HEATHCARE.................................................................. 6,814,545
----------------
HOUSING REVENUE--3.5%
California Housing Financing Agency Series C 7.20%, 8/1/17
(FHA Insured)........................................... AA- 550 569,937
California Housing Financing Agency Series D 7.25%, 8/1/17
(FHA Insured)........................................... AA- 510 539,962
California Housing Financing Agency Series A 7.75%, 8/1/17
(FHA Insured)........................................... AA- 330 344,025
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
HOUSING REVENUE--CONTINUED
L.A. Community Redevelopment Agency Series A 6.55%, 1/1/27
(AMBAC Insured)......................................... AAA $2,000 $ 2,152,500
----------------
TOTAL HOUSING REVENUE............................................................ 3,606,424
----------------
PRE-REFUNDED REVENUE--29.3%
Covina Redevelopment Agency 8.80%, 1/1/08................. NR 1,200 1,473,000
Hayward Hospital Revenue
(St. Rose Hosp.) 10%,
10/1/04 (d)............................................. AAA 510 601,162
Huntington Park Redevelopment Agency 8%, 12/1/19 (FHA
Insured)................................................ AAA 2,400 3,312,000
L.A. Harbor Department 7.60%, 10/1/18 (d)................. AAA 1,000 1,270,000
Northern California Hydro Electric 7.50%, 7/1/23 (AMBAC
Insured)................................................ AAA 195 253,013
Orange County Water District COP 7%, 8/15/15.............. AAA 1,000 1,081,250
Pasedena COP 6.75%, 8/1/15................................ AAA (c) 2,000 2,150,000
Puerto Rico Electric Power 7%, 7/1/21..................... BBB+ 2,500 2,753,125
Puerto Rico Highway Revenue Pre-refunded Series T 6.625%,
7/1/18 (d).............................................. AAA 200 220,500
Puerto Rico Highway Revenue Refunded Series T 6.625%,
7/1/18.................................................. A 800 882,000
Puerto Rico Public Building Series L 6.875%, 7/1/21....... AAA 3,170 3,522,663
Redlands COP Series C 7%, 12/1/22 (MBIA Insured).......... AAA 1,000 1,087,500
Riverside County 8.625%, 5/1/16 (GNMA Collaterized)....... AAA 700 943,250
Riverside County 7.80%, 5/1/21 (GNMA Collaterized)........ AAA 4,000 5,255,000
San Bernandino COP Series B 7%, 8/1/28.................... AAA 2,200 2,422,750
San Gabriel Valley Schools Financing 7.20%, 7/1/19........ NR 1,200 1,267,500
Torrance Hospital COP 7.10%, 12/1/15...................... AAA 1,705 1,937,306
----------------
TOTAL PRE-REFUNDED REVENUE....................................................... 30,432,019
----------------
TAX REVENUE--10.0%
Culver City Redevelopment Agency 4.60%, 11/1/20 (AMBAC
Insured)................................................ AAA 4,500 4,072,500
</TABLE>
4 See Notes to Financial Statements
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
- ------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
TAX REVENUE--CONTINUED
L.A. County Sales Tax 7%, 7/1/19.......................... AA- $2,500 $ 2,634,375
L.A. County Transit Authority Series A 5%, 7/1/21 (FGIC
Insured)................................................ AAA 1,500 1,428,750
San Francisco Redevelopment Agency 4.75%, 8/1/18 (FGIC
Insured)................................................ AAA 1,100 1,023,000
San Pablo Redevelopment 5%, 12/1/13 (FGIC Insured)........ AAA 1,250 1,240,625
----------------
TOTAL TAX REVENUE................................................................ 10,399,250
----------------
TRANSPORTATION REVENUE--1.4%
Riverside Public Financing Authority 7.80%, 2/1/08........ Baa(c) 360 366,077
San Francisco Airport Revenue 6.25%, 5/1/10 (FGIC
Insured)................................................ AAA 1,000 1,093,750
----------------
TOTAL TRANSPORTATION REVENUE..................................................... 1,459,827
----------------
UTILITY REVENUE--30.8%
California Department of Water Resources 5%, 12/1/15...... AA 1,375 1,338,906
Chino Basin Funding Authority Revenue 5.90%, 8/1/11 (AMBAC
Insured)................................................ AAA 2,000 2,202,500
Contra Costa Water District Series G 5.75%, 10/1/14 (MBIA
Insured)................................................ AAA 3,100 3,293,750
Delta Diablo Sanitation District 0%, 12/1/16 (MBIA
Insured)................................................ AAA 1,070 399,913
Irvine Ranch Water District 8.25%, 8/15/23 (b)............ A+ 2,000 2,021,800
L.A. Wastewater Series D 4.70%, 11/1/17 (FGIC Insured)
(b)..................................................... AAA 7,000 6,475,000
MSR Public Power Agency 6.75% 7/1/20 (MBIA Insured)....... AAA 1,500 1,822,500
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
UTILITY REVENUE--CONTINUED
Metropolitan Water District Series C 5%, 7/1/27........... AA $2,500 $ 2,378,125
Puerto Rico Electric Power Authority Series N 6%,
7/1/10.................................................. BBB+ 1,500 1,515,000
Sacramento Cogeneration Project 6.375%, 7/1/10............ BBB- 1,000 1,083,750
Sacramento Flood Control Agency 5.375%, 10/1/15 (FGIC
Insured)................................................ AAA 1,000 1,015,000
Sacramento Municipal Utility District Series K 5.75%,
7/1/18 (AMBAC Insured).................................. AAA 1,500 1,606,875
San Francisco City & County Public Utility 5%, 11/1/15.... AA- 2,000 1,957,500
Southern California Public Power Authority 5.50%,
7/1/20.................................................. A 915 915,000
Southern California Public Power Series A 4.875%, 7/1/20
(AMBAC Insured)......................................... AAA 2,000 1,885,000
Turlock California Irrigation District Revenue Series A
5.75%, 1/1/18 (MBIA Insured)............................ AAA 2,000 2,052,500
----------------
TOTAL UTILITY REVENUE............................................................ 31,963,119
----------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $91,418,260).................................................. 99,256,784
----------------
SHORT-TERM OBLIGATIONS--0.4%
COMMERCIAL PAPER--0.4%
Marsh & McClennan Cos, Inc. 5.52%, 5/1/98................. A-1+ 435 435,000
----------------
TOTAL SHORT-TERM OBLIGATION
(Identified cost $435,000)..................................................... 435,000
----------------
TOTAL INVESTMENTS--96.0%
(Identified cost $91,853,260).................................................. 99,691,784(a)
Cash and receivables, less liabilities--4.0%................................... 4,182,929
----------------
NET ASSETS--100.0%............................................................... $103,874,713
----------------
----------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,859,642 and gross
depreciation of $21,118 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$91,853,260.
(b) Segregated as collateral for futures contracts.
(c) As rated by Moody's Duff & Phelps or Fitch.
(d) Escrowed to maturity.
At April 30, 1998, the concentration of the Fund's investments by State,
determined as a percentage of total investments, is as follows:
California 92%, Puerto Rico 7%, Other 1%.
At April 30, 1998, 58.9% of the securities in the portfolio are backed by
insurance of financial institutions and financial guaranty assurance
agencies. Insurers with a concentration greater than 10% of net assets are as
follows: MBIA, 16%, AMBAC, 14% and FGIC, 12%.
See Notes to Financial Statements 5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $91,853,260) $ 99,691,784
Cash 2,774
Receivables
Fund shares sold 2,566,682
Interest 1,873,530
------------
Total assets 104,134,770
------------
Liabilities
Payables
Variation margin for futures contracts 19,906
Fund shares repurchased 25,575
Dividend distributions 87,556
Investment advisory fee 38,032
Distribution fee 22,130
Directors' fee 9,084
Transfer agent fee 8,944
Financial agent fee 6,720
Accrued expenses 42,110
------------
Total liabilities 260,057
------------
Net Assets $103,874,713
============
Net Assets Consist of:
Capital paid in on shares of common stock 95,797,497
Distributions in excess of net investment
income (87,557)
Accumulated net realized gain 325,850
Net unrealized appreciation 7,838,923
------------
Net Assets $103,874,713
============
Class A
Shares of common stock outstanding, $0.01
par value,
250,000,000 shares authorized
(Net Assets $102,312,278) 7,800,839
Net asset value per share $ 13.12
Offering price per share
$13.12/(1-4.75%) $ 13.77
Class B
Shares of common stock outstanding, $0.01
par value,
250,000,000 shares authorized
(Net Assets $1,562,435) 119,015
Net asset value and offering price per share $ 13.13
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $6,355,714
----------
Total investment income 6,355,714
----------
Expenses
Investment advisory fee 488,031
Distribution fee--Class A 267,674
Distribution fee--Class B 13,815
Financial agent fee 82,000
Transfer agent 69,528
Printing 33,839
Registration 25,649
Professional 25,553
Directors 21,282
Custodian 11,876
Miscellaneous 15,238
----------
Total expenses 1,054,485
----------
Net investment income 5,301,229
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 1,131,615
Net realized loss on futures contracts (199,570)
Net change in unrealized appreciation
(depreciation) on investements
3,180,703
----------
Net gain on investments 4,112,748
----------
Net increase in net assets resulting from
operations $9,413,977
==========
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1998 April 30, 1997
---------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 5,301,229 $ 5,937,898
Net realized gain 932,045 1,037,792
Net change in unrealized appreciation
(depreciation) 3,180,703 (395,154)
------------- -------------
Increase in net assets resulting from
operations 9,413,977 6,580,536
------------- -------------
From Distributions to Shareholders
Net investment income--Class A (5,233,550) (5,878,203)
Net investment income--Class B (56,307) (59,695)
Net realized gains--Class A (611,301) (778,981)
Net realized gains--Class B (7,993) (9,332)
Distributions in excess of net investment
income--Class A -- (20,400)
Distributions in excess of net investment
income--Class B -- (207)
------------- -------------
Decrease in net assets from distributions
to shareholders (5,909,151) (6,746,818)
------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (2,752,578
and 5,230,522 shares, respectively) 36,168,968 67,136,755
Net asset value of shares issued from
reinvestment of distributions
(198,792 and 228,498 shares, respectively) 2,620,648 2,940,319
Cost of shares repurchased (3,745,317 and
5,775,597 shares, respectively) (49,302,823) (74,366,195)
------------- -------------
Total (10,513,207) (4,289,121)
------------- -------------
Class B
Proceeds from sales of shares (30,551 and
32,053 shares, respectively) 405,480 412,944
Net asset value of shares issued from
reinvestment of distributions (2,640 and
2,791 shares, respectively) 34,843 35,912
Cost of shares repurchased (20,974 and
26,537 shares, respectively) (274,134) (340,933)
------------- -------------
Total 166,189 107,923
------------- -------------
Decrease in net assets from share transactions (10,347,018) (4,181,198)
------------- -------------
Net decrease in net assets (6,842,192) (4,347,480)
Net Assets
Beginning of period 110,716,905 115,064,385
------------- -------------
End of period (including distributions in
excess of net investment of ($87,557) and
($98,929), respectively) $ 103,874,713 $ 110,716,905
============= =============
</TABLE>
See Notes to Financial Statements
7
<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,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.72 $ 12.77 $ 12.63 $ 13.03 $ 13.64
Income from investment operations
Net investment income 0.65 0.66 0.67 0.71 0.80
Net realized and unrealized gain (loss) 0.47 0.04 0.20 0.05 (0.53)
-------- -------- -------- -------- --------
Total from investment operations 1.12 0.70 0.87 0.76 0.27
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.65) (0.66) (0.67) (0.76) (0.76)
Distributions in excess of net investment -- -- (0.01) -- --
income
Distributions from net realized gains (0.07) (0.09) (0.03) (0.31) (0.12)
Distributions in excess of accumulated net
realized gains -- -- (0.02) (0.09) --
-------- -------- -------- -------- --------
Total distributions (0.72) (0.75) (0.73) (1.16) (0.88)
-------- -------- -------- -------- --------
Change in net asset value 0.40 (0.05) 0.14 (0.40) (0.61)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.12 $ 12.72 $ 12.77 $ 12.63 $ 13.03
======== ======== ======== ======== ========
Total return(1) 8.84% 5.56% 6.92% 6.34% 1.80%
Ratios/supplemental data:
Net assets, end of period (thousands) $102,312 $109,358 $113,806 $117,370 $131,365
Ratio to average net assets of:
Operating expenses 0.96% 0.93% 0.99% 0.93% 0.85%
Net investment income 4.90% 5.13% 5.15% 5.63% 5.82%
Portfolio turnover 9% 17% 20% 51% 25%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
From
Inception
Year Ended April 30, 7/26/94 to
1998 1997 1996 4/30/95
----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.73 $ 12.77 $ 12.63 $ 13.04
Income from investment operations
Net investment income 0.56 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.46 0.05 0.20 0.01
------- -------- -------- --------
Total from investment operations 1.02 0.61 0.76 0.49
------- -------- -------- --------
Less distributions
Dividends from net investment income (0.55) (0.56) (0.56) (0.50)
Distributions in excess of net investment
income -- -- (0.01) --
Distributions from net realized gains (0.07) (0.09) (0.03) (0.31)
Distributions in excess of accumulated net
realized gains -- -- (0.02) (0.09)
------- -------- -------- --------
Total distributions (0.62) (0.65) (0.62) (0.90)
------- -------- -------- --------
Change in net asset value 0.40 (0.04) 0.14 (0.41)
------- -------- -------- --------
Net asset value, end of period $ 13.13 $ 12.73 $ 12.77 $ 12.63
======= ======== ======== ========
Total return(1) 8.10% 4.84% 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,562 $ 1,359 $ 1,258 $ 460
Ratio to average net assets of:
Operating expenses 1.71% 1.68% 1.78% 1.55%(2)
Net investment income 4.15% 4.37% 4.32% 4.90%(2)
Portfolio turnover 9% 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.
8 See Notes to Financial Statements
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
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
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 principals. 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
9
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (Continued)
$7,302 for Class A shares and deferred sales charges of $8,475 for Class B
shares for the year ended April 30, 1998. 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,
1998, $33,729 was earned by the Distributor, $247,623 was paid to unaffiliated
participants and $137 was paid to W.S. Griffith, an indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services 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, 1998,
transfer agent fees were $69,528 of which PEPCO retained $20,947, which is net
of fees paid to State Street.
At April 30, 1998, PHL and affiliates held 215 Class A shares and 9,960
Class B shares of the Fund with a combined value of $133,595.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1998, aggregated $9,745,623 and
$20,760,533, respectively. There were no purchases or sales of long-term US
Government securities.
At April 30, 1998, the Fund had entered into futures contracts as follows:
<TABLE>
<CAPTION>
Value of
Number Contracts Market Net
of when Value of Unrealized
Description Contracts Opened Contracts Appreciation
- ----------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury
Bond
June '98 (Long) 13 $1,562,445 $1,562,844 $399
</TABLE>
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)
Exempt-Interest Dividends:
For federal income tax purposes, 95.9% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
Long-Term Capital Gains:
For the fiscal year ended April 30, 1998, the fund distributed long-term
capital gain dividends as follows:
<TABLE>
<S> <C>
28% rate gain distributions $50,653
20% rate gain distributions $514,158
</TABLE>
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.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICE WATERHOUSE LOGO]
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, 1998, 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
June 16, 1998
11
<PAGE>
PHOENIX CALIFORNIA
TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Directors
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
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, 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>
Phoenix Funds
PO Box 2200
Enfield CT 06083-2200
[PHOENIX LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 742 (6/98)
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<NAME> PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
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<TABLE> <S> <C>
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