[COVER PAGE]
October 31, 1997
PHOENIX
FUNDS
SEMIANNUAL REPORT
o Phoenix California
Tax Exempt Bonds, Inc.
[LOGO] PHOENIX
DUFF & PHELPS
<PAGE>
Chairman's Message
Dear Fellow Shareholder,
We're pleased to provide this report for the California Tax Exempt Bonds
Fund for the six months ended October 31, 1997. This has been a remarkable time
for the financial markets, particularly in terms of market volatility.
During market extremes, your most important asset may be your financial
adviser. Managing your investments in changing markets can be challenging, and
your financial adviser knows some time-tested strategies that can help.
Rebalancing your portfolio is one strategy to reduce risk. As the stock
market has moved higher, your equity investments may have increased in value so
that now they represent a higher percentage of your total portfolio than you
originally intended. Your financial adviser may recommend a shift in asset
allocation to bring your portfolio back in line with your investment goals and
risk tolerance.
Diversifying your portfolio can smooth the effects of volatility.
Spreading your investments across a broad mix of securities, such as stocks and
bonds, reduces risk. You can also diversify by investment style. For example,
you may choose to balance an investment in growth stocks with a fund that
focuses on value-oriented stocks.
Dollar-cost averaging takes advantage of market fluctuations. In a
systematic savings plan, you'll buy fewer shares when prices are high and more
when prices fall. Periodic investments don't ensure a profit, however, and you
should consider your ability to continually make purchases.
On behalf of Phoenix Funds, I want to thank you for investing with us and
assure you that we will continue to work hard to help you meet your investment
needs.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
President and Chairman
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 six months ended October 31, Phoenix California Tax Exempt Bonds
Fund Class A shares returned 6.26% and Class B shares earned 5.85% compared
with 6.82% for the Lehman Brothers California Municipal Bond Index.* All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
The outlook for California remains positive as its economy continues to
rebound. The state has experienced healthy employment growth over the past two
years, which has helped improve its financial profile. Although economic
conditions are better, the state is still considered to be in a restructuring
process. Some cities and counties remain in various stages of recovery, making
issue selection very important.
Interest rates on long municipal bonds declined during the reporting
period as inflation stayed subdued while the economy continued to grow at a
slow pace. The Fund's emphasis on noncallable bonds and lower-coupon issues
contributed positively to performance during this falling rate environment.
Results were also helped by our holdings of California government
obligation bonds, and bonds backed by the state. However, performance was
limited by its overweighting in "AAA"-rated issues, which made up 71% of the
portfolio. High-quality credits significantly underperformed California
municipal bonds rated "A" or lower during the last six months.
OUTLOOK
Credit quality spreads continue to be at historically narrow levels,
indicating investors are not getting fairly compensated for the risks inherent
in lower-rated issues. Our current strategy is to continue to emphasize
high-quality "essential service" credits, such as municipal water and sewer
issues, since they provide the highest level 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.
1
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--96.5%
Certificates of Participation/Lease Revenue--7.0%
Anaheim Public Funding
Series C 6%, 9/1/16 (FSA
Insured) ..................... AAA $2,600 $2,854,202
Orange County Recovery
COP 5.80%, 7/1/16
(MBIA Insured) ............... AAA 1,500 1,568,415
San Francisco Building
Authority Civic Center A
6%, 12/1/09 (AMBAC
Insured) ..................... AAA 2,000 2,225,100
San Mateo County Revenue
5.125%, 7/1/18 (MBIA
Insured) ..................... AAA 1,000 993,000
----------
Total Certificates of Participation/
Lease Revenue .................................... 7,640,717
----------
General Obligations--8.1%
California State G.O. 5.50%,
4/1/08 (MBIA Insured) ......... AAA 1,500 1,599,735
Central School District G.O.
7.05%, 5/1/16 ............... A(b) 1,000 1,087,560
Pomona School District G.O.
Series C 5.60%, 8/1/12
(MBIA Insured) ............... AAA 1,500 1,605,660
Puerto Rico Commonwealth
G.O. 5.375%, 7/1/06 ......... A 2,000 2,096,800
Walnut Valley United School
District 0%, 8/1/19 (MBIA
Insured) ..................... AAA 8,480 2,436,219
----------
Total General Obligations ........................... 8,825,974
----------
Healthcare--6.3%
California Health Facilities
7.30%, 11/1/20 (CA
Mortgage Insurance) ......... A+ 1,400 1,518,216
California Health Facilities
6.25%, 7/1/22 ............... A+ 1,500 1,571,895
Grass Valley Hospital
7.25%, 4/1/19 (CA
Mortgage Insurance) ......... A+ 2,000 2,102,840
San Bernardino School
Health Care, Sisters of
Charity 7%, 7/1/21 ............ AA 1,500 1,666,605
----------
Total Healthcare .................................... 6,859,556
----------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- -------- -----------
<S> <C> <C> <C>
Housing Revenue--3.3%
California Housing
Financing Agency Series
A 7.75%, 8/1/17 (FHA
Insured) ..................... AA- $ 330 $ 346,764
California Housing Financing
Agency Series C 7.20%,
8/1/17 (FHA Insured) ......... AA- 550 572,726
California Housing
Financing Agency Series
D 7.25%, 8/1/17 (FHA
Insured) ..................... AA- 510 540,937
L.A. Community
Redevelopment Agency
Series A 6.55%, 1/1/27
(AMBAC Insured) ............... AAA 2,000 2,148,860
----------
Total Housing Revenue .............................. 3,609,287
----------
Pre-Refunded Revenue--28.1%
Covina Redevelopment
Agency 8.80%, 1/1/08 ......... NR 1,200 1,482,168
Hayward Hospital Revenue
(St. Rose Hosp.) 10%,
10/1/04 ..................... AAA 510 606,415
Huntington Park
Redevelopment Agency
8%, 12/1/19 (FHA
Insured) ..................... AAA 2,400 3,269,064
L.A. Harbor Department
7.60%, 10/1/18 ............... AAA 1,000 1,279,460
Northern California Hydro
Electric 7.50%, 7/1/23
(AMBAC Insured) ............... AAA 195 249,190
Orange County Water
District COP 7%, 8/15/15 ...... AAA 1,000 1,094,570
Pasadena COP 6.75%,
8/1/15 ........................ AAA(b) 2,000 2,174,340
Puerto Rico Electric Power
7%, 7/1/21 .................. AAA(b) 2,500 2,791,250
Puerto Rico Highway
Revenue Pre-refunded
Series T 6.625%, 7/1/18 ...... AAA 200 223,224
Puerto Rico Highway
Revenue Refunded Series
T 6.625%, 7/1/18 ............ AAA(b) 800 892,896
Puerto Rico Public Buildings
Series L 6.875%, 7/1/21 ...... AAA 3,170 3,571,322
</TABLE>
See Notes to Financial Statements
2
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- -------- -------------
<S> <C> <C> <C>
Pre-Refunded Revenue--continued
Redlands COP Series C 7%,
12/1/22 (MBIA Insured) ...... AAA $1,000 $ 1,102,050
Riverside County 8.625%,
5/1/16 (GNMA
Collateralized) ............... AAA 700 940,058
Riverside County 7.80%,
5/1/21 (GNMA
Collateralized) ............... AAA 4,000 5,225,520
San Bernardino COP Series
B 7%, 8/1/28 .................. AAA 2,200 2,456,696
San Gabriel Valley Schools
Financing 7.20%, 7/1/19 ...... NR 1,200 1,283,304
Torrance Hospital COP
7.10%, 12/1/15 ............... AAA 1,745 1,976,230
------------
Total Pre-Refunded Revenue ........................ 30,617,757
------------
Tax Revenue--9.5%
Culver City Redevelopment
Agency 4.60%, 11/1/20
(AMBAC Insured) ............... AAA 4,500 3,990,960
L.A. County Sales Tax 7%,
7/1/19 ........................ AA- 2,500 2,650,250
L.A. County Transit
Authority Series A 5%,
7/1/21 (FGIC Insured) ......... AAA 1,500 1,414,575
San Francisco
Redevelopment Agency
4.75%, 8/1/18 (FGIC
Insured) ..................... AAA 1,100 1,008,689
San Pablo Redevelopment
5%, 12/1/13 (FGIC
Insured) ..................... AAA 1,250 1,237,488
------------
Total Tax Revenue ................................. 10,301,962
------------
Transportation Revenue--1.3%
Riverside Public Financing
Authority 7.80%, 2/1/08 ...... Baa(b) 360 366,095
San Francisco Airport
Revenue 6.25%, 5/1/10
(FGIC Insured) ............... AAA 1,000 1,081,800
------------
Total Transportation Revenue ........................ 1,447,895
------------
Utility Revenue--32.9%
California Department of
Water Resources 5%,
12/1/15 ..................... AA 1,375 1,342,825
Chino Basin Funding
Authority Revenue 5.90%,
8/1/11 (AMBAC Insured) ....... AAA 2,000 2,185,080
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- -------- -------------
<S> <C> <C> <C>
Utility Revenue--continued
Contra Costa Water District
Series G 5.75%, 10/1/14
(MBIA Insured) ............... AAA $3,100 $ 3,243,251
Delta Diablo Sanitation
District 0%, 12/1/16
(MBIA Insured) ............... AAA 1,070 379,529
Irvine Ranch Water District
7.80%, 2/15/08 ............... A+ 1,500 1,515,285
Irvine Ranch Water District
8.25%, 8/15/23 ............... A+ 2,000 2,063,160
L.A. Wastewater Series D
4.70%, 11/1/17 (FGIC
Insured) (c) .................. AAA 7,000 6,388,550
Metropolitan Water District
Series C 5%, 7/1/27 ......... AA 2,500 2,388,775
MSR Public Power Agency
6.75%, 7/1/20 (MBIA
Insured) ..................... AAA 1,500 1,809,900
Puerto Rico Electric Power
Authority Series N 6%,
7/1/10 ........................ BBB+ 1,500 1,517,955
Sacramento Cogeneration
Project 6.375%, 7/1/10 ...... BBB- 1,000 1,083,600
Sacramento Flood Control
Agency 5.375%, 10/1/15
(FGIC Insured) ............... AAA 1,000 1,006,710
Sacramento Municipal Utility
District Revenue 5.75%,
1/1/11 (MBIA Insured) ......... AAA 3,500 3,667,020
Sacramento Municipal Utility
District Series K 5.75%,
7/1/18 (AMBAC Insured) ....... AAA 1,500 1,597,770
Sacramento Utility District
Electric Series G 4.75%,
9/1/21 (MBIA Insured) ......... AAA 1,000 910,880
San Francisco City & County
Public Utility 5%,
11/1/15 ..................... AA- 2,000 1,960,260
Southern California Public
Power Authority 5.50%,
7/1/20 ........................ A 915 912,603
Southern California Public
Power Series A 4.875%,
7/1/20 (AMBAC Insured) ....... AAA 2,000 1,846,300
------------
Total Utility Revenue ............................... 35,819,453
------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $97,035,714) ....................... 105,122,601
------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- -------- ----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.8%
Commercial Paper--1.8%
Preferred Receivables Funding
Corp. 5.70%, 11/3/97 ...... A-1 $1,985 $1,984,371
----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,984,371)..................... 1,984,371
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
------------
<S> <C>
TOTAL INVESTMENTS--98.3%
(Identified cost $99,020,085) ................ $ 107,106,972(a)
Cash and receivables, less liabilities--1.7%... 1,786,015
--------------
NET ASSETS--100.0% ............................ $ 108,892,987
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $8,113,986 and gross
depreciation of $27,099 for income tax purposes. At October 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$99,020,085.
(b) As rated by Moody's, Duff & Phelps or Fitch.
(c) Segregated as collateral for futures contracts.
At October 31, 1997, 57.9% 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, 17.7%; AMBAC, 13.1%; and, FGIC, 11.1%
At October 31, 1997, the concentration of the Fund's investments by state,
determined as a percentage of total investments, is as follows:
California 88%
Puerto Rico 10%
Other 2%
See Notes to Financial Statements
4
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
(Unaudited)
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $99,020,085) $107,106,972
Cash 1,915
Receivables
Fund shares sold 8,622
Interest 1,990,125
------------
Total assets 109,107,634
------------
Liabilities
Payables
Variation margin for futures contracts 4,687
Fund shares repurchased 2,425
Dividend distributions 70,107
Investment advisory fee 41,753
Distribution fee 24,052
Transfer agent fee 10,809
Financial agent fee 6,964
Directors' fee 4,200
Accrued expenses 49,650
------------
Total liabilities 214,647
------------
Net Assets $108,892,987
============
Net Assets Consist of:
Capital paid in on shares of common stock $100,362,534
Undistributed net investment loss (139,658)
Accumulated net realized gain 666,193
Net unrealized appreciation 8,003,918
------------
Net Assets $108,892,987
============
Class A
Shares of common stock outstanding, $0.01 par value,
250,000,000 shares authorized
(Net Assets $107,537,905) 8,157,380
Net asset value per share $ 13.18
Offering price per share
$13.18/(1-4.75%) $ 13.84
Class B
Shares of common stock outstanding, $0.01 par value,
250,000,000 shares authorized
(Net Assets $1,355,082) 102,756
Net asset value and offering price per share $ 13.19
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1997
(Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest $3,293,569
----------
Total investment income 3,293,569
----------
Expenses
Investment advisory fee 251,403
Distribution fee--Class A 138,012
Distribution fee--Class B 6,626
Financial agent fee 41,337
Transfer agent 37,850
Professional 27,400
Printing 22,455
Registration 16,174
Directors 10,908
Custodian 6,550
Miscellaneous 6,018
----------
Total expenses 564,733
----------
Net investment income 2,728,836
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 697,863
Net realized loss on futures contracts (44,769)
Net change in unrealized appreciation (depreciation)
on investments 3,345,698
----------
Net gain on investments 3,998,792
----------
Net increase in net assets resulting from
operations $6,727,628
==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
October 31, 1997 Year Ended
(Unaudited) April 30, 1997
------------------ ---------------
<S> <C> <C>
From Operations
Net investment income $ 2,728,836 $ 5,937,898
Net realized gain 653,094 1,037,792
Net change in unrealized appreciation (depreciation) 3,345,698 (395,154)
------------- ------------
Increase in net assets resulting from operations 6,727,628 6,580,536
------------- ------------
From Distributions to Shareholders
Net investment income--Class A (2,741,602) (5,878,203)
Net investment income--Class B (27,963) (59,695)
Net realized gains--Class A 0 (778,981)
Net realized gains--Class B 0 (9,332)
In excess of net investment income--Class A 0 (20,400)
In excess of net investment income--Class B 0 (207)
------------- ------------
Decrease in net assets from distributions to shareholders (2,769,565) (6,746,818)
------------- ------------
From Share Transactions
Class A
Proceeds from sales of shares (1,328,110 and 5,230,522 shares, respectively) 17,302,297 67,136,755
Net asset value of shares issued from reinvestment of distributions
(91,540 and 228,498 shares, respectively) 1,198,278 2,940,319
Cost of shares repurchased (1,857,056 and 5,775,597 shares, respectively) (24,231,768) (74,366,195)
------------- ------------
Total (5,731,193) (4,289,121)
------------- ------------
Class B
Proceeds from sales of shares (8,088 and 32,053 shares, respectively) 106,229 412,944
Net asset value of shares issued from reinvestment of distributions (1,120 and 2,791
shares, respectively) 14,673 35,912
Cost of shares repurchased (13,250 and 26,537 shares, respectively) (171,690) (340,933)
------------- ------------
Total (50,788) 107,923
------------- ------------
Decrease in net assets from share transactions (5,781,981) (4,181,198)
------------- ------------
Net decrease in net assets (1,823,918) (4,347,480)
Net Assets
Beginning of period 110,716,905 115,064,385
------------- ------------
End of period (including undistributed net investment loss and distributions
in excess of net investment income of ($139,658) and ($98,929), respectively) $ 108,892,987 $110,716,905
============= ============
</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
-------------------------------------------------------------------------------------
Six Months
Ended
10/31/97
(Unaudited) 1997 1996 1995 1994 1993
-------------- --------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.72 $12.77 $12.63 $13.03 $13.64 $13.20
Income from investment operations
Net investment income 0.32 0.66 0.67 0.71 0.80 0.81
Net realized and unrealized gain (loss) 0.47 0.04 0.20 0.05 (0.53) 0.51
---------- --------- ---------- ---------- --------- ---------
Total from investment operations 0.79 0.70 0.87 0.76 0.27 1.32
---------- --------- ---------- ---------- --------- ---------
Less distributions
Dividends from net investment income (0.33) (0.66) (0.67) (0.76) (0.76) (0.80)
In excess of net investment income -- -- (0.01) -- -- --
Dividends from net realized gains -- (0.09) (0.03) (0.31) (0.12) (0.08)
In excess of accumulated net realized gains -- -- (0.02) (0.09) -- --
---------- --------- ---------- ---------- --------- ---------
Total distributions (0.33) (0.75) (0.73) (1.16) (0.88) (0.88)
---------- --------- ---------- ---------- --------- ---------
Change in net asset value 0.46 (0.05) 0.14 (0.40) (0.61) 0.44
---------- --------- ---------- ---------- --------- ---------
Net asset value, end of period $13.18 $12.72 $12.77 $12.63 $ 13.03 $13.64
========== ========= ========== ========== ========= =========
Total return(1) 6.26%(3) 5.56% 6.92% 6.34% 1.80% 10.38%
Ratios/supplemental data:
Net assets, end of period (thousands) $107,538 $109,358 $113,806 $117,370 $131,365 $147,760
Ratio to average net assets of:
Operating expenses 1.00%(2) 0.93% 0.99% 0.93% 0.85% 0.90%
Net investment income 4.89%(2) 5.13% 5.15% 5.63% 5.82% 6.00%
Portfolio turnover 7%(3) 17% 20% 51% 25% 25%
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------------
Six Months From
Ended Inception
10/31/97 Year Ended April 30, 7/26/94 to
(Unaudited) 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 0.27 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.47 0.05 0.20 0.01
---------------- ---------- ------------ -----------
Total from investment operations 0.74 0.61 0.76 0.49
---------------- ---------- ------------ -----------
Less distributions
Dividends from net investment income (0.28) (0.56) (0.56) (0.50)
In excess of net investment income -- -- (0.01) --
Dividends from net realized gains -- (0.09) (0.03) (0.31)
In excess of accumulated net realized gains -- -- (0.02) (0.09)
---------------- ---------- ------------ -----------
Total distributions (0.28) (0.65) (0.62) (0.90)
---------------- ---------- ------------ -----------
Change in net asset value 0.46 (0.04) 0.14 (0.41)
---------------- ---------- ------------ -----------
Net asset value, end of period $13.19 $12.73 $12.77 $12.63
================ ========== ============ ===========
Total return(1) 5.85%(3) 4.84% 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $1,355 $1,359 $1,258 $460
Ratio to average net assets of:
Operating expenses 1.75%(2) 1.68% 1.78% 1.55%(2)
Net investment income 4.15%(2) 4.37% 4.32% 4.90%(2)
Portfolio turnover 7%(3) 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
OCTOBER 31, 1997 (Unaudited)
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
OCTOBER 31, 1997 (Continued) (Unaudited)
$3,797 for Class A shares and deferred sales charges of $5,945 for Class B
shares for the six months ended October 31, 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 six
months ended October 31, 1997, $18,180 was earned by the Distributor, $126,360
was paid to unaffiliated participants, and $98 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO receives 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 six months
ended October 31, 1997, transfer agent fees were $37,850 of which PEPCO
retained $11,032, which is net of fees paid to State Street.
At October 31, 1997, PHL and affiliates held 209 Class A shares and 9,708
Class B shares of the Fund with a combined value of $130,804.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the six months ended October 31, 1997, aggregated $7,689,283 and
$12,538,508, respectively. There were no purchases or sales of long-term U.S.
Government securities.
At October 31, 1997, 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 Depreciation
- -------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
U.S. Treasury
December '97
(Short) 15 $1,694,062 $1,777,031 $(82,969)
</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.
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>
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
James D. Wehr, Senior Vice President
Timothy M. Heaney, Vice President
William E. Keen, III, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, 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
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[BACK COVER]
-------------------
Phoenix Funds BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
-------------------
[LOGO] PHOENIX
DUFF & PHELPS
PDP 680 (12/97)
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 99020
<INVESTMENTS-AT-VALUE> 107107
<RECEIVABLES> 1999
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109108
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215
<TOTAL-LIABILITIES> 215
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100363
<SHARES-COMMON-STOCK> 8157
<SHARES-COMMON-PRIOR> 8595
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (140)
<ACCUMULATED-NET-GAINS> 666
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8004
<NET-ASSETS> 108893
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3294
<OTHER-INCOME> 0
<EXPENSES-NET> (565)
<NET-INVESTMENT-INCOME> 2729
<REALIZED-GAINS-CURRENT> 653
<APPREC-INCREASE-CURRENT> 3346
<NET-CHANGE-FROM-OPS> 6728
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2742)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1328
<NUMBER-OF-SHARES-REDEEMED> (1857)
<SHARES-REINVESTED> 92
<NET-CHANGE-IN-ASSETS> (1820)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13
<OVERDISTRIB-NII-PRIOR> (99)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 565
<AVERAGE-NET-ASSETS> 110824
<PER-SHARE-NAV-BEGIN> 12.72
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.18
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 99020
<INVESTMENTS-AT-VALUE> 107107
<RECEIVABLES> 1999
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109108
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215
<TOTAL-LIABILITIES> 215
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100363
<SHARES-COMMON-STOCK> 103
<SHARES-COMMON-PRIOR> 107
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (140)
<ACCUMULATED-NET-GAINS> 666
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8004
<NET-ASSETS> 108893
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3294
<OTHER-INCOME> 0
<EXPENSES-NET> (565)
<NET-INVESTMENT-INCOME> 2729
<REALIZED-GAINS-CURRENT> 653
<APPREC-INCREASE-CURRENT> 3346
<NET-CHANGE-FROM-OPS> 6728
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (28)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8
<NUMBER-OF-SHARES-REDEEMED> (13)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (4)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13
<OVERDISTRIB-NII-PRIOR> (99)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 565
<AVERAGE-NET-ASSETS> 110824
<PER-SHARE-NAV-BEGIN> 12.73
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.19
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
