<PAGE>
PHOENIX INVESTMENT PARTNERS
OCTOBER 31, 1998
SEMIANNUAL REPORT
Phoenix California Tax
Exempt Bonds, Inc.
[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>
MESSAGE FROM THE PRESIDENT
DEAR SHAREHOLDER:
[PHOTO]
We are pleased to provide this report for the six months ended October 31,
1998. On the following page, your Fund manager discusses how the portfolio has
performed over the last six months, what factors affected performance and
provides his outlook for the next six months. We hope you find his comments
informative.
As the year draws to a close, we would like to remind you to look for your
year-end tax mailings next month. California state tax regulations exempt the
portion of tax-exempt dividends derived from interest on municipal obligations
issued by California as well as U.S. territories. In addition to Form 1099-DIV,
California residents will receive a separate notification that identifies that
portion of the Fund's dividend income that may be exempt from state taxes.
If you have any questions, please contact your financial advisor or call us
toll-free at 1-800-243-1574.
Thank you for your continued participation in Phoenix California Tax Exempt
Bonds, Inc.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
December 9, 1998
1
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, TIMOTHY M. HEANEY, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund is appropriate for California residents who want to minimize payment
of federal and state income taxes and desire a quality-focused portfolio.
Investors should note that income from the Fund may be subject to state and
local taxes and the alternative minimum tax, if applicable.
Q: HOW DID THE FUND PERFORM FOR THE LAST SIX MONTHS?
A: For the six-month reporting period ended October 31, 1998, Class A shares
returned 4.83% and Class B shares returned 4.43% compared with a return of 5.11%
for the Lehman Brothers Municipal Bond Index(1) and a return of 5.67% for the
Lehman Brothers California Municipal Bond Index.(2) All performance figures
assume the reinvestment of distributions and exclude the effect of sales
charges.
Q: WHAT FACTORS AFFECTED PERFORMANCE?
A: After starting the reporting period at a yield of approximately 5.20%,
long-term high-quality municipal yields, as measured by AAA-rated general
obligation bonds, declined by 28 basis points in response to declining U.S.
Treasury interest rates caused by global financial turmoil as well as two
interest rate cuts by the Federal Reserve.(3)
However, performance was held back as a result of our investment strategy to
focus on high-quality, higher income-producing securities, which did not keep
pace in the declining rate environment. The Fund was overweighted in shorter
duration, higher coupon securities in an effort to maintain a high stream of
tax-exempt income.
Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A: The credit outlook for California remains relatively positive as its economy
and labor markets should experience moderate growth. Personal income levels have
rebounded; however, such issues as local property tax limitations, education
demands on state, city and county budgets and state-funded health-care programs
will continue to present fiscal challenges.
Q: HOW WILL YOU POSITION THE PORTFOLIO GIVEN YOUR OUTLOOK?
A: 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.
NOVEMBER 16, 1998
(1) THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF LONG-TERM, INVESTMENT-GRADE TAX-EXEMPT MUNICIPAL BOND TOTAL
RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT AND
DOES NOT REFLECT INVESTMENT MANAGEMENT OR OTHER MUTUAL FUND-RELATED FEES.
(2) THE LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX IS AN UNMANAGED,
COMMONLY USED MEASURE OF CALIFORNIA-ISSUED, LONG-TERM, INVESTMENT-GRADE
TAX-EXEMPT MUNICIPAL BOND TOTAL RETURN PERFORMANCE. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT AND DOES NOT REFLECT INVESTMENT MANAGEMENT
OR OTHER MUTUAL FUND-RELATED FEES.
(3) AFTER THIS WAS WRITTEN, THE FED AGAIN LOWERED RATES BY 25 BASIS POINTS ON
NOVEMBER 17, 1998.
2
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
TOP TEN HOLDINGS AT OCTOBER 31, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. L.A. Wastewater Series 6.8%
UTILITY REVENUE BOND
2. Riverside County 7.80%, 5/1/21 5.4%
PRE-REFUNDED REVENUE BOND
3. Culver City Redevelopment Agency 4.2%
TAX REVENUE BOND
4. Puerto Rico Public Building Series L 3.5%
PRE-REFUNDED REVENUE BOND
5. Contra Costa Water District Series G 3.4%
UTILITY REVENUE BOND
6. Huntington Park Redevelopment Agency 3.4%
PRE-REFUNDED REVENUE BOND
7. Anaheim Public Funding Series C 3.0%
LEASE REVENUE BOND
8. Walnut Valley United School District 2.9%
GENERAL OBLIGATION BOND
9. Puerto Rico Electric Power 2.7%
PRE-REFUNDED REVENUE BOND
10. Metropolitan Water District Series C 2.5%
UTILITY REVENUE BOND
</TABLE>
INVESTMENTS AT OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- ------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--97.2%
CERTIFICATES OF PARTICIPATION/LEASE REVENUE--8.0%
Anaheim Public Funding Series C 6%,
9/1/16 (FSA Insured).................... AAA $ 2,600 $ 3,003,000
Orange County Recovery COP 5.80%, 7/1/16
(MBIA Insured).......................... AAA 1,500 1,655,625
San Francisco Building Authority Civic
Center A 6%, 12/1/09 (AMBAC Insured).... AAA 2,000 2,312,500
San Mateo County Revenue 5.125%, 7/1/18
(MBIA Insured).......................... AAA 1,000 1,042,500
- ----------------------------------------------------------------------------
TOTAL CERTIFICATES OF PARTICIPATION/LEASE REVENUE 8,013,625
- ----------------------------------------------------------------------------
GENERAL OBLIGATIONS--7.2%
California State G.O. 5.50%, 4/1/08
(MBIA Insured).......................... AAA 1,500 1,665,000
Central School District G.O. 7.05%,
5/1/16.................................. A(b) 1,000 1,082,500
Pomona School District G.O. Series C
5.60%, 8/1/12 (MBIA Insured)............ AAA 1,500 1,663,125
Walnut Valley United School District
G.O. 0%, 8/1/19 (MBIA Insured).......... AAA 8,480 2,872,600
- ----------------------------------------------------------------------------
TOTAL GENERAL OBLIGATIONS 7,283,225
- ----------------------------------------------------------------------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- ------------
<S> <C> <C> <C>
HEALTHCARE--6.8%
California Health Facilities 7.30%,
11/1/20 (CA Mortgage Insurance)......... A+ $ 1,400 $ 1,512,000
California Health Facilities 6.25%,
7/1/22.................................. A+ 1,500 1,610,625
Grass Valley Hospital 7.25%, 4/1/19 (CA
Mortgage Insurance)..................... A+ 2,000 2,067,260
San Bernardino School Health Care Series
A, Sisters of Charity 7%, 7/1/21........ AA 1,500 1,657,500
- ----------------------------------------------------------------------------
TOTAL HEALTHCARE 6,847,385
- ----------------------------------------------------------------------------
HOUSING REVENUE--3.5%
California Housing Financing Agency
Series C 7.20%, 8/1/17 (FHA Insured).... AA- 475 490,000
California Housing Financing Agency
Series D 7.25%, 8/1/17 (FHA Insured).... AA- 510 539,325
California Housing Financing Agency
Series A 7.75%, 8/1/17 (FHA Insured).... AA- 295 305,104
L.A. Community Redevelopment Agency
Series A 6.55%, 1/1/27 (AMBAC
Insured)................................ AAA 2,000 2,165,000
- ----------------------------------------------------------------------------
TOTAL HOUSING REVENUE 3,499,429
- ----------------------------------------------------------------------------
</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>
PRE-REFUNDED REVENUE--29.6%
Covina Redevelopment Agency 8.80%,
1/1/08.................................. NR $ 1,200 $ 1,491,000
Hayward Hospital Revenue (St. Rose
Hosp.) 10%, 10/1/04(c).................. AAA 510 603,713
Huntington Park Redevelopment Agency 8%,
12/1/19 (FHA Insured)................... AAA 2,400 3,396,000
L.A. Harbor Department 7.60%,
10/1/18(c).............................. AAA 1,000 1,308,750
Northern California Hydro Electric
7.50%, 7/1/23 (AMBAC Insured)........... AAA 195 260,569
Pasadena COP 6.75%, 8/1/15.............. AAA(b) 2,000 2,152,500
Puerto Rico Electric Power 7%, 7/1/21... BBB+ 2,500 2,762,500
Puerto Rico Highway Revenue Pre-refunded
Series T 6.625%, 7/1/18(c).............. AAA 200 222,750
Puerto Rico Highway Revenue Refunded
Series T 6.625%, 7/1/18................. A 800 891,000
Puerto Rico Public Building Series L
6.875%, 7/1/21.......................... AAA 3,170 3,558,325
Redlands COP Series C 7%, 12/1/22 (MBIA
Insured)................................ AAA 1,000 1,090,000
Riverside County 8.625%, 5/1/16 (GNMA
Collateralized)......................... AAA 700 967,750
Riverside County 7.80%, 5/1/21 (GNMA
Collateralized)......................... AAA 4,000 5,430,000
San Bernardino COP Series B 7%,
8/1/28.................................. AAA 2,200 2,439,250
San Gabriel Valley Schools Financing
7.20%, 7/1/19........................... NR 1,200 1,256,892
Torrance Hospital COP 7.10%, 12/1/15.... AAA 1,705 1,988,456
- ----------------------------------------------------------------------------
TOTAL PRE-REFUNDED REVENUE 29,819,455
- ----------------------------------------------------------------------------
TAX REVENUE--9.6%
Culver City Redevelopment Agency 4.60%,
11/1/20 (AMBAC Insured)................. AAA 4,500 4,275,000
L.A. County Sales Tax 7%, 7/1/19........ AA- 2,500 2,615,300
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- ------------
<S> <C> <C> <C>
TAX REVENUE--CONTINUED
L.A. County Transit Authority Series A
5%, 7/1/21 (FGIC Insured)............... AAA $ 1,500 $ 1,492,500
San Pablo Redevelopment 5%, 12/1/13
(FGIC Insured).......................... AAA 1,250 1,281,250
- ----------------------------------------------------------------------------
TOTAL TAX REVENUE 9,664,050
- ----------------------------------------------------------------------------
TRANSPORTATION REVENUE--1.5%
Riverside Public Financing Authority
7.80%, 2/1/08........................... Baa(b) 360 364,572
San Francisco Airport Revenue 6.25%,
5/1/10 (FGIC Insured)................... AAA 1,000 1,130,000
- ----------------------------------------------------------------------------
TOTAL TRANSPORTATION REVENUE 1,494,572
- ----------------------------------------------------------------------------
UTILITY REVENUE--31.0%
California Department of Water Resources
5%, 12/1/15............................. AA 1,375 1,392,188
Chino Basin Funding Authority Revenue
5.90%, 8/1/11 (AMBAC Insured)........... AAA 2,000 2,305,000
Contra Costa Water District Series G
5.75%, 10/1/14 (MBIA Insured)........... AAA 3,100 3,402,250
Delta Diablo Sanitation District 0%,
12/1/16 (MBIA Insured).................. AAA 1,070 438,700
L.A. Wastewater Series D 4.70%, 11/1/17
(FGIC Insured).......................... AAA 7,000 6,816,250
MSR Public Power Agency 6.75%, 7/1/20
(MBIA Insured).......................... AAA 1,500 1,843,125
Metropolitan Water District Series A
4.75%, 7/1/22........................... AA 3,225 3,112,125
Metropolitan Water District Series C 5%,
7/1/27.................................. AA 2,500 2,490,625
Orange County Water District COP 7%,
8/15/15................................. AAA 1,000 1,081,250
Puerto Rico Electric Power Authority
Series N 6%, 7/1/10..................... BBB+ 1,500 1,529,535
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- ------------
<S> <C> <C> <C>
UTILITY REVENUE--CONTINUED
Sacramento Cogeneration Project
Pre-refunded 6.375%, 7/1/10............. NR $ 500 $ 578,125
Sacramento Cogeneration Project 6.375%,
7/1/10.................................. NR 500 558,750
Sacramento Flood Control Agency 5.375%,
10/1/15 (FGIC Insured).................. AAA 1,000 1,043,750
Sacramento Municipal Utility District
Series K 5.75%, 7/1/18 (AMBAC
Insured)................................ AAA 1,500 1,681,875
Southern California Public Power
Authority 5.50%, 7/1/20................. A 915 923,006
Southern California Public Power Series
A 4.875%, 7/1/20 (AMBAC Insured)........ AAA 2,000 1,967,500
- ----------------------------------------------------------------------------
TOTAL UTILITY REVENUE 31,164,054
- ----------------------------------------------------------------------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(IDENTIFIED COST $87,691,755) 97,785,795
- ----------------------------------------------------------------------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.2%
COMMERCIAL PAPER--1.2%
Anheuser-Busch Cos., Inc. 5.55%,
11/2/98................................. A-1+ $ 1,245 $ 1,244,808
- ----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,244,808) 1,244,808
- ----------------------------------------------------------------------------
</TABLE>
TOTAL INVESTMENTS--98.4%
(IDENTIFIED COST $88,936,563) 99,030,603(a)
Cash and receivables, less liabilities--1.6% 1,563,465
------------
NET ASSETS--100.0% $100,594,068
------------
------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $10,113,722 and gross
depreciation of $18,986 for federal income tax purposes. At October 31,
1998, the aggregate cost of securities for federal income tax purposes was
$88,935,867.
(b) As rated by Moody's, Duff & Phelps or Fitch.
(c) Escrowed to Maturity.
At October 31, 1998, the concentration of the Fund's investments by State,
determined as a percentage of total investments, is as follows: California
90%, Puerto Rico 9%, Other 1%.
At October 31, 1998, 59.8% 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, 15% and FGIC, 12%.
See Notes to Financial Statements 5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $88,936,563) $ 99,030,603
Cash 1,288
Receivables
Fund shares sold 39
Interest 1,774,780
--------------
Total assets 100,806,710
--------------
LIABILITIES
Payables
Fund shares repurchased 3,141
Dividend distributions 70,600
Investment advisory fee 38,865
Distribution fee 22,455
Transfer agent fee 13,489
Financial agent fee 9,926
Directors' fee 8,250
Accrued expenses 45,916
--------------
Total liabilities 212,642
--------------
NET ASSETS $ 100,594,068
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of common stock $ 90,110,462
Undistributed net investment loss (71,623)
Accumulated net realized gain 461,189
Net unrealized appreciation 10,094,040
--------------
NET ASSETS $ 100,594,068
--------------
--------------
CLASS A
Shares of common stock outstanding, $0.01 par value,
250,000,000 shares authorized (Net Assets $98,801,384) 7,362,472
Net asset value per share $13.42
Offering price per share $13.42/(1-4.75%) $14.09
CLASS B
Shares of common stock outstanding, $0.01 par value,
250,000,000 shares authorized (Net Assets $1,792,684) 133,399
Net asset value and offering price per share $13.44
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,991,415
--------------
Total investment income 2,991,415
--------------
EXPENSES
Investment advisory fee 233,857
Distribution fee, Class A 127,784
Distribution fee, Class B 8,545
Financial agent fee 53,258
Transfer agent 34,772
Printing 18,577
Professional 17,212
Registration 14,884
Directors 10,792
Custodian 6,081
Miscellaneous 7,183
--------------
Total expenses 532,945
--------------
NET INVESTMENT INCOME 2,458,470
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 262,064
Net realized loss on futures contracts (126,725)
Net change in unrealized appreciation (depreciation) on
investments 2,255,117
--------------
NET GAIN ON INVESTMENTS 2,390,456
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,848,926
--------------
--------------
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
10/31/98 Year Ended
(Unaudited) 4/30/98
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 2,458,470 $ 5,301,229
Net realized gain 135,339 932,045
Net change in unrealized appreciation
(depreciation) 2,255,117 3,180,703
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 4,848,926 9,413,977
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (2,408,843) (5,233,550)
Net investment income, Class B (33,693) (56,307)
Net realized gains, Class A -- (611,301)
Net realized gains, Class B -- (7,993)
------------- -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (2,442,536) (5,909,151)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (841,721
and 2,752,578 shares, respectively) 11,161,782 36,168,968
Net asset value of shares issued from
reinvestment of distributions
(78,250 and 198,792 shares,
respectively) 1,041,520 2,620,648
Cost of shares repurchased (1,358,338
and 3,745,317 shares, respectively) (18,081,215) (49,302,823)
------------- -------------
Total (5,877,913) (10,513,207)
------------- -------------
CLASS B
Proceeds from sales of shares (17,622
and 30,551 shares, respectively) 233,868 405,480
Net asset value of shares issued from
reinvestment of distributions
(1,382 and 2,640 shares,
respectively) 18,413 34,843
Cost of shares repurchased (4,620 and
20,974 shares, respectively) (61,403) (274,134)
------------- -------------
Total 190,878 166,189
------------- -------------
DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS (5,687,035) (10,347,018)
------------- -------------
NET DECREASE IN NET ASSETS (3,280,645) (6,842,192)
NET ASSETS
Beginning of period 103,874,713 110,716,905
------------- -------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT LOSS AND
DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME
OF ($71,623) AND ($87,557),
RESPECTIVELY] $ 100,594,068 $ 103,874,713
------------- -------------
------------- -------------
</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
------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED APRIL 30
10/31/98 ----------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 13.12 $ 12.72 $ 12.77 $ 12.63 $ 13.03 $ 13.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.32 0.65 0.66 0.67 0.71 0.80
Net realized and unrealized gain
(loss) 0.30 0.47 0.04 0.20 0.05 (0.53)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.62 1.12 0.70 0.87 0.76 0.27
----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.32) (0.65) (0.66) (0.67) (0.76) (0.76)
Distributions in excess of net
investment income -- -- -- (0.01) -- --
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 (0.32) (0.72) (0.75) (0.73) (1.16) (0.88)
----- ----- ----- ----- ----- -----
Change in net asset value 0.30 0.40 (0.05) 0.14 (0.40) (0.61)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 13.42 $ 13.12 $ 12.72 $ 12.77 $ 12.63 $ 13.03
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Total return(1) 4.83%(3) 8.84% 5.56% 6.92% 6.34% 1.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $98,801 $102,312 $109,358 $113,806 $117,370 $131,365
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.01%(2) 0.96% 0.93% 0.99% 0.93% 0.85%
Net investment income 4.74%(2) 4.90% 5.13% 5.15% 5.63% 5.82%
Portfolio turnover 4% 9% 17% 20% 51% 25%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED APRIL 30 INCEPTION
10/31/98 ---------------------------------------- 7/26/94 TO
(UNAUDITED) 1998 1997 1996 4/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 13.13 $ 12.73 $ 12.77 $ 12.63 $ 13.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.56 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.31 0.46 0.05 0.20 0.01
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.58 1.02 0.61 0.76 0.49
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.27) (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 (0.27) (0.62) (0.65) (0.62) (0.90)
----- ----- ----- ----- -----
Change in net asset value 0.31 0.40 (0.04) 0.14 (0.41)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 13.44 $ 13.13 $ 12.73 $ 12.77 $ 12.63
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) 4.43%(3) 8.10% 4.84% 6.10% 4.10%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $1,793 $1,562 $1,359 $1,258 $460
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.76%(2) 1.71% 1.68% 1.78% 1.55%(2)
Net investment income 3.99%(2) 4.15% 4.37% 4.32% 4.90%(2)
Portfolio turnover 4% 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
OCTOBER 31, 1998 (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
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 principals 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 reclassification 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
Effective June 1, 1998, National Securities and Research Corporation assigned
its investment advisory agreement to Phoenix Investment Counsel, Inc. ("PIC"),
an indirect majority-owned subsidiary of Phoenix Home Life Mutual Insurance
Company ("PHL"). PIC 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 $2,825 for Class A shares and deferred sales
charges of $2,102 for Class B shares for the six months ended October 31, 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
9
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED) (CONTINUED)
total amount expensed for the six months ended October 31, 1998, $14,694 was
earned by the Distributor, $121,635 was paid to unaffiliated participants and
none 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 through May 31, 1998, 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 applied. Effective June 1, 1998, PEPCO
receives a financial agent fee equal to the sum of (1) the documented cost of
fund accounting and related services provided by PFPC, Inc. (subagent to PEPCO),
plus (2) the documented cost to PEPCO to provide financial reporting, tax
services and oversight of subagent's performance. The current fee schedule of
PFPC, Inc. ranges from 0.085% to 0.0125% of the average daily net asset values
of the Fund. Certain minimum fees and fee waivers 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, 1998, transfer agent
fees were $34,772, of which PEPCO retained $8,569, which is net of fees paid to
State Street.
At October 31, 1998, PHL and affiliates held 220 Class A shares and 10,161
Class B shares of the Fund with a combined value of $139,523.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the six months ended October 31, 1998, aggregated $4,124,812 and
$8,242,507, respectively. There were no purchases or sales of long-term US
Government securities.
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.
10
<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
John F. Sharry, 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
Phoenix Investment Counsel, Inc.
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 Corporaton
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
HOW TO CONTACT US
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
Internet access:
WWW.PHOENIXINVESTMENTS.COM
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION ----------------
PO Box 2200 Bulk Rate Mail
Enfield CT 06083-2200 U.S. Postage
PAID
Springfield, MA
Permit No. 444
----------------
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 680 (12/98)
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