<PAGE>
Phoenix Investment Partners
APRIL 30, 1999
ANNUAL REPORT
Phoenix California Tax
Exempt Bonds, Inc.
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR SHAREHOLDER:
[PHOTO]
We are pleased to provide this report for the Phoenix California Tax Exempt
Bonds, Inc. Fund for the 12 months ended April 30, 1999.
On the following page, your portfolio manager discusses market factors that
affected portfolio performance and provides his near-term outlook. We hope you
find his comments informative. If you have any questions, please contact your
financial advisor or call us at 1-800-243-1574 (option 0), between 8:00 a.m. and
6:00 p.m. Eastern Time, Monday through Friday.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
MAY 17, 1999
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.
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 might be subject to state and
local taxes and the alternative minimum tax, if applicable.
Q: HOW DID THE FUND PERFORM OVER THE LAST FISCAL YEAR?
A: For the 12 months ended April 30, 1999, Class A shares returned 5.92% and
Class B shares returned 5.11% compared with a return of 6.94% for the Lehman
Brothers Municipal Bond Index(1) and a return of 7.48% 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 5.14% and 4.54%,
respectively, high quality 30-year and 10-year municipal bond yields declined by
16 and 26 basis points, respectively, in response to falling U.S. Treasury
interest rates caused by global financial turmoil as well as two interest rate
cuts by the Federal Reserve. The Fund's longer-term discount securities
performed well in this environment.
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 and continue to be tax efficient.
Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A: The credit outlook for California remains positive as its economy continues
to show strong growth. This growing state economy is expected to produce higher-
than-expected personal income tax receipts, the core of California's revenue
intake, resulting in a budget surplus that could reach $4 billion by the end of
the next fiscal year. This strong economic growth should result in continued
credit improvements to most municipalities throughout the state. However, such
issues as local property tax limitations, educational demands, health-care and
other social services programs will continue to present fiscal challenges for
most municipalities.
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 level of credit protection.
MAY 17, 1999
(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.
2
<PAGE>
Phoenix California Tax-Exempt Bonds, Inc.
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 4/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEARS 10 YEARS TO 4/30/99 DATE
------ ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Class A Shares at NAV(2) 5.92% 6.71% 7.14% -- --
Class A Shares at POP(3) 0.89 5.68 6.62 -- --
Class B Shares at NAV(2) 5.11 -- -- 5.93% 7/26/94
Class B Shares with CDSC(4) 1.27 -- -- 5.60 7/26/94
Lehman Brothers Municipal Bond Index 6.94 7.49 8.02 7.41 Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period.
(5) Index information from 7/31/94 to 4/30/99.
(6) This chart illustrates POP returns on Class A Shares for ten years. Returns
on Class B Shares will vary due to differing sales charges.
(7) 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 Lehman Brothers Municipal Bond Index performance
does not reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 4/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX CALIFORNIA TAX EXEMPT CLASS A (6) LEHMAN BROS. MUNICIPAL BOND INDEX (7)
<S> <C> <C>
4/28/89 $9,525.00 $10,000.00
4/30/90 $10,104.45 $10,720.96
4/30/91 $11,236.53 $11,952.37
4/30/92 $12,211.66 $13,089.77
4/30/93 $13,478.64 $14,745.53
4/29/94 $13,721.11 $15,063.19
4/28/95 $14,590.96 $16,065.43
4/30/96 $15,600.87 $17,343.09
4/30/97 $16,467.91 $18,495.89
4/30/98 $17,923.51 $20,215.37
4/30/99 $18,984.34 $21,619.09
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
4/30/89 in Class A shares and reflects the maximum sales charge of 4.75% on the
initial investment. Performance assumes dividends and capital gains are
reinvested. The performance of other share classes will be greater or less than
that shown based on differences in inception dates, fees and sales charges.
SECTOR WEIGHTINGS 4/30/99
As a percentage of bond holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Pre-Refunded 46%
Municipal Utility District 10
General Obligation 9
Water 7
General 6
Development 6
Facilities 4
Other 12
</TABLE>
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
TOP TEN HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. L.A. Wastewater System Revenue Series D 7.0%
UTILITY REVENUE BOND
2. Riverside County 7.80%, 5/1/21 5.6%
PRE-REFUNDED REVENUE BOND
3. MSR Public Power Agency Series D 4.3%
PRE-REFUNDED REVENUE BOND
4. Culver City Redevelopment Financing Authority Revenue 4.3%
DEVELOPMENT REVENUE BOND
5. Puerto Rico Public Building Authority Series L 3.6%
PRE-REFUNDED REVENUE BOND
6. Contra Costa Water District Revenue Series G 3.5%
UTILITY REVENUE BOND
7. Huntington Park Redevelopment Agency 3.5%
PRE-REFUNDED REVENUE BOND
8. Anaheim Public Financing Series C 3.1%
GENERAL REVENUE BOND
9. California State G.O. 2.8%
GENERAL OBLIGATION BOND
10. Walnut Valley United School District Series A G.O. 2.8%
GENERAL OBLIGATION BOND
</TABLE>
INVESTMENTS AT APRIL 30, 1999
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--96.9%
AIRPORT REVENUE--3.7%
San Francisco Airport Revenue 6.25%,
5/1/10 (FGIC Insured)................... AAA $ 1,000 $ 1,105,000
San Francisco Airport Revenue 4.50%,
5/1/28 (MBIA Insured)................... AAA 2,720 2,454,800
------------
3,559,800
------------
DEVELOPMENT REVENUE--5.6%
Culver City Redevelopment Financing
Authority Revenue 4.60%, 11/1/20 (AMBAC
Insured)................................ AAA 4,500 4,190,625
San Pablo Redevelopment Agency 5%,
12/1/13 (FGIC Insured).................. AAA 1,250 1,275,000
------------
5,465,625
------------
FACILITIES REVENUE--4.0%
Contra Costa County Public Financing
Lease Revenue Series 99-A 5%, 6/1/08
(MBIA Insured).......................... AAA 1,500 1,588,125
San Francisco Building Authority Lease
Revenue Civic Center Complex A 6%,
12/1/09 (AMBAC Insured)................. AAA 2,000 2,285,000
------------
3,873,125
------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ------------
<S> <C> <C> <C>
GENERAL OBLIGATION--8.5%
California State G.O. 5.50%, 4/1/08
(MBIA Insured).......................... AAA $ 1,500 $ 1,646,250
California State G.O. 4.50%, 12/1/21
(FGIC Insured).......................... AAA 3,000 2,760,000
Central School District San Bernardino
County Series A G.O. 7.05%, 5/1/16...... A(b) 1,000 1,073,750
Walnut Valley Unified School District
Series A G.O. 0%, 8/1/19 (MBIA
Insured)................................ AAA 8,480 2,756,000
------------
8,236,000
------------
GENERAL REVENUE--5.8%
Anaheim Public Financing Series C 6%,
9/1/16 (FSA Insured).................... AAA 2,600 2,967,250
Orange County Recovery COP Series A
5.80%, 7/1/16 (MBIA Insured)............ AAA 1,500 1,635,000
San Mateo County Lease Revenue 5.125%,
7/1/18 (MBIA Insured)................... AAA 1,000 1,031,250
------------
5,633,500
------------
MEDICAL REVENUE--3.2%
California Health Facilities Financing
Authority Series A 7.30%, 11/1/20 (CA
Mortgage Insured)....................... A+ 1,400 1,491,000
</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>
MEDICAL REVENUE--CONTINUED
California Health Facilities Financing
Authority Series A 6.25%, 7/1/22........ A+ $ 1,500 $ 1,599,375
------------
3,090,375
------------
MULTIFAMILY REVENUE--2.2%
L.A. Community Redevelopment Agency
Series A 6.55%, 11/1/27 (AMBAC/FHA
Insured)................................ AAA 2,000 2,152,500
MUNICIPAL UTILITY DISTRICT REVENUE--9.7%
Delta Diablo Sanitation District COP 0%,
12/1/16 (MBIA Insured).................. AAA 1,070 446,725
L.A. Wastewater System Revenue Series D
4.70%, 11/1/17 (FGIC Insured)........... AAA 7,000 6,798,750
Sacramento Cogeneration Authority
Project Revenue 6.375%, 7/1/10.......... BBB 500 575,625
Sacramento Municipal Utility District
Electric Revenue Series K 5.75%, 7/1/18
(AMBAC Insured)......................... AAA 1,500 1,663,125
------------
9,484,225
------------
POWER REVENUE--0.9%
Southern California Public Power
Authority Revenue 5.50% , 7/1/20........ A 915 924,150
PRE-REFUNDED--44.4%
Covina Community Redevelopment Agency
8.80%, 1/1/08(c)........................ NR 1,150 1,407,312
Hayward Hospital Revenue (St. Rose
Hospital) 10%, 10/1/04(c)............... AAA 425 496,719
Huntington Park Redevelopment Agency 8%,
12/1/19 (FHA Insured)................... AAA 2,400 3,378,000
L.A. County Sales Tax 7%, 7/1/19........ AA- 2,500 2,564,575
L.A. Harbor Department 7.60%,
10/1/18(c).............................. AAA 1,075 1,436,469
MSR Public Power Agency Series D 6.75%
7/1/20 (MBIA Insured)(c)................ AAA 3,500 4,208,750
Northern California Power Agency Public
Power Hydro Electric 7.50%, 7/1/23
(AMBAC Insured)......................... AAA 195 256,669
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ------------
<S> <C> <C> <C>
PRE-REFUNDED--CONTINUED
Orange County Water District COP 7%,
8/15/15................................. AAA $ 1,000 $ 1,066,250
Pasedena COP 6.75%, 8/1/15.............. Aaa(b) 2,000 2,125,000
Pomona Unified School District G.O.
Series C 5.60%, 8/1/12 (MBIA Insured)... AAA 1,500 1,642,500
Puerto Rico Electric Power Authority
Series N 6%, 7/1/10..................... BBB+ 1,500 1,506,345
Puerto Rico Electric Power Authority
Series P 7%, 7/1/21..................... Aaa(b) 2,500 2,728,125
Puerto Rico Highway and Transportation
Authority Revenue Series T 6.625%,
7/1/18.................................. AAA 200 220,750
Puerto Rico Highway and Transportation
Authority Revenue Series T 6.625%,
7/1/18.................................. Aaa(b) 800 883,000
Puerto Rico Public Building Authority
Series L 6.875%, 7/1/21................. AAA 3,170 3,522,662
Redlands COP Series C 7%, 12/1/22 (MBIA
Insured)................................ AAA 1,000 1,076,250
Riverside County 8.625%, 5/1/16 (GNMA
Collaterized)(c)........................ AAA 700 1,009,750
Riverside County 7.80%, 5/1/21 (GNMA
Collaterized)........................... AAA 4,000 5,480,000
Riverside Public Financing Authority
Revenue 7.80%, 2/1/08................... Baa(b) 360 366,912
Sacramento Cogeneration Authority
Project Revenue 6.375%, 7/1/10.......... BBB 500 546,250
San Bernandino County COP Series B 7%,
8/1/28.................................. AAA 2,200 2,409,000
San Bernandino School Health Care
Sisters of Charity Series A 7%,
7/1/21.................................. AA 1,500 1,636,875
San Gabriel Valley Schools Financing
Authority 7.20%, 7/1/19................. NR 1,200 1,231,356
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ------------
<S> <C> <C> <C>
PRE-REFUNDED--CONTINUED
Torrance Hospital Revenue 7.10%,
12/1/15................................. AAA $ 1,665 $ 1,893,938
------------
43,093,457
------------
SINGLE FAMILY HOUSING REVENUE--1.0%
California Housing Financing Agency
Series C 7.20%, 8/1/17 (FHA Insured).... AA- 425 435,022
California Housing Financing Agency
Series D 7.25%, 8/1/17 (FHA Insured).... AA- 265 276,925
California Housing Financing Agency
Series A 7.75%, 8/1/17 (FHA Insured).... AA- 240 245,918
------------
957,865
------------
SPECIAL OBLIGATION REVENUE--1.1%
Sacramento Flood Control Agency 5.375%,
10/1/15 (FGIC Insured).................. AAA 1,000 1,041,250
WATER REVENUE--6.8%
Chino Basin Financing Authority Revenue
5.90%, 8/1/11 (AMBAC Insured)........... AAA 2,000 2,260,000
Contra Costa Water District Revenue
Series G 5.75%, 10/1/14 (MBIA Insured).. AAA 3,100 3,379,000
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ------------
<S> <C> <C> <C>
WATER REVENUE--CONTINUED
Metropolitan Water District Waterworks
Revenue Series A 4.75%, 7/1/22.......... AA $ 1,000 $ 950,000
------------
6,589,000
------------
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(IDENTIFIED COST $86,149,310) 94,100,872
- --------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--96.9%
(IDENTIFIED COST $86,149,310) 94,100,872
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--1.6%
COMMERCIAL PAPER--1.6%
Goldman Sachs Group, L.P. 4.92%,
5/3/99.................................. A-1+ 1,550 1,549,576
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,549,576) 1,549,576
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--98.5%
(IDENTIFIED COST $87,698,886) 95,650,448(a)
Cash and receivables, less liabilities--1.5% 1,477,124
-------------
NET ASSETS--100.0% $ 97,127,572
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $8,160,201 and gross
depreciation of $208,639 for federal income tax purposes. At April 30,
1999, the aggregate cost of securities for federal income tax purposes was
$87,698,886.
(b) As rated by Moody's, Duff & Phelps or Fitch.
(c) Escrowed to Maturity.
At April 30, 1999, the concentration of the Fund's investments by State,
determined as a percentage of total investments, is as follows: California
91% and Puerto Rico 9%.
At April 30, 1999, 64.8% 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, 23%, AMBAC, 13% and FGIC, 13%.
6
See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $87,698,886) $ 95,650,448
Cash 3,456
Receivables
Interest 1,784,608
Prepaid expenses 2,302
--------------
Total assets 97,440,814
--------------
LIABILITIES
Payables
Fund shares repurchased 117,015
Dividend distributions 52,408
Investment advisory fee 36,152
Distribution fee 21,553
Financial agent fee 11,005
Transfer agent fee 4,954
Trustees' fee 4,514
Accrued expenses 65,641
--------------
Total liabilities 313,242
--------------
NET ASSETS $ 97,127,572
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of common stock $ 88,408,721
Distributions in excess of net investment income (52,409)
Accumulated net realized gain 819,698
Net unrealized appreciation 7,951,562
--------------
NET ASSETS $ 97,127,572
--------------
--------------
CLASS A
Shares of common stock outstanding, $0.01 par value,
250,000,000 shares authorized (Net Assets $95,230,394) 7,223,559
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 $1,897,178) 143,735
Net asset value and offering price per share $13.20
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 5,790,758
--------------
Total investment income 5,790,758
--------------
EXPENSES
Investment advisory fee 455,088
Distribution fee, Class A 248,413
Distribution fee, Class B 17,656
Financial agent fee 106,837
Transfer agent 61,143
Printing 39,539
Professional 37,676
Registration 25,539
Trustees 17,366
Custodian 10,619
Miscellaneous 6,315
--------------
Total expenses 1,026,191
--------------
NET INVESTMENT INCOME 4,764,567
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 1,124,505
Net realized loss on futures contracts (126,725)
Net change in unrealized appreciation (depreciation) on
investments 112,639
--------------
NET GAIN ON INVESTMENTS 1,110,419
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,874,986
--------------
--------------
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
4/30/99 4/30/98
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 4,764,567 $ 5,301,229
Net realized gain (loss) 997,780 932,045
Net change in unrealized appreciation
(depreciation) 112,639 3,180,703
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 5,874,986 9,413,977
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (4,660,039) (5,233,550)
Net investment income, Class B (69,380) (56,307)
Net realized gains, Class A (495,087) (611,301)
Net realized gains, Class B (8,845) (7,993)
------------- -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (5,233,351) (5,909,151)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (951,723
and 2,752,578 shares, respectively) 12,621,925 36,168,968
Net asset value of shares issued from
reinvestment of distributions
(172,258 and 198,792 shares,
respectively) 2,289,980 2,620,648
Cost of shares repurchased (1,701,261
and 3,745,317 shares, respectively) (22,628,530) (49,302,823)
------------- -------------
Total (7,716,625) (10,513,207)
------------- -------------
CLASS B
Proceeds from sales of shares (28,783
and 30,551 shares, respectively) 382,076 405,480
Net asset value of shares issued from
reinvestment of distributions
(3,219 and 2,640 shares,
respectively) 42,838 34,843
Cost of shares repurchased (7,282 and
20,974 shares, respectively) (97,065) (274,134)
------------- -------------
Total 327,849 166,189
------------- -------------
DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS (7,388,776) (10,347,018)
------------- -------------
NET DECREASE IN NET ASSETS (6,747,141) (6,842,192)
NET ASSETS
Beginning of period 103,874,713 110,716,905
------------- -------------
END OF PERIOD [INCLUDING DISTRIBUTIONS
IN EXCESS OF NET INVESTMENT INCOME
OF ($52,409) AND ($87,557),
RESPECTIVELY] $ 97,127,572 $ 103,874,713
------------- -------------
------------- -------------
</TABLE>
8 See Notes to Financial Statements
<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
---------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 13.12 $ 12.72 $ 12.77 $ 12.63 $ 13.03
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.64 0.65 0.66 0.67 0.71
Net realized and unrealized gain
(loss) 0.11 0.47 0.04 0.20 0.05
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.75 1.12 0.70 0.87 0.76
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.63) (0.65) (0.66) (0.67) (0.76)
Distributions in excess of net
investment income -- -- -- (0.01) --
Distributions from net realized
gains (0.06) (0.07) (0.09) (0.03) (0.31)
Distributions in excess of
accumulated net realized gains -- -- -- (0.02) (0.09)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.69) (0.72) (0.75) (0.73) (1.16)
----- ----- ----- ----- -----
Change in net asset value 0.06 0.40 (0.05) 0.14 (0.40)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 13.18 $ 13.12 $ 12.72 $ 12.77 $ 12.63
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) 5.92% 8.84% 5.56% 6.92% 6.34%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $95,230 $102,312 $109,358 $113,806 $117,370
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.00% 0.96% 0.93% 0.99% 0.93%
Net investment income 4.72% 4.90% 5.13% 5.15% 5.63%
Portfolio turnover 14% 9% 17% 20% 51%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------
FROM
YEAR ENDED APRIL 30 INCEPTION
------------------------------------------------------ 7/26/94 TO
1999 1998 1997 1996 4/30/95
<S> <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 (loss) 0.54 0.56 0.56 0.56(4) 0.48
Net realized and unrealized gain
(loss) 0.12 0.46 0.05 0.20 0.01
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.66 1.02 0.61 0.76 0.49
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.53) (0.55) (0.56) (0.56) (0.50)
Distributions in excess of net
investment income -- -- -- (0.01) --
Distributions from net realized
gains (0.06) (0.07) (0.09) (0.03) (0.31)
Distributions in excess of
accumulated net realized gains -- -- -- (0.02) (0.09)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.59) (0.62) (0.65) (0.62) (0.90)
----- ----- ----- ----- -----
Change in net asset value 0.07 0.40 (0.04) 0.14 (0.41)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 13.20 $ 13.13 $ 12.73 $ 12.77 $ 12.63
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) 5.11% 8.10% 4.84% 6.10% 4.10%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $1,897 $1,562 $1,359 $1,258 $460
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.75% 1.71% 1.68% 1.78% 1.55%(2)
Net investment income 3.97% 4.15% 4.37% 4.32% 4.90%(2)
Portfolio turnover 14% 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.
See Notes to Financial Statements
9
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
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 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 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 $4,593 for Class A shares and deferred sales
charges of $3,081 for Class B shares for the year ended April 30, 1999. 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, 1999, $30,420 was earned by the Distributor,
$235,500 was paid to unaffiliated participants and $149 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
10
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (CONTINUED)
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 year ended April 30, 1999, transfer agent fees were
$61,143, of which PEPCO retained $16,940, which is net of fees paid to State
Street.
At April 30, 1999, PHL and affiliates held 227 Class A shares and 10,413 Class
B shares of the Fund with a combined value of $140,443.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1999, aggregated $13,618,183 and
$20,260,530, 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.
TAX INFORMATION NOTICE (UNAUDITED)
EXEMPT-INTEREST DIVIDENDS:
For federal income tax purposes, 96.4% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
LONG-TERM CAPITAL GAINS:
The Fund distributed $503,932 of long-term capital gain dividends.
This report is not authorized for distribution to prospective investors in the
Phoenix California Tax Exempt Bonds, Inc. unless preceded or accompanied by an
effective Prospectus which includes information concerning the sales charge,
Fund's record and other pertinent information.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Board of Directors and Shareholders of
Phoenix California Tax Exempt Bonds, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets, and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") at April 30, 1999, the
results of its operations for the year then ended, 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 presented, 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, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 11, 1999
12
<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 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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
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
World Wide Web address:
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 742 (6/99)
