As filed with the Securities and Exchange Commission on August 28, 1995
Registration Nos. 2-83024
811-3714
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
[ ]
Pre-Effective Amendment No.
[ ]
Post-Effective Amendment No. 17
[x]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940
[x]
Amendment No. 18
[x]
(Check appropriate box or boxes.)
Phoenix California Tax Exempt Bonds, Inc.
(Exact Name of Registrant as Specified in Articles of Incorporation)
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101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
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c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
Philip R. McLoughlin
Phoenix Equity Opportunities Fund
c/o Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
(name and address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box
[x] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the fiscal year ended on April 30, 1995
was filed by Registrant with the Commission on June 27, 1995.
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PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
Cross Reference Sheet
Showing Location of Information Required by Form N-1A
PART A
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Form N-1A Item No. Prospectus Caption
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1. Cover Page Cover Page
2. Synopsis Introduction; Fund Expenses
3. Condensed Financial Information Financial Highlights; Performance Information
4. Introduction; Investment Objectives and
General Description of Registrant Policies; Investment Techniques
5. Introduction; Management of the Fund; National
Distributor and Distribution Plans; Custodian
Management of the Fund and Transfer Agent
6. Introduction; Investment Restrictions;
Dividends, Distributions and Taxes; Net Asset
Capital Stock and Other Securities Value; Additional Information
7. Distribution Plans; Purchase of Shares;
Purchase of Securities Being Offered Investor Accounts and Services Available
8. Redemption or Purchase How to Redeem Shares
9. Legal Proceedings Not applicable
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PART B
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Form N-1A Item No. Statement of Additional Information Caption
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Fund
13. Investment Objective and Policies; Investment
Restrictions; Fundamental Policies; Other
Investment Objectives and Policies Policies
14. Management of the Registrant Directors and Officers; Advisory Board
15. Control Persons and Principal Holders of
Securities Directors and Officers; Advisory Board
16. Services of the Adviser; Underwriter;
Investment Advisory and Other Services Distribution Plans
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities See "Organization of the Fund" in Prospectus
19. Net Asset Value; How to Buy Shares;
Purchase, Redemption and Pricing of Reinvestment Privilege; Exchange Privilege; How
Securities Being Offered to Redeem Shares
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter Underwriter; Distribution Plans
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
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PART C
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Form N-1A Item No.
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24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Persons Controlled by or Under Common Control Persons Controlled by or Under Common Control
26. Number of Holders of Securities Number of Holders of Securities
27. Indemnification Indemnification
28. Business and Other Connections of Investment Business and Other Connections of Investment
Adviser Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
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<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
August 28, 1995
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") is a diversified
open-end management investment company which invests in municipal securities
with the investment objective of obtaining 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. There can be no
assurance that the Fund's investment objective will be achieved.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must
not be relied upon. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy any of the securities offered hereby in any
state in which, or to any person to whom, it is unlawful to make such offer.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that information herein is
correct at any time subsequent to its date.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors should read and
retain this Prospectus for future reference. Additional information about the
Fund is contained in the Statement of Additional Information, dated August
28, 1995, which has been filed with the Securities and Exchange Commission
(the "Commission") and is available at no charge by calling 1-800-243-4361.
The Statement of Additional Information is incorporated herein by reference.
Shares described in this Prospectus are not deposits or obligations of, or
guaranteed by any bank, and are not federally insured or otherwise protected
by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board or any other agency and involve investment risk, including possible
loss of principal.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders/Exchanges: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
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TABLE OF CONTENTS
Page
-------
INTRODUCTION ............................... 3
FUND EXPENSES .............................. 4
FINANCIAL HIGHLIGHTS ....................... 5
PERFORMANCE INFORMATION .................... 6
INVESTMENT OBJECTIVE AND POLICIES .......... 7
INVESTMENT TECHNIQUES ...................... 9
MANAGEMENT OF THE FUND ..................... 11
DISTRIBUTOR AND DISTRIBUTION PLANS ......... 12
HOW TO BUY SHARES .......................... 13
INVESTOR ACCOUNTS AND SERVICES AVAILABLE ... 18
NET ASSET VALUE ............................ 21
HOW TO REDEEM SHARES ....................... 22
DIVIDENDS, DISTRIBUTIONS AND TAXES ......... 23
ADDITIONAL INFORMATION ..................... 24
TAX FREE vs. TAXABLE INCOME ................ 25
2
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INTRODUCTION
This Prospectus describes the shares offered by and the operations of Phoenix
California Tax Exempt Bonds, Inc. (the "Fund"). The Fund is a diversified,
open-end management investment company established in 1983 as a Maryland
corporation.
Investment Adviser
National Securities & Research Corporation ("National" or the "Adviser") is
the investment adviser of the Fund. The Adviser is a wholly-owned indirect
subsidiary of Phoenix Home Life Mutual Insurance Company. For managing or
directing the management of the investments of the Fund, the Adviser is
entitled to a fee, payable monthly, at the annual rate of 0.45% of the
average of the aggregate daily net asset values of the Fund up to $1 billion;
0.40% of such value between $1 billion and $2 billion; and 0.35% of such
value in excess of $2 billion. See "Management of the Fund" for a description
of the Investment Advisory Agreement.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as National Distributor of the Fund's shares. See "National
Distributor" and "Distribution Plans" and the Statement of Additional
Information. Equity Planning also acts as financial agent of the Fund and as
such receives a quarterly fee based on the average of the aggregate daily net
asset values of the Fund at an annual rate of $300 per $1 million. Equity
Planning also serves as the Fund's transfer agent.
The Fund has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). Pursuant to the distribution
plan adopted for Class A Shares, the Fund shall reimburse the Underwriter up
to a maximum annual rate of 0.25% of the Fund's average daily Class A Share
net assets for distribution expenditures incurred in connection with the sale
and promotion of Class A Shares and for furnishing of shareholder services.
Pursuant to the distribution plan adopted for Class B Shares, the Fund shall
reimburse the Underwriter up to a maximum annual rate of 1.00% of the Fund's
average daily Class B share net assets for distribution expenditures incurred
in connection with the sale and promotion of Class B Shares and for
furnishing of shareholder services. See "Distribution Plans".
Purchase of Shares
The Fund offers two classes of shares which may be purchased at a price equal
to their net asset value per share plus a sales charge which, at the election
of the purchaser, may be imposed (i) at the time of purchase (the "Class A
Shares"), or (ii) on a contingent deferred basis (the "Class B Shares").
Completed applications for the purchase of shares should be mailed to the
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301
Class A Shares are offered to the public at the next determined net asset
value after receipt of the order by State Street Bank and Trust Company, plus
a maximum sales charge of 4.75% of the offering price (4.99% of the amount
invested) on single purchases of less than $50,000. The sales charge for
Class A Shares is reduced on a graduated scale on single purchases of $50,000
or more and subject to other conditions stated below. See "How To Buy
Shares", "How to Obtain Reduced Sales Charges on Class A Shares" and "Net
Asset Value".
Class B Shares are offered to the public at the next determined net asset
value after receipt of an order by State Street Bank and Trust Company, with
no sales charge. However, Class B Shares are subject to a sales charge if
they are redeemed within five years of purchase. See "How To Buy Shares" and
"Deferred Sales Charge Alternative--Class B Shares".
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investment program designated "Investo-Matic") and the minimum subsequent
investment is $25. Certain exceptions to the minimum initial and subsequent
investment amounts are available under certain circumstances. See "How To Buy
Shares".
Redemption Price
Class A Shares may be redeemed at any time at their net asset value per share
next computed after receipt of a redemption request by Equity Planning, the
Fund's transfer agent. Class B shareholders redeeming shares within five
years of the date of purchase will normally be assessed a contingent deferred
sales charge. See "How to Redeem Shares".
Risk Factors
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 will attempt to
achieve its objective by investing in a diversified portfolio of obligations
issued by or on behalf of the states, territories and possessions of the
United States and their political subdivisions,
3
<PAGE>
agencies, authorities and instrumentalities, the interest from which is, in
the opinion of the bond counsel, exempt from Federal income tax (municipal
bonds).
There can be no assurance that the Fund will achieve its investment
objectives. Investors should be aware that certain California Constitutional
amendments, legislative measures, executive orders, administrative
regulations and voter initiatives could result in certain adverse
consequences affecting California municipal securities. The Fund may also
invest in securities issued by Puerto Rico. Puerto Rico's economy centers
around industrial employment. Based on recent tax law amendments, the
development of the Puerto Rican economy will be unpredictable for a number of
years. The Fund may also engage in transactions in financial futures
contracts and related options for hedging purposes. Among other
considerations, engaging in transactions in financial futures contracts
involves certain risks, such as the possibility of an imperfect correlation
between futures market prices and cash market prices and the possibility that
the Adviser could be incorrect in its expectations as to the direction or
extent of various interest rate movements, in which case the Fund's return
might have been greater had hedging not taken place. See "Investment
Objectives and Policies".
FUND EXPENSES
The following table illustrates all fees and expenses a shareholder will
incur. The fees and expenses set forth in the table were for fiscal year
ended April 30, 1995.
Class A
Shares Class B Shares
----------- ---------------------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases
(as a percentage of offering
price) 4.75% None
Maximum Sales Load Imposed on
Reinvested Dividends None None
Deferred Sales Load (as a 5% during the first year,
percentage of original decreasing 1% annually to
purchase price or redemption 2% during the 4th & 5th
proceeds, as applicable) None years; dropping from 2% to
0% after the 5th year
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of net assets
for the year ended April 30,
1995)
Management Fees 0.45% 0.45%
Rule 12b-1 Fees(a) 0.25% 1.00%
Other Operating Expenses 0.23% 0.23%
Total Fund Operating Expenses 0.93% 1.68%
(a) "Rule 12b-1 Fees" represent an asset-based sales charge that, for a
long-term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. See
"Distribution Plans".
Cumulative Expenses Paid
for the Period
1 3 5 10
Example year years years years
--------------------------------------------- ---- ----- ----- -----
An investor would pay the following expenses
on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the
end of each time period:
Class A Shares $57 $76 $ 97 $156
Class B Shares $67 $83 $111 $179
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Class A Shares $57 $76 $ 97 $156
Class B Shares $17 $53 $ 91 $179
The purpose of the table above is to help the investor understand the various
costs and expenses that the investor will bear, directly or indirectly. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown. See "Management of
Fund", "Distribution Plans" and "How to Buy Shares".
4
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FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for the
respective fiscal years of the Fund. The financial information has been
audited by Price Waterhouse LLP, independent accountants. Financial
statements and notes thereto are incorporated by reference in the Statement
of Additional Information. The Statement of Additional Information and the
Fund's most recent Annual Report containing the report of independent
accountants and additional information relating to the Fund performance are
available at no charge upon request by calling (800) 243-4361.
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Class A
------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -------------
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Net asset value,
beginning of
period $ 13.03 $ 13.64 $ 13.20 $ 13.07 $ 12.58
Income from
investment
operations
Net investment
income 0.71 0.80 0.81 0.87 0.90
Net realized and
unrealized gain
(loss) 0.05 (0.53) 0.51 0.24 0.51
------- --------- --------- --------- --------
Total from
investment
operations 0.76 0.27 1.32 1.11 1.41
------- --------- --------- --------- ---------
Less distributions
Dividends from net
investment income (0.76) (0.76) (0.80) (0.88) (0.90)
Distributions from
net realized gains (0.31) (0.12) (0.08) (0.10) (0.02)
Distributions in
excess of
accumulated net
realized gains (0.09) -- -- -- --
Total distributions (1.16) (0.88) (0.88) (0.98) (0.92)
------- --------- --------- --------- --------
Change in net asset
value (0.40) (0.61) 0.44 0.13 0.49
Net asset value,
end of period $ 12.63 $ 13.03 $ 13.64 $ 13.20 $13.07
========= ========= ========= ========= ========
Total Return((1)) 6.34% 1.80% 10.38% 8.68% 11.36%
Ratios/supplemental
data:
Net assets, end of
period (thousands) $117,370 $131,365 $147,760 $139,118 $124,051
Ratio to average net
asset of:
Operating expenses 0.93% 0.85% 0.90% 0.68% 0.63%
Net investment
income 5.63% 5.82% 6.00% 6.55% 6.94%
Portfolio turnover
rate 51% 25% 25% 33% 26%
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Class A Class B
------------------------------------------------------------------- ----------------
Year Ended April 30, From inception
------------------------------------------------------------------- 7/26/94 to
1990 1989 1988 1987 1986 4/30/95
---------- ---------- ---------- ------------ ---------- ----------------
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Net asset value,
beginning of
period $ 12.72 $ 12.27 $ 12.50 $ 12.80 $ 11.55 $13.04
Income from
investment
operations
Net investment
income 0.90 0.89 0.90 0.95((2)) 1.01 0.48
Net realized and
unrealized gain
(loss) (0.14) 0.46 (0.23) (0.27) 1.24 0.01
--------- -------- ------- --------- -------- ---------------
Total from
investment
operations 0.76 1.35 0.67 0.68 2.25 0.49
--------- -------- ------- --------- -------- ---------------
Less distributions
Dividends from net
investment income (0.90) (0.90) (0.90) (0.98) (1.00) (0.50)
Distributions from
net realized gains -- -- -- -- -- (0.31)
--------- -------- ------- --------- -------- ---------------
Distributions in
excess of
accumulated net
realized gains -- -- -- -- -- (0.09)
Total distributions (0.90) (0.90) (0.90) (0.98) (1.00) (0.90)
--------- -------- ------- --------- -------- ---------------
Change in net asset
value (0.14) 0.45 (0.23) (0.30) 1.25 (0.41)
Net asset value,
end of period $ 12.58 $ 12.72 $ 12.27 $ 12.50 $ 12.80 $12.63
========= ======== ======= ========= ======== ===============
Total Return((1)) 6.05% 11.41% 5.59% 5.25% 20.33% 4.10%((4))
Ratios/supplemental
data:
Net assets, end of
period (thousands) $107,612 $103,415 $88,703 $88,477 $83,193 $ 460
Ratio to average net
asset of:
Operating expenses 0.66% 0.73% 0.77% 0.56%((2)) 0.46% 1.55%((3))
Net investment
income 6.98% 7.13% 7.32% 7.30% 8.34% 4.90%((3))
Portfolio turnover
rate 27% 34% 30% 21% 34% 51%
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((1)) Maximum sales charge is not reflected in total return calculation.
((2)) Net investment income would have been $.94 and the ratio of expenses to
average net assets would have been .63%, had the manager not waived a
portion of the management fee in 1987.
((3)) Annualized
((4)) Not annualized
5
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PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Both
yield and total return figures are computed separately for Class A and Class
B Shares in accordance with formulas specified by the Securities and Exchange
Commission and are based on historical earnings and are not intended to
indicate future performance.
The yield of the Fund will be computed by dividing the Fund's net investment
income over a 30-day period by an average value of invested assets (using the
average number of shares entitled to receive dividends and the maximum
offering price per share at the end of the period), all in accordance with
applicable regulatory requirements. Such amount will be compounded for six
months and then annualized for a twelve-month period to derive the Fund's
yield.
Standardized quotations of average annual total return for Class A and Class
B Shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in either Class A or Class B Shares over
a period of 1, 5 and 10 years (or up to the life of the class of shares).
Standardized total return quotations reflect the deduction of a proportional
share of each Class's expenses (on an annual basis), deduction of the maximum
initial sales load in the case of Class A Shares and the maximum contingent
deferred sales charge applicable to a complete redemption of the investment
in the case of Class B Shares, and assume that all dividends and
distributions on Class A and Class B Shares are reinvested when paid. It is
expected that the performance of Class A Shares will be better than that of
Class B Shares as a result of lower distribution fees paid by Class A Shares.
The Fund may also quote supplementally a rate of total return over different
periods of time by means of aggregate, average, and year-by-year or other
types of total return figures. In addition, the Fund may from time to time
publish materials citing historical volatility for shares of the Fund.
Volatility is the standard deviation of day to day logarithmic price changes
expressed as an annualized percentage.
The Fund may also quote a "tax-equivalent yield" determined by dividing the
tax-exempt portion of quoted yield by 1 minus the stated income tax rate and
adding the result to the portion of the yield that is not tax-exempt.
In addition to the foregoing, the Fund may advertise the total return of a
class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. The Fund from time to
time may also advertise performance relative to certain performance rankings
and indices compiled by independent organizations.
The Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar,
Inc. Additionally, the Fund may compare its performance results to other
investment or savings vehicles (such as certificates of deposit) and may
refer to results published in various publications such as Changing Times,
Forbes, Fortune, Money, Barrons, Business Week and Investor's Daily,
Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, The New York Times, Consumer Reports,
Registered Representative, Financial Planning, Financial Services Weekly,
Financial World, U.S. News and World Report, Standard and Poor's The Outlook,
and Personal Investor. The Fund may from time to time illustrate the benefits
of tax deferral by comparing taxable investments to investments made through
tax-deferred retirement plans. The total return may also be used to compare
the performance of the Fund against certain widely acknowledged outside
standards or indices for stock and bond market performance, such as the
Standard & Poor's 500 Stock Index (the "S&P 500"), Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer's Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500
is a commonly quoted market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 common stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded
over the counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
Advertisements, sales literature and communications may contain information
about the Fund or Adviser's current investment strategies and management
style. Current strategies and style may change to allow the Fund to respond
6
<PAGE>
quickly to a changing market and economic environment. From time to time the
Fund may discuss specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses; or cite separately as a return figure the bond
portion of a Fund's portfolio; or compare a fund's bond return figure to
well-known indices of market performance including but not limited to: the
S&P 500 Index, Dow Jones Industrial Average, First Boston High Yield Index
and Salomon Brothers Corporate and Government Bond Indices.
Performance information for the Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of the Fund during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objective
and policies, characteristics and qualities of the portfolio, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of
the methods used to determine total return for the Fund, see the Statement of
Additional Information.
The Fund's Annual Report, available upon request and without charge by
calling (203) 243-4361, contains a discussion of the performance of the Fund
and a comparison of that performance to a securities market index.
INVESTMENT OBJECTIVE AND POLICIES
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. There can be no
assurance that the Fund will achieve its objective. The Fund's investment
objective is a fundamental policy and may not be changed without majority
shareholder approval.
The Fund will attempt to achieve its objective by investing in a diversified
portfolio of obligations issued by or on behalf of the states, territories
and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, the interest from which is, in
the opinion of the bond counsel, exempt from Federal income tax (municipal
bonds). The Fund may also engage in transactions in financial futures
contracts and related options for hedging purposes.
California law requires that at least 50% of the Fund's total assets be
invested in California tax exempt state and local issues or tax exempt
federal obligations at the end of each quarter of its taxable year in order
to be eligible to pay dividends to California residents which will be exempt
from California income taxes. As a fundamental policy, the Fund will invest
at least 80% of its net assets in California tax exempt municipal securities.
The Fund may invest up to 100% of its assets in such securities. The Fund may
also invest in tax-exempt securities issued by Puerto Rico.
The Tax Reform Act of 1986 made significant changes in the federal tax status
of certain obligations which were previously fully federally tax-exempt. As a
result, three categories of such obligations issued after August 7, 1986 now
exist: (1) "public purpose" bonds, the income of which remains fully exempt
from federal income taxation; (2) qualified "private activity" industrial
development bonds, the income of which, while exempt from federal income
taxation under section 103 of the Internal Revenue Code, is includable in the
calculation of the federal alternative minimum tax, and (3) "private
activity" (private purpose) bonds, the income from which is not exempt from
federal income taxation (the interest on which is also treated as an item of
tax preference for purposes of the Alternative Minimum Tax ("AMT Bonds")).
The Fund may invest up to 20% of its net assets in AMT Bonds and qualified
"private activity" industrial development bonds and taxable fixed income
obligations.
Characteristics of Municipal Bonds
The two principal classifications of tax exempt bonds are "general
obligation" and "revenue." General obligations ("G.O.s") are secured by the
issuer's general pledge of its faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable only from monies derived
from a specified source such as operating a particular facility or from a
guarantee, lease, specific tax or pool of assets, e.g., a portfolio of
mortgages. Pollution control or other bonds backed by private corporations do
not generally have the pledge of the credit of the issuing public body but
are secured only by the credit of the corporation benefiting from the
facilities being financed.
The yields on tax exempt bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the
municipal bond market, size of a particular offering, the maturity of the
obligation and rating of the issue.
7
<PAGE>
The ratings of Standard & Poor's Corporation ("S&P"), Moody's Investors
Service, Inc. ("Moody's") and Fitch Investors Services, Inc. ("Fitch"),
represent their opinions as to the quality of the tax exempt bonds which they
undertake to rate. It should be emphasized, however, that ratings are general
and not absolute standards of quality.
Callable Bonds
The Fund may purchase and hold callable municipal bonds which contain a
provision in the indenture permitting the issuer to redeem the bonds prior to
their maturity dates at a specific price which typically reflects a premium
over the bonds' original issue price. These bonds generally have call
protection (that is, a period of time during which the bonds may not be
called) which usually lasts for 7 to 10 years, after which time such bonds
may be called away. An issuer may generally be expected to call its bonds, or
a portion of them, during periods of relatively declining interest rates,
when borrowing may be replaced at lower rates than those obtained in prior
years. If the proceeds of a bond called under such circumstances are
reinvested, the result may be lower overall yield due to lower current
interest rates.
Municipal Lease Obligations
Municipal lease obligations are municipal securities that may be supported by
a lease or an installment purchase contract issued by state and local
government authorities to acquire funds to obtain the use of a wide variety
of buildings or equipment and facilities such as fire and sanitation
vehicles, computer equipment, prisons, office buildings and schools and other
capital assets. These obligations, which may be secured or unsecured, are not
G.O.s secured by unlimited taxes and have evolved to make it possible for
state and local government authorities to obtain the use of property and
equipment without meeting constitutional and statutory requirements for the
issuance of debt. Thus, municipal lease obligations have special risks not
normally associated with G.O.s municipal bonds. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental
issuer of the obligation has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
legislative body on a yearly or other periodic basis. In addition to the non-
appropriation risk, some municipal lease obligations have not yet developed
the depth of marketability associated with other municipal bonds. Although
these obligations may be secured by the leased equipment, the disposition of
collateral in the event of the foreclosure may prove difficult. The liquidity
of municipal lease obligations purchased by the Fund will be determined
pursuant to illiquid securities guidelines approved by the Board of
Directors. The Board of Directors will be responsible for determining the
credit quality of unrated municipal leases, on an ongoing basis, including an
assessment of the likelihood that any such leases will not be canceled.
Factors considered in making such determinations may include the frequency of
trades and quotes for the obligation; the number of dealers willing to
purchase or sell the security and the number of dealer willing to purchase or
sell the security and the number of other potential buyers; the willingness
of dealers to undertake to make a market in the security; the nature of
marketplace trades; the obligation's rating and, if the security is unrated,
factors generally considered by a rating agency. If a municipal lease
obligation is determined to be illiquid, it will be subject to a Fund's
overall limit on investments in illiquid securities.
Risk Factors
California Bonds. Investors should be aware that certain California
Constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting California municipal securities. For instance, certain
provisions of the California Constitution and statutes which limit the taxing
and spending authority of California governmental entities may impair the
ability of the issuers of some California bonds to maintain debt service on
their obligations.
If the issuers of any of the California municipal securities are unable to
meet their financial obligations, the income derived by the Fund, the ability
to preserve or realize appreciation of the Fund's capital and the Fund's
liquidity could be adversely affected. Additional considerations relating to
risks associated with investing in California municipal securities are
summarized below and in the Statement of Additional Information.
Puerto Rico Bonds. The Fund may also invest in securities issued by Puerto
Rico. Puerto Rico's economy centers around industrial employment, the
cornerstone of which is Section 936 of the Internal Revenue Code of 1986, as
amended (the "Code"). This provision offers certain tax advantages to U.S.
manufacturing firms operating in Puerto Rico by allowing exemptions from a
portion of U.S. corporate income tax to qualifying U.S. corporations.
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Significant changes were made to Section 936 of the Code as a result of the
Omnibus Budget Reconciliation Act of 1993. The effect of these changes on the
development of the Puerto Rican economy will not be certain for a number of
years; however, it appears that the changes will not likely dramatically
affect current investment or employment. The impact of future investment and
employment is more uncertain.
Additional information regarding the economy of Puerto Rico is contained in
the Statement of Additional Information.
Other Special Considerations. The ability of issuers engaged in the
generation, distribution and/or sale of electrical power and/or natural gas
to make payments of principal or interest on such obligations is dependent
on, among other things, the continuing ability of such issuers to derive
sufficient revenues from their operations to meet debt service requirements.
There are several Federal housing subsidy programs used by state housing
agencies which do not result in unconditional protection of the bondholder.
Changes enacted by Congress in these programs or administrative difficulty
might result in a decrease in present actual or future estimated debt service
coverage. A reduction in coverage might also result from economic
fluctuations leading to changes in interest rates or operating cost. Most
state housing authority bonds are also "moral obligations." In many, but not
all cases, this "moral obligation" is explicitly reflected in the bond
contract by means of an option permitting the state legislature to provide
debt service support if the legislature so chooses, thus providing the
bondholder with an additional source of potential support not directly
related to the specific housing program.
Financial Futures. Engaging in transactions in financial futures contracts
involves certain risks, such as the possibility of an imperfect correlation
between futures market prices and cash market prices and the possibility that
the Adviser could be incorrect in its expectations as to the direction or
extent of various interest rate movements, in which case the Fund's return
might have been greater had hedging not taken place. There is also the risk
that a liquid secondary market may not exist. The risk in purchasing an
option on a financial futures contract is that the Fund will lose the premium
it paid. Also, there may be circumstances when the purchase of an option on a
financial futures contract would result in a potentially unlimited loss to
the Fund.
INVESTMENT TECHNIQUES
Investment techniques and the related risks are summarized below and are
described in more detail in the Statement of Additional Information.
The Fund may invest, without percentage limitations, in investment grade
securities having ratings by Moody's of Aaa, Aa, A or Baa or ratings by S&P
or Fitch of AAA, AA, A or BBB, or in securities which are not rated, provided
that, in the opinion of the Adviser, such securities are comparable in rating
quality to those rated securities in which the Fund may invest. Except for
temporary investments (taxable or tax exempt) as described herein, including,
the investment of up to 20% of the Fund's net assets in AMT Bonds and
qualified "private activity" industrial development bonds and taxable fixed
income obligations, all of the Fund's investments consist of tax exempt
bonds. Municipal bonds rated Baa by Moody's or BBB by S&P or Fitch are medium
grade investment obligations that may have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments; in the case
of such obligations, than is the case for higher grade bonds. A description
of S&P's and Moody's rating systems is appended to the Statement of
Additional Information.
Subsequent to its purchase by the Fund, an issue of tax exempt bonds or a
temporary investment may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. Neither event will require the
elimination of such obligation from the Fund's portfolio, but the Adviser
will consider such an event in its determination of whether the Fund should
continue to hold such obligation in its portfolio. To the extent that the
ratings accorded by S&P, Moody's or Fitch for tax exempt bonds or temporary
investments may change as a result of changes in such organizations, or
changes in their rating systems, the Fund will attempt to use comparable
ratings as standards for its investments in accordance with the investment
policies contained herein. At the end of the Fund's last fiscal year, its
entire portfolio was invested in tax exempt securities as follows: 89.4% in
bonds rated "A" or better by S&P or Moody's, 5.7% in bonds rated "A-", "BBB"
or "Baa" and 4.9% in bonds which were non-rated.
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The Fund may from time to time invest a portion of its assets on a temporary
basis in "temporary investments," the income from which may be subject to
Federal and state income tax. Such temporary investments may consist of notes
from issuers having, at the time of purchase, an issue of outstanding
municipal bonds rated within the three highest grades by S&P, Moody's or
Fitch (taxable or tax exempt); commercial paper rated A-1, P-1 or F-1 grade
by S&P, Moody's or Fitch, respectively, and U.S. Treasury and agency
securities. These investments may be made pending the investment or
reinvestment of proceeds from the sale of its shares or portfolio securities
and will not exceed 20% of the Fund's total assets except when abnormal
market or economic conditions warrant a temporary defensive position. When
the Fund is in a temporary defensive position, it is not investing in
securities selected to meet the Fund's investment objectives. In addition,
for such temporary defensive purposes, the Fund may pursue a policy of
retaining cash or investing part or all of its assets in cash equivalents.
The Fund may purchase municipal obligations on a when-issued basis, i.e.,
delivery and payment for the securities will take place after the transaction
date, normally within 15 to 45 days, though the payment obligation and the
interest rate that will be received on the securities is fixed at the time
the buyer enters into the commitment. The Fund will only make commitments to
purchase such securities with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date
if it is deemed advisable as a matter of investment strategy. No interest
accrues to the Fund prior to delivery of the purchased securities. A
segregated account of the Fund consisting of high quality interest-bearing
liquid debt securities with a market value at least equal to the amount of
the Fund's when-issued commitment will be maintained with the Custodian so
that the market value of the account will, on a daily basis, equal or exceed
the amount of such commitments by the Fund. When the time comes to pay for
when-issued securities, the Fund may meet its obligations from the segregated
account, sale of other securities, or, although it would not normally expect
to do so, from the sale of the when-issued securities themselves (which may
have a market value greater or less than the Fund's payment obligation).
Securities purchased on a when-issued basis and the securities held in the
Fund's portfolio are subject to changes in value based upon the public's
perception of the creditworthiness of the issuers and changes in the level of
interest rates. Generally, the value of such securities will fluctuate
inversely with changes in interest rates. If the Fund remains substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility of fluctuation in the
Fund's net asset value.
Financial Futures and Related Options
The Fund may enter into financial futures contracts and related options as a
hedge against anticipated changes in the market value of Fund securities or
securities which the Fund intends to purchase. Hedging is the initiation of
an offsetting position in the futures market which is intended to minimize
the risk associated with a position's underlying securities in the cash
market. Investment techniques related to financial futures and options are
summarized below and are described more fully in the Statement of Additional
Information.
Financial futures contracts consist of interest rate futures contracts and
securities index futures contracts. An interest rate futures contract
obligates the seller of the contract to deliver, and the purchaser to take
delivery of, the interest rate securities called for in the contract at a
specified future time and at a specified price. A securities index assigns
relative values to the securities included in the index, and the index
fluctuates with changes in the market values of the securities so included. A
securities index futures contract is a bilateral agreement pursuant to which
two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the index value at the
close of the last trading day of the contract and the price at which the
futures contract is originally struck. An option on a financial futures
contract gives the purchaser the right to assume a position in the contract
(a long position if the option is a call and a short position if the option
is a put) at a specified exercise price at any time during the period of the
option.
The Fund may purchase and sell financial futures contracts which are traded
on a recognized exchange or board of trade and may purchase exchange- or
board-traded put and call options on financial futures contracts. The Fund
will engage in transactions in financial futures contracts and related
options only for hedging purposes and not for speculation. In addition, the
Fund will not purchase or sell any financial futures contract or related
option if, immediately thereafter, the sum of the cash or U.S. Treasury bills
committed with respect to the Fund's existing futures and related options
positions and the premiums paid for related options would exceed 5% of the
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<PAGE>
market value of the Fund's total assets. At the time of purchase of a futures
contract or a call option on a futures contract, an amount of cash, U.S.
Government securities or other appropriate high-grade debt obligations equal
to the market value of the futures contract minus the Fund's initial margin
deposit, will be deposited in a segregated account with the Fund's custodian
bank to fully collateralize the position and ensure that it is not leveraged.
The extent to which the Fund may enter into financial futures contracts and
related options may also be limited by requirements of the Internal Revenue
Code for qualification as a regulated investment company.
MANAGEMENT OF THE FUND
The Fund is a mutual fund, technically known as an open-end management
investment company. The Board of Directors of the Fund (the "Directors") are
responsible for the overall supervision of the operations of the Fund and
perform the various duties imposed on directors by the 1940 Act and the
Maryland General Corporation Law. The Board of Directors elect officers of
the Fund annually.
The Adviser
Pursuant to a Management Agreement (the "Management Agreement") with the
Fund, National acts as investment adviser to the Fund. In this capacity, the
Adviser, subject to the authority of the Directors, is responsible for the
overall management of the Fund's business affairs. The Directors periodically
review the services provided by the Adviser to ensure that the Fund's general
investment policies and programs are being properly carried out and that the
administrative services are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.
The Adviser is an indirect wholly-owned subsidiary of Phoenix Home Life
Mutual Insurance Company ("Phoenix Home Life"), a mutual insurance company
engaged in the insurance and investment businesses. Phoenix Home Life's
principal place of business is located at One American Row, Hartford,
Connecticut, where the company manages combined assets of approximately $12
billion through advisory accounts and mutual funds. The Adviser presently
also acts as the investment adviser to the Phoenix Income and Growth Fund,
Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix Asset Reserve, Phoenix
Strategic Equity Series Fund and Phoenix Worldwide Opportunities Fund. The
Adviser currently has approximately $1.7 billion in assets under management.
The Adviser has acted as an investment adviser for over 60 years.
As compensation for its services, the Adviser receives a fee, which is
accrued daily against the value of the Fund's net assets and is paid monthly
by the Fund. The fee is computed at an annual rate of 0.45% of the Fund's
average daily net assets up to $1 billion, 0.40% of the Fund's average daily
net assets from $1 to $2 billion, and 0.35% of the Fund's average daily net
assets in excess of $2 billion. The ratio of the management fees to average
net assets for the fiscal year ended April 30, 1995 for Class A Shares and
Class B Shares was .45%.
The Portfolio Manager
Mr. James D. Wehr has served as the portfolio manager of the Fund since July,
1993 and as such is primarily responsible for the day-to-day management of
the Fund. Mr. Wehr has also served as a Vice President of Phoenix Investment
Counsel, Inc. since 1991, and as Vice President of National Securities &
Research Corporation since May, 1993. Mr. Wehr has served as Portfolio
Manager of the Tax-Exempt Bond Portfolio of the Phoenix Multi-Portfolio Fund
since 1988. Mr. Wehr is also Managing Director, Public Fixed Income for
Phoenix Home Life and has been employed by Phoenix Home Life since 1981.
The Financial Agent
Pursuant to a Financial Agent Agreement with the Phoenix Funds, Equity
Planning acts as administrative agent of the Fund and, as such, performs
administrative, bookkeeping and pricing functions for the Fund. As
compensation, Equity Planning receives a quarterly fee based on the average
of the aggregate daily net asset values of the Fund at the annual rate of
$300 per $1 million. For its services during the Fund's fiscal year ended
April 30, 1995, Equity Planning received a fee of $36,661 or .03% of average
net assets.
Custodian and Transfer Agent
The Fund's custodian is State Street Bank and Trust Company. Pursuant to a
Transfer Agent and Service Agreement with the Phoenix Funds, Equity Planning
acts as transfer agent for the Fund (the "Transfer Agent") for which it is
paid $14.95 for each designated shareholder account. The Transfer Agent has
and shall engage sub-agents to perform certain shareholder servicing
functions from time to time for which such agents shall be paid a fee by
Equity Planning.
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DISTRIBUTOR AND
DISTRIBUTION PLANS
Pursuant to an Underwriting Agreement with the Fund, Equity Planning is the
underwriter of each class of the Fund's shares. The offices of the
Underwriter are located at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06038-2200. The Underwriter conducts a continuous
offering pursuant to a "best efforts" arrangement requiring it to take and
pay for any such securities as may be sold to the public through investment
dealers. The Underwriter purchases such copies of the Fund's Prospectuses,
reports and communications to shareholders as it may require for sales
purposes at printer's over-run cost. The Underwriter may sell Fund shares
through its registered representatives or through securities dealers with
whom it has sales agreements.
Distribution Plans
The Fund has adopted separate distribution plans under Rule 12b-1 of the 1940
Act for each class of shares of the Fund (the "Class A Plan", the "Class B
Plan", and collectively the "Plans"). The Plans permit the Fund to reimburse
the Underwriter for expenses incurred in connection with activities intended
to promote the sale of Fund shares and the furnishing of shareholder
services. Pursuant to the Class A Plan, the Fund may reimburse the
Underwriter for actual expenses of the Underwriter up to 0.25% annually for
the average daily net assets of the Fund's Class A Shares. Under the Class B
Plan, the Fund may reimburse the Underwriter for actual expenses of the
Underwriter up to 1.00% annually of the average daily net assets of the
Fund's Class B Shares.
Expenditures under the Plans may consist of: (i) commissions to sales
personnel for selling shares of the Fund (including underwriting commissions
and financing charges related to the payment of commissions for sales of
Class B Shares); (ii) compensation, sales incentives and payments to sales,
marketing and service personnel; (iii) payments to broker-dealers and other
financial institutions which have entered into agreements with the
Underwriter for services rendered in connection with the sale and
distribution of shares of the Fund and the provision of shareholder services;
(iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing
the Fund's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services
that the Directors determine are reasonably calculated to result in the sale
of shares of the Fund, provided, however, that a portion of the above fees
paid by the Fund to the Underwriter in connection with reimbursing the costs
of providing services to shareholders, including assistance in connection
with inquiries related to shareholder accounts (the "Service Fee") shall not
exceed 0.25% annually of the average daily net assets of the class to which
such fee relates.
If either or both of the Plans are terminated in accordance with their
respective terms, the obligations of the Fund to make payments to the
Underwriter pursuant to such Plan, including payments for expenses carried
over from previous years, will cease and the Fund will not be required to
make any payments past the date on which either Plan terminates.
For the fiscal year ended April 30, 1995, the Fund paid $305,043 and $1,865
under the Distribution Plan for Class A and Class B Shares respectively. The
fees were used to compensate unaffiliated broker-dealers for servicing
shareholder's accounts, compensating sales personnel and reimbursing the
Underwriter for commission expenses and expenses related to preparation of
the marketing material. On a quarterly basis, the Fund's Directors review a
report on expenditures under each Plan and the purposes for which
expenditures were made. The Directors conduct an additional, more extensive
review annually in determining whether each Plan will be continued. By its
terms, continuation of each Plan from year to year is contingent on annual
approval by a majority of the Fund's Directors and by a majority of the
Directors who are not "interested persons" (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of either
Plan or any related agreements (the "Plan Directors"). Each Plan provides
that it may not be amended to increase materially the costs which the Fund
may bear without approval of the applicable class of shareholders of the Fund
and that other material amendments must be approved by a majority of the Plan
Directors by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Plan further provides that while it is in
effect, the selection and nomination of Directors who are not "interested
persons" shall be committed to the discretion of the Directors who are not
"interested persons". Each Plan may be terminated at any time
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<PAGE>
by vote of a majority of the Plan Directors or a majority of the applicable
class of outstanding shares of the Fund.
The Directors have concluded that there is a reasonable likelihood that the
Plans will benefit the Fund and all classes of shareholders. The Class A Plan
was approved by Class A shareholders of the Fund at a special meeting of
shareholders held on May 7, 1993. The Class B Plan was adopted by the
Directors (including a majority of independent Directors) on May 25, 1994.
The National Association of Securities Dealers ("NASD") regards certain
distribution fees as asset-based sales charges subject to NASD sales load
limits. The NASD's maximum sales charge rule may require the Directors to
suspend distribution fees or amend either or both Plans.
HOW TO BUY SHARES
The Fund currently issues two classes of shares. Class A Shares are sold to
investors choosing the initial sales charge alternative. Class B Shares are
sold to investors choosing the deferred sales charge alternative. The minimum
initial purchase is $500 and the minimum subsequent investment is $25. Both
the minimum initial and subsequent investment amounts are $25 for investments
pursuant to the "Investo-Matic" plan, a bank draft investing program
administered by Equity Planning, or pursuant to the Systematic Exchange
Privilege (see the Statement of Additional Information).
Completed applications for the purchase of shares should be mailed to The
Phoenix Funds, c/o State Street Bank and Trust, P.O. Box 8301, Boston, MA
02266-8301.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights, and is identical to the other
in all respects, except that Class B Shares bear the expenses of the deferred
sales arrangement and any expenses (including the higher distribution
services fee and any incremental transfer agency costs) resulting from such
sales arrangement. Each class has exclusive voting rights with respect to
provisions of the Rule 12b-1 distribution plan pursuant to which its
distribution services fee is paid and each class has different exchange
privileges. Only the Class B Shares are subject to a conversion feature. The
net income attributable to Class B Shares and the dividends paid on Class B
Shares will be reduced by the amount of the higher distribution services fee
and incremental expenses associated with such distribution services fee;
likewise, the net asset value of the Class B Shares will be reduced by such
amount to the extent the Fund has undistributed net income.
Subsequent investments for the purchase of full and fractional shares in
amounts of $25 or more may be made through an investment dealer or by sending
a check to Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box
8301, Boston, MA 02266-8301. Share certificates representing any number of
full shares will be issued only on request, and subject to certain
conditions. A fee may be incurred by the shareholder for a lost or stolen
share certificate. Sales personnel of broker-dealers distributing the Fund's
shares may receive differing compensation for selling Class A or Class B
Shares.
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange
privileges. Certain privileges may not be available in connection with Class
B Shares. Shares of the Fund or shares of any other Phoenix Fund (except
Phoenix Asset Reserve Class A Shares held less than 6 months), may be
exchanged for shares of the same class on the basis of the relative net asset
values per share at the time of the exchange. Exchanges are subject to the
minimum initial investment requirement of the designated Phoenix Fund, except
if made in connection with the Systematic Exchange privilege. Shareholders
may exchange shares held in book-entry form for an equivalent number (value)
of the same class of shares from any other Phoenix Fund. On Class B Share
exchanges, the contingent deferred sales charge schedule of the original
shares purchased is not taken and continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangement permits an investor to choose the method
of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the
Fund, the accumulated continuing distribution services fee and contingent
deferred sales charges on Class B Shares prior to conversion would be less
than the initial sales charge and accumulated distribution services fee on
Class A Shares purchased at the same time, and to what extent such
differential would be offset by the higher yield of
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Class A Shares. In this regard, Class A Shares will normally be more
beneficial to the investor who qualifies for certain reduced initial sales
charges. For this reason, the Underwriter intends to limit sales of Class B
Shares sold to any shareholder to a maximum total value of $250,000. Class B
Shares sold to unallocated qualified employer sponsored plans will be limited
to a maximum total value of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401k plans, will be limited to a maximum total value of $250,000
for each participant provided such plans utilize an approved participant
tracking system. In addition, Class B Shares will not be sold to any
qualified employee benefit plan, endowment fund or foundation if, on the date
of the initial investment, the plan, fund or foundation has assets of
$10,000,000 or more or at least 200 participant employees. Class B Shares
will also not be sold to investors who have reached the age of 85 because of
such persons' expected distribution requirements.
Class A Shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share. However, because
initial sales charges are deducted at the time of purchase, Class A investors
would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced initial
sales charges who expect to maintain their investment for an extended period
of time might consider purchasing Class A Shares because the accumulated
continuing distribution charges on Class B Shares may exceed the initial
sales charge on Class A Shares during the life of the investment. Again,
however, such investors must weigh this consideration against the fact that,
because of such initial sales charge, not all their funds will be invested
initially. However, other investors might determine that it would be more
advantageous to purchase Class B Shares to have all their funds invested
initially, although remaining subject to higher continuing distribution
charges and, for a five-year period, being subject to a contingent deferred
sales charge.
Initial Sales Charge Alternative - Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the
close of the general trading session of the New York Stock Exchange. Orders
received by dealers prior to such time are confirmed at the offering price
effective at that time, provided the order is received by the Underwriter
prior to its close of business.
Mailed applications for purchases of shares are to be mailed to Phoenix
Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA
02266-8301.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Fund made at one time by "any
person," which term includes an individual, an individual and his/her spouse
and their children under the age of 21, or a trustee or other fiduciary
purchasing shares for a single trust, estate or fiduciary account although
more than one beneficiary is involved.
Class A Shares of the Fund are offered to the public at the net asset value
next computed after the purchase order is received by State Street Bank and
Trust Company, plus a maximum sales charge of 4.75% of the offering price
(4.99% of the amount invested) on single purchases of less than $50,000. The
sales charge is reduced on a graduated scale on single purchases of $50,000
or more as shown below.
Sales Charge Sales Charge Agency Fee
Amount of as % of as % of as % of
Transaction off. Price amt. invested off. price*
--------------------- ------------- -------------- --------------
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but
under $100,000 4.50% 4.71% 4.00%
$100,000 but
under $250,000 3.50% 3.63% 3.00%
$250,000 but
under $500,000 3.00% 3.09% 2.75%
$500,000 but
under $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None**
* Equity Planning will sponsor sales contests, training and educational
meetings and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips, merchandise or
expense reimbursement. Brokers or dealers other than Equity Planning may also
make customary additional charges for their services in effecting purchases,
if they notify the Fund of their intention to do so. Equity Planning shall
also pay service and retention fees, from its own profits and resources, to
qualified wholesalers who recruit registered financial institutions and
related third party marketers in connection with the sale of shares of
Phoenix Funds (exclusive of Class A Shares of Phoenix Money Market Series).
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** In connection with Class A share purchases of $1,000,000 or more (or
subsequent purchases in any amount), Equity Planning may pay broker/dealers,
from its own profits and resources, a percentage of the net asset value of
any shares sold as set forth below:
Payment to
Purchase Amount Broker/Dealers
----------------------------------- -------------
$1,000,000 to $2,000,000 0.75 of 1%
$2,000,001 to $4,000,000 0.50 of 1%
$4,000,001 or more 0.25 of 1%
If part or all of such an investment is subsequently redeemed within one
year of the investment date, the broker/dealer will refund to Equity
Planning any such amounts paid with respect to the investment.
How to Obtain Reduced Sales Charges on Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares to:
(1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or to any full-time employee or sales representative (who has acted
as such for at least 90 days), of the Adviser or of Equity Planning; (3)
registered representatives and employees of securities dealers with whom
Equity Planning has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or
employee or a corporate affiliate of the Adviser or Equity Planning; (6) any
spouse, child, parent, grandparent, brother or sister of any person named in
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the
Adviser, Equity Planning and/or their corporate affiliates; (8) any employee
or agent who retires from Phoenix Home Life or Equity Planning; (9) to any
account held in the name of a qualified employee benefit plan, endowment fund
or foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 200 participant
employees; (10) any person with a direct rollover transfer of shares from an
established Phoenix Fund qualified plan; (11) any Phoenix Home Life separate
account which funds group annuity contracts offered to qualified employee
benefits plans; (12) any state, county, city, instrumentality, department,
authority or agency prohibited by law from paying a sales charge; (13) any
fully matriculated student in any U.S. service academy; (14) any unallocated
account held by a third party administrator, registered investment adviser,
trust company, or bank trust department which exercises discretionary
authority and holds the account in a fiduciary, agency, custodial or similar
capacity, if in the aggregate such accounts equal or exceed $1,000,000; (15)
any person who is investing redemption proceeds from investment companies
other than the Phoenix Funds if, in connection with the purchases or
redemption of the redeemed shares, the investor paid a prior sales charge
provided such investor supplies verification that the redemption occurred
within 90 days of the Phoenix Fund purchase and that a sales charge was paid;
or (16) any accounts established by financial institutions, broker/dealers or
registered investment advisers that charge an account management fee or
transaction fee, provided such entity has entered into an agreement for such
program with the Distributor; provided that sales made to persons listed in
(1) through (14) above are made upon the written assurance that the purchase
is made for investment purposes and that such shares will not be resold
except to the Fund.
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to any sales charges. The Fund
receives the entire net asset value of its Class A Shares sold to investors.
The Underwriter's commission is the sales charge shown above less any
applicable discount or commission "re-allowed" to selected dealers and
agents. The Underwriter will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Underwriter may elect to re-allow the entire sales charge to selected
dealers and agents for all sales with respect to which orders are placed with
the Underwriter. A selected dealer who receives re-allowance in excess of 90%
of such a sales charge may be deemed to be an "Underwriter" under the
Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Phoenix Fund
(including Class B Shares and excluding Money Market Class A Shares), if made
at a single time by a single purchaser, will be combined for the purpose of
determining whether the total dollar amount of such purchases entitles the
purchaser to a reduced sales charge on any such purchases of Class A Shares.
Each purchase of Class A Shares will then be made at the public offering
price, as described in the then current Prospectus relating to such shares,
which at the time of such purchase is applicable to a
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single transaction of the total dollar amount of all such purchases. The term
"single purchaser" includes an individual, or an individual, his spouse and
their children under the age of majority purchasing for his or their own
account (including an IRA account) including his or their own trust, commonly
known as a living trust; a trustee or other fiduciary purchasing for a single
trust, estate or single fiduciary account, although more than one beneficiary
is involved; multiple trusts or 403(b) plans for the same employer; multiple
accounts (up to 200) under a qualified employee benefit plan or administered
by a third party administrator; or trust companies, bank trust departments,
registered investment advisers, and similar entities placing orders or
providing administrative services with respect to funds over which they
exercise discretionary investment authority and which are held in a
fiduciary, agency, custodial or similar capacity, provided all shares are
held in record in the name, or nominee name, of the entity placing the order.
Letter of Intent. Class A Shares or shares of any other Phoenix Fund
(including Class B Shares and excluding Money Market Class A Shares) may be
purchased by a "single purchaser" (as defined above) within a period of
thirteen months pursuant to a Letter of Intent, in the form provided by
Equity Planning, stating the investor's intention to invest in such shares
during such period an amount which, together with the value (at their maximum
offering prices on the date of the Letter) of the shares of the Fund or
shares of any other Phoenix Fund then owned by such investor, equals a
specified dollar amount. Each purchase of shares made pursuant to a Letter of
Intent will be made at the public offering price, as described in the then
current Prospectus relating to such shares, which at the time of purchase is
applicable to a single transaction of the total dollar amount specified in
the Letter of Intent.
An investor's Letter of Intent is not a binding commitment of the investor to
purchase or a binding obligation of the Fund or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete his
investment is held in escrow in the form of shares (valued at the purchase
price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If
the investor does not complete his investment and does not within 20 days
after written request by Equity Planning or his dealer pay the difference
between the sales charge on the dollar amount specified in his Letter of
Intent and the sales charge on the dollar amount of actual purchases, the
difference will be realized through the redemption of an appropriate number
of the escrowed shares and any remaining escrowed shares will be deposited to
his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Fund, or any other Phoenix Fund, made over
time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the
then current value (at the public offering price as described in the then
current prospectus relating to such shares) of shares of all Phoenix Funds
owned) in excess of the threshold amounts described in the section entitled
"Initial Sales Charge Alternative--Class A Shares". To use this option, the
investor must supply sufficient account information to Equity Planning to
permit verification that one or more purchases qualify for a reduced sales
charge.
Associations. A group or association may be treated as a "single purchaser"
and qualify for reduced initial sales charges under the Combination Purchase
Privilege and Right of Accumulation if the group or association (1) has been
in existence for at least six months; (2) has a legitimate purpose other than
to purchase mutual fund shares at a reduced sales charge; (3) gives its
endorsements or authorization in the investment program to facilitate
solicitation of the membership by the investment dealer, thus effecting
economies of sales effort; and (4) is not a group whose sole organizational
nexus is that the members are credit card holders of a company, policyholders
of an insurance company, customers of a bank or a broker-dealer or clients of
an investment adviser.
Deferred Sales Charge Alternative - Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge
at the time of purchase. The Class B Shares are subject to a sales charge if
redeemed within five years of purchase.
Proceeds from the contingent deferred sales charge are paid to the
Underwriter and are used in whole or in part by the Underwriter to defray the
expenses of the Underwriter related to providing distribution-related
services to the Fund in connection
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with the sale of the Class B Shares, such as the payment of compensation to
selected dealers and agents. The combination of the contingent deferred sales
charge and the distribution fee facilitates the ability of the Fund to sell
the Class B Shares without a sales charge being deducted at the time of
purchase.
Contingent Deferred Sales Charge. Class B Shares which are redeemed within
five years of purchase will be subject to a contingent deferred sales charge
at the rates set forth below charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser
of the current market value or the cost of the shares being redeemed.
Accordingly, no sales charge will be imposed on increases in net asset value
above the initial purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains distributions.
The Underwriter intends to pay investment dealers a sales commission of 4% of
the sale price of Class B Shares sold by such dealers, subject to future
amendment or termination. The Underwriter will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by
shareholders on the redemption of shares to finance the 4% commission plus
interest and related marketing expenses.
The amount of the contingent deferred sales charges, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment for
the purchases of shares, all payments during a month will be aggregated and
deemed to have been made on the last day of the previous month.
Contingent Deferred Sales
Charge as a Percentage of
Year Since Purchase Dollar Amount Subject to Charge
------------------- -------------------------------
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
In determining whether a contingent deferred sales charge is applicable to a
redemption, it will be assumed that any Class A Shares are redeemed first.
Class B Shares held for over 5 years and shares acquired pursuant to
reinvestment of dividends or distributions are redeemed next. Any Class B
Shares held longest during the 5 year period are redeemed next, unless the
shareholder directs otherwise. The charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.
To provide an example, assume in 1990, an investor purchased 100 Class B
Shares. In 1993, the investor purchased another 100 Class B Shares at $12 per
share. In 1995, the investor purchased 100 Class A Shares. Assume that in
1996, the investor owns 225 Class B Shares (15 Class B Shares resulting from
dividend reinvestment and distributions upon the Class B Shares purchased in
1990 and 10 Class B Shares resulting from dividend reinvestment and
distributions upon the Class B Shares purchased in 1993) as well as 100 Class
A Shares. If the investor wished to then redeem 300 shares and had not
specified a preference in redeeming shares; first, 100 Class A Shares would
be redeemed without charge. Second, 115 Class B Shares purchased in 1990
(including 15 shares issued as a result of dividend reinvestment and
distributions) would be redeemed next without charge. Finally, 85 Class B
Shares purchased in 1993 would be redeemed resulting in deferred sales charge
of $27 [85 shares (85 shares minus 10 shares resulting from dividend
reinvestment) x $12 (original price) x 3% (applicable rate in the third year
after purchase)].
The contingent deferred sales charge is waived on redemptions of shares (a)
if redemption is made within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint
tenant is the deceased's spouse, or (iii) of the beneficiary of a Uniform
Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other
custodial account; (b) if redemption is made within one year of disability,
as defined in Section 72(m)(7) of the Code; (c) in connection with mandatory
distributions upon reaching age 70 1/ 2 under any retirement plan qualified
under Sections 401, 408 or 403(b) of the Code or any redemption resulting
from the tax-free return of an excess contribution to an IRA; (d) in
connection with redemptions by 401(k) plans using an approved participant
tracking system for: participant hardships, death, disability or normal
retirement, and loans which are subsequently repaid; (e) in connection with
the exercise of certain exchange privileges among the Class B Shares of the
Fund and Class B Shares of other Phoenix Funds; (f) in connection with any
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the
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qualified plan; and (g) in accordance with the terms specified under the
Systematic Withdrawal Program. If, upon the occurrence of a death as outlined
above, the account is transferred to an account registered in the name of the
deceased's estate, the contingent deferred sales charge will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B Shares are not redeemed within one year of the death, they will
remain Class B Shares and be subject to the applicable contingent deferred
sales charge when redeemed.
Class B Shares of the Fund will automatically convert to Class A Shares
without a sales charge at the relative net asset values of each of the
classes after eight years from the acquisition of the Class B Shares, and as
a result, will thereafter be subject to the lower distribution fee under the
Class A Plan. Such conversion will be on the basis of the relative net asset
value of the two classes without the imposition of any sales load, fee or
other charge. The purpose of the conversion feature is to relieve the holders
of Class B Shares that have been outstanding for a period of time sufficient
for the National Distributor to have been compensated for
distribution-related expenses.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Fund account
(other than those in the sub-account) are converted to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
availability of an opinion of counsel or a ruling of the Internal Revenue
Service ("IRS") to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B Shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of shares does not
constitute a taxable event under federal income tax law. The Fund has not
sought opinions of counsel as to these matters but has or shall apply to the
IRS for such a ruling. While a ruling similar to the one sought by the Fund
as to preferential dividends has been issued previously by the IRS with
respect to Phoenix Multi-Sector Fixed Income Fund, Inc., complete assurance
cannot be given when or whether the Fund will receive a favorable ruling.
While an adverse determination by the IRS is not expected, the Fund may be
required to reassess the alternative purchase arrangement structure if the
IRS does not rule favorably. In addition, were the IRS not to rule favorably,
the Fund might make additional distributions if doing so would assist in
complying with the Fund's general practice of distributing sufficient income
to reduce or eliminate U.S. federal taxes. The conversion of Class B Shares
to Class A Shares may be suspended if such an opinion or ruling is not
available. In that event, no further conversions of Class B Shares would
occur, and shares might continue to be subject to the higher distribution fee
for an indefinite period which may extend beyond the period ending six years
after the end of the month in which affected Class B Shares were purchased.
INVESTOR ACCOUNTS AND SERVICES AVAILABLE
An account will be opened for the investor after the investor makes an
initial investment. Shares purchased will be held in the shareholder's
account by the Transfer Agent which will forward a statement each time there
is a change in the number of shares in the account. At any time, a
shareholder may request that a certificate be issued, subject to certain
conditions, representing any number of full shares held in his or her
account.
The Fund mails periodic reports to shareholders. In order to reduce the
volume of mail, to the extent possible, only one copy of most reports will be
mailed to households for multiple accounts with the same surname at the same
household address. Please contact Equity Planning to request additional
copies of shareholder reports.
Shareholder inquiries should be directed to the Fund at (800) 243-1574.
Bank Draft Investing Program (Investo-Matic Plan)
By completing the Investo-Matic Section of the New Account Application, a
shareholder may authorize the bank named in the form to draw $25 or more from
his/her personal checking account on or about the 15th day of the month, to
be used to purchase additional shares for his/her account. The amount the
shareholder designates will be made available, on form payable to the order
of the Transfer Agent by the bank on the date the bank draws on his/her
account and will be used to purchase shares at the applicable offering price.
The shareholder or his or her registered representative may, by telephone or
written notice, cancel or change the dollar amount
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<PAGE>
being invested pursuant to the Investo-Matic Plan unless the shareholder has
notified the Fund or Transfer Agent that his or her registered representative
shall not have this authority.
Distribution Option
The Fund currently declares all income dividends and all capital gain
distributions, if any, payable in shares of the Fund at net asset value or,
at the option of the shareholder, in cash. By exercising the distribution
option, a shareholder may elect (1) to receive both dividends and capital
gain distributions in additional shares; or (2) to receive dividends in cash
and capital gain distributions in additional shares; or (3) to receive both
dividends and capital gain distributions in cash. If a shareholder elects to
receive dividends and/or distributions in cash and the check cannot be
delivered or remains uncashed by the shareholder due to an invalid address,
the dividend and/or distribution will be reinvested after the Transfer Agent
has been informed that the proceeds are undeliverable. Additional shares will
be purchased for the shareholder's account at the then current net asset
value. Shareholders who maintain an account balance of at least $5,000, or
$2,000 for qualified retirement benefit plans (calculated on the basis of the
net asset value of the shares held in a single account), may direct that any
dividends and distributions paid with respect to shares in that account be
automatically reinvested in a single account of one of the other Phoenix
Funds at net asset value. Shareholders should obtain a current prospectus and
consider the objectives and policies of each Fund carefully before directing
dividends and distributions to another Fund. Reinvestment direction forms and
prospectuses are available from Equity Planning. An alternate payee section
has been incorporated into the application allowing distributions to be
mailed to a second payee and/or address. Dividends and capital gain
distributions received in shares are taxable to the shareholder and credited
to the shareholder's account in full and fractional shares and are computed
at the closing net asset value on the next business day after the record
date. A distribution option may be changed at any time by notifying Customer
Service by telephone at 800-243-1574 or by sending a written letter signed by
the registered owner(s) of the account. Requests for directing distributions
to an alternate payee must be made in writing with a signature guarantee of
the registered owner(s). To be effective with respect to a particular
dividend or distribution, notification of the new distribution option must be
received by the Transfer Agent at least three days prior to the record date
of such dividend or distribution. If all shares in the shareholder's account
are repurchased or redeemed or transferred between the record date and the
payment date of a dividend or distribution, he will receive cash for the
dividend or distribution regardless of the distribution option selected.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows shareholders to periodically redeem
a portion of their account at predetermined monthly or quarterly, semiannual
or annual basis. A sufficient number of full and fractional shares shall
therefore be redeemed so that the designated payment is made on or about the
20th day of the month. Shares are tendered for redemption by the Transfer
Agent, as agent for the shareowner, on or about the 15th of the month at the
closing net asset value on the date of redemption. The Systematic Withdrawal
Program also provides for redemptions to be tendered on or about the 10th,
15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to the shareholder's bank account. In addition to the
limitations stated below, withdrawals may not be less than $25 and minimum
account balance requirements shall continue to apply. See "Redemption of
Small Accounts".
Class A shareholders participating in the Systematic Withdrawal Program must
own shares of the Fund worth $5,000 or more, as determined by the
then-current net asset value per share.
To participate in the Systematic Withdrawal Program, Class B shareholders
must initially own shares of the Fund worth $20,000 or more and elect to have
all dividends reinvested in additional Class B Shares of the Fund. Through
the Program, Class B shareholders may not withdraw more than 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or more than 3% of their aggregate net
investments each quarter. A Shareholder's participation in the Program will
terminate automatically if redemptions made outside the Program, when
deducted from the shareholder's aggregate net investments, result in an
account value of less than $15,000. Class B Share withdrawals in accordance
with the Systematic Withdrawal Program will be exempt from otherwise
applicable contingent deferred sales charges.
The purchase of shares while participating in the withdrawal program will
ordinarily be disadvantageous to the Class A Share investor since a sales
charge will be paid by the investor on the purchase of Class A Shares at the
same time other shares are being redeemed. For this reason, investors in
Class A Shares may not participate in an automatic investment program while
participating in the Systematic Withdrawal Program.
Class B shareholders redeeming more shares than the percentage permitted by
the withdrawal program shall be
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<PAGE>
subject to any applicable contingent deferred sales charge. Accordingly, the
purchase of Class B Shares will generally not be suitable for an investor who
anticipates withdrawing sums in excess of the above limits shortly after
purchase.
Tax Sheltered Retirement Plans
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Write or call
Equity Planning (800) 243-4361 for further information about the plans.
Exchange Privileges
Shareholders may exchange their Class A or Class B Shares for shares of the
same class of other Phoenix Funds (except Phoenix Asset Reserve Class A
Shares held less than 6 months and Class A Shares of Phoenix Money Market
Series), provided that the following conditions are met: (1) the shares that
will be acquired in the exchange (the "Acquired Shares") are available for
sale in the shareholder's state of residence; (2) the Acquired Shares are of
the same class as the shares to be surrendered (the "Exchanged Shares"); (3)
the Acquired Shares will be registered to the same shareholder account as the
Exchanged Shares; (4) the account value of the fund whose shares are to be
acquired must equal or exceed the minimum initial investment amount required
by that fund after the exchange is implemented; and (5) if a shareholder has
elected not to participate in the Telephone Exchange Privilege (see below), a
properly executed exchange request must be received by State Street Bank and
Trust Company.
Subject to the above requirements for an exchange, a shareholder or his/her
registered representative may, by telephone or written notice, elect to have
Class A or Class B Shares of the Fund exchanged for the same class of shares
of another Phoenix Fund automatically on a monthly, quarterly, semi-annual,
or annual basis or may cancel the privilege ("Systematic Exchange").
Shareholders who maintain an account balance in the Fund of at least $5,000,
or $2,000 for tax qualified retirement benefit plans (calculated on the basis
of the net asset value of the shares of the account), may direct that shares
of the Fund be automatically exchanged at predetermined intervals for shares
of the same class of another Phoenix Fund. If the shareholder is
participating in the Self Security program offered by Phoenix Home Life, it
is not necessary to maintain the above account balances in order to use the
Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of a
month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without a
sales charge. On Class B share exchanges, the contingent deferred sales
charge schedule of the original shares purchased continues to apply.
The exchange of shares from one fund to another is treated as a sale of the
Exchanged Shares and a purchase of the Acquired Shares for Federal income tax
purposes. The shareholder may, therefore, realize a taxable gain or loss.
"See Dividends, Distributions and Taxes" for information concerning the
Federal income tax treatment of a disposition of shares.
It is the policy of the Underwriter to discourage and prevent frequent
trading by shareholders among the Fund and other Phoenix Funds in response to
market fluctuations. The Fund reserves the right to refuse exchange purchases
by any person or broker/dealer if, in the Fund's or Adviser's opinion, the
exchange would adversely affect the Fund's ability to invest according to its
investment objectives and policies, or otherwise adversely affect the Fund
and its shareholders. The Fund reserves the right to terminate or modify its
exchange privileges at any time upon giving prominent notice to shareholders
at least 60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the current prospectus of
the fund into which the exchange is to be made before any exchange requests
are made.
Telephone Exchanges
The Telephone Exchange Privilege is available only in states where shares
being acquired may be legally sold. Unless a shareholder elects in writing
not to participate in the Telephone Exchange Privilege, shares for which
certificates have not been issued may be exchanged by calling 800-367-
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5877 provided that the exchange is made between accounts with identical
account registrations. Under the Telephone Exchange Privilege, telephone
exchange orders may also be entered on behalf of the shareholder by his or
her registered representative.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that telephone instructions are genuine. In addition to requiring identical
registrations on both accounts, the Transfer Agent will require address
verification and will record telephone instructions on tape. All exchanges
will be confirmed in writing to the shareholder. To the extent that
procedures reasonably designed to prevent unauthorized telephone exchanges
are not followed, the Fund and/or Transfer Agent may be liable for following
telephone instructions for exchange transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone exchange instruction from the
firm or its registered representatives. However, the shareholder would bear
the risk of loss resulting from instructions entered by an unauthorized third
party that the Fund and/or the Transfer Agent reasonably believe to be
genuine. The Telephone Exchange Privilege may be modified or terminated at
any time on 60 days' notice to shareholders. In addition, during times of
drastic economic or market changes, the Telephone Exchange Privilege may be
difficult to exercise or may be suspended temporarily. In such an event an
exchange may be effected by following the procedure outlined for tendering
shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if the
shares being exchanged are represented by a certificate or certificates, in
order to exchange shares the shareholder must submit a written request to
Equity Planning, 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-
2200, ATTN: Phoenix Funds. If the shares are being exchanged between accounts
that are not registered identically, the signature on such request must be
guaranteed by an eligible guarantor institution as defined by the Fund's
transfer agent in accordance with its signature guarantee procedures.
Currently such procedures generally permit guarantees by banks,
broker/dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. Any
outstanding certificate or certificates for the tendered shares must be duly
endorsed and submitted.
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
NET ASSET VALUE
The net asset value per share of each class of shares of the Fund is
determined as of the close of the general trading session of the New York
Stock Exchange (currently 4:00 p.m. Eastern Time) on each business day that
the Exchange is open. The net asset value is computed by dividing the value
of the Fund's securities, plus any cash and other assets (including dividends
and interest accrued but not collected) less all liabilities (including
accrued expenses) by the number of the shares of the Fund outstanding. The
total liability allocated to a class, plus that class's distribution fee and
any other expenses specially allocated to that class, are deducted from the
proportionate interest of such class in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class
outstanding to produce the net asset value per share. Fixed-income securities
are valued by using independent pricing services, market quotations, prices
provided by market makers, and/or estimates of market values obtained from
yield data relating to investments or securities with similar characteristics
in accordance with procedures established in good faith by the Directors.
Short-term securities with remaining maturities of less than 60 days are
valued at amortized cost unless it is determined by the Directors that
amortized cost does not reflect the fair value of such obligations. Financial
futures are valued at the settlement price established each day by the board
of trade or exchange on which they are traded.
Generally, trading in corporate bonds, U.S. government securities, money
market instruments and repurchase agreements, is substantially completed each
day at various times prior to the close of the general trading session of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund are determined as of such times. Occasionally,
events affecting the value of such securities may occur between such times
and such closing which will not be reflected in the computation of the Fund's
net asset value. If events occur which materially affect the value of such
securities, the securities will be valued at fair market value as determined
in accordance with procedures established in good faith by the Directors.
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HOW TO REDEEM SHARES
Shareholders have the right to have the Fund buy back shares at the net asset
value next determined following receipt of a redemption order and any other
required documentation in proper form (see "Net Asset Value"). In the case of
Class B Share redemptions, investors will be subject to the applicable
deferred sales charge, if any, for such shares (see "Deferred Sales Charge
Alternative - Class B Shares"). To redeem, any outstanding share certificates
in proper form for transfer must be received by Phoenix Funds, c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. To be
in proper form to redeem shares, the signatures of the shareholder(s) on the
certificate or stock power must be signed exactly as registered, including
any fiduciary title, on a written instruction letter, certificate, or
accompanying stock power, such signatures being guaranteed by an eligible
guarantor institution as determined in accordance with standards and
procedures established by the Transfer Agent (please contact the Fund at
(800) 243-1574 with any questions regarding eligible guarantors).
If no certificate has been issued, the Transfer Agent requires a written
request with signature guarantee. The Transfer Agent may waive the signature
guarantee requirement in the case of shares registered in the names of
individuals singly, jointly, or as custodian under the Uniform Gifts to
Minors Act, if the proceeds do not exceed $50,000, and the proceeds are
payable to the registered owner(s) at the address of record. Such requests
must be signed by each person in whose name the account is registered. In
addition, a shareholder may sell shares back to the Fund through securities
dealers who may charge customary commissions for their services. The
redemption price in such case will be the price as of the close of the
general trading session of the New York Stock Exchange on that day, provided
the order is received by the dealer prior thereto, and is transmitted to the
Underwriter prior to the close of its business. No charge is made by the Fund
on redemptions, but shares tendered through investment dealers may be subject
to a service charge by such dealers. Payment for shares redeemed is made
within seven days; provided, however, that redemption proceeds will not be
disbursed until each check used for purchase of shares has been cleared for
payment by the investor's bank, which may take up to 15 days after receipt of
the check.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRAs or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Fund at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
Telephone Redemptions
Unless a shareholder elects in writing not to participate in the Telephone
Redemption privilege, shares for which certificates have not been issued may
be redeemed by telephoning (800) 367-5877 and telephone redemptions will also
be accepted on behalf of the shareholder from his or her registered
representative.
The Fund and the Transfer Agent will employ reasonable procedures to confirm
that telephone instructions are genuine. Address and bank account information
will be verified, the telephone redemption instructions will be recorded on
tape, and all redemptions will be confirmed in writing to the shareholder. If
there has been an address change within the past 60 days, a telephone
redemption will not be authorized. To the extent that procedures reasonably
designed to prevent unauthorized telephone redemptions are not followed, the
Fund and/or the Transfer Agent may be liable for following telephone
instructions for redemption transactions that prove to be fraudulent. Broker/
dealers other than Equity Planning have agreed to bear the risk of any loss
resulting from any unauthorized telephone redemption instruction from the
firm or its registered representatives. However, the shareholder would bear
the risk of loss resulting from instructions entered by an unauthorized third
party that the Fund and/or the Transfer Agent reasonably believe to be
genuine. The Telephone Redemption Privilege may be modified or terminated at
any time on 60 days' notice to shareholders. In addition, during times of
drastic economic or market changes, the Telephone Redemption Privilege may be
difficult to exercise and a shareholder should submit a written redemption
request, as described above.
If the amount of the redemption is over $500, the proceeds will be wired to
the shareholder's designated U.S. commercial bank account. If the amount of
the redemption is less than $500, the proceeds will be sent by check to the
address of record on the shareholder's account.
22
<PAGE>
Telephone redemption requests must be received by the Transfer Agent by the
close of trading on the New York Stock Exchange on any day when the Transfer
Agent is open for business. Requests made after that time or on a day when
the Transfer Agent is not open for business cannot be accepted. The proceeds
of a telephone redemption will normally be sent on the first business day
following receipt of the redemption request. However, with respect to the
telephone redemption of shares purchased by check, such requests will only be
effected after the Fund has assured itself that good payment has been
collected for the purchase of shares, which may take up to 15 days. This
expedited redemption privilege is not available to HR-10, IRA and 403(b)(7)
Plans.
Reinvestment Privilege
Shareholders may use redemption proceeds to purchase Class A Shares of any
Phoenix Fund at the net asset value next determined after the request for
reinstatement is made. For Federal income tax purposes, a redemption and
reinstatement will be treated as a sale and purchase of shares. Special rules
may apply in computing the amount of gain or loss in these situations. (See
"Dividends, Distributions and Taxes" for information on the Federal income
tax treatment of a disposition of shares.) A written request for
reinstatement must be received by the Underwriter within 180 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal
Program are not eligible to use this Reinstatement Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any
shareholder whose account has a value, due to redemptions, of less than $200.
Before the Fund redeems these shares, the shareholder will be given notice
that the value of the shares in the account is less than the minimum amount
and will be allowed 30 days to make an additional investment in an amount
which will increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a
street name account with another broker/dealer. The Fund has no specific
procedures governing such account transfers.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to continue to qualify annually as a regulated investment
company under Subchapter M of the Code and to distribute annually to
shareholders all or substantially all of its net investment income and net
realized capital gains, after utilization of any capital loss carryovers. If
the Fund so qualifies, it generally will not be subject to Federal income tax
on the income it distributes. The discussion below is based upon the
assumption that the Fund will continue to qualify as a regulated investment
company.
Income dividends are intended to be declared daily and paid monthly. Capital
gain distributions, if any, will be paid at least annually. An additional
capital gain distribution may be paid after the end of the Fund's fiscal
year.
The Fund will be subject to a nondeductible 4% excise tax if it fails to meet
certain calendar year distribution requirements. In order to prevent
imposition of the excise tax, it may be necessary for the Fund to make
distributions more frequently than described in the previous paragraph.
Distribution by the Fund of interest income from tax exempt bonds will not be
taxable to shareholders and will not be included in their respective gross
incomes for Federal income tax purposes. Distributions or parts thereof
derived from interest received on California state and local issues and
Puerto Rico issues held in the portfolio will be exempt from California
personal income taxes in proportion to the amount that such investments bear
to the total investment of the Fund, provided that the Fund has complied with
the requirement that at least 50% of its assets be invested in California tax
exempt state and local issues or tax exempt Federal obligations at the end of
each quarter of its taxable year. This requirement will be met because it is
a fundamental policy of the Fund that at least 80% of the assets of the Fund
be invested in California tax exempt municipal securities. Distributions
derived from other earnings will be subject to California personal income tax
for California residents and other persons subject to California income tax.
All net realized long- or short-term capital gains, if any, are declared and
distributed to the Fund's shareholders at least annually. Distributions of
net income from certain temporary investments (such as net interest income
from taxable commercial paper) and short-term capital gains, if any, will be
taxable as ordinary income whether they are received
23
<PAGE>
in cash or in shares. The Fund will inform shareholders of the amount and
nature of such gains. During the fiscal year ended April 30, 1995, the Fund
distributed to shareholders net realized capital gains of $0.39 per share
which are taxable for Federal and California income tax purposes.
The Tax Reform Act of 1986 made significant changes in the federal tax status
of certain obligations which were previously fully federally tax-exempt. As a
result, three categories of such obligations issued after August 7, 1986 now
exist: (1) "public purpose" bonds, the income of which remains fully exempt
from federal income taxation, (2) qualified "private activity" industrial
development bonds, the income of which, while exempt from federal income
taxation under section 103 of the Internal Revenue Code, is includable in the
calculation of the federal alternative minimum tax, and (3) "private
activity" (private purpose) bonds, the income of which is not exempt from
federal income taxation. The Fund's investments in the foregoing types of
obligations is more particularly described in the section entitled
"Investment Objective and Policies" on page 7.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders. In addition to the Federal
income tax consequences described above, which are applicable to any
investment in the Fund, there may be foreign, state or local tax
considerations, and estate tax considerations, applicable to the
circumstances of a particular investor. Additional information about taxes is
set forth in the Statement of Additional Information. Also, legislation may
be enacted in the future that could affect the tax consequences described
above. Shareholders are urged to consult their attorney or tax advisor
regarding specific questions as to Federal, foreign, state or local taxes.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Fund may be required to withhold 31% of all
reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds, for any account which does not
have a taxpayer identification number or social security number and certain
required certifications.
The Fund reserves the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
The Fund sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing federal income tax returns.
ADDITIONAL INFORMATION
Organization of the Fund
The Fund was incorporated as a Maryland corporation on April 7, 1983. On June
25, 1992, the Fund's name was changed to National's California Tax Exempt
Bonds, Inc. in order to reflect the Fund's affiliation with National and
other National Securities Funds. On June 30, 1993, the Directors approved an
amendment of the Fund's Articles of Incorporation to change the name of the
Fund to Phoenix California Tax Exempt Bonds, Inc. The amendment was
considered appropriate in light of the Fund's current affiliation with
Phoenix Home Life, which resulted from the transfer of ownership of National
to an affiliate of Phoenix Home Life on May 14, 1993. On December 23, 1993
the requisite majority of Fund shareholders approved the modification of the
Fund's name to Phoenix California Tax Exempt Bonds, Inc.
The Fund's Articles of Incorporation, as amended, provide that the Fund's
Directors are authorized to create an unlimited number of series and one or
more classes. The authorized capital stock of the Fund consists of
500,000,000 shares of common stock, with par value of One Cent ($0.01) each.
All shares have equal voting rights, except that only shares of the
respective series or separate classes within a series are entitled to vote on
matters concerning only that series or class. At the date of this Prospectus,
there is only one existing series of the Fund, which has two classes of
shares. The shares of the Fund, when issued, will be fully paid and
non-assessable, have no preference, preemptive, or similar rights, and will
be freely transferable.
Registration Statement
This Prospectus omits certain information included in the Statement of
Additional Information and Part C of the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933 and
the 1940 Act. A copy of the Registration Statement may be obtained from the
Securities and Exchange Commission in Washington, D.C.
24
<PAGE>
TAX-FREE vs. TAXABLE INCOME
(Combined Federal and California Taxes)
The table below shows the approximate taxable yields which are equivalent to
tax exempt yields under combined Federal and California income tax rates
using the 1994 rates contained in the Internal Revenue Code, and state and
local taxes currently scheduled to be in effect. The tables illustrate the
return required on taxable investments to equal the tax exempt yield in a
given income tax bracket. Find the relevant income bracket and read across
that line.
<TABLE>
<CAPTION>
Taxable Income 1994* Tax-Exempt Yield
-------------------- --------------------------------------------------
Combined
Federal
and
Single Joint State
Return Return Bracket** 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
is equivalent to a Taxable Yield of
---------- ------ --------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$17,662- $ 35,325-
22,749 37,999 20.10% 6.26 6.88 7.51 8.14 8.76 9.39 10.01
22,750- 38,000-
24,519 49,038 32.32% 7.39 8.13 8.87 9.60 10.34 11.08 11.82
24,520- 49,039-
30,987 61,974 33.76% 7.55 8.30 9.06 9.81 10.57 11.32 12.08
30,988- 61,975-
55,099 91,849 34.70% 7.66 8.42 9.19 9.95 10.72 11.49 12.25
55,100- 91,850-
107,464 139,999 37.42% 7.99 8.79 9.59 10.39 11.19 11.98 12.78
107,465-
114,999 -- 37.90% 8.05 8.86 9.66 10.47 11.27 12.08 12.88
-- 140,000-
214,929 41.95% 8.61 9.47 10.34 11.20 12.06 12.92 13.78
115,000- 214,930-
214,929 249,999 42.40% 8.68 9.55 10.42 11.28 12.15 13.02 13.89
214,930-
250,000 -- 43.04% 8.78 9.66 10.53 11.41 12.29 13.17 14.04
-- 250,000-
429,858 45.64% 9.20 10.12 11.04 11.96 12.88 13.80 14.72
250,000 + 429,859 +
46.24% 9.30 10.23 11.16 12.09 13.02 13.95 14.88
---------- ------- ------ ---- ----- ----- ----- ----- ----- -----
</TABLE>
* Represents taxable income as currently defined by the Internal Revenue
Code.
** Federal and State tax rates include the effect of fully deducting itemized
deductions on federal and state returns. However, taxpayers with adjusted
gross income in excess of certain amounts would be required to reduce
their itemized deductions, as provided in the Internal Revenue Code and
California State Tax Law. In addition, taxpayers with adjusted gross
income in excess of $105,250 (single) and $157,900 (joint) are required to
phase-out the benefit of any personal exemptions claimed.
Note--In determining the Combined Federal and State Bracket, it is assumed
that none of the tax-free obligations would give rise to a tax preference
and that the alternative minimum tax is otherwise inapplicable.
25
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
Give Social Security Number or Tax Identification
Account Type Number of:
----------------- ----------------------------------------------------
Individual Individual
Joint (or Joint
Tenant) Owner who will be paying tax
Uniform Gifts to
Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate,
Pension Plan Trust, Estate, Pension Plan Trust (not personal TIN
Trust of fiduciary)
Corporation,
Partnership,
Other
Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the
application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
o A corporation
o Financial institution
o Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
o United States or any agency or instrumentality thereof
o A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
o International organization or any agency or instrumentality
thereof
o Registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
o Real estate investment trust
o Common trust fund operated by a bank under section 584(a)
o An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
o Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to
reasonable cause and not willful neglect. If you fail to report
interest, dividend or patronage dividend income on your federal
income tax return, you will be treated as negligent and subject to an
IRS 5% penalty tax on any resulting underpayment of tax unless there
is clear and convincing evidence to the contrary. If you falsify
information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to a
backup withholding, you may be subject to an IRS $500 penalty and
certain criminal penalties including fines and imprisonment.
This Prospectus sets forth concisely the information about the Phoenix
California Tax Exempt Bonds, Inc. (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
The Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information, dated August 28, 1995. The Statement contains more
detailed information about the Fund and is incorporated into this Prospectus
by reference. You may obtain a free copy of the Statement by writing the Fund
c/o Phoenix Equity Planning Corporation, 100 Bright Meadow, P.O. Box 2200,
Enfield, Connecticut 06083-2200.
Financial information relating to the Fund is contained in the Annual Report
to Shareholders for the year ended April 30, 1995 and is incorporated into
the Statement of Additional Information by reference. An Annual Report will
also be sent if you request a Statement of Additional Information.
Painting: "Ten Dollar Bills" by Victor Dubreuil.
Courtesy of Berry-Hill Galleries, Inc., New York.
<PAGE>
[BACK COVER]
Phoenix California Tax Exempt Bonds, Inc.
P.O. Box 2200
Enfield, CT 06083-2200
[double-diamond logo: Phoenix Investments]
PEP 692 (8/95)
Bulk Rate Mail
U.S. Postage
PAID
Springfield, MA
Permit No. 444
<PAGE>
[FRONT COVER]
Phoenix Funds
Phoenix California
Tax Exempt Bonds, Inc.
Prospectus
August 28, 1994
[double-diamond logo: Phoenix Investments]
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Statement Of Additional Information
August 28, 1995
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix California Tax Exempt Bonds, Inc. (the "Fund"), dated August 28,
1995, and should be read in conjunction with it. The Fund's Prospectus may be
obtained by calling Phoenix Equity Planning Corporation ("Equity Planning")
at (800) 243-4361 or by writing to Equity Planning at 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND (24) 2
INVESTMENT OBJECTIVE AND POLICIES (7) 2
RISK FACTORS (7) 6
INVESTMENT RESTRICTIONS (9) 11
PERFORMANCE INFORMATION (6) 12
PORTFOLIO TRANSACTIONS AND BROKERAGE 14
SERVICES OF THE ADVISER (11) 14
DIRECTORS AND OFFICERS 15
ADVISORY BOARD 21
NET ASSET VALUE (21) 21
HOW TO BUY SHARES (13) 22
EXCHANGE PRIVILEGES (20) 22
REDEMPTION OF SHARES (22) 22
DIVIDENDS, DISTRIBUTIONS AND TAXES (23) 24
THE NATIONAL DISTRIBUTOR (12) 26
PLANS OF DISTRIBUTION (12) 26
OTHER INFORMATION (11) 27
</TABLE>
Numbers appearing in parenthesis correspond to related disclosures in the
Fund's Prospectus.
Customer Service--(800) 243-1574
Marketing--(800) 243-4361
Telephone Orders/Exchanges--(800) 367-5877
Telecommunication Device (TTY)--(800) 243-1926
1
<PAGE>
THE FUND
Phoenix California Tax Exempt Bonds, Inc. is a diversified open-end
management investment company, consisting currently of one series, with two
classes of shares. The Fund was organized as a Maryland corporation in 1983.
On December 23, 1993, shareholders of the Fund approved a change in the name
of the Fund to reflect the Fund's affiliation with Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life") which resulted from the transfer of
ownership of the Fund's investment adviser, National Securities & Research
Corporation to Phoenix Home Life on May 14, 1993. Prior to January 1, 1994,
the Fund's name was "National's California Tax Exempt Bonds, Inc."
INVESTMENT OBJECTIVE AND POLICIES
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 may invest in a
diversified portfolio of obligations issued by or on behalf of the states,
territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities; the interest from
these investments, in the opinion of bond counsel, is exempt from federal
income tax (municipal bonds). California law requires that at least 50% of
the Fund's total assets be invested in California tax exempt state and local
issues or tax exempt federal obligations at the end of each quarter of its
taxable year in order to be eligible to pay dividends to California
residents. Such dividends will be exempt from California income taxes in
ratable proportion of the exempt California investments to the total
investments of the Fund at the end of each quarter. The Fund, as a
fundamental policy, will invest at least 80% of its assets in California tax
exempt municipal securities and may invest up to 100% of its assets in such
securities. The Fund may also invest in tax-exempt private activity bonds,
the interest on which is treated as an item of tax preference for purposes of
the Alternative Minimum Tax ("AMT Bonds"). The Fund may also invest, without
percentage limitations, in investment grade securities having ratings by
Moody's Investors Service, Inc. ("Moody's") of Aaa, Aa, A, or Baa or by
Standard & Poor's Corporation ("S&P") or Fitch Investor Services, Inc.
("Fitch") of AAA, AA, A, or BBB, or in securities which are not rated,
provided that, in the opinion of the Adviser, such securities are comparable
in rating quality to those in which the Fund may invest. Except for temporary
investments (taxable or tax exempt) as described herein, all of the Fund's
investments consist of tax exempt bonds. Municipal bonds rated Baa by Moody's
or BBB by S&P and Fitch are medium grade investment obligations which have
certain speculative characteristics (see Appendix).
General Characteristics
Tax exempt bonds are debt obligations issued by the various states and their
subdivisions (e.g., cities, counties, towns, and school districts) to raise
funds, generally for various public improvements requiring long-term capital
investment. Purposes for which tax exempt bonds are issued include flood
control, airports, bridges and highways, housing medical facilities, schools,
mass transportation and power, water or sewage plants, as well as others. Tax
exempt bonds also are occasionally issued to retire outstanding obligations,
to obtain funds for operating expenses or to loan to other public or, in some
cases, private sector organizations or to individuals.
The two principal classifications of tax exempt bonds are "general
obligation" and "revenue." General obligations or "G.O.s" are secured by the
issuer's general pledge of its faith, credit, and taxing power for the
payment of principal and interest. Revenue bonds are payable only from monies
derived from a specified source such as operating a particular facility or
from a guarantee, lease, specific tax or pool of assets, e.g., a portfolio of
mortgages.
Pollution control or other bonds backed by private corporations do not
generally have the pledge of the credit of the issuing public body but are
secured only by the credit of the corporation benefiting from the facilities
being financed. There are, of course, variations in the security of municipal
bonds, both within a particular classification and between classifications
depending on numerous factors.
The yields on tax exempt bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the
municipal bond market, the size of a particular offering, the maturity of the
obligations and the rating of the
2
<PAGE>
issue. The ratings of S&P, Moody's and Fitch represent their opinions as to
the quality of the tax exempt bonds which they undertake to rate. It should
be emphasized however, that ratings are general and not absolute standards of
quality. Consequently, tax exempt bonds with the same maturity and coupon
with different ratings may have the same yield.
The ability of issuers engaged in the generation, distribution and/or sale
of electrical power and/or natural gas to make payments of principal or
interest on such obligations is dependent upon, among other things, the
continuing ability of such issuers to derive sufficient revenues from their
operations to meet debt service requirements. General problems confronting
such issuers include the difficulty in financing construction projects during
inflationary periods, restrictions on operations and increased costs and
delays attributable to applicable environmental laws, the difficulty in
obtaining fuel for energy generation at reasonable prices, the difficulty in
obtaining natural gas for resale, and the effects of present or proposed
energy or natural resource conservation programs.
There are several Federal housing subsidy programs used by state housing
agencies which do not result in unconditional protection of the bondholder.
Changes enacted by Congress in these programs or administrative difficulties
may result in decreases in the present actual or future estimated debt
service coverage. A reduction in coverage may also result from economic
fluctuations leading to changes in interest rates or operating costs. Most
state housing authority bonds are also "moral obligations" of the issuing
states; however, a few programs specifically reject the "moral obligation."
In many but not all cases, this "moral obligation" is explicitly reflected in
the bond contract by means of an option permitting the state legislature to
provide debt service support if the legislature so chooses; thus, this option
provides the bondholder with an additional source of potential support not
directly related to the specific housing program.
Subsequent to its purchase by the Fund, an issue of tax exempt bonds or a
temporary investment may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. Neither event will require the
elimination of such obligation from the Fund's portfolio but the adviser will
consider such an event in its determination of whether the Fund should
continue to hold such obligation in its portfolio. To the extent that the
ratings accorded by S&P, Moody's or Fitch for tax exempt bonds or temporary
investments may change as a result of changes in such organizations, or
changes in their rating systems, the Fund will attempt to use comparable
ratings as standards for its investments in tax exempt bonds or temporary
investments in accordance with the investment policies contained herein.
The Fund may purchase municipal obligations on a when-issued basis; i.e.,
delivery and payment for the securities will take place after the transaction
date, normally within 15 to 45 days, though the payment obligation and the
interest rate that will be received on the securities are fixed at the time
the buyer enters into the commitment. The Fund will only make commitments to
purchase such securities with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date
if it is deemed advisable as a matter of investment strategy. A segregated
account of the Fund consisting of high quality interest-bearing liquid debt
securities with a market value at least equal to the amount of the Fund's
when-issued commitments will be maintained with State Street Bank & Trust
Company, the Fund's custodian, on a daily basis so that the market value of
the account will equal or, exceed the amount of such commitments by the Fund.
At such time(s) as when-issued securities must be paid, the Fund will meet
its obligations from then-available cash flow, sale of securities held in the
segregated account, sale of other securities, or although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or lesser than the Fund's
payment obligation).
Securities purchased on a when-issued basis and the securities held in the
Fund's portfolio are subject to changes in value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates. Generally, the value of such securities will fluctuate
inversely to changes in interest rates, i.e., they will appreciate in value
when interest rates decline and decrease in value when interest rates rise.
Therefore, in order to achieve higher interest income, if the Fund remains
substantially invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility of fluctuation in the
Fund's net asset value.
The Fund may from time to time invest a portion of its assets on a
temporary basis in "temporary investments;" the income from which, may be
subject to Federal and California income tax. Specifically, the Fund may
invest in "private activity" (private
3
<PAGE>
purpose) bonds, the income from which is not exempt from federal income
taxation (the interest on which is also treated as an item of tax preference
for purposes of the Alternative Minimum Tax ("AMT Bonds"). Such investments
may be made pending the investment or reinvestment of the proceeds from the
sale of its shares or portfolio securities and will not exceed 20% of the
Fund's total assets except when made for defensive purposes. Such temporary
investments may consist of notes of issuers having, at the time of purchase,
an issue of outstanding municipal bonds rated within the three highest grades
by S&P, Moody's or Fitch (taxable or tax exempt); commercial paper rated at
least A-l by Moody's, P-l by S&P or F-l by Fitch; and U.S. Treasury and
agency securities. The Fund may invest in California bonds with any maturity
and may purchase short-term municipal notes such as tax anticipation notes,
revenue anticipation notes and bond anticipation notes.
The Fund may write call options only if they are covered and remain
covered for as long as the Fund is obligated as a writer. Thus, if the Fund
writes a call option on an individual security, the Fund must own the
underlying security or other securities that are acceptable for escrow at all
times during the option period. The Fund will write call options on indices
only to hedge in an economically appropriate way securities which are not
otherwise hedged with options or financial futures contracts. Call options on
securities indices written by the Fund will be "covered" by identifying the
specific securities being hedged.
Portfolio trading will be undertaken principally to accomplish the
objectives of the Fund in relation to anticipated movements in the general
level of interest rates, provided, however, the Fund may engage to a limited
extent in short-term trading consistent with its objective. Securities may be
sold in anticipation of a market decline (a rise in interest rates) or
purchased in anticipation of a market rise (a decline in interest rates) and
later sold, but the Fund will not engage in trading merely to realize a gain.
In addition, a security may be sold and another of comparable quality
purchased at approximately the same time to take advantage of what the Fund
believes to be a temporary disparity in the normal yield relationship between
the two securities. Yield disparities may occur for reasons not directly
related to the investment quality of particular issues or the general
movement of interest rates, such as changes in the overall demand for or
supply of various types of tax exempt bonds or changes in the investment
objective of investors.
Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the
value of portfolio securities, all excluding securities with maturities at
acquisition of one year or less. The Fund's portfolio turnover rate will not
be a limiting factor when the Fund deems it desirable to purchase or sell
securities.
Portfolio turnover may involve the payment by the Fund of dealer mark-ups
or underwriting commissions. It is impossible to predict portfolio turnover
rates; however, in periods of rapidly fluctuating interest rates, the Fund's
investment policies may lead to frequent changes in investments. The Fund's
portfolio turnover rates for the two years ended April 30, 1994 and 1995 were
25% and 51%, respectively.
The Fund may use financial futures contracts and related options to hedge
against changes in the market value of securities or securities which it
intends to purchase. Hedging is accomplished when an investor takes a
position in the futures market opposite to the investor's cash market
position. There are two types of hedges--long (or buying) and short (or
selling) hedges. Historically, prices in the futures market have tended to
move in concert with (although in inverse relation to) cash market prices,
and prices in the futures market have maintained a fairly predictable
relationship to prices in the cash market. Thus, a decline in the market
value of securities may be protected against to a considerable extent by
gains realized on futures contracts sales. Similarly, it is possible to
protect against an increase in the market price of securities which the Fund
may wish to purchase in the future by purchasing futures contracts.
The Fund may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange-
or board-traded put and call options on financial futures contracts as a
hedge against anticipated changes in the market value of its securities or
securities which it intends to purchase. Financial futures contracts consist
of interest rate futures contracts, securities index futures contracts and
foreign currency futures contracts. A public market presently exists in
interest rate futures contracts covering long-term U.S. Treasury bonds, U.S.
Treasury notes, three-month U.S. Treasury bills
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and GNMA certificates. Securities index futures contracts are currently
traded with respect to the Standard & Poor's 500 Composite Stock Price Index
and such other broad-based stock market indices as the New York Stock
Exchange Composite Stock Index and the Value Line Composite Stock Price
Index. A clearing corporation associated with the exchange or board of trade
on which a financial futures contract trades assumes responsibility for the
completion of transactions and also guarantees that open futures contracts
will be performed.
In contrast to the situation in which a Fund purchases or sells a
security, no security is delivered or received by the Fund upon the purchase
or sale of a financial futures contract (although an obligation to deliver or
receive the underlying security in the future is created by such a contract).
Initially, when it enters into a financial futures contract, the Fund will be
required to deposit in a segregated account with the Fund's custodian bank an
amount of cash or U.S. Treasury bills. This amount is known as initial margin
and is in the nature of a performance bond or good faith deposit on the
contract. The current initial margin deposit required per contract is
approximately 5% of the contract amount. Brokers may establish deposit
requirements higher than this minimum. Subsequent payments, called variation
margin, will be made to and from the account on a daily basis as the price of
the futures contract fluctuates. This process is known as marking to market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
margin account. This amount will be equal to the amount by which the market
price of the futures contract at the time of exercise exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
paid the difference and would realize a gain. If the offsetting purchase
price exceeds the sale price, the seller immediately would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same securities and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss.
The Fund will pay commissions on financial futures contracts and related
options transactions. These commissions may be higher than those which would
apply to purchases and sales of securities directly, and will be in addition
to those paid for direct purchases and sales of securities.
The Fund may not engage in transactions in financial futures contracts or
related options for speculative purposes but only as a hedge against
anticipated changes in the market value of its portfolio securities or
securities which it intends to purchase. The Fund may not purchase or sell
financial futures contracts or related options if, immediately thereafter,
the sum of the amount of initial margin deposits on the Fund's existing
futures and related options positions and the premiums paid for related
options would exceed 5% of the market value of the Fund's total assets after
taking into account unrealized profits and losses on any such contracts. At
the time of purchase of a futures contract or a call option on a futures
contract, an amount of cash, U.S. Government securities or other appropriate
high-grade debt obligations equal to the market value of the futures contract
minus the Fund's initial margin deposit with respect thereto will be
deposited in a segregated account with the Fund's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which the Fund may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code for qualification as a regulated investment company. See
"Dividends, Distributions & Taxes".
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RISK FACTORS
California Obligations
Certain developments regarding the California Constitution and state statutes
which limit the taxing and spending authority of California government entities
may impair the ability of California issuers to maintain debt service on their
obligations, as described more fully below. The following information as to
certain California state risk factors is provided to investors in view of the
policy of the Fund to concentrate its investments in California state and
municipal issuers. Such information constitutes only a brief discussion, does
not purport to be a complete description and is based on information from
sources believed by the Fund to be reliable, including official statements
relating to securities offerings of California state and municipal issuers and
periodic publications by national rating organizations. Such information,
however, has not been independently verified by the Fund.
Certain of the California municipal securities in which the Fund may
invest may be obligations of issuers which rely in whole or in part on
California state revenues for payment of these obligations. Property tax
revenues and a portion of the state's General Fund surplus are distributed to
counties, cities and their various taxing entities and the state assumes
certain obligations theretofore paid out of local funds. Whether and to what
extent a portion of the state's General Fund will be distributed in the
future to counties, cities and various entities is unclear.
Certain of the municipal securities purchased by the Fund may be
obligations of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue. On June 6, 1978, Proposition 13 added
Article XIIIA to the California Constitution. The effect of Article XIIIA is
to limit ad valorem taxes on real property and to restrict the ability of
taxing entities to increase real property revenues.
Legislation enacted by the California Legislature to implement Article
XIIIA (Statutes of 1978, Chapter 292, as amended) provides that,
notwithstanding any other law, local agencies may not levy any ad valorem
property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy maximum tax
permitted by Article XIIIA of $4.00 per $100 assessed valuation. The
apportionment of property taxes in fiscal years after 1978/79 has been
revised pursuant to Statutes of 1979, Chapter 282, which provides relief
funds from state moneys beginning in fiscal year 1979/80 and is designed to
provide a permanent system for sharing state taxes and budget funds with
local agencies. Under Chapter 282, cities and counties receive more of the
remaining property tax revenues collected under Proposition 13 instead of
direct state aid. School districts receive a correspondingly reduced amount
of property taxes, but receive compensation directly from the state and are
given additional relief.
The application and interpretation of Article XIIIA has been and will
probably continue to be the subject of numerous lawsuits in the California
courts. It is not possible to predict the outcome of litigation or the
ultimate scope and impact of Article XIIIA, its implementing legislation and
regulations issued by the California State Board of Equalization. However,
the outcome of such litigation could substantially impact local property tax
collections and the ability of the state agencies, local governments and
districts to make future payments on outstanding debt obligations.
On November 6, 1979, an initiative known as "Proposition 4" or the "Gann
Initiative" added Article XIIIB to the California Constitution which provides
that, state and local governmental entities have an annual "appropriations
limit" and are not allowed to spend certain moneys (called "appropriations
subject to limitations") in an amount higher than the "appropriations limit."
In general terms, the "appropriations limit" is required to be based on
certain 1978/79 expenditures, and is to be adjusted annually to reflect
changes in consumer prices, population and certain services provided by these
entities. Article XIIIB also provides that if revenues of these entities in
any year exceed the amounts permitted to be spent, the excess is to be
returned by revising tax rates or fee schedules over the subsequent two
years.
At the November 8, 1988 general election, California voters approved an
initiative known as Proposition 98. This initiative amends Article XIIIB to
require that (a) the California Legislature establish a prudent state reserve
fund in an amount that it shall
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deem reasonable and necessary, and (b) revenues in excess of amounts
permitted to be spent and which would otherwise be returned pursuant to
Article XIIIB by revision of tax rates or fee schedules, be transferred and
allocated (up to a maximum of 4%) to the State School Fund and be expended
solely for purposes of instructional improvement and accountability. No such
transfer or allocation of funds will be required if certain designated state
officials determine that annual student expenditures and class size meet
certain criteria as set forth in proposition 98. Any funds allocated to the
State School Fund shall cause the appropriation limits established in Article
XIIIB to be annually increased for any such allocation made in the prior
year.
Proposition 98 also amends Article XVI to require that the State of
California provide a minimum level of funding for public schools and
community colleges. Commencing with the 1988-89 fiscal year, state moneys to
support school districts and community college districts shall equal or
exceed the lesser of: (a) an amount equalling the percentage of state general
revenue bonds for school districts and community college districts in fiscal
year 1986-87, or (b) an amount equal to the prior year's state general fund
proceeds of taxes appropriated under Article XIIIB plus allocated proceeds of
local taxes, after adjustment under Article XIIIB. The initiative permits the
enactment of legislation, by a two-thirds vote, to suspend the minimum
funding requirement for one year.
Proposition 111 was approved by voters and took effect on July 1, 1990.
Among a number of important provisions, Proposition 111 recalculates spending
limits for the state and local governments, allows greater annual increases
in the limits, allows the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduces the amount of funding
guarantee in recession years for school districts and community college
districts (but with a floor of 40.9% of state General Fund tax revenues),
removes the provision of Proposition 98 which included excess moneys
transferred to school districts and community college districts in the base
calculation for the next year, limits the amount of state tax revenue over
the limit which would be transferred to school districts and community
college districts, and exempts increased gasoline taxes and truck weight fees
from the state appropriations limit. Additionally, Proposition 111 exempts
from the state appropriations limit funding for capital outlays.
Articles XIIIB, like Article XIIIA, may require further interpretation by
both the California Legislature and the courts to determine their
applicability to specific situations involving the state and local taxing
authorities. Depending upon such interpretations, Article XIIIB may limit
significantly a governmental entity's ability to budget sufficient funds to
meet debt service on bonds and other obligations.
Certain California municipal securities in the Fund may be obligations
which are secured in whole or in part by a mortgage or deed of trust on real
property. Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's non-judicial foreclosure rights
under the power of sale contained in the mortgage or deed of trust are
subject to the constraints imposed by California law upon transfer of title
to real property by private power of sale. During the three-month period
beginning with the filing of a formal notice of default, the debtor is
entitled to reinstate the home mortgage by making any overdue payments. Under
standard loan servicing procedures, the filing of the formal notice of loan
servicing procedures, and the filing of the formal notice of default does not
occur unless at least three full monthly payments have become due and remain
unpaid. The power of sale is exercised by posting and publishing a notice of
sale for at least 20 days after expiration of the three-month reinstatement
period. Therefore, the effective minimum period for foreclosing on a mortgage
could be in excess of seven months after the initial default. Such time
delays in collections could disrupt the flow of revenues available to an
issuer for the payment of debt service on the outstanding obligations if such
defaults occur with respect to a substantial number of home mortgages or
deeds of trust securing an issuer's obligations.
Certain California municipal securities in the Fund may be obligations
which finance the acquisition of single family home mortgages, and are
subject to California statutory limitations described above applicable to
obligations secured by real property. Under California antideficiency
legislation, there is no personal recourse against a mortgagor of a single
family residence purchased with a loan secured by the mortgage.
Under California law, mortgage loans secured by single family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on
such mortgage loans may be imposed only with respect to voluntary prepayments
made during the first five years during
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the term of the mortgage loan, and cannot in any event exceed six month's
advance interest on the amount prepaid in excess of 20% of the original
principal amount of the mortgage loan. This limitation could affect the flow
of revenues available to an issuer for debt service on outstanding debt
obligations which financed such home mortgages.
Since the start of the 1990-91 Fiscal Year, the State of California has
faced the worst economic, fiscal, and budget conditions since the 1930s.
Construction, manufacturing (especially aerospace), and financial services,
among others, have all been severely affected; agriculture has been hurt by
weather conditions. Overall, the State has lost over 850,000 jobs since May
1990. It is estimated that pre-recession job levels will not be reached until
1994 at the earliest.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also caused increased expenditures for health
and welfare programs. The State has also been facing a structural imbalance
in its budget with the largest programs supported by the General
Fund--education, health, welfare and corrections--growing at rates
significantly higher than the growth rates for the principal revenue sources
of the General Fund. As a result, the State entered a period of chronic
budget imbalance, with expenditures exceeding revenues for four of the last
five fiscal years. Revenues declined in 1990-91 over 1989-90, the first time
since the 1930s. By June 30, 1992, the State's General Fund had an
accumulated deficit, on a budget basis, of approximately $2.2 billion.
A further consequence of the large budget imbalances over two consecutive
years was that the State depleted all of its available cash resources. In
late June, 1992, the State was required to issue $475 million of short-term
revenue anticipation warrants to cover obligations coming due on June 30 and
July 1, 1992, the General Fund had borrowed $1.336 billion from the Special
Fund for Economic Uncertainties and $4.699 billion from other Special Funds,
using all but about $183 million of borrowable cash resources.
By the time the 1992-93 Governor's Budget was presented in January 1992,
it was evident the recession was much deeper than earlier anticipated. The
severity of the budget actions needed led to a long delay in adopting the
budget. With the failure of the Governor and Legislature to adopt a budget
for the 1992-93 Fiscal Year on time (to allow the State to carry out its
usual cash flow borrowing for the fiscal year), the shortfall of cash forced
the State Controller to issue interest-bearing "registered warrants" in lieu
of regular warrants redeemable for cash after July 1, 1992 to many State
vendors, suppliers, and employees and to local government agencies. Until the
State Budget was adopted on September 2, 1992, 64 days after the fiscal year
began, the Controller issued registered warrants totaling approximately $3.8
billion to pay valid obligations from the prior fiscal year, and to pay
continuing obligations after July 1 based on special appropriations or court
orders. Certain constitutionally mandated obligations, such as debt service
on bonds and revenue anticipated warrants, were paid with available cash.
Registered warrants had not been issued by the State since the 1930s.
The 1992-93 Budget Act closed a "gap" of about $7.9 billion, but budgeted
a reserve on June 30, 1993 of $28 million. The Budget was based on economic
forecasts and projections of major tax sources made in the Department of
Finance's May 1992 Revision of General Fund Revenues and Expenditures and on
a variety of other assumptions and projections made when the Budget Act was
adopted regarding revenue and expenditure levels.
After the 1992-93 Budget Act was enacted and as confirmed in the
Governor's Budget proposal for 1993-94, released on January 8, 1993, it
became evident that economic conditions in the State were not beginning to
improve in the second half of 1992, as assumed by the Department of Finance's
May 1992 economic estimates. The January Governor's budget projected a $2.1
billion budget deficit on June 30, 1993 (compared to the 1992-93 Budget Act
projection of a $28 million balance).
On May 20, 1993, the Department of Finance released its May Revision to
the January Governor's Budget (the "1993 May Revision"), updating revenue and
expenditure projections and proposals for the 1992-93 and 1993-94 fiscal
years. The 1993 May Revision projected that the General Fund would end the
fiscal year on June 30, 1993 with an accumulated budget deficit of about $2.8
billion, and a negative fund balance of about $2.2 billion (the difference
being certain reserves for encumbrances and school
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funding costs). Overall the 1993 May Revision projected total General Fund
expenditures of $41.1 billion for the 1992-93 fiscal year, about $300 million
higher than the Budget Act and $2.2 billion less than Fiscal Year 1991-92.
The January Governor's Budget had projected that, because of severely
reduced revenues, the State would face a cash flow shortfall in May 1993,
necessitating additional external borrowing. The State met this cash flow
need by issuing $3.0 billion of revenue anticipation notes on April 26, 1993,
which matured on June 24, 1993. On June 23, 1993, the State also issued the
1993 Revenue Anticipation Warrants, which mature on December 23, 1993, in the
principal amount of $2.0 billion to meet cash flow requirements for the end
of the 1992-93 Fiscal Year and the start of the 1993-94 Fiscal Year.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993. The
1993-94 Budget Act is predicated on General Fund revenues and transfers
estimated at $40.6 billion, about $700 million higher than the January
Governor's Budget, but still about $400 million below 1992-93 (and the second
consecutive year of actual decline). The principal reasons for declining
revenue are the continued weak economy and the expiration (or repeal) of
three fiscal steps taken in 1991--a half cent temporary sales tax, a deferral
of operating loss carry forwards, and repeal by initiative of a sales tax on
certain food items. The 1993-94 Budget Act also assumes Special Fund revenues
of $11.9 billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act includes General Fund expenditures of $38.5 billion
(a 6.3% reduction from projected 1992-93 expenditures of $41.1 billion), in
order to keep a balanced budget within the available revenues. The Budget
also includes Special Fund expenditures of $12.1 billion, a 4.2% increase.
The Budget Act reflects a number of major adjustments including, among
others, changes in local government financing to shift about $2.6 billion in
property taxes from cities, counties, special districts and redevelopment
agencies to school and community college districts, thereby reducing General
Fund support by an equal amount. About $2.5 billion would be permanent,
reflecting termination of the State's "bailout" of local governments
following the property tax cuts of Proposition 13 in 1978. The property tax
revenue losses for cities and counties are offset in part by additional sales
tax revenues and mandate relief. The temporary 0.5% sales tax had been
extended through December 31, 1993, for allocation to counties for public
safety programs. Proposition 172 was placed on the ballot in a special
statewide election in November 1993 to extend the sales tax permanently for
public safety purposes. Legislation also has been enacted to eliminate state
mandates in order to provide local governments flexibility in making their
programs responsive to local needs. Lawsuits have been filed by several local
governmental entities challenging the shift of property taxes. Other counties
or local agencies may join these actions or file separate suits. The court in
one case, County of Los Angeles v. Sasaki, has already ruled in favor of the
State. The State's petition to coordinate the other lawsuits into a single
proceeding has been granted. However, the Administration continues to predict
that population growth in the 1990's will keep upward pressure on major State
programs, outstripping projected revenue growth in an economy only very
slowly emerging from a deep recession.
On June 2, 1993, the Commission on State Finance (the "COSF") issued a
report which projected stagnant economic conditions through 1994. The COSF
projects about $700 million lower revenues in 1993-94 than the 1993 May
Revision, principally because it believes most of the increase in personal
income taxes seen late in 1992-93 came from the one-time shift, rather than
reflecting a permanent base of greater tax revenues. The COSF also shows
other major taxes (and local property taxes) a little weaker than the 1993
May Revision, with a resulting increase in expenditures to make up the
property tax shortfall for school financing. Altogether, the COSF projects in
its "Primary Forecast" that the fund balance at June 30, 1994 would be over
$800 million less than the 1993 May Revision forecast.
The report also includes two alternative forecasts based on either
continued recession, or stronger recovery. The pessimistic forecast is $1.5
billion worse at June 30, 1994 than the Primary Forecast, and the optimistic
forecast is about $1.5 billion better.
As a result of the deterioration in the State's budget and cash situation
in Fiscal Year 1991-92, and the delay in adopting the 1992-93 budget which
resulted in issuance of registered warrants, rating agencies reduced the
State's credit rating. Between November 1991 and January 1, 1993, the rating
on the State's general obligation bonds was reduced by Standard & Poor's from
"AAA" to "A+", by Moody's from "Aaa" to "Aa", and by Fitch from "AAA" to
"AA". As of December 16, 1993, the State's general
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obligation bonds were rated "Aa" by Moody's and "A+" by Standard and Poor's.
There can be no assurance that such ratings will continue for any given
period of time or that they will not in the future be further revised or
withdrawn.
Puerto Rico
Puerto Rico's economy centers around industrial employment, the cornerstone
of which is Section 936 of the Internal Revenue Code of 1986, as amended (the
"Code"). This provision offers certain tax advantages to U.S. manufacturing
firms operating in Puerto Rico by allowing exemptions from a portion of the U.S.
corporate income tax to qualifying U.S. corporations.
Significant changes were made to Section 936 of the Code as a result of
the Omnibus Budget Reconciliation Act of 1993. The effect of these changes on
the development of the Puerto Rican economy will not be certain for a number
of years. The impact on future investment and employment is more uncertain.
Capital-intensive industries have been the primary force in Puerto Rico's
economic development since the early 1970's. The other major sectors of
Puerto Rico's economy are tourism and agriculture. The labor force has grown
annually since 1983. Although Puerto Rico's unemployment rate had decreased
to 14.4% for 1990, the unemployment rate increased to 16.7% for January 1992,
showing that the economy is still weak. Economic growth has totalled 20.8%
since 1985. For fiscal year 1991, growth was only .9%, a drop from 3% for
each of the previous two years, due to the recession impacting the United
States.
Financial operations remain under stress, as the commonwealth expects a
significant deficit for the fiscal year ended June 30, 1993. Significant
non-recurring revenue measures were utilized in fiscal 1992 and 1991 to close
the deficit gap. A high debt burden continues to be closely managed.
Futures And Options
Positions in futures contracts and related options may be closed out on an
exchange if the exchange provides a secondary market for such contracts or
options. The Fund will enter into a futures or futures related option position
only if there appears to be a liquid secondary market. However, there can be no
assurance that a liquid secondary market will exist for any particular option or
futures contract at any specific time. Thus, it may not be possible to close out
a futures or related option position. In the case of a futures position, in the
event of adverse price movements the Fund would continue to be required to make
daily margin payments. In this situation, if the Fund has insufficient cash to
meet daily margin requirements it may have to sell portfolio securities to meet
its margin obligations at a time when it may be disadvantageous to do so. In
addition, the Fund may be required to take or make delivery of the securities
underlying the futures contracts it holds. The inability to close out futures
positions also could have an adverse impact on the Fund's ability to hedge its
positions effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also limit a hedger's opportunity to
benefit fully from favorable market movement. In addition, investing in
futures contracts and options on futures contracts will cause the Fund to
incur additional brokerage commissions and may cause an increase in the
Fund's turnover rate.
The successful use of futures contracts and related options depends on the
ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices
remain stable during the period a futures contract or option is held by the
Fund or such prices move in a direction opposite to that anticipated, the
Fund may realize a loss on the hedging transaction which is not offset by an
increase in the value of its portfolio securities. As a result, the Fund's
total return for the period may be less than if it had not engaged in the
hedging transaction.
Utilization of futures contracts involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in
the price of the securities or currencies which are being hedged. If the
price of the futures contract moves more or less than the price of the
securities being hedged, the Fund will experience a gain or loss which will
not be completely offset by movements in the price of the securities or
currency. It is possible that, where the Fund has sold futures contracts to
hedge against decline in the market, the market may advance and the value of
securities held in the Fund may decline. If this occurred,
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the Fund would lose money on the futures contract and would also experience a
decline in value in its portfolio securities. Where futures are purchased to
hedge against a possible increase in the prices of securities before the Fund
is able to invest its cash (or cash equivalents) in securities (or options)
in an orderly fashion, it is possible that the market may decline; if the
Fund then determines not to invest in securities (or options) at that time
because of concern as to possible further market decline or for other
reasons, the Fund will realize a loss on the futures that would not be offset
by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through offsetting
transactions rather than to meet margin deposit requirements. In such cases,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities or
currencies rather than to engage in closing transactions because such action
would reduce the liquidity of the futures market. In addition, because, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the underlying
securities market, increased participation by speculators in the futures
market could cause temporary price distortions. Because of the possibility of
price distortions in the futures market and of the imperfect correlation
between movements in the prices of securities and movements in the prices of
futures contracts, a correct forecast of market trends may still not result
in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk because the
maximum amount at risk is the premium paid for the options plus transaction
costs. However, there may be circumstances when the purchase of an option on
a futures contract would result in a loss (i.e., the loss of the premium
paid) while the purchase or sale of the futures contract would not have
resulted in loss, such as when there is no movement in the price of the
underlying securities.
INVESTMENT RESTRICTIONS
Fundamental Policies
The Fund has adopted the following investment restrictions which, in addition
to the investment objective set forth under Investment Objective and Policies,
are fundamental policies which cannot be changed with out the consent of the
holders of a majority of the shares of the Fund. A majority of the shares as
used in this Statement means (1) 67% or more of the shares present at a meeting,
if the holders of more than 50% of the shares are present or represented by
proxy, or (ii) more than 50% of the shares, whichever is less.
The Fund may not:
(1) invest in securities other than tax exempt bonds and temporary
investments as defined under "Investment Objective and Policies;"
(2) purchase the securities of any issuer (except states, territories and
possessions of the United States or the United States Government and its
agencies and instrumentalities) if, as a result, more than 5% of the total
assets of the Fund would be invested in the securities of such issuer;
(3) borrow money, except for temporary or emergency purposes and not for
investment purposes, and then only in an amount not exceeding 5% of the value
of the total assets of the Fund at the time of borrowing;
(4) pledge, mortgage or hypothecate its assets, except that, to secure
borrowing permitted by subparagraph (3) above, it may pledge, mortgage or
hypothecate assets having a market value at the time of pledge not exceeding
10% of the value of the total assets of the Fund; provided, however, deposits
in escrow in connection with the writing of covered call options, secured put
options, or the purchase or sale of financial futures contracts and related
options are not deemed to be a pledge or other encumbrance;
(5) issue senior securities, as defined in the Investment Company Act of
1940;
(6) underwrite any issue of securities, except in connection with the
purchase of securities for its portfolio of municipal bonds;
11
<PAGE>
(7) purchase or sell real estate, but it may invest in municipal bonds and
temporary investments secured by real estate or interests therein, except that
the Fund may (a) purchase or sell readily marketable securities which are
secured by interests in real estate, including real estate investment and
mortgage investment trusts, and (b) engage in financial futures contracts and
related options transactions, provided that the sum of the initial margin
deposits on the Fund's futures and related options positions and the premiums
paid for related options would not exceed 5% of the Fund's total assets;
(8) purchase or sell commodities or commodity contracts or oil, gas or
other mineral exploration or development programs;
(9) make loans;
(10) make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions; provided, however, the deposit or payment of an initial or
maintenance margin in connection with financial futures contracts or related
options transactions is not considered the purchase of a security on margin;
(11) participate on a joint or a joint and several basis in any trading
account in securities, except in connection with an underwriting in which it
is a participant; or
(12) purchase or otherwise acquire any securities which are subject to
legal or contractual restrictions on resale, or purchase illiquid securities
for which there is no readily available market, or engage in any repurchase
transactions that do not mature within seven days if, as a result, more than
10% of its total assets would be invested in all such securities.
For purposes of Investment Restriction No. 5, the definition of senior
securities is deemed not to include those borrowings that are permitted under
Investment Restriction No. 3.
Other Policies
The following investment restrictions do not constitute fundamental policies
of the Fund and, may therefore be changed without shareholder approval. They
are based upon undertakings that have been given to certain state securities
commissions. The Fund will not pledge more than 5-1/4% of its assets; except
as otherwise described herein, not purchase or sell puts, calls or straddles,
or any combination thereof (other than financial futures for hedging
purposes); not invest more than 5% of its assets in taxable obligations of
corporations which, including their predecessors, have had less than three
years' operating history; and not invest more than 5% of its assets in tax
exempt bonds whose payment and interest is the responsibility of an
industrial user with less than three years' operating history (provided,
however, this restriction shall not apply to a bond which is rated at least A
by S&P, Fitch or Moody's).
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to shareholders or prospective investors.
12
<PAGE>
Standardized quotations of average annual total return for Class A or
Class B Shares will be expressed in terms of the average annual compounded
rate of return for a hypothetical investment in either Class A or Class B
Shares over periods of 1, 5 and 10 years or up to the life of the class of
shares, calculated for each class separately pursuant to the following
formula: P(1+T)n = ERV (where P = a hypothetical initial payment of $1,000, T
= the average annual total return, n = the number of years, and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the deduction of a
proportional share of each Class's expenses (on an annual basis), deduction
of the maximum initial sales load in the case of Class A Shares and the
maximum contingent deferred sales charge applicable to a complete redemption
of the investment in the case of Class B Shares, and assume that all
dividends and distributions are on Class A and Class B Shares reinvested when
paid.
The Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Fund may compare its performance results to other investment
or savings vehicles (such as certificates of deposit) and may refer to results
published in various publications such as Changing Times, Forbes, Fortune,
Money, Barrons, Business Week and Investor's Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, The New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard & Poor's The Outlook, and Personal Investor. The Fund may
from time to time illustrate the benefits of tax deferral by comparing taxable
investments to investments made through tax-deferred retirement plans. The total
return may also be used to compare the performance of the Fund against certain
widely acknowledged outside standards or indices for stock and bond market
performance, such as the Standard & Poor's 500 Stock Index (the "S&P 500"), Dow
Jones Industrial Average, Europe Australia Far East Index (EAFE), Consumer's
Price Index, Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index.
The S&P 500 is a commonly quoted market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 common stocks relative
to the base period 1941-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded over
the counter are included. The 500 companies represented include 400 industrial,
60 transportation and 40 financial services concerns. The S&P 500 represents
about 80% of the market value of all issues traded on the New York Stock
Exchange.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund
to respond quickly to changing market and economic conditions. From time to
time the Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital
gains components; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's bond return future to
well-known indices of market performance, including, but not limited to: the
S&P 500 Index, Dow Jones Industrial Average, First Boston High Yield Index
and Salomon Brothers Corporate and Government Bond Indices.
For the 1, 5 and 10 year periods ended April 30, 1995, the average annual
total return of the Class A was 1.27%, 6.61% and 8.08%, respectively. For the
year ended April 30, 1995, for Class B Shares, the total return since
inception July 26, 1994 was 3.69%. Performance information reflects only the
performance of a hypothetical investment in each class during the particular
time period on which the calculations are based. Performance information
should be considered in light of the Fund's investment objectives and
policies, characteristics and quality of the portfolio, and the market
condition during the given time period, and should not be considered as a
representation of what may be achieved in the future.
The Fund may also compute aggregate total return for specified periods
based on a hypothetical Class A or Class B account with an assumed initial
investment of $10,000. The aggregate total return is determined by dividing
the net asset value of this account at the end of the specified period by the
value of the initial investment and is expressed as a percentage. Calculation
13
<PAGE>
of aggregate total return reflects payment of the Class A Shares's maximum
sales charge of 4.75% and assumes reinvestment of all income dividends and
capital gain distributions during the period. Based on the foregoing, the
Class A share's aggregate total return quotation for the period commencing
April 6, 1983 and ending April 30, 1995 was 161.25%.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for both classes of shares of
the Fund, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such
data will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate
rate of return calculations.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser places orders for the purchase and sale of securities,
supervises their execution and negotiates brokerage commissions on behalf of
the Fund. It is the practice of the Adviser to seek the best prices and
execution of orders and to negotiate brokerage commissions which in its
opinion are reasonable in relation to the value of the brokerage services
provided by the executing broker. Brokers who have executed orders for the
Fund will be asked to quote a fair commission for their services. If the
execution is satisfactory and if the requested rate approximates rates
currently being quoted by the other brokers selected by the Adviser, the rate
is deemed by the Adviser to be reasonable. Brokers may ask for higher rates
of commission if all or a portion of the securities involved in the
transaction are positioned by the broker, if the broker believes it has
brought the Fund an unusually favorable trading opportunity, or if the broker
regards its research services as being of exceptional value, and payment of
such commissions is authorized by the Adviser after the transaction has been
consummated. If the Adviser more than occasionally differs with the broker's
appraisal of opportunity or value, the broker would not be selected to
execute trades in the future.
The Adviser believes that the Fund benefits with a securities industry
comprised of many and diverse firms and that the long-term interests of
shareholders of the Fund are best served by its brokerage policies which will
include paying a fair commission rather than seeking to exploit its leverage
to force the lowest possible commission rate. The primary factors considered
in determining the firms to which brokerage orders will be given are the
Adviser's appraisal of the firm's ability to execute the order in the desired
manner, the value of research services provided by the firm, and the firm's
attitude toward and interest in mutual funds in general, including those
managed and sponsored by the Adviser. The Adviser does not offer or promise
to any broker an amount or percentage of brokerage commissions as an
inducement or reward for the sale of shares of the Fund. Over-the-counter
purchases and sales are transacted directly with principal market makers
except in those circumstances where, in the opinion of the Adviser, better
prices and execution are available elsewhere. In the over-the-counter market,
securities are usually traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually contains a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, usually referred to
as the underwriter's concession or discount.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm
with broadest coverage generally from the large full-line firms. Smaller
firms in general tend to provide information and interpretations on a smaller
scale, frequently with a regional emphasis. In addition, several firms
monitor federal, state, local and foreign political developments; many of the
brokers also provide access to outside consultants. The outside research
assistance is particularly useful to the Adviser's staff since the brokers as
a group tend to monitor a broader universe of securities and other matters
than the Adviser's staff can follow. In addition, it provides the Adviser
with a diverse perspective on financial markets. Research and investment
information is provided by these and other brokers at no cost to the Adviser
and is available for the benefit of other accounts advised by the Adviser and
its affiliates and not all of this information will be used in connection
with the Fund. While this information may be useful in varying degrees and
may tend to reduce the Adviser's expenses, it is not possible to estimate its
value and in the opinion of the Adviser it does not reduce the Adviser's
expenses in a determinable amount. The extent to
14
<PAGE>
which the Adviser makes use of statistical, research and other services
furnished by brokers will be considered by the Adviser in the allocation of
brokerage business, but there is no formula by which such business is allocated.
The Adviser will do so in accordance with its judgment of the best interest of
the Fund and its shareholders.
SERVICES OF THE ADVISER
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Fund (for which it receives a management
fee) other than the costs of printing and mailing proxy materials, reports
and notices to shareholders; legal and auditing services; regulatory filing
fees and expenses of printing the Fund's registration statements (but the
Underwriter purchases such copies of the Fund's prospectuses and reports and
communications to shareholders as it may require for sales purposes at
printer's over-run cost); insurance expense; association membership dues;
brokerage fees; and taxes.
For services provided and the expenses assumed pursuant to the Management
Agreement, the Fund will pay to the Adviser as compensation a monthly fee at
the annual rate of 0.45% of the Fund's average daily net assets up to $1
billion, 0.40% of the Fund's average daily net assets from $1 to $2 billion,
and 0.35% of the Fund's average daily net assets in excess of $2 billion. The
Adviser's fee will be accrued daily against the value of the Fund's net
assets and will be payable by the Fund on the last business day of each
month. Total management fees for the fiscal years ended April 30, 1993, 1994
and 1995 amounted to $652,051, $643,338, and $549,917, respectively. For the
fiscal years ended April 30, 1993, 1994 and 1995, the Adviser received a fee
at an annual rate of 0.45%, 0.45%, and 0.45%, respectively, of the Fund's
average daily net assets.
The Adviser is an indirect wholly owned subsidiary of Phoenix Home Life
whose principal place of business is located at One American Row, Hartford,
Connecticut. Phoenix Home Life manages combined assets of approximately $12
billion through advisory accounts and mutual funds. The Adviser serves as
investment adviser to other registered investment companies. For the purposes
hereof, the Fund, as well as such other investment companies within the
Phoenix Home Life family of funds shall hereinafter be referred to
collectively as the "Phoenix Funds." The Adviser presently has $1.7 billion
in managed assets. The Adviser has acted as investment adviser for over sixty
years.
The current Management Agreement was approved by the Board of Directors on
April 16, 1993 and by the shareholders of the Fund on May 7, 1993. The
Management Agreement became effective on May 14, 1993, and will continue in
effect until May 14, 1995. After that date, the Management Agreement will
continue in effect from year to year if specifically approved annually by a
majority of the Directors who are not interested persons of the parties
thereto, as defined in the 1940 Act, and by either (a) the Board of Directors
or (b) the vote of a majority of the outstanding voting securities of the
Fund (as defined in the 1940 Act). The Agreement may be terminated without
penalty at any time by the Directors or by a vote of a majority of the
outstanding voting securities of the Fund or by the Adviser upon 60 days'
written notice and will automatically terminate in the event of its
"assignment" as defined in Section 2(a)(4) of the 1940 Act.
The Management Agreement provides that the Adviser is not liable for any
act or omission in the course of or in connection with rendering services
under the Agreement in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under the
Agreement. The Agreement permits the Adviser to render services to others and
to engage in other activities.
The Adviser makes its personnel available to serve as officers and
"interested" Directors of the Fund. The Fund has not directly compensated any
of its officers or directors for services in such capacities except to pay
fees to the Directors who are not otherwise affiliated with the Fund. The
Fund reimburses all Directors for their out-of-pocket expenses. The Directors
of the Fund are not prohibited from authorizing the payment of salaries to
the officers pursuant to the Management Agreement, including out-of-pocket
expenses, at some future time.
In addition to the management fee, expenses paid by the Fund include fees
of Directors who are not "interested persons;" interest charges; taxes; fees
and commissions of every kind, including brokerage fees; expenses of
issuance, repurchase or redemption of shares; expenses of registering or
qualifying shares for sale (including the printing and filing of the Fund's
registration statements,
15
<PAGE>
reports, and prospectuses excluding those copies used for sales purposes which
the Underwriter purchases at printer's over-run cost); accounting services fees,
insurance expenses; association membership dues; all charges of custodians,
transfer agents, registrars, auditors and legal counsel; expenses of preparing,
printing and distributing all proxy material, reports and notices to
shareholders; and all costs incident to the Fund's existence as a Maryland
corporation.
DIRECTORS AND OFFICERS
The Directors and Officers of the Fund and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the
address of each executive officer and Director is One American Row, Hartford,
Connecticut, 06115. On
February 15, 1995, the Directors voted to increase the number of Directors
from ten to eleven and to appoint Lowell P. Weicker, Jr. to fill the vacancy
caused by the increase. The Directors and executive officers are listed
below:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
------------------------ ------------------ --------------------------------------
<S> <C> <C>
C. Duane Blinn Director Partner in the law firm of Day, Berry
Day, Berry & Howard & Howard. Director/ Trustee, Phoenix
CityPlace Funds (1980-present). Director/Trustee,
Hartford, CT 06103 the National Affiliated Investment
Companies (until 1993).
Robert Chesek Director Trustee/Director, Phoenix Funds
49 Old Post Road (1981-present) and Chairman
Wethersfield, CT 06109 (1989-1994). Director/Trustee, the
National Affiliated Investment
Companies (until 1993). Vice
President, Common Stock, Phoenix Home
Life Mutual Insurance Company
(1980-1994).
E. Virgil Conway Director Trustee/Director, Consolidated Edison
9 Rittenhouse Road Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University
(1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE
Properties (1989-present), Greater New
York Councils, Boy Scouts of America
(1985-present), Union Pacific Corp.
(1978-present), Atlantic Reinsurance
Company (1986-present), Blackrock Fund
for Fannie Mae Mortgage Securities
(Advisory Director) (1989-present),
Centennial Insurance Company, Josiah
Macy, Jr., Foundation, and The Harlem
Youth Development Foundation. Advisory
Director, Fund Directions (1993-
present). Board Member, Metropolitan
Transportation Authority
(1992-present). Chairman, Audit
Committee of the City of New York
(1981-present). Chairman, Audit
Committee of the City of New York
(1981-present). Chairman, Financial
Accounting Standard, Advisory Council
(1992-present). Director/Trustee, the
National Affiliated Investment
Companies (until 1993).
Director/Trustee, Phoenix Funds
(1993-present). Director, Accuhealth
(1994-present), Trism, Inc. (1994-
present), Realty Foundation of New
York (1972-present) and the New York
Housing Partnership Development Corp.
(1981- present). Former Director, New
York Chamber of Commerce and Industry
(1974-1990).
16
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
------------------------ ------------------ --------------------------------------
Harry Dalzell-Payne Director Director/Trustee, Phoenix Funds
330 East 39th Street (1983-present). Director, Farragut
Apartment 29G Mortgage Co., Inc. (1991-1994).
New York, NY 10016 Director/Trustee, the National
Affiliated Investment Companies
(1983-1993). Consultant, The Levett
Group Holding, Inc. (1989-1990).
Independent real estate market
consultant (1982-1990). Formerly a
Major General of the British Army.
Leroy Keith, Jr. Director Director/Trustee, Phoenix Funds
Chairman and Chief (1980-present). Director Equifax Corp.
Executive Officer (1991-present), and Keystone
Keith Ventures International Fund, Inc.
1729 Wood Nymph Trail (1989-present). Trustee, Keystone
Lookout Mountain, GA Liquid Trust, Keystone Tax Exempt
30750 Trust, Keystone Tax Free Fund, Master
Reserves Tax Free Trust, and Master
Reserves Trust. Director/ Trustee, the
National Affiliated Investment
Companies (until 1993). Director, Blue
Cross/Blue Shield (1989-1993) and
First Union Bank of Georgia
(1989-1993). President, Morehouse
College (1987-1994).
*Philip R. McLoughlin Director and Director (1994-present) and Executive
President Vice President, Investments, Phoenix
Home Life Mutual Insurance Company
(1987-present). Director/Trustee and
President, Phoenix Funds
(1989-present). Director, Phoenix
Investment Counsel, Inc.
(1983-present). Director
(1984-present) and President (1990-
present), Phoenix Equity Planning
Corporation. Director, Phoenix Realty
Group, Inc. (1994-present), Phoenix
Realty Advisors, Inc. (1987-present),
Phoenix Realty Investors, Inc.
(1994-present), Phoenix Realty
Securities, Inc. (1994-present),
Phoenix Re Corporation (Delaware)
(1985-present) and World Trust Fund
(1991-present). Director/Trustee, the
National Affiliated Investment
Companies (until 1993). Director,
Chairman and Chief Executive Officer,
National Securities & Research
Corporation (1993-present) and
Director and President, Phoenix
Securities Group, Inc. (1993-present).
Director (1992-present) and President
(1992-1994), W.S. Griffith & Co., Inc.
(1992-present) and Director
(1992-present) and President
(1992-1994), Townsend Financial
Advisers, Inc. (1992-present).
Director and Vice President, PM
Holdings, Inc. (1985-present).
James M. Oates Director Director/Trustee, Phoenix Funds
Managing Director (1987-present) Director, Govett
The Wydown Group Worldwide Opportunity Funds, Inc.
50 Congress Street (1991-present), and Stifel Financial
Suite 1000 Corporation (1986-present).
Boston, MA 02109 Director/Trustee, the National
Affiliated Investment Companies (until
1993). Director and President
(1984-1994) and Chief Executive
Officer (1986-1994), Neworld Bank.
Director, Savings Bank Life Insurance
Company (1988-1994).
17
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
------------------------ ------------------ --------------------------------------
Philip R. Reynolds Director Director/Trustee, Phoenix Funds
43 Montclair Drive (1984-present). Director, Vestaur
West Hartford, CT 06107 Securities, Inc. (1972-present).
Trustee and Treasurer, J. Walton
Bissell Foundation, Inc.
(1988-present). Director/Trustee, the
National Affiliated Investment
Companies (until 1993).
Herbert Roth, Jr. Director Director/Trustee, Phoenix Funds
134 Lake Street (1980-present). Director, Boston
P.O. Box 909 Edison Company (1978-present), Phoenix
Sherborn, MA 01770 Home Life Mutual Insurance Company
(1972-present), Landauer, Inc.
(medical services) (1970-present),
Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), Key
Energy Group (oil rig service)
(1988-1993), and Mark IV Industries
(diversified manufacturer)
(1985-present). Director/Trustee, the
National Affiliated Investment
Companies (until 1993).
Richard E. Segerson Director Director/Trustee, Phoenix Funds,
102 Valley Road (1993-present). Consultant, Tootal
New Canaan, CT 06840 Group (1989-1991). Vice President and
General Manager, Coats & Clark, Inc.
(previously Tootal American, Inc.)
(1991-1993). Director/Trustee, the
National Affiliated Investment
Companies (1984-1993).
Lowell P. Weicker, Jr. Director Trustee/Director, the Phoenix Funds
Dresing Lierman Weicker (1995-present). Chairman, Dresing,
6931 Arlington Road Lierman, Weicker (1995-present).
Suite 501 Governor of the State of Connecticut
Bethesda, MD 20814 (1991-1995). President and Chief
Executive Officer, Research! America
(1989-1990).
Martin J. Gavin Executive Vice Senior Vice President, Investment
President Products, Phoenix Home Life Mutual
Insurance Company (1989-present).
Director and Executive Vice President,
Phoenix Equity Planning Corporation
(1990-present). Director
(1994-present) and Executive Vice
President (1991-present), Phoenix
Investment Counsel, Inc. Director and
Executive Vice President, Phoenix
Securities Group, Inc. (1993-present),
National Securities & Research
Corporation (1993-present). Director
(1993-present) and Executive Vice
President (1993-1994), W.S. Griffith &
Co., Inc. and Townsend Financial
Advisers, Inc. Executive Vice
President, Phoenix Funds
(1993-present). Executive Vice
President, National Affiliated
Investment Companies (until 1993).
18
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
------------------------ ------------------ --------------------------------------
Michael E. Haylon Executive Vice Senior Vice President, Securities
President Investments, Phoenix Home Life Mutual
Insurance Company (1993-present).
Executive Vice President, Phoenix
Funds (1993-present). Director
(1994-present) and President
(1995-present), Executive Vice
President (1994-1995), Vice President
(1991-1994), Phoenix Investment
Counsel, Inc. Director and Executive
Vice President (1994-present), Vice
President (1993-1994), National
Securities & Research Corporation.
Director, Phoenix Equity Planning
Corporation (1995-present). Various
other positions with Phoenix Home Life
Mutual Insurance Company (1990-1993).
James M. Dolan Vice President Vice President and Compliance Officer
100 Bright Meadow Blvd. (1994-present), and Assistant
P.O. Box 2200 Secretary (1981-present), Phoenix
Enfield, CT 06083-2200 Equity Planning Corporation. Vice
President, Phoenix Funds
(1989-present). Vice President
(1991-present), Assistant Clerk and
Assistant Secretary (1982-present),
Phoenix Investment Counsel, Inc., Vice
President and Chief Compliance Officer
(1994-present), Phoenix Realty
Advisors, Inc. and Chief Compliance
Officer (1995-present), Phoenix Realty
Securities, Inc. Vice President, the
National Affiliated Investment
Companies (until 1993). Vice President
and Compliance Officer, Assistant
Secretary, National Securities &
Research Corporation (1994-present).
Various other positions with Phoenix
Equity Planning Corporation
(1978-1994).
William R. Moyer Vice President Vice President, Investment Products
100 Bright Meadow Blvd. Finance, Phoenix Home Life Mutual
P.O. Box 2200 Insurance Company (1990-present).
Enfield, CT 06083-2200 Senior Vice President, Finance
(1990-present), and Treasurer (1994-
present), Phoenix Equity Planning
Corporation and Phoenix Investment
Counsel, Inc. Vice President, Phoenix
Funds (1990-present). Vice President,
the National Affiliated Investment
Companies (until 1993). Senior Vice
President, Finance, Phoenix Securities
Group, Inc. (1993-present). Senior
Vice President, Finance
(1993-present), and Treasurer
(1994-present), National Securities &
Research Corporation. Senior Vice
President and Chief Financial Officer
(1993-present) and Treasurer
(1994-present), W.S. Griffith & Co.,
Inc. and Townsend Financial Advisers,
Inc. Senior Manager, Price Waterhouse
(1983-1990).
Leonard J. Saltiel Vice President Vice President, Investment Operations,
Phoenix Home Life Mutual Insurance
Company (1994-present). Senior Vice
President, Phoenix Equity Planning
Corporation (1994-present). Vice
President, Phoenix Funds
(1994-present) and National Securities
& Research Corporation. Various
positions with Home Life Insurance
Company and Phoenix Home Life Mutual
Insurance Company (1987-1994).
19
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
------------------------ ------------------ --------------------------------------
James D. Wehr Vice President Managing Director, Public Fixed
Income, Phoenix Home Life Mutual
Insurance Company, (1991-present).
Vice President, Phoenix California Tax
Exempt Bonds, Inc. (1993-present),
Phoenix Multi-Portfolio Fund
(1988-present), Phoenix Series Fund
(1990-present), The Phoenix Edge
Series Fund (1991-present), Phoenix
Investment Counsel, Inc.
(1991-present) and National Securities
& Research Corporation (1993-present).
Various positions with Phoenix Home
Life Mutual Insurance company
(1981-1991)
Nancy G. Curtiss Treasurer Second Vice President and Treasurer,
Fund Accounting, Phoenix Home Life
Mutual Insurance Company (1994-
present). Treasurer, Phoenix Funds
(1994-present). Vice President, Fund
Accounting, Phoenix Equity Planning
Corporation (1994-present). Various
positions with Phoenix Home Life
Insurance Company (1987-1994).
G. Jeffrey Bohne Secretary Vice President and General Manager,
101 Munson Street Phoenix Home Life Mutual Insurance Co.
Greenfield, MA 01301 (1993-present). Vice President,
Transfer Agent Operations, Phoenix
Equity Planning Corporation
(1993-present). Secretary, the Phoenix
Funds (1993-present). Clerk, Phoenix
Total Return Fund, Inc.(1994-present).
Vice President, Home Life of New York
Insurance Company (1984-1992).
</TABLE>
*Indicates that the Director(s) is an "interested person" of the Fund within
the meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
For his services on the Boards of the Phoenix Funds and the mutual funds
managed by the Adviser, each Director who is not a full-time employee of the
Adviser or any of its affiliates currently receives a retainer at the annual
rate of $30,000 and $2,000 per joint meeting of the Boards. Each Director who
serves on the Audit Committee receives a retainer at the annual rate of
$2,000 and $2,000 per joint Audit Committee meeting attended. Each Director
who serves on the Nominating Committee receives a retainer at the annual rate
of $1,000 and $1,000 per joint Nominating Committee meeting attended. Each
Director who serves on the Executive Committee and who is not an interested
person of the Fund receives a retainer at the annual rate of $1,000 and
$1,000 per joint Executive Committee meeting attended. For the Fund alone,
each Director who is not a full-time employee of the Adviser or any of its
affiliates receives for his services a retainer at the annual rate of $3,000
and a fee of $200 per meeting attended; each Director who serves on the Audit
Committee of the Fund receives a retainer at the annual rate of $200 and $200
per Audit Committee meeting attended; each Director who serves on the
Nominating Committee of the Fund receives a retainer at the annual rate of
$100 and $1,000 per joint Nominating Committee meeting attended; and each
Director who serves on the Executive Committee and who is not an interested
person of the Fund receives a retainer at the annual rate of $100 and $1,000
per joint Executive Committee meeting attended. Officers are compensated for
their services by the Adviser and receive no compensation from the Fund.
On April 30, 1995, the Directors and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
20
<PAGE>
For the Fund's last fiscal year ending April 30, 1995, the Directors
received the following compensation:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From Fund and
Aggregate Accrued as Part Estimated Fund Complex
Compensation of Fund Annual Benefits (10 Funds)
Name From Fund Expenses Upon Retirement Paid to Directors
-------------------- ----------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $2,000* $50,000
Robert Chesek $1,600 $40,000
E. Virgil Conway $2,080 $52,000
Harry Dalzell-Payne $1,680 $42,000
Leroy Keith, Jr. $1,680 None None $42,000
Philip R. McLoughlin $ 0 for any for any $ 0
James M. Oates $2,000 Director Director $50,000
Philip R. Reynolds $1,680 $42,000
Herbert Roth, Jr. $2,160* $54,000
Richard E. Segerson $2,000 $50,000
</TABLE>
*This compensation (and the earnings thereon) was deferred pursuant to the
Directors' Deferred Compensation Plan.
On April 30, 1995, the Directors and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
ADVISORY BOARD
The Fund also has an Advisory Board consisting of Messrs. Allan, Blakeley
and Palmer, former independent Directors of the Fund. The Advisory Board,
consisting of retired Directors provides advice and counsel to the current
Directors. They are scheduled to meet formally once in 1995 and to be
available for informal consultations during the same period. The Fund will
pay each Advisory Board member an annual stipend of $2,500 and a meeting fee
of $2,000. The following sets forth each Advisory Board member's business
affiliation for the past five years.
Lincoln W. Allan--Semi-retired commercial real estate investor, Plum
Realty, 101 South Sixth Avenue, Delray Beach, Florida. From 1988 to 1990, Mr.
Allan was with Allmon & Tiernan, Inc. real estate investors. Mr. Allan is a
former Director/Trustee of all of the National Affiliated Investment
Companies.
Gerald W. Blakeley, Jr.--Partner, Blakeley Investment Company, 60 State
Street, Boston, MA 02109. Prior to 1990, Mr. Blakeley was the Managing
Partner of Blakeley Maddox Investment Company. Mr. Blakeley is a former
Director/Trustee of all of the National Affiliated Investment Companies. Mr.
Blakely is a Trustee Emeritus of First Mutual of Boston.
Edward L. Palmer--President of Mill Neck Group, Inc. 339 Park Avenue, New
York, NY 10043. Mr. Palmer is a Director of Devon Group, Inc. and Lanxide
Corporation. Mr. Palmer is a former Director/Trustee of all of the National
Affiliated Investment Companies.
NET ASSET VALUE
The net asset value per share of the Fund is computed by dividing the
value of the Fund's securities, plus any cash and other assets (including
dividends and interest accrued but not collected) less all liabilities
(including accrued expenses), by the number of shares of the Fund
outstanding. The net asset value is computed at the close of the general
trading session on each day that the New York Stock Exchange is open. The New
York Stock Exchange is scheduled to be closed on New Year's Day, President's
Day (observed), Good Friday, Memorial Day (observed), Labor Day, Thanksgiving
Day and Christmas. Financial futures are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded. See "Net Asset Value" in the Fund's current Prospectus for more
information.
21
<PAGE>
HOW TO BUY SHARES
Shares may be purchased from investment dealers having a sales agreement
with the Underwriter at the public offering price (the net asset value next
computed following receipt of a purchase application in proper form, plus the
applicable sales charge i.e, front-end sales charges levied against Class A
Shares and contingent deferred sales charges levied against Class B Shares).
Unless otherwise specified, the minimum initial investment is $500. The
minimum amount of any subsequent investment is $25.
Class B Shares which are redeemed within five years of purchase will be
subject to a contingent deferred sales charge. The amount of the contingent
deferred sales charge, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of
redemption of such shares. The charge will be assessed on an amount equal to
the lesser of the current market value or the cost of the shares being
redeemed. No sales charge will be imposed on increases in net asset value
above the initial purchase price. In addition, no sales charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions.
Class B Shares will automatically convert to Class A Shares approximately
eight years after the end of the calendar month in which the shareholder's
order to purchase was accepted, in the circumstances and subject to the
qualifications described in the Prospectus.
See the Fund's current Prospectus under "How to Buy Shares" for additional
information and sales charges imposed upon purchases and redemptions.
EXCHANGE PRIVILEGES
Subject to limitations, shares of the Fund or shares of any other Phoenix
Fund (except Phoenix Asset Reserve Class A Shares held less than 6 months),
may be exchanged for shares of the same class on the basis of the relative
net asset values per share at the time of the exchange. Exchanges are subject
to the minimum initial investment requirement of the designated Portfolio,
Fund, or Series, except if made in connection with the Systematic Exchange
privilege. Class A shareholders may exchange shares held in book-entry form
for an equivalent number (value) of Class A Shares of any other Phoenix Fund.
On Class B share exchanges, the contingent deferred sales charge schedule of
the original shares purchased continues to apply. Shareholders should obtain
a current prospectus of the Phoenix Fund whose shares they intend to purchase
and read it carefully before requesting an exchange. Prospectuses are
available from Equity Planning.
Fund share certificates which have not been issued may be exchanged by
calling 800-367-5877 provided that exchanges are made between accounts with
identical registrations. Under the Telephone Exchange Privilege, telephone
exchange orders may also be entered on behalf of the shareholder by his or
her registered representative. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that telephone instructions are genuine. In
addition to requiring identical registrations on both accounts, the Transfer
Agent will require address verification and will record telephone
instructions on tape. All exchanges will be confirmed in writing to the
shareholder. To the extent that procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Fund and/or Transfer
Agent may be liable for following telephone instructions for exchange
transactions that prove to be fraudulent. Broker/dealers other than Equity
Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone exchange instruction from the firm or its registered
representatives. However, the shareholder would bear the risk of loss
resulting from instructions entered by an unauthorized third party that the
Fund and/or the Transfer Agent reasonably believe to be genuine. The
Telephone Exchange Privilege may be modified or terminated at any time on 60
days' notice to shareholders. In addition, during times of drastic economic
or market changes, the Telephone Exchange Privilege may be difficult to
exercise or may be suspended temporarily. In such event an exchange may be
effected by following the procedure outlined for tendering shares represented
by certificate(s). The Telephone Exchange Privilege is available only in
states where shares being acquired may be legally sold.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed at the net asset value next determined
after receipt of a redemption order and any other required documentation in
proper form. In the case of Class B Shares not held by the shareholder for
more than five years, investors
22
<PAGE>
will be subject to the applicable deferred sales charge, if any, for such
shares (see the Fund's current Prospectus under "How to Buy Shares"). Under
the 1940 Act, payment for shares redeemed must ordinarily be made within
seven business days after tender. The right to redeem shares may be suspended
during any period when: (1) the New York Stock Exchange is closed other than
customary weekend and holiday closings; (2) trading on the New York Stock
Exchange is restricted, or an emergency exists as determined by the
Securities and Exchange Commission, so that disposal of the Fund's portfolio
securities or fair determination of its net asset value is not reasonably
practicable; or (3) the Securities and Exchange Commission has by order
permitted such suspension. Furthermore, the Transfer Agent will not mail
redemption proceeds until checks received for shares purchased have cleared,
which may take up to 15 days or more.
A shareholder account in the Fund which has been in existence for at least
one year and has a value of less than $200 may be redeemed by the Fund in
which the shareholder is invested upon the giving of not less than 60 days'
written notice to the shareholder mailed to the address of record, unless the
decrease in value of such account has resulted solely from market activity.
During the 60 day period, the shareholder has the right to add to the account
to bring its value to $200 or more. See the Fund's current Prospectus for
more information.
By Mail
The shareholder may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds, c/o State Street Bank and
Trust Company, P. O. Box 8301, Boston, Massachusetts 02266-8301. However, when
certificates for shares are in the possession of the shareholder, they must be
mailed or presented, duly endorsed in the full name of the account, with a
written request to Equity Planning that the Fund redeem the shares.
By Telephone
Unless a shareholder elects in writing not to participate in the Telephone
Redemption privilege, shares for which certificates have not been issued may be
redeemed by telephoning (800) 367-5877 and telephone redemptions will also be
accepted on behalf of the shareholder from his or her registered representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, the telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Fund and/or the Transfer Agent may be liable for following
telephone instructions for redemption transactions that prove to be
fraudulent. Broker/dealers other than Equity Planning have agreed to bear the
risk of any loss resulting from any unauthorized telephone redemption
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the Fund and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Redemption Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Redemption Privilege may be difficult to exercise and a shareholder should
submit a written redemption request, as described above.
If the amount of the redemption is over $500, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount
of the redemption is less than $500, the proceeds will be sent by check to
the address of record on the shareholder's account.
Telephone redemption requests must be received by the Transfer Agent by
the close of trading on the New York Stock Exchange on any day when the
Transfer Agent is open for business. Requests made after that time or on a
day when the Transfer Agent is not open for business cannot be accepted. The
proceeds of a telephone redemption will normally be sent on the first
business day following receipt of the redemption request. However, with
respect to the telephone redemption of shares purchased by check, such
requests will only be effected after the Fund has assured itself that good
payment has been collected for the purchase of shares, which may take up to
15 days. This expedited redemption privilege is not available to HR-10, IRA
and 403(b)(7) Plans.
23
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to remain qualified as a regulated investment company
under certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"). Under such provisions, the Fund will not be subject to Federal
income tax on such part of its ordinary income and net realized capital gains
which it distributes to shareholders provided it meets certain distribution
requirements. To qualify for treatment as a regulated investment company, the
Fund must, among other things, (a) derive in each taxable year at least 90%
of its gross income from dividends, interest and gains from the sale or other
disposition of securities and (b) derive less than 30% of its gross income
each taxable year as gains (without deduction for losses) from the sale or
other disposition of securities held for less than three months; (c)
diversify its holdings so that, at the end of each quarter of the taxable
year (i) at least 50% of the market value of the Fund's assets are
represented by cash, U.S. Government Securities, securities of other
regulated investment companies and other securities of any one issuer limited
for purposes of this calculation to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of any one
issuer and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies), If, in
any taxable year, the Fund does not qualify as a regulated investment
company, all of its taxable income will be taxed to the Fund at corporate
rates and the Fund would not be eligible to pay exempt interest dividends.
Interest on certain "private activity bonds" issued after August 7, 1986,
although otherwise tax-exempt, is treated as a tax preference item for
alternative minimum tax purposes. Under regulations to be promulgated, the
Fund's exempt interest dividends will be treated as a tax preference item for
purposes of computing the alternative minimum tax liability of shareholders
to the extent attributable to interest paid on "private activity" bonds.
Corporate shareholders should also be aware that the receipt of exempt
interest dividends could subject them to alternative minimum tax under the
provisions of Code Section 56(f) (relating generally to book income or
adjusted current earnings in excess of taxable income).
The Fund declares a daily dividend, which is accrued and is paid monthly.
Income dividends and capital gains are reinvested automatically in additional
shares at net asset value unless the shareholder elects to receive
distributions in cash. If a shareholder withdraws the entire amount in the
account at any time during the month, all dividends accrued to the date of
liquidation will be paid to the shareholder along with the proceeds from the
redemption of shares.
Distribution by the Fund of interest income from tax exempt bonds will not
be taxable to shareholders and will not be included in their respective gross
incomes for Federal income tax purposes provided that certain conditions are
met. Distributions or parts thereof derived from interest received on
California state and local issues and U.S. Government Obligations held in the
portfolio will be exempt from California personal income taxes in ratable
proportion of the California investments and U.S. Government Obligations of
the Fund, provided that the Fund has complied with the requirement that at
least 50% of its assets be invested in California state and local issues and
U.S. Government issues at the end of each fiscal quarter. The Fund intends to
comply with this standard since at least 80% of the assets of the Fund will
normally be invested in California municipal securities. Distributions
derived from other earnings will be subject to California personal income tax
for California residents and other persons subject to California income tax.
Distributions, if any, of the excess of net long-term capital gain over net
short-term capital loss will be made at least annually and will be taxable to
shareholders (and not the Fund) as long-term capital gain. The Fund has no
plans to make a distribution of capital gains realized during any year in
which there is a tax loss carry forward available to offset such gains;
however, this is subject to review in the future. All net realized long- or
short-term capital gains, if any, are declared and distributed to the Fund's
shareholders annually after the close of the Fund's fiscal year.
Distributions of net income from certain temporary investments (such as net
interest income from taxable commercial paper) and short-term capital gains,
if any, will be taxable as ordinary income whether received in cash or in
shares. Any gain or loss realized by a shareholder on the sale or redemption
of shares will be long- or short-term capital gain or loss, depending upon
the length of the shareholder's holding period. However, any loss realized on
the sale of shares held for six months or less will be long-term loss to the
extent of the long term loss to the extent of long term capital gains
received by the shareholder. A shareholder will not be permitted to deduct
for Federal income tax purposes interest on indebtedness incurred to purchase
or carry shares.
24
<PAGE>
The Code imposes a 4% nondeductible excise tax on a regulated investment
company, such as the Fund, if it does not distribute to its shareholders during
the calendar year an amount equal to 98% of the Fund's net ordinary income, with
certain adjustments, for such calendar year, plus 98% of the Fund's capital gain
net income for the one-year period ending on April 30 of such calendar year. In
addition, an amount equal to any undistributed investment company taxable income
or capital gain net income from the previous reporting year must also be
distributed to avoid the excise tax. The excise tax will not, however, generally
apply to the tax-exempt income of a regulated investment company such as the
Fund that pays exempt-interest dividends. In addition, if the Fund has taxable
income that would be subject to the excise tax, the Fund intends to distribute
such income so as to avoid payment of the excise tax.
Under another provision of the Code, any dividend declared by a fund to
shareholders of record in October, November and December of any year will be
deemed to have been received by, and will be taxable to, shareholders as of
December 31 of such year, provided that the dividend is actually paid by the
Fund in January of the following year.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on
the disposition of those shares. This rule applies where shares of the Fund
are disposed of within 90 days after the date on which they were acquired and
new shares of a regulated investment company are acquired without a sales
charge or at a reduced sales charge. In that case, the gain or loss realized
on the disposition will be determined by excluding from the tax basis of the
shares disposed of all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced
as a result of the shareholder having incurred a sales charge initially. The
portion of the sales charge affected by this rule will be treated as a sales
charge paid for the new shares.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from the Fund ("backup withholding") at the
rate of 20%. Corporate shareholders and certain other shareholders specified
in the Code generally are exempt from such backup withholding. Generally,
shareholders subject to backup withholding will be (i) those for whom a
certified taxpayer identification number is not on file with the Fund, (ii)
those about whom notification has been received (either by the shareholder or
the Fund) from the Internal Revenue Service that they are subject to backup
withholding or (iii) those who, to the Fund's knowledge, have furnished an
incorrect taxpayer identification number. Generally, to avoid backup
withholding, an investor must, at the time an account is opened, certify
under penalties of perjury that the taxpayer identification number furnished
is correct and that he or she is not subject to backup withholding.
The Fund furnishes all shareholders, within 31 days after the end of the
calendar year, with information which is required by the Internal Revenue
Service for preparing Federal income tax returns with the final dividend
confirmation statement or dividend check of the calendar year (the percentage
of all income distributions made during a fiscal year designated as tax
exempt will be uniform).
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal bonds and similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of tax exempt bonds
for investment by the Fund and the value of the Fund's portfolio would be
affected. The Directors would then re-evaluate the Fund's investment
objective and policies.
Tax Sheltered Retirement Plans
Shares of the Fund and other Phoenix Funds may be offered in connection with
employer-sponsored 401(k) plans. National and its affiliates may, directly or
through third parties, provide administrative services to these plans and to
their participants, in addition to the services that National and its
affiliates provide to the Phoenix Funds and receive compensation therefor.
For information on the terms and conditions applicable to employee
participation in such plans, including information on applicable plan
administrative charges and expenses, prospective investors should consult the
plan documentation and employee enrollment information which is available
from participating employers.
25
<PAGE>
THE NATIONAL DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning") acts as the
Underwriter for the Fund and as such will conduct a continuous offering
pursuant to a "best efforts" arrangement requiring the Underwriter to take
and pay for only such securities as may be sold to the public. Equity
Planning is an indirect wholly owned subsidiary of Phoenix Home Life Mutual
Insurance Company and an affiliate of National. Shares of the Fund may be
purchased through investment dealers who have sales agreements with the
Underwriter. The Underwriter purchases such number of copies of the Fund's
Prospectus, Statement of Additional Information and reports to shareholders
as it may require for sales purposes at printers over-run cost. During the
fiscal years ended April 30, 1993, 1994, and 1995, purchasers of Fund shares
paid aggregate sales charges of $602,745, $246,087 and $124,446,
respectively, of which the principal underwriter received net commissions of
$96,189, $35,802 and $14,922, respectively, for its services, the balance
being paid to dealers.
PLANS OF DISTRIBUTION
Both Class A and Class B Shares of the Fund have adopted separate
distribution plans under Rule 12b-1 of the 1940 Act. The Plans permit the
Fund to reimburse the Underwriter for expenses incurred in connection with
activities intended to promote the sale of shares of each Class. Pursuant to
each Plan, with respect to Class A Shares, the Fund may reimburse the
Underwriter for actual expenses of the Underwriter related to that class up
to 0.25% annually of the average daily net assets of the Fund, and, with
respect to Class B Shares, the Fund may reimburse the Underwriter for actual
expenses of the Underwriter related to that class up to 1.00% annually of the
average daily net assets of the Fund. Expenditures under the Plans shall
consist of: (i) commissions to sales personnel for selling shares of the Fund
including Underwriting fees and related financing expenses for sales of
shares; (ii) compensation, sales incentives and payments to sales, marketing
and service personnel; (iii) payments to broker-dealers and other financial
institutions which have entered into agreements with the Underwriter in the
form of the Dealer Agreement for Phoenix Funds for services rendered in
connection with the sale and distribution of shares of the Fund; (iv) payment
of expenses incurred in sales and promotional activities, including
advertising expenditures related to the Fund; (v) the costs of preparing and
distributing promotional materials; (vi) the cost of printing the Fund's
Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Directors
of the Fund determine are reasonably calculated to result in the sale of
shares of the Fund, provided, however, that a portion of such amount equal to
or less than 0.25% annually of the average daily net assets of Fund shares
may be paid for reimbursing the costs of providing services to shareholders,
including assistance in connection with inquiries related to shareholder
accounts (the "Service Fee").
Expenses not reimbursed during any year, because of the limitations on
reimbursements, may be carried over and paid in future years when actual
expenses are less than the respective limits under each Plan. If a
reimbursement appears probable, it will be accounted for as a current expense
of the Fund regardless of the time period over which the reimbursement may
actually be paid by the Fund. If the Plans are terminated in accordance with
their terms, the obligations of the Fund to make payments to the Underwriter
pursuant to the Plans, including payments for expenses carried over from
previous years, will cease and the Fund will not be required to make any
payments past the date on which either Plan terminates.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Underwriter may from time to time pay, from its
own resources or pursuant to either Plan, a bonus or other incentive to
dealers (other than the Underwriter) which employ a registered representative
who sells a minimum dollar amount of the shares of the Fund during a specific
period of time. Such bonus or other incentive may take the form of payment
for travel expenses, including lodging, incurred in connection with trips
taken by qualifying registered representatives and members of their families
to places within or without the United States or other bonuses such as gift
certificates or the cash equivalent of such bonuses. The Underwriter may,
from time to time, re-allow the entire portion of the sales charge which it
normally retains to individual selling dealers. However, such additional
re-allowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
26
<PAGE>
The Directors have concluded that there is a reasonable likelihood that
each Plan will benefit the Fund and each affected class of shareholders. The
Distribution Plan for Class A Shares was approved by Class A shareholders of
the Fund at a special meeting of shareholders held on May 7, 1993. The
Distribution Plan for Class B Shares was approved by the Directors on May 25,
1994. For the fiscal year ended April 30, 1995, the Fund paid Rule 12b-1 fees
in the amount of $306,908 of which the principal underwriter of the Fund
earned $2,490. The Rule 12b-1 payments were used for compensating dealers
($304,645) (2) marketing materials (2,262).
On a quarterly basis, the Fund's Directors review a report on expenditures
under each Plan and the purposes for which expenditures were made. The
Directors conduct an additional, more extensive review annually in
determining whether each Plan will be continued. By its terms, continuation
of each Plan from year to year is contingent on annual approval by a majority
of the Fund's Directors and by a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of either Plan or any related
agreements (the "Plan Directors"). Each Plan provides that it may not be
amended to increase materially the costs which the Fund may bear without
approval of the applicable class of shareholders of the Fund and that other
material amendments to such Plan must be approved by a majority of the Plan
Directors by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Plan further provides that while it is in
effect, the selection and nomination of Directors who are not "interested
persons" shall be committed to the discretion of the Directors who are not
"interested persons". Each Plan may be terminated at any time by vote of a
majority of the Plan Directors or a majority of the outstanding shares of the
applicable class of the Fund.
The Underwriting Agreement may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding voting securities of the Fund, or by
vote of a majority of the Fund's Directors who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements. The Underwriting Agreement will
terminate automatically in the event of its assignment.
The National Association of Securities Dealers, Inc. ("NASD"), recently
approved certain amendments to the NASD's mutual fund maximum sales charge
rule. The amendments would, under certain circumstances, regard distribution
fees as asset-based sales charges subject to NASD sales load limits. The
NASD's maximum sales charge rule may require the Directors to suspend
distribution fees or amend the Plan.
OTHER INFORMATION
Custodian And Transfer Agent
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02105-8301,
serves as the Fund's custodian. Equity Planning serves as the Fund's transfer
agent. Pursuant to an agreement, State Street Bank and Trust Company serves as a
subagent to the Transfer Agent and as such provides certain shareholder
servicing functions for the Fund. Please contact the Underwriter at the
following phone numbers with service inquiries: Wire Order Room, (800) 367-5877,
Customer Service Department (800) 243-1574.
Reports to Shareholders
The fiscal year of the Fund ends on April 30. The Fund will send to its
shareholders at least semi-annually reports showing the securities of the Fund's
portfolio and other information.
Financial Statements
The financial statements for the Fund's fiscal year ended April 30, 1995,
appearing in the Fund's 1995 Annual Report to Shareholders, are incorporated
herein by reference.
Independent Accountants
Price Waterhouse LLP has been selected as the independent accountants for
the Fund. Price Waterhouse LLP audits the Fund's annual financial statements
and expresses an opinion thereon.
27
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
INVESTMENTS AT APRIL 30, 1995
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
MUNICIPAL TAX-EXEMPT BONDS--97.5%
Certificates of Participation/Lease
Revenue--9.3%
California Public Works Lease
Revenue
5.25%, '06 AAA $ 1,640 $ 1,584,043
California State Public Works
5.375%, '19 AAA 5,000 4,487,700
California Statewide Community
4.90%, '09 AAA 2,200 1,956,130
Modesto Irrigation District 7.25%,
'15 A+ 2,000 2,058,120
San Mateo County Revenue
5.125%, '18 AAA 1,000 875,090
Total Certificates of Participation/
Lease Revenue 10,961,083
General Obligations--5.1%
California State G.O.
5.50%, '08 AAA 1,500 1,457,535
Central School District G.O.
7.05%, '16 A (b) 1,000 1,087,760
East Bay Regional Park District
G.O., Series B 5.75%, '15 AA- 2,155 2,052,853
Pomona School District G.O.,
Series C 5.60%, '12 AAA 1,500 1,426,320
Total General Obligations 6,024,468
Healthcare--6.4%
California Health Facilities 7%,
'10 AA 1,000 1,047,040
California Health Facilities
7.30%, '20 A+ 1,400 1,453,662
California Health Facilities
6.25%, '22 A+ 1,500 1,421,115
Grass Valley Hospital
7.25%, '19 A 2,000 2,057,540
San Bernardino Sisters of Charity
Health Care
7%, '21 AA 1,500 1,555,455
Total Healthcare 7,534,812
Housing Revenue--3.6%
California Housing Financing
Agency
7.25%, '17 AA- 845 883,794
California Housing Financing
Agency
7.75%, '17 AA- 450 469,850
Housing Revenue--continued
California Housing Financing
Agency Series C 7.20%, '17 AA- 875 904,592
L.A. Community Redevelopment
Agency Series A 6.55%, '27 AAA 2,000 2,015,260
Total Housing Revenue 4,273,496
Industrial Development Revenue--0.6%
San Diego Industrial Development
Revenue (San Diego Gas &
Electric) 9.25%, '20 A+ 675 695,635
Total Industrial Development Revenue 695,635
Pre-Refunded Revenue--17.8%
Covina Redevelopment Agency 8.80%,
'08 NR 1,200 1,426,332
Hayward Hospital Revenue (St. Rose
Hosp.) 10%, '04 AAA 585 733,900
Northern California Hydro Electric
7.50%, '23 AAA 195 234,569
Orange County Water District COP
7%, '15 AAA 1,000 1,112,010
Pasadena COP 6.75%, '15 A+ 2,000 2,199,980
Puerto Rico Hwy. Revenue Series T
6.625%, '18 AAA 200 222,076
Puerto Rico Public Buildings
7%, '19 AAA 500 541,330
Puerto Rico Public Buildings
Series L 6.875%, '21 AAA 3,170 3,567,169
Redlands COP Series C
7%, '22 AAA 1,000 1,116,540
Riverside Public Financing
Authority 7.80%, '08 Baa (b) 1,000 1,071,260
San Bernardino COP Series B 7%,
'28 AAA 2,200 2,465,430
San Gabriel Valley Schools
Financing 7.20%, '19 NR 1,200 1,319,772
San Jose Redevelopment Agency
7.80%, '11 NR 1,000 1,058,780
Southern California Public Power
Authority
5.50%, '20 A 915 810,434
Stockton COP 7.50%, '16 NR 1,000 1,036,260
Torrance Hospital COP
7.10%, '15 AAA 1,820 2,014,067
Total Pre-Refunded Revenue 20,929,909
See Notes to Financial Statements
2
<PAGE>
Puerto Rico--7.2%
Puerto Rico Aqueduct 7%, '19 A $ 1,500 $ 1,562,955
Puerto Rico Electric Power 7%, '21 A- 2,500 2,701,450
Puerto Rico Electric Power
Authority Series N 6%, '10 A- 1,500 1,490,595
Puerto Rico G.O. 5.375%, '06 A 2,000 1,896,720
Puerto Rico Highway Authority
Series T 6.625%, '18 A 800 822,392
Total Puerto Rico 8,474,112
Tax Revenue--12.0%
Cerritos Public Financing
Authority 6.50%, '23 AAA 1,755 1,827,833
Culver City Redevelopment Agency
4.60%, '20 AAA 4,500 3,562,650
Industry Urban Development Agency
10.40%, '15 NR 750 772,500
L.A. County Sales Tax 7%, '19 AA- 2,500 2,601,525
Los Angeles County Trans.
Authority Series A 5%, '21 AAA 3,750 3,174,300
San Francisco Redevelopment Agency
4.75%, '18 AAA 1,100 899,800
San Francisco Redevelopment Agency
5.50%, '18 A- 1,500 1,290,870
Total Tax Revenue 14,129,478
Utility Revenue--35.5%
Beverly Hills Wastewater 6%, '22 AA- 2,230 2,174,629
California State Water Series L
5.75%, '19 AA 4,000 3,778,840
Utility Revenue--continued
Chino Basin 5.90%, '11 AAA 2,000 1,990,640
Contra Costa Water District Series
G 5.75%, '14 AAA 3,700 3,556,551
Fresno Sewer Revenue Series A-1
4.50%, '23 AAA 500 382,125
Irvine Ranch Water District
7.80%, '08 A+ 1,500 1,553,595
Irvine Ranch Water District
8.25%, '23 A+ 2,000 2,109,340
L.A. Department of Water & Power
4.50%, '12 AAA 3,800 3,127,362
L.A. Department of Water & Power
5.875%, '30 AAA 5,000 4,741,500
L.A. Wastewater Series D
4.70%, '17 AAA 7,000 5,703,250
L.A. Wastewater Series D
4.70%, '19 AAA 4,000 3,230,560
Sacramento Utility District
Electric Series H 5.75%, '11 AAA 5,000 4,876,150
Sacramento Utility District
Electric Series G 4.75%, '21 AAA 3,000 2,424,630
Southern California Public Power
Authority 5.75%, '21 AA- 600 564,461
Southern California Public Power
Series A 4.875%, '20 AAA 2,000 1,655,000
Total Utility Revenue 41,868,633
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $110,594,797) 114,891,626
TOTAL INVESTMENTS--97.5%
(Identified cost $110,594,797) 114,891,626(a)
Cash and receivables, less liabilities--2.5% 2,938,731
NET ASSETS--100.0% $117,830,357
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,659,989 and gross
depreciation of $1,363,160 for income tax purposes. At April 30, 1995, the
aggregate cost of securities for federal income tax purposes was
$110,594,797.
(b) Moody's rating.
See Notes to Financial Statements
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
Assets
Investment securities at value
(Identified cost $110,594,797) $114,891,626
Receivables
Fund shares sold 44,266
Investment securities sold 1,046,288
Interest 2,297,710
Total assets 118,279,890
Liabilities
Payables
Custodian 190,067
Distribution payable 78,322
Fund shares repurchased 62,830
Investment advisory fee 44,149
Distribution fee 24,810
Financial agent fee 2,943
Trustees' fee 2,980
Transfer agent fee 8,672
Accrued expenses 34,760
Total liabilities 449,533
Net Assets $117,830,357
Net Assets Consist of:
Capital paid in on shares of capital stock $114,376,179
Distributions in excess of net investment income (34,140)
Accumulated net realized losses (808,511)
Net unrealized appreciation 4,296,829
Net Assets $117,830,357
Class A
Shares of capital stock outstanding, $.01 par value,
250,000,000 shares authorized 9,290,765
(Net Assets $117,370,225)
Net asset value per share $ 12.63
Offering price per share
$12.63/(1-4.75%) $ 13.26
Class B
Shares of capital stock outstanding, $.01 par value,
250,000,000 shares authorized 36,445
(Net Assets $460,132)
Net asset value and offering price per share $ 12.63
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
Investment Income
Interest $8,022,689
Total investment income 8,022,689
Expenses
Investment advisory fee 549,917
Distribution fee--Class A 305,043
Distribution fee--Class B 1,865
Financial agent fee 36,661
Transfer agent 91,801
Professional 50,421
Registration 38,140
Custodian 24,891
Trustees 22,703
Printing 11,532
Miscellaneous 8,899
Total expenses 1,141,873
Net investment income 6,880,816
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 946,797
Net unrealized depreciation on investments (797,795)
Net gain on investments 149,002
Net increase in net assets resulting from operations $7,029,818
See Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS Year Year
Ended Ended
April 30, 1995 April 30, 1994
<S> <C> <C>
From Operations
Net investment income $ 6,880,816 $ 8,321,950
Net realized gain 946,797 2,811,583
Net unrealized depreciation (797,795) (8,191,323)
Increase in net assets resulting from operations 7,029,818 2,942,210
From Distributions to Shareholders
Net investment income--Class A (7,272,931) (7,888,033)
Net investment income--Class B (9,873) --
Net realized gains--Class A (2,856,630) (1,202,059)
Net realized gains--Class B (9,083) --
Distributions in excess of net investment income--Class A (29,892) --
Distributions in excess of net investment income--Class B (41) --
Distributions in excess of accumulated net realized gains--Class A (811,818) --
Distributions in excess of accumulated net realized gains--Class B (2,581) --
Decrease in net assets from distributions to shareholders (10,992,849) (9,090,092)
From Share Transactions
Class A
Proceeds from sales of shares (496,574 and 762,733 shares, respectively) 6,213,919 10,459,258
Net asset value of shares issued from reinvestment of distributions
(447,402 and 324,430 shares, respectively) 5,495,965 4,431,662
Cost of shares repurchased (1,731,374 and 1,841,834 shares, respectively) (21,728,823) (25,138,213)
Total (10,018,939) (10,247,293)
Class B
Proceeds from sales of shares (41,888 and 0 shares, respectively) 514,453 --
Net asset value of shares issued from reinvestment of distributions (1,035
and 0 shares, respectively) 12,543 --
Cost of shares repurchased (6,478 and 0 shares, respectively) (79,763) --
Total 447,233 --
Decrease in net assets from share transactions (9,571,706) (10,247,293)
Net decrease in net assets (13,534,737) (16,395,175)
Net Assets
Beginning of period 131,365,094 147,760,269
End of period (including distributions in excess of net investment income
of ($34,140) and undistributed net investment income of $401,988,
respectively) $117,830,357 $131,365,094
See Notes to Financial Statements
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
Year Ended April 30,
From
inception
7/26/94 to
1995 1994 1993 1992 1991 4/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.03 $13.64 $13.20 $13.07 $12.58 $13.04
Income from investment operations
Net investment income 0.71 0.80 0.81 0.87 0.90 0.48
Net realized and unrealized gain (loss) 0.05 (0.53) 0.51 0.24 0.51 0.01
Total from investment operations 0.76 0.27 1.32 1.11 1.41 0.49
Less distributions
Dividends from net investment income (0.76) (0.76) (0.80) (0.88) (0.90) (0.50)
Distributions from net realized gains (0.31) (0.12) (0.08) (0.10) (0.02) (0.31)
Distributions in excess of accumulated
net realized gains (0.09) -- -- -- -- (0.09)
Total distributions (1.16) (0.88) (0.88) (0.98) (0.92) (0.90)
Change in net asset value (0.40) (0.61) 0.44 0.13 0.49 (0.41)
Net asset value, end of period $12.63 $13.03 $13.64 $13.20 $13.07 $12.63
Total return( (1)) 6.34% 1.80% 10.38% 8.68% 11.36% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $117,370 $131,365 $147,760 $139,118 $124,051 $460
Ratio to average net assets of:
Operating expenses 0.93% 0.85% 0.90% 0.68% 0.63% 1.55%(2)
Net investment income 5.63% 5.82% 6.00% 6.55% 6.94% 4.90%(2)
Portfolio turnover 51% 25% 25% 33% 26% 51%
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
See Notes to Financial Statements
6
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
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 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. These
policies are in conformity with generally accepted accounting principles.
A. Security valuation:
Municipal bonds are valued at the most recently quoted bid prices or at bid
prices based on a matrix theory which considers such factors as security
prices, yields, maturities, coupons and ratings, furnished by dealers and an
independent pricing service. Short-term investments having a remaining
maturity of less than sixty days 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, partnerships, 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.
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 wholly-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 wholly-owned subsidiary of PHL, has advised the Fund that it
received selling commissions of $14,251 for Class A shares and deferred sales
charges of $671 for Class B shares for the year ended April 30, 1995. 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, 1995, $2,490 was earned by the
Distributor and $304,418 was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. Effective June 1, 1994, PEPCO serves as
the Fund's Transfer Agent with State Street Bank and Trust as sub-transfer
agent. Prior to that date, State Street was the Transfer Agent. For the year
ended April 30, 1995, transfer agent fees were $91,801 of which PEPCO
retained $32,551, which is net of fees paid to State Street.
At April 30, 1995, PHL and affiliates held 182 Class A shares and 8,618 Class
B shares of the Fund with a combined value of $111,058.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities, for the
year ended April 30, 1995, aggregated $60,846,547 and $75,030,933,
respectively. There were no purchases or sales of long-term U.S. Government
securities.
4. RECLASS OF CAPITAL ACCOUNTS
In accordance with recently approved accounting pronouncements, the Fund has
recorded several reclassifications in the capital accounts. These
reclassifications have no impact on the
7
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
net asset value of the Fund and are designed generally to present
undistributed income and realized gains on a tax basis which is considered to
be more informative to the shareholder. As of April 30, 1995, the Fund has
decreased undistributed net investment income by $4,207, increased
accumulated net realized gains by $5,888 and decreased paid in capital by
$1,681.
5. 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.
6. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1994 may be
deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1995, the Fund elected to defer $808,511
in losses occurring between November 1, 1994 and April 30, 1995.
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 99.5% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
This report is authorized for use by other than shareholders only when
accompanied or preceded by the delivery of a current prospectus showing the
sales charge and other material information.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [logo of Price Waterhouse]
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, 1995, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at April
30, 1995 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
[signature of Price Waterhouse LLP]
Boston, Massachusetts
June 12, 1995
9
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes thereto, and Report of
Independent Accountants are included in the Annual Report to
Shareholders for the year ended April 30, 1995, incorporated
by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1.1 Articles of Incorporation of the Registrant, previously filed, and
herein incorporated by reference.
1.2 Articles of Amendment of Registrant, filed with Post-Effective
Amendment No. 16 on July 13, 1994, and incorporated herein by
reference.
1.3 Articles Supplementary of Registrant, filed with Post-Effective
Amendment No. 16 on July 13, 1994, and incorporated herein by
reference.
2.1* Revised and Restated By-laws of the Registrant, adopted November 16,
1994, and further amended February 15, 1995, and filed herewith.
3. Not Applicable.
4 Reference is made to Article VIII Section 1 of Registrant's Revised and
Restated By-Laws as amended, and filed with the Registration Statement
referred to in Exhibit 2.1.
5.1 Management Agreement between Registrant and National Securities &
Research Corporation dated January 1, 1994, filed with Post-Effective
Amendment No. 16 on July 13, 1994, and incorporated herein by
reference.
6.1 Underwriting Agreement between Registrant and Phoenix Equity Planning
Corporation ("Equity Planning") dated May 14, 1993, filed with
Post-Effective Amendment No. 13 on June 30, 1993, and herein
incorporated by reference.
6.2 Underwriting Agreement for Class B Shares between Registrant and Equity
Planning, filed with Post- Effective Amendment No. 16 on July 13, 1994,
and incorporated herein by reference.
7. None.
8. Custodian Contract between Registrant and State Street Bank and Trust
Company dated October 14, 1993, previously filed, and incorporated
herein by reference.
9.1 Transfer Agency and Service Agreement between Registrant et al and
Phoenix Equity Planning Corporation dated June 1, 1994, filed with
Post-Effective Amendment No. 16 on July 13, 1994, and incorporated
herein by reference.
9.2 Form of Sales Agreement, filed with Post-Effective Amendment No. 16 on
July 13, 1994, and incorporated herein by reference.
10. Opinion of counsel as to legality of the Shares, filed with
Post-Effective Amendment No. 16 on July 13, 1994, and incorporated
herein by reference.
11.* Consent of Independent Accountants.
12. Not Applicable.
13. None.
14. None.
15.1 Distribution Plan dated May 14, 1993, filed with Post-Effective
Amendment No. 13 on June 30, 1993, and herein incorporated by
reference.
15.2 Distribution Plan for Class B Shares, filed with Post-Effective
Amendment No. 16 on July 13, 1994, and incorporated herein by
reference.
16. Schedule for computation of yield and effective yield quotations,
previously filed and herein incorporated by reference.
17.* Financial Data Schedule filed herewith and reflected on EDGAR as
Exhibit 27.
18.* Powers of attorney filed herewith and previously filed with
Post-Effective Amendment No. 14 on March 2, 1994 and incorporated
herein by reference.
</TABLE>
* Filed herewith.
C-1
<PAGE>
Item 25. Persons Controlled by Or Under Common Control With Registrant
No person is controlled by, or under common control, with the Registrant.
Item 26. Number of Holders of Securities
As of July 31, 1995, the number of record holders of each class of securities
of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record-holders
----------------------------- --------------------------------------------
<S> <C>
Shares of Common Stock--Class
A 2,356
Shares of Common Stock--Class
B 22
</TABLE>
Item 27. Indemnification
Registrant's indemnification provision is set forth in Post-Effective
Amendment No. 13 filed with the Securities and Exchange Commission on June 30,
1993, and is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus and "Services of the Adviser"
and "Directors and Officers" of the Statements of Additional Information
which is included in this Post-Effective Amendment.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of National Securities & Research Corporation is, or at any time
during the past two years has been engaged for his or her own account or in
the capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Position with
Name Investment Adviser Other Vocation or Employment
------------------------ ------------------ --------------------------------------
<S> <C> <C>
Robert W. Fiondella Director Chairman of the Board, President and
Chief Executive Officer, Phoenix
Home Life Mutual Insurance Company.
Director, Phoenix Equity Planning
Corporation, Phoenix Investment
Counsel, Inc. Phoenix Securities
Group, Inc., Phoenix Realty
Advisors, Inc., Phoenix Realty
Investors, Inc., Phoenix Realty
Securities, Inc., Phoenix Realty
Group, Inc., and Townsend Financial
Advisers, Inc. Director and
President of PM Holdings, Inc.
Martin J. Gavin Director and Senior Vice President, Investment
Executive Products, Phoenix Home Life Mutual
Vice President Insurance Company. Executive Vice
President and Director, Phoenix
Investment Counsel, Inc., Phoenix
Securities Group, Inc., and Phoenix
Equity Planning Corporation.
Director, W.S. Griffith & Co., Inc.,
and Townsend Financial Advisers,
Inc. Director and Vice President, PM
Holdings, Inc. Executive Vice
President, Phoenix Funds.
Michael E. Haylon Director and Senior Vice President, Securities
Executive Investments, Phoenix Home Life
Vice President Mutual Insurance Company. Executive
Vice President, Phoenix Funds.
Director and President, Phoenix
Investment Counsel, Inc.
Philip R. McLoughlin Chairman, CEO & Director and Executive Vice
Director President, Investments, Phoenix Home
Life Mutual Insurance Company.
Director and President, Phoenix
Equity Planning Corporation.
Director and Chairman, Phoenix
Investment Counsel, Inc., Director,
Phoenix Realty Group, Inc., Phoenix
Realty Advisors, Inc., Phoenix
Realty Investors, Inc., Phoenix
Realty Securities, Inc., Phoenix
Founders, Inc., Phoenix Re
Corporation (New York), Phoenix Re
Corporation (Delaware), and World
Trust Fund; Director and Vice
President, PM Holdings, Inc.
Director/Trustee/President of the
Phoenix Funds; President and
Director of Phoenix Securities
Group, Inc. Director, W.S. Griffith
& Co., Inc. and Townsend Financial
Advisers, Inc.
C-2
<PAGE>
Position with
Name Investment Adviser Other Vocation or Employment
------------------------ ------------------ --------------------------------------
Charles J. Paydos Director Executive Vice President and
Director, Phoenix Home Life Mutual
Insurance Company. Director, Phoenix
Equity Planning Corporation, Phoenix
Securities Group, Inc., Phoenix
Realty Securities, Inc., Phoenix
Realty Group, Inc., W.S. Griffith &
Co., Inc., and Townsend Financial
Advisers, Inc. Director and Vice
President, PM Holdings, Inc.
Richard C. Shaw Director Senior Vice President, International
and Corporate Development, Phoenix
Home Life Mutual Insurance Company.
Chairman, American Phoenix
Corporation. Director. President and
Chief Executive Officer, Worldwide
Phoenix Offshore, Inc. Director,
American Phoenix Investment
Portfolios. Director and Senior Vice
President, Phoenix Investment
Counsel, Inc. Executive Vice
President, Offshore Investment
Funds, Phoenix Investment Funds.
Patricia A. Bannan Vice President Vice President, Common Stock,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Series Fund and The Phoenix Edge
Series Fund. Vice President, Phoenix
Investment Counsel, Inc. Executive
Vice President, National Securities
& Research Corporation.
William R. Moyer Senior Vice Vice President, Investment Products
President, Finance, Phoenix Home Life Mutual
Finance and Life Insurance Company. Senior Vice
Treasurer President, Finance and Treasurer,
Phoenix Equity Planning Corporation
and Phoenix Investment Counsel, Inc.
Vice President, the Phoenix Funds.
Senior Vice President, Finance,
Phoenix Securities Group, Inc.,
Senior Vice President, Chief
Financial Officer, and Treasurer.
W.S. Griffith & Co., Inc. and
Townsend Financial Advisers, Inc.
Michael K. Arends Vice President Portfolio Manager, Phoenix Home Life
Mutual Insurance Company, Vice
President, Phoenix Series Fund,
National Securities & Research
Corporation and Phoenix Investment
Counsel, Inc. Various other
positions with Kemper Financial
Services.
Curtiss O. Barrows Vice President Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Series Fund. The Phoenix Edge Series
Fund, and Phoenix Investment
Counsel, Inc.
James M. Dolan Vice President Assistant Vice President Compliance,
and Phoenix Home Life Mutual Insurance
Compliance Company. Vice President and
Officer, Compliance Officer; Assistant
Assistant Secretary, Phoenix Equity Planning
Secretary Corporation. Vice President, Phoenix
Funds. Vice President, Assistant
Clerk and Assistant Secretary,
Phoenix Investment Counsel, Inc.
Vice President and Chief Compliance
Officer, Phoenix Realty Advisors,
Inc. and Chief Compliance Officer,
Phoenix Realty Securities, Inc.
C-3
<PAGE>
Position with
Name Investment Adviser Other Vocation or Employment
------------------------ ------------------ --------------------------------------
Jeanne H. Dorey Vice President Portfolio Manager, International,
Phoenix Home Life Mutual Insurance
Company. Vice President, The Phoenix
Edge Series Fund, Phoenix
Multi-Portfolio Fund, Phoenix
Investment Counsel, Inc. and Phoenix
Worldwide Opportunities Fund.
Catherine Dudley Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Series Fund, Phoenix Multi-Portfolio
Fund and Phoenix Investment Counsel,
Inc.
Jeanne T. Hanley Vice President Managing Director, Common Stock,
Research, Phoenix Home Life Mutual
Insurance Company. Vice President,
The Phoenix Edge Series Fund,
Phoenix Series Fund and Phoenix
Investment Counsel, Inc.
Christopher J. Kelleher Vice President Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Series Fund, The Phoenix Edge Series
Fund and Phoenix Investment Counsel,
Inc.
Michael R. Matty Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Series Fund and Phoenix Investment
Counsel, Inc.
Thomas S. Melvin, Jr. Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Investment Counsel, Inc. and Phoenix
Multi-Portfolio Fund.
Robert J. Milnamow Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company. Vice President, Phoenix
Total Return Fund, Inc., The Phoenix
Edge Series Fund, Phoenix Investment
Counsel, Inc., and Phoenix Equity
Opportunities Fund.
Amy L. Robinson Vice President Managing Director, Securities
Administration, Phoenix Home Life
Mutual Insurance Company. Vice
President, The Phoenix Edge Series
Fund, Phoenix Series Fund, and
Phoenix Investment Counsel, Inc.
Leonard J. Saltiel Vice President Vice President, Investment
Operations, Phoenix Home Life
Insurance Company. Senior Vice
President, Phoenix Equity Planning
Corporation. Vice President, Phoenix
Funds.
Elizabeth R. Sadowinski Vice President,
Field Vice President, Field and Investor
and Investors Services, Phoenix Equity Planning
Services Corporation.
Dorothy J. Skaret Vice President Director, Public Fixed Income,
Phoenix Home Life Mutual Life
Insurance Company. Vice President,
Phoenix Series Fund, The Phoenix
Edge Series Fund, Phoenix Investment
Counsel, Inc. and Phoenix Realty
Securities, Inc.
James D. Wehr Vice President Managing Director, Public Fixed
Income, Phoenix Home Life Mutual
Insurance Company. Vice President,
Phoenix Series Fund, The Phoenix
Edge Series Fund, Phoenix
Multi-Portfolio Fund, Phoenix
Investment Counsel, Inc., and
Phoenix California Tax-Exempt Bond
Fund.
C-4
<PAGE>
Position with
Name Investment Adviser Other Vocation or Employment
------------------------ ------------------ --------------------------------------
John T. Wilson Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company, Vice President, Phoenix
Multi-Portfolio Fund, The Phoenix
Edge Series Fund, Phoenix Worldwide
Opportunities Fund and National
Securities & Research Corporation.
Eugene A. Charon Controller Controller, Phoenix Equity Planning
Corporation and Phoenix Investment
Patricia O. McLaughlin Secretary Counsel, Phoenix Home Life Mutual
Insurance Company. Secretary and
Assistant Clerk, Phoenix Investment
Counsel, Inc. Assistant Secretary,
the Phoenix Funds. Phoenix
Securities Group, Inc., Phoenix
Equity Planning Corporation, and
Phoenix Realty Securities, Inc.
Secretary, W.S. Griffith & Co., Inc.
and Townsend Financial Advisers,
Inc.
</TABLE>
The respective principal addresses of the companies or other entities
named above are as follows:
American Phoenix Corporation 302 West Main Street
Avon, CT 06001
American Phoenix Investment Portfolios 13, rue Goethe
L-2014 Luxembourg
Kemper Financial Services 120 South LaSalle Street
Chicago, IL 60603
National Securities & Research Corporation One American Row
Hartford, CT 06115
Phoenix Equity Planning Corporation 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Phoenix Home Life Mutual Insurance Company One American Row
Hartford, CT 06115
Phoenix Realty Advisors, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Group, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Investors, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Securities, Inc. One American Row
Hartford, CT 06115
Phoenix Re Corporation (Delaware) 80 Maiden Lane
New York, NY 01301
Phoenix Securities Group, Inc. One American Row
Hartford, CT 06115
PM Holdings, Inc. One American Row
Hartfold, CT 06115
The Phoenix Funds 101 Munson Street
Greenfield, MA 01301
Townsend Financial Advisers, Inc. 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
C-5
<PAGE>
W.S. Griffith & Co., Inc. 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
World Trust Fund KREDIETRUST
Societe Anonyme
11, rue Aldringen
L-2690 Luxembourg
R.C. Luxembourg B 10.750
Worldwide Phoenix Limited 41 Cedar House
Hamilton HM 12, Bermuda
Item 29. Principal Underwriters
(a) See "The Underwriter" and "How to Buy Shares" in the Prospectus and
"Underwriter" and "Distribution Plans" in the Statement of Additional
Information, both of which are included in this Post-Effective Amendment to the
Registration Statement.
(b)
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Underwriter with Registrant
------------------------ ----------------------------- -------------------------------
<S> <C> <C>
Robert W. Fiondella Director None
One American Row
Hartford, CT 06115
Martin J. Gavin Director and Exec. Vice Executive Vice President
56 Prospect Street President
P.O. Box 150480
Hartford, CT 06115-0480
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director & President Director & President
One American Row
Hartford, CT 06115
Charles J. Paydos Director None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Dona D. Young Director None
One American Row
Hartford, CT 06115
Richard C. Shaw Executive Vice President None
One American Row Offshore Investment Funds
Hartford, CT 06115
Leonard J. Saltiel Senior Vice President Vice President
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
William R. Moyer Senior Vice President, Vice President
100 Bright Meadow Blvd. Finance and Treasurer
P.O. Box 2200
Enfield, CT 06083-2200
C-6
<PAGE>
Name and Position and Offices Position and Offices
Principal Address with Underwriter with Registrant
------------------------ ----------------------------- -------------------------------
G. Jeffrey Bohne Vice President, Secretary
101 Munson Street Transfer Agent Operations
Greenfield, MA 01301
Nancy G. Curtiss Vice President, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Maris Lambergs Vice President/National Sales None
100 Bright Meadow Blvd. Manager
P.O. Box 2200
Enfield, CT 06083-2200
James M. Dolan Vice President; Compliance Vice President
100 Bright Meadow Blvd. Officer & Asst. Secretary
P.O. Box 2200
Enfield, CT 06083-2200
Elizabeth R. Sadowinski Vice President, Field Assistant Secretary
100 Bright Meadow Blvd. and Investor Services
Enfield, CT 06083-2200
Ellen R. Moody Asst. Treasurer None
One American Row
Hartford, CT 06115
Eugene A. Charon Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Keith D. Robbins Secretary None
One American Row
Hartford, CT 06115
</TABLE>
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder include:
Registrant's investment adviser, National Securities & Research Corporation;
Registrant's financial agent, transfer agent and principal underwriter,
Phoenix Equity Planning Corporation; Registrant's dividend disbursing agent
and custodian, State Street Bank and Trust Company. The address of the
Secretary of the Trust is 101 Munson Street, Greenfield, Massachusetts 01301;
the address of National Securities & Research Corporation is One American
Row, Hartford, Connecticut 06115-2520; the address of Phoenix Equity Planning
Corporation is 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200; and the address of the custodian is P.O. Box 351,
Boston, Massachusetts 02101.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford
and State of Connecticut on the 28th day of August, 1995.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
ATTEST: /s/ Richard J. Wirth
Richard J. Wirth
Assistant Secretary
By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities indicated, on this 28th day of August, 1995.
Signature Title
------------------------------------ ---------------------
C. Duane Blinn* Director
Robert Chesek* Director
E. Virgil Conway* Director
Treasurer (principal
Nancy G. Curtiss** financial and
accounting officer)
Harry Dalzell-Payne* Director
Leroy Keith, Jr.* Director
/s/ Philip R. McLoughlin
Philip R. McLoughlin President and Director
James M. Oates* Director
Philip R. Reynolds* Director
Herbert Roth, Jr.* Director
Richard E. Segerson* Director
Lowell P. Weicker, Jr.** Director
*By: /s/ Philip R. McLoughlin
*Philip R. McLoughlin pursuant to powers of attorney, copies of which were
filed previously under this Registration Statement.
**Philip R. McLoughlin pursuant to powers of attorney filed herewith.
S1(c)
AMENDED AND RESTATED BYLAWS
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
ARTICLE I
OFFICES
The principal office of the Phoenix California Tax Exempt Bonds, Inc. (the
"Corporation") shall be in the City of Baltimore, State of Maryland.
The principal executive office of the Corporation shall be at 101 Munson
Street, Greenfield, MA 01301.
The Corporation may have such other offices in such places as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such day of each year as may be designated annually
by the Board of Directors; provided, however, that no annual meeting be held in
any year unless required under the Maryland General Corporation Laws or the
Investment Company Act of 1940, as amended.
Except as otherwise provided herein, any business of the Corporation may be
transacted at the annual meeting without being specifically designated in the
notice, except such business as is specifically required by statute to be stated
in the notice.
Section 2. Special Meeting. Special meetings of the stockholders, unless
otherwise provided by law or by the Articles of Incorporation, may be called for
any purpose or purposes by a majority of the Board of Directors or the President
or the Secretary and, upon satisfaction of statutory requirements, shall be
called on the written request of the holders of at least 25% of the outstanding
capital stock of the Corporation entitled to vote at such meeting, unless
otherwise exempted by statute.
Section 3. Place of Meetings. The annual meeting and any special meeting of
the stockholders shall be held at such place within the United States as the
Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Written notice of the
place, date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than ten nor more than ninety days before the
date of such meeting, to each stockholder entitled to notice of the meeting.
<PAGE>
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the stockholder at the stockholder's address as it
appears on the records of the Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless after the adjournment the Board of Directors shall fix a
new record date for any adjourned meeting or the adjournment is for more than
thirty days, notice of such adjourned meeting need not be given if the time and
place to which the meeting shall be adjourned is announced at the meeting at
which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of a
majority of the shares or, if applicable, class of stock of the Corporation
entitled to vote at the meeting present in person or by proxy shall constitute a
quorum for the transaction of any business, except as otherwise provided by
statute or by the Articles of Incorporation or these Bylaws. In the absence of a
quorum no business may be transacted, except that the holders of a majority of
the shares or, if applicable, class of stock present in person or by proxy and
entitled to vote may adjourn the meeting from time to time, without notice other
than announcement thereat except as otherwise required by these Bylaws, until
the holders of the requisite amount of shares or, if applicable, class of stock
shall be so present. At any such adjourned meeting at which a quorum may be
present any business may be transacted that might have been transacted at the
meeting as originally called. The absence from any meeting of holders of the
number of shares or, if applicable, class of stock of the Corporation in excess
of a majority as may be required by the laws of the State of Maryland, the
Investment Company Act of 1940 or any other applicable statute, the Articles of
Incorporation, or these Bylaws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters that may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares or, if applicable, class of stock
of the Corporation required for action in respect of such other matter or
matters.
Section 6. Organization and Transaction of Business at Meetings. At each
meeting of the stockholders, the Chairman of the Board of Directors (if one has
been designated by the Board of Directors), or in his absence or inability to
act, the President, or in the absence or inability to act of the Chairman of the
Board of Directors and the President, a Vice-President, shall act as chairman of
the meeting. The order of business at all meetings of the stockholders shall be
as determined by the chairman of the meeting. The Secretary, or in the
Secretary's absence or inability to act, any person appointed by the chairman of
the meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 7. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares or, if applicable, class of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of such class of stock standing
in the name of such stockholder on the record of stockholders of the Corporation
as of the record date determined pursuant to Article I.
<PAGE>
Each stockholder entitled to vote at any meeting of the stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders by the
holders of shares present in person or represented by proxy and entitled to vote
on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these Bylaws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by the stockholder's proxy, if there be
such proxy, and shall state the number of shares voted.
Section 8. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Inspectors, before entering upon the discharge of their duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of their ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
Section 9. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following are
filed with the records of stockholders meetings: (i) a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section l. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors and all of the
powers of the Corporation may be exercised by or under authority of the Board of
Directors except as conferred on or reserved to the stockholders by law or by
the Articles of Incorporation or by these Bylaws.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of directors
shall in no event be less than three nor more than twelve. Any vacancy created
by an increase in Directors may be filled in accordance with Section 3 of this
Article III. No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his term unless
such director is specifically removed pursuant to Section 4 of this Article III
at the time of such decrease. Directors need not be stockholders.
Section 3. Vacancies. Subject to the requirements of the Investment Company
Act of 1940: any vacancy occurring in the Board of Directors for any cause other
than by reason of an increase in the number of directors may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, and any vacancy occurring by reason of an
increase in the number of directors may be filled by action of a majority of the
entire Board of Directors. A director elected by the Board of Directors to fill
a vacancy shall be elected to hold office until the next annual meeting of
stockholders or until a successor is elected and qualifies.
Section 4. Removal of Directors. At any meeting of stockholders duly called
and at which a quorum is present, the stockholders may, by the affirmative vote
of the holders of a majority of all votes entitled to be cast for the election
of directors, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired terms
of removed directors.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held at any place in or out of the State of Maryland as the
Board may from time to time determine or as shall be specified in the notice of
such meeting.
Section 2. Annual Meeting. The first meeting of each newly elected Board of
Directors shall be held as soon as practicable after the meeting of stockholders
at which the directors were elected. No notice of such meeting shall be
necessary if held immediately after the adjournment, and at the site, of the
meeting of stockholders.
<PAGE>
Section 3. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called at any time by two or more directors or by the President.
Section 5. Notice of Meetings: Waiver of Notice. Notice of the place and
time of every special meeting of the Board of Directors shall be given to each
director at least two days before the date of the meeting. Notice to a director
may be given by mail, which shall be deemed given when mailed, by telephone or
telegram or by leaving the same at the director's residence or usual place of
business. Notice of any special meeting need not be given to any director who
shall, either before or after the meeting, sign a written waiver of notice or
who shall attend such meeting.
Section 6. Quorum. At all meetings of the Board of Directors, a majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business and the action of a majority of the directors present at any meeting at
which a quorum is present shall be the action of the Board of Directors unless
the concurrence of a greater proportion is required for such action by statute,
the Articles of Incorporation or these Bylaws. If a quorum shall not be present
at any meeting of directors, the directors present thereat may by a majority
vote adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At any such
adjourned meeting at which a quorum may be present any business may be
transacted that might have been transacted at the meeting as originally called.
The absence from any meeting of directors in excess of the number required by
the laws of the State of Maryland, the Investment Company Act of 1940 or any
other applicable statute, the Articles of Incorporation, or these Bylaws, for
action upon any given matter shall not prevent action at such meeting upon any
other matter or matters that may properly come before the meeting, if there
shall be present thereat, sufficient directors required for action in respect of
such other matter or matters.
Section 7. Consent of Directors in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent to such
action is signed by all member of the Board or of such committee, as the case
may be, and such written consent is filed with the minutes of proceedings of the
Board or committee.
ARTICLE V
COMMITTEES OF DIRECTORS
The Board of Directors may appoint from among its members an Executive
Committee and other committees composed of two or more directors and may
delegate to such committees any or all of the powers of the Board of Directors
in the management of the business and affairs of the Corporation, except the
power to declare dividends or distributions on stock, to issue stock, to
recommend to stockholders any action that requires stockholders' approval, to
fill a vacancy on the
<PAGE>
Board, to amend these Bylaws or to approve any merger or share exchange
which does not require stockholder approval. In the absence of any member of
any such committee, the members thereof present at any meeting, whether or not
they constitute a quorum, may appoint a member of the Board of Directors to act
in the place of such absent member. Committees shall report their proceedings
to the Board of Directors at the Board meeting next succeeding, and any action
by the Committee shall be subject to revision and alteration by the Board of
Directors, provided that no rights of third persons shall be affected by any
such revision or alteration.
ARTICLE VI
COMPENSATION OF DIRECTORS
Directors may receive compensation for services to the Corporation in their
capacities as directors or otherwise in such manner and in such amounts as may
be fixed from time to time by the Board of Directors.
ARTICLE VII
OFFICERS
Section 1. Officers (and Agents) and their Compensation. The officers of
the Corporation shall be a President, a Secretary, a Principal Accounting
Officer and a Treasurer each of whom shall be elected by the Board of Directors.
Such officers shall be elected by the Board of Directors each year at its first
meeting after each annual meeting of stockholders, each to hold office for one
year or until a successor is elected and qualifies. The Board of Directors may
elect or appoint one or more Vice-Presidents, and one or more Assistant
Secretaries, and such other officers and agents as it shall deem necessary, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as may be determined from time to time by the Board of
Directors. The compensation of all officers and agents of the Corporation shall
be fixed by the Board of Directors. Two or more officers, except those of
President and Vice-President, may be held by the same person but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
Section 2. Execution of Instruments. Checks, drafts, orders for payment of
money, notes and other evidences of indebtedness and other instruments shall be
signed by the President or such other officers as the Board of Directors by
resolution shall from time to time designate.
Section 3. Removal of Officers (and Agents). Any officer (or agent) may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed. If the
office of any officer becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
Section 4. The President. The President shall be the chief executive
officer of the Corporation; in the absence of the Chairman of the Board (or if
there be none), the President shall preside at all meetings of the stockholders
and directors, and subject to the control of the Board of Directors, the
President shall
<PAGE>
have general charge of the business and affairs of the Corporation and shall
see that all orders and resolutions of the Board are carried into effect.
Section 5. Vice-Presidents. Each Vice-President shall perform such duties
and have such powers as the Board of Directors or the President may from time
to time prescribe.
Section 6. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by, and under the
supervision of, the Board of Directors or the President. The Secretary shall
keep in safe custody the seal of the Corporation and affix and attest the seal
to all documents to be executed on behalf of the Corporation under its seal.
Section 7. Assistant Secretaries. Each Assistant Secretary, if any, shall
assist the Secretary and perform such duties and exercise such powers of the
Secretary as the Board of Directors or the President may from time to time
prescribe.
Section 8. The Treasurer. The Treasurer shall have charge and custody of,
and be responsible for, all the funds, securities and other assets of the
Corporation, except those which the Corporation has placed in the custody of a
bank or trust company or member of a national securities exchange (as that term
is defined in the Securities Exchange Act of 1934) pursuant to a written
agreement designating such bank or trust company or member of a national
securities exchange as custodian of the property of the Corporation; shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and in general, shall perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
by the Board or the President.
ARTICLE VIII
CAPITAL STOCK
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board of Directors, representing the number of
shares of stock of the Corporation owned by such stockholder, provided, however,
that certificates for fractional shares will not be delivered in any case. The
certificates representing shares and class of stock shall be signed by or in the
name of the Corporation by the President or a Vice-President and by the
Secretary or an Assistant Secretary or the Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be a facsimile. In case any officer, transfer agent or
<PAGE>
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue.
Section 2. Rules and Regulations. The Board may make such additional rules
and regulations, not inconsistent with these Bylaws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 3. Lost, Stolen, Destroyed or Mutilated Certificates. The holder of
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or mutilation
of such certificate, and the Corporation may issue a new certificate of stock,
subject to the requirements of the Lost and Stolen Securities Program, if any,
established from time to time, by the transfer agent or registrar, in the place
of any certificate theretofore issued by it which the owner thereof shall allege
to have been lost, stolen or destroyed or which shall have been mutilated, and
the Board of Directors may, in its discretion, require such owner or such
owner's legal representatives to give to the Corporation a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties, as the
Board of Directors in its absolute discretion shall determine, to indemnify the
Corporation and its agents or designees against any claim that may be made
against it or them, individually a collectively, on account of the alleged loss,
theft or destruction of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board of Directors, in its
absolute discretion, may refuse to issue any such new certificate, except
pursuant to legal proceedings under the laws of the State of Maryland.
Section 4. Stock Ledger. The Corporation shall maintain at the principal
office of the Corporation or any transfer agent designated by the Board of
Directors, an original or a duplicate stock ledger containing the names and
addresses of all stockholders and the number of shares of each class held by
each stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection. The Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares entitled to receive
dividends and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not it shall have received express or other notice thereof,
except as otherwise provided by the laws of Maryland.
Section 5. Transfer of Stock. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by voted
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon.
<PAGE>
ARTICLE IX
RECORD DATE
The Board of Directors may fix as the record, date for the purpose of
determining stockholders entitled to notice of, or to vote at, any meeting of
stockholders (or class thereof), or stockholders (or class thereof) entitled to
receive payment of any dividend or the allotment of any rights, or in order to
make a determination of stockholders for any other purpose, any day after the
close of business on the day the record date is fixed. Such date in any case
shall be not more than ninety days, and in case of a meeting of stockholders not
less than ten days, prior to the date on which the particular action requiring
such determination of stockholders is to be taken.
ARTICLE X
FISCAL YEAR AND ANNUAL STATEMENT
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
The President or a Vice-President or the Treasurer shall prepare or cause
to be prepared annually a full and correct statement of the affairs of the
Corporation, including a balance sheet (Statement of Assets and Liabilities) and
a financial statement of operations for the preceding fiscal year, which shall
be submitted at the annual meeting and within twenty days thereafter shall be
placed on file at the principal office of the Corporation.
ARTICLE XI
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. The Board of Directors shall have the power at any regular
meeting, or at any special meeting if notice thereof be included in the notice
of such special meeting, to alter or repeal any Bylaw of the Corporation and to
make new Bylaws; or the Stockholders shall have the power, at any annual meeting
or at any special meeting if notice thereof be included in the notice of such
special meeting, to alter or repeal any Bylaw of the Corporation and to make new
Bylaws.
<PAGE>
Section 2. Any notice of a meeting of stockholders or the Board of
Directors at which Bylaws are to be adopted, amended or repealed shall include
notice of such proposed action.
funds\1304
<PAGE>
POWER OF ATTORNEY
I, the undersigned Treasurer and Principal Financial Accounting Officer of
Phoenix California Tax-Exempt Bonds, Inc., hereby constitute and appoint Philip
R. McLoughlin and Patricia O. McLaughlin as my true and lawful attorneys and
agents with full power to sign for me in the capacity indicated below, any or
all Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to Phoenix Income and Growth Fund, and hereby
ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
/s/ Nancy G. Curtiss
August 24, 1994 -----------------------------
Nancy G. Curtiss
Treasurer
Principal Financial and
Accounting Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix California Tax
Exempt Bonds, Inc., hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act
of 1940 relating to Phoenix California Tax Exempt Bonds, Inc., and hereby
ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
/s/ Lowell P. Weicker, Jr.
June 6, 1995 -----------------------------, Director
Lowell P. Weicker, Jr.
funds\1081
Exhibit 11
Consent of Independent Accountants
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 17 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated June 12, 1995, relating to the financial
statements and financial highlights appearing in the April 30, 1995 Annual
Report to Shareholders of the Phoenix California Tax Exempt Bonds, Inc., which
are also incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the Statement
of Additional Information.
[Price Waterhouse signature]
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 22, 1995
Exhibit 18
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
I, the undersigned Treasurer and Principal Financial Accounting Officer of
Phoenix California Tax-Exempt Bonds, Inc., hereby constitute and appoint Philip
R. McLoughlin and Patricia O. McLaughlin as my true and lawful attorneys and
agents with full power to sign for me in the capacity indicated below, any or
all Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to Phoenix Income and Growth Fund, and hereby
ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
August 24, 1994 /s/ Nancy G. Curtiss
---------------------------------
Nancy G. Curtiss
Treasurer
Principal Financial and
Accounting Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix California
Tax-Exempt Bonds, Inc., hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940 relating to Phoenix California Tax-Exempt Bonds, Inc., and hereby ratify
and confirm my signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
June 6, 1995 /s/ Lowell P. Weicker, Jr.
----------------------, Director
Lowell P. Weicker, Jr.
<PAGE>
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