As filed with the Securities and Exchange Commission on August 28, 1996
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. 18
[x]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 19 [x]
(Check appropriate box or boxes.)
Phoenix California Tax Exempt Bonds, Inc.
(Exact Name of Registrant as Specified in Articles of Incorporation)
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
Philip R. McLoughlin
Vice Chairman and Chief Executive Officer
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0479
(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)(i)
[ ] on pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) 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, 1996 was filed by
Registrant with the Commission on June 27, 1996.
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
Cross Reference Sheet
Showing Location of Information Required by Form N-1A
PART A
<TABLE>
<CAPTION>
Form N-1A Item No. Prospectus Caption
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Introduction; Fund Expenses
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant Introduction; Investment Objectives and Policies;
Investment Techniques and Related Risks; Additional
Information
5. Management of the Fund Introduction; Management of the Fund; Distribution
Plans
6. Capital Stock and Other Securities Introduction; Investment Restrictions; Dividends,
Distributions and Taxes; Net Asset Value; Additional
Information
7. Purchase of Securities Being Offered Distribution Plans; Purchase of Shares; Investor
Accounts and Services Available
8. Redemption or Purchase How to Redeem Shares
9. Legal Proceedings Not applicable
PART B
Form N-1A Item No. Statement of Additional Information Caption
------------------------------------------- --------------------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Fund
13. Investment Objectives and Policies Investment Objective and Policies; Investment
Restrictions; Fundamental Policies; Other Policies
14. Management of the Registrant Directors and Officers; Advisory Board
15. Control Persons and Principal Holders Directors and Officers; Advisory Board
of Securities
16. Investment Advisory and Other Services Services of the Adviser; Underwriter; Distribution
Plans
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities See "Organization of the Fund" in Prospectus
19. Purchase, Redemption and Pricing of Net Asset Value; How to Buy Shares; Reinvestment
Securities Being Offered Privilege; Exchange Privilege; How 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
</TABLE>
<PAGE>
PHOENIX FUNDS
Phoenix California Tax Exempt Bonds, Inc.
PROSPECTUS
AUGUST 28, 1996
[Logo] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
August 28, 1996
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.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. 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 as
having been authorized by the Fund, Adviser or Distributor. 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. 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, 1996, which has been
filed with the Securities and Exchange Commission (the "Commission") and is
available upon request at no charge by calling 1-800-243-4361, or by writing
to Phoenix Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O.
Box 2200, Enfield, Connecticut 06033-2200. The Statement of Additional
Information is incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by any bank, credit union, or affiliated entity, 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
<PAGE>
TABLE OF CONTENTS
Page
-------
INTRODUCTION 3
FUND EXPENSES 4
FINANCIAL HIGHLIGHTS 5
PERFORMANCE INFORMATION 6
INVESTMENT OBJECTIVE AND POLICIES 7
INVESTMENT TECHNIQUES AND RELATED RISKS 8
MANAGEMENT OF THE FUND 10
DISTRIBUTION PLANS 10
HOW TO BUY SHARES 12
INVESTOR ACCOUNTS AND SERVICES AVAILABLE 16
NET ASSET VALUE 18
HOW TO REDEEM SHARES 19
DIVIDENDS, DISTRIBUTIONS AND TAXES 20
ADDITIONAL INFORMATION 21
TAX FREE vs. TAXABLE INCOME 22
2
<PAGE>
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. 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.
Investment Adviser
National Securities & Research Corporation ("National" or the "Adviser") is
the investment adviser of the Fund. The Adviser is a subsidiary of Phoenix
Duff & Phelps Corporation and prior to November 1, 1995, was an indirect
subsidiary of Phoenix Home Life Mutual Insurance Company. See "Management of
the Fund" for a description of the Investment Advisory Agreement and
management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Fund's shares. See "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 as amended (the "1940 Act") for all classes.
Pursuant to the distribution plan adopted for Class A Shares, the Fund shall
reimburse the Distributor 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 Distributor 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. 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."
Shares of each Class represent an identical interest in the investment
portfolio of the Fund and have the same rights, except that Class B Shares
bear the cost of the higher distribution fees which cause the Class B Shares
to have a higher expense ratio and to pay lower dividends than Class A
Shares. See "How to Buy 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, 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.
3
<PAGE>
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, 1996.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------- ------------------
<S> <C> <C>
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 percentage of original purchase None 5% during the
price or redemption proceeds, as applicable) first year,
decreasing 1%
annually to 2%
during the 4th &
5th 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, 1996)
Management Fees 0.45% 0.45%
12b-1 Fees (a) 0.25% 1.00%
Other Operating Expenses 0.29% 0.29%
Total Fund Operating Expenses 0.99% 1.74%
</TABLE>
(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. Rule 12b-1 Fees stated for Class B Shares include a Service Fee.
See "Distribution Plans".
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example 1 year 3 years 5 years 10 years
- --------------------------------------------------------- ------ ------- ------- ---------
<S> <C> <C> <C> <C>
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 $78 $100 $163
Class B Shares $68 $85 $114 $185
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 $78 $100 $163
Class B Shares $18 $55 $ 94 $185
</TABLE>
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
<PAGE>
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.
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------
Year Ended April 30,
1996 1995 1994 1993 1992 1991 1990 1989
----- ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $12.63 $13.03 $13.64 $13.20 $13.07 $12.58 $12.72 $12.27
Income from investment
operations
Net investment income 0.67 0.71 0.80 0.81 0.87 0.90 0.90 0.89
Net realized and unrealized
gain (loss) 0.20 0.05 (0.53) 0.51 0.24 0.51 (0.14) 0.46
--- --- --- --- --- --- --- -----
Total from investment
operations 0.87 0.76 0.27 1.32 1.11 1.41 0.76 1.35
--- --- --- --- --- --- --- -----
Less distributions
Dividends from net
investment income (0.67) (0.76) (0.76) (0.80) (0.88) (0.90) (0.90) (0.90)
Distributions in excess of
net investment income (0.01) -- -- -- -- -- -- --
Distributions from net
realized gains (0.03) (0.31) (0.12) (0.08) (0.10) (0.02) -- --
Distributions in excess of
accumulated net realized
gains (0.02) (0.09) -- -- -- -- -- --
Total distributions (0.73) (1.16) (0.88) (0.88) (0.98) (0.92) (0.90) (0.90)
--- --- --- --- --- --- --- -----
Change in net asset value 0.14 (0.40) (0.61) 0.44 0.13 0.49 (0.14) 0.45
Net asset value, end of
period $12.77 $12.63 $13.03 $13.64 $13.20 $13.07 $12.58 $12.72
=== === === === === === === =====
Total return (1) 6.92% 6.34% 1.80% 10.38% 8.68% 11.36% 6.05% 11.41%
Ratios/supplemental data:
Net assets, end of period
(thousands) $113,806 $117,370 $131,365 $147,760 $139,118 $124,051 $107,612 $103,415
Ratio to average net asset
of:
Operating expenses 0.99% 0.93% 0.85% 0.90% 0.68% 0.63% 0.66% 0.73%
Net investment income 5.15% 5.63% 5.82% 6.00% 6.55% 6.94% 6.98% 7.13%
Portfolio turnover rate 20% 51% 25% 25% 33% 26% 27% 34%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
----------------- ------------------------
From
Inception
Year 7/26/94
Ended to
1988 1987 4/30/96 4/30/95
---- --------- --------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $12.50 $12.80 $12.63 $13.04
Income from investment
operations
Net investment income 0.90 0.95(2) 0.56(5) 0.48
Net realized and unrealized
gain (loss) (0.23) (0.27) 0.20 0.01
------ ------- ------- ---------
Total from investment
operations 0.67 0.68 0.76 0.49
------ ------- ------- ---------
Less distributions
Dividends from net
investment income (0.90) (0.98) (0.56) (0.50)
Distributions in excess of
net investment income -- -- (0.01) --
Distributions from net
realized gains -- -- (0.03) (0.31)
Distributions in excess of
accumulated net realized
gains -- -- (0.02) (0.09)
Total distributions (0.90) (0.98) (0.62) (0.90)
------ ------- ------- ---------
Change in net asset value (0.23) (0.30) 0.14 (0.41)
Net asset value, end of
period $12.27 $12.50 $12.77 $12.63
====== ======= ======= =========
Total return (1) 5.59% 5.25% 6.10% 4.10%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $88,703 $88,477 $1,258 $460
Ratio to average net asset
of:
Operating expenses 0.77% 0.56%(2) 1.78% 1.55%(3)
Net investment income 7.32% 7.30% 4.32% 4.90%(3)
Portfolio turnover rate 30% 21% 20% 51%
</TABLE>
(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) Computed using average shares outstanding.
5
<PAGE>
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.
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.
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
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.
6
<PAGE>
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. 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
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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.
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
AND RELATED RISKS
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
8
<PAGE>
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.
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
market value of the Fund's total assets. At the time of purchase
9
<PAGE>
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 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 a subsidiary of Phoenix Duff & Phelps Corporation and prior
to November 1, 1995, was an indirect 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 $13 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 Multi-Sector Short Term Bond
Fund, Phoenix Equity Opportunities Fund Series of 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, 1996 for Class A Shares and
Class B Shares was .45%.
The Portfolio Managers
Mr. Timothy M. Heaney and Mr. James D. Wehr are Co- Managers of the Fund,
and as such, are primarily responsible for the day-to-day management of the
Fund's portfolio. Mr. Heaney has co-managed the Fund since March 1, 1996. Mr.
Wehr has managed the Fund since July 1993.
Mr. Heaney presently is an Investment Analyst with Phoenix Investment
Counsel ("PIC") and previously held a similar position from 1992 to 1994 with
Phoenix Home Life Mutual Insurance Company. He held various positions with
Connecticut National Bank between 1990 and 1992.
Mr. Wehr has also served as Vice President of PIC since 1991, and as Vice
President of National since May 1993. Mr. Wehr became the Portfolio Manager
of Phoenix Tax Exempt Bond Portfolio of Phoenix Multi-Portfolio Fund in 1988
and a Co-Manager on March 1, 1996. Until November 1995, Mr. Wehr was also
Managing Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Company and held various positions with Phoenix Home Life since 1981.
The Financial Agent
Equity Planning acts as financial 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, 1996, Equity Planning received a fee of $36,185 or .03% of average
net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Fund is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts 02101 (the "Custodian").
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 plus out of pocket expenses for each designated
shareholder account. The Transfer Agent engages sub-agents to perform certain
shareholder servicing functions from time to time for which such agents shall
be paid a fee by Equity Planning.
Brokerage Commissions
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Fund.
DISTRIBUTION PLANS
The offices of Equity Planning, the National Distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
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Philip R. McLoughlin is a Director and President of the Fund and a director
and officer of Equity Planning. David R. Pepin, a Director and officer of
Equity Planning, is an officer of the Fund. Michael E. Haylon, a director of
Equity Planning, is an officer of the Fund. G. Jeffrey Bohne, James M. Dolan,
Nancy G. Curtiss, William R. Moyer, William J. Newman, Leonard J. Saltiel and
Thomas N. Steenburg are officers of the Fund and officers of Equity Planning.
Equity Planning and the Fund have entered into distribution agreements under
which Equity Planning has agreed to use its best efforts to find purchasers
for Fund shares sold subject to an initial sales charge and those sold
subject to a contingent deferred sales charge. The Fund has granted Equity
Planning the exclusive right to purchase from the Fund and resell, as agent,
shares needed to fill unconditional orders for Fund shares. Equity Planning
may sell Fund shares through its registered representatives or through
securities dealers with whom it has sales agreements. Equity Planning may
also sell Fund shares pursuant to sales agreements entered into with banks or
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Fund shares with Equity Planning. Although the
Glass-Steagall Act prohibits banks and bank affiliates from engaging in the
business of underwriting, distributing or selling securities (including
mutual fund shares), banking regulators have not indicated that such
institutions are prohibited from purchasing mutual fund shares upon the order
and for the account of their customers. If, because of changes in law or
regulations, or because of new interpretations of existing law, it is
determined that agency transactions of banks or bank-affiliated securities
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank-affiliated securities
brokers would result in a loss to their customers or a change in the net
asset value per share of the Fund.
The sale of Fund shares through securities broker affiliated with a
particular bank is not expected to preclude the Fund from borrowing from such
bank or from availing itself of custodian transfer agency services offered by
such bank.
The Directors have 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 Distributor 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
Distributor for actual expenses of the Distributor 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 Distributor for actual expenses of the
Distributor 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
Distributor 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 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 Distributor 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
Distributor 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, 1996, the Fund paid $299,411 and $8,508
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
Distributor 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 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
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<PAGE>
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 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 Multi-Sector Short Term Bond Fund 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 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
Distributor 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. The Distributor reserves the right to decline the sale
of Class B Shares to allocated qualified employer sponsored plans not
utilizing 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 100 eligible
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,
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<PAGE>
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 State Street Bank
and Trust Company prior to its close of business.
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 Dealer Discount
as Percentage as Percentage or Agency Fee
Amount of of Offering of Amount as Percentage of
Transaction Price Invested Offering 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 in connection with the sale of shares of Phoenix Funds
(exclusive of Class A Shares of Phoenix Money Market Series) by registered
financial institutions and related third party marketers.
** In connection with Class A Share purchases by accounts held in the name of
qualified benefit plans with at least 100 eligible employees, Equity Planning
may pay broker/dealers, from its own resources, an amount equal to 1% on the
first $3 million of purchases, 0.50% on the next $3 million, plus 0.25% on
the amount in excess of $6 million.
In connection with Class A share purchases of $1,000,000 or more (or
subsequent purchases in any amount), excluding purchases by qualified
employee benefit plans as described above, 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:
Purchase Amount Payment to Broker/Dealers
- -------------------------- ----------------------------
$1,000,000 to $3,000,000 1%
$3,000,001 to $6,000,000 0.50 of 1%
$6,000,001 or more 0.25 of 1%
If part or all of such an investment, including investments by qualified
employee benefit plans, 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 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 of 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 100 eligible
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,
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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
for which an account management fee or transaction fee is charged and, provided
such entity has entered into an agreement for such program with the Distributor;
provided that sales made to persons listed in (1) through (15) 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 Distributor's commission is the sales charge shown above less any
applicable discount or commission "re-allowed" to selected dealers and
agents. The Distributor will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Distributor 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 Distributor. 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 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
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<PAGE>
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
Distributor and are used in whole or in part by the Distributor to defray the
expenses of the Distributor related to providing distribution-related
services to the Fund in connection 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 Distributor 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 Distributor 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
Dollar Amount
Year Since Purchase 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
15
<PAGE>
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 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 Distributor to have been compensated for distribution-related
expenses from the burden of such 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
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service ("IRS") to the effect that the conversion of shares does not
constitute a taxable event under federal income tax law. If the Fund were
unable to obtain such assurances, it 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 no longer 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 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
16
<PAGE>
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 $5,000 or more and elect to have
all dividends reinvested in additional Class B Shares of the Fund. Through
the Program, Class B shareholders may withdraw up to 1% of their aggregate
net investments (purchases, at initial value, to date net of non- Program
redemptions) each month or up to 3% of their aggregate net investments each
quarter without incurring 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 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 Muti-Sector Short Term Bond
Fund 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 the Phoenix funds c/o 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
17
<PAGE>
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 Adviser 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
Telephone Exchange Privileges are 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- 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
Phoenix Funds, c/o State Street Bank & Trust Company, P.O. Box 8301, Boston,
MA 02266-8301. 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 is determined as of the close of regular
trading of the New York Stock Exchange (the "Exchange") on days when 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
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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.
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 by Phoenix Funds, c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301 (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
Distributor 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.
19
<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 reinvestment and
reinvestment 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 reinvestment
must be received by the Distributor 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 the reinvestment 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 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, 1996, the Fund distributed to
shareholders net realized capital gains of $0.05 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
20
<PAGE>
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.
21
<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 1995 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 1995* Tax-Exempt Yield
- ------------------------------------------ ------------------------------------------------------
Combined
Federal
and
State
Single Return Joint 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>
$ 18,068 to $ 23,349 $ 36,136 to $ 38,999 20.10% 6.26 6.88 7.51 8.14 8.76 9.39 10.01
23,350 to 25,082 39,000 to 50,165 32.32% 7.39 8.13 8.87 9.60 10.34 11.08 11.82
25,083 to 31,699 50,166 to 63,399 33.76% 7.55 8.30 9.06 9.81 10.57 11.32 12.08
31,700 to 56,549 63,400 to 94,249 34.70% 7.66 8.42 9.19 9.95 10.72 11.49 12.25
56,550 to 109,935 94,250 to 143,599 37.42% 7.99 8.79 9.59 10.39 11.19 11.98 12.78
109,936 to 117,949 -- 37.90% 8.05 8.86 9.66 10.47 11.27 12.08 12.88
-- 143,600 to 219,871 41.95% 8.61 9.47 10.34 11.20 12.06 12.92 13.78
117,950 to 219,871 219,872 to 256,499 42.40% 8.68 9.55 10.42 11.28 12.15 13.02 13.89
219,872 to 256,499 -- 43.04% 8.78 9.66 10.53 11.41 12.29 13.17 14.04
-- 256,500 to 439,743 45.64% 9.20 10.12 11.04 11.96 12.88 13.80 14.72
256,500 + 439,744 + 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 $114,700 (single) and $172,050 (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.
22
<PAGE>
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<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:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
<S> <C>
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 Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
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.
(bullet) A corporation
(bullet) Financial institution
(bullet) Section 501(a) exempt organization (IRA, Corporate
Retirement Plan, 403(b), Keogh)
(bullet) United States or any agency or instrumentality thereof
(bullet) A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof
(bullet) International organization or any agency or instrumentality
thereof
(bullet) Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
(bullet) Real estate investment trust
(bullet) Common trust fund operated by a bank under section 584(a)
(bullet) An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
(bullet) 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, 1996. 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, 1996 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.
[recycle symbol] Printed on recycled paper using soybean ink
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
PO Box 2200
Enfield CT 06083-2200
[Logo] PHOENIX
DUFF & PHELPS
BULK RATE MAIL
U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
August 28, 1996
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,
1996, 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>
<CAPTION>
<S> <C>
THE FUND (24) 2
INVESTMENT OBJECTIVE AND POLICIES (7) 2
RISK FACTORS (7) 5
INVESTMENT RESTRICTIONS (9) 9
PERFORMANCE INFORMATION (6) 10
PORTFOLIO TRANSACTIONS AND BROKERAGE 11
SERVICES OF THE ADVISER (11) 12
NET ASSET VALUE (21) 12
HOW TO BUY SHARES (13) 13
EXCHANGE PRIVILEGES (20) 13
REDEMPTION OF SHARES (22) 13
DIVIDENDS, DISTRIBUTIONS AND TAXES (23) 14
TAX SHELTERED RETIREMENT PLANS 15
THE DISTRIBUTOR (12) 15
PLANS OF DISTRIBUTION (12) 16
DIRECTORS AND OFFICERS 17
OTHER INFORMATION (11) 23
</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 which 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 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
2
<PAGE>
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 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.
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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, 1995 and 1996 were
51% and 20%, 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 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.
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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".
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 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
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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.
During the recent recession, General Fund revenues for several years were
less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided
in the law. The legislature responded to these developments by designating
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments
would not be included in the Proposition 98 "base" for calculating future
years' entitlements. In 1992, a lawsuit was filed, called California
Teachers' Association v. Gould, which challenged the validity of these
off-budget loans. As part of the negotiations leading to the 1995-96 Budget
Act, an oral agreement was reached to settle this case. The settlement
required adoption of legislation satisfactory to the parties to implement its
terms, which has occurred. The court gave final approval of the settlement in
late July, 1996.
The settlement provides that both the State and K-14 schools share in the
repayment of prior years' emergency loans to schools. Of the total $1.76
billion in loans, the State will repay $935 million by forgiveness of the
amount owed, while the K-14 schools will repay $825 million. The State share
of the repayment will be reflected as expenditures above the current
Proposition 98 base calculation. The schools' share of the repayment will
count as appropriations that count toward satisfying the Proposition 98
guarantee, or from "below" the current base. Repayments are spread over the
eight-year period of 1994-95 through 2001-02 to mitigate any adverse fiscal
impact. The Director of Finance has certified that a settlement has occurred,
allowing approximately $377 million in appropriations from 1995-96 fiscal
year to schools to be disbursed in August 1996.
Substantially increased General Fund revenues, above initial budget
projections, in the 1994-95 and 1995-96 fiscal years have resulted in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
years' budgets.
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 for low- and
moderate-income mortgagors. These obligations may be payable solely from
revenues derived from 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 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.
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From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930's. Construction,
manufacturing (especially aerospace), and financial services, among others,
were all severely affected. Job losses were the worst of the post-war
recession. Employment levels stabilized by late 1993 and California's economy
has been on a steady recovery since the start of 1994. Employment has grown
by over 500,000 in 1994 and 1995. The strongest growth has been in
export-related industries, business services, electronics, entertainment and
tourism, all of which have offset the recession-related losses which were
heaviest in aerospace and defense-related industries, finance and insurance.
Residential housing construction, with new permits for under 100,000 annual
new units issued in 1994 and 1995, is weaker than in previous recoveries, but
has been growing slowly since 1993.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also caused increased expenditures for health
and welfare programs. The State also faced 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 experienced recurring budget deficits in the late 1980's
and early 1990's. The State Controller reports that expenditures exceeded
revenues for four of the five fiscal years ending with 1991-92; revenues and
expenditures were equal in 1992-93; and the State had an operating surplus of
$1.1 billion in 1993-94. However, at June 30, 1994, according to the
Department of Finance, the State's Special Fund for Economic Uncertainties
still had an accumulated deficit, on a budget basis, of approximately $1.5
billion.
As part of its cash management program, the State has regularly issued
short-term obligations to meet cash flow needs. Between spring 1992 and
summer 1994, the State depended upon external borrowing, including borrowings
extending into the subsequent fiscal year, to meet its cash needs, including
repayment of maturing notes and warrants. The State did not have to resort to
such cross-year borrowing during the 1995-96 fiscal year.
The State of California entered the 1995-96 budget negotiations with the
smallest nominal "budget gap" to be closed in many years, with strengthening
revenues and reduced caseload growth based on an improving economy.
Nonetheless, serious policy differences between the Governor and the
legislature prevented timely enactment of the budget.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5 percent increase over
1994-95. Also included in this figure was the projected receipt of $494
million from the federal government to reimburse the State's cost of
incarceration and health care costs of illegal immigrants above commitments
already made by the federal government. Expenditures were budgeted at $43.4
billion, a four percent increase over 1994-95. The Budget Act further
projected Special Fund revenues of $12.7 billion and appropriated Special
Fund expenditures of $13.0 billion.
A revision report released by the Department of Finance on May 21, 1966
(the "May Revision"), updated the projections for the 1995-96 fiscal year, so
that revenues and transfers were estimated to be $46.1 billion, some $2
billion over the original fiscal year estimate, which was attributed to the
strong economic recovery. Expenditures also increased, to an estimated $45.4
billion, as a result of the requirement to expend revenues for schools under
Proposition 98, and, among other things, failure of the federal government to
enact welfare reform and to budget new aid for illegal immigrant costs, both
of which had been counted on to allow reductions in State costs. The Special
Fund for Economic Uncertainties was projected to have a small negative
balance of about $70 million at June 30, 1996, all but eliminating the
accumulated budget deficit from the early 1990's.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996, along
with various implementing bills. The Governor vetoed about $82 million of
appropriations (both General Fund and Special Fund). With signing of the
Budget Act, the State will implement its regular cash flow borrowing program
with the issuance of $3.0 billion of revenue anticipation notes to mature on
or before June 30, 1997. The Budget Act appropriates a modest budget reserve
in the Special Fund for Economic Uncertainties of $305 million as of June 30,
1997. The Department of Finance projects that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, after
payment of all obligations due by that date, so that no cross-fiscal year
borrowing will be needed.
The legislature rejected the Governor's proposed 15% cut in personal
income taxes (to be phased in over three years), but did approve a 5% cut in
bank and corporation taxes, to be effective for income years starting in
January 1, 1997. As a result, revenues for the fiscal year will be an
estimated $550 million higher than projected in the May Revision, and are
estimated to total $47.643 billion, a 3.3% increase over the final estimated
1995-96 revenues. Special Fund revenues are estimated to be $13.3 billion.
The Budget Act contains General Fund appropriations totaling $47.251 billion,
a 4.0% increase over the final estimated 1995-96 expenditures. Special Fund
expenditures are budgeted at $12.6 billion.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Funds") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the Funds had
suffered significant market losses in their investments, causing liquidity
crisis for the Funds and the County. More than 200 other public entities,
most of which, but not all, are located in the County, were also depositors
in the Funds. Orange County has reported the Funds' loss at about $1.69
billion, or about 23 percent of their initial deposits of approximately $7.5
billion. Many of thee entities which deposited
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moneys in the Funds, including the County, faced interim and/or extended cash
flow difficulties because of the bankruptcy filing and may be required to
reduce programs or capital projects. The County has embarked on a fiscal
recovery plan based on sharp reductions in services and personnel, and
rescheduling of outstanding short term debt using certain new revenues
transferred to the County from other local governments pursuant to special
legislation enacted in October, 1995. The State has no existing obligation
with respect to any outstanding obligations or securities of the County or
any of the other participating entities.
The State is a party to numerous legal proceedings, many of which normally
recur in governmental operations. In addition, the State is involved in
certain other legal proceedings which, if decided against the State, may
require the State to make significant future expenditures or may impair
future revenue sources.
Among the more significant lawsuits pending against the State are the
following: (i) lawsuits involving the exclusion of small business stock gains
from taxation, one of which was decided against the State, resulting in an
$80 million loss to the State; (ii) cases challenging the amendment of
statutes prescribing specific percentages of tobacco tax revenues to be
placed in accounts to be used for health education and research programs as
well as the appropriation of approximately $63 million in tobacco tax funds
to medical treatment programs pursuant to legislation enacted in July 1995;
(iii) a lawsuit seeking reimbursement for alleged state-mandated costs
involving an estimated potential liability to the State of over $1 billion;
(iv) lawsuits related to contamination at the Stringfellow toxic waste site;
(v) an action involving damages caused by the Yuba River flood of February
1986 with potential liability to 3,000 plaintiffs, ranging from $800 million
to $1.5 billion; (vi) a claim that payment of wages in registered warrants
violated the Fair Labor Standards Act, which involves maximum damages of
approximately $500 million; (vii) lawsuits challenging the transfer of monies
from Special Fund accounts within the State Treasury to the State's General
Fund pursuant to the Budget Acts of 1991, 1992, 1993 and 1994; (viii) cases
challenging budget appropriations mandated by the 1994 and 1995 Budget Acts
regarding the transfer of funds from the State Highway Account to the General
Fund; (ix) a lawsuit involving the reduction of the State's Aid to Families
with Dependent Children ("AFDC") payments in 1992, 1993, and 1994; (x) a
lawsuit involving the 1994-95 Budget Act's 2.3% reduction in AFDC payments;
(xi) a lawsuit challenging the purposes of appropriations of funds from the
Cigarette and Tobacco Products Surtax Fund in the budgets for fiscal years
1989-90 through 1994-95; (xii) a lawsuit challenging the constitutionality of
legislation that deferred payment of the State's employer contribution to the
Public Employees' Retirement System beginning in fiscal year 1992-93; and
(xiii) a lawsuit involving potential damages of approximately $350 million,
in which prison inmate plaintiffs claim they are entitled to minimum wages
while working for the Prison Industry Authority.
In December 1991, S&P downgraded its rating of the State's general
obligation bonds to "AA" from "AAA". As the State's economy worsened and its
budget deficit swelled, rating agency officials closely monitored the State's
budget progress. In February 1992, Moody's downgraded its rating of the
State's general obligation bonds to "Aa1" from "Aaa". In April 1992, S&P
placed the State's general obligation bonds on its CreditWatch, indicating
the possibility of further downgrades should the State's budget and
recessionary problems persist. In July 1992, Moody's and S&P downgraded their
ratings of the State's general obligation bonds to "Aa" from "Aa1", and to
"A+" from "AA", respectively. On July 15, 1994, Moody's and S&P further
downgraded their ratings of the State's general obligation bonds from "Aa" to
"A1" and "A+" to "A", respectively. On July 30, 1996, S&P upgraded its rating
of the State's general obligation bonds to "A+" from "A", citing the State's
improving economy. 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
Since 1983, Puerto Rico has experienced a wide ranging economic expansion
with growth in almost every sector of its economy and record levels of
employment. Although the increase in real gross product slowed to 0.9% in fiscal
1991, and 0.8% in fiscal 1992, reflecting the effects of the recession in the
U.S. economy, the growth pattern continued in fiscal 1994 and 1995 with real
gross product increase's of 2.5% and 3.4%, respectively. While trends in the
Puerto Rican economy normally follow those in the United States, Puerto Rico did
not experience a recession during fiscal 1991 as the United States did,
primarily because its manufacturing base is comprised of certain industries less
prone to business cycle fluctuations. Other factors contributing to Puerto
Rico's decade-long expansion include Commonwealth-sponsored economic development
programs, the relatively stable prices of oil imports, the continued growth in
the U.S. economy, declines in the exchange value of the U.S. dollar and the
relatively low cost of borrowing during the period. These factors will continue
to affect Puerto Rico's economic growth rate in fiscal 1996 and beyond. As of
November 1995, Puerto Rico's unemployment rate was 13.4% (seasonally adjusted).
Puerto Rico has a diversified economy with the manufacturing and services
sectors comprising the principal sectors. Manufacturing is the largest sector in
terms of gross domestic product. In fiscal 1995, manufacturing generated $17.7
billion (or 41.8%) of gross domestic product. In the last two decades,
industrial development has tended to be more capital intensive and more
dependent on skilled labor. This gradual shift in emphasis is best exemplified
by the heavy investment in the pharmaceutical, scientific instruments, computer,
microprocessor, medical product and electrical product industries over the last
decade.
One of the factors assisting the development of the manufacturing sector was
the tax incentives offered by the federal and Commonwealth governments, most
notably Section 936 of the U.S. Internal Revenue Code, under which certain
qualifying U.S. corporations were entitled to U.S. corporate income tax credits.
On August 20, 1996, President Clinton signed into law a bill that
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will phase out Section 936 tax credits over a nine year period, ending January
1, 2006. The effect on Puerto Rico's economy of the phased elimination of
Section 936 tax credits will not be certain for a number of years. The impact on
future investment and employment is more uncertain.
Over the past decade, Puerto Rico has experienced significant growth in the
services sector in terms of both income and employment. The services sector
accounted for $15.9 billion (or 37.5%) of Puerto Rico's gross domestic product
in fiscal 1995. The services sector, particularly wholesale and retail trade and
finance, insurance and real estate, has experienced significant growth partly in
response to the expansion of the manufacturing sector. Growth in construction
and tourism also contributed to increased economic activity in fiscal 1995.
The Constitution of Puerto Rico provides a limitation on the amount of
general obligation debt that can be issued. The Commonwealth's policy has been
and continues to be to maintain the level of such debt within a prudent range
below the constitutional limitation. Historically, the Commonwealth has
maintained a fiscal policy which provides for a prudent relationship between the
growth of public sector debt and the growth of the economic base required to
service that debt. The Commonwealth also has sought opportunities to realize
debt service savings by refunding outstanding debt with obligations bearing
lower interest rates. In certain years, this policy has had the effect of
causing the rate of growth of public sector debt to be higher than the ratio of
growth of gross domestic product. Over the fiscal years 1991 to 1995, public
sector debt increased 24.7% while gross product rose 24.4%. Short-term debt
outstanding relative to total debt was 7.5% as of November 30, 1995.
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, 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.
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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;
(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
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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.
Performance information in advertisements and sales literature may be
expressed as yield of a class and as total return of a class.
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, 1996, the average annual
total return of the Class A Shares was 1.84%, 5.75% and 6.81%, respectively.
For the one year period ended April 30, 1996, and since inception (July 26,
1994) for Class B Shares, the average annual total return was 1.10% and 3.66%
respectively. 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
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
May 17, 1983 and ending April 30, 1996 was 179.33%.
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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 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;
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 monthly by the Fund. Total
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management fees for the fiscal years ended April 30, 1994, 1995 and 1996
amounted to $643,338, $549,917, and $542,769, respectively. For the fiscal years
ended April 30, 1994, 1995 and 1996, 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 Duff &
Phelps Corporation. Phoenix Home Life Mutual Insurance Company ("Phoenix Home
Life") is a mutual insurance company engaged in the insurance and investment
business. Phoenix Home Life manages combined assets of approximately 13
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 with 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, 1997. 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.
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 for regular trading. 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.
HOW TO BUY SHARES
Shares may be purchased from investment dealers having sales agreements
with the Underwriter at the public offering price (the net asset value next
computed following receipt by State Street Bank and Trust Company of a
purchase application in proper form, plus the applicable sales charge.) The
minimum initial purchase is $500 ($25 if using the bank draft investing
program designated "Investo-Matic") and the minimum subsequent investment is
$25. In the case of employee payroll deductions plans, organized group plans
and other benefit programs or arrangements offered by certain dealers, the
minimum initial investment may be fixed from time to time at such lesser
amounts as the adviser in its sole discretion may determine, and may in
certain cases be waived from time to time by the Adviser, in its sole
discretion. See the Fund's current Prospectus.
EXCHANGE PRIVILEGES
Subject to limitations, shareholders may exchange Class A or Class B
shares held in book-entry form for shares of the same class of other Phoenix
Funds, provided 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 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
Exchange 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 utilize the Telephone Exchange Privilege (see below), a
properly executed exchange request must be received by Equity Planning.
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 held in a single 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
shareholders 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.
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Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without
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 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" of the Prospectus for information
concerning the Federal income tax treatment of a disposition of shares. It is
the policy of the Adviser 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 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 prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
REDEMPTION OF SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended
and payment therefor postponed during periods when the New York Stock
Exchange is closed, other than customary weekend and holiday closings, or if
permitted by rules of the Securities and Exchange Commission, during periods
when trading on the Exchange is restricted or during any emergency which
makes it impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets or during any other period
permitted by order of the Securities and Exchange Commission for the
protection of investors. Furthermore, the Transfer Agent will not mail
redemption proceeds until checks received for shares purchased have cleared,
which may take up to 15 days, but payment will be forwarded immediately upon
demand. See the Fund's current Prospectus for further information.
Redemptions by Class B shareholders will be subject to the applicable
deferred sales charge, if any.
Each 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 upon the
giving of not less than 60 days' written notice to the shareholder mailed to
the address of record. 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.
Telephone Redemption
Shareholders who do not have certificated shares may redeem up to $500,000
worth of their shares by telephone. See the Fund's current Prospectus for
additional information.
Reinvestment Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinstatement of their investment at
net asset value. See the Fund's current Prospectus for more information and
conditions attached to the privilege.
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
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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.
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.
15
<PAGE>
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.
THE 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 less than 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, 1994, 1995, and 1996, purchasers of Fund shares paid aggregate sales charges
of $246,087, $124,446, and $156,046, respectively, of which the principal
underwriter received net commissions of $35,802, $14,922, and $18,687,
respectively, for its services, the balance being paid to dealers.
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 Trustees who are not "interested persons" of
the Fund and who have no direct or indirect financial interest in the
operation of the Distribution Plan or in any related agreements. The
Underwriting Agreement will terminate automatically in the event of its
assignment.
Dealers with whom the Underwriter has entered into sales agreements
receive sales charges in accordance with the commission table set forth in
the Prospectus. The Underwriter may from time to time pay, from its own
resources or pursuant to the Plan of Distribution described below, 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, reallow the entire portion
of the sales charge which it normally retains to individual selling dealers.
However, such additional reallowance 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.
PLANS OF DISTRIBUTION
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 shares of each class of shares of the Fund. Pursuant
to the Class A Plan, 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. Under the Class B Plan, 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
16
<PAGE>
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").
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.
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, 1996, the Fund paid Rule 12b-1 fees
in the amount of $307,919 of which the principal underwriter of the Fund
received $26,087 and unaffiliated broker-dealers received $281,832. The Rule
12b-1 payments were used for compensating dealers ($296,125) compensation to
sales and shareholder serviced personnel ($8,494), marketing materials
($1,573) and promotion expenses ($1,727).
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.
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 November 15, 1996, the Directors voted to increase the
number of Directors to fourteen and to appoint Francis E. Jeffries, Everett
L. Morris and Calvin J. Pedersen to fill the vacancies caused by the
increase. The elected and appointed Directors and executive officers are
listed below:
17
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -------------------------------------------------
<S> <C> <C>
C. Duane Blinn (68) Director Partner in the law firm of Day, Berry & Howard.
Day, Berry & Howard Director/ Trustee, Phoenix Funds (1980-present).
CityPlace Trustee, Phoenix Duff & Phelps Institutional
Hartford, CT 06103 Mutual Funds (1996-present). Director/ Trustee,
the National Affiliated Investment Companies
(until 1993).
Robert Chesek (62) Director Trustee/Director, Phoenix Funds (1981-present)
49 Old Post Road and Chairman (1989-1994). Director/Trustee, the
Wethersfield, CT 06109 National Affiliated Investment Companies (until
1993). Vice President, Common Stock, Phoenix Home
Life Mutual Insurance Company
(1980-1994). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present).
E. Virgil Conway (67) Director Trustee/Director, Consolidated Edison Company of
9 Rittenhouse Road New York, Inc. (1970-present), Pace University
Bronxville, NY 10708 (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), Blackrock Fund for Fannie Mae
Mortgage Securities (Advisory Director)
(1990-present), Centennial Insurance Company
(1974-present), Josiah Macy, Jr., Foundation
(1995-present), and The Harlem Youth Development
Foundation (1987- present), Chairman
(1987-present), 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). Director/Trustee, the National
Affiliated Investment Companies (until 1993).
Director/Trustee, Phoenix Funds (1993-present).
Trustee, Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director, Accuhealth
(1994-present), Trism, Inc. (1994-present),
Realty Foundation of New York (1972-present) and
Chairman New York Housing Partnership Development
Corp. (1981-present). Advisory Director, Fund
Direction (1995-present).
Harry Dalzell-Payne (67) Director Director/Trustee, Phoenix Funds (1983-present).
330 East 39th Street Trustee, Phoenix Duff & Phelps Institutional
Apartment 29G Mutual Funds (1996- present). Director, Farragut
New York, NY 10016 Mortgage Co., Inc. (1991-1994). Director/Trustee,
the National Affiliated Investment Companies
(1983-1993). Formerly a Major General of the
British Army.
*Francis E. Jeffries (65) Director Director and Chairman of the Board, Phoenix Duff
Phoenix Duff & Phelps & Phelps Corporation (1995-present).
Corporation Director/Trustee, Phoenix Funds (1995-present).
55 East Monroe Street Trustee, Phoenix Duff & Phelps Institutional
Suite 3600 Mutual Funds (1996-present). Director, Duff &
Chicago, IL 60603 Phelps Utilities Income Fund (1987-present), Duff
& Phelps Utilities Tax-Free Income Inc.
(1991-present), Duff & Phelps Utility and
Corporate Bond Trust Inc. (1993-present) and The
Empire District Electric Company (1984-present).
Director (1989-1995), Chairman of the Board
(1993-1995), President (1989-1993), and Chief
Executive Officer (1989-1995), Duff & Phelps
Corporation.
18
<PAGE>
Leroy Keith, Jr. (57) Director Chairman and Chief Executive Officer, Carson
Chairman and Chief Executive Products Company (1995-present).
Officer Director/Trustee, Phoenix Funds (1980-present).
Carson Product Company Trustee, Phoenix Duff & Phelps Institutional
64 Ross Road Mutual Funds (1996-present). Director Equifax
Savannah, GA 30750 Corp. (1991-present), and Keystone International
Fund, Inc. (1989-present). Trustee, Keystone
Liquid Trust, Keystone Tax Exempt 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). Chairman and Chief Executive
Officer, Keith Ventures (1992-1995).
*Philip R. McLoughlin (49) Director and Director, Vice Chairman and Chief Executive
One American Row President Officer, Phoenix Duff & Phelps Corporation
Hartford, CT 06102 (1995-present). Director (1994- present) and
Executive Vice President, Investments, (1987-
present) Phoenix Home Life Mutual Insurance
Company. Director/Trustee and President, Phoenix
Funds (1989-present). Trustee, Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present).
Director, (1983-present) and Chairman (1995-
present) Phoenix Investment Counsel, Inc.
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 Funds, Inc. (1985-
present), PXRE Corporation (Delaware)
(1985-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).
Everett L. Morris (68) Director Vice President, W.H. Reaves and Company
164 Laird Road (1993-present). Director/Trustee, Phoenix Funds
Colts Neck, NJ 07722 (1995-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds (1996- present), and
Trustee, Duff & Phelps Mutual Funds (1994-
present). Director, Duff & Phelps Utilities
Tax-Free Income, Inc. (1991-present). Duff &
Phelps Utility and Corporate Bond Trust, Inc.
(1993-present), and Public Service Enterprise
Group, Incorporated (1986-1993). President and
Chief Operating Officer, Enterprise Diversified
Holdings Incorporated (1989-1993). Senior
Executive Vice President and Chief Financial
Officer. Public Service Electric and Gas Company
(1986-1992). Director, First Fidelity Bank, N.A.,
N.J. (1984-1991).
19
<PAGE>
James M. Oates (50) Director Director, Phoenix Duff & Phelps Corporation
Managing Director (1995-present). Director/Trustee, Phoenix Funds
The Wydown Group (1987-present) Trustee, Phoenix Duff & Phelps
50 Congress Street Institutional Mutual Funds (1996- present).
Suite 1000 Director, Govett Worldwide Opportunity Funds,
Boston, MA 02109 Inc. (1991-present), Blue Cross and Blue Shield
of New Hampshire (1994-present). Investors
Financial Service Corporation (1995-present),
Investors Bank & Trust Corporation (1995-present)
and Plymouth Rubber Co. (1995- present).
Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director and
President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank.
*Calvin J. Pedersen (54) Director Director and President, Phoenix Duff & Phelps
Phoenix Duff & Phelps Corporation (1995-present). Director/Trustee,
Corporation Phoenix Funds (1995- present). Trustee, Phoenix
55 East Monroe Street Duff & Phelps Institutional Mutual Funds
Suite 3600 (1996-present). President and Chief Executive
Chicago, IL 60603 Officer, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present), Duff & Phelps Utilities
Income Fund (1995-present), and Duff & Phelps
Utility and Corporate Bond Trust, Inc. (1995-
present). Trustee, Chairman and Chief Executive
Officer, Phoenix Duff & Phelps Mutual Funds
(since inception). Director (1986-1995),
President (1993-1995) and Executive Vice
President (1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (69) Director Director/Trustee, Phoenix Funds (1984-present).
43 Montclair Drive Director, Vestaur Securities, Inc.
West Hartford, CT 06107 (1972-present). Trustee and Treasurer, J. Walton
Bissell Foundation, Inc. (1988-present).
Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Herbert Roth, Jr. (67) Director Director/Trustee, Phoenix Funds (1980-present).
134 Lake Street Trustee, Phoenix Duff & Phelps Institutional
P.O. Box 909 Mutual Funds (1996- present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix 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 (50) Director Director/Trustee, Phoenix Funds, (1993-present).
102 Valley Road Trustee, Phoenix Duff & Phelps Institutional
New Canaan, CT 06840 Mutual Funds (1996- present). Managing Director,
Mallin Associates (1993-present). 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. (65) Director Trustee/Director, the Phoenix Funds
Dresing Lierman Weicker (1995-present). Trustee, Phoenix Duff & Phelps
6931 Arlington Road Institutional Mutual Funds (1996-present).
Suite 501 Chairman, Dresing, Lierman, Weicker (1995-
Bethesda, MD 20814 present). Director, UST Inc. (1995-present) and
HPSC Inc. (1995-present). Governor of the State
of Connecticut (1991- 1995). President and Chief
Executive Officer, Research!America (1989-1990).
20
<PAGE>
Michael E. Haylon (38) Executive Vice Executive Vice President--Investments. Phoenix
President Duff & Phelps Corporation (1995-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). Vice President, Phoenix Duff &
Phelps Institutional Mutual Funds. Senior Vice
President. Securities Investments. Phoenix Home
Life Mutual Insurance Company (1993-1995).
Various other positions with Phoenix Home Life
Mutual Insurance Company (1990-1993).
William J. Newman (57) Senior Vice Executive Vice President, Phoenix Investment
President Counsel, Inc. (1995-present). Senior Vice
President, National Securities & Research
Corporation (1995-present), Phoenix Equity
Planning Corporation (1995-present), Phoenix
Strategic Equity Series Fund (1996-present). The
Pheonix Edge Series Fund (1995-present), Phoenix
Multi-Portfolio Fund (1995-present), Phoenix
Income and Growth Fund (1996-present), Phoenix
Series Fund (1996-present). Phoenix Total Return
Fund, Inc. (1996-present) and Phoenix Worldwide
Opportunities Fund (1996-present). Vice
President, Common Stock and Chief Investment
Strategist. Phoenix Home Life Mutual Insurance
Company (April, 1995-November, 1995). Chief
Investment Strategist, Kidder, Peabody Co., Inc.
(1993-1994). Managing Director, Equities, Bankers
Trust Company (1991-1993). Managing Director,
Equities, McKay Shield (1988-1990).
David R. Pepin (52) Executive Executive Vice President, Phoenix Funds
Vice (1996-present). Executive Vice President and
President General Manager, Mutual Fund Marketing and
Operations, Phoenix Duff & Phelps Corporation
(1995-present). Managing Director,
Phoenix-Aberdeen International Advisers, LLC
(1996-present). Director and Executive Vice
President, Phoenix Investment Counsel, Inc. and
Phoenix Equity Planning Corp. (1996-present).
Various positions with Phoenix Home Life Mutual
Insurance Company (1994-1995). Vice President and
General Manager, Finance and Health, Digital
Equipment Corporation (1980-1994).
James M. Dolan (47) Vice President Vice President and Compliance Officer
100 Bright Meadow Blvd. (1994-present), and Assistant Secretary
P.O. Box 2200 (1981-present), Phoenix Equity Planning
Enfield, CT 06083-2200 Corporation. Vice President, Phoenix Funds
(1989-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-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).
21
<PAGE>
William R. Moyer (52) Vice President Senior Vice President and Chief Financial
100 Bright Meadow Blvd. Officer, Phoenix Duff & Phelps Corporation
P.O. Box 2200 (1995-present). Senior Vice President, Finance
Enfield, CT 06083-2200 (1990-present), and Treasurer (1994- present),
Phoenix Equity Planning Corporation and Phoenix
Investment Counsel, Inc. Vice President, Phoenix
Funds (1990-present). Senior Vice President,
Finance, PHL Mutual Funds Holdings, Inc.
(1993-present), National Securities & Research
Corporation (1993-present). Senior Vice President
and Chief Financial Officer, W. S. Griffith &
Co., Inc. (1992- present) and Townsend Financial
Advisers, Inc. (1993- present). Vice President,
the National Affiliated Investment Companies
(until 1993). Senior Manager, Price Waterhouse
(1983-1990). Vice President, Investment Products
Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995).
Leonard J. Saltiel (42) Vice President Senior Vice President, Phoenix Equity Planning
Corporation (1994-present). Vice President,
Phoenix Funds (1994-present), National Securities
& Research Corporation (1994-present), and
Phoenix Duff & Phelps Institutional Mutual Funds
(1996- present) Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various positions with Home
Life Insurance Company and Phoenix Home Life
Mutual Insurance Company (1987-1994).
James D. Wehr (48) 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)
Timothy M. Heaney (41) Vice Vice President, Phoenix Multi-Portfolio Fund
President (1996-present). Investment Analyst, Phoenix
Investment Counsel, Inc. (1995- 1996), Phoenix
Home Life Mutual Insurance Company (1992- 1994).
Various positions with Fleet National (formerly
Connecticut National Bank) (1990-1992).
Nancy G. Curtiss (43) Treasurer Vice President, Fund Accounting, Phoenix Equity
Planning Corporation (1994-present). Second Vice
President and Treasurer, Fund Accounting, Phoenix
Home Life Mutual Insurance Company (1994-1995)
and Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present). Treasurer, Phoenix Funds
(1994-present). Various positions with Phoenix
Home Life Insurance Company (1987-1994).
G. Jeffrey Bohne (48) Secretary Vice President and General Manager, Phoenix Home
101 Munson Street Life Mutual Insurance Co. (1993-present). Vice
Greenfield, MA 01301 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.
22
<PAGE>
For services rendered to the Fund for the fiscal year ended April 30,
1996, the Directors receive aggregate renumeration of $17,625. 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
$36,000 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. The foregoing
fees do not include the reimbursement of expenses incurred in connection with
meetings attended. Officers are compensated for their services by the Adviser
and receive no compensation from the Fund.
For the Fund's last fiscal year ending April 30, 1996, the Directors
received the following compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (10 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Directors
- --------------------- ---------- ------------------- --------------- -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $1,730* $50,250
Robert Chesek $ 1,545 $45,750
E. Virgil Conway $ 1,915 $67,750
Harry Dalzell-Payne $ 1,605 $47,250
Francis E. Jeffries $ 0 $ 0
Leroy Keith, Jr. $ 1,525 None None $45,250
Philip R. McLoughlin $ 0 for any for any $ 0
Everett L. Morris $ 330 Director Director $40,750
James M. Oates $ 1,850 $54,250
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds $ 1,605 $47,250
Herbert Roth, Jr. $2,020* $59,250
Richard E. Segerson $ 1,850 $54,250
Lowell P. Weicker,
Jr. $ 1,650 $49,250
</TABLE>
*This compensation (and the earnings thereon) was deferred pursuant to the
Directors' Deferred Compensation Plan.
On April 30, 1996, the Directors and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
OTHER INFORMATION
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.
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.
Reports to Shareholders
The fiscal year of the Fund ends on April 30. The Fund will send financial
statements to its shareholders at least semi-annually. An annual report
containing financial statements audited by the Fund's independant
accountants, will be sent to shareholders each year.
Financial Statements
The financial statements for the Fund's fiscal year ended April 30, 1996,
appearing in the Fund's 1996 Annual Report to Shareholders, are incorporated
herein by reference.
23
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
INVESTMENTS AT APRIL 30, 1996
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
-------- ------- -------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--99.3%
Certificates of Participation/Lease Revenue--7.8%
California Public Works Lease Revenue 5.25%, '06 AAA $ 1,640 $ 1,644,477
California State Public Works 5.375%, '19 AAA 2,500 2,303,875
California Statewide Community 4.90%, '09 AAA 2,200 2,053,238
Modesto Irrigation District 7.25%, '15 A+ 2,000 2,055,460
San Mateo County Revenue 5.125%, '18 AAA 1,000 895,560
-----------
Total Certificates of Participation/Lease Revenue 8,952,610
-----------
General Obligations--5.4%
California State G.O. 5.50%, '08 AAA 1,500 1,526,940
Central School District G.O. 7.05%, '16 A(b) 1,000 1,093,120
East Bay Regional Park District G.O. Series B
5.75%, '15 AA- 2,155 2,069,188
Pomona School District G.O. Series C 5.60%, '12 AAA 1,500 1,477,530
-----------
Total General Obligations 6,166,778
-----------
Healthcare--5.8%
California Health Facilities 7.30%, '20 A+ 1,400 1,479,688
California Health Facilities 6.25%, '22 A+ 1,500 1,471,425
Grass Valley Hospital 7.25%, '19 A+ 2,000 2,091,740
San Bernardino Sisters of Charity Health Care
7%, '21 AA 1,500 1,608,150
-----------
Total Healthcare 6,651,003
-----------
Higher Education--1.5%
University of California Project C 5%, '23 AAA 2,000 1,720,680
-----------
Housing Revenue--3.6%
California Housing Financing Agency 7.25%, '17 A+ 815 847,714
California Housing Financing Agency 7.75%, '17 A+ 415 437,883
Housing Revenue--continued
California Housing Financing Agency Series C
7.20%, '17 A+ 835 862,154
L.A. Community Redevelopment Agency Series A
6.55%, '27 AAA 2,000 2,039,400
-----------
Total Housing Revenue 4,187,151
-----------
Pre-Refunded Revenue--26.2%
Covina Redevelopment Agency 8.80%, '08 NR 1,200 1,432,128
Hayward Hospital Revenue (St. Rose Hosp.) 10%, '04 AAA 550 685,465
Northern California Hydro Electric 7.50%, '23 AAA 195 233,912
Orange County Water District COP 7%, '15 AAA 1,000 1,112,840
Pasadena COP 6.75%, '15 AAA(b) 2,000 2,205,040
Puerto Rico Aqueduct 7%, '19 AAA 1,500 1,618,080
Puerto Rico Electric Power 7%, '21 AAA 2,500 2,818,350
Puerto Rico Hwy. Revenue Series T 6.625%, '18 AAA 200 223,194
Puerto Rico Public Buildings 7%, '19 AAA 500 537,065
Puerto Rico Public Buildings Series L 6.875%, '21 AAA 3,170 3,579,628
Redlands COP Series C 7%, '22 AAA 1,000 1,118,650
Riverside County 8.625%, '16 AAA 700 921,333
Riverside County 7.80%, '21 AAA 4,000 4,861,440
Riverside Public Financing Authority 7.80%, '08 Baa(b) 1,000 1,049,960
San Bernardino COP Series B 7%, '28 AAA 2,200 2,477,992
San Gabriel Valley Schools Financing 7.20%, '19 NR 1,200 1,318,956
San Jose Redevelopment Agency 7.80%, '11 NR 1,000 1,030,460
Stockton COP 7.50%, '16 NR 1,000 1,009,900
Torrance Hospital COP 7.10%, '15 AAA 1,780 1,932,243
-----------
Total Pre-Refunded Revenue 30,166,636
-----------
Puerto Rico--3.8%
Puerto Rico Electric Power Authority Series N 6%, '10 A- 1,500 1,507,545
See Notes to Financial Statements
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
Puerto Rico--continued
Puerto Rico G.O. 5.375%, '06 A $ 2,000 $ 1,990,380
Puerto Rico Highway Authority Series T 6.625%, '18 A 800 888,232
-----------
Total Puerto Rico 4,386,157
-----------
Tax Revenue--11.3%
Culver City Redevelopment Agency 4.60%, '20 AAA 4,500 3,671,235
L.A. County Sales Tax 7%, '19 AA- 2,500 2,674,150
L.A. County Transit Authority Series A 5%, '21 AAA 3,750 3,243,750
San Francisco Redevelopment Agency 4.75%, '18 AAA 1,100 932,074
San Francisco Redevelopment Agency 5.50%, '18 A- 1,500 1,354,020
San Pablo Redevelopment 5%, '13 AAA 1,250 1,133,938
-----------
Total Tax Revenue 13,009,167
-----------
Transportation Revenue--6.5%
Foothill/Eastern Transportation Revenue Series A
6%, '34 BBB- 2,000 1,862,700
Los Angeles County Series B Revenue 5.25%, '23 AAA 3,000 2,699,970
San Diego Transportation Series A 4.75%, '08 AAA 2,000 1,887,640
San Francisco Airport Revenue 6.25%, '10 AAA 1,000 1,034,050
-----------
Total Transportation Revenue 7,484,360
-----------
Utility Revenue--27.4%
Beverly Hills Wastewater 6%, '22 AA 1,500 1,474,770
California State Water Series L 5.75%, '19 AA 4,000 3,840,080
Chino Basin, California 5.90%, '11 AAA 2,000 2,041,760
Contra Costa Water District Series G 5.75%, '14 AAA 4,490 4,414,029
Delta Diablo Sanitation District, CA 0%, '16 AAA 1,070 306,919
Irvine Ranch Water District
7.80%, '08 A+ 1,500 1,562,040
Irvine Ranch Water District
8.25%, '23 A+ 2,000 2,123,720
L.A. Wastewater Series D
4.70%, '17 AAA 7,000 5,870,410
Sacramento Cogeneration Project 6.375%, '10 BBB- 1,000 997,250
Sacramento Municipal Utility District Revenue
5.75%, '11 AAA 5,000 5,000,600
Sacramento Utility District Electric Series G
4.75%, '21 (c) AAA 1,000 832,400
Southern California Public Power Authority
5.50%, '20 A 915 818,330
Southern California Public Power Authority
5.75%, '21 AA- 600 572,352
Southern California Public Power Series A
4.875%, '20 AAA 2,000 1,703,180
-----------
Total Utility Revenue 31,557,840
-----------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $109,492,288) 114,282,382
-----------
TOTAL INVESTMENTS--99.3%
(Identified cost $109,492,288) 114,282,382(a)
Cash and receivables, less liabilities--0.7% 782,003
-----------
NET ASSETS--100.0% $115,064,385
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,920,629 and gross
depreciation of $1,130,535 for income tax purposes. At April 30, 1996,
the aggregate cost of securities for federal income tax purposes was
$109,492,288.
(b) As rated by Moody's and/or Fitch.
(c) Segregated as collateral for initial margin on futures contracts.
See Notes to Financial Statements
4
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
Assets
Investment securities at value
(Identified cost $109,492,288) $114,282,382
Receivables
Variation margin for futures contracts 17,187
Fund shares sold 112,099
Interest 2,201,695
-----------
Total assets 116,613,363
-----------
Liabilities
Payables
Custodian 1,133,363
Fund shares repurchased 126,613
Dividend distributions 100,753
Investment advisory fee 43,097
Distribution fee 24,706
Transfer agent fee 14,326
Directors' fee 7,717
Financial agent fee 2,873
Accrued expenses 95,530
-----------
Total liabilities 1,548,978
-----------
Net Assets $115,064,385
===========
Net Assets Consist of:
Capital paid in on shares of capital stock $110,325,713
Distributions in excess of net investment income (78,322)
Accumulated net realized loss (236,380)
Net unrealized appreciation 5,053,374
-----------
Net Assets $115,064,385
===========
Class A
Shares of capital stock outstanding, $.01 par
value, 250,000,000 shares authorized
(Net Assets $113,806,356) 8,911,363
Net asset value per share $12.77
Offering price per share $12.77/(1-4.75%) $13.41
Class B
Shares of capital stock outstanding, $.01 par
value, 250,000,000 shares authorized
(Net Assets $1,258,029) 98,491
Net asset value and offering price per share $12.77
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
Investment Income
Interest $7,410,713
-----------
Total investment income 7,410,713
-----------
Expenses
Investment advisory fee 542,769
Distribution fee--Class A 299,411
Distribution fee--Class B 8,508
Financial agent fee 36,185
Transfer agent 108,622
Professional 52,016
Registration 51,466
Printing 38,325
Directors 26,777
Custodian 16,146
Miscellaneous 24,631
-----------
Total expenses 1,204,856
-----------
Net investment income 6,205,857
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 1,138,664
Net realized loss on futures contracts (40,344)
Net change in unrealized appreciation
(depreciation) on investments 756,545
-----------
Net gain on investments 1,854,865
-----------
Net increase in net assets resulting from
operations $8,060,722
===========
See Notes to Financial Statements
5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1996 April 30, 1995
-------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 6,205,857 $ 6,880,816
Net realized gain 1,098,320 946,797
Net change in unrealized appreciation (depreciation) 756,545 (797,795)
------------ --------------
Increase in net assets resulting from operations 8,060,722 7,029,818
------------ --------------
From Distributions to Shareholders
Net investment income--Class A (6,135,672) (7,272,931)
Net investment income--Class B (36,045) (9,873)
Net realized gains--Class A (288,116) (2,856,630)
Net realized gains--Class B (1,693) (9,083)
Distributions in excess of net investment income--Class A (77,865) (29,892)
Distributions in excess of net investment income--Class B (457) (41)
Distributions in excess of accumulated net realized gains--Class A (235,000) (811,818)
Distributions in excess of accumulated net realized gains--Class B (1,380) (2,581)
------------ --------------
Decrease in net assets from distributions to shareholders (6,776,228) (10,992,849)
------------ --------------
From Share Transactions
Class A
Proceeds from sales of shares (2,203,421 and 496,574 shares,
respectively) 28,531,594 6,213,919
Net asset value of shares issued from reinvestment of distributions
(218,807 and 447,402 shares, respectively) 2,842,822 5,495,965
Cost of shares repurchased (2,801,630 and 1,731,374 shares,
respectively) (36,234,994) (21,728,823)
------------ --------------
Total (4,860,578) (10,018,939)
------------ --------------
Class B
Proceeds from sales of shares (73,939 and 41,888 shares,
respectively) 962,800 514,453
Net asset value of shares issued from reinvestment of distributions
(1,751 and 1,035, respectively) 22,780 12,543
Cost of shares repurchased (13,644 and 6,478 shares, respectively) (175,468) (79,763)
------------ --------------
Total 810,112 447,233
------------ --------------
Decrease in net assets from share transactions (4,050,466) (9,571,706)
------------ --------------
Net decrease in net assets (2,765,972) (13,534,737)
Net Assets
Beginning of period 117,830,357 131,365,094
------------ --------------
End of period (including distributions in excess of net investment
income of ($78,322) and ($34,140), respectively) $115,064,385 $117,830,357
============ ==============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
Year Ended April 30,
1996 1995 1994 1993 1992
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.63 $13.03 $13.64 $13.20 $13.07
Income from investment operations
Net investment income 0.67 0.71 0.80 0.81 0.87
Net realized and unrealized gain (loss) 0.20 0.05 (0.53) 0.51 0.24
----- ----- ----- ----- -------
Total from investment operations 0.87 0.76 0.27 1.32 1.11
----- ----- ----- ----- -------
Less distributions
Dividends from net investment income (0.67) (0.76) (0.76) (0.80) (0.88)
Distributions in excess of net investment income (0.01) -- -- -- --
Distributions from net realized gains (0.03) (0.31) (0.12) (0.08) (0.10)
Distributions in excess of accumulated net realized
gains (0.02) (0.09) -- -- --
----- ----- ----- ----- -------
Total distributions (0.73) (1.16) (0.88) (0.88) (0.98)
----- ----- ----- ----- -------
Change in net asset value 0.14 (0.40) (0.61) 0.44 0.13
----- ----- ----- ----- -------
Net asset value, end of period $12.77 $12.63 $13.03 $13.64 $13.20
===== ===== ===== ===== =======
Total return (1) 6.92% 6.34% 1.80% 10.38% 8.68%
Ratios/supplemental data:
Net assets, end of period (thousands) $113,806 $117,370 $131,365 $147,760 $139,118
Ratio to average net assets of:
Operating expenses 0.99% 0.93% 0.85% 0.90% 0.68%
Net investment income 5.15% 5.63% 5.82% 6.00% 6.55%
Portfolio turnover 20% 51% 25% 25% 33%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------
From
Year Inception
Ended 7/26/94 to
4/30/96 4/30/95
------ -----------
<S> <C> <C>
Net asset value, beginning of period $12.63 $13.04
Income from investment operations
Net investment income 0.56
(4) 0.48
Net realized and unrealized gain 0.20 0.01
---- ---------
Total from investment operations 0.76 0.49
---- ---------
Less distributions
Dividends from net investment income (0.56) (0.50)
Distributions in excess of net investment income (0.01) --
Distributions from net realized gains (0.03) (0.31)
Distributions in excess of accumulated net realized gains (0.02) (0.09)
---- ---------
Total distributions (0.62) (0.90)
---- ---------
Change in net asset value 0.14 (0.41)
---- ---------
Net asset value, end of period $12.77 $12.63
==== =========
Total return (1) 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $1,258 $460
Ratio to average net assets of:
Operating expenses 1.78% 1.55%(2)
Net investment income 4.32% 4.90%(2)
Portfolio turnover 20% 51%
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
See Notes to Financial Statements
7
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") is organized as a
Maryland corporation and is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company.
The Fund's investment objective is to obtain a high level of current income
exempt from California state and local income taxes, as well as Federal
income tax, consistent with preservation of capital. The Fund offers both
Class A and Class B shares. Class A shares are sold with a front-end sales
charge of up to 4.75%. Class B shares are sold with a contingent deferred
sales charge which declines from 5% to zero depending on the period of time
the shares are held. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Income and expenses of the Fund
are borne pro rata by the holders of both classes of shares, except that each
class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
A. Security valuation:
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 61 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.
E. Futures contracts:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. The Fund may enter into financial
futures contracts as a hedge against anticipated changes in the market value
of the portfolio securities. Upon entering into a futures contract the Fund
is required to pledge to the broker an amount of cash and/or securities equal
to the "initial margin" requirements of the futures exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation
margin and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The potential risk to the Fund is that
the change in value of the futures contract may not correspond to the change
in value of the hedged instruments.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.45% of the average daily net assets of the
Fund for the first $1 billion.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $17,868 for Class A shares and
deferred sales charges of $819
8
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (Continued)
for Class B shares for the year ended April 30, 1996. 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, 1996, $26,087 was earned by the Distributor and $281,832
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. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust as sub-transfer agent. For the year
ended April 30, 1996, transfer agent fees were $108,622 of which PEPCO
retained $28,058, which is net of fees paid to State Street.
At April 30, 1996, PHL and affiliates held 192 Class A shares and 9,037
Class B shares of the Fund with a combined value of $117,854.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1996, aggregated $22,744,147 and
$25,197,046, respectively. There were no purchases or sales of long-term U.S.
Government securities.
At April 30, 1996, the Fund had entered into short futures contracts as
follows:
Value of Market Net
Number of Contracts Value of Unrealized
Description Contracts when Opened Contracts Appreciation
- ------------- ---------- ------------ --------- -------------
U.S. Treasury
June, 96 25 $2,992,187 $2,728,907 $263,280
4. ASSET CONCENTRATION
There are certain risks arising from the Fund's concentration in California
municipal securities. Certain California constitutional amendments,
legislative measures, executive orders, administrative regulations, court
decisions and voter initiatives could result in certain adverse consequences
including impairing the ability of certain issuers of California municipal
securities to pay principal and interest on their obligations.
5. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1995 may be
deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1996, the Fund did not defer any losses;
however, the Fund was able to utilize losses deferred in the prior year
against current year capital gains in the amount of $818,075.
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 97% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
For the fiscal year ended April 30, 1996, the Fund distributed $9,564 of
long-term capital gain dividends.
This report is not authorized for distribution to prospective investors
in the Phoenix California Tax Exempt Bonds, Inc. unless preceded or
accompanied by an effective Prospectus which includes information concerning
the sales charge, Fund's record and other pertinent information.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
To the Board of Directors and Shareholders of
Phoenix California Tax Exempt Bonds, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Phoenix California Tax Exempt Bonds, Inc. (the "Fund") at April
30, 1996, 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, 1996 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
[Price Waterhouse LLP Signature]
Boston, Massachusetts
June 14, 1996
10
<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, 1996, 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 with Post-Effective Amendment No. 17 on August 22, 1995 and incorporated herein by reference.
2.2* Revised and Restated By-Lawsof the Registrant, adapted November 16, 1994, amended February 15, 1995 and further amended
November 15, 1995 filed via EDGAR 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 Form of First Amendment to Distributors Plan for Class A Shares filed under Post-Effective amendment No. 14 on
March 2, 1994.
15.3 Distribution Plan for Class B Shares dated May 25, 1994, filed with Post-Effective Amendment No. 16
on July 13, 1994, and incorporated herein by reference.
15.4* Distribution Plan of National's California Tax Exempt Bonds, Inc. dated January 1, 1994, filed via Edgar herewith.
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 via Edgar herewith.
19.1* Rule 18f-3 Dual Distribution Plan, effective November 15, 1995, filed via Edgar herewith.
19.2* Amended and Restated Dual Distribution Plan, effective May 1, 1996, filed via Edgar herewith.
</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, 1996, the number of record holders of each class of
securities of the Registrant was as follows:
Number of
Title of Class Record-holders
- --------------------------------- -------------
Shares of Common Stock--Class A 2,178
Shares of Common Stock--Class B 38
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 in
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>
Name and Position with
National Securities &
Research Corporation Other Business, Profession, Vocation or Employment
- ------------------------------- ----------------------------------------------------------
<S> <C>
Michael E. Haylon Executive Vice President--Investments, Phoenix Duff &
Director and Executive Phelps Corporation. Executive Vice President, Phoenix
Vice President Funds. Director and President, Phoenix Investment Counsel,
Inc. Director, Phoenix Equity Planning Corporation. Vice
President, Phoenix Duff & Phelps Institutional Mutual
Funds. Senior Vice President, Securities Investments,
Phoenix Home Life Mutual Insurance Company.
Philip R. McLoughlin Director, Vice Chairman and Chief Executive Officer,
Director, Chairman, President Phoenix Duff & Phelps Corporation. Director and Executive
and Chief Executive Officer Vice President, Investments, Phoenix Home Life Mutual
Insurance Company. Director and President, Phoenix Equity
Planning Corporation. Director and Chairman, Phoenix
Investment Counsel, Inc., Trustee and President, Phoenix
Duff & Phelps Institutional Mutual Funds. Director,
Phoenix Realty Group, Inc., Phoenix Realty Advisors, Inc.,
Phoenix Realty Investors, Inc., Phoenix Realty Securities,
Inc., Phoenix Founders, Inc., and World Trust Fund;
Director and Vice President, PM Holdings, Inc.
Director/Trustee/ President of the Phoenix Funds;
Director, W.S. Griffith & Co., Inc.
David R. Pepin Executive Vice President and General Manager, Mutual Fund
Director and Executive Vice Marketing and Operations, Phoenix Duff & Phelps
President Corporation. Managing Director, Phoenix-Aberdeen
International Advisors, LLC. Director and Executive Vice
President, Phoenix Investment Counsel, Inc., and Phoenix
Equity Planning Corporation. Various positions with
Phoenix Home Life Mutual Insurance Company.
C-2
<PAGE>
Name and Position with
National Securities &
Research Corporation Other Business, Profession, Vocation or Employment
- ------------------------------- ----------------------------------------------------------
William R. Moyer Director, Senior Vice President and Chief Financial
Senior Vice President, Officer, Phoenix Duff & Phelps Corporation. Senior Vice
Finance, and Treasurer President, Finance, and Treasurer, Phoenix Equity Planning
Corporation and Phoenix Investment Counsel, Inc. Vice
President, the Phoenix Funds and Phoenix Duff & Phelps
Institutional Mutual Funds. Senior Vice President, Chief
Financial Officer, and Treasurer, W.S. Griffith & Co.,
Inc. Vice President, Investment Products Finance, Phoenix
Home Life Mutual Life Insurance Company.
William J. Newman Executive Vice President, Phoenix Investment Counsel, Inc.
Senior Vice President Senior Vice President, Phoenix Equity Planning
Corporation, Phoenix Strategic Equity Series Fund, The
Phoenix Edge Series Fund, Phoenix Multi-Portfolio Fund,
Phoenix Income and Growth Fund, Phoenix Series Fund,
Phoenix Total Return Fund, Inc., Phoenix Worldwide
Opportunities Fund and Phoenix Duff & Phelps Institutional
Mutual Funds. Vice President, Common Stock and Chief
Investment Strategist, Phoenix Home Life Mutual Insurance
Company. Chief Investment Strategist, Kidder, Peabody Co.,
Inc.
Michael K. Arends Vice President, Phoenix Series Fund, Phoenix Strategic
Vice President Equity Series Fund, and Phoenix Investment Counsel, Inc.
Portfolio Manager, Phoenix Home Life Mutual Insurance
Company.
Curtiss O. Barrows Vice President, Phoenix Series Fund, Phoenix Multi-
Vice President Portfolio Fund, The Phoenix Edge Series Fund, and Phoenix
Investment Counsel, Inc. Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company.
James M. Dolan Vice President, Compliance Officer and Assistant
Vice President and Secretary, Phoenix Equity Planning Corporation. Vice
Compliance Officer; President, Phoenix Funds and Phoenix Duff & Phelps
Assistant Secretary Institutional Mutual 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. Assistant Vice President
Compliance, Phoenix Home Life Mutual Insurance Company.
Jeanne H. Dorey Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Multi-Portfolio Fund, Phoenix Investment Counsel, Inc. and
Phoenix Worldwide Opportunities Fund. Portfolio Manager,
International, Phoenix Home Life Mutual Insurance Company.
Christopher J. Kelleher Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Investment Counsel, Inc., and Phoenix
Duff & Phelps Institutional Mutual Funds. Portfolio
Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Company.
C-3
<PAGE>
Name and Position with
National Securities &
Research Corporation Other Business, Profession, Vocation or Employment
- ------------------------------- ----------------------------------------------------------
Thomas S. Melvin, Jr. Vice President, Phoenix Investment Counsel, Inc., Phoenix
Vice President Multi-Portfolio Fund, and Phoenix Duff & Phelps
Institutional Mutual Funds. Portfolio Manager, Common
Stock, Phoenix Home Life Mutual Insurance Company.
Amy L. Robinson Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Series Fund, and Phoenix Investment Counsel, Inc. Managing
Director, Securities Administration, Phoenix Home Life
Mutual Insurance Company.
Elizabeth R. Sadowinski Vice President, Field and Investor Services, Phoenix
Vice President Equity Planning Corporation. Vice President,
Administration, Phoenix Duff & Phelps Corporation. Vice
President, Mutual Fund Customer Service, Phoenix Home Life
Mutual Insurance Company.
Leonard J. Saltiel Senior Vice President, Phoenix Equity Planning
Vice President Corporation. Vice President, Phoenix Funds and Phoenix
Duff & Phelps Institutional Mutual Funds. Vice President,
Investment Operations, Phoenix Home Life Mutual Insurance
Company.
Dorothy J. Skaret Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Investment Counsel, Inc., Phoenix
Realty Securities, Inc. and Phoenix Duff & Phelps
Institutional Mutual Funds. Director, Public Fixed Income,
Phoenix Home Life Mutual Life Insurance Company.
James D. Wehr Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Multi-Portfolio Fund, Phoenix
Investment Counsel, Inc., Phoenix California Tax-Exempt
Bonds, Inc. and Phoenix Duff & Phelps Institutional Mutual
Funds. Managing Director, Public Fixed Income, Phoenix
Home Life Mutual Insurance Company.
Eugene A. Charon Controller, Phoenix Equity Planning Corporation and
Controller Phoenix Investment Counsel, Inc.
Thomas N. Steenburg Vice President, Counsel and Secretary, Phoenix Duff &
Secretary Phelps Corporation. Counsel, Phoenix Home Life Mutual
Insurance Company. Secretary, Phoenix Investment Counsel,
Inc. and Phoenix Equity Planning Corporation. Assistant
Secretary, The Phoenix Funds and Phoenix Duff & Phelps
Institutional Mutual Funds.
</TABLE>
The respective principal addresses of the companies or other entities
named above are as follows:
Kidder, Peabody Co. Inc. }10 Hanover Square
}New York, NY 10005
National Securities & Research }One American Row
Corporation }Hartford, CT 06115
Phoenix Duff & Phelps Corporation }56 Prospect Street
}Hartford, CT 06115
Phoenix Duff & Phelps Institutional }101 Munson Street
Mutual Funds }Greenfield, MA 01301
C-4
<PAGE>
Phoenix Equity Planning Corporation }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
Phoenix Home Life Mutual Insurance }One American Row
Company }Hartford, CT 06115
Phoenix Investment Counsel, Inc. }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
PM Holdings, Inc. }One American Row
}Hartford, CT 06115
The Phoenix Funds }101 Munson Street
}Greenfield, MA 01301
W. S. Griffith & Co., Inc. }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
Item 29. Principal Underwriter
(a) See "Distribution Plans" and "How to Buy Shares" in the Prospectus and
"Distributor" and "Plans of Distribution" in the Statement of
Additional Information, both of which are included in this
Post-Effective Amendment to the Registration Statement.
(b) Directors and executive officers of Phoenix Equity Planning
Corporation are as follows:
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Underwriter with Registrant
- ------------------------- ------------------------- ---------------------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
One American Row
Hartford, CT 06115
David R. Pepin Director and Executive None
56 Prospect Street Vice President
P.O. Box 150480
Hartford, CT 06115-0480
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-5
<PAGE>
Name and Position and Offices Position and Offices
Principal Address with Underwriter with Registrant
- ------------------------- ------------------------- ---------------------------
William J. Newman Senior Vice President Senior Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
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 None
100 Bright Meadow Blvd. Sales Manager
P.O. Box 2200
Enfield, CT 06083-2200
James M. Dolan Vice President and Vice President
100 Bright Meadow Blvd. Compliance Officer;
P.O. Box 2200 Assistant Secretary
Enfield, CT 06083-2200
Elizabeth R. Sadowinski Vice President, Field and Assistant Secretary
100 Bright Meadow Blvd. Investor Services
Enfield, CT 06083-2200
Eugene A. Charon Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Thomas N. Steenburg Secretary Assistant Secretary
One American Row
Hartford, CT 06115
</TABLE>
(c) Equity Planning received the following commissions or other compensation
from the Registrant during the fiscal year ending April 30, 1996:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discounts and Redemption and Brokerage Other
Underwriter Commissions Repurchase Commissions Compensation
- ------------------- ---------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Equity Planning $17,868 $819 0 $36,185
</TABLE>
C-6
<PAGE>
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 23 day of August, 1996.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
ATTEST: /s/ Richard J. Wirth By: /s/ Philip R. McLoughlin
----------------------- -----------------------------
Richard J. Wirth Philip R. McLoughlin
Assistant Secretary 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 23 day of August, 1996.
Signature Title
- -------------------------- -------------------------
- -------------------------- Director
C. Duane Blinn*
- -------------------------- Director
Robert Chesek*
- -------------------------- Director
E. Virgil Conway*
- -------------------------- Treasurer (principal
Nancy G. Curtiss* financial and
accounting officer)
- -------------------------- Director
Harry Dalzell-Payne*
- -------------------------- Director
Frances E. Jeffries*
- -------------------------- Director
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin President and Director
- --------------------------
Philip R. McLoughlin
- -------------------------- Director
Everett L. Morris*
- -------------------------- Director
James M. Oates*
- -------------------------- Director
Calvin J. Pedersen*
- -------------------------- Director
Philip R. Reynolds*
- -------------------------- Director
Herbert Roth, Jr.*
- -------------------------- Director
Richard E. Segerson*
- -------------------------- Director
Lowell P. Weicker, Jr.*
*By: /s/ Philip R. McLoughlin
- -----------------------------
*Philip R. McLoughlin pursuant to powers of attorney filed herewith.
S1(c)
AMENDED AND RESTATED BYLAWS
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
Adopted November 16, 1994
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.
-2-
<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.
-3-
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1. 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 twenty. 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. (Amended
February 15, 1995; and further amended November 15, 1995.)
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.
-4-
<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 Board, to amend these Bylaws or to approve any merger or
share exchange which does not require
-5-
<PAGE>
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 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.
-6-
<PAGE>
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 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
-7-
<PAGE>
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.
-8-
<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.
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.
fund\1304
Rev: 11/15/95
-9-
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. 18 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated June 14, 1996, relating to the financial
statements and financial highlights appearing in the April 30, 1996 Annual
Report to Shareholders of Phoenix California Tax Exempt Bonds, Inc., which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the Statement of
Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
August 23, 1996
DISTRIBUTION PLAN OF
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
PURSUANT TO RULE 12B-1
Distribution Plan dated January 1, 1994 (the "Plan"), of NATIONAL'S CALIFORNIA
TAX EXEMPT BONDS, INC., to be renamed PHOENIX CALIFORNIA TAX EXEMPT BONDS,
INC. (the "Fund"), a Maryland corporation.
WHEREAS, the Fund and Phoenix Equity Planning Corporation ("PEPCO" or the
"Distributor"), a wholly owned subsidiary of Phoenix Home Life Mutual Insurance
Company ("Phoenix Home Life") and a broker-dealer registered under the
Securities Exchange Act of 1934, have entered into an Underwriting Agreement
pursuant to which the Distributor will act as principal underwriter of shares of
the Fund for sale to the public; and
WHEREAS, Phoenix Home Life has purchased all of the stock of National
Securities & Research Corporation and its subsidiary, NSR Distributors, Inc.
("NSR"), the predecessor distributor of the Fund: and
WHEREAS, the Directors of the Fund have determined to adopt this Distribution
Plan (the "Plan"), in accordance with the requirements of the Investment Company
Act of 1940, as amended (the "Act") and have determined that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
NOW THEREFORE, the Fund hereby adopts the Plan on the following terms and
conditions:
1. The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of 0.15% of the average daily value of the net
assets of the Fund, subject to any applicable restrictions imposed by rules of
the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by NSR pursuant to the Fund's Distribution Plan dated June
1, 1992 but unreimbursed prior to the effectiveness of this Plan, and up to a
maximum on an annual basis of 0.25% of the average daily value of the net assets
of the Fund, subject to the above-cited restrictions, for expenditures incurred
by PEPCO subsequent to the effectiveness of this Plan, in connection with the
sale and promotion of shares of the Fund and the furnishing of services to
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling shares of the Fund; (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 Distributor in the form of the Dealer Agreement for
National Affiliated Investment Companies 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
<PAGE>
to result in the sale of shares of the Fund; provided however, that a portion of
such amount paid to the Distributor, which portion shall be equal to or less
than 0.25% annually of the average daily net assets of the 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").
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Directors of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
2. At least quarterly in each year the Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Directors of the Fund for their review, and the Directors shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under the Plan and the purposes for which
such expenditures were made.
3. This Plan shall not take effect until it, together with any related
agreements, have been approved by a vote of at least a majority of the Fund's
Directors as well as a vote of at least a majority of the Directors of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of the Plan or in any
related agreements (the "Disinterested Directors"), cast in person at a meeting
called for the purpose of voting on the Plan or any related agreement, and the
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting securities (as
defined in the Act) of the Fund.
4. This Plan shall remain in effect for one year from the date of its
execution and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Directors of the Fund as well
as a majority of the Disinterested Directors. This Plan may be amended at any
time, provided that (a) the Plan may not be amended to increase materially the
amount of the distribution expenses provided in Paragraph 1 hereof (including
the Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Fund and (b) all material
amendments to this Plan must be approved by a vote of the Directors of the Fund
and of the Disinterested Directors cast in person at a meeting called for the
purpose of such vote.
5. While this Plan is in effect, the selection and nomination of Directors
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Directors then in office.
<PAGE>
6. Any related agreement shall be in writing and shall provide that (a)
such agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Fund on not more than 60 days' written notice to the other party to the
agreement and (b) such agreement shall terminate automatically in the event of
its assignment.
7. This Plan may be terminated at any time by a vote of a majority of the
Disinterested Directors or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Fund. In the event this Plan is
terminated or otherwise discontinued, no further payments hereunder will be made
by the Plan.
8. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 2 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Directors of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
IN WITNESS WHEREOF, the Fund and its shareholders have adopted this Plan as of
this day of December 31, 1993.
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
By: /s/ Thomas N. Steenburg
Attest:
/s/ Winifred H. Luzzi
c:\wpdocs\pcal\200\210.000
POWER OF ATTORNEY
I, the undersigned Treasurer and Principal Accounting Officer of
Phoenix California Tax Exempt Bonds, Inc., hereby constitute and appoint Philip
R. McLoughlin and Thomas N. Steenburg or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Nancy G. Curtiss
- ----------------- ------------------------
Nancy G. Curtiss
Treasurer
Principal Financial and
Accounting Officer
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/E. Virgil Conway
- ----------------- ------------------------
E. Virgil Conway, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Harry Dalzell-Payne
- ----------------- ------------------------
Harry Dalzell-Payne, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Leroy Keith, Jr.
- ----------------- ------------------------
Leroy Keith, Jr., Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/James M. Oates
- ----------------- ------------------------
James M. Oates, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Philip R. Reynolds
- ----------------- ------------------------
Philip R. Reynolds, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Herbert Roth, Jr.
- ----------------- ------------------------
Herbert Roth, Jr., Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Richard E. Segerson
- ----------------- ------------------------
Richard E. Segerson, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/C. Duane Blinn
- ----------------- ------------------------
C. Duane Blinn, Esq., Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Robert Chesek
- ----------------- ------------------------
Robert Chesek, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Lowell P. Weicker, Jr.
- ----------------- ------------------------
Lowell P. Weicker, Jr., Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Everett L. Morris
- ----------------- ------------------------
Everett L. Morris, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Francis E. Jeffries
- ----------------- ------------------------
Francis E. Jeffries, Director
form\pcal.poa
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Phoenix California Tax Exempt Bonds,
Inc., hereby constitute and appoint Philip R. McLoughlin and Thomas N. Steenburg
or either of them 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.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix California Tax Exempt Bonds, Inc., provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
February 21, 1996 /s/Calvin J. Pedersen
- ----------------- ------------------------
Calvin J. Pedersen, Director
form\pcal.poa
PHOENIX FUNDS
(the "Funds")
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the effective date of this Plan, the Funds shall offer multiple
classes of shares, as described herein, pursuant to Rule 18f-3 and this Plan.
2. The Multi-Class Structure
The portfolios of the Funds listed on Schedule A hereto shall offer two
classes of shares, Class A and Class B ("Multi-Class Portfolios"). Shares of the
Multi-Class Portfolios shall represent an equal pro rata interest in the
respective Portfolio and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class shall bear any Class Expenses, as
defined by Section B, below; (c) each class shall have exclusive voting rights
on any matter submitted to shareholders that relates solely to its distribution
arrangement; and (d) each class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class. In addition, Class A and Class B shares shall have
the features described in Sections a, b, c and d, below.
a. Distribution Plan
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 with
respect to Class B shares for each Multi-Class Portfolio, containing
substantially the following terms:
Class B shares of each Portfolio shall reimburse Phoenix Equity
Planning Corporation (the "Distributor") for costs and expenses incurred in
connection with distribution and marketing of shares of the Fund, as provided in
the Distribution Plan and any supplements thereto, subject to an annual limit of
1.00% of the average daily net assets of a Portfolio's Class B shares.
<PAGE>
-2-
b. Allocation of Income and Expenses
i. General.
The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each
Portfolio shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Portfolio. Expenses to be so allocated
include expenses of the Fund that are not attributable to a particular Portfolio
or class of a Portfolio but are allocated to a Portfolio ("Fund Expenses") and
expenses of a particular Portfolio that are not attributable to a particular
class of that Portfolio ("Portfolio Expenses"). Fund Expenses include, but are
not limited to, Trustees' fees, insurance costs and certain legal fees.
Portfolio Expenses include, but are not limited to, certain state registration
fees, custodial fees, advisory fees and other expenses relating to the
management of the Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (a) payments pursuant to the Distribution Plan for that
class; (b) transfer agent fees attributable to a specific class, (c) printing
and postage expenses related to preparing and distributing material such as
shareholder reports, prospectuses and proxy materials to current shareholders of
the class; (d) registration fees for shares of the class (other than those set
forth in Section b.i. above); (e) the expense of administrative personnel and
services as required to support the shareholders of a specific class; (f)
litigation or other legal expenses relating solely to one class of shares; and
(g) Trustees' fees incurred as a result of issues relating to a class of shares.
Expenses described in (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this paragraph may be
allocated as Class Expenses, if the Fund's President and Treasurer have
determined, subject to Board approval or ratification, which of such categories
of expenses will be treated as Class Expenses, consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of 1986, as amended
("Code").
In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense or
Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 18f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated
as Class Expenses and any subsequent changes thereto as set forth in this Plan
shall be reviewed by the Board of Trustees and approved by such Board and by a
majority of the Trustees who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Trustees")
<PAGE>
- 3 -
iii. Waivers or Reimbursements of Expenses
Expenses may be waived or reimbursed by the Funds' investment
adviser(s), their principal underwriters, or any other provider of services to a
Portfolio or Fund without the prior approval of the Board of Trustees.
c. Exchange Privileges
Shareholders of a Multi-Class Portfolio may exchange shares of a
particular class for shares of the same class in another Multi-Class Portfolio,
at the relative net asset values of the respective shares to be exchanged and
with no sales charge, provided the shares to be acquired in the exchange are, as
may be necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount.
d. Conversion Feature
Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each of such classes, not later than eight years from the
acquisition of the Class B Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of an opinion of counsel or a
ruling from the Internal Revenue Service 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 Internal Revenue Code of 1986, as amended,
and (ii) that the conversion of shares does not constitute a taxable event under
federal income tax law.
3. Board Review
a. Initial Approval
The Board of Trustees, including the Independent Trustees at a
meeting held on November 15, 1995, initially approved the Plan based on a
determination that the Plan, including the expense allocation, is in the best
interests of each class and Portfolio individually and of the Funds.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, the Independent Trustees, have found that the proposed amendment,
including any proposed related expense allocation, is in the best interests of
each class and Portfolio individually and of the Fund.
<PAGE>
- 4 -
c. Periodic Review
The Board shall review reports of expense allocations and such
other information as they request at such times, or pursuant to such schedule,
as they may determine consistent with applicable legal requirements.
4. Contracts
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
The Plan, having been reviewed and approved by the Board of Trustees
and the Independent Trustees, shall take effect as of March 15, 1996.
6. Amendments
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3.b. of this
Plan.
funds\1912
<PAGE>
SCHEDULE A
PHOENIX ASSET RESERVE
PHOENIX CALIFORNIA TAX -EXEMPT BONDS, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND
STRATEGIC THEME FUND
SMALL CAP FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND:
CAPITAL APPRECIATION PORTFOLIO
DIVERSIFIED INCOME
INTERNATIONAL PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO
TAX-EXEMPT BOND PORTFOLIO
EMERGING MARKETS BOND PORTFOLIO
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX SERIES FUND:
BALANCED SERIES
CONVERTIBLE SERIES
GROWTH SERIES
HIGH YIELD FUND SERIES
MONEY MARKET FUND SERIES
U.S. GOVERNMENT SECURITIES FUND
U.S. STOCK FUND
PHOENIX TOTAL RETURN FUND, INC.
PHOENIX WORLDWIDE OPPORTUNITIES FUND
funds\1922
PHOENIX FUNDS
(the "Funds")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
The portfolios of the Funds listed on Schedule A hereto shall offer two
classes of shares, Class A and Class B ("Multi-Class Portfolios"). Shares of the
Multi-Class Portfolios shall represent an equal pro rata interest in the
respective Multi-Class Portfolio and, generally, shall have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class shall have a different designation; (b) each class shall bear any Class
Expenses, as defined by Section B, below; (c) each class shall have exclusive
voting rights on any matter submitted to shareholders that relates solely to its
distribution arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. In addition, Class A and Class B
shares shall have the features described in Sections a, b, c and d, below.
a. Distribution Plans
The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with
respect to each Multi-Class Portfolio, containing substantially the following
terms:
i. Class A shares of each Multi-Class Portfolio shall
reimburse Phoenix Equity Planning Corporation (the "Distributor") for costs and
expenses incurred in connection with distribution and marketing of shares
thereof, as provided in the Class A Distribution Plan and any supplements
thereto, subject to an annual limit of 0.25%, or in some cases 0.30%, of the
average daily net assets of a Multi-Class Portfolio's Class A shares.
<PAGE>
- 2 -
ii. Class B shares of each Multi-Class Portfolio shall
reimburse the Distributor for costs and expenses incurred in connection with
distribution and marketing of shares thereof, as provided in the Class B
Distribution Plan and any supplements thereto, subject to an annual limit of
1.00% of the average daily net assets of a Multi-Class Portfolio's Class B
shares.
b. Allocation of Income and Expenses
i. General.
The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each
Multi-Class Portfolio shall be allocated to each class on the basis of its net
asset value relative to the net asset value of the Multi-Class Portfolio.
Expenses to be so allocated include expenses of the Funds that are not
attributable to a particular Multi-Class Portfolio or class of a Multi-Class
Portfolio but are allocated to a Multi-Class Portfolio ("Fund Expenses") and
expenses of a particular Multi-Class Portfolio that are not attributable to a
particular class of that Multi-Class Portfolio ("Portfolio Expenses"). Fund
Expenses include, but are not limited to, trustees' fees, insurance costs and
certain legal fees. Portfolio Expenses include, but are not limited to, certain
state registration fees, custodial fees, advisory fees and other expenses
relating to the management of the Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (1) transfer agency fees; (2) stationery, printing,
postage, and delivery expenses relating to preparing and distributing
shareholder reports, prospectuses, and proxy statements; (3) state Blue Sky
registration fees; (4) SEC registration fees; (5) expenses of administrative
personnel and services to the extent related to another category of
class-specific expenses; (6) trustees' fees and expenses; (7) accounting
expenses, auditors' fees, litigation expenses, and legal fees and expenses; and
(8) expenses incurred in connection with shareholder meetings. Expenses
described in subsection (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this paragraph may be
allocated as Class Expenses, if a Fund's President and Treasurer have
determined, subject to Board approval or ratification, which of such categories
of expenses will be treated as Class Expenses, consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of 1986, as amended
("Code"). The difference between the Class Expenses allocated to each share of a
class during a year and the Class Expenses allocated to each share of any other
class during such year shall at all times be less than .50% of the average daily
net asset value of the class of shares with the smallest average net asset
value. The afore-described description of Class Expenses and any amendment
thereto shall be subject to the continuing availability of an opinion of counsel
or a ruling from the Internal Revenue Service to the effect that any such
allocation of expenses or the assessment of higher distribution fees and
transfer agency costs on any class of shares does not result in any dividends or
distributions constituting "preferential dividends" under the Code.
<PAGE>
- 3 -
In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense or
Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 18f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated
as Class Expenses and any subsequent changes thereto as set forth in this Plan
shall be reviewed by the Board of Trustees and approved by such Board and by a
majority of the Trustees who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Trustees")
iii. Waivers or Reimbursements of Expenses
Expenses may be waived or reimbursed by the Fund's investment
adviser(s), its principal underwriters, or any other provider of services to a
Multi-Class Portfolio without the prior approval of the Board of Trustees.
c. Exchange Privileges
Shareholders of a Multi-Class Portfolio may exchange shares of a
particular class for shares of the same class in another Multi-Class Portfolio,
at the relative net asset values of the respective shares to be exchanged and
with no sales charge, provided the shares to be acquired in the exchange are, as
may be necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount.
d. Conversion Feature
Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each such classes, not later than eight years from the
acquisition of the Class B Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of an opinion of counsel or a
ruling from the Internal Revenue Service to the effect that the conversion of
shares does not constitute a taxable event under federal income tax law.
3. Board Review
a. Approval of Amended and Restated Plan
The Board of Trustees, including the Independent Trustees, at
a meeting held on August 21, 1996, approved the Amended and Restated Plan based
on a determination that the Plan, including the expense allocation, is in the
best interests of each class and Multi-Class Portfolio individually and of the
Funds.
<PAGE>
- 4 -
b. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, the Independent Trustees, have found that the proposed amendment,
including any proposed related expense allocation, is in the best interests of
each class and Multi-Class Portfolio individually and of the Funds.
c. Periodic Review
The Board shall review reports of expense allocations and such
other information as they request at such times, or pursuant to such schedule,
as they may determine consistent with applicable legal requirements.
4. Contracts
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
6. Amendments
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
<PAGE>
SCHEDULE A
PHOENIX CALIFORNIA TAX -EXEMPT BONDS, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND:
DIVERSIFIED INCOME PORTFOLIO
EMERGING MARKETS BOND PORTFOLIO
INTERNATIONAL PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO
SMALL CAP PORTFOLIO
TAX-EXEMPT BOND PORTFOLIO
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES
BALANCED FUND SERIES
CONVERTIBLE FUND SERIES
GROWTH FUND SERIES
HIGH YIELD FUND SERIES
MONEY MARKET FUND SERIES
U.S. GOVERNMENT SECURITIES FUND SERIES
PHOENIX TOTAL RETURN FUND, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND
MICRO CAP FUND
STRATEGIC THEME FUND
SMALL CAP FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC. CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 109492
<INVESTMENTS-AT-VALUE> 114282
<RECEIVABLES> 2331
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 116613
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1549
<TOTAL-LIABILITIES> 1549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110326
<SHARES-COMMON-STOCK> 8911
<SHARES-COMMON-PRIOR> 9291
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (78)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (237)
<ACCUM-APPREC-OR-DEPREC> 5053
<NET-ASSETS> 115064
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7411
<OTHER-INCOME> 0
<EXPENSES-NET> (1205)
<NET-INVESTMENT-INCOME> 6206
<REALIZED-GAINS-CURRENT> 1098
<APPREC-INCREASE-CURRENT> 757
<NET-CHANGE-FROM-OPS> 8061
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6214
<DISTRIBUTIONS-OF-GAINS> 523
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2203
<NUMBER-OF-SHARES-REDEEMED> (2802)
<SHARES-REINVESTED> 219
<NET-CHANGE-IN-ASSETS> (3564)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (34)
<OVERDIST-NET-GAINS-PRIOR> (809)
<GROSS-ADVISORY-FEES> 543
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1204
<AVERAGE-NET-ASSETS> 120615
<PER-SHARE-NAV-BEGIN> 12.63
<PER-SHARE-NII> 0.67
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (0.68)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.77
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 00
<NAME> Class B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 110994
<INVESTMENTS-AT-VALUE> 119060
<RECEIVABLES> 2313
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121377
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 297
<TOTAL-LIABILITIES> 297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113655
<SHARES-COMMON-STOCK> 63
<SHARES-COMMON-PRIOR> 36
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (427)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (163)
<ACCUM-APPREC-OR-DEPREC> 8014
<NET-ASSETS> 121079
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3737
<OTHER-INCOME> 0
<EXPENSES-NET> (564)
<NET-INVESTMENT-INCOME> 3173
<REALIZED-GAINS-CURRENT> 646
<APPREC-INCREASE-CURRENT> 3716
<NET-CHANGE-FROM-OPS> 7535
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 369
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (34)
<OVERDIST-NET-GAINS-PRIOR> (809)
<GROSS-ADVISORY-FEES> 272
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 564
<AVERAGE-NET-ASSETS> 120032
<PER-SHARE-NAV-BEGIN> 12.63
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.44
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.06
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
