As filed with the Securities and Exchange Commission on August 8, 1997
Registration Nos. 2-83024
811-3714
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective
Amendment No. 20 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 21 [X]
(Check appropriate box or boxes.)
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Phoenix California Tax Exempt Bonds, Inc.
(Exact Name of Registrant as Specified in Articles of Incorporation)
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101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
-------------
Thomas N. Steenburg
Vice President, Counsel and Secretary
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0479
(name and address of Agent for Service)
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Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 28, 1997 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, 1997 was filed by
Registrant with the Commission on June 27, 1997.
================================================================================
<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
- ---------------------------------------------------- ------------------------------------------------------
<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
Account Services
8. Redemption or Purchase ..................... How to Redeem Shares
9. Legal Proceedings ........................ Not applicable
</TABLE>
PART B
<TABLE>
<CAPTION>
Form N-1A Item No. Statement of Additional Information Caption
- ------------------------------------------------------- --------------------------------------------------------
<S> <C> <C>
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
15. Control Persons and Principal Holders of
Securities ................................. Directors and Officers
16. Investment Advisory and Other Services ...... Services of the Adviser; The Distributor; Distribution
Plans
17. Brokerage Allocation ........................ Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities ......... The Fund
19. Purchase, Redemption and Pricing of Securities Net Asset Value; How to Buy Shares; Reinvestment
Being Offered .............................. Privilege; Investor Account Services; How to Redeem
Shares
20. Tax Status .................................... Dividends, Distributions and Taxes
21. Underwriter ................................. The Distributor; Distribution Plans
22. Calculations of Performance Data ............ Performance Information
23. Financial Statements ........................ Financial Statements
</TABLE>
<PAGE>
PHOENIX FUNDS
PROSPECTUS
AUGUST 28, 1997
Phoenix California Tax Exempt Bonds, Inc.
[logo] Phoenix
Duff & Phelps
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
August 28, 1997
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, 1997, 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: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
INTRODUCTION ................................. 3
FUND EXPENSES ................................. 4
FINANCIAL HIGHLIGHTS ........................ 5
PERFORMANCE INFORMATION ..................... 6
INVESTMENT OBJECTIVE AND POLICIES ............ 6
INVESTMENT TECHNIQUES AND RELATED RISKS ...... 8
MANAGEMENT OF THE FUND ........................ 9
DISTRIBUTION PLANS ........................... 10
HOW TO BUY SHARES ........................... 12
INVESTOR ACCOUNT SERVICES ..................... 16
NET ASSET VALUE .............................. 17
HOW TO REDEEM SHARES ........................ 18
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 19
ADDITIONAL INFORMATION ........................ 19
TAX FREE vs. TAXABLE INCOME .................. 20
</TABLE>
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 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 fee. See "The Financial
Agent." Equity Planning also serves as the Fund's transfer agent. See "The
Custodian and 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 and 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
3
<PAGE>
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 the fiscal year
ended April 30, 1997.
<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 first year,
price or redemption proceeds, as applicable) 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, 1997)
Management Fees 0.45% 0.45%
12b-1 Fees (a) 0.25% 1.00%
Other Operating Expenses 0.23% 0.23%
------ --------------------------
Total Fund Operating Expenses 0.93% 1.68%
====== ==========================
</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 $76 $97 $156
Class B Shares $57 $73 $91 $179
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of the
period:
Class A Shares $57 $76 $97 $156
Class B Shares $17 $53 $91 $179
</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. Class B
Share figures assume conversion to Class A Shares after eight years. 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,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ........................... $ 12.77 $ 12.63 $ 13.03
Income from investment operations
Net investment income .......................................... 0.66 0.67 0.71
Net realized and unrealized gain (loss) ........................ 0.04 0.20 0.05
-------- -------- --------
Total from investment operations .............................. 0.70 0.87 0.76
-------- -------- --------
Less distributions
Dividends from net investment income ........................... (0.66) (0.67) (0.76)
Distributions in excess of net investment income ............... -- (0.01) --
Distributions from net realized gains ........................... (0.09) (0.03) (0.31)
Distributions in excess of accumulated net realized gains ...... -- (0.02) (0.09)
-------- -------- --------
Total distributions .......................................... (0.75) (0.73) (1.16)
-------- -------- --------
Change in net asset value ....................................... (0.05) 0.14 (0.40)
-------- -------- --------
Net asset value, end of period ................................. $ 12.72 $ 12.77 $ 12.63
======== ======== ========
Total return(1) ................................................ 5.56% 6.92% 6.34%
Ratios/supplemental data:
Net assets, end of period (thousands) ........................... $109,358 $113,806 $117,370
Ratio to average net asset of:
Operating expenses ............................................. 0.93% 0.99% 0.93%
Net investment income .......................................... 5.13% 5.15% 5.63%
Portfolio turnover rate .......................................... 17% 20% 51%
<CAPTION>
1994 1993 1992 1991
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................... $ 13.64 $ 13.20 $ 13.07 $ 12.58
Income from investment operations
Net investment income .......................................... 0.80 0.81 0.87 0.90
Net realized and unrealized gain (loss) ........................ (0.53) 0.51 0.24 0.51
-------- -------- -------- --------
Total from investment operations .............................. 0.27 1.32 1.11 1.41
-------- -------- -------- --------
Less distributions
Dividends from net investment income ........................... (0.76) (0.80) (0.88) (0.90)
Distributions in excess of net investment income ............... -- -- -- --
Distributions from net realized gains ........................... (0.12) (0.08) (0.10) (0.02)
Distributions in excess of accumulated net realized gains ...... -- -- -- --
-------- -------- -------- --------
Total distributions .......................................... (0.88) (0.88) (0.98) (0.92)
-------- -------- -------- --------
Change in net asset value ....................................... (0.61) 0.44 0.13 0.49
-------- -------- -------- --------
Net asset value, end of period ................................. $ 13.03 $ 13.64 $ 13.20 $ 13.07
======== ======== ======== ========
Total return(1) ................................................ 1.80% 10.38% 8.68% 11.36%
Ratios/supplemental data:
Net assets, end of period (thousands) ........................... $131,365 $147,760 $139,118 $124,051
Ratio to average net asset of:
Operating expenses ............................................. 0.85% 0.90% 0.68% 0.63%
Net investment income .......................................... 5.82% 6.00% 6.55% 6.94%
Portfolio turnover rate .......................................... 25% 25% 33% 26%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
----------------------------------- --------------------------
Year Ended April 30,
1990 1989 1988 1997 1996
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 12.72 $ 12.27 $ 12.50 $ 12.77 $ 12.63
Income from investment operations
Net investment income .................................... 0.90 0.89 0.90 0.56 0.56(2)
Net realized and unrealized gain (loss) .................. (0.14) 0.46 (0.23) 0.05 0.20
-------- -------- ------- --------- -----------
Total from investment operations ..................... 0.76 1.35 0.67 0.61 0.76
-------- -------- ------- --------- -----------
Less distributions
Dividends from net investment income ..................... (0.90) (0.90) (0.90) (0.56) (0.56)
Distributions in excess of net investment income ......... -- -- -- -- (0.01)
Distributions from net realized gains .................. -- -- -- (0.09) (0.03)
Distributions in excess of accumulated net realized gains -- -- -- -- (0.02)
-------- -------- ------- --------- -----------
Total distributions .................................... (0.90) (0.90) (0.90) (0.65) (0.62)
-------- -------- ------- --------- -----------
Change in net asset value ................................. (0.14) 0.45 (0.23) (0.04) 0.14
-------- -------- ------- --------- -----------
Net asset value, end of period ........................... $ 12.58 $ 12.72 $ 12.27 $ 12.73 $ 12.77
======== ======== ======= ========= ===========
Total return(1) .......................................... 6.05% 11.41% 5.59% 4.84% 6.10%
Ratios/supplemental data:
Net assets, end of period (thousands) ..................... $107,612 $103,415 $88,703 $1,359 $1,258
Ratio to average net asset of:
Operating expenses ....................................... 0.66% 0.73% 0.77% 1.68% 1.78%
Net investment income .................................... 6.98% 7.13% 7.32% 4.37% 4.32%
Portfolio turnover rate .................................... 27% 34% 30% 17% 20%
<CAPTION>
From
Inception
7/26/94
to
4/30/95
---------------
<S> <C>
Net asset value, beginning of period ..................... $ 13.04
Income from investment operations
Net investment income .................................... 0.48
Net realized and unrealized gain (loss) .................. 0.01
----------
Total from investment operations ..................... 0.49
----------
Less distributions
Dividends from net investment income ..................... (0.50)
Distributions in excess of net investment income ......... --
Distributions from net realized gains .................. (0.31)
Distributions in excess of accumulated net realized gains (0.09)
----------
Total distributions .................................... (0.90)
----------
Change in net asset value ................................. (0.41)
----------
Net asset value, end of period ........................... $ 12.63
==========
Total return(1) .......................................... 4.10%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ..................... $460
Ratio to average net asset of:
Operating expenses ....................................... 1.55%(3)
Net investment income .................................... 4.90%(3)
Portfolio turnover rate .................................... 51%
</TABLE>
- -----------
(1) Maximum sales charge is not reflected in total return calculation.
(2) Computed using average shares outstanding.
(3) Annualized
(4) Not annualized
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 Composite Stock
Price Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far
East Index (EAFE), Consumer's Price Index, Lehman Brothers Aggregate Bond
Index, Lehman Brothers Municipal Bond Index, Lehman Brothers Corporate Index
and Lehman Brothers T-Bond Index.
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 the 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, Lehman Brothers Aggregate Bond Index, Lehman
Brothers Municipal Bond Index, CS First Boston High Yield Index and Salomon
Brothers Corporate and Government Bond Indices.
Performance information for the Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of the Fund during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objective
and policies, characteristics and qualities of the portfolio, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of the
methods used to determine total return for the Fund, see the Statement of
Additional Information.
The Fund's Annual Report, available upon request and without charge by
calling (800) 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.
6
<PAGE>
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
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 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
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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. Industrial employment is central to Puerto Rico's economy, 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.
On August 20, 1996, President Clinton signed into law a bill that 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 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.
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 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.
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The Fund may from time to time invest a portion of its assets on a
temporary basis in "temporary investments," the income from which may be
subject to Federal and state income tax. Such temporary investments may consist
of notes from issuers having, at the time of purchase, an issue of outstanding
municipal bonds rated within the three highest grades by S&P, Moody's or Fitch
(taxable or tax exempt); commercial paper rated A-1, P-1 or F-1 grade by S&P,
Moody's or Fitch, respectively, and U.S. Treasury and agency securities. These
investments may be made pending the investment or reinvestment of proceeds from
the sale of its shares or portfolio securities and will not exceed 20% of the
Fund's total assets except when abnormal market or economic conditions warrant
a temporary defensive position. When the Fund is in a temporary defensive
position, it is not investing in securities selected to meet the Fund's
investment objectives. In addition, for such temporary defensive purposes, the
Fund may pursue a policy of retaining cash or investing part or all of its
assets in cash equivalents.
The Fund may purchase municipal obligations on a when-issued basis, i.e.,
delivery and payment for the securities will take place after the transaction
date, normally within 15 to 45 days, though the payment obligation and the
interest rate that will be received on the securities is fixed at the time the
buyer enters into the commitment. The Fund will only make commitments to
purchase such securities with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date
if it is deemed advisable as a matter of investment strategy. No interest
accrues to the Fund prior to delivery of the purchased securities. A segregated
account of the Fund consisting of high quality interest-bearing liquid debt
securities with a market value at least equal to the amount of the Fund's
when-issued commitment will be maintained with the Custodian so that the market
value of the account will, on a daily basis, equal or exceed the amount of such
commitments by the Fund. When the time comes to pay for when-issued securities,
the Fund may meet its obligations from the segregated account, sale of other
securities, or, although it would not normally expect to do so, from the sale
of the when-issued securities themselves (which may have a market value greater
or less than the Fund's payment obligation). Securities purchased on a
when-issued basis and the securities held in the Fund's portfolio are subject
to changes in value based upon the public's perception of the creditworthiness
of the issuers and changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely with changes in interest rates. If
the Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater
possibility of fluctuation in the Fund's net asset value.
Financial Futures and Related Options
The Fund may enter into financial futures contracts and related options as
a hedge against anticipated changes in the market value of Fund securities or
securities which the Fund intends to purchase. Hedging is the initiation of an
offsetting position in the futures market which is intended to minimize the
risk associated with a position's underlying securities in the cash market.
Investment techniques related to financial futures and options are summarized
below and are described more fully in the Statement of Additional Information.
Financial futures contracts consist of interest rate futures contracts and
securities index futures contracts. An interest rate futures contract obligates
the seller of the contract to deliver, and the purchaser to take delivery of,
the interest rate securities called for in the contract at a specified future
time and at a specified price. A securities index assigns relative values to
the securities included in the index, and the index fluctuates with changes in
the market values of the securities so included. A securities index futures
contract is a bilateral agreement pursuant to which two parties agree to take
or make delivery of an amount of cash equal to a specified dollar amount times
the difference between the index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
An option on a financial futures contract gives the purchaser the right to
assume a position in the contract (a long position if the option is a call and
a short position if the option is a put) at a specified exercise price at any
time during the period of the option.
The Fund may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange- or
board-traded put and call options on financial futures contracts. The Fund will
engage in transactions in financial futures contracts and related options only
for hedging purposes and not for speculation. In addition, the Fund will not
purchase or sell any financial futures contract or related option if,
immediately thereafter, the sum of the assets 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 of a futures contract or a call option on a futures
contract, any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily equal
to the market value of the futures contract minus the Fund's initial margin
deposit, will be deposited in a pledged 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 an open-end management investment company, known as a mutual
fund. 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
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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 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. 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
$1.6 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, 1997 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 has been the Director, Fixed Income Research with National
since 1996. He also became the Vice President of Phoenix Multi-Portfolio Fund
in 1996. From 1992-1994 he was an Investment Analyst with Phoenix Home Life and
from 1995-1996 he was an Investment Analyst with Phoenix Investment Counsel,
Inc. He also held various positions with Connecticut National Bank between 1990
and 1992.
Mr. Wehr has been the Managing Director, Fixed Income with National since
1996 and Vice President between 1993 and 1996. He has also been Senior Vice
President (1997-present), Vice President (1988-1997) of Phoenix Multi-Portfolio
Fund; Senior Vice President (1997-present), Vice President (1990-1997) of
Phoenix Series Fund; Senior Vice President (1997-present), Vice President
(1991-1997) of the Phoenix Edge Series Fund; Senior Vice President (1997-
present), Vice President (1996-1997) of Phoenix Duff & Phelps Institutional
Mutual Funds; Senior Vice President (1997-present) of Phoenix Multi-Sector
Fixed Income Fund, Inc., and Senior Vice President (1997-present), Phoenix
Multi-Sector Short Term Bond Fund. He also held the position Managing Director,
Public Fixed Income of Phoenix Home Life Insurance Company between 1991-1995
and various positions with Phoenix Home Life since 1991.
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 is entitled to a fee, payable monthly and based
upon (a) the average of the aggregate daily net asset values of the Fund, at
the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee based on the predominant type of assets of the Fund; and
(c) an annual fee of $12,000 for each class of shares beyond one.
For its services during the Fund's fiscal year ended April 30, 1997,
Equity Planning received a fee of $50,587 or .04% 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 $19.25 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 Conduct Rules 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. 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
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officer of the Fund. G. Jeffrey Bohne, Nancy G. Curtiss, William E. Keen, III,
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 brokers 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, 1997, the Fund paid $286,562 and
$13,644 under the Distribution Plan for Class A and Class B Shares respectively.
The fees were used to compensate broker-dealers for servicing shareholder's
accounts, including $206 paid to W.S. Griffith & Co., an affiliate, 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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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. Shares issued will be electronically recorded in book
entry form. A fee may be incurred by the shareholder for a previously issued
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 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, 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
12
<PAGE>
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.
<TABLE>
<CAPTION>
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 %
- -------------------- --------------- --------------- -----------------
<S> <C> <C> <C>
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**
</TABLE>
- ---------
* 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:
<TABLE>
<CAPTION>
Purchase Amount Payment to Broker/Dealers
- -------------------------- --------------------------
<S> <C>
$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%
</TABLE>
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, agency,
custodial or similar capacity, if in the aggregate such accounts equal or
exceed $1,000,000; or (15) any person who
13
<PAGE>
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; 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.
In addition, Class A shares purchased by the following investors are not
subject to any Class A sales charge: (1) investment advisors and financial
planners who charge an advisory, consulting or other fee for their services and
buy shares for their own accounts or the accounts of their clients, and (2)
retirement plans and deferred compensation plans and trusts used to fund those
plans (including, for example, plans qualified or created under sections
401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that
buy shares for their own accounts, in each case if those purchases ae made
through a broker or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; (3) clients of such
investment advisors or financial planners who buy shares for their own accounts
may also purchase shares without sales charge but only if their accounts are
linked to a master account of their investment advisor or financial planner on
the books and records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements (each of these investors may
be charged a fee by the broker, agent or financial intermediary for purchasing
shares).
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
14
<PAGE>
price as described in the then current prospectus relating to such shares) of
shares of all Phoenix Funds owned) in excess of the threshold amounts described
in the section entitled "Initial Sales Charge Alternative--Class A Shares". To
use this option, the investor must supply sufficient account information to
Equity Planning to permit verification that one or more purchases qualify for a
reduced sales charge.
Associations. A group or association may be treated as a "single
purchaser" and qualify for reduced initial sales charges under the Combination
Purchase Privilege and Right of Accumulation if the group or association (1)
has been in existence for at least six months; (2) has a legitimate purpose
other than to purchase mutual fund shares at a reduced sales charge; (3) gives
its endorsements or authorization in the investment program to facilitate
solicitation of the membership by the investment dealer, thus effecting
economies of sales effort; and (4) is not a group whose sole organizational
nexus is that the members are credit card holders of a company, policyholders
of an insurance company, customers of a bank or a broker-dealer or clients of
an investment adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge at
the time of purchase. The Class B Shares are subject to a sales charge if
redeemed within five years of purchase.
Proceeds from the contingent deferred sales charge are paid to the
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.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- --------------------- ---------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
</TABLE>
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 [75 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 701/2 under any
15
<PAGE>
retirement plan qualified under Sections 401, 408 or 403(b) of the Code or any
redemption resulting from the tax-free return of an excess contribution to an
IRA; (d) in connection with redemptions by 401(k) plans using an approved
participant tracking system for: participant hardships, death, disability or
normal retirement, and loans which are subsequently repaid; (e) in connection
with the exercise of certain exchange privileges among the Class B Shares of
the Fund and Class B Shares of other Phoenix Funds; (f) in connection with any
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the 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: (i) that the conversion of shares does
not constitute a taxable event under federal income tax law; and (ii) the
assessment of the higher distribution fees and transfer agency costs with
respect to Class B Shares does not result in any dividends or distributions
constituting "preferential dividends" under the Code. The conversion of Class B
Shares to Class A Shares may be suspended if such an opinion or ruling is not
available. In that event, no further conversions of Class B Shares would occur,
and shares might continue to be subject to the higher distribution fee for an
indefinite period which may extend beyond the period ending eight (8) years
after the end of the month in which affected Class B Shares were purchased. If
the Fund were unable to obtain such assurances with respect to the assessment
of distribution fees and transfer agent costs relative to the Class B Shares 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.
INVESTOR ACCOUNT SERVICES
The Fund mails periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund 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 toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Fund's Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal bank account to
be used to purchase additional shares for your account. The amount you
designate will be made available, in form payable to the order of the Transfer
Agent, by the bank on the date the bank draws on your account and will be used
to purchase shares at the applicable offering price.
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 your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then 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 in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the next business day after the
record date.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will 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
16
<PAGE>
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 your 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.
Class A and B 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, and elect to have all dividends
reinvested. The purchase of shares while participating in the withdrawal
program will ordinarily be disadvantageous to the Class A Shares investor since
a sales charge will be paid by the investor on the purchase of Class A Shares
at the same time as 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.
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. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
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, SIMPLE IRA, SIMPLE 401(k), 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
at (800) 243-4631 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix Fund for shares of another Phoenix
Fund without paying any fees or sales charges. On exchanges with share classes
that carry a contingent deferred sales charge, the CDSC schedule of the
original shares purchased continues to apply. Exchanges of shares held in
book-entry form may be exchanged 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; (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 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 Phoenix Fund after the exchange is made; and
(5) if you have elected not to use the telephone exchange privilege (see
below), a properly executed exchange request must be received by the
Distributor. Exchanges may be made over the telephone or in writing and may be
made at one time or systematically over a period of time. Note, each Phoenix
Fund has different investment objectives and policies. You should read the
prospectus of the Phoenix Fund into which the exchange is to be made before
making any exchanges. This privilege may be modified or terminated at any time
on 60 days' notice.
Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Fund reserves the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Fund and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk that the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by following the procedure outlined for selling shares
represented by certificate(s).
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading. The net asset value per share of the Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of the Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
17
<PAGE>
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
The Fund's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Directors or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Directors when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Short term investments
having a remaining maturity of less than sixty-one days are valued at amortized
cost, which the Directors have determined approximates market value. For
further information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
You have the right to have the Fund buy back shares at the net asset value
next determined after 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. In the case of a Class B Share
redemption, you will be subject to the applicable deferred sales charge, if
any, for such shares (see "Deferred Sales Charge Alternative--Class B Shares,"
above). Subject to certain restrictions, shares may be redeemed by telephone,
by check or in writing. In addition, shares may be sold through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The Fund does not charge any redemption fees. Payment for
shares redeemed is made within seven days; provided, however, that redemption
proceeds will not be disbursed until each check used for purchases of shares
has been cleared for payment by your bank, which may take up to 15 days after
receipt of the check.
The requirements to redeem shares are outlined in the table below.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's 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.
How can I sell my Shares?
[Phone symbol]
By Phone
[bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4PM will be executed
on the following business day
[Check symbol]
By Check [bullet] Select checkwriting on your New Account
Application
[bullet] $500 or more per check
[bullet] Can not be used to close an account
[Envelope symbol]
In Writing [bullet] Letter of instruction from the registered owner
including the fund and account number and
the number of shares or dollar amount you
wish to sell
[bullet] No signature guarantee is required if your
shares are registered individually, jointly, or
as custodian under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors
Act, the proceeds of the redemption do not
exceed $50,000, and the proceeds are payable
to the registered owners(s) at the address of
record
Shares previously issued in certificate form can not be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions. 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, telephone redemption
instructions will be recorded on tape, and all redemptions will be confirmed in
writing to you. 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, you 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
or may be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
Written Redemptions. Ownership of shares is recorded electronically in
book entry form; no share certificates are available. If you elect not to use
the telephone redemption or telephone exchange privileges or if the shares
being exchanged are represented by a previously issued certificate(s), you must
submit your request in writing. If the shares are being exchanged between
accounts that are not identically registered, the signature on such request
must be guaranteed by an eligible guarantor institution as defined by the
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
18
<PAGE>
certificate or certificates for the tendered shares must be duly endorsed and
submitted. The Distributor reserves the right to charge you for lost or stolen
certificates.
Account Reinstatement Privilege. You have a one time privilege of using
redemption proceeds from Class A and B Shares to purchase Class A Shares of any
Phoenix Fund with no sales charge (at net asset value next determined after the
request for reinvestment is made). For Federal income tax purposes, a
redemption 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 to
reinstate your account must be received by the Transfer Agent 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 Reinstatement Privilege.
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, 1997, the Fund distributed to shareholders net
realized capital gains of $0.09 per share which are taxable for Federal and
California income tax purposes.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders. In addition
to the Federal income tax consequences described above, which are applicable to
any investment in the Fund, there may be foreign, state or local tax
considerations, and estate tax considerations, applicable to the circumstances
of a particular investor. Additional information about taxes is set forth in
the Statement of Additional Information. Also, legislation may be enacted in
the future that could affect the tax consequences described above. Shareholders
are urged to consult their attorney or tax advisor regarding specific questions
as to Federal, foreign, state or local taxes.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Fund may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds, for any account which does not have
a taxpayer identification number or social security number and certain required
certifications.
The Fund reserves the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
The Fund sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing federal income tax returns.
ADDITIONAL INFORMATION
Organization of the Fund
The Fund was incorporated as a Maryland corporation on April 7, 1983 and
has undergone several name changes. Since December 23, 1993, the Fund has been
known as 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
19
<PAGE>
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.
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 1996 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 1996* Combined Tax-Exempt Yield
- ---------------------------------------------------- Federal and ------------------------------------------------------
State
Single Return Joint Return Bracket** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
is equivalent to a Taxable Yield of
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 18,358 to $24,000 $ 36,715 to $40,100 20.10% 5.63 6.26 6.88 7.51 8.14 8.76 9.39
24,001 to 25,484 40,101 to 50,968 32.32% 6.65 7.39 8.13 8.87 9.60 10.34 11.08
25,485 to 32,207 50,969 to 64,414 33.76% 6.79 7.55 8.30 9.06 9.81 10.57 11.32
32,208 to 58,150 64,415 to 96,900 34.70% 6.89 7.66 8.42 9.19 9.95 10.72 11.48
58,151 to 121,300 96,901 to 147,700 37.42% 7.19 7.99 8.79 9.59 10.39 11.19 11.98
121,301 to 263,750 147,701 to 263,750 41.95% 7.75 8.61 9.47 10.34 11.20 12.06 12.92
263,751 + 263,751 + 45.22% 8.21 9.13 10.04 10.95 11.87 12.78 13.69
- ------------------------ ------------------------- ------ ---- ---- ------ ------ ------ ------ ------
</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 $117,950 (single) and $176,950 (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. The chart
also assumes shareholders earned no capital gains or experienced no
capital losses.
20
<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:
Account Type Give Social Security Number or Tax Identification Number
of:
<TABLE>
<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, 1997. 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 fiscal year ended April 30, 1997 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.
[Recycled logo graphic] Printed on recycled paper using soybean ink
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
PO Box 2200
Enfield CT 06083-2200
BULK RATE MAIL
U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
[logo] Phoenix
Duff & Phelps
PEP692 (8/97)
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
August 28, 1997
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, 1997,
and should be read in conjunction with it. The Fund's Prospectus may be
obtained by calling Phoenix Equity Planning Corporation ("Equity Planning") at
(800) 243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND (19) ................................. 2
INVESTMENT OBJECTIVE AND POLICIES (6) ......... 2
RISK FACTORS (8) .............................. 5
INVESTMENT RESTRICTIONS ..................... 10
PERFORMANCE INFORMATION (6) .................. 11
PORTFOLIO TRANSACTIONS AND BROKERAGE ......... 12
SERVICES OF THE ADVISER (9) .................... 13
NET ASSET VALUE (17) ........................ 13
HOW TO BUY SHARES (12) ........................ 14
INVESTOR ACCOUNT SERVICES (16) ............... 14
REDEMPTION OF SHARES (18) ..................... 14
DIVIDENDS, DISTRIBUTIONS AND TAXES (19) ...... 15
TAX SHELTERED RETIREMENT PLANS ............... 17
THE DISTRIBUTOR (10) ........................ 17
PLANS OF DISTRIBUTION (10) .................. 17
DIRECTORS AND OFFICERS ........................ 19
OTHER INFORMATION ........................... 25
APPENDIX .................................... 26
</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--(800) 367-5877
Telecommunication Device (TTY)--(800) 243-1926
PDP 692B (8/97)
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.
3
<PAGE>
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, 1996 and 1997 were
20% and 17%, 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, any
asset, including equity securities and non-investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily equal to the market
value of the futures contract minus the Fund's initial margin deposit with
respect thereto will be deposited in a pledged 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 issues. 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 an appropriation 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.
Substantially increased General Fund revenues, above initial budget
projections, in the 1994-95, 1995-96 and 1996-97 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.
On November 5, 1996, voters approved Proposition 218, entitled the "Right
to Vote on Taxes Act," which incorporates new Articles XIIIC and XIIID into the
California Constitution. These new provisions enact limitations on the ability
of local government agencies to impose or raise various taxes, fees, charges
and assessments without voter approval. Certain "general taxes" imposed after
January 1, 1995 must be approved by voters in order to remain in effect. In
addition, Article XIIIC clarifies the right of local voters to reduce taxes,
fees, assessments or charges through local initiatives.
Proposition 218 does not affect the State or its ability to levy or
collect taxes. There are a number of ambiguities concerning the Proposition and
its impact on local governments and their bonded debt which will require
interpretation by the courts or the Legislature. The State legislative analyst
estimated that enactment of Proposition 218 would reduce local government
revenues statewide by over $100 million a year, and that over time revenues to
local governments would be reduced by several hundred million dollars a year
under this Proposition.
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.
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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.
After suffering through a severe recession, since the start of 1994 the
State's economy has been on a steady recovery. Employment increased 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.
The recession seriously affected State tax revenues and caused an increase
in expenditures for health and welfare programs. 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
six years, and the State accumulated a budget deficit of about $2.8 billion at
its peak at June 30, 1993. The State's cash condition became so serious from
late spring 1992 until 1995, the State had to rely on the issuance of
short-term notes which matured in a subsequent fiscal year to finance its
ongoing deficit and pay current obligations. With the repayment of the last of
these deficit notes in April, 1996, the State does not plan to rely further on
external borrowing across fiscal years, but will continue its normal cash flow.
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. 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.
Final data for the 1995-96 fiscal year showed revenues and transfers of
$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 during the fiscal year 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 had a
small negative balance of about $87 million at June 30, 1996, all but
eliminating the accumulated budget deficit from the early 1990's. Available
internal borrowable resources (available cash, after payment of all obligations
due) on June 30, 1996 was about $3.8 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash position
allowed it to repay the $4.0 billion Revenue Anticipation Warrant issue on
April 25, 1996, and to issue only $2.0 billion of revenue anticipation notes
during the fiscal year, which matured on June 28, 1996.
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 the signing of the
Budget Act, the State implemented its regular cash flow borrowing program with
the issuance of $3.0 billion of Revenue Anticipation Notes to mature on June
30, 1997. The Budget Act appropriated a modest budget reserve in the Special
Fund for Economic Uncertainties of $305 million, as of June 30, 1997. The
Department of Finance projected 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 on
January 1, 1997. As a result, revenues for the fiscal year were 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 contained General Fund appropriations totaling $47.251 billion, a 4.0%
increase over the final estimated 1995-96 expenditures. Special Fund
expenditures were budgeted at $12.6 billion.
Following enactment of the 1996-97 Budget Act, Congress passed and the
President signed (on August 22, 1996) the Personal Responsibility and Work
Opportunity Act of 1996 (P.L. 104-193, the "Law") making a fundamental reform
of the current welfare system. Among many provisions, the Law includes: (i)
conversion of Aid to Families with Dependent Children from an entitlement
program to a block grant titled Temporary Assistance for Needy Families (TANF),
with lifetime time limits on TANF recipients,
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work requirements and other changes; (ii) provisions denying certain federal
welfare and public benefits to legal noncitizens, allowing states to elect to
deny additional benefits (including TANF) to legal noncitizens, and generally
denying almost all benefits to illegal immigrants; and (iii) changes in the
Food Stamp program, including reducing maximum benefits and imposing work
requirements.
The Law requires states to implement the new TANF program not later than
July 1, 1997 and provides California approximately $3.7 billion in block grant
funds for fiscal year 1996-97 for the provisions of the Law. States are allowed
to implement TANF as soon as possible and will receive a prorated block grant
effective the date of application. The California State Plan was approved
November 27, 1996 to allow grant reductions to be implemented effective January
1, 1997 and to allow the State to capture approximately $267 million in
additional federal block grant funds over the currently budgeted level. None of
the other federal changes needed to achieve the balance of the $660 million
cost savings were enacted. Thus, in lieu of the $660 million savings initially
assumed, it is now projected that savings will total approximately $320
million. A preliminary analysis of the Law indicates that an overall assessment
of how these changes will affect the State's General Fund will not be known for
some time, and will depend on how the State implements the Law.
On January 9, 1997, the Governor released his proposed budget for the
1997-98 fiscal year (the "Governor's Budget"). The Governor's Budget projects
General Fund revenues and transfers in 1997-98 of $50.7 billion, a 4.6%
increase from revised 1996-97 figures. The Governor proposes expenditures of
$50.3 billion, a 3.9% increase from 1996-97. The Governor's Budget proposes a
balance in the Special Fund for Economic Uncertainties of $553 million on June
30, 1998. The Governor's Budget also anticipates about $3 billion of external
borrowing for cash flow purposes during the year, with no requirement for
cross-fiscal year borrowing.
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 a 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. The bankruptcy filing stemmed from approximately $1.7 billion in losses
suffered by the County's investment pool due to investments in high risk
"derivative" securities. On June 12, 1996, it emerged from bankruptcy after the
successful sale of $880 million in municipal bonds allowed the County to pay
off the last of its creditors. On January 7, 1997, the County returned to the
municipal bond market with a $136 million bond issue maturing in 13 years at an
insured yield of 7.23%.
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) 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; (ii) a lawsuit seeking
reimbursement for alleged state-mandated costs involving an estimated potential
liability to the State of over $1 billion; (iii) lawsuits related to
contamination at the Stringfellow toxic waste site; (iv) 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; (v) a
claim that payment of wages in registered warrants violated the Fair Labor
Standards Act, which involves maximum damages of approximately $500 million;
(vi) 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; (vii) a lawsuit involving the reduction of the State's Aid to
Families with Dependent Children ("AFDC") payments in 1992, 1993, and 1994;
(viii) a lawsuit involving the 1994-95 Budget Act's 2.3% reduction in AFDC
payments; (ix) 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; (x) 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
(xi) 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.
Due to the State's continuing budget problems, the State's general
obligation bonds were downgraded in July 1994 from "A1" to "Aa" by Moody's,
from "A+" to "A" by S&P, and from "AA" to "A" by Fitch. All three ratings
companies expressed uncertainty in the State's ability to balance its budget by
1996. However, in 1996, citing the State's improving economy and budget
situation, the State's general obligation bonds are now rated "A+" by S&P, "A1"
by Moody's and "A+" by Fitch. 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 0.8% in
fiscal 1992, reflecting the effects of the last recession in the U.S. economy,
the growth pattern continued thereafter with real gross domestic product
increases of
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3.4% and 3.1% for fiscal 1995 and 1996, respectively. Factors contributing to
Puerto Rico's more than 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.
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. The Planning Board estimates that in fiscal
1996, manufacturing generated $18.9 billion or 41.4% of gross domestic product
and accounted for 15.3% of total employment; as compared with fiscal 1995, when
it generated $17.9 billion, or 41.9%, of gross domestic product and accounted
for 16.4% of total employment. 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 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.
The service sector, which includes hotel and related services, and which
currently accounts for approximately 48.3% of total employment, accounted for
$17.1 billion, or 37.6%, of Puerto Rico's gross domestic product in fiscal
1996, as compared with $16.2 billion, or 38.1%, of gross domestic product in
fiscal 1995. The service 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 has also contributed to increased
economic activity in fiscal 1996. The growth in the construction industry has
been evidenced by an increase of 26.4% in construction investment for fiscal
1996 over fiscal 1995. Tourism has grown in each fiscal year since fiscal 1985.
More than 4 million visitors spent over $1.9 billion in Puerto Rico in fiscal
1996. San Juan has become the largest home port for cruise ships in the
Caribbean and the second largest home port for cruise ships in the world.
Twenty-five U.S. and international airlines offer scheduled service to and from
San Juan, and a major U.S. airline uses San Juan as a hub for its
intra-Caribbean operations. This reflects the importance of Puerto Rico as a
tourist destination and as a transportation hub in the Caribbean.
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 resulted in the rate of
growth of public sector debt exceeding the rate of growth of gross domestic
product. During fiscal years 1992 to 1996, public sector debt increased 27.5%,
while gross product rose 27.7%. After taking into consideration the issuance on
April 3, 1997 of the Public Improvement Bonds and the Refunding Bonds and the
refunding of certain general obligation bonds of the Commonwealth by the
Refunding Bonds and the issuance of the bonds, short-term debt outstanding
relative to total debt was approximately 12.2%. Short-term debt outstanding
includes $550,000,000 in tax and revenue anticipation notes issued on December
17, 1996 and maturing on July 30, 1997.
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
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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.
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 without 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) issue senior securities, as such term is defined in the Investment
Company Act of 1940, as amended, except as otherwise permitted under these
fundamental investment restrictions;
(2) 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;
(3) borrow money in excess of 5% of the value of its total assets, or
pledge its assets to an extent greater than 5% of the value of its total
assets. Any such borrowings shall be from banks and shall be undertaken only as
a temporary measure or for extraordinary or emergency purposes. Deposits in
escrow in connection with the writing of covered call options or in connection
with the purchase or sale of financial futures contracts and related options
shall not be deemed to be a pledge or other encumbrance;
(4) engage in the business of underwriting the securities of others except
in connection with the purchase of securities for its portfolio of municipal
bonds;
(5) concentrate its investments in the securities of issuers all of which
conduct their principal business activities in the same industry provided that
this restriction shall not apply to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
(6) make any investment in real estate, real estate mortgage loans and/or
commodities, except that the Fund may (a) purchase or sell readily marketable
securities which are secured by interests in real estate, or issued by
companies which deal 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 do not exceed 5% of the value of the Fund's total
assets; and
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(7) make loans, except that the Fund may (a) invest up to 15% of its total
assets in repurchase agreements of a type regarded as "liquid" which are fully
collateralized as to principal and interest and which are entered into only
with commercial banks, brokers and dealers considered by the Fund to be
creditworthy and (b) loan its portfolio securities in amounts up to one-third
of the value of its total assets.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the values or costs of the Fund's assets
will not be considered a violation of the restriction.
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 Composite Stock
Price Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far
East Index (EAFE), Consumer's Price Index, Lehman Brothers Aggregate Bond
Index, Lehman Brothers Municipal Bond Index, Lehman Brothers Corporate Index
and Lehman Brothers T-Bond Index.
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, Lehman Brothers Aggregate Bond
Index, Lehman Brothers Municipal Bond Index, CS First Boston High Yield Index
and Salomon Brothers Corporate and Government Bond Indices.
For the 1, 5 and 10 year periods ended April 30, 1997, the average annual
total return of the Class A Shares was 0.52%, 5.13% and 6.83%, respectively.
For the one year period ended April 30, 1997, and since inception (July 26,
1994) for Class B Shares, the average annual total return was 0.85% and 4.48%
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, 1997 was 182.86%.
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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.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Fund. No advisory account of the Adviser is to be favored over any
other account and each account that participates in an aggregated order is
expected to participate at the average share price for all transactions of the
Adviser in that security on a given business day, with all transaction costs
shared pro rata based on the Fund's participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order is
partially filled, it shall be allocated pro rata based on the allocation order.
Notwithstanding the foregoing, the order may be allocated on a basis different
from that specified in the allocation order if all accounts of the Adviser
whose orders are allocated receive fair and equitable treatment and the reason
for such different allocation is explained in writing and is approved in
writing by the Adviser's compliance officer as soon as practicable after the
opening of the markets on the trading day following the day on which the order
is executed. If an aggregated
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<PAGE>
order is partially filled and allocated on a basis different from that
specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or
sale for a reasonable period following the execution of the aggregated order
that would result in it receiving or selling more shares than the amount of
shares it would have received or sold had the aggregated order been completely
filled. The Directors will annually review these procedures or as frequently as
shall appear appropriate.
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 management fees for the fiscal
years ended April 30, 1995, 1996 and 1997 amounted to $549,917, $542,769 and
$521,952 respectively. For the fiscal years ended April 30, 1995, 1996 and
1997, 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 a subsidiary of Phoenix Duff & Phelps Corporation, whose
majority shareholder is Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life"). Phoenix Home Life is a mutual insurance company engaged in the
insurance and investment business. 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 $1.6 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
November 19, 1996 and by the shareholders on March 14, 1997. 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 determined as of the close of
regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Since the Fund does not price securities on weekends or United States national
holidays, the net asset value of the Fund's foreign assets may be significantly
affected on days when the investor has no access to the Fund. The net asset
value per share of the Fund is determined by adding the values of all
securities and other assets of the Fund, subtracting liabilities, and dividing
by the total number of outstanding shares of the Fund. Assets and liabilities
are determined in accordance with generally accepted accounting principles and
applicable rules and regulations of the Securities and Exchange Commission. The
total liability allocated to a class, plus that class's distribution fee and
any other expenses allocated solely to that class, are deducted from the
proportionate interest of such class in the assets of the Fund, and the
resulting amount of each is divided by the number of shares of that class
outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Directors or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world,
the calculation of net asset value may not take place for the Fund which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of the Fund. All assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Directors or their
delegates. If at any time the Fund has investments where market quotations are
not readily available, such investments are valued at the fair value thereof as
determined in good faith by the Directors although the actual calculations may
be made by persons acting pursuant to the direction of the Directors.
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<PAGE>
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. However, 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 Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. See
the Fund's current Prospectus for more information.
INVESTOR ACCOUNT SERVICES
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 all classes. In most
cases, changes to account services may be accomplished over the phone.
Inquiries regarding policies and procedures relating to shareholder account
services should be directed to Shareholder Services at (800) 243-1574.
Exchanges. Under certain circumstances, shares of any Phoenix Fund 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 Series, Fund, or
Portfolio, 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 of any other Phoenix Fund, if
currently offered. On exchanges with Share Classes that carry a contingent
deferred sales charge, the CDSC schedule of the original shares purchased
continues to apply. The exchange of shares is treated as a sale and purchase
for federal income tax purposes (see also "Dividends, Distributions and
Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund automatically on a monthly,
quarterly, semi-annual or annual basis or may cancel this privilege at any
time. If you maintain an account balance 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), you may direct that shares be
automatically exchanged at predetermined intervals for shares of the same class
of another Phoenix Fund. This requirement does not apply to Phoenix "Self
Security" program participants. Systematic exchanges will be executed upon the
close of business on the 10th day of each month or the next succeeding business
day. Systematic exchange forms are available from the Distributor. 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 CDSC schedule of the original shares
purchased continues to apply.
Dividend Reinvestment Across Accounts. If you maintain an account balance
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), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Funds at net asset value. You should obtain a current
prospectus and consider the objectives and policies of each Fund carefully
before directing dividends and distributions to another Fund. Reinvestment
election forms and prospectuses are available from Equity Planning.
Distributions may also be mailed to a second payee and/or address. 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 your account are
repurchased or redeemed or transferred between the record date and the payment
date of a dividend or distribution, you will receive cash for the dividend or
distribution regardless of the distribution option selected.
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.
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<PAGE>
Telephone Redemption. Shareholders who do not have certificated shares
may redeem up to $50,000 worth of their shares by telephone. See the Fund's
current Prospectus for additional information.
By Check. You may elect to redeem shares held in your account by check.
Checks will be sent to you upon receipt by Equity Planning of a completed
application and signature card (attached to the application). If the signature
card accompanies your initial account application, the signature guarantee
section of the form may be disregarded. However, the Fund reserves the right to
require that all signatures be guaranteed prior to the establishment of a check
writing service account. When an authorization form is submitted after receipt
of the initial account application, all signatures must be guaranteed
regardless of account value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of redemption proceeds the
balance in your account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares in your account will be redeemed to cover
the amount of the check. The number of shares to be redeemed will be determined
on the date the check is received by the Transfer Agent. Presently there is no
charge to you for the check writing service, but this may be changed or
modified in the future upon two weeks written notice to shareholders. Checks
drawn from Class B accounts are subject to the applicable deferred sales
charge, if any.
The checkwriting procedure for redemption enables you to receive income
accruing on the shares to be redeemed until such time as the check is presented
to Equity Planning for payment. Inasmuch as canceled checks are returned to
shareholders monthly, no confirmation statement is issued at the time of
redemption.
Shareholders utilizing withdrawal checks will be subject to Equity
Planning's rules governing checking accounts. You should make sure that there
are sufficient shares in your account to cover the amount of any check drawn.
If insufficient shares are in the account and the check is presented to Equity
Planning on a banking day on which the Fund does not redeem shares (for
example, a day on which the New York Stock Exchange is closed), or if the check
is presented against redemption proceeds of an investment made by check which
has not been in the account for at least fifteen calendar days, the check may
be returned marked "Non-sufficient Funds" and no shares will be redeemed. You
may not close your account by a withdrawal check because the exact value of the
account will not be known until after the check is received by Equity Planning.
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). As of the date of this document, legislation is pending
under which the 30% "short short" test will be repealed. If the test is
repealed, the Fund would no longer be subject to this restriction. If, in any
taxable year, the Fund does not qualify as a regulated investment company, all
of its taxable income will be taxed to the Fund at corporate rates and the Fund
would not be eligible to pay exempt interest dividends.
Interest on certain "private activity bonds" issued after August 7, 1986,
although otherwise tax-exempt, is treated as a tax preference item for
alternative minimum tax purposes. Under regulations to be promulgated, the
Fund's exempt interest dividends will be treated as a tax preference item for
purposes of computing the alternative minimum tax liability of shareholders to
the extent attributable to interest paid on "private activity" bonds. Corporate
shareholders should also be aware that the receipt of exempt interest dividends
could subject them to alternative minimum tax under the provisions of Code
Section 56(f) (relating generally to book income or adjusted current earnings
in excess of taxable income).
15
<PAGE>
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 31%. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Generally,
shareholders subject to backup withholding will be (i) those for whom a
certified taxpayer identification number is not on file with the Fund, (ii)
those about whom notification has been received (either by the shareholder or
the Fund) from the Internal Revenue Service that they are subject to backup
withholding or (iii) those who, to the Fund's knowledge, have furnished an
incorrect taxpayer identification number. Generally, to avoid backup
withholding, an investor must, at the time an account is opened, certify under
penalties of perjury that the taxpayer identification number furnished is
correct and that he or she is not subject to backup withholding.
The Fund furnishes all shareholders, within 31 days after the end of the
calendar year, with information which is required by the Internal Revenue
Service for preparing Federal income tax returns with the final dividend
confirmation statement or dividend check of the calendar year (the percentage
of all income distributions made during a fiscal year designated as tax exempt
will be uniform).
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal bonds and similar proposals may be introduced in the
future. If such a proposal
16
<PAGE>
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
Distributor for the Fund and as such will conduct a continuous offering
pursuant to a "best efforts" arrangement requiring the Distributor 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
Distributor. The Distributor 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, 1995, 1996, and 1997, purchasers of Fund shares paid
aggregate sales charges of $124,446, $156,046 and $96,217 respectively, of
which the Distributor received net commissions of $14,922, $18,687 and $18,320,
respectively, for its services, the balance being paid to dealers.
The Distribution Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, 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 Distribution Agreement
will terminate automatically in the event of its assignment.
Dealers with whom the Distributor has entered into sales agreements
receive sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor 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 Distributor) 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 Distributor 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.
Equity Planning also acts as financial agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. As
compensation for such services, effective as of January 1, 1997, Equity
Planning is entitled to a fee, payable monthly and based upon the average of
the aggregate daily net asset values of the Fund, at the following incremental
annual rates:
<TABLE>
<S> <C> <C>
First $100 million .05% subject to a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
</TABLE>
A minimum fee of $70,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares of the Fund beyond one.
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
17
<PAGE>
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Underwriter in the form of the
Dealer Agreement for Phoenix Funds for services rendered in connection with the
sale and distribution of shares of the Fund; (iv) payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Fund; (v) the costs of preparing and distributing promotional materials;
(vi) the cost of printing the Fund's Prospectus and Statement of Additional
Information for distribution to potential investors; and (vii) such other
similar services that the Directors of the Fund determine are reasonably
calculated to result in the sale of shares of the Fund, provided, however, that
a portion of such amount equal to or less than 0.25% annually of the average
daily net assets of Fund shares may be paid for reimbursing the costs of
providing services to shareholders, including assistance in connection with
inquiries related to shareholder accounts (the "Service Fee").
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, 1997, the Fund paid Rule 12b-1 fees in the amount of
$300,206 of which the principal underwriter of the Fund received $31,613,
unaffiliated broker-dealers received $268,388 and W.S. Griffith & Co., Inc., an
affiliate, received $206. The Rule 12b-1 payments were used for: compensating
dealers ($281,133), compensation to sales personnel ($114,367), advertising
($16,672), printing and mailing prospectuses to other than current shareholders
($6,569), service costs ($26,972) and other costs ($23,152).
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.
18
<PAGE>
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 56 Prospect Street, Hartford,
Connecticut, 06115. On March 14, 1997, the shareholders of the Fund voted to
fix the number of Directors at fourteen and elect the persons to serve as
Directors. The elected Directors and executive officers are listed below:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- -------------------------- ---------------- -----------------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (69) Director Partner in the law firm of Day, Berry & Howard. Director/
Day, Berry & Howard Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
CityPlace Aberdeen Series Fund and Phoenix Duff & Phelps
Hartford, CT 06103 Institutional Mutual Funds (1996-present). Director/Trustee,
the National Affiliated Investment Companies (until 1993).
Robert Chesek (63) Director Trustee/Director (1981-present) and Chairman (1989-1994),
49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund and
Wethersfield, CT 06109 Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Vice President, Common Stock, Phoenix Home Life
Mutual Insurance Company (1980-1994). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
E. Virgil Conway (68) Director Chairman, Metropolitan Transportation Authority (1992-
9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company of
Bronxville, NY 10708 New York, Inc. (1970-present), Pace University (1978-
present), Atlantic Mutual Insurance Company (1974-present),
HRE Properties (1989-present), Greater New York Councils,
Boy Scouts of America (1985-present), Union Pacific Corp.
(1978-present), Blackrock Freddie Mac Mortgage Securities
Fund (Advisory Director) (1990-present), Centennial Insurance
Company (1974-present), Josiah Macy, Jr., Foundation (1975-
present) ,The Harlem Youth Development Foundation (1987-
present), Accuhealth (1994-present), Trism, Inc. (1994-
present), Realty Foundation of New York (1972-present), New
York Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory Director)
(1993-present). Director/Trustee, Phoenix Funds (1993-
present). Trustee, Phoenix-Aberdeen Series Fund and 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). Chairman, Audit Committee of the City of New York
(1981-1996). Advisory Director, Blackrock Fannie Mae
Mortgage Securities Fund (1989-1996). Chairman, Financial
Accounting Standards Advisory Council (1992- 1995).
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
Harry Dalzell-Payne (67) Director Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present). Director,
Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, the
National Affiliated Investment Companies (1983-1993).
Formerly a Major General of the British Army.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- -----------------------------------------------------------------
<S> <C> <C>
*Francis E. Jeffries (66) Director Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Fund (1987-present), Duff & Phelps
Utilities Tax-Free Income Inc. (1991-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present). Director,
The Empire District Electric Company (1984-present). Director
and Chairman of the Board, Phoenix Duff & Phelps Corporation
(1995-1997). Director (1989-1995), Chairman of the Board
(1993-1995), President (1989-1993), and Chief Executive Officer
(1989-1995), Duff & Phelps Corporation.
Leroy Keith, Jr. (58) Director Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds
Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund and
Carson Products Company Phoenix Duff & Phelps Institutional Mutual Funds (1996-
64 Ross Road present). Director, Equifax Corp. (1991-present) and Keystone
Savannah, GA 30750 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. President, Morehouse College (1987-1994). Chairman
and Chief Executive Officer, Keith Ventures (1992-1994).
Director/Trustee, the National Affiliated Investment Companies
(until 1993) . Director, Blue Cross/Blue Shield (1989-1993)
and First Union Bank of Georgia (1989-1993).
*Philip R. McLoughlin (50) Director and Chairman, (1997-present), Director, (1995-present), Vice
President Chairman (1995-1997) and Chief Executive Officer, (1995-
present) Phoenix Duff & Phelps Corporation (1995-present).
Director (1994-present) and Executive Vice President,
Investments (1988-present), Phoenix Home Life Mutual
Insurance Company. Director/Trustee and President, Phoenix
Funds (1989-present). Trustee and President, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. (1995-present) and
Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995- present). Director (1983-present) and Chairman
(1995- present), Phoenix Investment Counsel, Inc. Director
(1984- present) and President (1990-present), Phoenix Equity
Planning Corporation. Director (1993-present), Chairman
(1993-present) and Chief Executive Officer (1993-1995),
National Securities & Research 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),
PXRE Corporation (Delaware) (1985-present), and World Trust
Fund (1991-present). Director and Executive Vice President,
Phoenix Life and Annuity Company (1996-present). Director
and Executive Vice President, PHL Variable Insurance
Company (1995-present). Director, Phoenix Charter Oak Trust
Company (1996-present). Director and Vice President, PM
Holdings, Inc. (1985-present). Director and President, Phoenix
Securities Group, Inc. (1993-1995). Director (1992-present)
and President (1992-1994), W.S. Griffith & Co., Inc. Director
(1992-present) and President (1992-1994), Townsend
Financial Advisers, Inc. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C>
Everett L. Morris (69) Director Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee, Duff
Colts Neck, NJ 07722 & Phelps Mutual Funds (1994-present). Trustee, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. (1991-present) and Duff
& Phelps Utility and Corporate Bond Trust Inc. (1993-
present). Director, Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated (1989-
1993).
*James M. Oates (51) Director Chairman, IBEX Capital Markets LLC (1997-present).
Managing Director Managing Director, Wydown Group (1994-present). Director,
The Wydown Group Phoenix Duff & Phelps Corporation (1995-present). Director/
IBEX Capital Markets LLC Trustee, Phoenix Fund (1987-present). Trustee, Phoenix-
60 State Street Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 950 Institutional Mutual Funds (1996-present). Director, Govett
Boston, MA 02109 Worldwide Opportunity Funds, 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), Plymouth Rubber Co.
(1995-present) and Stifel Financial (1996-present). Member,
Chief Executives Organization (1996-present). Director (1984-
1994), President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
*Calvin J. Pedersen (55) Director Director and President, Phoenix Duff & Phelps Corporation
Phoenix Duff & Phelps (1995-present). Director/Trustee, Phoenix Funds (1995-
Corporation present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
55 East Monroe Street Duff & Phelps Institutional Mutual Funds (1996-present).
Suite 3600 President and Chief Executive Officer, Duff & Phelps Utilities
Chicago, IL 60603 Tax-Free Income Inc. (1995-present), Duff & Phelps Utilities
Income Inc. (1994-present) and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director (1986-
1995), President (1993-1995) and Executive Vice President
(1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (70) Director Director/Trustee, Phoenix Funds (1984-present). Trustee,
43 Montclair Drive Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
West Hartford, CT 06107 Institutional Mutual Funds (1996-present). Director, Vestaur
Securities, Inc. (1972-present). Trustee and Treasurer, J.
Walton Bissell Foundation, Inc. (1988-present). Director/
Trustee, the National Affiliated Investment Companies (until
1993).
Herbert Roth, Jr. (68) Director Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional 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), and Mark IV Industries
(diversified manufacturer) (1985-present). Director, Key
Energy Group (oil rig service) (1988-1994). Director/Trustee,
the National Affiliated Investment Companies (until 1993).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C>
Richard E. Segerson (51) Director Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds, (1993-present). Trustee,
New Canaan, CT 06840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-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. (66) Director Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Duty Free
International (1997-present) and Compuware (1996-present).
Visiting Professor, University of Virginia (1997-present).
Chairman, Dresing, Lierman, Weicker (1995-1996). Governor
of the State of Connecticut (1991-1995).
Michael E. Haylon (39) Executive Director and Executive Vice President-Investments, Phoenix
Vice Duff & Phelps Corporation (1995-present). Senior Vice
President President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-1995). Director (1994-present),
President (1996-present), and Executive Vice President
(1994-1996), National Securities & Research Corporation.
Executive Vice President, Phoenix Funds (1995-present),
Phoenix-Aberdeen Series Fund (1996-present). Executive Vice
President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds. Director
(1994-present), President (1995-present), and Executive Vice
President (1994-1995), Phoenix Investment Counsel, Inc.
Director, Phoenix Equity Planning Corporation (1995-present).
Various other positions with Phoenix Home Life Mutual
Insurance Company (1990-1993).
David R. Pepin (54) Executive Executive Vice President, Phoenix Funds, Phoenix-Aberdeen
Vice Series Fund, and Phoenix Duff & Phelps Institutional Mutual
President Funds (1996-present). Director, Phoenix Investment Counsel,
Inc., and National Securities & Research Corporation (1996-
present). Director and Executive Vice President, Mutual Fund
Sales and Operations, Phoenix Equity Planning Corporation
(1996-present). Managing Director, Phoenix-Aberdeen
International Advisors, LLC (1996-present). Executive Vice
President (1996-present) and Director (1997-present), Phoenix
Duff & Phelps Corporation. Vice President, Phoenix Home
Life Mutual Insurance Company (1994-1995). Vice President
and General Manager, Digital Equipment and Corporation
(1980-1994).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- -----------------------------------------------------------------
<S> <C> <C>
James D. Wehr (40) Senior Vice Managing Director, Fixed Income, (1996-present), Vice
President President (1991-1996), Phoenix Investment Counsel, Inc. and
Managing Director, Fixed Income, (1996-present), Vice
President (1993-1996), National Securities & Research
Corporation. Senior Vice President (1997-present), Vice
President (1988-1997), Phoenix Multi-Portfolio Fund; Senior
Vice President (1997-present), Vice President (1990-1997),
Phoenix Series Fund; Senior Vice President (1997-present),
Vice President (1991-1997), The Phoenix Edge Series Fund;
Senior Vice President (1997-present), Vice President (1993-
1997), Phoenix California Tax Exempt Bonds, Inc.; Senior
Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds; Senior
Vice President (1997-present), Phoenix Multi-Sector Fixed
Income Fund, Inc.; and Senior Vice President (1997-present),
Phoenix Multi-Sector Short Term Bond Fund. Managing
Director, Public Fixed Income, Phoenix Home Life Insurance
Company (1991-1995). Various positions with Phoenix Home
Life Insurance Company.
Timothy M. Heaney (32) Vice Director, Fixed Income Research, Phoenix Investment
President Counsel, Inc. and National Securities & Research Corporation,
(1996-present). Vice President, Phoenix California Tax Exempt
Bonds, Inc. and Phoenix Multi-Portfolio Fund (1996-present).
Various positions with Phoenix Home Life Insurance Company
(1992-1995).
William E. Keen, III (33) Vice Assistant Vice President, Phoenix Equity Planning Corporation
100 Bright Meadow Blvd. President (1996-present). Vice President, Phoenix Funds, Phoenix-
P.O. Box 2200 Aberdeen Series Fund, and Phoenix Duff & Phelps Institutional
Enfield, CT 06083-2200 Mutual Funds (1996-present). Assistant Vice President
USAffinity Funds, USAffinity Investments LP, (1994-1995).
Manager, Fund Administration, SEI Corporation (1991-1994).
William R. Moyer (52) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff
100 Bright Meadow Blvd. President & Phelps Corporation (1995-present). Senior Vice President
P.O. Box 2200 (1990-present), Chief Financial Officer (1996-present), Finance
Enfield, CT 06083-2200 (until 1996) and Treasurer (1994-1996), Phoenix Equity Planning
Corporation. Senior Vice President (1990-present), Chief
Financial Officer (1996-present), Finance (until 1996) and
Treasurer (1994-present), Phoenix Investment Counsel, Inc.
Senior Vice President (1994-present), Chief Financial Officer
(1996-present), Finance (until 1996), and Treasurer (1994-
present), National Securities & Research Corporation. Vice
President, Phoenix Funds (1990-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen
Series Fund (1996-present). Senior Vice President and Chief
Financial Officer, Phoenix Duff & Phelps Investment
Management Co. (1996-present). Vice President, Investment
Products Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995). Vice President, the National Affiliated
Companies (until 1993). Senior Vice President, Finance, Phoenix
Securities Group, Inc. (1993-1995). Senior Vice President and
Chief Financial Officer (1993-1995) and Treasurer (1994-1995),
W.S. Griffith & Co., Inc. and Townsend Financial Advisers, Inc.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------- --------------- --------------------------------------------------------------
<S> <C> <C>
Leonard J. Saltiel (43) Vice Managing Director, Operations and Service (1996-present),
100 Bright Meadow Blvd. President Senior Vice President (1994-1996), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds (1994-present),
Enfield, CT 06083-2200 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present), and National
Securities & Research Corporation (1994-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).
Nancy G. Curtiss (44) Treasurer Treasurer (1996-present), Vice President, Fund Accounting
(1994-present), Phoenix Equity Planning Corporation.
Treasurer, Phoenix Funds (1994-present), Phoenix-Aberdeen
Series Fund (1996-present) and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Second Vice
President and Treasurer, Fund Accounting, Phoenix Home
Life Mutual Insurance Company (1994-1995). Various
positions with Phoenix Home Life Insurance Company (1987-
1994).
G. Jeffrey Bohne (49) Secretary Vice President, Mutual Fund Customer Service (1996-
101 Munson Street present), Vice President, Transfer Agent Operations (1993-
Greenfield, MA 01301 1996), Phoenix Equity Planning Corporation. Clerk, Phoenix
Investment Counsel, Inc. (1995-present). Secretary, the
Phoenix Funds (1993-present), and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Clerk and
Secretary, Phoenix-Aberdeen Series Fund (1996-present). Vice
President and General Manager, Phoenix Home Life Mutual
Insurance Co. (1993-present). Assistant Vice President,
Phoenix Home Life Mutual Insurance Company (1992-1993).
</TABLE>
- -----------
*Indicates that the Director(s) is an "interested person" of the Fund within
the meaning of the definition set forth in Section 2(a)(19)of the Investment
Company Act of 1940.
For services rendered to the Fund for the fiscal year ended April 30,
1997, the Directors received aggregate renumeration of $18,075. For services on
the Boards of the various Phoenix Funds, including 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 $40,000 and
$2,500 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 function of the Executive Committee
is to serve as a contract review, compliance review and performance review
delegate of the full Board of Directors. The foregoing fees do not include the
reimbursement of expenses incurred in connection with meetings attended.
Officers and employees of the Adviser who are interested persons are
compensated by the Adviser and receive no compensation from the Fund.
24
<PAGE>
For the Fund's last fiscal year ending April 30, 1997, 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 (12 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Directors
- ------------------------ -------------- --------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
C. Duane Blinn $ 1,710* $63,250
Robert Chesek $ 1,500 $56,250
E. Virgil Conway+ $ 1,770 $66,000
Harry Dalzell-Payne+ $ 1,500 $56,750
Francis E. Jeffries $ 375* $15,000
Leroy Keith, Jr. $ 1,500 None None $56,250
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $ 1,410* Director Director $54,000
James M. Oates+ $ 1,560 $58,500
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds $ 1,500 $56,250
Herbert Roth, Jr.+ $ 1,860 $68,750
Richard E. Segerson $ 1,680 $62,750
Lowell P. Weicker, Jr. $ 1,710 $63,250
</TABLE>
- ---------
*This compensation (and the earnings thereon) was deferred pursuant to the
Directors' Deferred Compensation Plan. At June 30, 1997, the total amount of
deferred compensation (including interest and other accumulation earned on the
original amounts deferred) accrued for Messrs. Blinn, Jeffries, Morris and Roth
was $349,026.91, $28,561.41, $85,849.73 and $132,587.69, respectively. At
present, by agreement among the Fund, the Distributor and the electing
director, director fees that are deferred are paid by the Fund to the
Distributor. The liability for the deferred compensation obligation appears
only as a liability of the Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
On April 30, 1997, 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 independent accountants,
will be sent to shareholders each year.
Financial Statements
The financial statements for the Fund's fiscal year ended April 30, 1997,
appearing in the Fund's Annual Report to Shareholders, are incorporated herein
by reference.
25
<PAGE>
APPENDIX
Moody's Investors Service, Inc. Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa Group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard & Poor's Corporation's Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
26
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ ------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--95.5%
Certificates of Participation/Lease
Revenue--6.1 %
Anaheim Public Funding
Series C 6%, '16 ............... AAA $2,600 $2,708,914
California Public Works
Lease Revenue 5.25%,
'06 ........................... AAA 1,640 1,658,811
Orange County Recovery
COP 5.80%, '16 ............... AAA 1,500 1,496,265
San Mateo County Revenue
5.125%, '18 .................. AAA 1,000 930,830
-----------
Total Certificates of Participation/Lease
Revenue ................................................... 6,794,820
-----------
General Obligations--5.5%
California State G.O. 5.50%,
'08 ........................... AAA 1,500 1,537,650
Central School District G.O.
7.05 %, '16 .................. A(b) 1,000 1,078,080
Pomona School District G.O.
Series C 5.60%, '12 ............ AAA 1,500 1,528,875
Puerto Rico G.O. 5.375%,
'06 ........................... A 2,000 1,996,620
-----------
Total General Obligations ................................. 6,141,225
-----------
Healthcare--6.1 %
California Health Facilities
7.30 %, '20 .................. A+ 1,400 1,488,396
California Health Facilities
6.25 %, '22 .................. A+ 1,500 1,519,530
Grass Valley Hospital
7.25 %, '19 .................. A+ 2,000 2,092,860
San Bernardino School
Health Care, Sisters of
Charity Series A 7%, '21 AA 1,500 1,647,480
-----------
Total Healthcare .......................................... 6,748,266
-----------
Housing Revenue--3.4%
California Housing
Financing Agency Series
D 7.25%, '17 .................. AA- 625 650,975
California Housing
Financing Agency Series
A 7.75%, '17 .................. AA- 350 366,933
California Housing
Financing Agency Series
C 7.20%, '17 .................. AA- 595 614,195
L.A. Community
Redevelopment Agency
Series A 6.55%, '27 ............ AAA 2,000 2,080,000
-----------
Total Housing Revenue .................................... 3,712,103
-----------
Pre-Refunded Revenue--28.8%
Covina Redevelopment
Agency 8.80%, '08 ............ NR 1,200 1,440,048
Hayward Hospital Revenue
(St. Rose Hosp.) 10%,
'04 ........................... AAA 510 595,910
Huntington Park
Redevelopment Agency
8%, '19 ........................ AAA 2,400 3,092,904
Los Angeles Harbor
Department 7.60%, '18 ......... AAA 1,000 1,216,190
Northern California Hydro
Electric 7.50%, '23 ............ AAA 195 236,073
Orange County Water
District COP 7%, '15 ......... AAA 1,000 1,089,380
Pasadena COP 6.75%, '15 ......... Aaa(b) 2,000 2,162,360
Puerto Rico Aqueduct 7%,
'19 ........................... AAA 1,500 1,579,740
Puerto Rico Electric Power
7%, '21 ........................ BBB+ 2,500 2,760,775
Puerto Rico Highway
Authority Series T
6.625%, '18 .................. A 800 877,232
Puerto Rico Highway
Revenue Series T 6.625%,
'18 ........................... AAA 200 219,308
Puerto Rico Public Buildings
7%, '19 ........................ AAA 500 524,190
Puerto Rico Public Buildings
Series L 6.875%, '21 ......... AAA 3,170 3,511,884
Redlands COP Series C 7%,
'22 ........................... AAA 1,000 1,095,180
Riverside County 8.625%,
'16 ........................... AAA 700 896,287
Riverside County 7.80%,
'21 ........................... AAA 4,000 4,904,360
San Bernardino COP Series
B 7%, '28 ..................... AAA 2,200 2,428,338
San Gabriel Valley Schools
Financing 7.20%, '19 ......... NR 1,200 1,288,836
Torrance Hospital COP
7.10 %, '15 ............ AAA 1,745 1,925,241
-----------
Total Pre-Refunded Revenue ................................ 31,844,236
-----------
Tax Revenue--11.1%
Culver City Redevelopment
Agency 4.60%, '20 ............ AAA 4,500 3,716,055
L.A. County Sales Tax 7%,
'19 ........................... AA- 2,500 2,656,800
L.A. County Transit
Authority Series A 5%,
'21 ........................... AAA 2,750 2,436,280
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
<S> <C> <C> <C>
---------- ------ ------------
Tax Revenue--continued
San Francisco
Redevelopment Agency
4.75%, '18 ..................... AAA $1,100 $ 942,909
San Francisco
Redevelopment Agency
5.50%, '18 ..................... A- 1,500 1,401,960
San Pablo Redevelopment
Agency 5%, '13 ............... AAA 1,250 1,170,637
----------------
Total Tax Revenue .......................................... 12,324,641
----------------
Transportation Revenue--3.0%
Riverside Public Financing
Authority 7.80%, '08 ......... Baa(b) 360 367,052
San Diego Transportation
Series A 4.75%, '08 ............ AAA 2,000 1,910,360
San Francisco Airport
Revenue 6.25%, '10 ............ AAA 1,000 1,049,200
----------------
Total Transportation Revenue .............................. 3,326,612
----------------
Utility Revenue--31.5%
California Department of
Water 5%, '15 .................. AA 1,375 1,260,614
Chino Basin Funding
Authority Revenue 5.90%,
'11 ........................... AAA 2,000 2,099,840
Contra Costa Water District
Series G 5.75%, '14 (c) ...... AAA 3,100 3,122,785
Delta Diablo Sanitation
District 0%, '16 ............... AAA 1,070 333,166
Irvine Ranch Water District
7.80%, '08 ..................... A+ 1,500 1,537,365
Irvine Ranch Water District
8.25%, '23 (c) ............... A+ 2,000 2,090,880
L.A. Wastewater Series D
4.70%, '17 ..................... AAA 7,000 5,977,720
Metropolitan Water District
Series C 5%, '27 ............... AA 3,500 3,098,830
MSR Public Power Agency
6.75%, '20 ..................... AAA 1,500 1,686,555
Puerto Rico Electric Power
Authority Series N 6%,
'10 ........................... BBB+ 1,500 1,508,865
Sacramento Cogeneration
Project 6.375%, '10 ............ BBB- 1,000 1,030,690
Sacramento Flood Control
Agency 5.375%, '15 ............ AAA 2,370 2,271,953
Sacramento Municipal Utility
District Revenue 5.75%,
'11 ........................... AAA 3,500 3,559,745
Sacramento Utility District
Electric Series G 4.75%,
'21 ........................... AAA 1,000 853,430
San Francisco City & County
Public Utility 5%, '15 ......... AA- 2,000 1,834,100
Southern California Public
Power Authority 5.50%,
'20 ........................... A 915 856,916
Southern California Public
Power Series A 4.875%,
'20 ........................... AAA 2,000 1,733,480
----------------
Total Utility Revenue .................................... 34,856,934
----------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $101,109,679) ........................... 105,748,837
----------------
SHORT-TERM OBLIGATIONS--0.5%
Commercial Paper--0.5%
Anheuser-Busch Cos., Inc.
5.55%, 5-1-97 .................. A-1+ 555 555,000
----------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $555,000) .............................. 555,000
----------------
TOTAL INVESTMENTS--96.0%
(Identified cost $101,664,679) ........................... 106,303,837(a)
Cash and receivables, less 4,413,068
liabilities--4.0% ----------------
NET ASSETS--100.0% ....................................... $ 110,716,905
================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,277,823 and gross
depreciation of $638,665 for income tax purposes. At April 30, 1997, the
aggregate cost of securities for federal income tax purposes was
$101,664,679.
(b) As rated by Moody's, Duff and Phelps or Fitch.
(c) Segregated as collateral for futures contracts.
At April 30, 1997, the concentration of the Fund's investments by state,
determined as a percentage of total investments, is as follows:
California 87%
Puerto Rico 12%
Other 1%
4 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets
Investment securities at value
(Identified cost $101,664,679) $106,303,837
Cash 2,636,081
Receivables
Variation margin for futures contracts 8,750
Fund shares sold 159,507
Interest 2,075,640
------------
Total assets 111,183,815
------------
Liabilities
Payables
Fund shares repurchased 219,749
Dividend distributions 98,929
Investment advisory fee 40,548
Distribution fee 23,398
Transfer agent fee 10,169
Financial agent fee 6,740
Directors' fee 4,277
Accrued expenses 63,100
------------
Total liabilities 466,910
------------
Net Assets $110,716,905
============
Net Assets Consist of:
Capital paid in on shares of common stock $106,144,515
Distributions in excess of net investment
income (98,929)
Accumulated net realized gain 13,099
Net unrealized appreciation 4,658,220
------------
Net Assets $110,716,905
============
Class A
Shares of common stock outstanding, $0.01
par value, 250,000,000 shares authorized
(Net Assets $109,357,862) 8,594,786
Net asset value per share $ 12.72
Offering price per share
$12.72/(1-4.75%) $ 13.35
Class B
Shares of common stock outstanding, $0.01
par value, 250,000,000 shares authorized
(Net Assets $1,359,043) 106,798
Net asset value and offering price per share $ 12.73
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
Investment Income
Interest $7,022,576
----------
Total investment income 7,022,576
----------
Expenses
Investment advisory fee 521,952
Distribution fee--Class A 286,562
Distribution fee--Class B 13,644
Financial agent fee 50,587
Transfer agent 77,152
Professional 43,850
Printing 30,453
Registration 28,100
Directors 19,230
Custodian 11,200
Miscellaneous 1,948
----------
Total expenses 1,084,678
----------
Net investment income 5,937,898
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 606,865
Net realized gain on futures contracts 430,927
Net change in unrealized appreciation
(depreciation) on investments (395,154)
----------
Net gain on investments 642,638
----------
Net increase in net assets resulting from
operations $6,580,536
==========
See Notes to Financial Statements
5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Year
Ended Ended
April 30, 1997 April 30, 1996
---------------- --------------
From Operations
Net investment income $ 5,937,898 $ 6,205,857
Net realized gain 1,037,792 1,098,320
Net change in unrealized appreciation
(depreciation) (395,154) 756,545
------------ ------------
Increase in net assets resulting from
operations 6,580,536 8,060,722
------------ ------------
From Distributions to Shareholders
Net investment income--Class A (5,878,203) (6,135,672)
Net investment income--Class B (59,695) (36,045)
Net realized gains--Class A (778,981) (288,116)
Net realized gains--Class B (9,332) (1,693)
Distributions in excess of net investment
income--Class A (20,400) (77,865)
Distributions in excess of net investment
income--Class B (207) (457)
Distributions in excess of accumulated net
realized gains--Class A -- (235,000)
Distributions in excess of accumulated net
realized gains--Class B -- (1,380)
------------ ------------
Decrease in net assets from distributions to
shareholders (6,746,818) (6,776,228)
------------ ------------
From Share Transactions
Class A
Proceeds from sales of shares (5,230,522
and 2,203,421 shares, respectively) 67,136,755 28,531,594
Net asset value of shares issued from
reinvestment of distributions
(228,498 and 218,807 shares, respectively) 2,940,319 2,842,822
Cost of shares repurchased (5,775,597 and
2,801,630 shares, respectively) (74,366,195) (36,234,994)
------------ ------------
Total (4,289,121) (4,860,578)
------------ ------------
Class B
Proceeds from sales of shares (32,053 and
73,939 shares, respectively) 412,944 962,800
Net asset value of shares issued from
reinvestment of distributions (2,791 and
1,751, respectively) 35,912 22,780
Cost of shares repurchased (26,537 and
13,644 shares, respectively) (340,933) (175,468)
------------ ------------
Total 107,923 810,112
------------ ------------
Decrease in net assets from share
transactions (4,181,198) (4,050,466)
------------ ------------
Net decrease in net assets (4,347,480) (2,765,972)
Net Assets
Beginning of period 115,064,385 117,830,357
------------ ------------
End of period (including distributions in
excess of net investment of ($98,929) and
($78,322), respectively) $110,716,905 $115,064,385
============ ============
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,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 12.63 $ 13.03 $ 13.64 $ 13.20
Income from investment operations
Net investment income 0.66 0.67 0.71 0.80 0.81
Net realized and unrealized gain (loss) 0.04 0.20 0.05 (0.53) 0.51
--------- -------- -------- -------- --------
Total from investment operations 0.70 0.87 0.76 0.27 1.32
--------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.66) (0.67) (0.76) (0.76) (0.80)
Distributions in excess of net investment
income -- (0.01) -- -- --
Distributions from net realized gains (0.09) (0.03) (0.31) (0.12) (0.08)
Distributions in excess of accumulated net
realized gains -- (0.02) (0.09) -- --
--------- -------- -------- -------- --------
Total distributions (0.75) (0.73) (1.16) (0.88) (0.88)
--------- -------- -------- -------- --------
Change in net asset value (0.05) 0.14 (0.40) (0.61) 0.44
--------- -------- -------- -------- --------
Net asset value, end of period $ 12.72 $ 12.77 $ 12.63 $ 13.03 $ 13.64
========= ======== ======== ======== ========
Total return(1) 5.56% 6.92% 6.34% 1.80% 10.38%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 109,358 $113,806 $117,370 $131,365 $147,760
Ratio to average net assets of:
Operating expenses 0.93% 0.99% 0.93% 0.85% 0.90%
Net investment income 5.13% 5.15% 5.63% 5.82% 6.00%
Portfolio turnover 17% 20% 51% 25% 25%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------
From
Inception
Year Ended April 30, 7/26/94 to
1997 1996 4/30/95
----------- --------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 12.63 $ 13.04
Income from investment operations
Net investment income 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.05 0.20 0.01
------- ---------- ----------
Total from investment operations 0.61 0.76 0.49
------- ---------- ----------
Less distributions
Dividends from net investment income (0.56) (0.56) (0.50)
Distributions in excess of net investment
income -- (0.01) --
Distributions from net realized gains (0.09) (0.03) (0.31)
Distributions in excess of accumulated net
realized gains -- (0.02) (0.09)
------- ---------- ----------
Total distributions (0.65) (0.62) (0.90)
------- ---------- ----------
Change in net asset value (0.04) 0.14 (0.41)
------- ---------- ----------
Net asset value, end of period $ 12.73 $ 12.77 $ 12.63
======= ========== ==========
Total return(1) 4.84% 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,359 $ 1,258 $ 460
Ratio to average net assets of:
Operating expenses 1.68% 1.78% 1.55%(2)
Net investment income 4.37% 4.32% 4.90%(2)
Portfolio turnover 17% 20% 51%
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
See Notes to Financial Statements
7
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") is organized as a
Maryland corporation and is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company. The
Fund's investment objective is to obtain a high level of current income exempt
from California state and local income taxes, as well as Federal income tax,
consistent with preservation of capital. The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge of up to 4.75%.
Class B shares are sold with a contingent deferred sales charge which declines
from 5% to zero depending on the period of time the shares are held. Both
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. Income and expenses of the Fund are borne pro rata by the
holders of both classes of shares, except that each class bears distribution
expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. Security valuation:
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service which utilizes information with respect to recent
sales, market transactions in comparable securities, quotations from dealers,
and various relationships between securities in determining value. Short-term
investments having a remaining maturity of 60 days or less are valued at
amortized cost which approximates market. All other securities and assets are
valued at their fair value as determined in good faith by or under the
direction of the Directors.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Premiums and discounts are amortized to income
using the effective interest method. Realized gains and losses are determined
on the identified cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the
Internal Revenue Code (the "Code") applicable to regulated investment companies
and to distribute substantially all of its taxable and tax-exempt income to its
shareholders. In addition, the Fund intends to distribute an amount sufficient
to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision for federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions to shareholders are declared and recorded daily. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards and losses deferred due to wash sales and excise tax
regulations. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
E. Futures contracts:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. The Fund may enter into financial
futures contracts as a hedge against anticipated changes in the market value of
the portfolio securities. Upon entering into a futures contract, the Fund is
required to pledge to the broker an amount of cash and/or securities equal to
the "initial margin" requirements of the futures exchange on which the contract
is traded. Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. The potential risk to the Fund is that the change in
value of the futures contract may not correspond to the change in value of the
hedged instruments.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.45% of the average daily net assets of the Fund
for the first $1 billion.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of
8
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (Continued)
$10,540 for Class A shares and deferred sales charges of $7,780 for Class B
shares for the year ended April 30, 1997. In addition, the Fund pays PEPCO a
distribution fee at an annual rate of 0.25% for Class A shares and 1.00% for
Class B shares of the average daily net assets of the Fund. The Distributor has
advised the Fund that of the total amount expensed for the year ended April 30,
1997, $31,613 was earned by the Distributor and $268,593 was earned by
unaffiliated participants.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of the Fund through December 31, 1996, and starting on January
1, 1997, at an annual rate of 0.05% of average daily net assets up to $100
million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Fund's Transfer Agent with State Street Bank and
Trust as sub-transfer agent. For the year ended April 30, 1997, transfer agent
fees were $77,152 of which PEPCO retained $25,031, which is net of fees paid to
State Street.
At April 30, 1997, PHL and affiliates held 204 Class A shares and 9,504
Class B shares of the Fund with a combined value of $123,571.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1997, aggregated $18,805,940 and
$27,932,377, respectively. There were no purchases or sales of long-term U.S.
Government securities.
At April 30, 1997, the Fund had entered into futures contracts as follows:
Value of
Number Contracts Market Net
of when Value of Unrealized
Description Contracts Opened Contracts Appreciation
- --------------- ----------- ------------ ------------ -------------
U.S. Treasury
June, '97 (Long) 10 $1,079,063 $1,092,813 $13,750
U.S. Treasury
Sept., '97 10 1,083,125 1,088,437 5,312
(Long)
4. ASSET CONCENTRATION
There are certain risks arising from the Fund's concentration in
California municipal securities. Certain California constitutional amendments,
legislative measures, executive orders, administrative regulations, court
decisions and voter initiatives could result in certain adverse consequences
including impairing the ability of certain issuers of California municipal
securities to pay principal and interest on their obligations.
TAX INFORMATION NOTICE (Unaudited)
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, 1997, the Fund distributed $761,412 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 [Logo]
To the Board of Directors and Shareholders of
Phoenix California Tax Exempt Bonds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") at April 30, 1997, 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, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 9, 1997
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, are included
in the Annual Report to Shareholders for the fiscal year
ended April 30, 1997, incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1.1* Articles of Incorporation of the Registrant, previously filed and filed herewith via EDGAR, and herein
incorporated by reference.
1.2* Articles of Amendment of Registrant, filed with Post-Effective Amendment No. 16 on July 13, 1994,
and filed herewith via EDGAR and incorporated herein by reference.
1.3* Articles Supplementary of Registrant, filed with Post-Effective Amendment No. 16 on July 13, 1994,
and filed herewith via EDGAR 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 via EDGAR with Post-Effective Amendment No. 17 on August 22, 1995
and incorporated herein by reference.
2.2 Revised and Restated By-laws of the Registrant, adopted November 16, 1994, amended February 15,
1995 and further amended November 15, 1995 filed via Edgar with Post-Effective Amendment No. 18
on August 28, 1996, and incorporated herein by reference.
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 2.2.
5.1 Investment Advisory Agreement between Registrant and National Securities & Research Corporation
dated March 14, 1997, filed via EDGAR with a Post-Effective Amendment No. 19 on April 10, 1997,
and incorporated 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
filed herewith via EDGAR 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 filed herewith via EDGAR 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 filed herewith via EDGAR 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
filed herewith via EDGAR and incorporated herein by reference.
9.1a* Sub-transfer Agent Agreement between Phoenix Equity Planning Corporation and State Street Bank and
Trust Company dated June 1, 1994, filed with Post-Effective Amendment No. 16 on July 13, 1994 and
file herewith via EDGAR and incorporated herein by reference.
9.2* Form of Sales Agreement, filed with Post-Effective Amendment No. 16 on July 13, 1994, and filed
herewith via EDGAR and incorporated herein by reference.
9.3 Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation, and filed via
Edgar with Post-Effective Amendment No. 19 on April 10, 1997, and incorporated by reference.
9.4 First Amendment to Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation, and filed via Edgar with Post-Effective Amendment No. 19 on April 10, 1997, and
incorporated by reference.
9.5* Second Amendment to Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation and filed via EDGAR herewith and incorporated by reference.
10.* Opinion of counsel as to legality of the Shares, filed with Post-Effective Amendment No. 16 on July 13,
1994, and filed herewith via EDGAR and incorporated herein by reference.
11.* Consent of Independent Accountants, filed herewith via Edgar and incorporated herein by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
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 filed herewith via EDGAR and herein incorporated by reference.
15.2* First Amendment to Distribution Plan for Class A Shares filed with Post-Effective Amendment No. 14
on March 2, 1994 and filed herewith via EDGAR and incorporated herein by reference.
15.3* Distribution Plan for Class B Shares dated May 25, 1994, filed with Post-Effective Amendment No. 16
on July 13, 1994, and filed herewith via EDGAR and incorporated herein by reference.
15.4 Distribution Plan of National's California Tax Exempt Bonds, Inc. dated January 1, 1994 filed via Edgar
with Post-Effective Amendment No. 18 on August 28, 1996, and incorporated herein by reference.
16.* Schedule for computation of yield and effective yield quotations, previously filed and filed herewith via
EDGAR 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 with Post-Effective Amendment No. 18 on August 28, 1996, and
incorporated herein by reference.
19.* Amended and Restated Rule 18f-3 Dual Distribution Plan, effective May 1, 1997, and filed herewith
via EDGAR, and incorporated herein by reference.
19.1* First Amendment to the Amended and Restated Plan Pursuant to Rule 18f-3 and filed herewith via
EDGAR, and incorporated herein by reference.
</TABLE>
- -----------
* Filed herewith.
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 May 30, 1997, the number of record holders of each class of
securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record-holders
- ---------------------------------- ---------------
<S> <C>
Shares of Common Stock--Class A 1,994
Shares of Common Stock--Class B 37
</TABLE>
Item 27. Indemnification
Registrant's indemnification provision is set forth in Post-Effective
Amendment No. 13 filed with the Securities and Exchange Commission on June 30,
1993, and is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus and "Services of the
Adviser" and "Directors and Officers" in the Statement of Additional
Information which is included in this Post-Effective Amendment.
For information as to the business, profession, vocation or employment of
a substantial nature of directors and officers of National Securities &
Research Corporation, the Adviser, reference is made to the Advisers' current
Form ADV (SEC File No. 801-8177) filed under the Investment Advisers Act of
1940 and incorporated herein by reference.
Item 29. Principal Underwriter
(a) See "Distribution Plans" and "How to Buy Shares" in the Prospectus and
"The 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 Distributor with Registrant
- ------------------------- ------------------------ -------------------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Distributor with Registrant
- -------------------------- ------------------------------- -------------------------
<S> <C> <C>
David R. Pepin Executive Vice President, Executive Vice President
56 Prospect St. Mutual Fund Sales and
P.O. Box 150480 Operations
Hartford, CT 06115-0480
Paul A. Atkins Senior Vice President and None
56 Prospect St. Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
Maris L. Lambergs Senior Vice President, None
100 Bright Meadow Blvd. Insurance and Independent
P.O. Box 1900 Division
Enfield, CT 06083-1900
William R. Moyer Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
P.O. Box 1900
Enfield, CT 06083-1900
Leonard J. Saltiel Managing Director, Vice President
100 Bright Meadow Blvd. Operations and Service
P.O. Box 1900
Enfield, CT 06083-1900
John F. Sharry Managing Director, Mutual None
100 Bright Meadow Blvd. Fund Distribution
P.O. Box 1900
Enfield, CT 06083-1900
G. Jeffrey Bohne Vice President, Mutual Fund Secretary
101 Munson Street Customer Service
P.O. Box 810
Greenfield, MA 01302-0810
Eugene A. Charon Vice President and Controller None
100 Bright Meadow Blvd.
P.O. Box 1900
Enfield, CT 06083-1900
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect St. Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 1900
Enfield, CT 06083-1900
Elizabeth R. Sadowinski Vice President, None
56 Prospect St. Administration
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel and Assistant Secretary
56 Prospect St. Secretary
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-3
<PAGE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received be any principal underwriter who is not an
affiliated person of the Registrant or an affiliated person of such
affiliated person, directly or indirectly, from the Registrant during the
Registrant's last fiscal year.
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 Fund
is 101 Munson Street, Greenfield, Massachusetts 01301; the address of National
Securities & Research Corporation is 56 Prospect Street, 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-4
<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 Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Hartford and State
of Connecticut on the 8th day of August, 1997.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
ATTEST: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
----------------------------- -----------------------------------
Thomas N. Steenburg 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 8th day of August, 1997.
Signature Title
- ----------------------------------- -----------------------
Director
- --------------------------------
C. Duane Blinn*
Director
- --------------------------------
Robert Chesek*
Director
- --------------------------------
E. Virgil Conway*
Treasurer (principal
- -------------------------------- financial and
Nancy G. Curtiss* 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 Attorney-in-fact
pursuant to powers of attorney filed with
Post-Effective Amendment No. 18.
S1(c)
Exhibit 1.1
Articles of Incorporation
<PAGE>
ARTICLES OF INCORPORATION
OF
CALIFORNIA TAX EXEMPT BONDS, INC.
---------------------------------
The undersigned incorporator adopts the following Articles of
Incorporation for the purpose of forming a corporation under the general laws of
the State of Maryland:
FIRST: (1) The name of the incorporator is C. Grant Anderson.
(2) The incorporator's address is 200 Park Avenue, New York,
New York 10166.
(3) The incorporator is eighteen years old or older.
(4) The incorporator is forming the corporation named in these
Articles of Incorporation under the general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is CALIFORNIA TAX EXEMPT BONDS, INC.
THIRD: The Corporation is formed for the following purposes:
(a) To conduct, operate and carry on the business of an
investment company;
- 1 -
<PAGE>
(b) To hold, invest and reinvest its funds and in connection
therewith to hold part or all of its funds in cash, and to subscribe
for, invest in, reinvest in, purchase or otherwise acquire, hold,
pledge, sell, assign, transfer, exchange, distribute or otherwise
dispose of securities of any and all types and classes (which term
"securities" shall for the purposes of these Articles of Incorporation
include, without in any way limiting the generality thereof, stocks,
shares, bonds, notes, debentures, mortgages, certificates of interest
or participation, bank certificates of deposit, bank time deposits,
banker's acceptances, letters of credit, repurchase agreements or other
negotiable or non-negotiable instruments, obligations or evidences of
indebtedness, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interests
therein or in any property or assets) created or issued by any persons,
firms, associations, corporations, syndicates, combinations,
organizations, governments or subdivisions, agencies or
instrumentalities thereof; and to exercise any and all rights, powers
and privileges of ownership or interest in respect of any and all such
securities of every kind and description, including without limitation,
the right to consent and otherwise act with respect thereto, with power
to
- 2 -
<PAGE>
designate one or more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in respect of any
said instruments;
(c) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions for such purposes and for such
amount or kind or consideration (including, without limitation thereof,
securities) now or hereafter permitted by the laws of the State of
Maryland and by these Articles of Incorporation as its Board of
Directors may determine;
(d) To purchase or otherwise acquire, redeem, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or
consent of the shareholders of the Corporation) shares of its capital
stock, in any manner and to the extent now or hereafter permitted by
the laws of the State of Maryland and by these Articles of
Incorporation;
(e) to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of the
State of Maryland;
(f) to do any and all acts and to exercise any and all
powers as are necessary, suitable, convenient, or proper for the
conduct, promotion and attainment of any of the purposes or objects
- 3 -
<PAGE>
herein specified or which at any time may be incidental thereto or may
appear conducive to or expedient for the accomplishment of any of such
purposes and objects.
The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers shall not be held to limit
or restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from the terms of any provision of this or any other Article of these
Articles of Incorporation. The expression of one thing shall not be deemed to
exclude another which is not expressed.
FOURTH: The post office address, of the principal office of the
Corporation in the State of Maryland is c/o Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202.
FIFTH: The name of the resident agent of the Corporation within the
State of Maryland is the Corporation Trust Incorporated, a Maryland corporation,
and the post office
- 4 -
<PAGE>
address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
SIXTH: (1) The total number of shares of stock which the corporation
has authority to issue is 20,000,000 all of which are the same class, are of a
par value of $.01 each, and are designated Common Stock. References in the
following provisions of these Articles of Incorporation to "shares" mean the
shares of Common Stock of the Corporation.
(2) The aggregate par value of all the authorized shares of
stock is $200,000.
(3) The Board of Directors of the Corporation is authorized,
from time to time, to fix the price or the minimum price or the consideration or
minimum consideration for shares, and to issue shares up to the total number of
shares which the Corporation is authorized to issue.
(4) At all meetings of shareholders, each shareholder of the
Corporation shall be entitled to one vote for each share standing in his name on
the books of the Corporation on the date, fixed in accordance with the by-laws,
for determination of shareholders entitled to vote at such meeting.
(5) Notwithstanding any provision of the General Corporation
Law of the State of Maryland requiring a greater portion than a majority of the
votes entitled to be cast in order to take or authorize any action, any such
action may be taken or authorized upon the concurrence of a majority
- 5 -
<PAGE>
of the aggregate number of votes entitled to be cast thereon.
(6) The Corporation may issue shares in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall have proportionately to the respective fractions represented
thereby all the rights of the whole shares, including, without limitation the
right to vote, the right to receive dividends and distributions, and the right
to participate upon liquidation of the Corporation.
(7) No holder of any shares shall be entitled as of right to
subscribe for, purchase, or otherwise acquire any shares which the Corporation
proposes to issue or any rights or options which the Corporation proposes to
grant for the purchase of shares or for the purchase of any bonds, securities,
or obligations of the Corporation which are convertible into or exchangeable
for, or which carry any rights to subscribe for, purchase, or otherwise acquire
shares; and any and all of such shares, bonds, securities or obligations of the
Corporation, whether now or hereafter authorized or created may be issued, or
may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms, as the Board of Directors
in its discretion
- 6 -
<PAGE>
may determine, without first offering the same, or any thereof, to any such
holder.
(8) Each shareholder upon request to the Corporation,
accompanied by surrender of any outstanding certificate or certificates therefor
in proper form for transfer, shall be entitled to require the Corporation to
redeem all or any part of the shares standing in his name on the books of the
Corporation, at the then current net asset value of such shares. The method of
computing such current net asset value, and the time within which the
Corporation shall make payment therefor shall be determined as hereinafter
provided. Notwithstanding the foregoing, the Corporation may suspend the right
of the shareholders to require the Corporation to redeem shares:
(a) for any period (i) during which the New York Stock
Exchange is closed other than the customary weekend and holiday
closings, or (ii) during which trading on the New York Stock Exchange
is restricted;
(b) for any period during which an emergency, as determined by
the Securities and Exchange Commission or any successor thereto, exists
as a result of which (i) disposal by it is not reasonably practicable,
or (ii) it is not reasonably practicable for the Corporation fairly to
determine the value of its net assets; or
(c) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the Corporation.
(9) The Corporation may at any time and from time to time, at
the sole discretion of the Board of Directors, upon not less than 30 days
written notice, redeem at the then
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<PAGE>
current net asset value of such shares, all the shares of any shareholder the
aggregate current net asset value of whose shares is less than $1,000.
(10) Payment of the redemption or repurchase price for shares
redeemed or repurchased by the Corporation may be made either in cash or in
securities or other assets at the time owned by the Corporation or partly in
cash and partly in securities or other assets at the time owned by the
Corporation as the Board of Directors may, in its sole discretion, determine. In
the case of redemption, the value of any part of such payment to be made in
securities or other assets of the Corporation shall be the value employed in
determining the redemption price, and payment of the redemption price shall be
made on or before the seventh day following the day on which the shares are
properly presented for redemption except that delivery of any securities
included in any such payment shall be made as promptly as any necessary
transfers on the books of the issuers whose securities are to be delivered may
be made, and, except as postponement of the date of payment may be permissable
under the Investment Company Act of 1940, and the rules and regulations
thereunder.
(11) The net asset value of the shares shall be determined at
least once on each day that the New York Stock Exchange is open for trading as
of the close of trading ("current net asset value"). The current net asset value
shall be determined in good faith pursuant to
- 8 -
<PAGE>
the direction of the Board of Directors in a manner not inconsistent with the
provisions of the Investment Company Act of 1940 or any rule or regulation
thereunder.
(12) In the case of shares of stock of the Corporation issued
in whole or in part in exchange for securities, there may, at the discretion of
the Board of Directors of the Corporation, be included in the value of such
securities, for the purpose of determining the number of shares of capital stock
of the Corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable in
connection with the purchase of comparable securities on the New York Stock
Exchange) or other similar costs of acquisition of such securities held by the
holder of said securities in acquiring the same.
(13) Shares redeemed or repurchased by the Corporation shall
be retired and restored to the status of authorized and unissued shares, and the
capital of the Corporation correspondingly reduces, without any further action
by the Corporation, to the extent permitted by the laws of the State of
Maryland.
SEVENTH: (1) The number of directors of the Corporation until such
number shall be changed pursuant to the by-laws of the Corporation, is five.
(2) The names of the persons who shall act as directors of the
Corporation until the first annual meeting
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<PAGE>
of shareholders or until their successors are duly chosen and qualify are as
follows:
Lincoln W. Allen
Joseph H. Fleiss
Donald R. Foley
Philip C. Smith
Burton J. Greenwald
(3) The initial by-laws of the Corporation shall be adopted by
the Board of Directors at their organization meeting or by their informal
written action, as the case may be. Thereafter, the power to make, alter, and
repeal the by-laws of the Corporation shall be vested in the Board of Directors
of the Corporation.
EIGHTH: (1) The Corporation shall indemnify its corporate
representatives, as defined in Section 2-418(a) of the General Corporation Law
of the State of Maryland, in the manner and to the full extent provided and
permitted by the General Corporation Law of the State of Maryland.
(2) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
- 10 -
<PAGE>
of his status as such, whether or not the Corporation would have the power to
indemnify him against the liability under the provision of this Article EIGHTH.
(3) Anything herein contained to the contrary notwithstanding,
no officer or director of the Corporation shall be indemnified for any liability
to the Corporation or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
NINTH: From time to time the Corporation may amend, alter, repeal, or
change any of the provisions of these Articles of Incorporation or any amendment
thereto in the manner prescribed by law, and all contracts and rights at any
time conferred upon the shareholders of the Corporation are subject to the
provisions of this Article.
IN WITNESS WHEREOF, the undersigned incorporator has adopted and signed
these Articles of Incorporation and does hereby acknowledge that the adoption
and signing are his act.
/s/ C. Grant Anderson
C. Grant Anderson
Dated: April 6, 1983
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Exhibit 1.2
Articles of Amendment
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
ARTICLES SUPPLEMENTARY
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC., formerly National's
California Tax Exempt Bonds, Inc., a Maryland corporation having its principal
Maryland office in the City of Baltimore in the State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland, that:
FIRST: (a) The total number of shares of stock which the Corporation
was heretofore authorized to issue is TWO HUNDRED MILLION (200,000,000) shares,
of one or more distinct and separate series or classes thereof as the Board of
Directors shall from time to time create and establish, with par value of One
Cent ($0.01) each, and with aggregate par value of TWO MILLION Dollars
($2,000,000).
(b) The total number of shares of stock will be increased by
these Articles Supplementary to FIVE HUNDRED MILLION (500,000,000) shares, of
one or more distinct and separate series or classes thereof as the Board of
Directors shall from time to time create, and establish, with par value of One
Cent ($0.01) each, and with aggregate par value of FIVE MILLION Dollars
($5,000,000).
(c) The Corporation's Board of Directors has classified TWO
HUNDRED FIFTY MILLION (250,000,000) unissued shares of Common Stock of the
Corporation, par value One Cent ($0.01) per share as Phoenix California Tax
Exempt Bonds, Inc. Class B Common Stock, par value One Cent ($0.01) per share
(hereinafter "Class B Shares").
(d) The Corporation's Board of Directors has classified the
TWO HUNDRED FIFTY MILLION (250,000,000) shares previously designated as the
Common Stock of the Corporation, par value One Cent ($0.01) per share, as
Phoenix California Tax Exempt Bonds, Inc. Class A Common Stock, par value One
Cent ($0.01) per share (hereinafter "Class A Shares").
SECOND: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the two classes of shares shall be as set forth in
the Corporation's Articles of Incorporation and shall be subject to all
provisions of the Articles of Incorporation relating to shares of the
Corporation generally, and those set forth as follows:
(a) The assets belonging to each class shall be invested in
the same investment portfolio of the Corporation.
(b) The dividends and distributions of investment income and
capital gains with respect to each class shall be in such amounts as may be
declared from time to time by the Board of Directors, and the dividends and
distributions of each class may vary from dividends and distributions of
investment income and capital gains with respect to the other class to reflect
differing allocations of the expenses of the Corporation between the holders of
the two classes and any resultant differences between the net asset value per
share of the two classes, to such extent and for such purposes as the Board of
Directors may deem appropriate. The allocation of investment income or capital
gains and expenses and liabilities of the Corporation between the Class A Shares
and Class B Shares shall be determined by the Board of Directors in a manner
that is consistent with the order dated September 13, 1994 (Investment Company
Act of 1940 Release No. IC-19706) issued by the
<PAGE>
Securities and Exchange Commission in connection with the application for
exemption filed by National Multi-Sector Fixed Income Fund, Inc., et. al., any
amendment to such order or any rule or interpretation under the Investment
Company Act of 1940 that modifies or supersedes such order.
(c) Class A Shares (including fractional shares) may be
subject to an initial sales charge pursuant to the terms of the issuance of such
shares.
(d) The proceeds of the redemption of Class B Shares
(including fractional shares) shall be reduced by the amount of any contingent
deferred sales charge payable on such redemption pursuant to the terms of the
issuance of such shares.
(e) The holders of Class A and Class B Shares shall have (i)
exclusive voting rights with respect to provisions of any distribution plan
adopted by the Corporation pursuant to Rule 12b-1 under the Investment Company
Act 1940 (a "Plan") applicable to the respective class, and (ii) no voting
rights with respect to provisions of any Plan applicable to the other class or
with regard to any other matter submitted to a vote of shareholders which does
not affect holders of that respective class.
(f) (1) Each Class B Share, other than a share purchased
through the automatic reinvestment of a dividend or a distribution with respect
to Class B Shares, shall be converted automatically, and without any action or
choice on the part of the holder thereof, into Class A Shares on the date that
is the first business day of the month in which the eighth anniversary date of
the date of the issuance of the Class B Share falls (the "Conversion Date").
With respect to Class B Shares issued in an exchange or series of exchanges for
shares of capital stock or shares of beneficial interest, as applicable, of
another investment company or class or series thereof registered under the
Investment Company Act of 1940 pursuant to an exchange privilege granted by the
Corporation, the date of issuance of the Class B Shares for purposes of the
immediately preceding sentence shall be the date of issuance of the original
shares of capital stock or shares of beneficial interest, as applicable.
(2) Each Class B Share purchased through the automatic
reinvestment of a dividend or a distribution with respect to Class B Shares
shall be segregated in a separate sub-account. Each time any Class B Shares in a
shareholder's Fund account (other than those in the sub-account) convert to
Class A Shares, an equal pro rata portion of the Class B Shares then in the
sub-account will also convert automatically to Class A Shares without any action
or choice on the part of the holder thereof. The portion will be determined by
the ratio that the shareholder's Class B Shares converting to Class A Shares
bears to the shareholder's total Class B Shares not acquired through dividends
and distributions.
(3) 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 that payment of different dividends on Class A
Shares and Class B Shares does not result in the Corporation's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code of 1986, as amended, and that the conversion of shares does not constitute
a taxable event under federal income tax law.
(4) The number of Class A Shares into which a share of
Class B Shares is converted pursuant to paragraphs (f)(1) and (f)(2) hereof
shall equal the number (including for this
- 2 -
<PAGE>
purpose fractions of a share) obtained by dividing the net asset value per share
of the Class B Shares (for purposes of sales and redemptions thereof on the
Conversion Date) by the net asset value per share of the Class A Shares (for
purposes of sales and redemptions thereof on the Conversion Date).
(5) On the Conversion Date, the Class B Shares converted
into Class A Shares will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to receive
(i) the number of Class A Shares into which the Class B Shares have been
converted and (ii) declared but unpaid dividends to the Conversion Date) will
cease. Certificates representing Class A Shares resulting from the conversion
need not be issued until certificates representing Class B Shares converted, if
issued, have been received by the Corporation or its agent duly endorsed for
transfer.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
FOURTH: The total number of shares of capital stock that the
Corporation has authority to issue has been increased by the Board of Directors
in accordance with Section 2-105(c) of the General Corporation Law of Maryland.
The Class A Shares and Class B Shares have been duly authorized and classified
by the Corporation's Board of Directors pursuant to authority and power
contained in the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
has caused there Articles Supplementary to be executed by its duly authorized
officers who acknowledge that these Articles Supplementary are the act of the
Corporation, that to the best of their knowledge, information and belief, the
matters and facts set forth herein relating to authorization and approval of
these Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
DATED THIS 10th day of June, 1994.
PHOENIX CALIFORNIA TAX EXEMPT BONDS,
INC.
(SEAL)
By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
ATTEST:
By: /s/ Richard J. Wirth
Richard J. Wirth
Assistant Secretary
fund/909
- 3 -
Exhibit 1.3
Articles Supplementary
<PAGE>
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
ARTICLES OF AMENDMENT
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC., to be renamed
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC., a Maryland corporation having its
principal Maryland office in the City of Baltimore in the State of Maryland
(hereinafter referred to as the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland, that:
FIRST: Article SECOND of the Articles of Incorporation of the
Corporation is hereby amended so that said Article, as so amended, shall read in
full as follows:
"SECOND: The name of the corporation (hereinafter called the
"Corporation") is PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC."
SECOND: The amendment to the Articles of Incorporation of the
Corporation as hereinabove set forth has been duly approved by the Board of
Directors and approved by the stockholders of the Corporation in the manner and
by the vote required by law.
THIRD: The amendments to the Articles of Incorporation of the
Corporation as hereinabove set forth shall become effective upon filing pursuant
to Section 2-610.1(1) of the General Corporation Law of Maryland.
IN WITNESS WHEREOF, NATIONAL'S CALIFORNIA TAX EXEMPT BONDS,
INC. has caused these Articles of Amendment to be executed in its name and on
its behalf by its duly authorized officers who acknowledge that these Articles
of Amendment are the act of the Corporation, that to the best of their
knowledge, information and belief, the matters and facts set forth herein as to
authorization and approval are true in all material respects and that this
statement is made under the penalties of perjury.
DATED this 10th day of June, 1994.
NATIONAL'S CALIFORNIA TAX EXEMPT
BONDS, INC. (renamed PHOENIX
CALIFORNIA TAX EXEMPT BONDS, INC.)
(seal) By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
ATTEST:
By: /s/ Richard J. Wirth
Richard J. Wirth
Assistant Secretary
Exhibit 6.1
Underwriting Agreement
(Class A Shares)
<PAGE>
Class A Shares
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
UNDERWRITING AGREEMENT
AGREEMENT made and entered into the 14th day of May, 1993, by and
between NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC., a Maryland corporation
(the "Fund"), and PHOENIX EQUITY PLANNING CORPORATION, a Connecticut corporation
(the "Underwriter").
1. The Fund hereby appoints the Underwriter as exclusive agent to
promote the sales and to arrange for the sale of shares of the Fund, including
both unissued shares and treasury shares, through broker-dealers or otherwise,
in all parts of the United States and elsewhere throughout the world. The Fund
agrees to sell and deliver its shares, upon the terms hereinafter set forth, as
long as it has unissued and/or treasury shares available for sale.
(a) The Fund hereby authorizes the Underwriter, subject to law
and the Articles of Incorporation of the Fund, to accept, for the
account of the Fund, orders for the purchase of its shares,
satisfactory to the Underwriter, as of the time of receipt of such
orders by the dealer, or as otherwise described in the Prospectus of
the Fund.
(b) The public offering price of such shares shall be based on
the net asset value per share (as determined by the Fund) of the
outstanding shares of the Fund. Such net asset value shall be regularly
determined on every business day as of the time of closing of the
general trading session of the New York Stock Exchange and the public
offering price based upon such net asset value shall become effective
as set forth from time to time in the current Prospectus; such net
asset value shall also be regularly determined, and the public offering
price based thereon shall become effective, as of such other times for
the regular determination of net asset value as may be required or
permitted by rules of the National Association of Securities Dealers,
Inc. or the Securities and Exchange Commission. The Fund shall furnish
the Underwriter, with all possible promptness, a statement of each
computation of net asset value, and of the details entering into such
computation.
The public offering price of such shares shall be
equal to the net asset value, as described above, plus a commission to
be fixed from time to time by the Fund and the Underwriter and as
described in the current Prospectus of the Fund. The Underwriter may
fix quantity discounts and other similar terms not inconsistent with
the provisions of the Investment Company Act of 1940, as amended (the
"Act"). The Underwriter shall not impose any commission, permit any
quantity discounts or impose any other similar terms in connection with
the sale of shares of the Fund except as disclosed in the Prospectus of
the Fund.
<PAGE>
(c) The Underwriter shall be entitled to deduct a commission
on all such shares sold equal to the difference between the public
offering price and the net asset value on which such price is based. If
any such commission is received by the Fund, it will pay such
commission to the Underwriter. Out of the commission, the Underwriter
may reallow to dealers such concessions as the Underwriter may
determine from time to time. Notwithstanding anything in this Agreement
otherwise provided, sales may be made at net asset value as provided in
the Prospectus of the Fund.
(d) As reimbursement for expenditures made in connection with
providing certain distribution-related services, the Underwriter may
receive from the Fund a distribution services fee under the terms and
conditions set forth in the Fund's Distribution Plan adopted under Rule
12b-1 under the Act (the "Plan"), as the Plan may be amended from time
to time and subject to any further limitations on such fees as the
Directors may impose.
2. The Underwriter agrees to devote reasonable time and effort to
enlist investment dealers and otherwise promote the sale and distribution and
act as Underwriter for the sale and distribution of the shares of the Fund as
such arrangements may profitably be made; but so long as it does so, nothing
contained herein shall prevent the Underwriter from entering into similar
arrangements with other funds and to engage in other activities. The Fund
reserves the right to issue shares in connection with any merger or
consolidation of the Fund with any other investment company or any personal
holding company or in connection with offers of exchange exempted from Section
22(d) of the Act.
3. Upon receipt by the Fund at its principal place of business of a
written order from the Underwriter, together with the delivery instructions, the
Fund shall, as promptly as practicable, cause certificates for the shares called
for in such order to be delivered or credited in such amounts and in such names
as shall be specified by the Underwriter, against payment therefor in such
manner as may be acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the shares of the Fund shall be subject to the approval
of the Fund. The Fund authorizes the Underwriter in connection with the sale or
arranging for the sale of its shares to give only such information and to make
only such statements or representations as are contained in the Prospectus or in
sales literature or advertisements approved by the Fund or in such financial
statements and reports as are furnished to the Underwriter pursuant to paragraph
6 below. The Fund shall not be responsible in any way for any information,
statements or
- 2 -
<PAGE>
representations given or made by the Underwriter or its representatives or
agents other than such information, statements and representations.
5. The Underwriter as agent of the Fund is authorized, subject to the
direction of the Fund, to accept shares for redemption at prices determined as
prescribed in the then-current Prospectus of the Fund. The Fund shall reimburse
the Underwriter monthly for its out-of-pocket expenses reasonably incurred in
carrying out the foregoing authorization, but the Underwriter shall not be
entitled to any commissions or other compensation with respect to such
redemptions. The Underwriter shall report all such redemptions promptly to the
Fund.
6. The Fund shall keep the Underwriter fully informed with regard to
its affairs, shall furnish the Underwriter with a certified copy of all
financial statements, and a signed copy of each report, prepared by independent
public accountants and with such reasonable number of printed copies of each
annual and other periodic reports of the Fund as the Underwriter may request,
and shall cooperate fully in the efforts of the Underwriter to sell and arrange
for the sale of its shares and in the performance by the Underwriter of all of
its duties under this Agreement.
7. The Fund will pay or cause to be paid expenses (including counsel
fees and disbursements) of any registration of its shares under, but not limited
to, Federal, State or other regulatory authority, fees for filing periodic
reports with regulatory bodies and of preparing, setting in type and printing
the Prospectus and any amendments thereto prepared for use in connection with
the offering of shares of the Fund, for fees and expenses incident to the
issuance of shares of capital stock such as the cost of stock certificates,
issuance taxes, fees of the transfer agent including the cost of preparing and
mailing notices to shareholders pertaining to transactions with respect to such
shareholders' accounts, dividend disbursing agent's costs including the cost of
preparing and mailing notices confirming shares acquired by the shareholder
pursuant to the reinvestment of dividends and distributions, and mailing to
shareholders of prospectuses, notices and reports as may be required from time
to time by regulatory bodies or for such other purposes, except for purposes of
sales by the Underwriter as outlined in paragraph 8 below.
8. The Underwriter shall pay all of its own costs and expenses (other
than expenses and costs heretofore deemed payable by the Fund and other than
expenses which one or more dealers may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the shares issued or sold
hereunder including (a) expenses of printing copies of the Prospectus to be used
in connection with the sale of shares of the Fund at printer's
- 3 -
<PAGE>
overrun cost; (b) expenses of printing and distributing or disseminating any
other literature, advertising or selling aids in connection with the offering of
shares for sale (however, the expenses referred to in (a) and (b) do not include
expenses incurred in connection with the preparation, printing and distribution
of any prospectus or report or other communication to shareholders to the extent
that such expenses are necessarily incurred to effect compliance by the Fund
with any Federal or State law or other regulatory bodies); and (c) expenses of
advertising in connection with such offering.
9. The Fund agrees to register, from time to time as necessary,
additional shares with the Securities and Exchange Commission, State and other
regulatory bodies and to pay the related filing fees therefor and to file such
amendments, reports and other documents as may be necessary in order that there
may be no untrue statement of a material fact in the Registration Statement or
Prospectus or no omission to state a material fact therein necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended, as such Registration Statement is amended from time to
time, and the term "Prospectus" shall mean the most recent form of prospectus
authorized by the Fund for use by the Underwriter and by dealers.
10. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the meaning
defined in Section 2 (a) (4) of the Act.
11. This Agreement has been approved by the Directors of the Fund,
including the Directors who are not "interested persons" of the Fund, as defined
in the Act, and who have no direct or indirect financial interest in this
Agreement (the "Disinterested Directors"), by vote cast in person at a meeting
called for the purpose of voting on this Agreement. This Agreement shall
continue in effect for two years from its effective date, and thereafter for
successive annual periods, provided that such continuance is specifically
approved annually by a majority of the Directors, acting on behalf of the Fund,
and by a majority of the Disinterested Directors, cast in person at a meeting
called for such purpose.
12. This Agreement may be terminated at any time, without the payment
of any penalty, by vote of a majority of the Disinterested Directors or by vote
of a majority of the outstanding voting securities of the Fund, as that term is
defined in the Act, on not more than 60 days' written notice to the Underwriter.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS,
INC.
By: /s/ John G. DeJong
John G. DeJong, Vice President
Attest:
By: /s/ Mairead M. Collins
Mairead M. Collins
Assistant Secretary
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Martin J. Gavin
Martin J. Gavin, Executive Vice President
Attest:
By: /s/ Patricia O. McLaughlin
Patricia O. McLaughlin
Assistant Secretary
- 5 -
Exhibit 6.2
Underwriting Agreement
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
UNDERWRITING AGREEMENT
CLASS B SHARES
THIS AGREEMENT by and between PHOENIX CALIFORNIA TAX EXEMPT BONDS,
INC., a Maryland corporation (the "Fund"), and PHOENIX EQUITY PLANNING
CORPORATION, a Connecticut corporation (the "Underwriter").
1. The Fund hereby appoints the Underwriter as exclusive agent to
promote the sales and to arrange for the sale of Class B shares of the Fund,
including both unissued shares and treasury shares, through broker-dealers or
otherwise, in all parts of the United States and elsewhere throughout the world.
The Fund agrees to sell and deliver its shares, upon the terms hereinafter set
forth, as long as it has unissued and/or treasury shares available for sale.
(a) The Fund hereby authorizes the Underwriter, subject to law and the
Articles of Incorporation of the Fund, to accept, for the account of the Fund,
orders for the purchase of its Class B shares, satisfactory to the Underwriter,
as of the time of receipt of such orders by the dealer, or as otherwise
described in the Prospectus of the Fund.
(b) The public offering price of such class B shares shall be based on
the net asset value per share (as determined by the Fund) of the outstanding
Class B shares of the Fund. Such net asset value shall be regularly determined
on every business day as of the time of closing of the general trading session
of the New York Stock Exchange and the public offering price based upon such net
asset value shall become effective as set forth from time to time in the current
Prospectus; such net asset value shall also be regularly determined, and the
public offering price based thereon shall become effective, as of such other
times for the regular determination of net asset value as may be required or
permitted by rules of the National Association of Securities Dealers, Inc. or
the Securities and Exchange Commission. The Fund shall furnish the Underwriter,
with all possible promptness, a statement of each computation of net asset
value, and of the details entering into such computation. The public offering
price of such Class B shares shall be equal to the net asset value, as described
above, plus a commission to be fixed from time to time by the Fund and the
Underwriter and as described in the current Prospectus of the Fund. The
Underwriter may fix quantity discounts and other similar terms not inconsistent
with the provisions of the Investment Company Act of 1940, as amended (the
"Act"). The Underwriter shall not impose any commission, permit any quantity
discounts or impose any other similar terms in connection with the sale of Class
B shares of the Fund except as disclosed in the Prospectus of the Fund.
(c) The Underwriter shall be entitled to deduct a commission on all
such Class B shares sold equal to the differences between the public offering
price and the net asset value on which such price is based. If any such
commission is received by the Fund, it will pay such commission to the
Underwriter. Out of the commission, the Underwriter may offer to dealers such
concessions as the Underwriter may determine from time to time. Notwithstanding
anything in this Agreement otherwise provided, sales may be made at net asset
value as provided in the Prospectus of the Fund.
<PAGE>
-2-
(d) As reimbursement for expenditures made in connection with providing
certain distribution-related services, the Underwriter may receive from the Fund
a distribution services fee under the terms and conditions set forth in the
Fund's Distribution Plan for Class B Shares adopted under Rule 12b-1 under the
Act (the "Plan"), as the Plan may be amended from time to time and subject to
any further limitations on such fees as the Directors may impose.
2. The Underwriter agrees to devote reasonable time and effort to
enlist investment dealers and otherwise promote the sale and distribution and
act as Underwriter for the sale and--distribution of the shares of the Fund as
such arrangements may profitably be made; but so long as it does so, nothing
contained herein shall prevent the Underwriter from entering into similar
arrangements with other funds and to engage in other activities. The Fund
reserves the right to issue shares in connection with any merger or
consolidation of the Fund with any other investment company or any personal
holding company or in connection with offers of exchange exempted from Section
22(d) of the Act.
3. Upon receipt by the Fund at its principal place of business of a
written order from the Underwriter, together with the delivery instruction, the
Fund shall, as promptly as practicable, cause certificates for the shares called
for in such order to be delivered or credited in such amounts and in such names
as shall be specified by the Underwriter, against payment therefor in such
manner as may be acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the shares of the Fund shall be subject to the approval
of the Fund. The Fund authorizes the Underwriter in connection with the sale or
arranging for the sale of its shares to give only such information and to make
only such statements or representations as are contained in the Prospectus or in
sales literature or advertisements approved by the Fund or in such financial
statements and reports as are furnished to the Underwriter pursuant to paragraph
6 below. The Fund shall not be responsible in any way for any information,
statements or representations given or made by the Underwriter or its
representatives or agents.
5. The Underwriter, as agent of the Fund, is authorized, subject to the
direction of the Fund, to accept shares for redemption at prices determined as
prescribed in the then-current Prospectus of the Fund. The Fund shall reimburse
the Underwriter monthly for its out-of-pocket expenses reasonably incurred in
carrying out the foregoing authorization, but the Underwriter shall not be
entitled to any commissions or other compensation with respect to such
redemptions. The Underwriter shall report all such redemptions promptly to the
Fund.
6. The Fund shall keep the Underwriter fully informed with regard to
its affairs, shall furnish the Underwriter with a certified copy of all
financial statements, and a signed copy of each report, prepared by independent
public accountants and with such reasonable number of printed copies of each
annual and other periodic reports of the Fund as the Underwriter may request,
and shall cooperate fully in the efforts of the Underwriter to sell and arrange
for the sale of its shares and in the performance by the Underwriter of all of
its duties under this Agreement.
<PAGE>
-3-
7. The Fund will pay or cause to be paid expenses (including counsel
fees and disbursements) of any registration of its shares under, but not limited
to, Federal, State or other regulatory authority, fees for filing periodic
reports with regulatory bodies and of preparing, setting in type and printing
the Prospectus and any amendments thereto prepared for use in connection with
the offering of shares of the Fund, for fees and expenses incident to the
issuance of shares of capital stock such as the cost of stock certificates,
issuance taxes, fees of the transfer agent including the cost of preparing and
mailing notices to shareholders pertaining to transactions with respect to such
shareholders' accounts, dividend disbursing agent's costs including the cost of
preparing and mailing notices confirming shares acquired by the shareholder
pursuant to the reinvestment of dividends and distributions, and mailing to
shareholders of prospectuses, notices and reports as may be required from time
to time by regulatory bodies or for such other purposes, except for purposes of
sales by the Underwriter as outlined in paragraph 8 below.
8. The Underwriter shall pay all of its own costs and expenses (other
than expenses and costs heretofore deemed payable by the Fund and other than
expenses which one or more dealers may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the Class B shares issued
or sold hereunder including (a) expenses of printing copies of the Prospectus to
be used in connection with the sale of Class B shares of the Fund at printer's
overrun cost; (b) expenses of printing and distributing or disseminating any
other literature, advertising or selling aids in connection with the offering of
Class B shares for sale (however, the expenses referred to in (a) and (b) do not
include expenses incurred in connection with the preparation, printing and
distribution of any prospectus or report or other communication to shareholders
to the extent that such expenses are necessarily incurred to effect compliance
by the Fund with any Federal or State law or other regulatory bodies); and (c)
expenses of advertising in connection with such offering.
9. The Fund agrees to register, from time to time as necessary,
additional shares with the Securities and Exchange Commission, State and other
regulatory bodies and to pay the related filing fees therefor and to file such
amendments, reports and other documents as may be necessary in order that there
may be no untrue statement of a material fact in the Registration Statement or
Prospectus or no omission to state a material fact therein necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended, as such Registration Statement is amended from time to
time, and the term "Prospectus" shall mean the most recent form of prospectus
authorized by the Fund for use by the Underwriter and by dealers.
10. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Act.
11. This Agreement has been approved by the Directors of the Fund,
including the Directors who are not "interested persons" of the Fund, as defined
in the Act, and who have no direct or indirect financial interest in this
Agreement (the "Disinterested Directors"), by vote cast in person
<PAGE>
- 4 -
at a meeting called for the purpose of voting on this Agreement. This Agreement
shall continue in effect for two years from its effective date, and thereafter
for successive annual periods, provided that such continuance is specifically
approved annually by a majority of the Directors, acting on behalf of the Fund,
and by a majority of the Disinterested Directors, cast in person at a meeting
called for such purpose.
12. This Agreement may be terminated at any time, without the payment
of any penalty, by vote of a majority of the Disinterested Directors or by vote
of a majority of the outstanding voting securities of the Fund, as that term is
defined in the Act, on not more than 60 days' written notice to the Underwriter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized this 26th day of May, 1994.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
Attest: /s/ Richard J. Wirth By: /s/ Philip R. McLoughlin
Richard J. Wirth Name: Philip R. McLoughlin
Asst. Secretary Title: President
PHOENIX EQUITY PLANNING
CORPORATION
Attest: /s/ Patricia O. McLaughlin By: /s/ Martin J. Gavin
Patricia O. McLaughlin Name: Martin J. Gavin
Title: Executive Vice President
Exhibit 8
Custodian Contract
<PAGE>
CUSTODIAN CONTRACT
Between
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Employment of Custodian and Property to be Held By It .............................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian..................................................................2
2.1 Holding Securities........................................................................2
2.2 Delivery of Securities....................................................................2
2.3 Registration of Securities................................................................7
2.4 Bank Accounts.............................................................................8
2.5 Payments for Shares.......................................................................9
2.6 Availability of Federal Funds.............................................................9
2.7 Collection of Income......................................................................9
2.8 Payment of Fund Monies...................................................................10
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased..........................................................13
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund....................................................................13
2.11 Appointment of Agents....................................................................14
2.12 Deposit of Fund Assets in Securities System..............................................15
2.12A Fund Assets Held in the Custodian's
Direct Paper System......................................................................18
2.13 Segregated Account.......................................................................19
2.14 Ownership Certificates for Tax Purposes..................................................20
2.15 Proxies .................................................................................20
2.16 Communications Relating to Fund
Portfolio Securities.....................................................................21
2.17 Proper Instructions......................................................................21
2.18 Actions Permitted Without Express Authority..............................................22
2.19 Evidence of Authority....................................................................23
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net
Income............................................................................................24
4. Records...........................................................................................24
5. Opinion of Fund's Independent Accountant..........................................................25
6. Reports to Fund by Independent Public Accountants.................................................25
7. Compensation of Custodian.........................................................................26
8. Responsibility of Custodian.......................................................................26
9. Effective Period, Termination and Amendment.......................................................27
10. Successor Custodian...............................................................................29
11. Interpretive and Additional Provisions............................................................30
12. Massachusetts Law to Apply........................................................................31
13. Prior Contracts...................................................................................31
14. Shareholder Communications Election...............................................................31
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between National's California Tax Exempt Bonds, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at 100 Bright Meadow Boulevard, Enfield,
Connecticut, 06083-1900, hereinafter called the "Fund", and State Street Bank
and Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH, that in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, payments of principal or capital distribution received by it with
respect to all securities owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock
("Shares") of the Fund as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held or received by the
Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an
<PAGE>
applicable vote by the Board of Directors of the Fund, and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian
- -------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as a
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper Account") only upon receipt of
Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
- 2 -
<PAGE>
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount
- 3 -
<PAGE>
or number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the
- 4 -
<PAGE>
exercise of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the
new securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund,
- 5 -
<PAGE>
the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently
- 6 -
<PAGE>
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment ------ of a
nominee to be used in common with other registered investment companies
having the same investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.11 or in the
name or
- 7 -
<PAGE>
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment Company Act
of 1940. Funds held by the Custodian for the Fund may be deposited by
it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every
such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and
- 8 -
<PAGE>
that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved
by vote of a majority of the Board of Directors of the Fund. Such
funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and
deposit into the Fund's account such payments as are received for
Shares of the Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the Transfer
Agent of any receipt by it of payments for Shares of the Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.7 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely
- 9 -
<PAGE>
basis all income and other payments with respect to bearer securities
if, on the date of payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
- 10 -
<PAGE>
futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.12 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the
- 11 -
<PAGE>
Custodian to repurchase such securities from the Fund or (e)
for transfer to a time deposit account of the Fund in any
bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Section 2.17;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
- 12 -
<PAGE>
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the board of Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From
such funds as may be available for the purpose but subject to the
limitations of the Articles of
- 13 -
<PAGE>
Incorporation and any applicable votes of the Board of Directors of the
Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment
to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares
of the Fund, the Custodian shall honor checks drawn on the Custodian by
a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to
time between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
- 14 -
<PAGE>
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon
- 15 -
<PAGE>
(i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund. Copies of all advices from the Securities System
of transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
- 16 -
<PAGE>
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
- 17 -
<PAGE>
2.12A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
- 18 -
<PAGE>
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transaction in the Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding
- 19 -
<PAGE>
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purpose of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed
- 20 -
<PAGE>
by the registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a nominee of the
Fund, all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.16 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund all written information (including, without limitation, pendency
of calls and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take action
with respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or
- 21 -
<PAGE>
initialled by one or more person or persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if
the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the
Board of Directors, Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.13.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund:
- 22 -
<PAGE>
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Directors of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
any instruction, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of Directors
of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of
any action by the Board of Directors pursuant to the Articles of
- 23 -
<PAGE>
Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian
of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.
4. Records
-------
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to
- 24 -
<PAGE>
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall
be the property of the Fund and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund
with a tabulation of securities owned by the Fund and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such
- 25 -
<PAGE>
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
7. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
8. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
- 26 -
<PAGE>
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of Fund assets to the
extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either
- 27 -
<PAGE>
party by an instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however that the Custodian
shall not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors of the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors has reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not act under
Section 2.12A hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors has approved the
initial use of the Direct Paper System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Directors has
reviewed the use by the Fund of the Direct Paper System; provided further,
however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the
- 28 -
<PAGE>
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own
- 29 -
<PAGE>
selection, having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $25,000,000, all securities,
funds and other properties held by the Custodian and all instruments held by the
Custodian relative thereto and all other property held by it under this Contract
and to transfer to an account of such successor custodian all of the Fund's
securities held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such
- 30 -
<PAGE>
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
13. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
14. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the
- 31 -
<PAGE>
Fund as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release
the Fund's name, address, and share
positions.
NO [x] The Custodian is not authorized to
release the Fund's name, address, and share
positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 14th day of October, 1993.
NATIONAL'S CALIFORNIA TAX EXEMPT
ATTEST BONDS, INC.
/s/ James M. Dolan By /s/ William R. Moyer
James M. Dolan William R. Moyer
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ MaryEllen Bonomo By /s/ Ronald E. Logue
(SEAL) MaryEllen Bonomo Ronald E. Logue
Assistant Secretary Executive Vice President
- 32 -
Exhibit 9.1
Transfer Agency and Service Agreement
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
PHOENIX FUNDS
and
PHOENIX EQUITY PLANNING CORPORATION
<PAGE>
Table of Contents
Page
Article 1 - Terms of Appointment; Duties of Transfer Agent...................1
Article 2 - Fees and Expenses................................................3
Article 3 - Representations and Warranties of Transfer Agent.................3
Article 4 - Representations and Warranties of the Phoenix Funds..............3
Article 5 - Data Access and Proprietary Information..........................4
Article 6 - Indemnification..................................................5
Article 7 - Standard of Care.................................................6
Article 8 - Covenants........................................................6
Article 9 - Termination......................................................7
Article 10 - Assignment.......................................................7
Article 11 - Amendment........................................................7
Article 12 - Connecticut Law to Apply.........................................7
Article 13 - Force Majeure....................................................7
Article 14 - Consequential Damages............................................8
Article 15 - Merger of Agreement..............................................8
Article 16 - Limitations of Liability of the Trustees
and Shareholders.................................................8
Article 17 - Counterparts.....................................................8
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 1st day of June, 1994, by and between the
undersigned entities (hereinafter singularly referred to as a "Fund" and
collectively referred to as the "Phoenix Funds"), and PHOENIX EQUITY PLANNING
CORPORATION (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
WHEREAS, the Phoenix Funds desire to appoint Transfer Agent as their
transfer agent, dividend disbursing agent and agent in connection with certain
other activities, and Transfer Agent desires to accept such appointment; and
WHEREAS, the parties wish to set forth herein their mutual
understandings and agreements.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency whereof being hereby acknowledged and affirmed, the parties hereto
agree as follows:
Article 1 Terms of Appointment; Duties of Transfer Agent
----------------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement,
the Phoenix Funds hereby employ and appoint Transfer Agent to act as, and
Transfer Agent agrees to act as, transfer agent for the authorized and issued
shares of beneficial interest or common stock, as the case may be, of each of
the Phoenix Funds (hereinafter collectively and singularly referred to as
"Shares"), dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Phoenix Funds ("Shareholders") and as set out in the currently effective
registration statement of each Fund (the prospectus and statement of additional
information portions of such registration statement being referred to as the
"Prospectus"), including, without limitation, any periodic investment plan or
periodic withdrawal program.
1.02 Transfer Agent agrees that it will perform the following services
pursuant to this Agreement:
(a) In accordance with procedures established from time to time by
agreement between the Phoenix Funds and Transfer Agent, Transfer Agent shall:
i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation therefor to the Custodian appointed from
time to time by the Trustees/Directors of each Fund
(which entity or entities, as the case may be, shall be
referred to as the "Custodian");
ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the each
appropriate Shareholder account;
iii) Receive for acceptance, redemption requests and
redemption directions and deliver the appropriate
documentation therefor to the Custodian;
iv) In respect to the transactions in items (i), (ii) and
(iii) above, the Transfer Agent shall execute
transactions directly with broker-dealers authorized by
the Phoenix Funds who shall thereby be deemed to be
acting on behalf of the Phoenix Funds;
<PAGE>
v) At the appropriate time as and when it receives monies
paid to it by any Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
vii) Prepare and transmit payments for dividends and
distributions declared by each Fund, if any;
viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Transfer Agent of indemnification
satisfactory to the Transfer Agent and the Phoenix
Funds, and the Transfer Agent at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
ix) Maintain records of account for and advise each Fund and
its respective Shareholders as to the foregoing; and
x) Record the issuance of Shares and maintain pursuant to
Rule 17Ad-10(e) under the Exchange Act of 1934, a record
of the total number of Shares which are authorized,
issued and outstanding based upon data provided to it by
each Fund. The Transfer Agent shall also provide on a
regular basis to each Fund the total number of Shares
which are authorized, issued and outstanding shall have
no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of each respective Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), Transfer Agent shall: (i) perform all of the customary
services of a transfer agent, dividend disbursing agent and, as relevant, agent
in connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal program),
including, but not limited to, maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating proxies,
mailing Shareholder reports and Prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders, and providing Shareholder account information; and
(ii) provide a system which will enable each Fund to monitor the total number of
Shares sold in each State.
(c) In addition, the Phoenix Funds shall (i) identify to Transfer Agent
in writing those transactions and assets to be treated as exempt from blue sky
reporting for each State, and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of Transfer Agent for a Fund's blue
sky State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Phoenix Funds and the
reporting of such transactions to each Fund as provided above.
(d) Procedures as to who shall provide certain of the services in
Article 1 may be established from time to time by agreement between the Phoenix
Funds and Transfer Agent per the attached service responsibility schedule, if
any. The Transfer Agent may at times perform only a portion of these services
and the Phoenix Funds or its agent may perform these services on behalf of any
Fund.
- 2 -
<PAGE>
(e) The Transfer Agent shall provide additional services on behalf of
the Phoenix Funds (i.e., escheatment services) which may be agreed upon in
writing between the Phoenix Funds and the Transfer Agent.
Article 2 Fees and Expenses
-----------------
2.01 In consideration of the services provided by the Transfer Agent
pursuant to this Agreement, each Fund agrees to pay Transfer Agent an annual
maintenance fee for each Shareholder account as set forth in Schedule A attached
hereto and made a part hereof. Annual Maintenance Fees and out-of-pocket
expenses and advances identified under Section 2.02 below may be changed from
time to time subject to mutual written agreement between each Fund and Transfer
Agent. Nothing herein shall preclude the assignment of all or any portion of the
foregoing fees and expense reimbursements to any sub-agent contracted by
Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Phoenix
Funds agree to reimburse Transfer Agent for out-of-pocket expenses or advances
incurred by Transfer Agent for the items set out in Schedule A attached hereto.
In addition, any other expenses incurred by Transfer Agent at the request or
with the consent of any Fund, will be reimbursed by the Fund requesting the
same.
2.03 The Phoenix Funds agree to pay all fees and reimbursable expenses
within five days following the mailing of the respective billing notice. The
above fees will be charged against each Fund's custodian checking account five
(5) days after the invoice is transmitted to the Phoenix Funds. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
Shareholder accounts shall be advanced to Transfer Agent at least seven (7) days
prior to the mailing date of such materials.
Article 3 Representations and Warranties of Transfer Agent
------------------------------------------------
The Transfer Agent represents and warrants to the Phoenix Funds that:
3.01 It is a corporation organized and existing and in good standing
under the laws of the State of Connecticut.
3.02 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.03 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.05 It is and shall continue to be a duly registered transfer agent
pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934.
Article 4 Representations and Warranties of Phoenix Funds
-----------------------------------------------
The Phoenix Funds represent and warrant to Transfer Agent that:
4.01 All corporate or trust proceedings, as the case may be, required
to enter into and perform this Agreement have been undertaken and are in full
force and effect.
4.02 Each Fund is an open-end, diversified management investment
companies registered under the Investment Company Act of 1940.
- 3 -
<PAGE>
4.03 A registration statement under the Securities Act of 1933 is
currently effective for each Fund that is offering its securities for sale and
such registration statement will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares being offered for sale.
Article 5 Data Access and Proprietary Information
---------------------------------------
5.02 The Phoenix Funds acknowledge that the data bases, computer
programs, screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Phoenix Funds by the Transfer Agent as
part of each Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Transfer Agent on data bases under the control and
ownership of the Transfer Agent or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Transfer
Agent or other third party. In no event shall Proprietary Information be deemed
Customer Data. The Phoenix Funds agree to treat all Proprietary Information as
proprietary to the Transfer Agent and further agree that it shall not divulge
any Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Phoenix Funds agree for
itself and its employees and agents:
(a) to access Customer Data solely from location as may be designated
in writing by the Transfer Agent and solely in accordance with
the Transfer Agent's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose
of such information in accordance with the Transfer Agent's
instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility
or other location, except with the prior written consent of the
Transfer Agent;
(e) that the Phoenix Funds shall have access only to those authorized
transactions agreed upon by the parties; and
(f) to honor all reasonable written requests made by the Transfer
Agent to protect at the Transfer Agent's expense the rights of
the Transfer Agent in Propriety Information at common law, under
federal copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Phoenix Funds notified the Transfer Agent that any of the
Data Access Services do not operate in material compliance with the most
recently issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from which
the Transfer Agent may obtain certain data included in the Data Access Services
are solely responsible for the contents of such data and the Phoenix Funds agree
to make no claim against the Transfer Agent arising out of the contents of such
third-party data, including, but not limited to, the accuracy thereof. DATA
ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER
AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
- 4 -
<PAGE>
5.03 If the transactions available to the Phoenix Funds include the
ability to originate electronic instructions to the Transfer Agent in order to
(i) effect the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information (such transactions constituting a
"COEFI"), then in such event the Transfer Agent shall be entitled to rely on the
validity and authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity with security
procedures established by the Transfer Agent from time to time.
Article 6 Indemnification
---------------
6.01 The Transfer Agent shall not be responsible for, and the Phoenix
Funds shall indemnify and hold Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of Transfer Agent or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The lack of good faith, negligence or willful misconduct by the
Phoenix Funds which arise out of the breach of any representation or warranty of
the Phoenix Funds hereunder.
(c) The reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents which (i) are received by
Transfer Agent or its agents or subcontractors, and (ii) have been prepared,
maintained or performed by the Phoenix Funds or any other person or firm on
behalf of the Phoenix Funds including but not limited to any previous transfer
agent or registrar.
(d) The reliance on, or the carrying out by Transfer Agent or its
agents or subcontractors of any instructions or requests of the Phoenix Funds.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
6.02 Transfer Agent shall indemnify and hold each of the Phoenix Funds
harmless from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or attributable to any
action or failure or omission to act by Transfer Agent, or any sub-agent, as a
result of Transfer Agent's, or such sub-agent's, lack of good faith, negligence
or willful misconduct.
6 .03 At any time the Transfer Agent may apply to any officer of the
Phoenix Funds for instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be performed by
Transfer Agent under this Agreement, and Transfer Agent and its agents or
subcontractors shall not be liable and shall be indemnified by the Phoenix Funds
for any action taken or omitted by it in reliance upon such instructions or upon
the opinion of such counsel. The Transfer Agent, its agents and subcontractors
shall be protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Phoenix Funds, reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided Transfer Agent or
its agents or subcontrators by machine readable input, telex, CRT data entry or
other similar means authorized by the Phoenix Funds, and shall not be held to
have notice of any change of authority of any person, until receipt of written
notice thereof from the Phoenix Funds. Transfer Agent, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably
- 5 -
<PAGE>
believed to bear the proper manual or facsimile signatures of the officers of
any Fund, and the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
6.04 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6.05 Transfer Agent hereby expressly acknowledges that recourse against
any of the Phoenix Funds, if any, shall be subject to those limitations provided
by governing law and the Declaration of Trust of the Phoenix Funds, as
applicable, and agrees that obligations assumed by the Phoenix Funds hereunder
shall be limited in all cases to the Phoenix Funds and their respective assets.
Transfer Agent shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Phoenix Funds, nor shall the Transfer
Agent seek satisfaction of any obligations from the Trustees/Directors or any
individual Trustee/Director of the Phoenix Funds.
Article 7 Standard of Care
----------------
7 .01 The Transfer Agent shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure the accuracy
of all services performed under this Agreement, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct of that of its
employees.
Article 8 Covenants
---------
8.01 The Phoenix Funds shall promptly furnish to Transfer Agent the
following:
(a) A certified copy of the resolution of its Trustees/Directors
authorizing the appointment of Transfer Agent and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust or Articles of Incorporation, as
the case may be, and ByLaws, if any, and all amendments thereto of each Fund.
8.02 The Transfer Agent hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Phoenix Funds for
safekeeping of stock certificates, check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
8.03 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, Transfer Agent agrees that all such records prepared
or maintained by Transfer Agent relating to the services to be performed by
Transfer Agent hereunder are the property of each respective Fund and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to each respective Fund on and in
accordance with its request.
8.04 The parties agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this
- 6 -
<PAGE>
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records, Transfer Agent will endeavor to notify the affected Fund
and to secure instructions from an authorized officer of such Fund as to such
inspection. Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
Article 9 Termination
-----------
9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. The parties mutually acknowledge
that the termination of this Agreement by one, but not each Fund shall not
effect a termination of this Agreement as to any and all other Phoenix Fund(s)
which have not terminated the Agreement.
9.02 Should any Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the terminating Fund. Additionally, Transfer Agent reserves the right to charge
any other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees to the terminating Fund.
Article 10 Assignment
----------
10.01 Except as provided in Section 10.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
10.03 The Transfer Agent may, without further consent on the part of
any of the Phoenix Funds, subcontract for the performance hereof with one or
more sub-agents; provided, however, that Transfer Agent shall be as fully
responsible to each Fund for the acts and omissions of any subcontractor as it
is for its own acts and omissions.
Article 11 Amendment
---------
11.01 This Agreement may be amended or modified by a written agreement
executed by the parties and authorized or approved by a resolution of the
Trustees/Directors of each respective Fund.
Article 12 Connecticut Law to Apply
------------------------
12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Connecticut.
Article 13 Force Majeure
-------------
13.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of the acts of God, strikes, equipment
or transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
- 7 -
<PAGE>
Article 14 Consequential Damages
---------------------
14.01 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
Article 15 Merger of Agreement
-------------------
15.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
15.02 This Agreement shall not be merged with or construed in
conjunction with any other current or future agreement between the Phoenix Funds
(including any Fund) and Phoenix Equity Planning Corporation, each and all of
which agreements shall at all times remain separate and distinct.
Article 16 Limitations of Liability of the Trustees and Shareholders
---------------------------------------------------------
16.01 For the Funds which that are formed as Massachusetts business
trusts, notice is hereby given that the Agreement and Declaration of such Trusts
are on file with the Secretary of the Commonwealth of Massachusetts and was
executed on behalf of the Trustees of such Trusts as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees or Shareholders individually but are binding only upon the
assets and property of each Fund.
Article 17 Counterparts
------------
17.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
Phoenix Asset Reserve
Phoenix California Tax Exempt Bonds, Inc.
Phoenix Equity Opportunities Fund
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Series Fund
Phoenix Total Return Fund, Inc.
Phoenix Worldwide Opportunities Fund
By: /s/ Philip R. McLoughlin
----------------------------
Name: Philip R. McLoughlin
Title: President
ATTEST:
By: /s/ Richard Wirth
----------------------------
Name: Richard Wirth
Title: Assistant Secretary
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Martin J. Gavin
----------------------------
Executive Vice President
ATTEST:
By: /s/ Patricia O. McLaughlin
----------------------------
Name: Patricia O. McLaughlin
Title: Assistant Secretary
- 9 -
<PAGE>
Schedule A
Fee Schedule
Annual Maintenance Fees shall be based on the following formula:
AMF = BAMF x SA
Fund
where, AMFFund refers to the aggregate Annual Maintenance Fee levied
against each respective Fund,
BAMF refers to the Base Annual Maintenance Fee levied against
each respective Fund for each shareholder account, as more
particularly described below, at the basic annual per account
rate of $19.25 for daily dividend accounts and $14.95 for
non-daily dividend accounts, and
SA refers to the number of Shareholder Accounts subject to the
terms of this Agreement and any and all sub-transfer agent
agreements which presently or hereafter may be entered into by
the Transfer Agent. For the purpose of computing the foregoing,
the Transfer Agent will ascertain the number of Shareholders of
each Fund regardless of whether any such Shares are held in
accordance with any pooled or omnibus accounts or arrangement
managed or controlled by any entity, broker/dealer or
sub-transfer agent.
Other Fees
[bullet] Omnibus Accounts, Per Transaction $2.50
[bullet] Closed Accounts, per Account, per month $0.20
[bullet] Check writing Fees:
[bullet] Privilege set-up $5.00
[bullet] Per Cleared Check $1.00
Out-of-Pocket Expenses
- ----------------------
Out-of-pocket expenses include, but are not limited to: confirmation production,
postage, forms, telephone, microfilm, microfiche, stationary and supplies billed
as .1122% of postage costs and expenses incurred at the specific direction of
any Fund. Postage for mass mailings is due seven days in advance of the mailing
date.
Exhibit 9.1a
Sub-transfer Agent Agreement
<PAGE>
SUB-TRANSFER AGENT AGREEMENT
THIS AGREEMENT effective as of the 1st day of June, 1994, by and
between PHOENIX EQUITY PLANNING CORPORATION, having a principal place of
business located at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083
(hereinafter referred to as the "Transfer Agent"); and STATE STREET BANK AND
TRUST COMPANY, having a principal place of business located at 225 Franklin
Street, Boston, Massachusetts (hereinafter referred to as the "Sub-Transfer
Agent").
WITNESSETH:
WHEREAS, Transfer Agent has entered into a Transfer Agency Agreement
with the Phoenix Funds (collectively referred to herein as the "Phoenix Funds")
dated as of June 1, 1995, pursuant to which the Phoenix Funds have appointed
Transfer Agent as transfer agent, dividend disbursing agent, and plan agent for
shareholders of the Phoenix Funds (the "Transfer Agency Agreement");
WHEREAS, Transfer Agent wishes to appoint the Sub-Transfer Agent as its
agent, and Sub-Transfer Agent is willing to accept such appointment, to carry
out certain of Transfer Agent's duties under the Transfer Agency Agreement
solely with respect to those shareholders of the Phoenix Funds whose accounts
have been or are hereafter created and duly recorded on the books and records of
the Phoenix Funds (collectively, the "Shareholders"); and
WHEREAS, the parties desire to set forth herein their mutual agreements
and understandings with respect to the foregoing.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency thereof being hereby acknowledged and
affirmed, Transfer Agent and Sub-Transfer Agent hereby agree as follows:
1. Appointment of Agent
--------------------
Transfer Agent hereby appoints Sub-Transfer Agent as its non-exclusive
agent to carry out the duties and functions of the Transfer Agent set forth in
Schedule A attached hereto and made a part hereof and as set forth below.
Sub-Transfer Agent hereby agrees to accept such appointment and carry out the
responsibilities set forth in Schedule A attached hereto and made a part hereof,
upon the terms and conditions set forth herein. Transfer Agent agrees to supply
the Sub-Transfer Agent with all documents, records and other information
supplied to the Transfer Agent by the Phoenix Funds pursuant to the Transfer
Agency Agreement, as may be reasonable necessary for the Sub-Transfer Agent to
carry out its responsibilities hereunder.
2. Fees
----
In consideration for the Sub-Transfer Agent's performance hereunder,
Transfer Agent agrees to pay to the Sub-Transfer Agent an annual fee equal to
$6.95 per shareholder account in the Phoenix Funds as to which the Sub-Transfer
Agent actually supplies the services described herein, payable at the rate of
1/12 of the annual fee per month due within 10 days after the last day of each
month. The fee will be due for an account in the month that an account opens or
closes. This Agreement and the fee contemplated hereunder shall apply only to
those shareholder accounts specifically designated to the Sub-Transfer Agent by
Transfer Agent in writing as being covered by the terms of this Agreement. The
number of shareholder accounts subject to the provisions hereof shall be
certified each year by independent public accountants retained by the and at the
expense of the Sub-Transfer Agent as of a month selected by the Transfer Agent
and/or Phoenix Funds.
3. Standard of Care; Indemnity
---------------------------
(a) The Sub-Transfer Agent shall be held to a standard of care in
carrying out the provisions of
<PAGE>
- 2 -
this Agreement imposed by any and all applicable laws or regulations now or
hereafter affecting the subject matter hereof. Transfer Agent shall endeavor to
inform the Sub-Transfer Agent of any condition of which Transfer Agent has
actual knowledge which could cause the Sub-Transfer Agent to violate its
standard of care, and the Sub-Transfer Agent shall immediately correct any such
condition. Notwithstanding the foregoing, the Transfer Agent assumes no duty or
obligation, whether express or implied, to monitor Sub-Transfer Agent's
compliance with governing laws and standards.
(b) The Sub-Transfer Agent does hereby indemnify and hold both the
Transfer Agent and each of the Phoenix Funds and their respective employees,
agents, representatives and affiliates (collectively, the "Indemnified Parties")
harmless from any losses, claims, damages, liabilities, and expenses, including,
without limitation, counsel fees and expenses (hereinafter collectively referred
to as "losses") which any of the Indemnified Parties may incur in connection
with the Sub-Transfer Agent's activities hereunder, unless such losses directly
result from the gross negligence, willful misconduct, or bad faith of the
Transfer Agent.
(c) The Transfer Agent is entitled to indemnification pursuant to the
terms of the Transfer Agency Agreement. The Transfer Agent agrees to indemnify
the Sub-Transfer Agent for the Sub-Transfer Agent's losses to the extent, but
only to the extent, that the Transfer Agent is entitled to and receives
indemnification from the Phoenix Funds pursuant to the terms of the Transfer
Agency Agreement in connection with the events upon which the Sub-Transfer
Agent's indemnification claim is based. Transfer Agent agrees to advise the
Phoenix Funds of any claim of the Sub-Transfer Agent for the Sub-Transfer
Agent's indemnification arising in connection with the Sub-Transfer Agent's
activities in carrying out the responsibilities of the Transfer Agent as
provided herein. Except as expressly provided in the second sentence of this
Subsection (c), Transfer Agent shall not otherwise be liable to or be required
to indemnify the Sub- Transfer Agent in connection with any losses by the
Sub-Transfer Agent arising hereunder or under the Transfer Agency Agreement
unless such losses directly or indirectly resulted from the Transfer Agent's own
negligence, willful misconduct, or bad faith.
4. Representations and Warranties of Sub-Transfer Agent
----------------------------------------------------
The Sub-Transfer Agent hereby represents, warrants and certifies to the
Transfer Agent and each of the Phoenix Funds that:
(a) it has the power and authority and has taken all requisite actions
in order to authorize the execution and performance of this Agreement by the
Sub-Transfer Agent;
(b) it has and will continue to have access to all necessary
facilities, equipment and personnel requires in order to perform its duties and
obligations under this Agreement;
(c) it has implemented procedures and systems acceptable to the
Transfer Agent to safeguard the Phoenix Funds' records and other data from loss
or damage attributable to fire, theft or any other cause; and
(d) it is and shall continue to be a duly registered transfer agent
pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934.
5. Covenants of Sub-Transfer Agent
-------------------------------
Sub-Transfer Agent covenants that:
(a) it shall utilize and employ reasonable control procedures
acceptable to the Transfer Agent, and shall promptly advise Transfer Agent of
any errors or mistakes in the data or information transmitted to Transfer Agent
or its designee, the records maintained or output generated thereby and, using
normal audit and control procedures, Sub-Transfer Agent shall verify all output
received from the Transfer Agent or its
<PAGE>
- 3 -
designee;
(b) it shall provide to Transfer Agent or its designee, in the formats
and form specified by Transfer Agent, all information and data required in
connection therewith so that the output shall be complete and accurate when it
is generated for the Phoenix Funds by the Transfer Agent, and the Sub-Transfer
Agent shall be responsible and liable for the cost or expense of regenerating
any output if the Sub-Transfer Agent shall have failed to provide any such data
or information or failed to verify and reconcile any such data or information
before data or information is generated for the Phoenix Funds by the Transfer
Agent;
(c) in the event the Sub-Transfer Agent shall erroneously provide
information or shall provide incorrect information or data to the Transfer Agent
or its designee, it shall correct such information and data and provide the
corrected information or data to the Transfer Agent or its designee;
(d) all information furnished to or obtained by Sub-Transfer Agent
pertaining to the procedures, programs and data bases of Transfer Agent or its
designees is confidential and proprietary to Transfer Agent, and the
Sub-Transfer Agent shall not disclose such information, directly or indirectly,
to any third party except to the extent that is required by law;
(e) it shall make its facilities and records, including without
limitation, financial records, historical records relating to transactions, all
written communications and related transmissions, and records of any service
bureau available for inspection and examination by Transfer Agent and/or Phoenix
Funds and its and their respective representatives during normal business hours
in order that the Transfer Agent and/or Phoenix Funds and its and their
respective representatives may determine, monitor and review the Sub-Transfer
Agent's performance of its duties and responsibilities hereunder;
(f) it shall maintain and preserve all records required by governing
Federal and State laws and regulations to be maintained and preserved in
connection herewith and will otherwise comply with all laws, rules and
regulations applicable to the services to be provided hereunder; and
(g) it shall, at all times, maintain adequate insurance coverage in an
amount acceptable to Transfer Agent to satisfy all of its reasonable anticipated
liabilities hereunder.
6. Covenants of Transfer Agent
---------------------------
Transfer Agent agrees that all information furnished to or obtained by
it pertaining to procedures, programs, and data bases of the Sub-Transfer Agent
or its designees is confidential and proprietary to the Sub- Transfer Agent, and
it shall not disclose such information directly or indirectly to any third party
except to the extent required by law.
7. Miscellaneous
-------------
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof. This Agreement
shall be constructed and enforced in accordance with and governed by the laws of
the State of Connecticut. This Agreement may be executed simultaneously in
counterparts, each of which taken together shall constitute one and the same
instrument.
8. Amendments; Termination
-----------------------
This Agreement may be terminated at any time by six months' written
notice given to the other party; provided however that this Agreement may be
terminated immediately at any time by Transfer Agent in the event that either
the Transfer Agency Agreement is terminated or in the event that the
Sub-Transfer Agent fails to cure a breach of, or a failure to perform its duties
hereunder within thirty (30) days following written
<PAGE>
- 4 -
notice of such breach or failure or in the event that the Sub-Transfer Agent
shall cease to be a registered transfer agent.
9. Limitations of Shareholder Liability
------------------------------------
Sub-Transfer Agent hereby expressly acknowledges that recourse against
any of the Phoenix Funds shall be subject to those limitations provided by
governing law and the Declaration of Trust of the Phoenix Funds, as applicable,
and agrees that obligations assumed by the Phoenix Funds pursuant to the
Transfer Agency Agreement shall be limited in all cases to the Phoenix Funds and
their respective assets. Sub-Transfer Agent shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Phoenix Funds,
nor shall the Sub-Transfer Agent seek satisfaction of any obligations from the
Trustees/Directors or any individual Trustee/Director of the Phoenix Funds.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
Transfer Agent
--------------
PHOENIX EQUITY PLANNING CORPORATION
ATTEST:
- -------
By:
Name:
Title:
Sub-Transfer Agent
------------------
STATE STREET BANK AND TRUST COMPANY
ATTEST:
- -------
By:
Name:
Title:
<PAGE>
SCHEDULE A
Duties and Functions of
STATE STREET BANK AND TRUST COMPANY
1) Cash processing and reconciliation
2) Check production and reconciliation
3) Adjustment/account corrections
4) Records retention
5) Certificate production
6) Compliance Functions
7) IRS Filings and Reporting - Including the production of individual
shareholder tax documents
Exhibit 9.2
Form of Sales Agreement
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
100 Bright Meadow Boulevard
Enfield, Connecticut 06082-1989
800-243-4361
(203) 253-1000
PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
To: Phoenix Equity Planning Corporation From:
100 Bright Meadow Boulevard
Enfield, Connecticut 06082
Sir/Madam:
We desire to enter into an Agreement with you for the sale and distribution of
shares of registered investment companies (which shall collectively be referred
to hereafter as the "Funds") for which you are national distributor or principal
underwriter and which may be listed in the Annex A hereto which such Annex may
be amended by you from time to time. Upon acceptance of this Agreement by you,
we understand that we may offer and sell shares of each of the Funds (hereafter
"Shares") subject, however, to all of the terms and conditions hereof including
your right to suspend or cease the sale of such shares.
1. We understand and agree that in all sales of Shares to the public we shall
be acting as dealer for our own account: that all purchase orders and
applications submitted to you by us are subject to acceptance or rejection
by you in your sole discretion: and that each purchase will be deemed to
have been consummated in your principal office subject to your acceptance
and effective only upon confirmation in us by you.
2. We agree that all purchases of Shares by us shall be made only for the
purpose of covering purchase orders already received from our customers
(who may be any person other than a securities dealer or broker) or for
our own bona fide investment.
3. We shall offer and sell shares purchased pursuant to this Agreement for
the purpose of covering purchase orders of our customers at the current
public offering price for such Shares ("Offering Price") as set forth in
the current prospectus of each of the funds.
4. We shall pay you for Shares purchased by us within five (5) business days
of the date of your confirmation to us of such purchase. The purchase
price shall be the Offering Price, less only the applicable dealer
discount ("Dealer Discount"), if any, as set forth in Annex A hereto. We
agree that you have the right, without notice, to cancel any order for
which payment has not been received by you as provided in this paragraph,
in which case you may hold us responsible for any loss suffered by you
resulting from our failure to make payment as aforesaid.
5. We understand and agree that any Dealer Discount or fee is subject to
change from time to time. Any orders placed after the effective date of
any such Dealer Discount change shall be subject to the Dealer Discounts
in effect at the time such order is received by you.
6. We understand and agree that Shares purchased by us under this Agreement
will not be delivered until payment has been received by you. Delivery of
shares will be made by credit to a shareholder open account unless
delivery of certificates is specified in the purchase order. In order to
avoid unnecessary delay, it is understood that, at our request, any Shares
resold by us to one of our customers will be delivered (whether by credit
to a shareholder open account or by delivery of certificates) in the name
of our customer.
PEP 80 (5-92)
<PAGE>
7. We understand that on all purchases of Shares to which the terms of this
Agreement are applicable by a person for whom we are dealer of record, you
will pay us an amount equal to the Dealer Discount or fees which would
have been paid to us with respect to such Shares if such Shares had been
purchased through us. We understand and agree that the dealer of record
for this purpose shall be the dealer through whom such person most
recently purchased Shares of such fund. We understand that all amounts
payable to us under this paragraph and currently payable under this
agreement will be paid as of the end of each month unless specified
otherwise for the total amount of Shares to which this paragraph is
applicable but may be paid more frequently as you may determine in your
discretion.
8. You appoint the transfer agent for each of the Funds as your agent to
execute the purchase transaction of Shares and to confirm such purchases
to our customers on our behalf, and we guarantee the legal capacity of our
customers so purchasing such shares. We further understand if a customer's
account is established without the customer signing the application form,
we represent that the instructions relating to the registration and
shareholder options selected (whether on the application form, in some
other document or orally) are in accordance with the customer's
instructions and we agree to indemnify the Funds, the transfer agent and
you for any loss or liability resulting from acting upon such
instructions.
9. Upon the purchase of Shares pursuant to a Letter of Intent, we will
promptly return to you any excess of the Dealer Discount previously
allowed or paid to us over that allowable in respect to such larger
purchase.
10. Unless at the time of transmitting a purchase order we advise you to the
contrary, you may consider that the investor owns no other Shares and may
further assume that the investor is not entitled to any lower sales charge
than that accorded to a single transaction in the amount of the purchase
order as set forth in Annex A hereto.
11. We understand and agree that if any Shares purchased by us under the terms
of this Agreement are, within seven (7) business days after the date of
your confirmation to us of the original purchase order for such shares,
repurchased by you as agent for such fund or are tendered to such fund for
redemption, we shall forfeit the right to, and shall pay over to you the
amount of, any Dealer Discount allowed to us with respect to such Shares.
It is understood that you will forthwith pay over such amount to such fund
and also shall pay over to such fund your share of the Sales Charge, if
any, on the original transaction. We understand that you will notify us of
such repurchase or redemption within ten (10) days of the date upon which
certificates are delivered to you or to such fund or the date upon which
the holder of Shares held in a shareholder open account places or causes
to be placed to you or with such fund an order to have such Shares
repurchased or redeemed.
12. We agree that, in the case of any repurchase of any Shares made more than
seven (7) business days after confirmation by you of any purchase of such
Shares, except in the case of Shares purchased by us from you for our own
bona fide investment, we will act only as agent for the holders of such
Shares and will place the orders for repurchase only with you. It is
understood that we may charge the holder of such Shares a fair commission
for handling the transaction.
13. Your obligations to us under this Agreement are subject to all the
provisions of the respective distribution agreements entered into between
you and each of the Funds. We understand and agree that in performing our
services under this agreement we are acting in the capacity of an
independent contractor, and you are in no way responsible for the manner
of our performance or for any of our acts or omissions in connection
therewith. Nothing in the Agreement shall be construed to constitute us or
any of our agents, employees or representatives as your agent, partner or
employee or the agent, partner or employee of any of the Funds.
14. We understand that you will supply us with reasonable quantities of the
current prospectus and periodic reports to shareholders for each of the
Funds. We agree not to use any other advertising or sales material
relating to the sale of shares of any of the Funds unless other
advertising or sales material is approved in writing by you.
<PAGE>
15. We shall offer and sell Shares, and execute telephone exchanges, only in
accordance with the terms and conditions of the then current prospectus of
each of the Funds and subject to the provisions of this Agreement, and we
will make no representations not contained in any such prospectus or in
any authorized supplemental material supplied by you. We will use our best
efforts in the development and promotion of sales of the Shares covered by
this Agreement, and agree to be responsible for the proper instruction and
training of all sales representatives employed by us in order that such
Shares will be offered in accordance with terms and conditions of this
Agreement and all applicable laws, rules and regulations. We agree to hold
you harmless and indemnify you in the event that we or any of our sales
representatives should violate any law, rule or regulation or any
provisions of this Agreement which may result in possible liability to
you. In addition, in consideration for the extension of the right to
exercise the telephone exchange privilege to us and our registered
representatives, we acknowledge that neither the Funds nor the Transfer
Agent nor Equity Planning will be liable for any loss, injury or damage
incurred as a result of acting upon, nor will they be responsible for the
authenticity of any telephone instructions, and agree that we will
indemnify and hold harmless the Funds, Equity Planning and the Transfer
Agent against any loss, injury or damage resulting from any telephone
exchange instruction from us or our registered representatives. (Telephone
instructions will be recorded on tape.) In the event you determine to
refund any amounts paid by any investor by reason of any such violation on
our part, we shall forfeit the right to, and pay over to you, the amount
of any dealer discount allowed to us with respect to the transaction for
which the refund is made. All expenses which we incur in connection with
our activities under this Agreement shall be borne by us.
16. We represent that we are properly registered as a broker or dealer under
the Securities Exchange Act of 1934 and are members of the National
Assocation of Securities Dealers, Inc. ("NASD") and agree to maintain
membership in the NASD or, in the alternative, that we are foreign dealers
not eligible for membership in the NASD. We agree to notify you promptly
of any change, termination, or suspension of the foregoing status. We
agree to abide by all the rules and regulations of the NASD including
Section 26 of Article III of the Rules of Fair Practice which is
incorporated herein by reference as if set forth in full. We further agree
to comply with all applicable state and Federal laws and the rules and
regulations of applicable regulatory agencies. We further agree that we
will not sell, or offer for sale, Shares in any state or jurisdiction in
which such Shares have not been duly registered or qualified for sale.
17. Either party may terminate this Agreement for any reason by written or
telegraphic notice to the other party which termination shall become
effective fifteen (15) days after the date of mailing or telegraphing such
notice to the other party. You may also terminate this Agreement for cause
or as a result of a violation by us, as determined by you in your
discretion, of any of the provisions of this Agreement, said termination
to be effective on the date of mailing written or telegraphing notice to
us of the same. Without limiting the generality of the foregoing, our own
expulsion from the NASD will automatically terminate this Agreement
without notice. Our suspension from the NASD of violation or applicable
state or Federal laws or rules and regulations of applicable regulatory
agencies will terminate this Agreement effective upon the date of your
mailing written notice or telegraphing notice to us of such termination.
Your failure to terminate this Agreement for any cause shall not
constitute a waiver of your right to so terminate at a later date for such
cause.
18. We understand and agree that all communications and notices to you or to
us shall be sent to the addresses set forth at the beginning of this
Agreement or to such other addresses as either party may specify in
writing from time to time.
19. This Agreement shall become effective upon the date of its acceptance by
you as set forth herein. This Agreement and all rights and obligations of
the parties hereunder shall be governed by and construed under the laws of
the State of Connecticut. This Agreement is not assignable or
transferable, except that you may assign or transfer this Agreement to any
successor distributor of the Shares described herein.
ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING CORPORATION DEALER FIRM
Date _________________________________ ________________________________________
NAME OF DEALER
By John W. Filoon, Jr.,
___________________________________
Snr. Vice Pres., Sales & Mktg. Date ___________________________________
NAME AND TITLE
By _____________________________________
NAME AND TITLE
/s/ John W. Filoon, Jr.
______________________________________ ________________________________________
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
NASD - CRD -NUMBER _____________________
<PAGE>
ANNEX A
DEALER'S AGREEMENT WITH
PHOENIX EQUITY PLANNING CORPORATION
The public offering price of Class A Shares of all Series of the Phoenix Series
Fund (except the Money Market Fund Series) all Portfolios of the Phoenix
Multi-Portfolio Fund and the Phoenix Total Return Fund Inc., is the net asset
value plus a sales charge. The offering price so determined becomes effective
after the purchase order is received by Equity Planning or the Trust's agent,
State Street Bank and Trust Company. The sales charge is reduced on a graduated
scale on single purchases of $50,000 or more as shown below:
<TABLE>
<CAPTION>
Class A Shares
- --------------
Sales Charge Sales Charge Dealer Discount or Agency
Amount of Transaction as percentage as percentage fee as percentage
at offering price of offering price of amount invested of offering price*
- ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
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 (see below*)
</TABLE>
*In connection with purchase of Class A shares of $1,000,000 or more (and
subsequent purchases in any amount) including purchases of shares of the Phoenix
Money Market Fund Series, Equity Planning may pay broker-dealers from its own
profits and resources, a percentage of the net asset value of any shares sold
(excluding Phoenix Money Market Fund Series) as set forth below:
Purchase Amount Payment to Broker/Dealers
- --------------- -------------------------
$1,000,000 - $2,000,000 .75 of 1%
$2,000,000 - $4,000,000 .50 of 1%
$4,000,000 or more .25 of 1%
Effective January 1, 1994: Class B shares will be offered on sales of shares of
the Phoenix High Yield Fund Series and Phoenix U.S. Government Fund Series both
of which are Series of the Phoenix Series Fund, on sales of Shares of the
Phoenix Tax Exempt Bond Portfolio which is a Portfolio of the Phoenix
Multi-Portfolio Fund and on shares of the Phoenix Total Return Fund Inc. Class B
shares are sold at net asset value per share without the imposition of a sales
charge at the time of purchase. Shares which are redeemed within six years of
purchase will be subject to a contingent deferred sales charge, as described in
the Fund's current prospectus, at the rates set forth below:
Class B Shares:
- ---------------
Contingent Deferred Sales Charge
as a percentage of dollar amount
Years Since Purchase subject to charge
- -------------------- -----------------
First 4%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0
PHOENIX FUNDS DISTRIBUTION PLAN
- -------------------------------
Under their respective Distribution Plans, each of the Phoenix Funds may pay
Equity Planning an amount annually not to exceed a certain percentage of the
average daily net assets of the Fund, as shown below. Equity Planning may pay to
qualifying dealers an amount up to this percentage of the average daily net
assets in qualifying shares sold by such dealers as described in the Fund's
prospectus.
<PAGE>
FUND NAME DISTRIBUTION PLAN
- --------- -----------------
Phoenix Series Fund Class A .25% Class B .75%
Phoenix Multi-Portfolio Fund .25% .75%
Phoenix Total Return Fund .25% .75%
*Equity Planning may sponsor sales contests and provide to all qualifying
dealers from its own profits and resources, additional compensation in the form
of trips and merchandise. Brokers or dealers other than Equity Planning may also
make customary additional charges for their Services in effecting purchases, if
they notify the Trust of their intention to do so.
Exhibit 9.5
Second Amendment to Financial
Agent Agreement
<PAGE>
SECOND AMENDMENT TO FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 1st day of July, 1997 amends that
certain Financial Agent Agreement dated December 11, 1997 and amended January 1,
1997 by and among the following parties (the "Agreement") as hereinbelow
provided.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the Agreement to include an
express provision to allow the addition of funds without necessitating a formal
amendment to said Agreement:
NOW, THEREFORE, in consideration of the foregoing premise, Paragraph 8
of the Agreement is renumbered to Paragraph 9 and the following language
inserted as the new Paragraph 8:
8. Additional Funds
----------------
Additional funds may become party to this Agreement by
notifying the Financial Agent in writing, and if the Financial Agent
agrees in writing to provide its services, such fund shall become a
Trust subject to the terms of the Agreement. Such notification shall
include a revised Schedule A reflecting the new fund(s) as added to the
appropriate fund classification(s).
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized officers on this 22nd day of July, 1997.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX SERIES FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
By: /s/ Philip R. McLoughlin
--------------------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ David R. Pepin
--------------------------------------
David R. Pepin
Executive Vice President
Exhibit 10
Opinion as to Legality of Shares
<PAGE>
July 12, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of Class B shares ("Shares") of the Phoenix
California Tax Exempt Bonds, Inc. (the "Phoenix Fund"), a separate class that
will be offered and sold by the Phoenix Fund.
In rendering our opinion, we have examined such documents, records, and
matters of law as we deemed necessary for purposes of this opinion. We have
assumed the genuineness of all signatures of all parties, the authenticity of
all documents submitted as originals, the correctness of all copies, and the
correctness of all facts set forth in the certificates delivered to us and the
correctness of all written or oral statements made to us.
Based upon the subject to the foregoing, it is our opinion that the Shares
that will be issued by the Phoenix Fund when sold will be legally issued, fully
paid, and nonassessable.
Our opinion is rendered solely in connection with the Registration
Statement on Form N-1A under which the Shares will be registered and may not be
relied upon for any other purposes without our written consent. We hereby
consent to the use of this opinion as an exhibit to such Registration Statement.
Yours truly,
/s/ Richard J. Wirth
---------------------------
Richard J. Wirth
Exhibit 99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 20 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated June 9, 1997, relating to the financial
statements and financial highlights appearing in the April 30, 1997 Annual
Report to Shareholders of the Phoenix California Tax Exempt Bonds, Inc., which
are also incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Other Information-Independent Accountants" in
the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 5, 1997
Exhibit 15.1
Distribution Plan
<PAGE>
DISTRIBUTION PLAN OF
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
PURSUANT TO RULE 12B-1
Distribution Plan dated May 14, 1993 (the "Plan"), of NATIONAL'S 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;
WHEREAS, Phoenix Home Life has entered into an agreement with Aitken Hume plc,
the parent of National Securities and Research Corporation ("NS&RC") and its
subsidiary, NSR Distributors, Inc. ("NSR"), the predecessor distributor of the
Fund, providing for the sale of the intermediate holding company parent of NS&RC
to Phoenix Home Life; 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
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
- 1 -
<PAGE>
with the sale and distribution of shares of the Fund; (iv) payment of expenses
incurred in sales and promotional activities, including advertising expenditures
related to the Fund; (v) the costs of preparing and distributing promotional
materials; (vi) the cost of printing the Fund's Prospectus and Statement of
Additional Information for distribution to potential investors; and (vii) such
other similar services that the Directors of the Fund determine are reasonably
calculated to result in sales 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 0.15% 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-1 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.
- 2 -
<PAGE>
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.
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.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the Fund and its shareholders have adopted this
Plan as of this 14th day of May, 1993.
NATIONAL'S CALIFORNIA TAX EXEMPT BONDS, INC.
By: /s/ John G. DeJong
John G. DeJong, Vice President
Attest:
/s/ Mairead M. Collins
Mairead M. Collins
Assistant Secretary
- 4 -
Exhibit 15.2
First Amendment to Distribution Plan
(Class A Shares)
<PAGE>
FIRST AMENDMENT TO DISTRIBUTION PLAN OF
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PURSUANT TO RULE 12B-1 (CLASS A SHARES)
THIS AMENDMENT dated January 4, 1994, of PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC. (the "Fund"), a Maryland corporation.
Preamble
--------
The Fund and Phoenix Equity Planning Corporation ("PEPCO" or the "Distributor")
have entered into an Underwriting Agreement pursuant to which the Distributor
has and continues to act as principal underwriter of Class A shares of the Fund
(the "Class A Shares") for sale to the public. The Directors of the Fund have
adopted a Distribution Plan dated May 14, 1993 (the "Plan"), in accordance with
the requirements of the Investment Company Act of 1940, as amended (the "Act").
The Directors of the Fund have ratified the issuance of Class B shares of the
Fund and, in connection therewith adopted a Distribution Plan in accordance with
the Act with respect to such shares. In order to clarify and confirm the
expenses and fees to be incurred by Class A shareholders in accordance with the
Plan, the Fund hereby adopts the following modifications to the Plan.
NOW, THEREFORE, in accordance with the rights reserved within paragraph numbered
4 of the Plan, the Plan is hereby amended by replacing all references to "shares
of the Fund" with "Class A shares of the Fund". Except as herein modified, all
other terms and provisions of the Plan shall be and remain unmodified and in
full force and effect.
IN WITNESS WHEREOF, the undersigned has set its hand and seal as of the
day and year first above written.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
By: /s/ Thomas N. Steenburg
Thomas N. Steenburg
Attest:
/s/ Richard J. Wirth
Richard J. Wirth
Exhibit 15.3
Distribution Plan (Class B Shares)
<PAGE>
DISTRIBUTION PLAN OF
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PURSUANT TO RULE 12B-1
CLASS B SHARES
Distribution Plan for Class B shares dated May 25, 1994 (the "Plan"), of PHOENIX
CALIFORNIA TAX EXEMPT BONDS, INC. (the "Fund"), a Maryland corporation.
WITNESSETH THAT:
WHEREAS, the Fund 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 Class B shares of the Fund for
sale to the public; 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 Class B
Shareholders.
NOW, THEREFORE, the Fund hereby adopts the Plan on the following terms and
conditions with respect to any and all Class B shares now or hereafter issued by
the Fund:
1. The Fund shall reimburse the Distributor at the end of each month,
up to a maximum on an annual basis of 1.00% of the average daily value of the
net assets of the Fund, subject to any applicable restrictions imposed by rules
of the Phoenix Association of Securities Dealers, Inc., for distribution
expenditures incurred by the Distributor subsequent to the effectiveness of this
Plan in connection with the sale and promotion of Class B 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 Class B 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 Phoenix Affiliated Investment Companies for services
rendered in connection with the sale and distribution of Class B shares of the
Fund; (iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Class B shares of 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 sales
of Class B 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, 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
<PAGE>
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-1 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 Class B shares of the Fund.
4. This Plan shall remain in effect until May 14, 1994 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 Class B shares 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.
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 Class B
shares 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.
- 2 -
<PAGE>
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 Class B shares 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 Directors have adopted this Plan
as of the day and year first above written.
PHOENIX CALIFORNIA TAX EXEMPT BONDS,
INC.
By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
Attest:
/s/ Richard Wirth
Richard Wirth
Asst. Secretary
- 3 -
Exhibit 16
Schedule for Computation of Yield and Effective Yield Quotations
<PAGE>
EXPLANATION OF YIELD AND EFFECTING YIELD CALCULATION
The following is an example of the yield calculation for the Phoenix
California Tax Exempt Bonds, Inc. based on a 30 day period ending April 30,
1994.
The yield is computed by dividing the net investment income per share
earned during the accounting period by the maximum offering price per share on
the last day of the period, according to the following formula:
YIELD =
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day
of the period.
The yield of the Phoenix California Tax Exempt Bonds, Inc. is computed
as follows:
Yield =
a - b + 1(6) - 1 = yield
-----
c x d
592,504 - 100,841 + 1(6) - 1 = 4.29%
-----------------
10,143,107 x 13.68
<PAGE>
TOTAL RETURN FORMULA:
T = (N) ERV .1 =
---
P
Phoenix California
Tax Exempt Bonds, Inc.
T = (10) 2316 .1 = 8.76
---- ----
1000
Where: P = a hypothetical initial payment of $1,000 invested on 4/30/84
T = average annual total return assuming reinvestment of dividends,
distributions and annual capital gains distributions
N = number of years
ERV = ending redeemable value
<PAGE>
EXPLANATION OF TOTAL RETURN CALCULATION
- TEN YEAR -
<TABLE>
<CAPTION>
Fund Initial Sales Initial Number of Share Gross Less Recurring Ending
Payment Charge* Net Shares Value Redemption (-) Account Redemption
Asset Per 4/30/94 Value Fees Value
Value Initial 4/30/94
Payment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix $1,000 47.50 953 85.179 2,316 2,316 - None 2,316
California Tax
Exempt Bonds,
Inc.
</TABLE>
*Assumes initial sales load is deducted from the initial $1,000 payment.
<PAGE>
PHOENIX CALIFORNIA TAX-EXEMPT BOND
PREPARED FOR: LVOTTA
<TABLE>
<CAPTION>
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
4/30/84 $1,000.00 $11.7400 4.75% 85.179 $11.1800 $952
</TABLE>
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
- - - - - - C O S T O F S H A R E S - - - - - - - - - - - - V A L U E O F S H A R E S - - - - - -
Annual Cumulative Total Annual From From
Cumulative Income Income Investment Cap Gain From Cap Gains Sub- Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Total Reinvested Value Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/30/84 1,000 0 0 1,000 0 952 0 952 0 952 85
4/30/85 1,000 90 90 1,090 0 984 0 984 94 1,078 93
4/30/86 1,000 97 187 1,187 0 1,090 0 1,090 207 1,297 101
4/30/87 1,000 103 289 1,289 0 1,065 0 1,065 300 1,365 109
4/30/88 1,000 102 391 1,391 0 1,045 0 1,015 396 1,441 117
4/30/89 1,000 109 500 1,500 0 1,084 0 1,084 522 1,606 126
4/30/90 1,000 117 618 1,618 0 1,072 0 1,072 631 1,703 135
4/30/91 1,000 122 740 1,740 3 1,112 3 1,115 781 1,896 145
4/30/92 1,000 132 872 1,872 14 1,124 17 1,141 920 2,061 156
4/30/93 1,000 130 1,002 2,002 13 1,162 30 1,192 1,083 2,275 167
4/30/94 1,000 130 1,132 2,132 20 1,111 47 1,156 1,158 2,316 178
Totals 1,132 49 1,111 47 1,158 1,158 2,316 178
</TABLE>
Average Annual Total Return for This Illustration: 8.76% (Annual Compounding)
Average Annual Total Returns 1 - Year 5 - Year 10 - Year
-------- -------- ---------
after Maximum 4.75% Sales Charge
for Periods Ending 3/31/94: -2.64% 7.04% 8.74%
<PAGE>
PHOENIX CALIFORNIA TAX-EXEMPT BOND
PREPARED FOR: LVOTTA
<TABLE>
<CAPTION>
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
4/30/84 $1,000.00 $11.1800 0.00% 89.445 $11.1800 $1,000
</TABLE>
Dividends and Capital Gains Reinvested
<TABLE>
<CAPTION>
- - - - - - C O S T O F S H A R E S - - - - - - - - - - - - V A L U E O F S H A R E S - - - - - -
Annual Cumulative Total Annual From From
Cumulative Income Income Investment Cap Gain From Cap Gains Sub- Dividends Total Shares
Date Investment Dividends Dividends Cost Distrib'n Investment Reinvested Total Reinvested Value Held
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/30/84 1,000 0 0 1,000 0 1,000 0 1,000 0 1,000 89
4/30/85 1,000 94 94 1,094 0 1,033 0 1,033 99 1,132 98
4/30/86 1,000 102 196 1,196 0 1,145 0 1,145 217 1,362 106
4/30/87 1,000 108 304 1,304 0 1,118 0 1,118 315 1,433 115
4/30/88 1,000 107 411 1,411 0 1,098 0 1,098 416 1,514 123
4/30/89 1,000 115 525 1,525 0 1,138 0 1,138 548 1,686 133
4/30/90 1,000 123 649 1,649 0 1,125 0 1,125 663 1,788 142
4/30/91 1,000 129 777 1,777 3 1,168 3 1,171 820 1,991 152
4/30/92 1,000 138 915 1,915 15 1,180 18 1,198 966 2,164 164
4/30/93 1,000 137 1,052 2,052 13 1,221 31 1,252 1,137 2,389 175
4/30/94 1,000 136 1,188 2,188 21 1,166 50 1,216 1,216 2,432 187
Totals 1,188 52 1,166 50 1,216 1,216 2,432 187
</TABLE>
Average Annual Total Return for This Illustration: 9.29% (Annual Compounding)
Average Annual Total Returns 1 - Year 5 - Year 10 - Year
-------- -------- ---------
after Maximum 4.75% Sales Charge
for Periods Ending 3/31/94: -2.64% 7.04% 8.74%
Exhibit 19
Plan Pursuant to Rule 18f-3
<PAGE>
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 2(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) (i) and (ii) above of this paragraph must be
allocated to the class for which they are incurred. All other expenses described
in this paragraph will 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
Investment Advisor may waive or reimburse its management fee in whole
or in part provided that the fee is waived or reimbursed to all shares of the
Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class
Expense may waive or reimburse that fee in whole or in part only if the revised
fee more accurately reflects the relative cost of providing to each Multi-Class
Portfolio the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b-1 Plan fee payment in
whole or in part.
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. Each
Multi-Class Portfolio reserves the right to temporarily or permanently terminate
exchange privileges, impose conditions upon the exercision of exchange
privileges, or reject any specific order for any dealer, shareholder or person
whose transactions seem to follow a timing pattern, including those who request
more than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi- Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
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
<PAGE>
- 4 -
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 a majority of the Independent
Trustees, at a meeting held on November 20, 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. Their determination was based on their review of
information furnished to them which they deemed reasonably necessary and
sufficient to evaluate the Plan.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, including a majority of 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. Such funding shall be based on information required by the Board and
furnished to them that the Board deems reasonably necessary to evaluate the
proposed amendment.
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.
<PAGE>
- 5 -
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
MID CAP PORTFOLIO
REAL ESTATE SECURITIES 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 STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND
MICRO CAP FUND
SMALL CAP FUND
STRATEGIC THEME FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX WORLDWIDE OPPORTUNITIES FUND
Exhibit 19.1
First Amendment to the Amended
and Restated Plan Pursuant to Rule 18f-3
<PAGE>
PHOENIX FUNDS
(the "Funds")
FIRST AMENDMENT TO THE
AMENDED AND RESTATED PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
That certain Amended and Restated Plan Pursuant to Rule 18f-3 under the
Investment Company Act of 1940 duly adopted by the Board of Directors/Trustees
of the Funds on November 20, 1996, is hereby amended as follows:
1. The first and last sentences of Section 2. The Multi-Class Structure
are deleted and the following two sentences substituted therefor:
The portfolios of the Funds listed on Schedule A hereto shall offer
up to four classes of shares as indicated on Schedule A: Class A, Class
B, Class C and Class M. ( . . . ) In addition, Class A, Class B, Class
C and Class M shares shall have the features described in Sections a,
b, c and d, below.
2. The following two subparagraphs are added to Section 2a.
Distribution Plans immediately following subparagraph 2a(ii):
iii. Class C 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
C Distribution Plan and any supplements thereto, subject to an annual
limit of 1.00%, or in some cases 0.50%, of the average daily net assets
of a Multi-Class Portfolio's Class C shares.
iv. Class M 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
M Distribution Plan and any supplements thereto, subject to an annual
limit of 0.50% of the average daily net assets of a Multi-Class
Portfolio's Class M shares.
3. Schedule A is amended as attached hereto.
This Amendment was approved by the Board of Directors/Trustees at a
meeting held on May 28, 1997.
/s/ Thomas N. Steenburg
-----------------------------------
Assistant Secretary
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Class A Class B Class C Class M
------- ------- ------- -------
<S> <C> <C> <C> <C>
PHOENIX CALIFORNIA TAX -EXEMPT BONDS, INC. X X ___ ___
PHOENIX INCOME AND GROWTH FUND X X ___ ___
PHOENIX MULTI-PORTFOLIO FUND:
EMERGING MARKETS BOND PORTFOLIO X X X X
INTERNATIONAL PORTFOLIO X X ___ ___
MID CAP PORTFOLIO X X ___ ___
REAL ESTATE SECURITIES PORTFOLIO X X ___ ___
STRATEGIC INCOME PORTFOLIO X X X X
TAX-EXEMPT BOND PORTFOLIO X X ___ ___
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC. X X X X
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND X X X ___
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES X X ___ ___
BALANCED FUND SERIES X X ___ ___
CONVERTIBLE FUND SERIES X X ___ ___
GROWTH FUND SERIES X X ___ ___
HIGH YIELD FUND SERIES X X X X
MONEY MARKET FUND SERIES X X X X
U.S. GOVERNMENT SECURITIES FUND X X ___ ___
SERIES
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND X X ___ ___
MICRO CAP FUND X X ___ ___
SMALL CAP FUND X X ___ ___
STRATEGIC THEME FUND X X X X
PHOENIX STRATEGIC ALLOCATION FUND, INC. X X ___ ___
PHOENIX WORLDWIDE OPPORTUNITIES FUND X X ___ ___
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC. CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 101665
<INVESTMENTS-AT-VALUE> 106304
<RECEIVABLES> 2244
<ASSETS-OTHER> 2636
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 111184
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 467
<TOTAL-LIABILITIES> 467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106145
<SHARES-COMMON-STOCK> 8595
<SHARES-COMMON-PRIOR> 8911
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (99)
<ACCUMULATED-NET-GAINS> 13
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4658
<NET-ASSETS> 110717
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7023
<OTHER-INCOME> 0
<EXPENSES-NET> (1085)
<NET-INVESTMENT-INCOME> 5938
<REALIZED-GAINS-CURRENT> 1038
<APPREC-INCREASE-CURRENT> (395)
<NET-CHANGE-FROM-OPS> 6581
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5878)
<DISTRIBUTIONS-OF-GAINS> (779)
<DISTRIBUTIONS-OTHER> (20)
<NUMBER-OF-SHARES-SOLD> 5231
<NUMBER-OF-SHARES-REDEEMED> 5776
<SHARES-REINVESTED> 229
<NET-CHANGE-IN-ASSETS> (4448)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (78)
<OVERDIST-NET-GAINS-PRIOR> (236)
<GROSS-ADVISORY-FEES> 522
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1085
<AVERAGE-NET-ASSETS> 115989
<PER-SHARE-NAV-BEGIN> 12.77
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> (0.66)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.72
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC. CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 101665
<INVESTMENTS-AT-VALUE> 106304
<RECEIVABLES> 2244
<ASSETS-OTHER> 2636
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 111184
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 467
<TOTAL-LIABILITIES> 467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106145
<SHARES-COMMON-STOCK> 107
<SHARES-COMMON-PRIOR> 98
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (99)
<ACCUMULATED-NET-GAINS> 13
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4658
<NET-ASSETS> 110717
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7023
<OTHER-INCOME> 0
<EXPENSES-NET> (1085)
<NET-INVESTMENT-INCOME> 5938
<REALIZED-GAINS-CURRENT> 1038
<APPREC-INCREASE-CURRENT> (395)
<NET-CHANGE-FROM-OPS> 6581
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (60)
<DISTRIBUTIONS-OF-GAINS> (9)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32
<NUMBER-OF-SHARES-REDEEMED> 26
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 101
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (78)
<OVERDIST-NET-GAINS-PRIOR> (236)
<GROSS-ADVISORY-FEES> 522
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1085
<AVERAGE-NET-ASSETS> 115989
<PER-SHARE-NAV-BEGIN> 12.77
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.73
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
