As filed with the Securities and Exchange Commission on August 18, 1998
Registration Nos. 2-83024
811-3714
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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. 21 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22 [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)
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Thomas N. Steenburg
Vice President, Counsel and Secretary
Phoenix Investment Partners, Ltd.
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, 1998 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.
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<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
Cross Reference Sheet
Showing Location of Information Required by Form N-1A
PART A
<TABLE>
<CAPTION>
Form N-1A Item No. Prospectus Caption
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<S> <C> <C>
1. Cover Page ....................................... Cover Page
2. Synopsis ......................................... Introduction; Fund Expenses
3. Condensed Financial Information .................. Financial Highlights
4. General Description of Registrant ................ Introduction; Investment Objectives and Policies;
Additional Information
5. Management of the Fund ........................... Introduction; Management of the Fund;
Distribution Plans
5A. Management's Discussion of Fund Performance ...... Performance Information
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; How to Buy Shares; Investor
Account Services; Net Asset Value
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
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; Investor Account
Being Offered ................................... Services; Redemption of 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, 1998
[Right facing solid triangle] PHOENIX CALIFORNIA
TAX EXEMPT BONDS, INC.
[Logo: Two interlocking diamonds] PHOENIX
INVESTMENT PARTNERS
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
August 28, 1998
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, 1998, 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.
The Commission maintains a Web site (http://www.sec.gov) that contains this
Prospectus, the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Commission.
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.
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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
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<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 ........................... 10
DISTRIBUTION PLANS ............................... 11
HOW TO BUY SHARES ................................ 12
INVESTOR ACCOUNT SERVICES ........................ 16
NET ASSET VALUE .................................. 18
HOW TO REDEEM SHARES ............................. 18
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 19
ADDITIONAL INFORMATION ........................... 20
TAX FREE vs. TAXABLE INCOME ...................... 21
</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
Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser") is the
investment adviser to the Fund and its professional staff selects and
supervises the investments in the Fund's portfolio. The Adviser is a subsidiary
of Phoenix Investment Partners, Ltd. (previously known as Phoenix Duff & Phelps
Corporation) and an indirect subsidiary of Phoenix Home Life Mutual Insurance
Company ("Phoenix Home Life"). Under the terms of the Investment Advisory
Agreement, for its services to the Fund, the Adviser is entitled to fees as set
forth under "The Adviser."
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or the
"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 amended and restated 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 plans adopted for Class A and B
Shares, the Fund will pay the Distributor 0.25% of the Fund's average daily net
assets of each Class for furnishing of shareholder services (the "Service Fee")
and for Class B Shares, the Fund shall reimburse the Distributor up to a maximum
annual rate of 0.75% 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. 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 ("State
Street Bank"), or an authorized agent, 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, or an authorized agent,
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. Exceptions to the minimum initial and subsequent investment
amounts are available under certain circumstances. See "How To Buy Shares."
Redemption of Shares
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 State Street Bank,
or an authorized 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, 1998.
<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)
Management Fees 0.45% 0.45%
12b-1 Fees (a) 0.25% 1.00%
Other Operating Expenses 0.26% 0.26%
----- ----
Total Fund Operating Expenses 0.96% 1.71%
===== ====
</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 as stated 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 $77 $98 $160
Class B Shares $57 $74 $93 $182
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 $77 $98 $160
Class B Shares $17 $54 $93 $182
</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 PricewaterhouseCoopers 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 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,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period ................... $12.72 $12.77 $12.63
Income from investment operations
Net investment income ................................. 0.65 0.66 0.67
Net realized and unrealized gain (loss) ............... 0.47 0.04 0.20
------ ------ ------
Total from investment operations .................... 1.12 0.70 0.87
------ ------ ------
Less distributions
Dividends from net investment income .................. (0.65) (0.66) (0.67)
Distributions in excess of net investment income ...... -- -- (0.01)
Distributions from net realized gains ................. (0.07) (0.09) (0.03)
Distributions in excess of accumulated net realized
gains ................................................. -- -- (0.02)
------ ------ ------
Total distributions ................................. (0.72) (0.75) (0.73)
------ ------ ------
Change in net asset value ............................. 0.40 (0.05) 0.14
------ ------ ------
Net asset value, end of period ......................... $13.12 $12.72 $12.77
====== ====== ======
Total return(1) ........................................ 8.84% 5.56% 6.92%
Ratios/supplemental data:
Net assets, end of period (thousands) .................. $102,312 $109,358 $113,806
Ratio to average net asset of:
Operating expenses .................................... 0.96% 0.93% 0.99%
Net investment income ................................. 4.90% 5.13% 5.15%
Portfolio turnover rate ................................ 9% 17% 20%
<CAPTION>
Class A
--------------------------------------------------
Year Ended April 30,
1995 1994 1993 1992
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $13.03 $13.64 $13.20 13.07
Income from investment operations
Net investment income ................................. 0.71 0.80 0.81 0.87
Net realized and unrealized gain (loss) ............... 0.05 (0.53) 0.51 0.24
------ ------ ------ ------
Total from investment operations .................... 0.76 0.27 1.32 1.11
------ ------ ------ ------
Less distributions
Dividends from net investment income .................. (0.76) (0.76) (0.80) (0.88)
Distributions in excess of net investment income ...... -- -- -- --
Distributions from net realized gains ................. (0.31) (0.12) (0.08) (0.10)
Distributions in excess of accumulated net realized
gains ................................................. (0.09) -- -- --
------ ------ ------ ------
Total distributions ................................. (1.16) (0.88) (0.88) (0.98)
------ ------ ------ ------
Change in net asset value ............................. (0.40) (0.61) 0.44 0.13
------ ------ ------ ------
Net asset value, end of period ......................... $12.63 $13.03 $13.64 $13.20
====== ====== ====== ======
Total return(1) ........................................ 6.34% 1.80% 10.38% 8.68%
Ratios/supplemental data:
Net assets, end of period (thousands) .................. $117,370 $131,365 $147,760 $139,118
Ratio to average net asset of:
Operating expenses .................................... 0.93% 0.85% 0.90% 0.68%
Net investment income ................................. 5.63% 5.82% 6.00% 6.55%
Portfolio turnover rate ................................ 51% 25% 25% 33%
</TABLE>
<TABLE>
<CAPTION>
Class A
--------------------------------------
Year Ended April 30,
1991 1990 1989
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period ................... $12.58 $12.72 $12.27
Income from investment operations
Net investment income ................................. 0.90 0.90 0.89
Net realized and unrealized gain (loss) ............... 0.51 (0.14) 0.46
------ ------ ------
Total from investment operations .................... 1.41 0.76 1.35
------ ------ ------
Less distributions
Dividends from net investment income .................. (0.90) (0.90) (0.90)
Distributions in excess of net investment income ...... -- -- --
Distributions from net realized gains ................. (0.02) -- --
Distributions in excess of accumulated net realized
gains ................................................. -- -- --
------ ------ ------
Total distributions ................................. (0.92) (0.90) (0.90)
------ ------ ------
Change in net asset value ............................. 0.49 (0.14) 0.45
------ ------ ------
Net asset value, end of period ......................... $13.07 $12.58 $12.72
====== ====== ======
Total return(1) ........................................ 11.36% 6.05% 11.41%
Ratios/supplemental data:
Net assets, end of period (thousands) .................. $124,051 $107,612 $103,415
Ratio to average net asset of:
Operating expenses .................................... 0.63% 0.66% 0.73%
Net investment income ................................. 6.94% 6.98% 7.13%
Portfolio turnover rate ................................ 26% 27% 34%
<CAPTION>
Class B
---------------------------------------------------------
From
Inception
7/26/94
Year Ended April 30, to
1998 1997 1996 4/30/95
----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $12.73 $12.77 $12.63 $13.04
Income from investment operations
Net investment income ................................. 0.56 0.56 0.56(2) 0.48
Net realized and unrealized gain (loss) ............... 0.46 0.05 0.20 0.01
------ ------ ------ ------
Total from investment operations .................... 1.02 0.61 0.76 0.49
------ ------ ------ ------
Less distributions
Dividends from net investment income .................. (0.55) (0.56) (0.56) (0.50)
Distributions in excess of net investment income ...... -- -- (0.01) --
Distributions from net realized gains ................. (0.07) (0.09) (0.03) (0.31)
Distributions in excess of accumulated net realized
gains ................................................. -- -- (0.02) (0.09)
------ ------ ------ ------
Total distributions ................................. (0.62) (0.65) (0.62) (0.90)
------ ------ ------ ------
Change in net asset value ............................. 0.40 (0.04) 0.14 (0.41)
------ ------ ------ ------
Net asset value, end of period ......................... $13.13 $12.73 $12.77 $12.63
====== ====== ====== ======
Total return(1) ........................................ 8.10% 4.84% 6.10% 4.10%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) .................. $1,562 $1,359 $1,258 $460
Ratio to average net asset of:
Operating expenses .................................... 1.71% 1.68% 1.78% 1.55%(3)
Net investment income ................................. 4.15% 4.37% 4.32% 4.90%(3)
Portfolio turnover rate ................................ 9% 17% 20% 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 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 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 compare the Fund's 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.
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.
6
<PAGE>
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, "private activity bonds," as defined in section 141 of the Internal
Revenue Code, issued after August 15, 1986, are not exempt from federal income
taxation (the interest on which are also treated as an item of tax preference
for purposes of the Alternative Minimum Tax ("AMT Bonds"). Under certain
circumstances, however, such bonds may qualify for limited tax-exempt status
(exempt from federal income taxation under section 103 of the Internal Revenue
Code but is subject to the federal alternative minimum tax). The Fund may invest
up to 20% of its net assets in AMT Bonds and qualified "private activity bonds,"
and other 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 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
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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.
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
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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.
Impact of the Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. There is the
possibility that some or all of a company's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. The cost of modifying computer programs to become Year 2000
compliant may impact the financial performance and market price of companies
whose securities are held by the Fund.
The Directors have directed management to ensure that the systems used by
service providers (including Phoenix Investment Partners, Ltd. ("PXP") and its
subsidiaries) in support of the Fund's operations be assessed and brought into
Year 2000 compliance. Based upon preliminary assessments, PXP has determined
that it will be required to modify or replace portions of its software so that
its computer systems will properly utilize dates beyond December 31, 1999. Since
many of the core systems of PXP companies are investment related, PXP management
believes that the majority of these systems are already Year 2000 compliant. PXP
believes that with modifications to existing software and conversions to new
software, the Year 2000 issue will be mitigated. It is
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anticipated that such modifications and conversions will be completed on a
timely basis. It is not known if there could be a material impact on the
operations of PXP companies or the Fund if such modifications and conversions
are not completed timely.
PXP will utilize both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. Certain systems are
already in the process of being converted due to previous initiatives and it is
expected that all core systems will be remediated by December 31, 1998 and
tested by June 1999. The total cost to become Year 2000 compliant is not an
expense of the Fund and is not expected to have a material impact on the
operating results of PXP.
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 an Investment Advisory Agreement (the "Advisory Agreement")
with the Fund, PIC acts as investment adviser to the Fund. In this capacity, the
Adviser, subject to the authority of the Directors, is responsible for the
overall management of the Fund's business affairs. The Directors periodically
review the services provided by the Adviser to ensure that the Fund's general
investment policies and programs are being properly carried out and that the
administrative services are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
PIC's address is 56 Prospect Street, Hartford, Connecticut. The Adviser is
a subsidiary of Phoenix Investment Partners, Ltd. and an indirect subsidiary of
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 Strategic Equity Series Fund, Phoenix Series Fund, Phoenix Duff & Phelps
Institutional Mutual Funds (except Real Estate Equity Securities Portfolio,
Enhanced Reserves Portfolio and Core Equity Portfolio), Phoenix Multi-Portfolio
Fund (except Real Estate Securities Portfolio), Phoenix Growth and Income Fund
of Phoenix Equity Series Fund, Phoenix Investment Trust 97, Phoenix Strategic
Allocation Fund, Inc., The Phoenix Edge Series Fund (except Aberdeen New Asia
Series and Real Estate Securities Series) and Phoenix Worldwide Opportunities
Fund. As of May 31, 1998, the Adviser had approximately $21.6 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, 1998 for Class A Shares and Class B Shares was
0.45%.
The Portfolio Manager
Mr. Timothy Heaney is the portfolio manager of the Fund and as such is
primarily responsible for the day-to-day management of the Fund's portfolio. Mr.
Heaney has managed the Fund since September 1997 and previously co-managed the
Fund from March 1996. Mr. Heaney has been a Vice President of the Fund since May
1996. Mr. Heaney is Managing Director, Fixed Income (since December 1997) of
PIC, and was previously Director, Fixed Income Research (September 1996 to
December 1997) and Investment Analyst (January 1995 to September 1996). He
served as Investment Analyst of Phoenix Home Life from November 1992 until
December 1994. Mr. Heaney is also portfolio manager of Phoenix Tax-Exempt Bond
Portfolio of Phoenix Multi-Portfolio Fund.
The Financial Agent
Equity Planning acts as financial agent of the Fund and, as such, performs
administrative, bookkeeping and pricing functions for the Fund. For its services
as financial agent, Equity Planning will be paid a fee equal to the sum of (1)
the documented cost of fund accounting and related services provided by PFPC,
Inc., as subagent, to the financial agent, plus (2) the documented cost to the
financial agent to provide financial reporting and tax services and oversight of
the subagent's performance. The current fee schedule of PFPC, Inc. ranges from
0.085% to 0.0125% of the aggregate daily net asset values of the Fund. Certain
minimum fees and fee waivers may apply. For its services during the Fund's
fiscal year ended April 30, 1998, Equity Planning received a fee of $82,000 or
.08% 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. ("NASD") 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
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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. Michael E. Haylon and
William R. Moyer, officers of the Fund, are directors of Equity Planning and Mr.
Moyer is also an officer of Equity Planning. G. Jeffrey Bohne, Nancy G. Curtiss,
William E. Keen, III, Leonard J. Saltiel, John F. Sharry and Thomas N. Steenburg
are officers of the Fund and officers of Equity Planning.
Equity Planning and the Fund have entered into an Underwriting Agreement
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 principal,
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 or transfer agency services offered by
such bank.
The Directors have adopted separate amended and restated 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 to pay for the
furnishing of shareholder services. Pursuant to the Plans, the Fund will pay the
Distributor 0.25% annually of the average daily net assets of each Class of the
Fund for providing services to shareholders, including assistance in connection
with inquiries related to shareholder accounts (the "Service Fee"). Under the
Class B Plan, the Fund shall reimburse the Distributor for actual expenses of
the Distributor up to 0.75% 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); (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. From the Service Fee, the Distributor
expects to pay a quarterly fee to qualifying broker/dealer firms, as
compensation for providing personal services to shareholders and/or maintaining
shareholder accounts, with respect to shares sold by such firms. This fee will
not exceed on an annual basis 0.25% of the average annual net asset value of
such shares, and will be in addition to sales charges on Fund shares which are
reallowed to such firms. To the extent that the entire amount of the Service Fee
is not paid to such firms, the balance will serve as compensation for personal
and account maintenance services furnished by the Distributor.
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, 1998, the Fund paid $267,674 and
$13,815 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 $137 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. The Distributor's
expenses from selling and servicing Class B Shares may be more than the payments
received from contingent deferred sales charges collected on redeemed shares and
from the Fund under the Class B Plan. Those expenses may be carried over and
paid in future years. At April 30, 1998, the end of the last Plan year, the
Distributor has incurred unreimbursed expenses
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under the Class B Plan of $305,493 (equal to 0.29% of the Fund's net assets)
which have been carried over into the present Class B Plan year.
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 materially increase 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 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 plan fees 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 plan fees are 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 plan fees and incremental expenses associated with such
distribution and services fees; 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 recorded electronically 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 or
other mutual funds advised, subadvised or distributed by the Adviser,
Distributor or any of their corporate affiliates (an "Affiliated Phoenix Fund").
See "Investor Account Services." Shares of the Fund or shares of any other
Affiliated 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 Affiliated 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 Affiliated 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 service fees 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
12
<PAGE>
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 lower distribution plan fees and,
accordingly, pay correspondingly higher dividends per share. However, because
initial sales charges are deducted at the time of purchase, Class A investors
would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A Shares because the accumulated continuing
distribution charges on Class B Shares may exceed the initial sales charge on
Class A Shares during the life of the investment. Again, however, such investors
must weigh this consideration against the fact that, because of such initial
sales charge, not all their funds will be invested initially. However, other
investors might determine that it would be more advantageous to purchase Class B
Shares to have all their funds invested initially, although remaining subject to
higher continuing distribution charges and, for a five-year period, being
subject to a contingent deferred sales charge.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the close
of the general trading session of the New York Stock Exchange (normally 4:00 PM
eastern time). 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 or an authorized agent 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 or an
authorized agent, 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 employee 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.
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
13
<PAGE>
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.
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 trustee, director or officer of the Phoenix Funds, Phoenix-Engemann
Funds, Phoenix-Seneca Funds or any other Affiliated Phoenix Fund; (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) 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 or any other
Affiliated 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
is investing redemption proceeds from investment companies other than the
Phoenix Funds or any other Affiliated Phoenix Fund 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;
(16) any deferred compensation plan established for the benefit of any Phoenix
Fund or any other Affiliated Phoenix Fund trustee or director provided that
sales made to persons listed in (1) through (16) 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 are 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).
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Affiliated 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 Affiliated 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
14
<PAGE>
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 Affiliated 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 Affiliated Phoenix Fund, made
over time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the then
current value (at the public offering price as described in the then current
prospectus relating to such shares) of shares of all Affiliated 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 plan fees 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
15
<PAGE>
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.
For example, assume an investor purchased 100 Class B Shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share has increased to $12 and, during such time, the investor has
acquired 10 additional Class B Shares through dividend reinvestment. If, at such
time the investor makes his first redemption of 50 Class B Shares (proceeds of
$600), 10 shares will not be subject to charge because they were acquired
through dividend reinvestment. With respect to the remaining 40 shares, the
charge is applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 4% (the applicable rate in the
second year after purchase) or $16.00.
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 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 Affiliated Phoenix Funds;
(f) in connection with any direct rollover transfer of shares from an
established Affiliated Phoenix Fund qualified plan into an Affiliated 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 plan fees 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
16
<PAGE>
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. You or your registered representative may, by telephone or written
notice, cancel or change the dollar amount being invested pursuant to the
Investo-Matic Plan unless you have notified the Fund or Transfer Agent that your
registered representative shall not have this authority.
Distribution Option. The Fund currently declares all income dividends and
all capital gain distributions, if any, payable in shares of the Fund at net
asset value or, at 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. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
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 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. See "Redemption of Small Accounts."
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 retirement plans: IRA, Rollover IRA,
SEP-IRA, SIMPLE IRA, Roth 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
Affiliated 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. Shares held in
book-entry form may be exchanged for shares of the same class of other
Affiliated 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 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
Transfer Agent. 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
Affiliated Phoenix Fund has different investment objectives and policies. You
should read the prospectus of the Affiliated 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
17
<PAGE>
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
Transfer Agent 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 Transfer Agent 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 Transfer Agent 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.
If you elect not to use the Telephone Exchange Privilege or if the shares
being exchanged are represented by a certificate or certificates, you must
submit a written request to exchange such shares to Phoenix Funds, c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. If the
shares being exchanged between accounts that are not registered identically, the
signature on such request must be guaranteed by an eligible guarantor
institution as defined by the Fund's Transfer Agent in accordance with its
signature guarantee procedures. Currently such procedures generally permit
guarantees by banks, broker-dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. Any outstanding certificate or certificates for the tendered
shares must be duly endorsed and submitted.
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
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 plan fees 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.
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, or an authorized agent. 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?
<TABLE>
<S> <C>
[Symbol of telephone] 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
[Symbol of hand with writing instrument] 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
[Symbold of envelope with seal] 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
</TABLE>
18
<PAGE>
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. 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 certificate(s) 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
Affiliated 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.
Redemption of Small Accounts. Due to the relatively high cost of
maintaining small accounts, the Fund reserves the right to redeem, at net asset
value, the shares of any shareholder whose account has a value, due to
redemptions, of less than $200. Before the Fund redeems these shares, the
shareholder will be given notice that the value of the shares in the account is
less than the minimum amount and will be allowed 30 days to make an additional
investment in an amount which will increase the value of the account to at least
$200.
Redemption in Kind. To the extent consistent with state and federal law,
the Fund may make payment of the redemption price either in cash or in kind.
However, the Fund has elected to pay in cash all requests for redemption by any
shareholder of record, limited in respect to each shareholder during any 90-day
period to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. This election has been made pursuant to Rule 18f-1
under the Investment Company Act of 1940 and is irrevocable while the Rule is in
effect unless the Securities and Exchange Commission, by order, permits the
withdrawal thereof. In case of a redemption in kind, securities delivered in
payment for shares would be readily marketable and valued at the same value
assigned to them in computing the net asset value per share of the Fund. A
shareholder receiving such securities would incur brokerage costs when selling
the securities.
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 and it annually makes the required distributions, 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.
19
<PAGE>
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. Distributions of the excess of net long-term capital gain
over net short-term capital loss will be taxable to shareholders (and not the
Fund) as long-term capital gain regardless of how long shareholders have held
the Fund shares. The maximum federal capital gains rate for individuals is 20%
with respect to capital assets held more than 12 months. The maximum capital
gains rate for corporate shareholders is the same as the maximum tax rate for
ordinary income. The Fund will inform shareholders of the amount and nature of
such gains. During the fiscal year ended April 30, 1998, the Fund distributed to
shareholders net realized long-term capital gains of $0.073 per share and net
realized short-term capital gains of $0.007 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 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 (other than as described herein), and will be
freely transferable.
Additional Inquiries
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semiannual Report to Shareholders should
be directed to Equity Planning at (800) 243-4361 or 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
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. upon payment of the prescribed fee.
20
<PAGE>
TAX-FREE vs. TAXABLE INCOME
(Combined Federal and California Taxes)
The table below shows the approximate taxable yields which are equivalent
to tax exempt yields under combined federal and California income tax rates
using the 1998* 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>
Combined
Taxable Income 1998 Federal and Tax-Exempt Yield
- ----------------------------------------------- State -------------------------------------------------------------------
Single Return Joint Return Bracket** 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
is equivalent to a Taxable Yield of
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 18,762 to $ 25,350 $ 37,523 to $ 42,350 20.10% 4.38 5.01 5.63 6.26 6.88 7.51 8.14
25,351 to 26,045 42,351 to 52,090 32.32% 5.17 5.91 6.65 7.39 8.13 8.87 9.60
26,046 to 32,916 52,091 to 65,832 33.76% 5.28 6.04 6.79 7.55 8.30 9.06 9.81
32,917 to 61,400 65,833 to 102,300 34.70% 5.36 6.13 6.89 7.66 8.42 9.19 9.95
61,401 to 128,100 102,301 to 155,950 37.42% 5.59 6.39 7.19 7.99 8.79 9.59 10.39
128,101 to 278,450 155,951 to 278,450 41.95% 6.03 6.89 7.75 8.61 9.47 10.34 11.20
278,451 + 278,451 + 45.22% 6.39 7.30 8.21 9.13 10.04 10.95 11.87
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Represents taxable income as currently defined by the Internal Revenue Code.
** This table is a combination of the 1998 federal and the 1997 California
taxable income brackets which are adjusted annually for inflation. As of the
publishing date, California had not announced its inflation adjusted tax
rates. Thus, the above tax brackets are based on the most recent information
available and are subject to change. 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 $121,200 (single) and $181,800
(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.
21
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Individual Individual
- -------------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- -------------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- -------------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- -------------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- -------------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- -------------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- -------------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about 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, 1998. 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 Boulevard, 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, 1998 and is incorporated into
the Statement of Additional Information by reference. An Annual Report will also
be sent if you request a Statement of Additional Information.
[Recycle Bug] Printed on recycled paper using soybean ink
<PAGE>
Phoenix Funds BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
[Logo: Two interlocking diamonds] PHOENIX
INVESTMENT PARTNERS
PXP 692 (8/98)
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
August 28, 1998
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, 1998,
and should be read in conjunction with it. The Fund's Prospectus may be obtained
by calling Phoenix Equity Planning Corporation ("Equity Planning") at (800)
243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O.
Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND ..................................... 2
INVESTMENT OBJECTIVE AND POLICIES ............ 2
RISK FACTORS ................................. 5
INVESTMENT RESTRICTIONS ...................... 10
PERFORMANCE INFORMATION ...................... 11
PORTFOLIO TRANSACTIONS AND BROKERAGE ......... 12
SERVICES OF THE ADVISER ...................... 13
NET ASSET VALUE .............................. 13
HOW TO BUY SHARES ............................ 14
INVESTOR ACCOUNT SERVICES .................... 14
REDEMPTION OF SHARES ......................... 15
DIVIDENDS, DISTRIBUTIONS AND TAXES ........... 15
TAX SHELTERED RETIREMENT PLANS ............... 17
THE DISTRIBUTOR .............................. 17
DISTRIBUTION PLANS ........................... 18
DIRECTORS AND OFFICERS ....................... 19
OTHER INFORMATION ............................ 25
APPENDIX ..................................... 26
</TABLE>
Customer Service--(800) 243-1574
Marketing--(800) 243-4361
Telephone Orders--(800) 367-5877
Telecommunication Device (TTY)--(800) 243-1926
PXP 692B (8/98)
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 former 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 United
States, its territories and possessions and their political subdivisions,
agencies, authorities and instrumentalities, the interest from which, 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 that 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 "qualified"
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 bonds," the income from which is not exempt from federal
income taxation (the interest on which is also treated as an item of tax
preference for purposes of the Alternative Minimum Tax ("AMT Bonds"). Such
investments may be made pending the investment or reinvestment of the proceeds
from the sale of its shares or portfolio securities and will not exceed 20% of
the Fund's total assets except when made for defensive purposes. Such temporary
investments may consist of notes of issuers having, at the time of purchase, an
issue of outstanding municipal bonds rated within the three highest grades by
S&P, Moody's or Fitch (taxable or tax exempt); commercial paper rated at least
A-l by Moody's, P-l by S&P or F-l by Fitch; and U.S. Treasury and agency
securities. The Fund may invest in California bonds with any maturity and may
purchase short-term municipal notes such as tax anticipation notes, revenue
anticipation notes and bond anticipation notes.
The Fund may write call options only if they are covered and remain covered
for as long as the Fund is obligated as a writer. Thus, if the Fund writes a
call option on an individual security, the Fund must own the underlying security
or other securities that are acceptable for escrow at all times during the
option period. The Fund will write call options on indices only to hedge in an
economically appropriate way securities which are not otherwise hedged with
options or financial futures contracts. Call options on securities indices
written by the Fund will be "covered" by identifying the specific securities
being hedged.
Portfolio trading will be undertaken principally to accomplish the
objectives of the Fund in relation to anticipated movements in the general level
of interest rates, provided, however, the Fund may engage to a limited extent in
short-term trading consistent with its objective. Securities may be sold in
anticipation of a market decline (a rise in interest rates) or purchased in
anticipation of a market rise (a decline in interest rates) and later sold, but
the Fund will not engage in trading merely to realize a gain. In addition, a
security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what the Fund believes to be a
temporary disparity in the normal yield relationship between the two securities.
Yield disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such as
changes in the overall demand for or supply of various types of tax exempt bonds
or changes in the investment objective of investors.
Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities, all excluding securities with maturities at acquisition
of one year or less. The Fund's portfolio turnover rate will not be a limiting
factor when the Fund deems it desirable to purchase or sell securities.
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Portfolio turnover may involve the payment by the Fund of dealer mark-ups
or underwriting commissions. It is impossible to predict portfolio turnover
rates; however, in periods of rapidly fluctuating interest rates, the Fund's
investment policies may lead to frequent changes in investments. The Fund's
portfolio turnover rates for the two years ended April 30, 1997 and 1998 were
17% and 9%, 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
430,000 non-farm jobs in 1997. 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 rate of economic
growth in California in 1997, in terms of job gains, exceeded that of the rest
of the United States. The unemployment rate, while still higher than the
national average, fell to 5.9% in early 1998, compared to over 10% during the
recession.
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 borrowing.
On August 18, 1997, the Governor signed the 1997-98 Budget Act which
provides for General Fund and Special Fund expenditures of approximately $67.2
billion and projects a 97-98 fiscal year end reserve of $112 million. For the
second year in a row, the State budget contains a large increase in funding for
K-14 education, reflecting strong revenues which have exceeded initial budgeted
amounts. The Budget Act reflects a $1.235 billion pension case judgment payment,
and returns funding of the State's pension contribution to the quarterly basis
existing prior to the deferral actions invalidated by the courts. Because of the
effect of the pension payment, most other State programs were continued at
1996-97 levels. Health and welfare costs are contained, continuing generally the
grant levels from prior years, as part of the initial implementation of the new
CalWORKs welfare reform program. Unlike prior years, this Budget Act does not
depend on uncertain federal budget actions. About $300 million in federal funds,
already included in the federal FY 1997 and 1998 budgets, are included in the
Budget Act to offset incarceration costs for illegal immigrants. The Budget Act
contains no tax increases and no tax reductions. The Renters Tax Credit was
suspended for another year, saving approximately $500 million. After enactment
of the Budget Act, and prior to the end of the Legislative Session, the
Legislature and the Governor reached certain agreements related to State
expenditures and taxes. Legislation signed by the Governor includes a variety of
phased-in tax cuts, conformity with certain provisions of the federal tax reform
law passed earlier in the year, and reform of funding for county trial courts,
with the State to assume greater financial responsibility.
The Governor's proposed budget for fiscal year 1998-1999 proposes total
State spending of $70.6 billion (excluding the expenditure of federal funds and
selected bond funds), which is up 4.7% from the current year's budget. This
total includes $55.4 billion in General Fund spending (a 4.5% increase from the
current year) and $15.2 billion in special funds spending (a 5.3% increase). The
Governor's proposed budget anticipates a $296 million reserve for economic
uncertainties. The new budget reflects agreements reached in the prior year in
the areas of welfare reform, education, state tax relief, and the financial
restructuring of the State's trial court system. The budget contains no tax
changes and relatively few major programmatic changes.
The May 1998 Revision to the Governor's proposed budget increases the
General Fund revenue forecast by nearly $1.8 billion in 1997-98 and $2.5 billion
in 1998-99. The May Revision provides for a balanced budget and a budget reserve
for economic uncertainties of $1.6 billion. In the May Revision the
administration proposed, among other things, a two-step reduction in the State's
vehicle license fee (VLF) which, when fully phased in, would reduce State
revenues by more than $3 billion annually. Since VLF is a primary source of
revenue for local governments, the May Revision proposed continuous
appropriation from the General Fund to replace that loss in revenues.
The VLF proposal met significant opposition in the Legislature and
continuing disagreement over the nature and extent of the proposed tax cut
delayed final adoption of the 1998-99 budget. Local government concern about the
potential impact of the VLF proposal on local government revenues underscores
the extent to which California county and other local government budgets are
affected by State budget decisions beyond their control.
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In early August, 1998 the Governor and leaders of the State Legislature
reached agreement on a $76 billion State budget that includes a $1.4 billion tax
cut. The main feature of the tax cut is a 25% reduction in the VLF, with future
reductions contingent upon higher than forecast State revenues. The budget
accord included significant additional funding for public schools and community
colleges intended, among other things, to increase the length of the California
school year and extend the class size reduction initiatives already under way.
The budget accord also included a 7.9% increase in welfare recipients' monthly
checks as well as a variety of smaller tax credits and cuts, including an
increase in the income tax credit for dependents, a modest renters' credit and a
number of tax credits and cuts aimed at specific industries important to the
California economy. The budget must be approved by a two-thirds vote of the
State Senate and Assembly. The Governor may exercise a line-item veto to ensure
the final budget includes sufficient reserves.
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%. In December, 1997, Moody's raised its ratings on $325
million of Orange County pension obligation bonds to Baa3 from Ba. In February
1998 Fitch assigned outstanding Orange County pension obligation bonds a BBB
rating.
The State is a party to numerous legal proceedings, many of which normally
recur in governmental operations. In addition, the State is involved in certain
other legal proceedings which, if decided against the State, may require the
State to make significant future expenditures or may impair future revenue
sources.
Among the more significant lawsuits pending against the State are the
following: (i) lawsuits related to the 1997 northern California floods with
potential State liability of approximately $2 billion; (ii) cases seeking to
compel the State to pay Part B ambulance and physician services co-payments
under the Medicare and Medicaid Acts; (iii) a lawsuit challenging two sections
of the State tax laws; (iv) a lawsuit seeking reimbursement for alleged
state-mandated costs involving potential State liability of over $1 billion; (v)
lawsuits related to contamination at the Stringfellow toxic waste site; (vi)
various lawsuits challenging budget appropriations and fund transfers; (vii) a
lawsuit challenging the appropriation of funds in the Cigarette and Tobacco
Products Surtax Fund for programs which were allegedly not health education or
tobacco related disease research; and (viii) lawsuits concerning reductions in
Aid to Families with Dependent Children (AFDC) with potential State liability
estimated at $831 million.
Due to the State's continuing budget problems, the State's general
obligation bonds were downgraded in July 1994 from "Aa" to "A1" 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 California's improving economy and budget situation,
both Fitch and Standard & Poor's raised their ratings from A to A+. In October,
1997, Fitch raised its rating from A+ to AA- referring to California's
fundamental strengths, the extent of economic recovery and the return of
financial stability. 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.
In October 1997 the Governor issued Executive Order W-163-97 stating that
Year 2000 solutions would be a State priority and requiring each agency of the
State, no later than December 31, 1998, to address Year 2000 problems in their
essential systems and protect those systems from corruption by non-compliant
systems, in accordance with the Department of Information Technology's
California 2000 Program. There can be no assurance that steps being taken by
state or local government agencies with respect to the Year 2000 problem will be
sufficient to avoid any adverse impact upon the budgets or operations of those
agencies or upon the California Trust.
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 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
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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 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
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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
(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.
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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 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.
Average annual return and yield are computed separately for Class A and
Class B Shares in accordance with the formulas specified by the Commission. The
yield will be computed by dividing the Fund's net investment income over a
30-day period by an average value (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 12-month period to
derive the Fund's yield. For the 30-day period ending April 30, 1998, the Class
A Shares yield, calculated pursuant to this formula, was 4.53% and the Class B
Shares yield was 4.00%, calculated pursuant to this formula.
For the 1, 5 and 10 year periods ended April 30, 1998, the average annual
total return of the Class A Shares was 3.70%, 4.84% and 7.16%, respectively. For
the one year period ended April 30, 1998, and since inception (July 26, 1994)
for Class B Shares, the average annual total return was 4.10% and 5.69%
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
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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, 1998 was 207.66%.
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
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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 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 Distributor
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 Investment
Advisory 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, 1996, 1997 and 1998 amounted to $542,769, $521,952 and
$488,031, respectively. For the fiscal years ended April 30, 1996, 1997 and
1998, management fees were paid at an annual rate of 0.45%, 0.45%, and 0.45%,
respectively, of the Fund's average daily net assets.
Effective June 1, 1998, National Securities & Research Corporation
("National") assigned its investment advisory agreement to Phoenix Investment
Counsel, Inc. ("PIC"). PIC now serves as the Adviser for the Fund. National and
PIC are both subsidiaries of Phoenix Investment Partners, Ltd. (formerly known
as 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 $21.6 billion in
managed assets. The Adviser has acted as investment adviser for over sixty
years.
Philip R. McLoughlin, a director and officer of the Fund, is also a
director of the Adviser. Michael E. Haylon and William R. Moyer, officers of the
Fund, are also directors and officers of the Adviser. G. Jeffrey Bohne, Nancy G.
Curtiss, Timothy M. Heaney, William E. Keen, III, Leonard J. Saltiel, Thomas N.
Steenburg and James D. Wehr, officers of the Fund, are also officers of the
Adviser.
The current Investment Advisory Agreement was approved by the Board of
Directors on November 19, 1996 and by the shareholders on March 14, 1997. The
Investment Advisory 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
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, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. 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.
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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. Any 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.
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.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Fund's net asset value next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
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 Affiliated 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 Affiliated Phoenix Fund,
if currently offered. 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 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 Affiliated 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 Affiliated 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.
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 Affiliated 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.
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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.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Fund's net asset value next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
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 30 days' written notice to the shareholder mailed to the
address of record. During the 30 day period the shareholder has the right to add
to the account to bring its value to $200 or more. See the Fund's current
Prospectus for more information.
Telephone Redemption. Shareholders who do not have certificated shares may
redeem up to $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
15
<PAGE>
taxable year at least 90% of its gross income from dividends, interest and gains
from the sale or other disposition of securities and (b) diversify its holdings
so that, at the end of each quarter of the taxable year (i) at least 50% of the
market value of the Fund's assets are represented by cash, U.S. Government
Securities, securities of other regulated investment companies and other
securities of any one issuer limited for purposes of this calculation to an
amount not greater than 5% of the Fund's total assets and 10% of the outstanding
voting securities of any one issuer and (ii) not more than 25% of the value of
its total assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies). If, in any taxable year, the Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to the Fund at
corporate rates and the Fund would not be eligible to pay exempt interest
dividends.
Interest on certain "qualified 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.
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 regardless of how long shareholders have held the Fund
shares. The maximum federal capital gains rate for individuals is 20% with
respect to capital assets held more than 12 months. The maximum capital gains
rate for corporate shareholders is the same as the maximum tax rate for ordinary
income. 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. 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 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 October 31 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 a regulated investment company such as the Fund that invests
substantially in tax-exempt investments. 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.
Pursuant to Code section 852(b)(7), any dividend declared by a fund to
shareholders of record in October, November and December of any year and payable
to shareholders of record on a specified date in such a month 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.
16
<PAGE>
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 (the percentage of all income
distributions made during a fiscal year designated as tax exempt will be
uniform).
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal bonds and similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of tax exempt bonds
for investment by the Fund and the value of the Fund's portfolio would be
affected. The Directors would then re-evaluate the Fund's investment objective
and policies.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Affiliated Phoenix Funds may be offered in
connection with employer-sponsored 401(k) plans. PIC 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 PIC 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 and an affiliate
of the Adviser. 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. During the
fiscal years ended April 30, 1996, 1997, and 1998, purchasers of Fund shares
paid aggregate sales charges of $156,046, $96,217 and $69,141, respectively, of
which the Distributor received net commissions of $18,687, $18,320 and $15,777,
respectively, for its services, the balance being paid to dealers.
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, 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 Distribution Plans or in any related agreements. The Underwriting 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 Distribution Plans 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. For its
services as financial agent, Equity Planning will be paid a fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC, Inc., as subagent, to the financial agent, plus (2) the documented cost to
the financial agent to provide financial reporting and tax services and
oversight of the subagent's performance. The current fee schedule of PFPC, Inc.
is based upon the average of the aggregate daily net asset values of the Fund,
at the following incremental annual rates.
17
<PAGE>
<TABLE>
<S> <C>
First $200 million .085%
$200 million to $400 million .05%
$400 million to $600 million .03%
$600 million to $800 million .02%
$800 million to $1 billion .015%
Greater than $1 billion .0125%
</TABLE>
Percentage rates are applied to the aggregate daily net asset values of the
Fund. PFPC, Inc. also charges minimum fees and additional fees for each
additional class of fund shares. Equity Planning retains PFPC, Inc. as subagent
for each of the funds for which Equity Planning serves as financial agent. PFPC,
Inc. agreed to a modified fee structure and waived certain charges. Because
PFPC, Inc.'s arrangement would have favored smaller funds over larger funds,
Equity Planning reallocates PFPC, Inc.'s overall asset-based charges among all
funds for which it serves as financial agent on the basis of the relative net
assets of each fund. As a result, the PFPC, Inc. charges to the Fund are
expected to be slightly less than the amount that would be found through direct
application of the table illustrated above. For its services during the Fund's
fiscal year ended April 30, 1998, Equity Planning received $82,000.
DISTRIBUTION PLANS
The Fund has adopted separate amended and restated 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 to pay for the
furnishing of shareholder services. Pursuant to the Plans, the Fund will pay the
Distributor 0.25% annually of the average daily net assets of each Class of the
Fund for providing services to shareholders (the "Service Fee"). Under the Class
B Plan, the Fund may reimburse the Distributor for actual expenses of the
Distributor related to that Class up to 0.75% 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 commissions and financing expenses incurred in connection with the
payment of commissions; (ii) compensation, sales incentives and payments to
sales, marketing and service personnel; (iii) payments to broker-dealers and
other financial institutions which have entered into agreements with the
Underwriter in the form of the Dealer Agreement for Phoenix Funds for services
rendered in connection with the sale and distribution of shares of the Fund;
(iv) payment of expenses incurred in sales and promotional activities, including
advertising expenditures related to the Fund; (v) the costs of preparing and
distributing promotional materials; (vi) the cost of printing the Fund's
Prospectus and Statement of Additional Information for distribution to potential
investors; and (vii) such other similar services that the Directors of the Fund
determine are reasonably calculated to result in the sale of shares of the Fund.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Distributor 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 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,
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. For the
fiscal year ended April 30, 1998, the Fund paid Rule 12b-1 fees in the amount of
$281,489 of which the Distributor received $33,729, unaffiliated broker-dealers
received $247,623 and W.S. Griffith & Co., Inc., an affiliate, received $137.
The Rule 12b-1 payments were used for: compensating dealers ($257,856),
compensation to sales personnel ($149,213), advertising ($83,796), printing and
mailing prospectuses to other than current shareholders ($7,650), service costs
($40,560) and other costs ($29,752).
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.
18
<PAGE>
The National Association of Securities Dealers, Inc. ("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 plan fees or amend the Plans.
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. The 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>
Robert Chesek (64) 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 (69) 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). Member, Audit Committee of the City of New York
(1981-1996). Advisory Director, Blackrock Fannie Mae
Mortgage Securities Fund (1989-1996). Member (1990-1995),
Chairman (1992-1995), Financial Accounting Standards
Advisory Council. Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Harry Dalzell-Payne (69) 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 (67) 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 Inc. (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
(1989-1997), Chairman of the Board, (1993-1997), President
(1989-1993), and Chief Executive Officer (1989-1995), Phoenix
Investment Partners, Ltd.
Leroy Keith, Jr. (59) 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
Savannah, GA 30750 Evergreen International Fund, Inc. (1989-present). Trustee,
Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen 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).
*Philip R. McLoughlin (51) Director and Chairman, (1997-present), Director, (1995-present), Vice
President Chairman (1995-1997) and Chief Executive Officer,
(1995-present) Phoenix Investment Partners, Ltd. 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, PHL
Associates, Inc. (1995-present). 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 (70) Director Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee,
Colts Neck, NJ 07722 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).
*James M. Oates (52) Director Chairman, IBEX Capital Markets LLC (1997-present).
Managing Director Managing Director, Wydown Group (1994-present). Director,
The Wydown Group Phoenix Investment Partners, Ltd. (1995-present). Director/
IBEX Capital Markets LLC Trustee, Phoenix Funds (1987-present). Trustee, Phoenix-
60 State Street Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 950 Institutional Mutual Funds (1996-present). Director, AIB
Boston, MA 02109 Govett Funds (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), Stifel Financial (1996-present) and Command
Systems, Inc. (1998-present). Vice Chairman Massachusetts
Housing Partnership (1992-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 (56) Director Director (1986-present), President (1993-present) and
Phoenix Investment Executive Vice President (1992-1993), Phoenix Investment
Partners, Ltd. Partners, Ltd. Director/Trustee, Phoenix Funds (1995-present).
55 East Monroe Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Suite 3600 Phelps Institutional Mutual Funds (1996-present). President
Chicago, IL 60603 and Chief Executive Officer, Duff & Phelps Utilities Tax-Free
Income Inc. (1995-present), Duff & Phelps Utilities Income
Inc. (1994-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present).
**Herbert Roth, Jr. (69) 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), Landauer, Inc. (medical
services) (1970-present),Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), and Mark IV Industries
(diversified manufacturer) (1985-present). Member, Directors
Advisory Council, Phoenix Home Life Mutual Insurance
Company (1998-present). Director, Key Energy Group (oil rig
service) (1988-1994) and Phoenix Home Life Mutual
Insurance Company (1972-1998). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Richard E. Segerson (52) 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 Total
American, Inc.) (1991-1993). Director/Trustee, the National
Affiliated Investment Companies (1984-1993).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- ------------- -----------------------
<S> <C> <C>
Lowell P. Weicker, Jr. (67) 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), Burroughs Wellcome Fund (1996-present),
HPSC Inc. (1995-present) and Compuware (1996-present).
Visiting Professor, University of Virginia (1997-present).
Director, Duty Free International (1997). Chairman, Dresing,
Lierman, Weicker (1995-1996). Governor of the State of
Connecticut (1991-1995).
Michael E. Haylon (40) Executive Director and Executive Vice President--Investments, Phoenix
Vice Investment Partners, Ltd. (1995-present). Executive Vice
President President, Phoenix Funds (1993-present) and 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), Executive Vice
President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present), President
(1996-present), Executive Vice President (1994-1996), Vice
President (1993-1994), National Securities & Research
Corporation. Director, Phoenix Equity Planning Corporation
(1995-present). Senior Vice President, Securities Investments,
Phoenix Home Life Mutual Insurance Company (1993-1995).
Various other positions with Phoenix Home Life Mutual
Insurance Company (1990-1993).
John F. Sharry (46) Executive Managing Director, Retail, Phoenix Equity Planning
Vice Corporation (1995-present). Executive Vice President, Phoenix
President Funds and Phoenix-Aberdeen Series Fund (1998-present).
Managing Director, Director and National Sales Manager
(December 1993-November 1995), Senior Vice President,
Director and National Sales Manager (December 1992-
December 1993), Putnam Funds.
James D. Wehr (41) Senior Vice Managing Director, Fixed Income, (1996-present), Vice
President President (1991-1996), Phoenix Investment Counsel, Inc.
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; and Senior
Vice President, Phoenix Multi-Sector Short Term Bond Fund,
Phoenix Multi-Sector Fixed Income Fund, Phoenix Income
and Growth Fund and Phoenix Strategic Allocation Fund, Inc.
(1997-present). Senior Vice President and Chief Investment
Officer, Duff & Phelps Utilities Tax Free Income Inc. (1997-
present). Managing Director, Public Fixed Income, Phoenix
Home Life Insurance Company (1991-1995). Various positions
with Phoenix Home Life Insurance Company (1981-1991).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- ------------- -----------------------
<S> <C> <C>
Timothy M. Heaney (33) Vice Managing Director, Fixed Income (1997-present), Director,
President Fixed Income Research (1996-1997), Investment Analyst
(1995-1996), Phoenix Investment Counsel, Inc. Managing
Director, Fixed Income (1997-present), Director, Fixed Income
Research (1996-1997), National Securities & Research
Corporation. Vice President, Phoenix California Tax Exempt
Bonds, Inc. and Phoenix Multi-Portfolio Fund (1995-present).
Investment Analyst, Phoenix Home Life Mutual Insurance
Company (1992-1994).
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning Corporation
100 Bright Meadow Blvd. President (1996-present). Vice President, Phoenix Funds, Phoenix Duff
P.O. Box 2200 & Phelps Institutional Mutual Funds and Phoenix-Aberdeen
Enfield, CT 06083-2200 Series Fund (1996-present). Assistant Vice President,
USAffinity Investments LP, (1994-1995). Treasurer and
Secretary, USAffinity Funds (1994-1995). Manager, Fund
Administration, SEI Corporation (1991-1994).
William R. Moyer (54) Vice Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. President Investment Partners, Ltd. (1995-present). Director (1998-present),
P.O. Box 2200 Senior Vice President, Finance (1990-present), Chief Financial
Enfield, CT 06083-2200 Officer (1996-present), and Treasurer (1994-1996 and 1998-
present), Phoenix Equity Planning Corporation. Director (1998-
present), Senior Vice President (1990-present), Chief Financial
Officer (1996-present) and Treasurer (1994-present), Phoenix
Investment Counsel, Inc. Director (1998-present), Senior Vice
President, Finance (1993-present), Chief Financial Officer (1996-
present), and Treasurer (1994-present), National Securities &
Research Corporation. Senior Vice President and Chief Financial
Officer, Duff & Phelps Investment Management Co. (1996-
present). Vice President, Phoenix Funds (1990-present), Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice President,
Investment Products Finance, Phoenix Home Life Mutual Insur-
ance Company (1990-1995). Senior Vice President and Chief
Financial Officer, W. S. Griffith & Co., Inc. (1992-1995) and
Townsend Financial Advisers, Inc. (1993-1995). Vice President,
the National Affiliated Investment Companies (until 1993).
Leonard J. Saltiel (44) Vice Managing Director, Operations and Service (1996-present),
President Senior Vice President (1994-1996), Phoenix Equity Planning
Corporation. Vice President, Phoenix Funds (1994-present),
Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present) and Phoenix-Aberdeen Series Fund (1996-present). Vice
President, Investment Operations, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Phoenix
Home Life Mutual Insurance Company (1987-1994).
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1995-present) and Phoenix-Aberdeen
Series Fund (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).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- ------------- -----------------------
<S> <C> <C>
G. Jeffrey Bohne (50) Secretary Vice President and General Manager, Phoenix Home Life
101 Munson Street Mutual Insurance Co. (1993-present). Vice President, Mutual
Greenfield, MA 01301 Fund Customer Service (1996-present), Vice President,
Transfer Agent Operations (1993-1996), Phoenix Equity
Planning Corporation. Secretary/Clerk, Phoenix Funds (1993-
present), Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund (1996-
present). Vice President, Home Life of New York Insurance
Company (1984-1992).
</TABLE>
- -----------
*Indicates that the Director(s) is an "interested person" of the Fund within
the meaning of the definition set forth in Section 2(a)(19)of the Investment
Company Act of 1940.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Morris and
Roth will retire from the Board of Directors effective January 1, 1999.
For services rendered to the Fund for the fiscal year ended April 30, 1998,
the Directors received aggregate remumeration of $20,078. For services on the
Boards of the various Phoenix Funds, 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. Each Director who serves on the Executive Committee and who is not an
interested person of the Fund receives a retainer at the annual rate of $2,000
and $2,000 per joint Executive 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. Costs are allocated
equally to each of the Series and Funds within the Fund Complex. 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.
For the Fund's last fiscal year ending April 30, 1998, 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 (14 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Directors
- ------------------------ -------------- --------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Robert Chesek $1,538 $55,750
E. Virgil Conway+ $2,040 $74,500
Harry Dalzell-Payne+ $1,815 $67,250
Francis E. Jeffries $1,500* $53,750
Leroy Keith, Jr. $1,538 None None $55,750
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $1,778* Director Director $65,750
James M. Oates+ $1,778 $65,250
Calvin J. Pedersen $ 0 $ 0
Herbert Roth, Jr.+ $2,108* $77,000
Richard E. Segerson $1,785 $63,750
Lowell P. Weicker, Jr. $1,688 $60,000
</TABLE>
- ---------
*This compensation (and the earnings thereon) was deferred pursuant to the
Directors' Deferred Compensation Plan. At April 30, 1998, the total amount of
deferred compensation (including interest and other accumulation earned on the
original amounts deferred) accrued for Messrs. Jeffries, Morris and Roth was
$82,041, $137,256 and $140,068, 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 July 29, 1998, the Directors and officers of the Fund beneficially owned
less than 1% of the outstanding shares of the Fund.
24
<PAGE>
Principal Shareholders
The following table sets forth information as of July 29, 1998 with respect
to each person who owns of record or is known by the Registrant to own of record
or beneficially own 5% or more of any Class of the Registrant's equity
securities.
<TABLE>
<CAPTION>
Name of Shareholder Class Number of Shares Percent of Class
- ------------------------------------- ------- ------------------ -----------------
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith B 20,491.3630 16.42%
4800 Deer Lake Dr. E. 3rd Fl.
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette B 12,636.0790 10.13%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO B 11,910.4400 9.55%
Bill & Sadaye Kasuga Trust
Hiroshi William Kasuga
U/A 07/06/89
29353 Quailwood Drive
Rancho Palos Verdes, CA 90275-4926
Toshio Takayama B 10,632.3380 8.52%
Joan Takayama Ttees
Takayama Family Trust DTD 4/9/88
9200 Orchid Dr.
Westminster, CA 92683-7316
Phoenix Investment Counsel B 10,060.7580 8.06%
100 Bright Meadow Blvd.
Enfield, CT 06082-1957
</TABLE>
OTHER INFORMATION
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110 has been
selected as the independent accountants for the Fund. PricewaterhouseCoopers LLP
audits the Fund's annual financial statements and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
MA 02101, serves as custodian of the Fund's assets. Equity Planning, 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200, acts as Transfer Agent
for the Fund (the "Transfer Agent"). As compensation, Equity Planning receives a
fee equivalent to $19.25 for each designated daily dividend shareholder account
plus out-of-pocket expenses. Transfer Agent fees are also utilized to offset
costs and fees paid to subtransfer agents employed by Equity Planning. State
Street Bank and Trust Company serves as a subtransfer agent pursuant to a
Subtransfer Agency Agreement.
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, and is available without charge upon
request.
Financial Statements
The financial statements for the Fund's fiscal year ended April 30, 1998,
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, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--95.6%
CERTIFICATES OF PARTICIPATION/LEASE REVENUE--7.4%
Anaheim Public Funding Series C 6%, 9/1/16 (FSA Insured).. AAA $2,600 $ 2,866,500
Orange County Recovery COP 5.80%, 7/1/16 (MBIA Insured)... AAA 1,500 1,584,375
San Francisco Building Authority Civic Center A 6%,
12/1/09 (AMBAC Insured)................................. AAA 2,000 2,230,000
San Mateo County Revenue 5.125%, 7/1/18 (MBIA Insured).... AAA 1,000 992,500
----------------
TOTAL CERTIFICATES OF PARTICIPATION/LEASE REVENUE................................ 7,673,375
----------------
GENERAL OBLIGATIONS--6.6%
California State G.O. 5.50%, 4/1/08 (MBIA Insured)........ AAA 1,500 1,605,000
Central School District G.O. 7.05%, 5/1/16................ A (c) 1,000 1,077,500
Pomona School District G.O. Series C 5.60%, 8/1/12 (MBIA
Insured)................................................ AAA 1,500 1,618,125
Walnut Valley United School District G.O. 0%, 8/1/19 (MBIA
Insured)................................................ AAA 8,480 2,607,600
----------------
TOTAL GENERAL OBLIGATIONS........................................................ 6,908,225
----------------
HEALTHCARE--6.6%
California Health Facilities 7.30%, 11/1/20 (CA Mortgage
Insurance).............................................. A+ 1,400 1,508,500
California Health Facilities 6.25%, 7/1/22................ A+ 1,500 1,576,875
Grass Valley Hospital 7.25%, 4/1/19 (CA Mortgage
Insurance).............................................. A+ 2,000 2,082,920
San Bernandino School Health Care Series A, Sisters of
Charity 7%, 7/1/21...................................... AA 1,500 1,646,250
----------------
TOTAL HEATHCARE.................................................................. 6,814,545
----------------
HOUSING REVENUE--3.5%
California Housing Financing Agency Series C 7.20%, 8/1/17
(FHA Insured)........................................... AA- 550 569,937
California Housing Financing Agency Series D 7.25%, 8/1/17
(FHA Insured)........................................... AA- 510 539,962
California Housing Financing Agency Series A 7.75%, 8/1/17
(FHA Insured)........................................... AA- 330 344,025
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
HOUSING REVENUE--CONTINUED
L.A. Community Redevelopment Agency Series A 6.55%, 1/1/27
(AMBAC Insured)......................................... AAA $2,000 $ 2,152,500
----------------
TOTAL HOUSING REVENUE............................................................ 3,606,424
----------------
PRE-REFUNDED REVENUE--29.3%
Covina Redevelopment Agency 8.80%, 1/1/08................. NR 1,200 1,473,000
Hayward Hospital Revenue
(St. Rose Hosp.) 10%,
10/1/04 (d)............................................. AAA 510 601,162
Huntington Park Redevelopment Agency 8%, 12/1/19 (FHA
Insured)................................................ AAA 2,400 3,312,000
L.A. Harbor Department 7.60%, 10/1/18 (d)................. AAA 1,000 1,270,000
Northern California Hydro Electric 7.50%, 7/1/23 (AMBAC
Insured)................................................ AAA 195 253,013
Orange County Water District COP 7%, 8/15/15.............. AAA 1,000 1,081,250
Pasedena COP 6.75%, 8/1/15................................ AAA (c) 2,000 2,150,000
Puerto Rico Electric Power 7%, 7/1/21..................... BBB+ 2,500 2,753,125
Puerto Rico Highway Revenue Pre-refunded Series T 6.625%,
7/1/18 (d).............................................. AAA 200 220,500
Puerto Rico Highway Revenue Refunded Series T 6.625%,
7/1/18.................................................. A 800 882,000
Puerto Rico Public Building Series L 6.875%, 7/1/21....... AAA 3,170 3,522,663
Redlands COP Series C 7%, 12/1/22 (MBIA Insured).......... AAA 1,000 1,087,500
Riverside County 8.625%, 5/1/16 (GNMA Collaterized)....... AAA 700 943,250
Riverside County 7.80%, 5/1/21 (GNMA Collaterized)........ AAA 4,000 5,255,000
San Bernandino COP Series B 7%, 8/1/28.................... AAA 2,200 2,422,750
San Gabriel Valley Schools Financing 7.20%, 7/1/19........ NR 1,200 1,267,500
Torrance Hospital COP 7.10%, 12/1/15...................... AAA 1,705 1,937,306
----------------
TOTAL PRE-REFUNDED REVENUE....................................................... 30,432,019
----------------
TAX REVENUE--10.0%
Culver City Redevelopment Agency 4.60%, 11/1/20 (AMBAC
Insured)................................................ AAA 4,500 4,072,500
</TABLE>
4 See Notes to Financial Statements
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
- ------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
TAX REVENUE--CONTINUED
L.A. County Sales Tax 7%, 7/1/19.......................... AA- $2,500 $ 2,634,375
L.A. County Transit Authority Series A 5%, 7/1/21 (FGIC
Insured)................................................ AAA 1,500 1,428,750
San Francisco Redevelopment Agency 4.75%, 8/1/18 (FGIC
Insured)................................................ AAA 1,100 1,023,000
San Pablo Redevelopment 5%, 12/1/13 (FGIC Insured)........ AAA 1,250 1,240,625
----------------
TOTAL TAX REVENUE................................................................ 10,399,250
----------------
TRANSPORTATION REVENUE--1.4%
Riverside Public Financing Authority 7.80%, 2/1/08........ Baa(c) 360 366,077
San Francisco Airport Revenue 6.25%, 5/1/10 (FGIC
Insured)................................................ AAA 1,000 1,093,750
----------------
TOTAL TRANSPORTATION REVENUE..................................................... 1,459,827
----------------
UTILITY REVENUE--30.8%
California Department of Water Resources 5%, 12/1/15...... AA 1,375 1,338,906
Chino Basin Funding Authority Revenue 5.90%, 8/1/11 (AMBAC
Insured)................................................ AAA 2,000 2,202,500
Contra Costa Water District Series G 5.75%, 10/1/14 (MBIA
Insured)................................................ AAA 3,100 3,293,750
Delta Diablo Sanitation District 0%, 12/1/16 (MBIA
Insured)................................................ AAA 1,070 399,913
Irvine Ranch Water District 8.25%, 8/15/23 (b)............ A+ 2,000 2,021,800
L.A. Wastewater Series D 4.70%, 11/1/17 (FGIC Insured)
(b)..................................................... AAA 7,000 6,475,000
MSR Public Power Agency 6.75% 7/1/20 (MBIA Insured)....... AAA 1,500 1,822,500
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000) VALUE
----------- ------ ----------------
<S> <C> <C> <C>
UTILITY REVENUE--CONTINUED
Metropolitan Water District Series C 5%, 7/1/27........... AA $2,500 $ 2,378,125
Puerto Rico Electric Power Authority Series N 6%,
7/1/10.................................................. BBB+ 1,500 1,515,000
Sacramento Cogeneration Project 6.375%, 7/1/10............ BBB- 1,000 1,083,750
Sacramento Flood Control Agency 5.375%, 10/1/15 (FGIC
Insured)................................................ AAA 1,000 1,015,000
Sacramento Municipal Utility District Series K 5.75%,
7/1/18 (AMBAC Insured).................................. AAA 1,500 1,606,875
San Francisco City & County Public Utility 5%, 11/1/15.... AA- 2,000 1,957,500
Southern California Public Power Authority 5.50%,
7/1/20.................................................. A 915 915,000
Southern California Public Power Series A 4.875%, 7/1/20
(AMBAC Insured)......................................... AAA 2,000 1,885,000
Turlock California Irrigation District Revenue Series A
5.75%, 1/1/18 (MBIA Insured)............................ AAA 2,000 2,052,500
----------------
TOTAL UTILITY REVENUE............................................................ 31,963,119
----------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $91,418,260).................................................. 99,256,784
----------------
SHORT-TERM OBLIGATIONS--0.4%
COMMERCIAL PAPER--0.4%
Marsh & McClennan Cos, Inc. 5.52%, 5/1/98................. A-1+ 435 435,000
----------------
TOTAL SHORT-TERM OBLIGATION
(Identified cost $435,000)..................................................... 435,000
----------------
TOTAL INVESTMENTS--96.0%
(Identified cost $91,853,260).................................................. 99,691,784(a)
Cash and receivables, less liabilities--4.0%................................... 4,182,929
----------------
NET ASSETS--100.0%............................................................... $103,874,713
----------------
----------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,859,642 and gross
depreciation of $21,118 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$91,853,260.
(b) Segregated as collateral for futures contracts.
(c) As rated by Moody's Duff & Phelps or Fitch.
(d) Escrowed to maturity.
At April 30, 1998, the concentration of the Fund's investments by State,
determined as a percentage of total investments, is as follows:
California 92%, Puerto Rico 7%, Other 1%.
At April 30, 1998, 58.9% of the securities in the portfolio are backed by
insurance of financial institutions and financial guaranty assurance
agencies. Insurers with a concentration greater than 10% of net assets are as
follows: MBIA, 16%, AMBAC, 14% and FGIC, 12%.
See Notes to Financial Statements 5
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $91,853,260) $ 99,691,784
Cash 2,774
Receivables
Fund shares sold 2,566,682
Interest 1,873,530
------------
Total assets 104,134,770
------------
Liabilities
Payables
Variation margin for futures contracts 19,906
Fund shares repurchased 25,575
Dividend distributions 87,556
Investment advisory fee 38,032
Distribution fee 22,130
Directors' fee 9,084
Transfer agent fee 8,944
Financial agent fee 6,720
Accrued expenses 42,110
------------
Total liabilities 260,057
------------
Net Assets $103,874,713
============
Net Assets Consist of:
Capital paid in on shares of common stock 95,797,497
Distributions in excess of net investment
income (87,557)
Accumulated net realized gain 325,850
Net unrealized appreciation 7,838,923
------------
Net Assets $103,874,713
============
Class A
Shares of common stock outstanding, $0.01
par value,
250,000,000 shares authorized
(Net Assets $102,312,278) 7,800,839
Net asset value per share $ 13.12
Offering price per share
$13.12/(1-4.75%) $ 13.77
Class B
Shares of common stock outstanding, $0.01
par value,
250,000,000 shares authorized
(Net Assets $1,562,435) 119,015
Net asset value and offering price per share $ 13.13
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $6,355,714
----------
Total investment income 6,355,714
----------
Expenses
Investment advisory fee 488,031
Distribution fee--Class A 267,674
Distribution fee--Class B 13,815
Financial agent fee 82,000
Transfer agent 69,528
Printing 33,839
Registration 25,649
Professional 25,553
Directors 21,282
Custodian 11,876
Miscellaneous 15,238
----------
Total expenses 1,054,485
----------
Net investment income 5,301,229
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 1,131,615
Net realized loss on futures contracts (199,570)
Net change in unrealized appreciation
(depreciation) on investements
3,180,703
----------
Net gain on investments 4,112,748
----------
Net increase in net assets resulting from
operations $9,413,977
==========
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1998 April 30, 1997
---------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 5,301,229 $ 5,937,898
Net realized gain 932,045 1,037,792
Net change in unrealized appreciation
(depreciation) 3,180,703 (395,154)
------------- -------------
Increase in net assets resulting from
operations 9,413,977 6,580,536
------------- -------------
From Distributions to Shareholders
Net investment income--Class A (5,233,550) (5,878,203)
Net investment income--Class B (56,307) (59,695)
Net realized gains--Class A (611,301) (778,981)
Net realized gains--Class B (7,993) (9,332)
Distributions in excess of net investment
income--Class A -- (20,400)
Distributions in excess of net investment
income--Class B -- (207)
------------- -------------
Decrease in net assets from distributions
to shareholders (5,909,151) (6,746,818)
------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (2,752,578
and 5,230,522 shares, respectively) 36,168,968 67,136,755
Net asset value of shares issued from
reinvestment of distributions
(198,792 and 228,498 shares, respectively) 2,620,648 2,940,319
Cost of shares repurchased (3,745,317 and
5,775,597 shares, respectively) (49,302,823) (74,366,195)
------------- -------------
Total (10,513,207) (4,289,121)
------------- -------------
Class B
Proceeds from sales of shares (30,551 and
32,053 shares, respectively) 405,480 412,944
Net asset value of shares issued from
reinvestment of distributions (2,640 and
2,791 shares, respectively) 34,843 35,912
Cost of shares repurchased (20,974 and
26,537 shares, respectively) (274,134) (340,933)
------------- -------------
Total 166,189 107,923
------------- -------------
Decrease in net assets from share transactions (10,347,018) (4,181,198)
------------- -------------
Net decrease in net assets (6,842,192) (4,347,480)
Net Assets
Beginning of period 110,716,905 115,064,385
------------- -------------
End of period (including distributions in
excess of net investment of ($87,557) and
($98,929), respectively) $ 103,874,713 $ 110,716,905
============= =============
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Phoenix California Tax Exempt Bonds, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Year Ended April 30,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.72 $ 12.77 $ 12.63 $ 13.03 $ 13.64
Income from investment operations
Net investment income 0.65 0.66 0.67 0.71 0.80
Net realized and unrealized gain (loss) 0.47 0.04 0.20 0.05 (0.53)
-------- -------- -------- -------- --------
Total from investment operations 1.12 0.70 0.87 0.76 0.27
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.65) (0.66) (0.67) (0.76) (0.76)
Distributions in excess of net investment -- -- (0.01) -- --
income
Distributions from net realized gains (0.07) (0.09) (0.03) (0.31) (0.12)
Distributions in excess of accumulated net
realized gains -- -- (0.02) (0.09) --
-------- -------- -------- -------- --------
Total distributions (0.72) (0.75) (0.73) (1.16) (0.88)
-------- -------- -------- -------- --------
Change in net asset value 0.40 (0.05) 0.14 (0.40) (0.61)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.12 $ 12.72 $ 12.77 $ 12.63 $ 13.03
======== ======== ======== ======== ========
Total return(1) 8.84% 5.56% 6.92% 6.34% 1.80%
Ratios/supplemental data:
Net assets, end of period (thousands) $102,312 $109,358 $113,806 $117,370 $131,365
Ratio to average net assets of:
Operating expenses 0.96% 0.93% 0.99% 0.93% 0.85%
Net investment income 4.90% 5.13% 5.15% 5.63% 5.82%
Portfolio turnover 9% 17% 20% 51% 25%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
From
Inception
Year Ended April 30, 7/26/94 to
1998 1997 1996 4/30/95
----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.73 $ 12.77 $ 12.63 $ 13.04
Income from investment operations
Net investment income 0.56 0.56 0.56(4) 0.48
Net realized and unrealized gain 0.46 0.05 0.20 0.01
------- -------- -------- --------
Total from investment operations 1.02 0.61 0.76 0.49
------- -------- -------- --------
Less distributions
Dividends from net investment income (0.55) (0.56) (0.56) (0.50)
Distributions in excess of net investment
income -- -- (0.01) --
Distributions from net realized gains (0.07) (0.09) (0.03) (0.31)
Distributions in excess of accumulated net
realized gains -- -- (0.02) (0.09)
------- -------- -------- --------
Total distributions (0.62) (0.65) (0.62) (0.90)
------- -------- -------- --------
Change in net asset value 0.40 (0.04) 0.14 (0.41)
------- -------- -------- --------
Net asset value, end of period $ 13.13 $ 12.73 $ 12.77 $ 12.63
======= ======== ======== ========
Total return(1) 8.10% 4.84% 6.10% 4.10%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,562 $ 1,359 $ 1,258 $ 460
Ratio to average net assets of:
Operating expenses 1.71% 1.68% 1.78% 1.55%(2)
Net investment income 4.15% 4.37% 4.32% 4.90%(2)
Portfolio turnover 9% 17% 20% 51%
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
8 See Notes to Financial Statements
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") is organized as a
Maryland corporation and is registered under the Investment Company Act of 1940,
as amended, as a diversified open-end management investment company. The Fund's
investment objective is to obtain a high level of current income exempt from
California state and local income taxes, as well as Federal income tax,
consistent with preservation of capital. The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge of up to 4.75%.
Class B shares are sold with a contingent deferred sales charge which declines
from 5% to zero depending on the period of time the shares are held. Both
classes of shares have identical voting, dividend, liquidation and other rights
with respect to its distribution plan. Income and expenses of the Fund are borne
pro rata by the holders of both classes of shares, except that each class bears
distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principals. 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
9
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (Continued)
$7,302 for Class A shares and deferred sales charges of $8,475 for Class B
shares for the year ended April 30, 1998. In addition, the Fund pays PEPCO a
distribution fee at an annual rate of 0.25% for Class A shares and 1.00% for
Class B shares of the average daily net assets of the Fund. The Distributor has
advised the Fund that of the total amount expensed for the year ended April 30,
1998, $33,729 was earned by the Distributor, $247,623 was paid to unaffiliated
participants and $137 was paid to W.S. Griffith, an indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services 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, 1998,
transfer agent fees were $69,528 of which PEPCO retained $20,947, which is net
of fees paid to State Street.
At April 30, 1998, PHL and affiliates held 215 Class A shares and 9,960
Class B shares of the Fund with a combined value of $133,595.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
futures, for the year ended April 30, 1998, aggregated $9,745,623 and
$20,760,533, respectively. There were no purchases or sales of long-term US
Government securities.
At April 30, 1998, the Fund had entered into futures contracts as follows:
<TABLE>
<CAPTION>
Value of
Number Contracts Market Net
of when Value of Unrealized
Description Contracts Opened Contracts Appreciation
- ----------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury
Bond
June '98 (Long) 13 $1,562,445 $1,562,844 $399
</TABLE>
4. ASSET CONCENTRATION
There are certain risks arising from the Fund's concentration in
California municipal securities. Certain California constitutional amendments,
legislative measures, executive orders, administrative regulations, court
decisions and voter initiatives could result in certain adverse consequences
including impairing the ability of certain issuers of California municipal
securities to pay principal and interest on their obligations.
TAX INFORMATION NOTICE (Unaudited)
Exempt-Interest Dividends:
For federal income tax purposes, 95.9% of the income dividends paid by the
Fund qualify as exempt-interest dividends.
Long-Term Capital Gains:
For the fiscal year ended April 30, 1998, the fund distributed long-term
capital gain dividends as follows:
<TABLE>
<S> <C>
28% rate gain distributions $50,653
20% rate gain distributions $514,158
</TABLE>
This report is not authorized for distribution to prospective investors
in the Phoenix California Tax Exempt Bonds, Inc. unless preceded or accompanied
by an effective Prospectus which includes information concerning the sales
charge, Fund's record and other pertinent information.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICE WATERHOUSE LOGO]
Price Waterhouse LLP
To the Board of Directors and Shareholders of
Phoenix California Tax Exempt Bonds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix California Tax Exempt Bonds, Inc. (the "Fund") at April 30, 1998, 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
June 16, 1998
11
<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, 1998, incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1.1 Articles of Incorporation of the Registrant, previously filed and filed via EDGAR with Post-Effective
Amendment No. 20 on August 8, 1997, 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 via EDGAR with Post-Effective Amendment No. 20 on August 8, 1997 and incorporated
herein by reference.
1.3 Articles Supplementary of Registrant, filed with Post-Effective Amendment No. 16 on July 13, 1994,
and filed via EDGAR with Post-Effective Amendment No. 20 on August 8, 1997 and incorporated
herein by reference.
2.1 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 2.1.
5.1* Investment Advisory Agreement between Registrant and National Securities & Research Corporation
dated March 14, 1997, assigned to Phoenix Investment Counsel, Inc. effective June 1, 1998, filed via
EDGAR herewith.
6.1* Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation dated November
19, 1997 filed herewith via EDGAR.
6.2* Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers filed via EDGAR
herewith.
6.3* Form of Supplement to Phoenix Family of Funds Sales Agreement filed via EDGAR herewith.
6.4* Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed via EDGAR
herewith.
7. None.
8.* Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997,
filed herewith via EDGAR.
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 via EDGAR with Post-Effective Amendment No. 20 on August 8, 1997 and incorporated herein by
reference.
9.2 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
filed via EDGAR with Post-Effective Amendment No. 20 on August 8, 1997 and incorporated herein by
reference.
9.3* Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated November 19, 1997 and filed via EDGAR herewith.
9.4* First Amendment to Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated March 23, 1998 and filed via EDGAR herewith.
9.5* Second Amendment to Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated July 31, 1998 and filed via EDGAR herewith.
10. Opinion of counsel as to legality of the Shares, filed with Post-Effective Amendment No. 16 on July 13,
1994, and filed via EDGAR with Post-Effective Amendment No. 20 on August 8, 1997 and
incorporated herein by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
11.* Consent of Independent Accountants, filed herewith via EDGAR.
12. Not Applicable.
13. None.
14. None.
15.1* Amended and Restated Distribution Plan for Class A Shares effective August 27, 1997, and filed
herewith via EDGAR.
15.2* Amended and Restated Distribution Plan for Class B Shares effective August 27, 1997, and filed
herewith via EDGAR.
16. Schedule for computation of yield and effective yield quotations, previously filed and filed via EDGAR
with Post-Effective Amendment No. 20 on August 8, 1997 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.
19.1* Amended and Restated Rule 18f-3 Multi-Class Distribution Plan, effective May 1, 1997, and filed
herewith via EDGAR.
</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 June 30, 1998, 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 1,797
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 Phoenix Investment Counsel,
Inc., the Adviser, reference is made to the Advisers' current Form ADV (SEC File
No. 801-5995) filed under the Investment Advisers Act of 1940 and incorporated
herein by reference.
Item 29. Principal Underwriter
(a) Phoenix Equity Planning Corporation also serves as the principal
underwriter for the following other registrants:
Phoenix Strategic Allocation Fund, Inc., Phoenix Series Fund, Phoenix
Multi-Sector Short Term Bond Fund, Phoenix Multi-Sector Fixed Income Fund,
Inc., Phoenix Multi-Portfolio Fund, Phoenix Investment Trust 97, Phoenix
Income and Growth Fund, Phoenix Worldwide Opportunities Fund, Phoenix
Strategic Equity Series Fund, Phoenix Equity Series Fund, Phoenix-Aberdeen
Series Fund, Phoenix-Engemann Funds, Phoenix-Seneca Funds, Phoenix Duff &
Phelps Institutional Mutual Funds, Phoenix Home Life Variable Universal
Life Account, Phoenix Home Life Variable Accumulation Account, PHL
Variable Accumulation Account, Phoenix Life and Annuity Variable Universal
Life Account and PHL Variable Separate Account MVA1.
C-2
<PAGE>
(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 Director and President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Director, Senior Vice Vice President
100 Bright Meadow Blvd. President, Chief Financial
P.O. Box 1900 Officer and Treasurer
Enfield, CT 06083-1900
John F. Sharry Executive Vice President, Executive Vice President
100 Bright Meadow Blvd. Retail Distribution
P.O. Box 1900
Enfield, CT 06083-1900
Leonard J. Saltiel Managing Director, Vice President
56 Prospect St. Operations and Service
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Mutual Fund Secretary
101 Munson Street Customer Service
P.O. Box 810
Greenfield, MA 01302-0810
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect St. Fund Accounting
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
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 1900
Enfield, CT 06083-1900
Jacqueline M. Porter Assistant Vice President, Assistant Treasurer
56 Prospect St. Financial Reporting
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, Phoenix Investment Counsel, Inc.; 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 Phoenix Investment
Counsel, Inc. 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 18th day of August, 1998.
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 18th day of August, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Director
- ----------------------------
Robert Chesek*
Director
- ----------------------------
E. Virgil Conway*
/s/ Nancy G. Curtiss 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
- ---------------------------- (Principal Executive Officer)
Philip R. McLoughlin
Director
- ----------------------------
Everett L. Morris*
Director
- ----------------------------
James M. Oates*
Director
- ----------------------------
Calvin J. Pedersen*
Director
- ----------------------------
Herbert Roth, Jr.*
Director
- ----------------------------
Richard E. Segerson*
Director
- ----------------------------
Lowell P. Weicker, Jr.*
</TABLE>
*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 5.1
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
INVESTMENT ADVISORY AGREEMENT
<PAGE>
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the 14th day of March, 1997 by and
between PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC., a Maryland corporation having
a place of business located at 101 Munson Street, Greenfield, Massachusetts (the
"Fund") and NATIONAL SECURITIES & RESEARCH CORPORATION, a New York corporation
having a place of business located at 56 Prospect Street, Hartford, Connecticut
(the "Adviser").
WITNESSETH THAT:
1. The Fund hereby appoints the Adviser to act as investment adviser to the
Fund for the period and on the terms set forth herein. The Adviser accepts such
appointment and agrees to render the services described in this Agreement for
the compensation herein provided.
2. In the event that the Directors desire to retain the Adviser to render
investment advisory services hereunder with respect to one or more series
("Additional Series"), the Fund shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Fund in writing,
whereupon such Additional Series shall become subject to the terms and
conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the
Fund and any Additional Series which may become subject to the terms and
conditions set forth herein (sometimes collectively referred to as the "Series")
and shall manage the investment and reinvestment of the assets of each Series,
subject at all times to the supervision of the Directors. In effectuating the
investment program for the Fund, the Adviser shall aggregate a transaction in
accordance with the Statement of Policy with respect to Aggregation of Orders as
most recently adopted by the Fund.
4. With respect to managing the investment and reinvestment of the Series'
assets, the Adviser shall provide, at its own expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Series consistent with its
investment objectives;
(c) Implementation of the investment program for each Series including
the purchase and sale of securities;
(d) Advice and assistance on the general operations of the Fund; and
<PAGE>
(e) Regular reports to the Directors on the implementation of each
Series' investment program.
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
6. The Adviser shall furnish at its own expense, or pay the expenses of the
Fund, for the following:
(a) Personnel necessary to perform the functions required to manage the
investment and reinvestment of each Series' assets (including those
required for research, statistical and investment work);
(b) Any Subadviser recommended by the Adviser and appointed to act on
behalf of the Fund.
7. All costs and expenses not specifically enumerated herein as payable by
the Adviser shall be paid by the Fund. Such expenses shall include, but shall
not be limited to, all expenses (other than those specifically referred to as
being borne by the Adviser) incurred in the operation of the Fund and any public
offering of its shares, including, among others, interest, taxes, brokerage fees
and commissions, fees of Directors who are not full-time employees of the
Adviser or any of its affiliates, expenses of Directors' and shareholders'
meetings including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of repurchase and
redemption of shares, expenses of issue and sale of shares (to the extent not
borne by its national distributor under its agreement with the Fund), expenses
of printing and mailing stock certificates representing shares of the Fund,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents and financial agents, bookkeeping, auditing and legal
expenses. The Fund will also pay the fees and bear the expense of registering
and maintaining the registration of the Fund and its shares with the Securities
and Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. Additionally, if authorized by the Directors, the Fund
shall pay for extraordinary expenses and expenses of a non-recurring nature
which may include, but not be limited to the reasonable and proportionate cost
of any reorganization or acquisition of assets and the cost of legal proceedings
to which the Fund is a party.
8. For providing the services and assuming the expenses outlined herein,
the Fund agrees that the Adviser shall be compensated as follows:
2
<PAGE>
(a) The Fund shall pay the Adviser a monthly fee with respect to each
Series at the annual rate of 0.45% of the Fund's average aggregate
daily net assets up to $1 billion, 0.40% of the Fund's average
aggregate daily net assets from $1 to $2 billion, and 0.35% of the
Fund's average aggregate daily net assets in excess of $2 billion.
The amounts payable to the Adviser with respect to the Fund shall
be payable on the last day of each month.
(b) Compensation shall accrue immediately upon the effective date of
this Agreement.
(c) If there is termination of this Agreement during a month, each
Series' fee for that month shall be proportionately computed upon
the average of the daily net asset values of such Series for such
partial period in such month.
9. The services of the Adviser to the Fund are not to be deemed exclusive,
the Adviser being free to render services to others and to engage in other
activities. Without relieving the Adviser of its duties hereunder and subject to
the prior approval of the Directors and subject further to compliance with
applicable provisions of the Investment Company Act of 1940, as amended, the
Adviser may appoint one or more agents to perform any of the functions and
services which are to be provided under the terms of this Agreement upon such
terms and conditions as may be mutually agreed upon among the Fund, the Adviser
and any such agent.
10. The Adviser shall not be liable to the Fund or to any shareholder of
the Fund for any error of judgment or mistake of law or for any loss suffered by
the Fund or by any shareholder of the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith, gross negligence or reckless disregard on the part of the Adviser in
the performance of its duties hereunder.
11. It is understood that:
(a) Directors, officers, employees, agents and shareholders of the Fund
are or may be "interested persons" of the Adviser as directors,
officers, stockholders or otherwise;
(b) Directors, officers, employees, agents and stockholders of the
Adviser are or may be "interested persons" of the Fund as
Directors, officers, shareholders or otherwise; and
(c) The existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder.
3
<PAGE>
12. This Agreement shall become effective with respect to the Fund as of
the date stated above (the "Contract Date") and with respect to any Additional
Series, on the date specified in the notice to the Fund from the Adviser in
accordance with paragraph 2 hereof that the Adviser is willing to serve as
Adviser with respect to such Additional Series. Unless terminated as herein
provided, this Agreement shall remain in full force and effect for a period of
two years following the Contract Date, and, with respect to each Additional
Series, until the next anniversary of the Contract Date following the date on
which such Additional Series became subject to the terms and conditions of this
Agreement and shall continue in full force and effect for periods of one year
thereafter with respect to each Series so long as (a) such continuance with
respect to any such Series is approved at least annually by either the Directors
or by a "vote of the majority of the outstanding voting securities" of such
Series and (b) the terms and any renewal of this Agreement with respect to any
such Series have been approved by a vote of a majority of the Directors who are
not parties to this Agreement or "interested persons" of any such party cast in
person at a meeting called for the purpose of voting on such approval; provided,
however, that the continuance of this Agreement with respect to each Additional
Series is subject to its approval by a "vote of a majority of the outstanding
voting securities" of any such Additional Series on or before the next
anniversary of the Contract Date following the date on which such Additional
Series became a Series hereunder.
Any approval of this Agreement by a vote of the holders of a "majority of
the outstanding voting securities" of any Series shall be effective to continue
this Agreement with respect to such Series notwithstanding (a) that this
Agreement has not been approved by a "vote of a majority of the outstanding
voting securities" of any other Series of the Fund affected thereby and (b) that
this Agreement has not been approved by the holders of a "vote of a majority of
the outstanding voting securities" of the Fund, unless either such additional
approval shall be required by any other applicable law or otherwise.
13. The Fund may terminate this Agreement with respect to the Fund or to
any Series upon 60 days' written notice to the Adviser at any time, without the
payment of any penalty, by vote of the Directors or, as to each Series, by a
"vote of the majority of the outstanding voting securities" of such Series. The
Adviser may terminate this Agreement upon 60 days' written notice to the Fund,
without the payment of any penalty. This Agreement shall immediately terminate
in the event of its "assignment".
14. The terms "majority of the outstanding voting securities", "interested
persons" and "assignment", when used herein, shall have the respective meanings
in the Investment Company Act of 1940, as amended.
4
<PAGE>
15. In the event of termination of this Agreement, or at the request of the
Adviser, the Fund will eliminate all reference to "Phoenix" and/or "Phoenix Duff
& Phelps" from its name, and will not thereafter transact business in a name
using the word "Phoenix" and/or "Phoenix Duff & Phelps" in any form or
combination whatsoever, or otherwise use the word "Phoenix" and/or "Phoenix Duff
& Phelps" as part of its name. The Fund will thereafter in all prospectuses,
advertising materials, letterheads, and other material designed to be read by
investors and prospective investors delete from its name the word "Phoenix"
and/or "Phoenix Duff & Phelps" or any approximation thereof. If the Adviser
chooses to withdraw the Fund's right to use the word "Phoenix" and/or "Phoenix
Duff & Phelps", it agrees to submit the question of continuing this Agreement to
a vote of the Fund's shareholders at the time of such withdrawal.
16. It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Directors, shareholders, nominees, officers,
agents or employees of the Fund personally, but bind only the property of the
Fund. The execution and delivery of this Agreement have been authorized by the
Directors and shareholders of the Fund and signed by the President of the Fund,
acting as such, and neither such authorization by such Directors and
shareholders nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or be binding upon or impose any
liability on any of them personally, but shall bind only the property of the
Fund.
17. This Agreement shall be construed and the rights and obligations of the
parties hereunder enforced in accordance with the General Corporation Laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
By: /s/ Philip R. McLoughlin
--------------------------------------
Name: Philip R. McLoughlin
Title: President
NATIONAL SECURITIES & RESEARCH CORPORATION
By: /s/ Michael E. Haylon
--------------------------------------
Name: Michael E. Haylon
Title: President
5
Exhibit 6.1
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
THIS AGREEMENT made as of this 19th day of November, 1997, by and between
Phoenix California Tax Exempt Bonds, Inc., a Maryland corporation having a place
of business located at 101 Munson Street, Greenfield, Massachusetts (the "Fund")
and Phoenix Equity Planning Corporation, a Connecticut corporation having a
place of business located at 100 Bright Meadow Boulevard, Enfield, Connecticut
(the "Underwriter").
WITNESSETH THAT:
1. The Fund hereby grants to the Underwriter the right to purchase shares of
beneficial interest of each class of each series of the Fund established and
designated as of the date hereof and of any additional series and classes
thereof which the Board of Directors or Board of Trustees, as applicable
("Trustees") may establish and designate during the term of this Agreement
(called the "Series" and "Classes", respectively) and to resell shares of
various Classes, as applicable, of each Series (collectively called the
"Shares") as principal and not as agent. The Underwriter accepts such
appointment and agrees to render the services described in this Agreement for
the compensation herein provided.
2. The Underwriter's right to purchase Shares shall be exclusive except that the
terms of this Agreement shall not apply to Shares issued or transferred:
a) pursuant to an offer of exchange exempted under Section 22(d) of
the Investment Company Act of 1940, as amended (the "Act") by
reason of the fact that said offer is permitted by Section 11 of
the Act, including any offer made pursuant to clause (1) or (2) of
Section 11(b);
b) upon the sale to a registered unit investment trust which is the
issuer of periodic payment plan certificates the net proceeds of
which are invested in redeemable securities;
c) pursuant to an offer made solely to all registered holders of
Shares, or all registered holders of Shares of any Series,
proportionate to their holdings or proportionate to any cash
distribution made to them by the Fund (subject to appropriate
qualifications designed solely to avoid issuance of fractional
securities);
d) in connection with any merger or consolidation of the Fund or of
any Series with any other investment company or the acquisition by
the Fund, by purchase or otherwise, of any other investment
company;
<PAGE>
e) pursuant to sales exempted from Section 22(d) of the Act, by rule
or regulation or order of the Securities and Exchange Commission as
provided in the then current registration statement of the Fund; or
f) in connection with the reinvestment by Fund shareholders of
dividend and capital gains distributions.
3. The "Net Asset Value" and the "Public Offering Price" of the Shares as
referred to in this Agreement shall be computed in accordance with the
provisions of the then current registration statement of the Fund. The
Underwriter shall be notified promptly by the Fund of such computations.
4. The Underwriter has and shall enter into written sales agreements with
broker/dealers ("dealers") and with banks as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, (Exchange Act) that are not
required to register as a broker/dealer under the Exchange Act or the
regulations thereunder ("Banks"). Such sales agreements shall provide that
dealers or Banks shall use their best efforts to promote the sale of Shares.
Such sales agreements shall include such terms and conditions as Underwriter may
determine not inconsistent with this Agreement; provided, however, that such
sales agreements shall specify a) that the dealer is registered as a
broker/dealer under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. or, in the alternative, that the Bank is exempt from
broker/dealer registration under the Exchange Act; and b) that such dealers and
Banks agree that they will comply with all applicable state, and federal laws
and the rules and regulations of applicable regulatory agencies.
5. Each day the Underwriter shall have the right to purchase from the Fund, as
principal, the amount of Shares needed to fill unconditional orders for such
Shares received by the Underwriter from dealers, Banks, or investors, but no
more than the Shares needed, at a price equal to the Net Asset Value of the
Shares. Any purchase of Shares by the Underwriter under this Agreement shall be
subject to reasonable adjustment for clerical errors, delays and errors of
transmission and cancellation of orders.
6. With respect to transactions other than with dealers or Banks, the
Underwriter will sell Shares only at the Public Offering Price then in effect,
except to the extent that sales at less than the Public Offering Price may be
allowed by the Act, any rule or regulation promulgated thereunder or by order of
the Securities and Exchange Commission, provided, however, that any such sales
at less than the Public Offering Price shall be consistent with the terms of the
then current registration statement of the Fund. The Underwriter will sell at
Net Asset Value Shares of any Classes which are offered by the then current
registration statement or prospectus of the Fund for sale at such Net Asset
Value or at Net Asset Value with a contingent deferred sales charge ("CDSC
Shares"). The Underwriter shall receive from the Fund all contingent deferred
sales charges applied on redemptions of CDSC Shares.
2
<PAGE>
7. Sales at a discount from the Public Offering Price shall be made in
accordance with the terms and conditions of the terms of the current
registration statement of the Fund allowing such discounts. Such discounts shall
not exceed the difference between the Net Asset Value and the Public Offering
Price; however, the Underwriter may offer compensation in excess of the
difference between the Net Asset Value and the Public Offering Price, at its
discretion and from its own profits and resources, and only as described in the
current registration statement of the Fund. With respect to sales of CDSC
Shares, the Underwriter, in accordance with the terms of the current
registration statement of the Fund, shall pay dealers a commission on such sales
from its own profits and resources.
8. As reimbursement for expenditures made in connection with providing certain
distribution-related services, the Underwriter may receive from the Fund a
distribution service fee under the terms and conditions set forth in the Fund's
distribution plan adopted under Rule 12b-1 under the Investment Company Act of
1940, as amended, as the plan may be amended from time to time and subject to
any further limitations on such fees as the Trustees may impose. The Underwriter
may receive from the Fund a service fee to be retained by the Underwriter as
compensation for providing services to shareholders of the Fund or to be paid to
dealers and Banks for providing services to their clients who are also
shareholders of the Fund.
9. The Fund shall furnish the Underwriter with copies of its organizational
documents, as amended from time to time. The Fund shall also furnish the
Underwriter with any other documents of the Fund which will assist the
Underwriter in the performance of its duties hereunder.
10. The Underwriter agrees to use its best efforts (in states where it may
lawfully do so) to obtain from investors unconditional orders for Shares
authorized for issue by the Fund and registered under applicable Federal
securities laws, and, so long as it does so, nothing herein contained shall
prevent the Underwriter from entering into similar arrangements with other
registered investment companies. The Underwriter may, in the exercise of its
discretion, refuse to accept orders for Shares from any person.
11. Upon receipt by the Fund of a purchase order from the Underwriter,
accompanied by proper delivery instructions, the Fund shall, as promptly as
practicable thereafter, cause evidence of ownership of Shares to be delivered as
indicated in such purchase order. Payment for such Shares shall be made by the
Underwriter to the Fund in a manner acceptable to the Fund, provided that the
Underwriter shall pay for such Shares no later than the third business day after
the Underwriter shall have contracted to purchase such shares.
12. In connection with offering for sale and selling Shares, the Fund authorizes
the Underwriter to give only such information and to make only such statements
or representations as are contained in the then current registration statement
of the Fund. The Underwriter shall be responsible for the approval and filing of
sales material as required under SEC and NASD regulations.
3
<PAGE>
13. The Fund agrees to pay the following expenses:
a) the cost of mailing stock certificates representing Shares;
b) fees and expenses (including legal expenses) of registering and
maintaining registrations of the Fund and of each Series and Class
with the Securities and Exchange Commission including the
preparation and printing of registration statements and
prospectuses for filing with said Commission;
c) fees and expenses (including legal expenses) incurred in
registering and qualifying Shares for sale with any state
regulatory agency and fees and expenses of maintaining, renewing,
increasing or amending such registrations and qualifications;
d) the expense of any issue or transfer taxes upon the sale of Shares
to the Underwriter by the Fund;
e) the cost of preparing and distributing reports and notices to
shareholders; and
f) fees and expenses of the transfer agent, including the cost of
preparing and mailing notices to shareholders pertaining to
transactions with respect to such shareholders accounts.
14. The Underwriter agrees to pay the following expenses:
a) all expenses of printing prospectuses and statements of additional
information used in connection with the sale of Shares and printing
and preparing all other sales literature;
b) all fees and expenses in connection with the qualification of the
Underwriter as a dealer in the various states and countries;
c) the expense of any stock transfer tax required in connection with
the sale of Shares by the Underwriter as principal to dealers or to
investors; and
d) all other expenses in connection with offering for sale and the
sale of Shares which have not been herein specifically allocated to
the Fund.
15. The Fund hereby appoints the Underwriter its agent to receive requests to
accept the Fund's offer to repurchase Shares upon such terms and conditions as
may be described in the Fund's then current registration statement. The agency
granted in this paragraph 15 is terminable at the discretion of the Fund. As
compensation for acting as such agent and as part of the
4
<PAGE>
consideration for acting as underwriter, Underwriter shall receive from the Fund
all contingent deferred sales charges imposed upon the redemption of Shares.
Whether and to what extent a contingent deferred sales charge will be imposed
shall be determined in accordance with, and in the manner set forth in, the
Fund's prospectus.
16. The Fund agrees to indemnify and hold harmless the Underwriter, its officers
and directors and each person, if any, who controls the Underwriter within the
meaning of section 15 of the Securities Act of 1933, as amended, against any
losses, claims, damages, liabilities and expenses (including the cost of any
legal fees incurred in connection therewith) which the Underwriter, its
officers, directors or any such controlling person may incur under said Act,
under any other statute, at common law or otherwise, arising out of or based
upon
a) any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement or prospectus
(including amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact required
to be stated in the Fund's registration statement or prospectus or
necessary to make the statements in either not misleading,
provided, however, that insofar as losses, claims, damages,
liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information
furnished to the Fund by the Underwriter for use in the Fund's
registration statement or prospectus, such indemnification is not
applicable. In no case shall the Fund indemnify the Underwriter or
its controlling persons as to any amounts incurred for any
liability arising out of or based upon any action for which the
Underwriter, its officers and directors or any controlling person
would otherwise be subject to liability by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
its duties or by reason of the reckless disregard of its
obligations and duties under this Agreement.
17. The Underwriter agrees to indemnify and hold harmless the Fund, its officers
and trustees and each person, if any, who controls the Fund within the meaning
of Section 15 of the Securities Act of 1933, as amended, against any losses,
claims, damages, liabilities and expenses (including the cost of any legal fees
incurred in connection therewith) which the Fund, its officers, trustees or any
such controlling person may incur under said Act, under any other statute, at
common law or otherwise arising out of the acquisition of any shares by any
person which
a) may be based upon any wrongful act by the Underwriter or any of its
employees or representatives, or
b) may be based upon any untrue statement or alleged untrue statement
of a material fact contained in the Fund's registration statement,
prospectus (including
5
<PAGE>
amendments and supplements thereto) or sales material, or any
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon
information furnished or confirmed in writing to the Fund by the
Underwriter.
18. It is understood that:
a) trustees, officers, employees, agents and shareholders of the Fund
are or may be interested persons, as that term is defined in the
Act ("Interested Persons"), of the Underwriter as directors,
officers, stockholders or otherwise;
b) directors, officers, employees, agents and stockholders of the
Underwriter are or may be Interested Persons of the Fund as
trustees, officers, shareholders or otherwise;
c) the Underwriter may be an Interested Person of the Fund as
shareholder or otherwise; and
d) the existence of any such dual interest shall not offset the
validity hereof or of any transactions hereunder.
19. The Fund may terminate this Agreement by 60 days written notice to the
Underwriter at any time, without the payment of any penalty, by vote of the
Trustees or by a vote of a majority of the outstanding voting securities, as
that term is defined in the Act, of the Fund. The Underwriter may terminate this
Agreement by 60 days written notice to the Fund, without the payment of any
penalty. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in the Act.
20. Subject to prior termination as provided in paragraph 19, this Agreement
shall continue in force for one year from the date of execution and from year to
year thereafter so long as the continuance after such one year period shall be
specifically approved at least annually by vote of the Trustees, or by a vote of
a majority of the appropriate class of outstanding voting securities, as that
term is defined in the Act, of the Fund. Additionally, each annual renewal of
this Agreement must be approved by the vote of a majority of the Trustees who
are not parties to the Agreement or Interested Persons of any such party, cast
in person at a meeting of the Trustees called for the purpose of voting on such
approval.
6
<PAGE>
21. This Agreement shall become effective upon the date first set forth above.
This Agreement shall be governed by the laws of the State of Connecticut and
shall be binding on the successors and assigns of the parties to the extend
permitted by law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first written above.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
By: /s/ Philip R. McLoughlin
-----------------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ David R. Pepin
-----------------------------------
David R. Pepin
Executive Vice President
7
Exhibit 6.2
SALES AGREEMENT
<PAGE>
[logo]PHOENIX Phoenix Funds
DUFF&PHELPS Sales Agreement
- --------------------------------------------------------------------------------
PHOENIX EQUITY PLANNING CORPORATION
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, Connecticut 06083-2200
Dealer Name:
Address:
Phoenix Equity Planning Corporation ("PEPCO", "we", "us", or "our") invites you
to participate in the sale and distribution of shares of registered investment
companies (which shall collectively be referred to hereinafter as the "Funds")
for which we are national distributor or principal underwriter, and which may be
listed in Annex A hereto which such Annex may be amended by us from time to
time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares
of each of the Funds (hereafter "Shares") subject, however, to the terms and
conditions hereof including our right to suspend or cease the sale of such
shares. For the purposes hereof, the above referenced dealer shall be referred
to as "you".
1. You understand and agree that in all sales of Shares to the public, you
shall act as dealer for your own account. All purchase orders and
applications are subject to acceptance or rejection by us in our sole
discretion and are effective only upon confirmation by us. Each purchase
will be deemed to have been consummated in our principal office subject to
our acceptance and effective only upon confirmation to you by us.
2. You agree that all purchases of Shares by you shall be made only for the
purpose of covering purchase orders already received from your customers
(who may be any person other than a securities dealer or broker) or for
your own bona-fide investment.
3. You shall offer and sell Shares pursuant to this agreement for the purpose
of covering purchase orders of your customers, to the extent applicable,
(a) at the current public offering price ("Offering Price") for Class A
Shares or (b) at the Net Asset Value for Class B shares as set forth in the
current prospectus of each of the funds. The offer and sale of Class B
Shares by you is subject to Annex B hereto, "Compliance Standards for the
Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements".
4. You shall pay us for Shares purchased within three (3) business days of the
date of our confirmation to you of such purchase or within such time as
required by applicable rule or law. The purchase price shall be (a) the
Offering Price, less only the applicable dealer discount (Dealer Discount)
for Class A Shares, if applicable, or (b) the Net Asset Value, less only
the applicable sales commission (Sales Commission) for Class B Shares, if
applicable, as set forth in the current prospectus at the time the purchase
is received by us. We have the right, without notice, to cancel any order
for which payment of good and sufficient funds has not been received by us
as provided in this paragraph, in which case you may be held responsible
for any loss suffered resulting from your failure to make payment as
aforesaid.
5. You understand and agree that any Dealer Discount, Sales Commission or fee
is subject to change from time to time without prior notice. Any orders
placed after the effective date of any such change shall be subject to the
Dealer Discount or Sales Commission in effect at the time such order is
received by us.
6. You understand and agree that Shares purchased by you under this Agreement
will not be delivered until payment of good and sufficient funds has been
received by us. 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 your
request, any Shares resold by you to one of your customers will be
delivered (whether by credit to a shareholder open account or by delivery
of certificates) in the name of your customer.
<PAGE>
7. You understand that on all purchases of Shares to which the terms of this
Agreement are applicable by a shareholder for whom you are dealer of
record, we will pay you an amount equal to the Dealer Discount, Sales
Commission or fees which would have been paid to you with respect to such
Shares if such Shares had been purchased through you. You understand and
agree that the dealer of record for this purpose shall be the dealer
through whom such shareholder most recently purchased Shares of such fund,
unless the shareholder or you have instructed us otherwise. You understand
that all amounts payable to you under this paragraph and currently payable
under this agreement will be paid as of the end of the month unless
specified otherwise for the total amount of Shares to which this paragraph
is applicable but may be paid more frequently as we may determine in our
discretion. Your request for Dealer Discount or Sales Commission reclaims
will be considered if adequate verification and documentation of the
purchase in question is supplied to us, and the reclaim is requested within
three years of such purchase.
8. We appoint the transfer agent (or identified sub-transfer agent) for each
of the Funds as our agent to execute the purchase transaction of Shares and
to confirm such purchases to your customers on your behalf, and you
guarantee the legal capacity of your customers so purchasing such Shares.
You further understand that if a customer's account is established without
the customer signing the application form, you hereby 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 you agree to indemnify the
Funds, the transfer agent (or identified sub-transfer agent) and us for any
loss or liability resulting from acting upon such instructions.
9. Upon the purchase of Class A Shares pursuant to a Letter of Intent, you
will promptly return to us any excess of the Dealer Discount previously
allowed or paid to you over that allowable in respect to such larger
purchases.
10. Unless at the time of transmitting a purchase order you advise us to the
contrary, we 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 the current prospectus.
11. You understand and agree that if any Shares purchased by you under the
terms of this Agreement are, within seven (7) business days after the date
of our confirmation to you of the original purchase order for such Shares,
repurchased by us as agent for such fund or are tendered to such fund for
redemption, you shall forfeit the right to, and shall promptly pay over to
us the amount of any Dealer Discount or Sales Commission allowed to you
with respect to such Shares. We will notify you of such repurchase or
redemption within ten (10) days of the date upon which certificates are
delivered to us 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 with us or
with such fund an order to have such shares repurchased or redeemed.
12. You agree that, in the case of any repurchase of any Shares made more than
seven (7) business days after confirmation by us of any purchase of such
Shares, except in the case of Shares purchased from you by us for your own
bona fide investment, you will act only as agent for the holders of such
Shares and will place the orders for repurchase only with us. It is
understood that you may charge the holder of such Shares a fair commission
for handling the transaction.
13. Our obligations to you under this Agreement are subject to all the
provisions of the respective distribution agreements entered into between
us and each of the Funds. You understand and agree that in performing your
services under this agreement you are acting in the capacity of an
independent contractor, and we are in no way responsible for the manner of
your performance or for any of your acts or omissions in connection
therewith. Nothing in the Agreement shall be construed to constitute you or
any of your agents, employees, or representatives as our agent, partner or
employee, or the agent, partner of employee of any of the Funds.
In connection with the sale and distribution of shares of Phoenix Funds,
you agree to indemnify and hold us and our affiliates, employees, and/or
officers harmless from any damage or expense as a result of (a) the
negligence, misconduct or wrongful act by you or any employee,
representative, or agent of yours and/or (b) any actual or alleged
violation of any securities laws, regulations or orders. Any indebtedness
or obligation of yours to us whether arising hereunder or otherwise, and
any liabilities incurred or moneys paid by us to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of you or your employees, representatives or agents to
comply with the Sales Agreement, shall be set off against any compensation
payable under this agreement. Any differential between such expenses and
compensation payable hereunder shall be payable to us upon demand. The
terms of this provision shall not be impaired by the termination of this
agreement.
In connection with the sale and distribution of shares of Phoenix Funds, we
agree to indemnify and hold you, harmless from any damage or expense on
account of the gross and willful negligence, misconduct or wrongful act of
us or any employee, representative, or agent of ours which arises out of or
is based upon any untrue statement or alleged untrue statement of material
fact, or the omission or alleged omission of a material fact in: (i) any
registration statement, including any prospectus or any post-effective
amendment thereto; or (ii) any material prepared and/or supplied by us for
use in conjunction with the offer or sale of Phoenix Funds; or (iii) any
state registration or other document filed in any state or jurisdiction in
order to qualify any Fund under the securities laws of such state or
jurisdiction. The terms of this provision shall not be impaired by the
termination of this agreement.
<PAGE>
14. We will supply you with reasonable quantities of the current prospectus,
periodic reports to shareholders, and sales materials for each of the
Funds. You agree not to use any other advertising or sales material
relating to the sale of shares of any of the Funds unless such other
advertising or sales material is pre-approved in writing by us.
15. You agree to offer and sell Shares 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 you will make no representations
not contained in any such prospectus or any authorized supplemental sales
material supplied by us. You agree to use your 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, training and
supervision of all sales representatives employed by you in order that such
Shares will be offered in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations. All expenses
incurred by you in connection with your activities under this Agreement
shall be borne by you. In consideration for the extension of the right to
exercise telephone exchange and redemption privileges to you and your
registered representatives, you agree to bear the risk of any loss
resulting from any unauthorized telephone exchange or redemption
instructions from you or your registered representatives. In the event we
determine to refund any amounts paid by any investor by reason of such
violation on your part, you shall forfeit the right to, and pay over to us,
the amount of any Dealer Discount or Sales Commission allowed to you with
respect to the transaction for which the refund is made.
16. You represent that you are properly registered as a broker or dealer under
the Securities and Exchange Act of 1934 and are member of the National
Association of Securities Dealers, Inc. (NASD) and agree to maintain
membership in the NASD or in the alternative, that you are a foreign dealer
not eligible for membership in the NASD. You agree to notify us promptly of
any change, termination or suspension of the foregoing status. You 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. You further agree to comply with all
applicable state and Federal laws and the rules and regulations of
applicable regulatory agencies. You further agree that you will not sell,
or offer for sale, Shares in any jurisdiction in which such Shares have not
been duly registered or qualified for sale. You agree to promptly notify us
with respect to (a) the initiation and disposition of any formal
disciplinary action by the NASD or any other agency or instrumentality
having jurisdiction with respect to the subject matter hereof against you
or any of your employees or agents; (b) the issuance of any form of
deficiency notice by the NASD or any such agency regarding your training,
supervision or sales practices; and (c) the effectuation of any consensual
order with respect thereto.
17. Either party may terminate this agreement for any reason by written or
electronic notice to the other party which termination shall become
effective fifteen (15) days after the date of mailing or electronically
transmitting such notice to the other party. We may also terminate this
agreement for cause or as a result of a violation by you, as determined by
us in our discretion, of any of the provisions of this Agreement, said
termination to be effective on the date of mailing written or transmitting
electronic notice to you of the same. Without limiting the generality of
the foregoing, your own expulsion from the NASD will automatically
terminate this Agreement without notice. Your suspension from the NASD or
violation of applicable state or Federal laws or rules and regulations of
applicable regulatory agencies will terminate this Agreement effective upon
the date of our mailing written notice or transmitting electronic notice to
you of such termination. Our failure to terminate this Agreement for any
cause shall not constitute a waiver of our right to so terminate at a later
date.
18. All communications and notices to you or us shall be sent to the addresses
set forth at the beginning of this Agreement or to such other address as
may be specified in writing from time to time.
19. This agreement shall become effective upon the date of its acceptance by us
as set forth herein. This agreement may be amended by PEPCO from time to
time. 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
we may assign or transfer this agreement to any successor distributor of
the Shares described herein.
ACCEPTED ON BEHALF OF ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING DEALER FIRM:
CORPORATION:
Date ______________________________ Date __________________________________
By /s/ John F. Sharry By
________________________________ ____________________________________
Print Name John F. Sharry Print Name
_________________________ ____________________________
Managing Director, Retail Sales
Print Title _______________________ Print Title ___________________________
NASD CRD Number _______________________
<PAGE>
[LOGO]PHOENIX AMENDED ANNEX A, DEALER AGREEMENT WITH
DUFF&PHELPS PHOENIX EQUITY PLANNING CORPORATION, FEBRUARY 27, 1998
================================================================================
I. PHOENIX FAMILY OF FUNDS
- --------------------------------------------------------------------------------
PHOENIX SERIES FUND
Balanced Fund Series
Convertible Fund Series
Growth Fund Series
Aggressive Growth Fund Series
High Yield Fund Series
Money Market Fund Series
U.S. Government Securities Fund Series
PHOENIX-ABERDEEN SERIES FUND
Aberdeen New Asia Fund
Aberdeen Global Small Cap Fund
PHOENIX MULTI-PORTFOLIO FUND
Tax-Exempt Bond Portfolio
Mid Cap Portfolio
International Portfolio
Real Estate Securities Portfolio
Emerging Markets Bond Portfolio
Strategic Income Fund
PHOENIX STRATEGIC EQUITY SERIES FUND
Equity Opportunities Fund
Strategic Theme Fund
Small Cap Fund
PHOENIX EQUITY SERIES FUND
Core Equity Fund
Growth and Income Fund
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX VALUE EQUITY FUND
PHOENIX SMALL CAP VALUE FUND
PHOENIX-ENGEMANN FUNDS
Balanced Return Fund
Global Growth Fund
Growth Fund
Nifty Fifty Fund
Small & Mid-Cap Growth Fund
Value 25 Fund
- --------------------------------------------------------------------------------
Equity Planning may sponsor, to all qualifying dealers, on a non-discriminatory
basis, sales contests, training and educational meetings and provide to all
qualifying broker/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. Applicable waivers of Class A sales loads and Class B
contingent deferred sales charges are described in the prospectus.
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES (EXCEPT MULTI-SECTOR SHORT TERM MULTI-SECTOR SHORT TERM
BOND FUND & MONEY MARKET) BOND FUND CLASS A SHARES
DEALER DISCOUNT DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
TRANSACTION OFFERING PRICE OFFERING PRICE OFFERING PRICE OFFERING PRICE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.25% 2.25% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.50 4.00 1.25 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.50 3.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 3.00 2.75 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75 0.75 0.75
- ---------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None None None None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Shares of the Money Market Series are offered to the public at their constant
net asset value of $1.00 per share with no sales charge on Class A shares.
$1 MILLION NAV SALES FINDERS FEE: In connection with Class A Share purchases of
$1,000,000 or more (or subsequent purchases in any amount), Equity Planning may
pay broker/dealers, from its own profits and resources, a percentage of the net
asset value of shares sold (excluding Money Market shares) as set forth in the
table below. If part or all of such investment, is subsequently redeemed within
one year of the investment date, the broker/dealer will refund to Equity
Planning any such amounts paid with respect to the investment.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT $1,000,000 to $3,000,000 $3,000,001 to $6,000,000 $6,000,001 or more
- ---------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 1% 0.50 of 1% 0.25 of 1%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of Class A shares sold by such broker/dealers (except
Money Market Series) and remaining outstanding on the Funds' books during the
period in which the fee is calculated. Dealers must have an aggregate value of
$50,000 or more in one Fund to qualify for payment in that Fund.
<PAGE>
================================================================================
CLASS B SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
(EXCEPT MULTI-SECTOR SHORT TERM BOND FUND) MULTI-SECTOR SHORT TERM BOND FUND CLASS B
<S> <C>
Sales Commission 4.00% Sales Commission 2.00%
</TABLE>
Broker/Dealer firms maintaining house/omnibus accounts, upon redemption of a
customer account within the time frames specified below, shall forward to Equity
Planning the indicated contingent deferred sales charge.
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First 5.00% 2.00%
- -----------------------------------------------------------------------------------------------------------------------------
Second 4.00 1.50
- -----------------------------------------------------------------------------------------------------------------------------
Third 3.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------
Fourth and Fifth 2.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
Sixth 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of shares sold by such broker/dealers (except Money Market
Series) and remaining outstanding on the Funds' books during the period in which
the fee is calculated, commencing one year after the investment date. Dealers
must have an aggregate value of $50,000 or more in one Fund to qualify for
payment in that Fund.
================================================================================
CLASS C SHARES - MULTI-SECTOR SHORT TERM BOND FUND ONLY
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
FINDERS FEE:
In connection with Class C Share purchases of $250,000 or more (or subsequent
purchases in any amount), Equity Planning may pay broker-dealers,
from its own resources, on amount equal to 0.50% of purchases above $250,000
but under $3 million plus 0.25% on purchases in excess of $3 million.
If all or part of the investment is subsequently redeemed, except for exchanges
or purchases of other Phoenix funds, within one year of the investment date, the
broker-dealer will refund to the Distributor such amount paid with respect to
the investment.
================================================================================
CLASS C SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP
EMERGING MARKETS BOND PORTFOLIO MULTI-SECTOR FIXED INCOME FUND GROWTH FUND
(EFFECTIVE 3-27-98) STRATEGIC INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND (EFFECTIVE 3-27-98) SMALL CAP VALUE FUND
HIGH YIELD FUND SERIES STRATEGIC THEME FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
(EFFECTIVE 2-27-98) PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN VALUE 25 FUND
PHOENIX-ENGEMANN GROWTH FUND
</TABLE>
Sales Commission: 1%. Contingent deferred sales charge: 1% for one year from the
date of each purchase. Broker/Dealer firms maintaining house/omnibus accounts,
upon redemption of a customer account within one year of purchase date, shall
forward to Equity Planning the indicated contingent deferred sales charge.
TRAIL AND SERVICE FEE: Equity Planning intends to pay a fee after the first year
to qualifying broker/dealer firms at the equivalent of 0.75% annually, and a
Service Fee at the equivalent of 0.25% annually, based on the average daily net
asset value of shares sold by such broker/dealers and remaining outstanding on
the Funds' books during the period in which the fee is calculated. Dealers must
have an aggregate value of $50,000 or more in the Fund to qualify for payment.
<PAGE>
================================================================================
CLASS M SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND MULTI-SECTOR FIXED INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND STRATEGIC THEME FUND SMALL CAP VALUE FUND
PHOENIX-ENGEMANN GROWTH FUND PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP PHOENIX-ENGEMANN VALUE 25 FUND
GROWTH FUND
</TABLE>
<TABLE>
<CAPTION>
DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF
OFFERING PRICE OFFERING PRICE OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.50% 3.00%
- ------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 2.50 2.00
- ------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 1.50 1.00
- ------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 None None
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
================================================================================
II. A. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Balanced Portfolio Growth Stock Portfolio
Enhanced Reserves Portfolio Money Market Portfolio
Managed Bond Portfolio U.S. Government Securities Portfolio
FINDER'S FEE: Equity Planning may pay broker/dealers, from its own profits and
resources, a percentage of the net asset value of Class X and Class Y shares
sold as set forth in the table below. If part of any investment is subsequently
redeemed within one year of the investment date, the broker/dealer will refund
to Equity Planning any such amounts paid with respect to the investment.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT 0 to $5,000,000 $5,000,001 to $10,000,000 $10,000,001 or more
- ------------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 0.50% 0.25% 0.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
================================================================================
II. B. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Phoenix Real Estate Equity Securities Portfolio
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
<PAGE>
PDP80A (2-98) Distributed by Phoenix Equity Planning Corporation,
Enfield, CT, 06083
<PAGE>
[logo]PHOENIX Annex B To Dealer Agreement With
DUFF&PHELPS Phoenix Equity Planning Corporation
- --------------------------------------------------------------------------------
Compliance Standards for
the Sale of the Phoenix Funds
Under Their Alternative Purchase Arrangements
As national distributor or principal underwriter of the Phoenix Funds, which
offer their shares on both a front-end and deferred sales charge basis, Phoenix
Equity Planning Corporation ("PEPCO") has established the following compliance
standards which set forth the basis upon which shares of the Phoenix Funds may
be sold. These standards are designed for those broker/dealers ("dealers") that
distribute shares of the Phoenix Funds and for each dealer's financial
advisors/registered representatives.
As shares of the Phoenix Funds are offered with two different sales arrangements
for sales and distribution fees, it is important for an investor not only to
choose a mutual fund that best suits his investment objectives, but also to
choose the sales financing method which best suits his particular situation. To
assist investors in these decisions and to ensure proper supervision of mutual
fund purchase recommendations, we are instituting the following compliance
standards to which dealers must adhere when selling shares of the Phoenix Funds:
1. Any purchase of a Phoenix Fund for less than $250,000 may be either of
shares subject to a front-end load (Class A shares) or subject to deferred
sales charge (Class B shares).
2. Any purchase of a Phoenix Fund by an unallocated qualified employer
sponsored plan for less than $1,000,000 may be either of shares subject to
a front-end load (Class A shares) or subject to deferred sales charge
(Class B shares). Class B shares sold to allocated qualified employer
sponsored plans will be limited to a maximum total value of $250,000 per
participant.
3. Any purchase of a Phoenix Fund for $250,000 or more (except as noted above)
or which qualifies under the terms of the prospectus for net asset value
purchase of Class A shares should be for Class A shares.
General Guidelines
These are instances where one financing method may be more advantageous to an
investor than the other. Class A shares are subject to a lower distribution fee
and, accordingly, pay correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase, such
investors would not have all of 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 of their funds will be
invested initially. However, other investors might determine that it would be
more advantageous to purchase Class B Shares to have all of 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
(three years for Asset Reserve).
A National Association of Securities Dealers rule specifically prohibits
"breakpoint sales" of front-end load shares. A "breakpoint sale" is a sale to
the client of an amount of front-end load (Class A) shares just below the amount
which would be subject to the next breakpoint on the fund's sales charge
schedule. Because the deferred sales charge on Class B shares is reduced by 1%
for each year the shares are held, a redemption of Class B shares just before an
"anniversary date" is in some ways analogous to a breakpoint sale. A client
might wish to redeem just before an anniversary date for tax or other reasons,
and a client who chose to wait would continue to be at market risk.
Nevertheless, investment executives should inform clients intending to redeem
Class B shares near an anniversary date that, if the redemption were delayed,
the deferred sales charge would be reduced.
Responsibilities of Branch Office Manager (or other appropriate reviewing
officer).
A dealer's branch manger or other appropriate reviewing officer ("the Reviewing
Officer") must ensure that the financial advisor/registered representative has
advised the client of the available financing methods offered by the Phoenix
Funds, and the impact of choosing one method over another. In certain instances,
it may be appropriate for the Reviewing Officer to discuss the purchase directly
with the client. The reviewing officer should review purchases for Class A or
Class B shares given the relevant facts and circumstances, including but not
limited to: (a) the specific purchase order dollar amount; (b) the length of
time the investor expects to hold his shares; and (c) any other relevant
circumstances, such as the availability of purchases under letters of intent or
pursuant to rights of accumulation and distribution requirements. The foregoing
guidelines, as well as the examples cited above, should assist the Reviewing
Officer in reviewing and supervising purchase recommendations and orders.
Effectiveness
These compliance guidelines are effective immediately with respect to any order
for shares of those Phoenix Funds which offer their shares pursuant to the
alternative purchase arrangement.
Questions relating to these compliance guidelines should be directed by the
dealer to its national mutual fund sales and market group or its legal
department or compliance director. PEPCO will advise dealers in writing of any
future changes in these guidelines.
PEP80B 11/95
Exhibit 6.3
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
It is hereby agreed that this AGREEMENT, dated this __________ day
of __________, 19__, between ________________________________________ ("Dealer")
and Phoenix Equity Planning Corporation ("Distributor"), supplements and amends
the Sales Agreement between Dealer and Distributor dated by Distributor
_______________________ 19__ ("Sales Agreement').
WHEREAS, Dealer wishes to use shares of the Funds in a fee-based
program made available by Dealer to clients of Dealer (the "Fee-Based Program");
WHEREAS, Dealer wishes to afford its fee-based clients the
opportunity to qualify for the ability to purchase shares of the Funds at net
asset value; and
WHEREAS, Distributor is willing to allow Dealer to purchase shares
of the Funds for clients in the Fee-Based Program subject to the provisions of
this agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by both parties, Dealer
and Distributor hereby agree as follows:
1. Dealer may sell shares of any Funds made available by
Distributor, from time to time, at net asset value to bona fide clients of
Dealer for use solely in their Fee-Based Program. Dealer will earn no concession
or commission on any such sale.
2. Distributor, after consulting Dealer, will determine, from time
to time, which Funds it will make available to Dealer for use in the Fee-Based
Program. Dealer will comply with all provisions of the Prospectus and Statement
of Additional Information of each Fund.
1
<PAGE>
3. All shares made available to Dealer under the Fee-Based Program
must be purchased by Dealer for the benefit of Dealer's clients participating in
its Fee-Based Program under which Dealer provides portfolio management and other
services to such clients for a fee. Such fee to be paid in connection with
investment in the Funds shall at all times be at a level acceptable to
Distributor. Dealer acknowledges that it has sent the Distributor the current
fee schedule for the Fee-Based Program and Dealer agrees to notify Distributor
at least thirty (30) days in advance in writing of any amendment to such fee
schedule. The current fee schedule is attached. Dealer shall not prepare, use or
distribute brochures, written materials or advertising in any form that refers
to sales of the Funds as no-load or at net asset value except, in the case of
brochures, it may refer to the Funds as available at net asset value under the
Fee-Based Program if the fees and expenses of the Fee-Based Program are given at
least equal prominence. Notwithstanding the foregoing, in connection with
explaining the fees and expenses of the Fee-Based Program, representatives of
Dealer may describe to customers the option of purchasing Fund shares through
the Fee-Based Program at net asset value.
4. Distributor warrants that all necessary disclosures regarding
the sale of shares at net asset value will be set forth in the Prospectus and
Statement of Additional Information of the Funds available under this Agreement.
5. Dealer may maintain either an omnibus account(s) solely for the
clients of its Fee-Based program or may maintain separate accounts for each
client of its Fee-Based Program with the Fund's transfer agent. If an omnibus
account(s) is maintained, Dealer shall be solely responsible for meeting all
legal obligations with respect to each beneficial owner including, but not
limited to, the delivery of proxies, annual and semi-annual reports and other
materials.
6. This Agreement shall be governed and interpreted in accordance
with the laws of the State of Connecticut. This Agreement shall not relieve
Dealer or Distributor from any obligations either may have under any other
agreements between them (except with respect to the payment of service fees),
including but not limited to the Sales Agreement, which is incorporated by
reference herein and shall control in case of any conflict with this Agreement.
7. Distributor is not endorsing, recommending or otherwise involved
in providing any investment product or advisory service of Dealer (including but
not limited to the Fee-Based Program). Distributor is merely affording Dealer
the opportunity to use shares of the Funds distributed by Distributor as an
investment medium for the Fee-Based Program.
8. This Agreement is not exclusive and may be terminated by either
party upon sixty (60) days prior written notice to the other party. It shall
terminate automatically upon termination of the Sales Agreement between the
parties. This Agreement may be amended only by a written instrument, signed by
both parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date set
forth above by a duly authorized officer of each party.
2
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
By: _______________________________________
John F. Sharry
Managing Director, Retail Sales
Dealer: _____________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
Address: ____________________________
____________________________
____________________________
Phone: ______________________________
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P O Box 2200
Enfield, CT 06083-2200
(230) 253-1000
3
Exhibit 6.4
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
<PAGE>
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
Between: and
PHOENIX EQUITY PLANNING CORPORATION
Distributor of: The Phoenix Family of Funds
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
As distributor of The Phoenix Family of Funds (the "Funds"), we agree that you
may make available to your customers, under an agency relationship with your
customers, shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitation imposed by the Funds and to confirmation by us of each
transaction. By your acceptance hereof, you agree to all of the following terms
and conditions:
I. Offering Prices and Fees
The public offering price at which you may make Shares available to your
customers is the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then current prospectus of the
applicable Fund. In the case of purchases by you, as agent for your customers,
of shares sold with a sales charge, you will receive an agency fee consisting of
a portion of the public offering price, determined on the same basis as the
"dealer discount" described in the then current Prospectus of the Funds, and
such other compensation to dealers as may be described therein, which shall be
payable to you at the same time and on the same basis as the same is paid to
such dealers, consistent with applicable law, rules and regulations. In
determining the amount of any agency fee payable to you hereunder, we reserve
the right to revise the agency fee referred to herein upon written notice to
you. We will furnish you upon request with the public offering prices for the
Shares and you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Each purchase of Shares by your
customers is made subject to confirmation by us at the public offering price
next computed after receipt of the order. There is no sales charge or agency fee
to you on the reinvestment of dividends and distributions.
II. Manner of Making Shares Available for Purchase
We will, upon request, deliver to you a copy of each Fund's then current
Prospectus and will provide you with such number of copies of each Fund's
current Prospectus, Statement of Additional Information and shareholder reports
and of supplementary sales materials prepared by us, as you may reasonably
request. It shall be your obligation to ensure that all such information and
materials are distributed to your customers who own Shares in accordance with
securities and/or banking law and regulations and any other applicable
regulations. Neither you nor any other person is authorized to give any
information or make any representations other than those contained in such
prospectuses, Statements of Additional Information and shareholder reports or in
such supplemental sales materials. You shall not furnish or cause to be
furnished to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements, statements,
posters, signs or similar material), except such information and materials as
may be furnished to you by us or the Fund, and such other information and
materials as may be approved in writing by us. We reserve the right to reject
any purchases for any accounts which we reasonably determine are not made in
accordance with the terms of the applicable Fund Prospectus and the provisions
of this Agreement.
You hereby agree:
(i) to not purchase any Shares as agent for any customer, unless you
deliver or cause to be delivered to such customer, at or prior to the
time of such purchase, a copy of the then-current Prospectus of the
applicable Fund unless such customer has acknowledged receipt of the
Prospectus of such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase Shares
pursuant to federal securities laws and you have taken all necessary
steps to comply with such prospectus delivery requirements;
PEP 613 12-92
<PAGE>
(ii) to transmit to us promptly upon receipt any and all orders received by
you, it being understood that no conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent for the
purchase of Shares any taxpayer identification number certification
and backup withholding information required under the Internal Revenue
Code, as amended from time to time (the "Code"), and the regulations
set forth thereunder, or other sections of the Code which may become
applicable and to provide us or our designee with timely written
notice of any failure to obtain such taxpayer identification number
certification or information in order to enable the implementation of
any required backup withholding in accordance with the Code and the
regulations thereunder;
(iv) to pay to us the offering price, less any agency fee to which you are
entitled, within five (5) business days of our confirmation of your
customer's order, or such shorter time as may be required by law. You
may, subject to our approval, remit the total public offering price to
us, and we will return to you your agency fee. If such payment is not
received within said time period, we reserve the right, without prior
notice, to cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter case, we shall
have the right to hold you responsible for any loss resulting to us.
Should payment be made by local bank check, liquidation of Shares may
be delayed pending clearance of your check; and
(v) to offer and sell Shares, and execute telephone transactions only in
accordance with the terms and conditions of the then current
prospectuses of the relevant Funds and to make no representations not
contained in any such prospectus or in any authorized supplemental
material supplied to you. In addition, in consideration for the
extension of the right to exercise telephone transaction privileges,
you 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 you agree to
indemnify and hold harmless the Funds, Equity Planning and the
Transfer Agent against any loss, injury or damage resulting from any
unauthorized telephone transaction instruction from you or your
representatives. (Telephone instructions will be recorded on tape).
Unless otherwise mutually agreed in writing or except as provided below, each
transaction placed by you shall be promptly confirmed by us in writing to you,
and shall be confirmed to the customer promptly upon receipt by us of
instructions from you as to such customer. In the case of a purchase order by
customer's application, each transaction shall be promptly confirmed in writing
directly to the customer and a copy of each confirmation shall be sent
simultaneously to you. You understand that in the case of an Omnibus Account we
shall send a confirmation to you as the shareholder of record only. We reserve
the right, at our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the Funds. All orders
are subject to acceptance or rejection by us in our sole discretion, and by the
Funds in their sole discretion. The procedure stated herein relating to the
pricing and handling of orders shall be subject to instructions which we may
forward to you from time to time.
III. Compliance With Law
You hereby represent that you are either (1) a "bank" as defined in Section
3(a)(6) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and at the time of each transaction in shares of the Funds, are not required to
register as a broker-dealer under the Exchange Act or regulations thereunder; or
(2) registered as a broker-dealer under the Exchange Act, a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
affiliated with a bank.
(i) If you are a bank, not required to register as a broker-dealer under
the Exchange Act, you further represent and warrant to us that with
respect to any sales in the United States, you will use your best
efforts to ensure that any purchase of Shares by your customers
constitutes a suitable investment for such customers. You shall not
effect any transaction in, or induce any purchase or sale of, any
Shares by means of any manipulative deceptive or other fraudulent
device or contrivance and shall otherwise deal equitable and fairly
with your customers with respect to transactions in Shares of a Fund.
-2-
<PAGE>
(ii) If you are a NASD member broker-dealer affiliated with a bank and
registered under the Exchange Act, you further represent and warrant
to us that with respect to any sales in the United States, you agree
to abide by all of the applicable laws, rules and regulations
including applicable provisions of the Securities Act of 1933 as
amended, and the applicable rules and regulations of the NASD,
including, without limitation, its Rules of Fair Practice, and the
applicable rules and regulations of any jurisdiction in which you make
Shares available for sale to your customers. You agree not to make
available for sale to your customers the Shares in any jurisdiction in
which the Shares are not qualified for sale or in which you are not
qualified as a broker-dealer. We shall have no obligation or
responsibility as to your right to make Shares of any Fund available
to your customers in any jurisdiction. You agree to notify us
immediately in the event of (a) your expulsion or suspension from the
NASD or your becoming subject to any enforcement action by the
Securities and Exchange Commission, NASD, or any other self-regulatory
organization, or (b) your violation of any applicable federal or state
law, rule or regulation including, but not limited to, those of the
SEC, NASD, or other self-regulatory organization, arising out of or in
connection with this Agreement, or which may otherwise affect in any
material way your ability to act in accordance with the terms of this
Agreement.
You shall not make Shares of any Fund available to your customers, including
your fiduciary customers, except in compliance with all federal and state laws
and rules and regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which may affect your
business practices. You confirm that you are not in violation of any banking law
or regulations to which you are subject. You agree to hold us and the Funds
harmless and indemnify us in the event that you or any of your representatives
should violate any law, rule or regulation or any provisions of this Agreement.
In the event that we determine to refund any amounts paid by a customer in
connection with any such violation on your part, you shall forfeit the right to
the amount of any agency fee allowed by us with respect to the transaction for
which the refund is made. All expenses which you incur in connection with your
activities under this Agreement shall be borne by you.
IV. Relationship With Customer
With respect to any and all transactions in the Shares of any Fund pursuant to
this Agreement, it is understood and agreed in each case that: (i) you shall be
acting solely as agent for the account of your customer; (ii) each transaction
shall be initiated solely upon the order of your customer; (iii) we shall
execute transactions only upon receiving instructions from you acting as agent
for your customer or upon receiving instructions directly from your customer;
(iv) as between you and your customer, your customer will have full beneficial
ownership of all Shares; and (v) each transaction shall be for the account of
your customer and not for your account.
Subject to the foregoing, however, you may maintain record ownership of such
customers' Shares in an "Omnibus Account" or an account registered in your name
or the name of your nominee, for the benefit of such customers. You understand
that such Shares must be held in a separate account for each shareholder of such
Funds. You represent and warrant to us that you will have full right, power and
authority to effect transactions (including, without limitation, any purchases
and redemptions) in Shares on behalf of all customer accounts provided by you.
V. Relationship With Financial Institutions
Your obligations to us under this Agreement are subject to all the provisions of
the respective distribution agreements entered into between us and each of the
Funds. You understand and agree that in performing your services under this
Agreement you are acting in the capacity of an independent contractor, and we
are in no way responsible for the manner of your performance or for any of your
acts or omissions in connection therewith. It is further understood that neither
this Agreement nor the performance of the services of the respective parties
hereunder shall be considered to constitute an exclusive arrangement, or to
create a partnership, association or joint venture between you and us. In making
available Shares of the Funds under this Agreement, nothing herein shall be
construed to constitute you or any of your agents, employees or representatives
as our agent or employee, or as an agent or employee of the Funds, and you shall
not make any representations to the contrary. As distributor of the Funds, we
shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the distribution of the Shares. We shall
not be under any obligation to you, except for obligations expressly assumed by
us in this Agreement.
-3-
<PAGE>
VI. Termination
Either party hereto may terminate this Agreement, without cause, upon ten days'
written notice to the other party. We may terminate this Agreement for cause
upon the violation by you of any of the provisions hereof, such termination to
become effective on the date such notice of termination is mailed to you. If you
are registered as a broker-dealer and affiliated with a bank, this Agreement
shall terminate automatically if either Party ceases to be a member of the NASD.
VII. Assignability
This Agreement is not assignable or transferable, except that we may assign or
transfer this Agreement to any successor distributor of the Funds.
VIII. Miscellaneous
(i) All communications mailed to us should be sent to the above address.
Any notice to you shall be duly given if mailed or delivered to you at
the address specified by you below.
(ii) This Agreement constitutes the entire agreement and understanding
between the parties and supersedes any and all prior agreements
between the parties.
(iii) This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Connecticut.
Very truly yours,
PHOENIX EQUITY PLANNING CORPORATION
By _________________________________________
Authorized Signature
____________________________________________
Name and Title
We accept and agree to the foregoing Agreement as of the date set forth below
Financial Institution: __________________________________
By _________________________________________
Authorized Signature, Title
____________________________________________
____________________________________________
Address
(NASD CRD # if applicable _________________ )
Date: ______________________________________
Please return the signed copy of this Sales Contract to Phoenix Equity Planning
Corporation at the above address.
Exhibit 8
CUSTODIAN CONTRACT
<PAGE>
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX 1
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 each Fund Held by the Custodian in the United States..................................................2
2.1 Holding Securities..............................................................................2
2.2 Delivery of Securities..........................................................................2
2.3 Registration of Securities......................................................................4
2.4 Bank Accounts...................................................................................4
2.5 Availability of Federal Funds...................................................................5
2.6 Collection of Income............................................................................5
2.7 Payment of Fund Moneys..........................................................................5
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.............................6
2.9 Appointment of Agents...........................................................................7
2.10 Deposit of Fund Assets in U.S. Securities System................................................7
2.11 Fund Assets Held in the Custodian's Direct Paper System.........................................8
2.12 Segregated Account..............................................................................9
2.13 Ownership Certificates for Tax Purposes.........................................................9
2.14 Proxies.........................................................................................9
2.15 Communications Relating to Fund Securities.....................................................10
3. Duties of the Custodian with Respect to Property of
each Fund Held Outside of the United States.............................................................10
3.1 Appointment of Foreign Sub-Custodians..........................................................10
3.2 Assets to be Held..............................................................................10
3.3 Foreign Securities Systems.....................................................................10
3.4 Holding Securities.............................................................................11
3.5 Agreements with Foreign Banking Institutions...................................................11
3.6 Access of Independent Accountants of each Fund.................................................11
3.7 Reports by Custodian...........................................................................11
3.8 Transactions in Foreign Custody Account........................................................12
3.9 Liability of Foreign Sub-Custodians............................................................12
3.10 Liability of Custodian.........................................................................12
3.11 Reimbursement for Advances.....................................................................13
3.12 Monitoring Responsibilities....................................................................13
3.13 Branches of U.S. Banks.........................................................................13
3.14 Tax Law........................................................................................13
4. Payments for Sales or Repurchase or Redemptions
of Shares of each Fund..................................................................................14
5. Proper Instructions.....................................................................................14
6. Actions Permitted Without Express Authority.............................................................15
7. Evidence of Authority...................................................................................15
8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value
and Net Income..........................................................................................15
9. Records 16
10. Opinion of Fund's Independent Accountants...............................................................16
11. Reports to Fund by Independent Public Accountants.......................................................16
12. Compensation of Custodian...............................................................................16
13. Responsibility of Custodian.............................................................................16
14. Effective Period, Termination and Amendment.............................................................18
15. Successor Custodian.....................................................................................18
16. Interpretive and Additional Provisions..................................................................19
17. Additional Funds........................................................................................19
18. Massachusetts Law to Apply..............................................................................20
19. Prior Contracts.........................................................................................20
20. Shareholder Communications..............................................................................20
21. Limitation of Liability................................................................................21
</TABLE>
<PAGE>
MASTER CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on Appendix 1
which evidences its agreement to be bound hereby by executing a copy of this
Contract (each such fund, any and all separate series or portfolios thereof and
any additional portfolios or separate series thereof which become subject to
this Contract pursuant to Section 17 hereof, are individually hereafter referred
to as a "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:
WHEREAS, each of the Funds has previously entered into a Custodian Contract
with the Custodian;
WHEREAS, the Custodian and each of the Funds desire to replace such
existing Custodian Contracts with this Master Custodian Contract between the
Custodian and all of the Funds;
NOW THEREFORE, 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
-----------------------------------------------------
Each Fund hereby employs the Custodian as the custodian of the assets of
such Fund, including securities which such Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of such Fund's governing documents (domestic securities and foreign securities
are sometimes collectively referred to herein as "Securities"). Each Fund agrees
to deliver to the Custodian all securities and cash of such Fund, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by such Fund from time to time, and the
cash consideration received by it for such new or treasury shares each class of
capital stock or beneficial interest, as applicable, of such Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by such Fund and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Fund from time to time employ
one or more sub-custodians, located in the United States but only in accordance
with an applicable vote by the Board 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. The Fund shall approve in writing the
terms of any subcustodian agreement with a United States subcustodian. The
Custodian may employ as sub-custodian for each Fund's foreign securities the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of each Fund Held By the
Custodian in the United States
--------------------------------------------------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Fund all non-cash property, to be held by it in the
United States including all domestic securities owned by such Fund, other
than (a) securities which are maintained pursuant to Section 2.10 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 (each, a "U.S.
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 (the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Fund held by the Custodian or in a U.S. Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from such Fund, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of such 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 such Fund;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of such 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
such 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 2.9 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
2
<PAGE>
aggregate face amount 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 such 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 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 such
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and such 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 such Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowings by such
Fund requiring a pledge of assets by such Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
such Fund, 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 such Fund;
3
<PAGE>
13) For delivery in accordance with the provisions of any agreement among
such 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 such Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for such 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 currently effective prospectus and
statement of additional information of such Fund ("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 from such Fund, a certified copy of a
resolution of the Board or of the Executive Committee of such Fund
signed by an officer of such Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of such Fund 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. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of each Fund
or in the name of any nominee of each Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to each Fund, unless
a 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 such Fund, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian under the terms of this Contract shall be in "street name"
or other good delivery form. If, however, a Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize
commercially reasonable means to timely collect income due such Fund on
such securities and to timely notify each Fund 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 United States in the name of each 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 such
Fund, other than cash maintained by such Fund in a bank account established
and used
4
<PAGE>
in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for each 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 that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Fund be approved by vote of a majority of the Board of such
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 Availability of Federal Funds. Upon mutual agreement between a Fund and the
Custodian, the Custodian shall, upon the receipt of Proper Instructions
from such Fund, make federal funds available to such Fund as of specified
times agreed upon from time to time by such Fund and the Custodian in the
amount of checks received in payment for Shares of such Fund which are
deposited into such Fund's account.
2.6 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 Securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities business,
and shall collect on a timely 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 such 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. Unless otherwise agreed to by the
parties, income due each 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 each Fund with such information or data as may be
necessary to assist each Fund in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from a Fund,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the following
cases only:
1) Upon the purchase of Securities, options, futures contracts or options
on futures contracts for the account of such Fund but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on 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
5
<PAGE>
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 such 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 U.S. Securities System,
in accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.11; (d) in the
case of repurchase agreements entered into between such 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 such Fund of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from such Fund or (e) for
transfer to a time deposit account of such 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 such Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of Securities
owned by such Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by such Fund as set
forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by such Fund,
including but not limited to the following payments for the account of
such Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of such 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 on Shares of such Fund declared
pursuant to the governing documents of such Fund;
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 from such Fund, a certified copy of a resolution
of the Board or of the Executive Committee of such Fund signed by an
officer of such 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
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<PAGE>
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 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 such Fund is
made by the Custodian in advance of receipt of the securities purchased in
the absence of specific Proper Instructions from such Fund to so pay in
advance, the Custodian shall be absolutely liable to such Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times, subject to
the applicable Fund's prior approval, 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.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Exchange Act, 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 "U.S.
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 each Fund in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. 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 each Fund
which are maintained in a U.S. Securities System shall identify by
book-entry those securities belonging to each Fund;
3) The Custodian shall pay for securities purchased for the account of
each Fund upon (i) receipt of advice from the U.S. 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 each Fund. The Custodian shall
transfer securities sold for the account of each Fund upon (i) receipt
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<PAGE>
of advice from the U.S. 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 each Fund. Copies of all advices from the
U.S. Securities System of transfers of securities for the account of
each Fund shall identify each Fund, be maintained for each Fund by the
Custodian and be provided to each Fund at its request. Upon request,
the Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each Fund in the form of a written advice or
notice and shall furnish to each Fund copies of daily transaction
sheets reflecting each day's transactions in the U.S. Securities
System for the account of each Fund.
4) The Custodian shall provide each Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from each Fund the initial
certificate required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to each Fund for the benefit of such Fund
for any loss or damage to such Fund resulting from use of the U.S.
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 U.S.
Securities System; at the election of the affected Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the U.S. 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 such Fund has not been made whole for
any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by each 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 from each Fund;
2) The Custodian may keep securities of each Fund in the Direct Paper
System only if such securities are represented in an 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;
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<PAGE>
3) The records of the Custodian with respect to securities of each Fund
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to each Fund;
4) The Custodian shall pay for securities purchased for the account of
each 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
each Fund. The Custodian shall transfer securities sold for the
account of each 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 each Fund;
5) The Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each 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 each Fund copies of daily transaction
sheets reflecting each day's transactions in the Direct Paper System
for the account of each Fund;
6) The Custodian shall provide each Fund with any report on its system of
internal accounting control as each Fund may reasonably request from
time to time.
2.12 Pledged Account. The Custodian shall upon receipt of Proper
Instructions from a Fund establish and maintain a pledged account or
accounts for and on behalf of such 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 2.10
hereof, (i) in accordance with the provisions of any agreement among
such 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 escrow or other
arrangements in connection with transactions by such Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by such Fund or commodity
futures contracts or options thereon purchased or sold by such Fund,
(iii) for the purposes of compliance by such Fund with the procedures
required by Investment Company Act Release No. 10666, and 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 from such Fund, a certified copy of a resolution of the
Board or of the Executive Committee of such Fund signed by an
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<PAGE>
officer of such Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account.
2.13 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 each Fund held by it and in connection with
transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
such Fund or a nominee of such Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the applicable Fund such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions of
Section 2.3, the Custodian shall transmit promptly to each Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by such
Fund and the maturity of futures contracts purchased or sold by such Fund)
received by the Custodian from issuers of the securities being held for
such Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to each 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
a Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, such Fund shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of each Fund Held Outside
of the United States
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3.1 Appointment of Foreign Sub-Custodians. Each Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for such Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of such Fund's Board, the Custodian and such Fund may
agree to amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, a Fund may instruct the
Custodian to cease the employment of any one or more such sub-custodians
for maintaining custody of such Fund's assets.
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<PAGE>
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or each Fund may determine to be reasonably
necessary to effect such Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to each Fund, the
foreign securities of each Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and each Fund, assets of each Fund shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
of the United States (each a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.6
hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including each Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of each Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
each Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign
banking institution shall provide that: (a) the assets of each Fund will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each Fund will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each Fund; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for each
Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Custodian;
and (e) assets of each Fund held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents. Agreements
with
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<PAGE>
foreign banking institutions shall contain those provisions required by
subparagraph (c) of Section 17f-5 under the Investment Company Act of 1940.
3.6 Access of Independent Accountants of each Fund. Upon request of each Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of each Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to each Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of each Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of such Fund's
securities and other assets and advices or notifications of any transfers
of securities to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of such Fund indicating, as
to securities acquired for such Fund, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provisions of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of each Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the account of
each Fund and delivery of securities maintained for the account of each
Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of this Contract, and each Fund
agrees to hold any such nominee harmless from any liability as a holder of
record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of a Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that such Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
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<PAGE>
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by Section 3.13 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this Section
3.10, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to each Fund for any
loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 Reimbursement for Advances. If, pursuant to Proper Instructions, a Fund
requires the Custodian to advance cash or securities for any purpose for
the benefit of a Fund including the purchase or sale of foreign exchange or
of contracts for foreign exchange, 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 events or circumstances for
which the Custodian or a sub-custodian are liable pursuant to Sections 3.9
and 3.10 above, or 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 applicable Fund shall be security therefor and
should such Fund fail to repay the Custodian promptly, the Custodian shall
upon prior written notice be entitled to utilize available cash and to
dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to each
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian and such other information needed
to permit the Fund to comply with Section 17f-5 under the 1940 Act. Such
information shall be similar in kind and scope to that furnished to each
Fund in connection with the initial approval of this Contract. In addition,
the Custodian will promptly inform each Fund in the event that the
Custodian learns of a material adverse change in the financial condition of
a foreign sub-custodian or any material loss of the assets of each Fund or
in the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity
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<PAGE>
will decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract,
the provisions hereof shall not apply where the custody of a Fund's assets
are maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 of this Contract. (b) Cash held for each Fund in the United
Kingdom shall be maintained in an interest bearing account established for
each Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on any Fund or the Custodian as
custodian of such Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of each Fund to notify the Custodian of the obligations imposed on each
Fund or the Custodian as custodian of each Fund by the tax law of
jurisdictions other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist each Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which each Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of each Fund
-----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of each Fund and deposit into the account of each Fund such
payments as are received for Shares of each Fund issued or sold from time to
time by each Fund. The Custodian will provide timely notification to each Fund
and the Transfer Agent of any receipt by it of payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of each Fund's governing documents and any applicable votes of the
Board of each 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 each 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 each Fund, the Custodian shall honor checks drawn on
the
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<PAGE>
Custodian by a holder of Shares, which checks have been furnished by such
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 each Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board of each Fund 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. Each 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 each Fund
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for such
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 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from each
Fund:
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 applicable Fund;
1) surrender securities in temporary form for securities in definitive
form;
2) endorse for collection, in the name of each Fund, checks, drafts and
other negotiable instruments; and
3) in general, attend to all ministerial details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of each Fund except as otherwise
directed by the Board of each Fund.
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7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of each Fund. The Custodian may receive and accept a certified copy of a vote of
the Board of each 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 pursuant to the governing documents of each Fund 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.
8. 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 each Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if directed in writing to do so by each
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 each Fund as described in each Fund's currently effective
Prospectus and shall advise each Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of each
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 each Fund shall be made at the time or
times described from time to time in each Fund's currently effective Prospectus.
9. Records
-------
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of each Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of each 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 applicable
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the request of any Fund, supply such Fund with a tabulation
of securities owned by such Fund and held by the Custodian and shall, when
requested to do so by a Fund and for such compensation as shall be agreed upon
between such Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as each Fund may from time
to time request, to obtain from year to year favorable opinions from each Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of each Fund's Form N-1A,
16
<PAGE>
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
--------------------------------------------------
The Custodian shall provide each Fund, at such times as each 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 reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
each 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.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, determine in accordance with the fee
schedule attached hereto as Schedule B, as amended from time to time as agreed
by each Fund and the Custodian.
13. 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 any 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 a Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to any Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
17
<PAGE>
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts provided Custodian has maintained an adequate
disaster recovery plan; (ii) errors by a Fund or its investment advisor in their
instructions to the Custodian provided such instructions have been in accordance
with this Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary, central
bank or other commercially prevalent payment or clearing system to deliver to
the Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge or registering or transferring
securities in the name of the Custodian, a Fund, the Custodian's sub-custodians,
nominees or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any provision of any present
or future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of any
court of competent jurisdiction.
Except as expressly provided in Section 3.9, the Custodian shall be liable
for the acts or omissions of a foreign banking institution appointed pursuant to
the provisions of Article 3 to the same extent as set forth in Article 1 hereof
with respect to sub-custodians located in the United States.
If a 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 reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to a Fund being liable for the payment of money or incurring liability
of some other form, such 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 a 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 settlements)
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 such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement.
18
<PAGE>
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. 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 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 with respect to each Fund act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of each Fund has approved the initial use of
a particular Securities System by each Fund, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not with
respect to a Fund act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board
has approved the initial use of the Direct Paper System by each Fund; provided
further, however, that a Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of its governing documents, and further provided, that a Fund may at any time by
action of its Board (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 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, each Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination as provided
herein.
15. Successor Custodian
-------------------
If a successor custodian for a Fund shall be appointed by the Board of such
Fund, the Custodian shall, upon termination, and upon receipt of a certified
copy of such vote, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of such
Fund then held by it hereunder and shall transfer to an account of the successor
custodian all of the securities of such Fund 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 the
applicable 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 shall have been delivered to the Custodian
on or before the date when such
19
<PAGE>
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, of its own 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 on behalf of such Fund and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract on behalf
of such Fund and to transfer to an account of such successor custodian all of
the securities of such Fund 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 a Fund to procure the certified copy of the vote referred to above or
of the Board 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.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and each
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 interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing documents of any Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
17. Additional Funds
----------------
In the event that any mutual funds in addition to the Funds are hereafter
established which desire to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references to the "Fund"
are to each of the Funds listed on Appendix 1 individually, as if this Contract
were between each such individual Fund and the Custodian.
18. 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.
20
<PAGE>
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between each of the Funds and the Custodian relating to the custody of
such Fund's assets.
20. Shareholder Communications
--------------------------
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 each Fund to indicate whether such Fund authorizes
the Custodian to provide such Fund's name, address, and share position to
requesting companies whose stock each Fund owns. If a Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If a Fund tells the Custodian "yes" or do not check either "yes" or "no" below,
the Custodian is required by the rule to treat such Fund as consenting to
disclosure of this information for all securities owned by such Fund or any
funds or accounts established by each Fund. For each Fund's protection, the Rule
prohibits the requesting company from using such Fund's name and address for any
purpose other than corporate communications. Please indicate below whether each
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Appendix 1.
NO [X] The Custodian is not authorized to release the
name, address, and share positions of each Fund listed
on Appendix 1.
21. Limitation of Liability.
------------------------
The execution of this Contract has been authorized by each Fund's Board.
This Contract is executed on behalf of each Fund or, in the case of a Fund
organized as a business trust, the trustees of such Fund as trustees and not
individually and the obligations of each Fund under this Contract are not
binding upon any of such Fund's trustees, officers or shareholders individually
but are binding only upon the assets and property of such Fund. A Certificate of
Trust in respect of each Fund organized as a business trust is on file with the
Secretary of the Commonwealth of Massachusetts.
<PAGE>
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 1st day of May, 1997.
EACH OF THE FUNDS LISTED ON APPENDIX 1
By: /s/ Michael E. Haylon
--------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
--------------------------
Executive Vice President
<PAGE>
APPENDIX 1
Fund Names
(as of May 1, 1997)
Phoenix California Tax Exempt Bonds, Inc.
The Phoenix Edge Series Fund
Real Estate Securities Series
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund
Phoenix Diversified Income Portfolio
Phoenix Emerging Markets Bond Portfolio
Phoenix Endowment Equity Portfolio
Phoenix Real Estate Securities Portfolio
Phoenix Mid Cap Portfolio
Phoenix Tax-Exempt Bond Portfolio
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Series Fund
Phoenix Aggressive Growth Fund Series
Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Growth Fund Series
Phoenix High Yield Fund Series
Phoenix Money Market Series
Phoenix U.S. Government Securities Fund Series
Phoenix Strategic Allocation Fund, Inc.
Phoenix Strategic Equity Series Fund
Phoenix Equity Opportunities Fund
Phoenix Micro Cap Fund
Phoenix Small Cap Fund
Phoenix Strategic Theme Fund
Phoenix Duff & Phelps Institutional Mutual Funds
Enhanced Reserves Portfolio
Real Estate Equity Securities Portfolio
<PAGE>
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of each Fund for use as
sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
- ----------------------------
Fund's Authorized Officer
Date:
-------------------------
<PAGE>
[LOGO]State Street
SCHEDULE B
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
Effective June 1, 1996
Phoenix Duff and Phelps Funds
- --------------------------------------------------------------------------------
I. Administration
Domestic Custody - Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions.
Monitor corporate actions. Report portfolio positions. The custody fee
shown below is an annual charge, billed and payable monthly, based on
average monthly net assets.
Average Monthly Net Assets Annual Fees in Basis Points
-------------------------- ---------------------------
First $3 Billion .5
Next $2 Billion .375
Thereafter .25
II. Domestic Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $ 6.00
New York Physical Settlements $25.00
Physical Maturities-delivery and collection fee $33.00
All other trades $16.00
III. International Custody - Maintain custody of funds assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions in
local and base currency. Report foreign taxes. File foreign tax reclaims.
Monitor corporate actions. Report portfolio positions.
<PAGE>
[LOGO]State Street
A. Country Grouping
- ---------------------
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Mexico Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy South Korea China
Singapore Luxembourg Spain Columbia
Switzerland Norway Sri Lanka Cypress
Philippines Sweden Greece
Thailand Taiwan Hungary
United Kingdom India
Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
B. Transaction Charges
- ------------------------
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
$26 $30 $45 $60 $75
C. Holding Charges in Basis Points (Annual Fee)
- -------------------------------------------------
Assets Group A Group B Group C Group D Group E
- ------ ------- ------- ------- ------- -------
First $100 MM 5.0 8.0 13.0 15.0 25.0
Next $100 MM 4.0 6.0 10.0 13.0 25.0
Excess 3.0 5.0 8.0 13.0 25.0
IV. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
<PAGE>
[LOGO]State Street
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of
loaned securities $25.00
Loan administration -- mark-to-market per day, per loan $ 3.00
VI. Interest Rate Futures
Transactions -- no security movement $ 8.00
VII. Coupon Bonds
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
VIII. Holdings Charge
For each issue maintained -- monthly charge $ 5.00
IX. Principal Reduction Payments Per Paydown $10.00
<PAGE>
[LOGO]State Street
X. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments
and the preparation of special reports will be subject to negotiation.
Fees for tax accounting/recordkeeping for options, financial futures,
and other special items will be negotiated separately.
Account Position Appraisal
--------------------------
Special appraisal by industry classification:
Monthly fee - per portfolio $50.00
XI. Out-of-Pocket Expenses
----------------------
A billing for the recovery of applicable out-of-pocket expenses will
be made as of the end of each month. Out-of-pocket expenses include,
but are not limited to the following:
Telephone
Wire Charges ($4.70 per wire in and $4.55 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
XII. Payment
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices.
<PAGE>
[LOGO]State Street
PHOENIX DUFF AND PHELPS FUNDS STATE STREET BANK & TRUST CO.
By /s/ Nancy G. Curtiss By /s/ Charles R. Whittemore, Jr.
------------------------------ ------------------------------
Title Treasurer Title Vice President
------------------------------ ------------------------------
Date June 13, 1997 Date June 11, 1996
------------------------------ ------------------------------
Exhibit 9.3
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
<PAGE>
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 19th day of November, 1997
by and between Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Financial Agent") and each of the undersigned mutual funds
(hereinafter collectively and singularly referred to as the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the
daily net asset value of shares of the Trust in accordance with instructions
received from time to time from the Board of Trustees of the Trust; which
instructions shall be certified to Financial Agent by the Trust's Secretary.
Financial Agent shall report such net asset value so determined to the Trust and
shall perform such other services as may be requested from time to time by the
Trust as are reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and
in the places required by Rule 31a-2 under the Investment Company Act of 1940,
as amended, those books and records maintained by Financial Agent. Such books
and records are the property of the Trust and shall be surrendered promptly to
the Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of
the Trust, Financial Agent shall receive, within eight days after the end of
each month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by
it in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained
<PAGE>
by Financial Agent hereunder a certificate signed by the Secretary of the Trust.
Financial Agent shall be entitled, with respect to questions of law relating to
its duties hereunder, to advice of counsel (which may be counsel for the Trust)
and, with respect to anything done or omitted by it in good faith hereunder in
conformity with the advice of or based upon an opinion of counsel, to be held
harmless by the Trust from all claims of loss or damage. Nothing herein shall
protect Financial Agent against any liability to the Trust or to its respective
shareholders to which Financial Agent would otherwise be subject by reason of
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties hereunder. Except as provided in this paragraph, Financial Agent
shall not be entitled to any indemnification by the Trust.
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. 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).
<PAGE>
9. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
PHOENIX EQUITY SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX INVESTMENT TRUST 97
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/ Michael E. Haylon
--------------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ Philip R. McLoughlin
--------------------------------
Philip R. McLoughlin
President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
(1) An incremental schedule applies as follows:
<TABLE>
<CAPTION>
<S> <C>
Up to $100 million: 5 basis points on average daily net assets
$100 million to $300 million: 4 basis points on average daily net assets
$300 million through $500 million: 3 basis points on average daily net assets
Greater than $500 million: 1.5 basis points on average daily net assets
</TABLE>
A minimum fee will apply as follows:
Money Market $35,000
Equity $50,000
Balanced $60,000
Fixed Income $70,000
International $70,000
REIT $70,000
(2) An additional charge of $12,000 applies for each additional class
of shares above one, over and above the minimum asset-based fee previously
noted.
The following tables indicates the classification and effective date
for each of the applicable fund/series/portfolio:
<TABLE>
<CAPTION>
Classification Series Name
- -------------- -----------
<S> <C>
Money Market Phoenix Money Market Fund Series
Equity Phoenix Aggressive Growth Fund Series
Phoenix Core Equity Fund
Phoenix Equity Opportunities Fund
Phoenix Growth and Income Fund
Phoenix Growth Fund Series
Phoenix Micro Cap Fund
Phoenix Mid Cap Portfolio
Phoenix Small Cap Fund
Phoenix Small Cap Value Fund
Phoenix Strategic Theme Fund
Phoenix Value Equity Fund
<PAGE>
<CAPTION>
Classification Series Name
- -------------- -----------
<S> <C>
Balanced Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Income and Growth Fund
Phoenix Strategic Allocation Fund, Inc.
Fixed Income Phoenix California Tax Exempt Bonds, Inc.
Phoenix Strategic Income Fund
Phoenix Emerging Markets Bond Portfolio
Phoenix High Yield Fund Series
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Tax-Exempt Bond Portfolio
Phoenix U.S. Government Securities Fund Series
International Phoenix International Portfolio
Phoenix Worldwide Opportunities Fund
REIT Phoenix Real Estate Securities Portfolio
</TABLE>
Exhibit 9.4
FIRST AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
<PAGE>
FIRST AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 27th day of February, 1998 amends that
certain Amended and Restated Financial Agent Agreement dated November 19, 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 eliminate
the provision that states that Financial Agent is not responsible for the acts
or omissions of any agent appointed by it:
NOW, THEREFORE, in consideration of the foregoing premise, the first
sentence of Paragraph 4 of the Agreement is amended to read as follows:
"Financial Agent shall not be liable for anything done or omitted to be
done by it in the exercise of due care in discharging its duties
specifically described hereunder."
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized officers on this 23rd day of March, 1998.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX EQUITY SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX INVESTMENT TRUST 97
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/ Michael E. Haylon
----------------------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Philip R. McLoughlin
----------------------------------------
Philip R. McLoughlin
President
EXHIBIT 9.5
SECOND AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
<PAGE>
SECOND AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 1st day of June, 1998 amends that
certain Amended and Restated Financial Agent Agreement dated November 19, 1997,
as amended March 23, 1998, 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 Schedule A of the Agreement to
reflect the recently approved fee structure:
NOW, THEREFORE, in consideration of the foregoing premise, Schedule A is
hereby replaced with the Schedule A attached hereto and made a part hereof.
Except as hereinabove provided, the Agreement shall be and remain unmodified and
in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers on this 31st day of July, 1998.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX EQUITY SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX INVESTMENT TRUST 97
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/ Michael E. Haylon
------------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Philip R. McLoughlin
------------------------------
Philip R. McLoughlin
President
<PAGE>
Schedule A
Revised Fee Schedule
Fee Information For Services as Financial Agent
For its services hereunder Financial Agent shall be paid a fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC, Inc., as subagent, to Financial Agent, plus (2) the documented cost to
Financial Agent to provide financial reporting and tax services and oversight
of subagent's performance.
The current PFPC fees are attached hereto and made a part hereof.
<PAGE>
PFPC Fee Schedule
<TABLE>
<CAPTION>
Assets Under Management Fees
---------------------------------------------------------
<S> <C>
$0 - $200,000,000 0.0850%
---------------------------------------------------------
$200 - $400,000,000 0.0500%
---------------------------------------------------------
$400 - $600,000,000 0.0300%
---------------------------------------------------------
$600 - $800,000,000 0.0200%
---------------------------------------------------------
$800 - $1,000,000,000 0.0150%
---------------------------------------------------------
greater than $1,000,000,000 0.0125%
---------------------------------------------------------
Minimum Fund Fee $84,000
---------------------------------------------------------
Additional Class $12,000
---------------------------------------------------------
</TABLE>
Existing Portfolios:
- --------------------
Asset Based Fees less than $50MM WAIVED
Class Fees - WAIVED
Minimum Fund Fees - WAIVED
New Portfolios (First Year):
- ----------------------------
Asset Based Fees less than $50MM - 50% WAIVED
Class Fees less than $25MM per Class - WAIVED
Minimum Fund Fees - WAIVED
New Portfolios (There After):
- -----------------------------
Asset Based Fees less than $50MM - 25% WAIVED
Class Fees less than $25MM per Class - 50% WAIVED
Minimum Fund Fees less than $50MM - 50% WAIVED
Minimum Fund Fees $50-100MM - 25% WAIVED
Variable Unit Investment Trust Valuation and Reporting
- ------------------------------------------------------
$1,500 per Unit Investment Trust
Exhibit 11
Consent of Independent Accountants
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 21 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated June 16, 1998, relating to the financial
statements and financial highlights appearing in the April 30, 1998 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/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
August 17, 1998
Exhibit 15.1
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
<PAGE>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC.
(the "Fund")
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class A shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class A shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall pay the Distributor, at the end of each month, an amount on
an annual basis equal to 0.25% of the average daily value of the net assets of
the Fund's Class A shares, as compensation for providing personal service to
shareholders, including assistance in connection with inquiries relating to
shareholder accounts, and for maintaining 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 Trustees 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.
3. Reports
-------
At least quarterly in each year this 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 Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
<PAGE>
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees 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 this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
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 Class A shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. 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 2 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 Class A shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
6. Selection of Disinterested Trustees
-----------------------------------
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
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
Class A 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.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class A shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
<PAGE>
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees 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.
[Adopted at a duly held meeting of the Board of Directors on August 27, 1997.]
Exhibit 15.2
CLASS B SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
<PAGE>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC.
(the "Fund")
CLASS B SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class B shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class B shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of .75% of the average daily value of the net
assets of the Fund's Class B shares, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by Distributor subsequent to the
effectiveness of this Plan, in connection with the sale and promotion of the
Class B shares of the Fund and the furnishing of services to Class B
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling Class B shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions); (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 selling agreements with the Distributor 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 Trustees of the Fund determine are reasonably calculated to result in the
sale of Class B shares of the Fund. The Fund shall also pay the Distributor, at
the end of each month, an amount on an annual basis equal to 0.25% of the
average daily value of the net assets of the Fund's Class B shares, as
compensation for providing personal service to shareholders, including
assistance in connection with inquiries relating to shareholder accounts, and
for maintaining shareholder accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 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 Trustees 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.
3. Reports
-------
At least quarterly in each year this 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 Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees 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 this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
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 Class B shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its
adoption and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Trustees of the Fund as well as
a majority of the Disinterested Trustees. 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 2 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 Class B shares of the Fund and
(b) all material amendments to this Plan must be approved by a majority vote of
the Trustees of the Fund and of the Disinterested Trustees cast in person at a
meeting called for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
------------------------------------
While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
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
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.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class B shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees 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.
[Adopted at a duly held meeting of the Board of Directors on August 27, 1997.]
Exhibit 19.1
AMENDED AND RESTATED
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 up to
four classes of shares as indicated on Schedule A: Class A, Class B, Class C and
Class M ("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, Class B, Class C and Class M 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.
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.
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
<PAGE>
-3-
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.
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 1 8f-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
<PAGE>
-4-
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 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 19, l997, 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.
<PAGE>
-5-
4. Contracts
---------
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
--------------
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
6. Amendments
----------
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Class A Class B Class C Class M
------- ------- ------- -------
<S> <C> <C> <C> <C>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC. X X __ __
PHOENIX EQUITY SERIES FUND:
PHOENIX CORE EQUITY FUND X X X X
PHOENIX GROWTH AND INCOME FUND X X X X
PHOENIX INCOME AND GROWTH FUND X X __ __
PHOENIX INVESTMENT TRUST 97:
PHOENIX SMALL CAP VALUE FUND X X X X
PHOENIX VALUE EQUITY FUND X X 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
<PAGE>
<S> <C> <C> <C> <C>
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
<CIK> 0000718027
<NAME> PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
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