As filed with the Securities and Exchange Commission on December 8,
2000
Securities Act File No. 33-54549
Investment Company Act File No. 811-7201

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM N-2

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [    ]
 Post-Effective Amendment No. 7 [ X ]

and/or

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No.  9    [ X ]

(check appropriate box or boxes)
___________

GREENWICH STREET CALIFORNIA
MUNICIPAL FUND INC.
(Exact Name of Registrant as Specified in Charter)

Seven World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (zip code)

Registrant's Telephone Number, including Area Code: (800) 331-1710

Christina T. Sydor, Secretary
Greenwich Street California Municipal Fund Inc.
Seven World Trade Center, 39th Floor
New York, New York 10048
(Name and Address of Agent for Service of Process)
___________
Copies to:

John Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004


	Approximate Date of Proposed Public Offering:  As soon as
practicable after
the effective date of this Registration Statement.


	If any of the securities being registered on this Form N-2 are to
be
offered on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act of 1933, as amended (the "1933 Act"), other than
securities
offered only in connection with dividend or interest reinvestment
plans, check
the following box. [ X ]

	This Registration Statement relates to the registration of an
indeterminate number of shares solely for market-making transactions.
This Registration Statement relates to shares previously
registered on Form N-2. (Registration No. 33-54549).

It is proposed that this filing will become effective:
	[ X ] when declared effective pursuant to section 8(c).

	Registrant amends this Registration Statement under the 1933 Act,
on
such date as may be necessary to delay its effective date until
Registrant
files a further amendment that specifically states that this
Registration
Statement will thereafter become effective in accordance with the
provisions
of Section 8(a) of the 1933 Act, or until the Registration Statement
becomes
effective on such date as the Securities and Exchange Commission,
acting
pursuant to Section 8(a), may determine.



GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.

	Form N-2
	Cross Reference Sheet

Part A
Item No.	Caption	Prospectus Caption

1.	Outside Front Cover		Outside Front Cover of
Prospectus
2.	Inside Front and Outside Back Cover Page		Inside Front and
Outside Back Cover Page
		of Prospectus
3.	Fee Table and Synopsis		Prospectus Summary;
Fund Expenses
4.	Financial Highlights		Financial Highlights
5.	Plan of Distribution		Prospectus Summary; The
Offering;
6.	Selling Shareholders		Not Applicable
7.	Use of Proceeds..........................................................
 .	Use of Proceeds
8.	General Description of the
Registrant.........................................	Prospectus
Summary;  The Fund;
	Investment Objectives and Policies;  			Description
of Common Stock; Share Price 			Data;
Certain Provisions of the Articles of
	Incorporation;  Appendix.
9.	Management		Management of the Fund;
Description of
		Common Stock; Custodian
and Transfer 			Agent
10.	Capital Stock, Long-Term Debt, and Other
	Securities 		Taxation; Dividend
Reinvestment Plan;
		Dividends and
Distributions; Description of 		Common Stock;
Share Price Data
11.	Defaults and Arrears on Senior Securities		Not Applicable
12.	Legal Proceedings		Not Applicable
13.	Table of Contents of the Statement of
	Additional Information		Further Information

Part B		Statement of Additional
Item No.		Information Caption

14.	Cover Page		Cover Page
15.	Table of Contents		Table of Contents
16.	General Information and
History................................................	The Fund;
Description of Common 			Stock (see
Prospectus)
17.	Investment Objective and Policies		Investment Objective
and Policies; Invest-
		ment Restrictions
18.
	Management..........................................................
 .....................	Management of the Fund;
Directors and 		Executive
Officers of the Fund
19.	Control Persons and Principal Holders of
	 Securities		Not Applicable
20.	Investment Advisory and Other Services		Management of the Fund
21.	Brokerage Allocation and Other Practices		Investment Objectives
and Policies;

		Fund Transactions
22.	Tax Status		Taxes; Taxation (see
Prospectus)
23.	Financial Statements		Financial Statements


PART A

--------------------------------------------------------------------------------
Prospectus                                                     December 29, 2000
--------------------------------------------------------------------------------

Greenwich Street California Municipal Fund Inc.

Common Stock
      Listed on the American Stock Exchange
      Trading symbol -- GCM

Greenwich Street California Municipal Fund Inc. is a non-diversified, closed-end
management investment company. The fund's investment objective is to seek as
high a level of current income exempt from federal income tax and California
personal income tax as is consistent with preservation of principal. The fund
invests primarily in long-term, investment grade municipal debt securities
issued by, or on behalf of, the State of California, its agencies,
instrumentalities or political subdivisions or multistate agencies or
authorities.

      The market price of shares of closed-end funds is sometimes less than the
net asset value per share. For more information about this or other risks of
investing in the fund, see the "Prospectus Summary" beginning on page 3, and
"Risk Factors and Special Considerations" beginning on page 19.

      The prospectus contains important information about the fund. For your
benefit and protection, please read it before you invest, and keep it on hand
for future reference.


      Shareholder reports can be obtained without charge from your Salomon Smith
Barney Financial Consultant or from the fund by calling 1-800-331-1710 or
writing to the fund at Seven World Trade Center, New York, New York 10048. You
can review the fund's shareholder reports at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. The Commission charges a
fee for this service. Information about the Public Reference Room may be
obtained by calling 1-800-SEC-0330. You can get the same information free from
the Commission's Internet web site at www.sec.gov


      The Securities and Exchange Commission has not approved the fund's shares
as an investment or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.

SALOMON SMITH BARNEY INC.

SSB CITI FUND MANAGEMENT LLC
Investment Manager and Administrator


                                                                               1
<PAGE>

--------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------------------

Prospectus Summary                                                             3
--------------------------------------------------------------------------------
Fund Expenses                                                                  6
--------------------------------------------------------------------------------
Financial Highlights                                                           7
--------------------------------------------------------------------------------
The Fund                                                                       8
--------------------------------------------------------------------------------
The Offering                                                                   8
--------------------------------------------------------------------------------
Use of Proceeds                                                                8
--------------------------------------------------------------------------------
Investment Objective and Management Policies                                   8
--------------------------------------------------------------------------------
Risk Factors and Special Considerations                                       19
--------------------------------------------------------------------------------
Investment Restrictions                                                       22
--------------------------------------------------------------------------------
Share Price Data                                                              23
--------------------------------------------------------------------------------
Management of the Fund                                                        25
--------------------------------------------------------------------------------
Securities Transactions and Turnover                                          29
--------------------------------------------------------------------------------
Dividends and Distributions; Dividend Reinvestment Plan                       30
--------------------------------------------------------------------------------
Net Asset Value                                                               32
--------------------------------------------------------------------------------
Taxation                                                                      32
--------------------------------------------------------------------------------
Description of Shares                                                         37
--------------------------------------------------------------------------------
Certain Provisions of the Articles of Incorporation                           38
--------------------------------------------------------------------------------
Custodian, Transfer Agent, Dividend-Paying Agent,
  Registrar and Plan Agent                                                    41
--------------------------------------------------------------------------------
Reports to Shareholders                                                       41
--------------------------------------------------------------------------------
Independent Auditors                                                          41
--------------------------------------------------------------------------------
Further Information                                                           41
--------------------------------------------------------------------------------
Appendix A                                                                   A-1
--------------------------------------------------------------------------------


2
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary
--------------------------------------------------------------------------------

The following is a summary of more complete information appearing later in the
prospectus. You should read the entire prospectus because it contains details
that are not in the summary. Cross references in the summary to headings in the
prospectus will help you locate information.

INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS The fund's investment objective is
to seek as high a level of current income exempt from federal income tax and
California personal income tax as is consistent with the preservation of
principal. The fund invests primarily in long-term, investment grade municipal
obligations issued by, or on behalf of, the State of California and its
political subdivisions, agencies or instrumentalities or multistate agencies or
authorities. Investment grade debt securities are rated in one of the four
highest rating categories by a nationally recognized statistical rating
organization.

      Municipal obligations may have all types of interest rate payment and
reset terms, including fixed rate, adjustable rate, zero coupon, payment in kind
and auction rate features. See "The Fund" and "Investment Objective and
Management Policies."

TAX-EXEMPT INCOME The fund invests with the objective that dividends paid by the
fund may be excluded by shareholders from their gross incomes for federal income
tax and California personal income tax purposes. A portion of the fund's
dividends may be taxable. See "The Fund," "Investment Objective and Management
Policies" and "Taxation,"

THE OFFERING The fund's shares of common stock trade on the American Stock
Exchange. Salomon Smith Barney intends to buy and sell the fund's shares and
make a market in the common stock. Salomon Smith Barney is not obligated to
conduct market-making activities and may stop doing so at any time without
notice. See "The Offering" and "Use of Proceeds."

LISTING AMEX.

SYMBOL GCM.


INVESTMENT MANAGER SSB Citi Fund Management LLC (SSB Citi or manager) (successor
to SSBC Fund Management Inc.). The manager selects and manages the fund's
investments in accordance with the fund's investment objective and policies.
SSBC is also the fund's administrator and oversees the fund's non-investment
operations and its relations with its service providers. For its services, SSB
Citi receives a fee equal on an annual basis to 0.90% of the fund's average
daily net assets. See "Management of the Fund."


RISK FACTORS AND SPECIAL CONSIDERATIONS The value of the securities in the
fund's portfolio fluctuates in price and the value of your investment in the
fund


                                                                               3
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

will go up and down in value. This means that you could lose money on your
investment in the fund or the fund could perform less well than similar
investments. In addition, the price of the shares is determined by market prices
on the AMEX and elsewhere, so you may receive a price that is less than net
asset value when you sell your shares. The principal risks associated with an
investment in the fund are described under "Risk Factors and Special
Considerations," and are summarized below.

      Municipal obligations

      The fund invests primarily in municipal obligations and may be affected by
any of the following:

      o Interest rates rise, causing the value of the fund's portfolio generally
to decline.

      o Adverse conditions in the California economy negatively affect the
amount of state or local tax receipts or legislative or electoral action is
taken to reduce the tax revenues available to issuers of California obligations.

      o When interest rates are declining, the issuer of a security may exercise
its right to prepay principal earlier than scheduled, forcing the fund to
reinvest in lower yielding securities. This is known as call or prepayment risk.

      o The underlying revenue source for a municipal obligation other than a
general obligation bond is insufficient to pay principal or interest in a timely
manner.

      o The issuer of a security owned by the fund has its credit rating
downgraded or defaults on its obligation to pay principal and/or interest.

      o The manager's judgment about the attractiveness, value or income
potential of a particular bond proves to be incorrect.

      o Municipal bonds fall out of favor with investors.

      o Unfavorable legislation affects the tax-exempt status of municipal
bonds.

      Investment grade and unrated securities

      The fund invests in investment grade debt securities, and unrated
securities that the manager believes are of comparable quality. Investment grade
securities that are not in the highest rating category may be subject to greater
risk of downgrade and issuer default than higher rated securities and may have
speculative characteristics. The fund may experience more difficulty selling
unrated securities because markets for these securities may be less liquid.

      Issuer diversification and concentration

      The fund is not diversified, which means that it can invest a higher
percentage of its assets in any one issuer. Also, the fund concentrates its
investments in


4
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

California issuers. Being non-diversified and concentrated in California
obligations may magnify the fund's losses from adverse political or economic
events affecting a particular issuer or California issuers as a group.

      Derivatives

      The fund may hold securities or use investment techniques that provide for
payments based on or "derived" from the performance of an underlying asset,
index or other economic benchmark.

      Even a small investment in derivative contracts can have a big impact on
the fund's interest rate exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
interest rates are changing. The fund may not fully benefit from or may lose
money on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings. The other parties to certain
derivative contracts present the same types of default risk as issuers of fixed
income securities. Derivatives can also make the fund less liquid and harder to
value, especially in declining markets. Derivatives include futures and options
transactions.

      Closed-end investment company

      The fund is a closed-end investment company and its shares may trade on
the AMEX at a price that is less than its net asset value.

      See "Risk Factors and Special Considerations" and "Certain Provisions of
the Articles of Incorporation--Market Discount."

DIVIDENDS AND DISTRIBUTIONS Any dividends from net investment income (income
other than net realized capital gains) are paid monthly and any distributions of
net realized capital gains are paid annually. Your dividends or distributions
are reinvested in additional fund shares through participation in the dividend
reinvestment plan, unless you elect to receive cash. The number of shares issued
to you by the plan depends on the price of the shares. The price of the shares
is determined by the market price at the time the shares are purchased.

   Market Price of Fund Shares          Price of Fund Shares Issued by Plan
   ------------------------------------------------------------------------
   Greater than or equal to net         Shares issued at net asset value or
   asset value                          95% of market price, whichever is
                                        greater

   Less than net asset value            Market price

      See "Dividends and Distributions; Dividend Reinvestment Plan."

CUSTODIAN PNC Bank, National Association (PNC Bank) is the fund's custodian. See
"Custodian, Transfer Agent, Dividend-Paying Agent, Registrar and Plan Agent."

TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN AGENT PFPC Global Fund
Services (PFPC) is the fund's transfer agent, dividend-


                                                                               5
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

paying agent and registrar. See "Custodian, Transfer Agent, Dividend-Paying
Agent, Registrar and Plan Agent."

--------------------------------------------------------------------------------
Fund Expenses
--------------------------------------------------------------------------------

      The following table shows the expenses the fund pays. As a shareholder,
you indirectly bear these expenses.

Greenwich Street California Municipal Fund Inc.
--------------------------------------------------------------------------------
   Annual Expenses
       (as a percentage of net assets)
       Management Fees                                                     0.90%
       Other Expenses*                                                     0.35
--------------------------------------------------------------------------------
       TOTAL ANNUAL OPERATING EXPENSES*                                    1.25%
================================================================================


*     "Other Expenses," as shown above, is based on expenses for the fiscal year
      ended August 31, 2000.


      EXAMPLE

      The following example estimates the dollar amount of total cumulative
expenses that you would pay indirectly over various periods with respect to a
hypothetical investment in the fund. These amounts are based upon payment by the
fund of operating expenses at the levels set forth in the table above.

      You would indirectly pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) reinvestment of all dividends and
distributions at net asset value:

                               1 year        3 years       5 years      10 years
--------------------------------------------------------------------------------
                                 $13           $40           $69          $151

      This example should not be considered a representation of future expenses
of the fund. Actual expenses may be greater or less. Moreover, while the example
assumes a 5% annual return, the fund's performance will vary and may result in a
return greater or less than 5%. In addition, while the example assumes
reinvestment of all dividends and distributions at net asset value, participants
in the fund's Dividend Reinvestment Plan may receive shares purchased or issued
at a price or value different from net asset value. See "Dividends and
Distributions; Dividend Reinvestment Plan."


6
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------

      The following information has been audited by KPMG LLP, independent
auditors, whose report appears in the fund's August 31, 2000 Annual Report to
Shareholders. The information set out below should be read in conjunction with
the financial statements and related notes that also appear in the fund's Annual
Report, which is incorporated by reference into this prospectus.

For a share of capital stock outstanding throughout each year ended August 31:

<TABLE>
<CAPTION>
                                                 2000        1999        1998
1997        1996     1995(1)(2)
================================================================================
====================================
<S>                                            <C>         <C>         <C>
<C>         <C>         <C>
Net Asset Value, Beginning of Year             $13.49      $14.37      $13.66
$13.13      $12.92      $12.00
--------------------------------------------------------------------------------
------------------------------------
Income (Loss) From
  Investment Operations:
    Net investment income(3)                     0.61        0.59        0.60
0.62        0.63        0.60
    Net realized and unrealized gain (loss)      0.22       (0.84)       0.80
0.87        0.30        0.84
--------------------------------------------------------------------------------
------------------------------------
Total Income (Loss) From
  Investment Operations                          0.83       (0.25)       1.40
1.49        0.93        1.44
--------------------------------------------------------------------------------
------------------------------------
Gain From Repurchase
  of Treasury Stock                              0.00*         --          --
--          --          --
--------------------------------------------------------------------------------
------------------------------------
Less Distributions From:
    Net investment income                       (0.59)      (0.61)      (0.59)
(0.63)      (0.70)      (0.52)
    Net realized gains                          (0.00)*     (0.02)      (0.10)
(0.33)      (0.02)         --
--------------------------------------------------------------------------------
------------------------------------
Total Distributions                             (0.59)      (0.63)      (0.69)
(0.96)      (0.72)      (0.52)
--------------------------------------------------------------------------------
------------------------------------
Net Asset Value, End of Year                   $13.73      $13.49      $14.37
$13.66      $13.13      $12.92
--------------------------------------------------------------------------------
------------------------------------
Total Return, Based on
  Market Value(4)                                4.28%      (3.07)%      7.56%
13.39%      11.92%       0.25%++
--------------------------------------------------------------------------------
------------------------------------
Total Return, Based on Net
  Asset Value(4)                                 7.21%      (1.43)%     10.98%
12.19%       7.96%      12.24%++
--------------------------------------------------------------------------------
------------------------------------
Net Assets, End of Period (millions)              $50         $49         $53
$50         $48         $47
--------------------------------------------------------------------------------
------------------------------------
Ratios to Average Net Assets:
    Expenses (3)                                 1.25%       1.24%       1.20%
1.21%       1.15%       1.02%+
    Net investment income                        4.63        4.16        4.25
4.64        4.75        5.16+
--------------------------------------------------------------------------------
------------------------------------
Portfolio Turnover Rate                             8%          0%          7%
28%         42%          7%
--------------------------------------------------------------------------------
------------------------------------
Market Price at End of Period                 $11.875      $12.00      $13.00
$12.75      $12.13      $11.50
================================================================================
====================================
</TABLE>

(1)   Based on weighted average shares outstanding for period.
(2)   For the period from September 23, 1994 (commencement of operations) to
      August 31, 1995
(3)   The manager waived a portion of its fees for the period from September 23,
      1994 to August 31, 1995. If such fees were not waived, the per share
      decrease in net investment income would have been $0.01, and the ratio of
      expenses to average net assets would have been 1.14%, annualized.
(4)   The total return calculation assumes that dividends are reinvested in
      accordance with the Fund's dividend reinvestment plan.
*     Amount represents less than $0.01.
+     Annualized.
++    Total return is not annualized, as it may not be representative of the
      total return for the period.


                                                                               7
<PAGE>

--------------------------------------------------------------------------------
The Fund
--------------------------------------------------------------------------------


      The fund was incorporated under the laws of the State of Maryland on July
8, 1994 and is registered under the Investment Company Act of 1940, as amended
(the 1940 Act). Its principal office is located at Seven World Trade Center, New
York, New York 10048. The fund's telephone number is (800) 331-1710.


--------------------------------------------------------------------------------
The Offering
--------------------------------------------------------------------------------

      Salomon Smith Barney currently makes a market in the common stock. This
prospectus is to be used by Salomon Smith Barney in connection with offers and
sales of the common stock in market-making transactions in the over-the-counter
market at negotiated prices related to prevailing market prices at the time of
the sale. Salomon Smith Barney is not required to make a market in the common
stock and may stop doing so at any time. You should not rely on Salomon Smith
Barney's market making activites to provide an active or liquid trading market
for the common stock.

--------------------------------------------------------------------------------
Use of Proceeds
--------------------------------------------------------------------------------

      The fund will not receive any proceeds from the sale of the common stock
offered pursuant to this prospectus. Proceeds received by Salomon Smith Barney
as a result of its market-making in the common stock will be used by Salomon
Smith Barney in connection with its secondary market operations and for general
corporate purposes.

--------------------------------------------------------------------------------
Investment Objective and Management Policies
--------------------------------------------------------------------------------

      The investment objective and principal investment policies of the fund are
discussed below. The fund may not achieve its investment objective. The fund's
investment objective may be changed only with the approval of a majority of the
fund's outstanding voting securities which is defined in the 1940 Act as the
lesser of (1) 67% or more of the shares present at a meeting of the fund, if the
holders of more than 50% of the outstanding shares of the fund are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
fund.

      General

      The fund's investment objective is to seek as high a level of current
income exempt from federal income tax and California personal income taxes as is
consistent with the preservation of principal. In seeking its objective, the
fund invests primarily in investment grade debt obligations issued by, or on
behalf of, the State of California and its political subdivisions, agencies and
instrumentalities or


8
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

multistate agencies or authorities, the interest from which is, in the opinion
of bond counsel to the issuers, excluded from gross income for the purposes of
federal income tax as well as California personal income tax. The fund operates
subject to a fundamental investment policy providing that, under normal
conditions, the fund will invest not less than 80% of its net assets in
municipal obligations the interest on which is exempt from federal income tax
(other than the alternative minimum tax) and not less than 65% of its net assets
in municipal obligations the interest on which is also exempt from California
personal income tax in the opinion of bond counsel to the issuers (California
obligations). The fund generally invests in long-term municipal obligations;
under normal market conditions, the weighted average maturity of the fund's
securities is generally in excess of 20 years.

      As a non-diversified fund, the fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the obligations of a single
issuer. The fund conducts its operations, however, so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (Code), which relieves the fund of any liability for federal
income tax to the extent that its earnings are distributed to shareholders. To
qualify as a regulated investment company, the fund, among other things, limits
its investments so that, at the close of each quarter of its taxable year (1)
not more than 25% of the market value of the fund's total assets will be
invested in the securities of a single issuer and (2) with respect to 50% of the
market value of its total assets, not more than 5% of the market value of its
total assets will be invested in the securities of a single issuer. See
"Taxation."

      The fund generally does not invest more than 25% of its total assets in
any industry. Governmental issuers of municipal obligations are not considered
part of any "industry." Municipal obligations backed only by the assets and
revenues of non-governmental users may be deemed to be issued by the
non-governmental users, and would be subject to the fund's 25% industry
limitation.

      The fund may invest more than 25% of its total assets in a broad segment
of the municipal obligations market, such as revenue obligations of hospitals
and other health care facilities, housing agency revenue obligations, or airport
revenue obligations, if the manager determines that the yields available from
obligations in a particular segment of the market justify the additional risks
associated with a large investment in the segment. Although these municipal
obligations could be supported by the credit of governmental users, or by the
credit of non-governmental users engaged in a number of industries, economic,
business, political and other developments generally affecting the revenues of
the users (for example, proposed legislation or pending court decisions
affecting the financing of projects and market factors affecting the demand for
their services or products) may have a general adverse effect on all municipal
securities in such a market segment.


                                                                               9
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

      From time to time, the fund's investments include securities as to which
the fund, by itself or together with other funds or accounts managed by the
manager, holds a major portion or all of an issue of municipal obligations.
Because relatively few potential purchasers may by available for these
investments and, in some cases, contractual restrictions may apply on resales,
the fund may find it more difficult to sell these securities at a time when the
manager believes it is advisable to do so.

      Municipal Obligations

      Municipal obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general taxing
power. Notes are short-term obligations of issuing municipalities or agencies
and are sold in anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations bear fixed, floating and variable rates of
interest, and variations exist in the security of municipal obligations, both
within a particular classification and between classifications.

      The yields on, and values of, municipal obligations are dependent on a
variety of factors, including general economic and monetary conditions, money
market factors, conditions in the municipal obligation markets, size of a
particular offering, maturity of the obligation and rating of the issue.
Consequently, municipal obligations with the same maturity, coupon and rating
may have different yields or values, whereas obligations of the same maturity
and coupon with different ratings may have the same yield or value. See "Risk
Factors and Special Considerations -- Municipal Obligations."

      Issuers of municipal obligations may be subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform Act
of 1978, affecting the rights and remedies of creditors. In addition, the
obligations of those issuers may become subject to laws enacted in the future by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of the
obligations or upon the ability of municipalities to levy taxes. The possibility
also exists that, as a result of litigation or other conditions, the power or
ability of any issuer to pay, when due, the principal of, and interest on, its
obligations may be materially affected.

      Quality Standards

      The fund typically purchases municipal obligations if the manager believes
that the yield of the obligation is sufficiently attractive in light of the
risks of ownership


10
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

of the obligation. In determining whether the fund should invest in particular
municipal obligations, the manager generally considers factors such as:

      o     the price, coupon and yield to maturity of the obligations;

      o     the manager's assessment of the credit quality of the issuer of the
            obligations;

      o     the issuer's available cash flow and the related coverage ratios;

      o     the property, if any, securing the obligations; and

      o     the terms of the obligations, including subordination, default,
            sinking fund and early redemption provisions.

The manager will also review the ratings, if any, assigned to the securities by
Moody's Investors Service, Inc. (Moody's), Standard & Poor's Rating Group (S&P),
Fitch IBCA, Inc. (Fitch) or another nationally recognized statistical rating
organization (NRSRO).

      The fund will invest at least 80% of its total assets in municipal
obligations rated investment grade by Moody's, S&P, Fitch or any other NRSRO at
the time of investment. For a description of certain investment grade ratings,
see Appendix A.

      The ratings of NRSROs represent their opinions as to the quality of the
municipal obligations they undertake to rate; the ratings are relative and
subjective and are not absolute standards of quality. The manager's judgment as
to the credit quality of a municipal obligation, thus, may differ from that
suggested by the ratings published by a rating service. The policies of the fund
described above as to ratings of investments will apply only at the time of the
purchase of a security, and the fund will not be required to dispose of a
security in the event an NRSRO downgrades its assessment of the credit
characteristics of the security's issuer.

      Private Activity Bonds

      The fund may invest without limit in municipal obligations that are
tax-exempt "private activity bonds," as defined in the Code, which are in most
cases revenue bonds. Private activity bonds generally do not carry the pledge of
the credit of the issuing municipality, but are guaranteed by the corporate
entity on whose behalf they are issued. Interest income on certain types of
private activity bonds issued after August 7, 1986 to finance non-governmental
activities is a specific tax preference item for purposes of the federal
individual and corporate alternative minimum taxes. Individual and corporate
shareholders may be subject to a federal alternative minimum tax to the extent
that the fund's dividends are derived from interest on these bonds. Dividends
derived from interest income on municipal obligations are a "current earnings"
adjustment item for purposes of the federal corporate alternative minimum tax.
See "Taxation." Private activity bonds held by the fund will be included in the
term municipal obligations for purposes of


                                                                              11
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Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

determining compliance with the fund's policy of investing at least 80% of its
total assets in municipal obligations.

      Types of Municipal Obligations Held by the Fund

      Municipal Leases. Among the municipal obligations in which the fund may
invest are municipal leases, which may take the form of a lease or an
installment purchase or conditional sales contract to acquire a wide variety of
equipment and facilities. Interest payments on qualifying municipal leases are
exempt from federal income taxes and state income taxes within the state of
issuance. The fund may invest in municipal leases containing "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for the
purpose by the applicable legislative body on a yearly or other periodic basis.

      Municipal leases that the fund may acquire will be both rated and unrated.
Rated leases that may be held by the fund include those rated investment grade
at the time of investment. The fund may acquire unrated issues that the manager
deems to be comparable in quality to rated issues in which the fund is
authorized to invest. A determination by the manager that an unrated lease
obligation is comparable in quality to a rated lease obligation will be made on
the basis of, among other things, a consideration of whether the nature of the
leased equipment or other property is such that its ownership or use is
reasonably essential to a governmental function of the issuing municipality. In
addition, all such determinations made by the manager will be subject to
oversight and approval by the fund's board of directors.

      Municipal leases held by the fund are considered illiquid securities
unless the fund's board of directors determines on an ongoing basis that the
leases are readily marketable. An unrated municipal lease with a
non-appropriation risk that is backed by an irrevocable bank letter of credit or
an insurance policy issued by a bank or insurer deemed by the manager to be of
high quality and minimal credit risk will not be deemed to be illiquid solely
because the underlying municipal lease is unrated, if the manager determines
that the lease is readily marketable because it is backed by the letter of
credit or insurance policy.

      Municipal leases are subject to special risks described below under "Risk
Factors and Special Considerations." To limit those risks, the fund will invest
no more than 5% of its total assets in lease obligations that contain
non-appropriation clauses and will only purchase a non-appropriation lease
obligation with respect to which (1) the nature of the leased equipment or other
property is such that its ownership or use is reasonably essential to a
governmental function of the issuing municipality, (2) the lease payments will
begin to amortize the principal balance due at an early date, resulting in an
average life of five years or less for the lease obligation, (3) appropriate
covenants will be obtained from the municipal obligor


12
<PAGE>

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Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

prohibiting the substitution or purchase of similar equipment or other property
if lease payments are not appropriated, (4) the lease obligor has maintained
good market acceptability in the past, (5) the investment is of a size that will
be attractive to institutional investors and (6) the underlying leased equipment
or other property has elements of portability and/or use that enhance its
marketability in the event that foreclosure on the underlying equipment or other
property were ever required.

      Zero Coupon Securities. The fund may invest its assets in zero coupon
municipal obligations. Zero coupon municipal obligations are generally divided
into two categories: pure zero obligations, which are those that pay no interest
for their entire term, and zero/fixed obligations, which pay no interest for
some initial period and thereafter pay interest currently. In the case of a pure
zero obligation, the failure to pay interest currently may result from the
obligation's having no stated interest rate, in which case the obligation pays
only principal at maturity and is issued at a discount from its stated principal
amount. A pure zero obligation may, in the alternative, specify a stated
interest rate, but provide that no interest is payable until maturity, in which
case accrued unpaid interest on the obligation may be capitalized as incremental
principal. The value to the investor of a zero coupon municipal obligation
consists of the economic accretion either of the difference between the purchase
price and the nominal principal amount (if no interest is stated to accrue) or
of accrued, unpaid interest during the municipal obligation's life or payment
deferral period.

      Custodial Receipts. The fund may acquire custodial receipts or
certificates underwritten by securities dealers or banks that evidence ownership
of future interest payments, principal payments or both on certain municipal
obligations. The underwriter of these certificates or receipts typically
purchases municipal obligations and deposits the obligations in an irrevocable
trust or custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Custodial receipts
evidencing specific coupon or principal payments have the same general
attributes as zero coupon municipal obligations described above. Although under
the terms of a custodial receipt, the fund would be typically authorized to
assert its rights directly against the issuer of the underlying obligation, the
fund could be required to assert through the custodian bank those rights as may
exist against the underlying issuer. Thus, in the event the underlying issuer
fails to pay principal and/or interest when due, the fund may be subject to
delays, expenses and risks that are greater than those that would have been
involved if the fund had purchased a direct obligation of the issuer. In
addition, in the event that the trust or custodial account in which the
underlying security has been deposited is determined to be an association
taxable as a corporation, instead of a non-taxable entity, the yield on the
underlying security would be reduced in recognition of any taxes paid and the
income earned by the fund could be taxable.


                                                                              13
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--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

      Municipal Obligation Components. The fund may invest in municipal
obligations, the interest rate on which has been divided by the issuer into two
different and variable components, which together result in a fixed interest
rate. Typically, the first of the components (auction component) pays an
interest rate that is reset periodically through an auction process, whereas the
second of the components (residual component) pays a residual interest rate
based on the difference between the total interest paid by the issuer on the
municipal obligation and the auction rate paid on the auction component. The
fund may purchase both auction and residual components.

      Because the interest rate paid to holders of residual components, which
are also sometimes referred to as "inverse floaters," is generally determined by
subtracting the interest rate paid to the holders of auction components from a
fixed amount, the interest rate paid to residual component holders will decrease
as the auction component's rate increases and increase as the auction
component's rate decreases. Moreover, the extent of the increases and decreases
in market value of residual components may be larger than comparable changes in
the market value of an equal principal amount of a fixed rate municipal
obligation having similar credit quality, redemption provisions and maturity.

      Floating and Variable Rate Instruments. The fund may purchase floating and
variable rate demand notes and bonds, which are municipal obligations normally
having a stated maturity in excess of one year, but which permit their holder to
demand payment of principal at any time, or at specified intervals. The issuer
of floating and variable rate demand obligations normally has a corresponding
right, after a given period, to prepay at its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days' notice to the holders of the obligations. The interest rate on a
floating rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time that rate is
adjusted. The interest rate on a variable rate demand obligation is adjusted
automatically at specified intervals. Frequently, floating and variable rate
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Use of letters of credit or other credit support
arrangements will not adversely affect the tax-exempt status of these
obligations.

      Because they are direct lending arrangements between the lender and
borrower, floating and variable rate obligations will generally not be traded.
In addition, no secondary market generally exists for these obligations,
although their holders may demand their payment at face value. For these
reasons, when floating and variable rate obligations held by the fund are not
secured by letters of credit or other credit support arrangements, the fund's
right to demand payment is dependent on the ability of the borrower to pay
principal and interest on demand. The manager, on behalf of the fund, will
consider, on an ongoing basis, the creditworthiness of the


14
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Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

issuers of floating and variable rate demand obligations held by the fund. To
the extent the fund holds certain floating and variable rate demand obligations
or auction components, the fund may not, under certain market conditions, be
fully achieving its investment objective.

      Participation Interests. The fund may purchase from financial institutions
tax-exempt participation interests in municipal obligations. A participation
interest gives the fund an undivided interest in the municipal obligation in the
proportion that the fund's participation interest bears to the total amount of
the municipal obligation. These instruments may have floating or variable rates
of interest. If the participation interest is unrated, it will be backed by an
irrevocable letter of credit or guarantee of a bank that the fund's board of
directors has determined meets certain quality standards or the payment
obligation otherwise will be collateralized by obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (U.S. Government
securities). The fund will have the right, with respect to certain participation
interests, to demand payment, on a specified number of days' notice, for all or
any part of the fund's interest in the municipal obligation, plus accrued
interest. The fund intends to exercise its right with respect to these
instruments to demand payment only upon a default under the terms of the
municipal obligation or to maintain or improve the quality of the instruments it
holds. In addition, the fund will invest no more than 5% of its total assets in
participation interests.

      Taxable Investments

      Under normal conditions, the fund may hold up to 20% of its total assets
in cash or money market instruments, including taxable money market instruments
(collectively, taxable investments). In addition, the fund may take a temporary
defensive posture and invest without limitation in short-term municipal
obligations and taxable investments, upon a determination by the manager that
market conditions warrant such a posture. To the extent the fund holds taxable
investments, the fund will not be pursuing its investment objective.

      Money market instruments in which the fund may invest include: U.S.
Government securities; tax-exempt notes of municipal issuers rated, at the time
of purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or, if
not rated, by issuers having outstanding, unsecured debt then rated within the
three highest rating categories; bank obligations (including certificates of
deposit, time deposits and bankers' acceptances of domestic banks, domestic
savings and loan associations and similar institutions); commercial paper rated
no lower than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent from
another nationally recognized rating agency or, if unrated, of an issuer having
an outstanding, unsecured debt issue then rated within the three highest rating
categories; and repurchase agreements. At no time will the fund's investments in
bank obligations, including time deposits, exceed 25% of the value of its
assets.


                                                                              15
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

      U.S. Government securities in which the fund may invest include direct
obligations of the United States and obligations issued by U.S. Government
agencies and instrumentalities. Included among direct obligations of the United
States are Treasury bills, Treasury notes and Treasury bonds, which differ
principally in terms of their maturities. Included among the securities issued
by U.S. Government agencies and instrumentalities are: securities that are
supported by the full faith and credit of the United States (such as Government
National Mortgage Association certificates); securities that are supported by
the right of the issuer to borrow from the U.S. Treasury (such as securities of
Federal Home Loan Banks); and securities that are supported only by the credit
of the instrumentality (such as Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation bonds).

      The fund may enter into repurchase agreement transactions with member
banks of the Federal Reserve System or with certain dealers listed on the
Federal Reserve Bank of New York's list of reporting dealers. A repurchase
agreement is a contract under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price on an
agreed-upon date. Under the terms of a typical repurchase agreement, the
portfolio would acquire an underlying debt obligation for a relatively short
period subject to an obligation of the seller to repurchase, and the fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the portfolio's holding period. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the fund's
holding period. Under each repurchase agreement, the selling institution will be
required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price.

      The value of the securities underlying a repurchase agreement of the fund
will be monitored on an ongoing basis by the manager to ensure that the value is
at least equal at all times to the total amount of the repurchase obligation,
including interest. The manager will also monitor, on an ongoing basis to
evaluate potential risks, the creditworthiness of the banks and dealers with
which the fund enters into repurchase agreements.

      Investment Techniques

      The fund may employ, among others, the investment techniques described
below, which may give rise to taxable income:

      When-Issued and Delayed Delivery Securities. The fund may purchase
securities on a when-issued basis, or may purchase or sell securities for
delayed delivery. In when-issued or delayed delivery transactions, delivery of
the securities occurs beyond normal settlement periods, but no payment or
delivery will be made by the fund prior to the actual delivery or payment by the
other party to the transaction. The fund will not accrue income with respect to
a when-issued or


16
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

delayed delivery security prior to its stated delivery date. The fund will
establish with PNC Bank a segregated account consisting of cash, or liquid
securities having a value equal to or greater than the fund's purchase
commitments marked to market daily, pursuant to guidelines. Placing securities
rather than cash in the segregated account may have a leveraging effect on the
fund's net asset value per share.

      Stand-By Commitments. The fund may acquire "stand-by commitments" with
respect to municipal obligations it holds. Under a stand-by commitment, which
resembles a put option, a broker, dealer or bank is obligated to repurchase at
the fund's option specified securities at a specified price. Each exercise of a
stand-by commitment, therefore, is subject to the ability of the fund's
counterparty to make payment on demand. The fund will acquire stand-by
commitments solely to facilitate liquidity and does not intend to exercise the
rights afforded by the commitments for trading purposes. The fund anticipates
that stand-by commitments will be available from brokers, dealers and banks
without the payment of any direct or indirect consideration. The fund may pay
for stand-by commitments if payment is deemed necessary, thus increasing to a
degree the cost of the underlying municipal obligation and similarly decreasing
the obligation's yield to investors.

      Financial Futures and Options Transactions. To hedge against a decline in
the value of municipal obligations it owns or an increase in the price of
municipal obligations it proposes to purchase, the fund may enter into financial
futures contracts and invest in options on financial futures contracts that are
traded on a U.S. exchange or board of trade. The futures contracts or options on
futures contracts that may be entered into by the fund will be restricted to
those that are either based on an index of municipal obligations or relate to
debt securities the prices of which are anticipated by the manager to correlate
with the prices of the municipal obligations owned or to be purchased by the
fund.

      In entering into a financial futures contract, the fund will be required
to deposit with the broker through which it undertakes the transaction an amount
of cash or cash equivalents equal to approximately 5% of the contract amount.
This amount, which is known as "initial margin," is subject to change by the
exchange or board of trade on which the contract is traded, and members of the
exchange or board of trade may charge a higher amount. Initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. In accordance with a process known
as "marking-to-market," subsequent payments, known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, the fund may elect to close the position by
taking an opposite position, which will operate to terminate the fund's existing
position in the contract.


                                                                              17
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

      A financial futures contract provides for the future sale by one party and
the purchase by the other party of a certain amount of a specified property at a
specified price, date, time and place. Unlike the direct investment in a futures
contract, an option on a financial futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in the financial
futures contract at a specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an option, 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 futures
margin account, which represents the amount by which the market price of the
futures contract 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. The potential
loss related to the purchase of an option on financial futures contracts is
limited to the premium paid for the option (plus transaction costs). The value
of the option may change daily, and that change would be reflected in the net
asset value of the fund.

      Regulations of the Commodity Futures Trading Commission applicable to the
fund require that its transactions in financial futures contracts and options on
financial futures contracts be engaged in for bona fide hedging purposes or
other permitted purposes, and that no such transactions may be entered into by
the fund if the aggregate initial margin deposits and premiums paid by the fund
exceed 5% of the market value of its assets. In addition, the fund will, with
respect to its purchases of financial futures contracts, establish a segregated
account consisting of cash or liquid securities in an amount equal to the total
market value of the futures contracts, less the amount of initial margin on
deposit for the contracts. The fund's ability to trade in financial futures
contracts and options on financial futures contracts may be limited to some
extent by the requirements of the Code applicable to a regulated investment
company that are described below under "Taxation."

      Lending Securities. The fund is authorized to lend securities it holds to
brokers, dealers and other financial organizations, but it will not lend
securities to any affiliate of the manager, including Salomon Smith Barney,
unless the fund applies for and receives specific authority to do so from the
SEC. Loans of the fund's securities, if and when made, may not exceed 331/3 % of
the fund's assets taken at value. The funds's loans of securities will be
collateralized by cash, letters of credit or U.S. Government securities that
will be maintained at all times in a segregated account with PNC Bank in an
amount equal to the current market value of the loaned securities. From time to
time, the fund may pay a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the fund and that is acting as a "finder."

      By lending its securities, the fund can increase its income by continuing
to receive interest on the loaned securities, by investing the cash collateral
in short-


18
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--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

term instruments or by obtaining yield in the form of interest (which is taxable
to shareholders as ordinary income) paid by the borrower when U.S. Government
securities are used as collateral. The fund will adhere to the following
conditions whenever it lends its securities: (1) the fund must receive at least
100% cash collateral or equivalent securities from the borrower which amount of
collateral will be maintained by daily marking to market; (2) the borrower must
increase the collateral whenever the market value of the securities loaned rises
above the level of the collateral; (3) the fund must be able to terminate the
loan any time; (4) the fund must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned securities,
and any increase in market value; (5) the fund may pay only reasonable custodian
fees in connection with the loan; and (6) voting rights on the loaned securities
may pass to the borrower, except that, if a material event adversely affecting
the investment in the loaned securities occurs, the fund's board of directors
must terminate the loan and retain the fund's right to vote the securities.

--------------------------------------------------------------------------------
Risk Factors and Special Considerations
--------------------------------------------------------------------------------

      There are various risks associated with an investment in the fund. You
should consider whether the fund is an appropriate investment for you. The fund
invests substantially all of its assets in municipal obligations of California
issuers, and circumstances or events that affect the value of California
municipal obligations or the State of California will affect the fund's net
asset value. While certain risks are described elsewhere in this prospectus, the
following is intended to provide a summary of the principal risks of an
investment in the fund.

      Interest rate sensitivity

      o Municipal obligations are fixed-income securities which are sensitive to
changes in interest rates. Generally, when interest rates are rising, the value
of the fund's fixed-income securities can be expected to decrease. When interest
rates are declining, the value of the fund's fixed-income securities can be
expected to increase. The fund's net asset value will fluctuate in response to
the increasing or decreasing value of the fund's fixed-income securities.

      Less liquid markets for some municipal obligations

      o The market for municipal obligations and especially unrated obligations
may be less liquid than for corporate bonds. Less liquid markets tend to be more
volatile and react more negatively to adverse publicity and investor perception
than more liquid markets.


                                                                              19
<PAGE>

--------------------------------------------------------------------------------
Risk Factors and Special Considerations (continued)
--------------------------------------------------------------------------------

      Issuer of a municipal obligation defaults or rating is downgraded

      o The issuer of a municipal obligation may not be able to make timely
payments of interest and principal because of general economic downturns or
adverse allocation of government cost burdens. This risk of default may be
greater for private activity bonds or other municipal obligation whose payments
are dependent upon a specific source of revenue. Adverse changes in the issuer's
financial condition may negatively affect its credit rating or presumed
creditworthiness. These developments would adversely affect the market value of
the issuer's obligations.

      Issuer of a municipal obligation declares bankruptcy

      o The issuer of a municipal obligation might declare bankruptcy. To
enforce its rights to interest and principal, the fund might be required to take
possession of and manage the assets securing the issuer's obligation. This may
increase the fund's expenses, reduce its net asset value and increase the amount
of the fund's distributions in taxable form.

      Adverse governmental action

      o The U.S. government has enacted laws that have restricted or diminished
the income tax exemption on some municipal obligations and it may do so again in
the future. If this were to happen, shareholders could receive more of the
distributions from the fund in taxable form.

      o The creditworthiness of issuers of California obligations is highly
dependent upon the continued strength of the California economy. Governmental
activity, either at the federal or state levels, that negatively impacts the
California economy may adversely affect the value of the fund's investments.

      o Voters in California have adopted ballot initiatives in the past
restricting revenue sources of state and local governments. The adoption of
restrictive measures or the passage of tax reduction legislation by the
California Assembly may adversely affect the ability of issuers of California
obligations to make timely payment of principal or interest.

      Other

      o The issuer of a municipal obligation may be obligated to redeem the
security at face value, but if the fund paid more than face value for the
security, the fund may lose money on the security when it is sold.

      o There may be less extensive information available about the financial
condition of issuers of municipal obligations than for corporate issuers with
publicly traded securities.


20
<PAGE>

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Risk Factors and Special Considerations (continued)
--------------------------------------------------------------------------------

      When-Issued and Delayed Delivery Transactions

      The fund may use when-issued and delayed delivery transactions to purchase
securities. The value of securities purchased in these transactions may decrease
before they are delivered to the fund. Also, the yield on securities purchased
in these transactions may be higher in the market when the delivery takes place.

      Financial Futures and Options

      The fund may use financial futures contracts and options on these
contracts to protect the fund from a decline in the price of municipal
obligations it owns or an increase in the price of a municipal obligation it
plans to buy.

      o Because it is not possible to correlate perfectly the price of the
securities being hedged with the price movement in a futures contract, it is not
possible to provide a perfect offset on losses on the futures contract or the
option on the contract. Losses on the fund's security may be greater than gains
on the future contract, or losses on the futures contract may be greater than
gains on the securities subject to the hedge.

      o To compensate for imperfect correlation, the fund may over-hedge or
under-hedge by entering into a futures contract or options on futures contracts
in dollar amounts greater or lesser than the dollar amounts of the securities
being hedged. If market movements are not as anticipated, the fund could lose
money from these positions.

      o If the fund hedges against an increase in interest rates, and rates
decline instead, the fund will lose all or part of the benefit of the increase
in value of the securities it hedged because it will have offsetting losses in
its futures or options positions. Also, in order to meet margin requirements,
the fund may have to sell securities at a time it would not normally choose.

      Concentration in California obligations

      The fund concentrates its investments in California obligations and this
involves additional risk to the fund that you should consider before you invest
in the fund. The following is a summary of special factors affecting California
obligations.

      Generally. From the late 1980s through the early 1990s, an economic
recession eroded California's revenue base. At the same time, rapid population
growth caused State expenditures to exceed budget appropriations.

      o     As a result, California experienced a period of sustained budget
            imbalance.

      o     Since that time the California economy has improved and the extreme
            budgetary pressures have begun to lessen.


                                                                              21
<PAGE>

--------------------------------------------------------------------------------
Risk Factors and Special Considerations (continued)
--------------------------------------------------------------------------------

      State Government. The 2000-01 Budget Act allocated a State budget of
approximately $78.2 billion and contains tax reductions totaling $545 million.
Despite this somewhat improved state, California's budget is still subject to
certain unforeseeable events. For example:

      o     In December, 1994, Orange County and its investment pool filed for
            bankruptcy. While a settlement has been reached, the full impact on
            the State and Orange County is still unknown.

      o     California faces constant fluctuations in other expenses (including
            health and welfare caseloads, property tax receipts, federal funding
            and natural disaster relief) that will undoubtedly create new
            budgetary pressure and reduce issuers' ability to pay their debts.

      o     California's general obligation bonds were recently rated Aa3 by
            Moody's and AA- by S&P. The ratings merely reflect the opinions of
            the rating agencies and can change at any time. See Appendix A.

      o     California's economy is dependent to some extent on the ability of
            its local businesses to export goods to foreign markets. Global
            events that adversely affect foreign markets may adversely affect
            the California economy.

      Other Risks. An issuers' ability to make payments on bonds (and the
remedies available to bondholders) could also be adversely affected by the
following constraints:

      o     Certain provisions of California's Constitution, laws and regulatory
            system contain tax, spending and appropriations limits and prohibit
            certain new taxes.

      o     Certain other California laws subject the users of bond proceeds to
            strict rules and limits regarding revenue repayment.

      o     Bonds of health care institutions which are subject to the strict
            rules and limits regarding reimbursement payments of California's
            Medi-Cal program for health care services to welfare recipients and
            bonds secured by liens on real property are two of the types of
            bonds affected by these provisions.

--------------------------------------------------------------------------------
Investment Restrictions
--------------------------------------------------------------------------------

      The fund has adopted certain fundamental investment restrictions that may
not be changed without the prior approval of the holders of a majority of the
fund's outstanding voting securities as defined in the 1940 Act. All percentage
limitations included in the investment restrictions below apply immediately
after a purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations will not require the
fund to dispose of any security that it holds. Under its fundamental
restrictions, the fund may not:


22
<PAGE>

--------------------------------------------------------------------------------
Investment Restrictions (continued)
--------------------------------------------------------------------------------

      1. Borrow money, except for temporary or emergency purposes, or for
      clearance of transactions, and then only in amounts not exceeding 15% of
      its total assets (not including the amount borrowed) and as otherwise
      described in this prospectus. When the fund's borrowings exceed 5% of the
      value of its total assets, the fund will not make any additional
      investments.

      2. Sell securities short or purchase securities on margin, except for
      short-term credits as are necessary for the clearance of transactions, but
      the fund may make margin deposits in connection with transactions in
      options, futures and options on futures.

      3. Underwrite any issue of securities, except to the extent that the
      purchase of municipal obligations may be deemed to be an underwriting.

      4. Purchase, hold or deal in real estate or oil and gas interests, except
      that the fund may invest in municipal obligations secured by real estate
      or interests in real estate.

      5. Invest in commodities, except that the fund may enter into futures
      contracts, including those relating to indexes, and options on futures
      contracts or indexes, as described in this prospectus.

      6. Lend any funds or other assets, except through purchasing municipal
      obligations or taxable investments, lending securities and entering into
      repurchase agreements consistent with the fund's investment objective.

      7. Issue senior securities.

      8. Invest more than 25% of its total assets in the securities of issuers
      in any single industry, except that this limitation will not be applicable
      to the purchase of U.S. Government securities.

      9. Make any investments for the purpose of exercising control or
      management of any company.

--------------------------------------------------------------------------------
Share Price Data
--------------------------------------------------------------------------------

      The common stock is listed on the AMEX under the symbol "GCM." Salomon
Smith Barney currently intends to buy and sell the fund's shares in order to
make a market in the common stock.

      The following table sets forth the high and low sales prices for the
fund's common stock, the net asset value per share and the discount or premium
to net asset value represented by the quotation for each quarterly period for
the two most recent fiscal years and each full fiscal quarter since the
beginning of the current fiscal year.


                                                                              23
<PAGE>

--------------------------------------------------------------------------------
Share Price Data (continued)
--------------------------------------------------------------------------------

                   Quarterly High Price               Quarterly Low Price
                   --------------------               -------------------
                                     Premium                           Premium
             Net Asset     AMEX    (Discount)   Net Asset    AMEX    (Discount)
               Value       Price     to NAV       Value      Price     to NAV
================================================================================


02/28/99       $14.47     $14.000    (3.25)%     $14.40     $12.500    (31.19)%


05/31/99        14.34      13.188    (8.04)       14.14      12.000    (15.13)

08/31/99        14.05      12.375   (11.92)       13.84      11.750    (15.10)

11/30/99        13.33      12.625    (5.29)       13.20      11.375    (13.83)

02/29/00        13.20      11.375   (13.83)       12.78      10.375    (18.82)

05/31/00        13.41      11.313   (15.64)       12.87      10.750    (16.47)

08/31/00        13.73      11.938   (13.06)       13.08      11.125    (14.95)

11/30/00

================================================================================

      As of December , 2000, the price per share of common stock as quoted on
the AMEX was $ . , representing a . % discount from the common stock's net asset
value calculated on that day.


24
<PAGE>

--------------------------------------------------------------------------------
Management of the Fund
--------------------------------------------------------------------------------

      Directors and Officers

      The business and affairs of the fund, including the general supervision of
the duties performed by the manager under the management agreement, are the
responsibility of the fund's board of directors. The Directors and officers of
the fund, their addresses and their principal occupations for at least the past
five years are set forth below:

                                                       Principal Occupations
                            Positions Held                During Past Five
Name and Address            with the Fund                   Years and Age
================================================================================

*+Heath B. McLendon         Chairman of the Board of   Managing Director of
  Seven World Trade Center  Directors, President and   Salomon Smith Barney;
  New York, NY 10048        Chief Executive Officer    Director of 78 investment
                                                       companies associated with
                                                       Citigroup, Inc.; Director
                                                       and President of SSB Citi
                                                       and Travelers Investment
                                                       Adviser, Inc. ("TIA");
                                                       67.


 +Lee Abraham               Director                   Retired; Director or
  13732 LeHavre Drive                                  trustee of twelve
  Frenchman's Creek                                    investment companies
  Palm Beach Gardens, FL 33410                         associated with
                                                       Citigroup; Director of R.
                                                       G. Barry Corp., and of
                                                       Signet Group plc;
                                                       formerly Chairman and
                                                       Chief Executive Officer
                                                       of Associated
                                                       Merchandising
                                                       Corporation; formerly
                                                       Director of Galey & Lord
                                                       and of Liz Claiborne; 73.


 +Allan J. Bloostein        Director                   Consultant; Director or
  425 Park Avenue, 27th Fl.                            trustee of 19 investment
  New York, NY 10022                                   companies associated with
                                                       Citigroup; formerly Vice
                                                       Chairman and Director of
                                                       The May Department Stores
                                                       Company; Director of CVS
                                                       Corp. and of Taubman
                                                       Centers; 71.

 +Jane Dasher               Director                   Investment Officer of
  283 Greenwich Ave.                                   Korsant Partners, a
  Greenwich, CT 06830                                  family investment
                                                       company; Director or
                                                       trustee of twelve
                                                       investment companies
                                                       associated with
                                                       Citigroup. Prior to 1997,
                                                       an Independent Financial
                                                       Consultant; 50.

 +Donald R. Foley           Director                   Retired; Director of
  3668 Freshwater Drive                                twelve investment compa-
  Jupiter, FL 33477                                    nies associated with
                                                       Citigroup. Formerly Vice
                                                       President of Edwin Bird
                                                       Wilson, Incorporated
                                                       (advertising), 78.

 +Paul Hardin               Director                   Professor of Law at the
  60134 Davie Street                                   University of North
  Chapel Hill, NC 27599                                Carolina at Chapel Hill;
                                                       Director of 14 investment
                                                       companies associated with
                                                       Citigroup; Director of
                                                       The Summit
                                                       Bancorporation. Formerly,
                                                       Chancellor of the
                                                       University of North
                                                       Carolina at Chapel Hill;
                                                       69.
================================================================================

*     Director who is an "interested person" of the fund as defined in the 1940
      Act.
+     Director, trustee and/or general partner of other investment companies
      registered under the 1940 Act with which Salomon Smith Barney is
      affiliated.


                                                                              25
<PAGE>

--------------------------------------------------------------------------------
Management of the Fund (continued)
--------------------------------------------------------------------------------

                                                       Principal Occupations
                            Positions Held                During Past Five
Name and Address            with the Fund                   Years and Age
================================================================================

 Richard E. Hanson, Jr.     Director                   Retired; formerly Head of
 2751 Vermount Route 140                               The New Atlanta Jewish
 Poultney, VT 05764                                    Community High School,
                                                       Atlanta Georgia; formerly
                                                       Headmaster Lawrence
                                                       Country Day
                                                       School--Woodmere Academy;
                                                       Director or trustee of 14
                                                       investment companies
                                                       associated with
                                                       Citigroup; 59.

+Roderick C. Rasmussen      Director                   Investment Counselor;
 9 Cadence Court                                       Director of twelve
 Morristown, NJ 07960                                  investment companies
                                                       associated with Citi-
                                                       group. Formerly Vice
                                                       President of Dresdner and
                                                       Company Inc. (Investment
                                                       counselors); 74.

+John P. Toolan             Director                   Retired; Director of
 13 Chadwell Place                                     twelve investment com-
 Morristown, NJ 07960                                  panies associated with
                                                       Citigroup; Trustee of
                                                       John Hancock Funds.
                                                       Formerly Director and
                                                       Chairman of Smith Barney
                                                       Trust Company and
                                                       Director of Smith Barney
                                                       Inc. and SSB Citi; 70.

 Lewis F. Daidone           Senior Vice President      Managing Director of
 125 Broad Street           and Treasurer              Salomon Smith Barney,
 New York, NY 10004                                    Senior Vice President and
                                                       Treasurer of 61
                                                       investment companies
                                                       associated with
                                                       Citigroup; Director and
                                                       Senior Vice President of
                                                       SSB Citi and TIA; 43.

 Joseph P. Deane            Vice President and         Managing Director of
 Seven World Trade Center   Investment Officer         Salomon Smith Barney and
 New York, NY 10048                                    investment officer of
                                                       other investment
                                                       companies associated with
                                                       Citigroup; 53.

 Paul Brook                 Controller                 Director of Salomon Smith
 125 Broad Street                                      Barney and Controller and
 New York, NY 10004                                    Assistant Treasurer of 43
                                                       investment companies
                                                       associated with
                                                       Citigroup; prior to 1998,
                                                       Managing Director of AMT
                                                       Capital Services Inc.;
                                                       prior to 1997, Partner
                                                       with Ernst & Young LLP;
                                                       47.

 Christina T. Sydor         Secretary                  Managing Director of
 Seven World Trade Center                              Salomon Smith Barney;
 New York, NY 10048                                    Secretary of 61
                                                       investment companies
                                                       associated with
                                                       Citigroup; Secretary and
                                                       General Counsel of SSB
                                                       Citi and TIA; 49.

================================================================================


+     Director, trustee and/or general partner of other investment companies
      registered under the 1940 Act with which Salomon Smith Barney is
      affiliated.


      Fees for directors who are not "interested persons" of the fund, all of
whom are board members of a group of funds sponsored by Salomon Smith Barney,
are set at $60,000 per annum and are allocated based on relative net assets of
each fund in the group. In addition, these directors receive $2,500 for each
board meeting attended and $100 for each telephone meeting plus reimbursement
for travel and out-of-pocket expenses incurred in connection with board
meetings.


26
<PAGE>

--------------------------------------------------------------------------------
Management of the Fund (continued)
--------------------------------------------------------------------------------


      The following table shows the compensation paid by the fund to each person
who was a director during the fund's fiscal year ended August 31, 2000.


                               COMPENSATION TABLE

<TABLE>
<CAPTION>

Total
                                       Pension or            Compensation
Number of
                                       Retirement              from Fund
Funds for
                     Aggregate      Benefits Accrued           and Fund
Which Director
                   Compensation        as part of               Complex
Serves Within
Name of Person       from Fund        Fund Expenses        Paid to Directors
Fund Complex
--------------       ---------        -------------        -----------------
------------
<S>                    <C>                   <C>               <C>
<C>
Lee Abraham            $ 30                  0                 $ 71,133
12
Allan J. Bloostein       30                  0                  112,483
19
Jane F. Dasher          130                  0                        0
12
Donald R. Foley         119**                0                   71,300
12
Richard E. Hanson       130                  0                   68,233
14
Paul Hardin             130                  0                   90,450
14
Heath B. McLendon*        0                  0                        0
78
Roderick C. Rasmussen   120**                0                   71,200
12
John P. Toolan          130**                0                   69,100
12
</TABLE>

----------

*     Designates a director who is an "interested person" of the fund as defined
      under the 1940 Act.


**    Pursuant to the fund's deferred compensation plan, the indicated directors
      elected to defer the following amounts of their compensation from the
      fund: Donald R. Foley -- $16, Roderick C. Rasmussen -- $10 and John P.
      Toolan -- $130. and the following amounts of their total compensation from
      the fund complex: Donald R. Foley -- $27,000, Roderick C. Rasmussen --
      $22,500 and John P. Toolan -- $57,400.

      Upon attainment of age 72 the fund's current directors may elect to change
      to emeritus status. Any directors elected or appointed to the board of
      directors in the future will be required to change to emeritus status upon
      attainment of age 80. Directors emeritus are entitled to serve in emeritus
      status for a maximum of 10 years during which time they are paid 50% of
      the annual retainer fee and meeting fees otherwise applicable to the
      fund's directors, together with reasonable out-of-pocket expenses for each
      meeting attended. During the fund's last fiscal year, total compensation
      paid by the fund to directors emeritus totalled $15.

      At the close of business on October 25, 2000, 3,620,352 shares of common
stock, or 99.04% of the fund's total shares outstanding on that date, were held
of record, but not beneficially owned, by CEDE & Co., c/o The Depository Trust
Company, Box 20, Bowling Green Station, NY, NY 10004-9998. As of that date, the
officers and Board members of the fund as a group beneficially owned less than
1% of the outstanding shares of the fund.


      Investment Manager


      SSB Citi serves as the fund's investment manager. The manager provides
investment advisory and management services to investment companies affiliated
with Salomon Smith Barney. SSB Citi was incorporated in 1968 and manages
investment companies that had total assets in excess of $ billion as of November
30, 2000. SSB Citi is located at Seven World Trade Center, New York, New York
10048. The manager and Salomon Smith Barney are subsidiaries of Citigroup Inc.
Citigroup businesses produce a broad range of financial services -- asset
management, banking and consumer finance, credit and charge cards, insurance,



                                                                              27
<PAGE>

--------------------------------------------------------------------------------
Management of the Fund (continued)
--------------------------------------------------------------------------------

investments, investment banking and trading -- and use diverse channels to make
them available to consumer and corporate customers around the world.


      Subject to the supervision and direction of the fund's board of directors,
the manager manages the securities held by the fund in accordance with the
fund's stated investment objectives and policies, makes investment decisions for
the fund, places orders to purchase and sell securities on behalf of the fund
and employs managers and securities analysts who provide research services to
the fund. SSB Citi also provides certain administration services to the fund,
including overseeing the fund's non-investment operations and its relations with
other service providers and providing executive and other officers to the fund.
The fund pays the manager a management fee for the services provided to the fund
that is computed daily and paid monthly at the annual rate of 0.90% of the value
of the fund's average daily net assets, which is higher than the rates for
similar services paid by other recently organized publicly offered, closed-end
management investment companies that have investment objectives and policies
similar to those of the fund. For the fiscal year ended August 31, 2000, the
fund paid $435,467 in management fees to SSB Citi.


      Citigroup is a bank holding company subject to regulation under the Bank
Holding Company Act of 1956 (the "BHCA") and certain other laws and regulations.

      Salomon Smith Barney and the manager believe that the manager's services
under the Management Agreement and the market-making activities performed by
Salomon Smith Barney are not underwriting and are consistent with the BHCA and
other federal and state laws applicable to Citigroup. However, there is little
controlling precedent regarding the performance of the combination of investment
advisory and administrative activities by subsidiaries of bank holding
companies. If Salomon Smith Barney and the manager, or their affiliates, were to
be prevented from acting as the manager or administrator, the fund would seek
alternative means for obtaining these services. The fund does not expect that
shareholders would suffer any adverse financial consequences as a result of any
such occurrence.

      Joseph P. Deane, vice president and investment officer of the fund, is
primarily responsible for management of the fund's assets. Mr. Deane is a
managing director of Salomon Smith Barney and is the senior asset manager for
seven other investment companies.

      The manager bears all expenses in connection with the performance of the
services it provides to the fund. The fund will bear all other expenses to be
incurred in its operation including, but not limited to, the costs incurred in
connection with the fund's organization; management fees; fees for necessary
professional and brokerage services fees for any pricing service; the costs of
regulatory compliance; the costs associated with maintaining the fund's
corporate existence; and costs of corresponding with the fund's shareholders.


28
<PAGE>

--------------------------------------------------------------------------------
Securities Transactions and Turnover
--------------------------------------------------------------------------------

      General

      The fund's securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which the manager determines
that the best prices or execution will be obtained. Usually no brokerage
commissions, as such, are paid by the fund for purchases and sales undertaken
through principal transactions, although the price paid usually includes an
undisclosed compensation to the dealer. The prices paid to underwriters of newly
issued securities typically include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers ordinarily
are executed at a price between the bid and asked price.

      Transactions on behalf of the fund are allocated to various dealers by the
manager in its best judgment. The primary consideration is prompt and effective
execution of orders at the most favorable price. Subject to that primary
consideration, dealers may be selected for research, statistical or other
services to enable the manager to supplement its own research and analysis with
the views and information of other securities firms.

      Research services furnished by broker-dealers through which the fund
effects securities transactions may be used by the manager in managing other
investment funds and accounts and conversely, research services furnished to the
manager by broker-dealers in connection with other funds and accounts the
manager advises may be used by the manager in advising the fund. Although it is
not possible to place a dollar value on these services, the manager is of the
view that the receipt of the services should not reduce the overall costs of its
research services.

      Investment decisions for the fund are made independently from those of
other investment companies or accounts managed by the manager. If those
investment companies or accounts are prepared to invest in, or desire to dispose
of, municipal obligations or taxable investments at the same time as the fund,
however, available investments or opportunities for sales will be allocated
equitably to each client of the manager. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by the
fund or the price paid or received by the fund.

      Turnover

      The fund cannot accurately predict its turnover rate, but anticipates that
its annual turnover rate will not exceed 100%. The fund's turnover rate is
calculated by dividing the lesser of the fund's sales or purchases of securities
during a year (excluding any security the maturity of which at the time of
acquisition is one year or less) by the average monthly value of the fund's
securities for the year. Higher turnover rates can result in corresponding
increases in the fund's transaction costs.


                                                                              29
<PAGE>

--------------------------------------------------------------------------------
Securities Transactions and Turnover(continued)
--------------------------------------------------------------------------------

The fund will not consider turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies.

--------------------------------------------------------------------------------
Dividends and Distributions; Dividend Reinvestment Plan
--------------------------------------------------------------------------------

      The fund expects to pay monthly dividends of substantially all net
investment income to the holders of the common stock. Net investment income is
income (including tax-exempt income and accrued original issue discount income)
other than net realized capital gains. Under the fund's current policy, which
may be changed at any time by its board of directors, the fund's monthly
dividends will be paid at a level that reflects the past and projected
performance of the fund, which policy over time will result in the distribution
of all net investment income of the fund. From time to time, when the fund makes
a capital gains distribution, it may do so in lieu of paying its regular monthly
dividend. Net income of the fund consists of all interest income accrued on the
fund's assets less all expenses of the fund. Expenses of the fund are accrued
each day. Net realized capital gains, if any, will be distributed to the
shareholders at least once per year.

      Under the fund's Dividend Reinvestment Plan (plan), a shareholder whose
shares of common stock are registered in his own name will have all
distributions from the fund reinvested automatically by PFPC as purchasing agent
under the plan, unless the shareholder elects to receive cash. Distributions
with respect to shares registered in the name of a brokerdealer or other nominee
(that is, in street name) will be reinvested by the broker or nominee in
additional shares under the plan, unless the service is not provided by the
broker or nominee or the shareholder elects to receive distributions in cash.
Investors who own common stock registered in street name should consult their
broker-dealers for details regarding reinvestment. All distributions to
shareholders who do not participate in the plan will be paid by check mailed
directly to the record holder by or under the direction of PFPC as dividend
paying agent.

      The number of shares of common stock distributed to participants in the
plan in lieu of a cash dividend is determined in the following manner. When the
market price of the common stock is equal to or exceeds the net asset value per
share of the common stock on the determination date (generally, the record date
for the distribution), plan participants will be issued shares of common stock
by the fund at a price equal to the greater of net asset value determined as
described below under "Net Asset Value" or 95% of the market price of the common
stock.

      If the market price of the common stock is less than the net asset value
of the common stock at the time of valuation (which is the close of business on
the determination date), or if the fund declares a dividend or capital gains
distribution payable only in cash, PFPC will buy common stock in the open
market, on the AMEX or elsewhere, for the participants' accounts. If following
the


30
<PAGE>

--------------------------------------------------------------------------------
Dividends and Distributions; Dividend Reinvestment Plan (continued)
--------------------------------------------------------------------------------

commencement of the purchases and before PFPC has completed its purchases, the
market price exceeds the net asset value of the common stock as of the valuation
time, PFPC will attempt to terminate purchases in the open market and cause the
fund to issue the remaining portion of the dividend or distribution in shares at
a price equal to the greater of (a) net asset value as of the valuation time or
(b) 95% of the then current market price. In this case, the number of shares
received by a plan participant will be based on the weighted average of prices
paid for shares purchased in the open market and the price at which the fund
issues the remaining shares. To the extent PFPC is unable to stop open market
purchases and cause the fund to issue the remaining shares, the average per
share purchase price paid by PFPC may exceed the net asset value of the common
stock as of the valuation time, resulting in the acquisition of fewer shares
than if the dividend or capital gains distribution had been paid in common stock
issued by the fund at such net asset value. PFPC will begin to purchase common
stock on the open market as soon as practicable after the determination date for
the dividend or capital gains distribution, but in no event shall such purchases
continue later than 30 days after the payment date for such dividend or
distribution, or the record date for a succeeding dividend or distribution,
except when necessary to comply with applicable provisions of the federal
securities laws.

      PFPC maintains all shareholder accounts in the plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each plan participant will be held
by PFPC in uncertificated form in the name of the plan participant.

      Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the plan. PFPC's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
fund. No brokerage charges apply with respect to shares of common stock issued
directly by the fund under the plan. Each plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the plan.

      Experience under the plan may indicate that changes to it are desirable.
The fund reserves the right to amend or terminate the plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The plan also may be amended or
terminated by PFPC, with the fund's prior written consent, on at least 30 days'
written notice to plan participants. All correspondence concerning the plan
should be directed by mail to PFPC Global Fund Services, P.O. Box 8209, Boston,
Massachusetts 02266-8209 or by telephone at 1-800-331-1710.


                                                                              31
<PAGE>

--------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------

      The net asset value of shares of the common stock will be calculated as of
the close of regular trading on the New York Stock Exchange (NYSE), currently
4:00 p.m. New York time, on each day on which the NYSE is open for trading. The
fund reserves the right to cause its net asset value to be calculated on a less
frequent basis as determined by the fund's board of directors. For purposes of
determining net asset value, futures contracts and options on futures contracts
will be valued 15 minutes after the close of regular trading on the NYSE.

      Net asset value per share of common stock is calculated based on the value
of the fund's total assets less liabilities. In general, the fund's investments
will be valued at market value, or, in the absence of market value, at fair
value as determined by or under the direction of the fund's board of directors.

      Short-term investments that mature in 60 days or less are valued on the
basis of amortized cost (which involves valuing an investment at its cost and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest rates on the market
value of the investment) when the board of directors has determined that
amortized cost represents fair value.

      The valuation of the fund's assets is made after consultation with an
independent pricing service approved by the fund's board of directors. When, in
the judgment of the service, quoted bid prices for investments are readily
available and are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid prices and asked
prices. Investments for which, in the judgment of the service, no readily
obtainable market quotation is available, are carried at fair value as
determined by the service, based on methods that include consideration of:
yields or prices of municipal obligations of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. The service may use electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of the service are
reviewed periodically by the officers of the fund under the general supervision
and responsibility of the board of directors, which may replace the service at
any time if it determines it to be in the best interests of the fund to do so.

--------------------------------------------------------------------------------
Taxation
--------------------------------------------------------------------------------

      The discussion set out below of tax considerations generally affecting the
fund and its shareholders is intended to be only a summary and is not intended
as a substitute for careful tax planning by prospective shareholders.


32
<PAGE>

--------------------------------------------------------------------------------
Taxation (continued)
--------------------------------------------------------------------------------

      Taxation of the Fund and its Investments

      The fund has qualified and intends to continue to qualify each year as a
"regulated investment company" under Subchapter M of the Code. In addition, the
fund intends to satisfy each year conditions contained in the Code that will
enable interest from municipal obligations, excluded from gross income for
federal income tax purposes with respect to the fund, to retain that tax-exempt
status when distributed to the shareholders of the fund (that is, to be
classified as "exempt-interest" dividends of the fund).

      As a regulated investment company, the fund pays no federal income taxes
on its taxable net investment income (that is, taxable income other than net
realized capital gains) and its net realized capital gains that are distributed
to shareholders. To qualify under Subchapter M of the Code, the fund must, among
other things: (1) distribute to its shareholders at least 90% of its taxable net
investment income (for this purpose consisting of taxable net investment income
and any net realized short-term capital gain in excess of net realized long-term
capital loss) and 90% of its tax-exempt net investment income (reduced by
certain expenses); (2) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not limited to,
gains from options, futures and forward contracts) derived with respect to the
fund's business of investing in securities; and (3) diversify its holdings so
that, at the end of each fiscal quarter of the fund (a) at least 50% of the
market value of the fund's assets is represented by cash, U.S. Government
securities and securities of other regulated investment companies, and other
securities, with those other securities limited, with respect to any one issuer,
to an amount no greater than 5% of the fund's assets and (b) not more than 25%
of the market value of the fund's assets is invested in the securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies) or of two or more issuers that the fund controls
and that are determined to be in the same or similar trades or businesses or
related trades or businesses. As a regulated investment company, the fund is
subject to a 4% non-deductible excise tax measured with respect to certain
undistributed amounts of ordinary income and capital gain. The fund pays
dividends and distributions necessary to avoid the application of this excise
tax.

      As described above, the fund may invest in financial futures contracts and
options on financial futures contracts that are traded on a U.S. exchange or
board of trade. As a general rule, these investment activities will increase or
decrease the amount of long-term and short-term capital gains or losses realized
by the fund and, thus, will affect the amount of capital gains distributed to
the fund's shareholders.

      For federal income tax purposes, gain or loss on the futures and options
described above (collectively referred to as "Section 1256 Contracts") would, as
a general rule, be taxed pursuant to a special "mark-to-market system." Under
the


                                                                              33
<PAGE>

--------------------------------------------------------------------------------
Taxation (continued)
--------------------------------------------------------------------------------

mark-to-market system, the fund may be treated as realizing a greater or lesser
amount of gains or losses than actually realized. As a general rule, gain or
loss on Section 1256 Contracts is treated as 60% long-term capital gain or loss
and 40% short-term capital gain or loss, and as a result, the mark-to-market
system will generally affect the amount of capital gains or losses taxable to
the fund and the amount of distributions taxable to a shareholder. Moreover, if
the fund invests in both Section 1256 Contracts and offsetting positions to
those contracts, then the fund might not be able to receive the benefit of
certain realized losses for an indeterminate period of time. The fund expects
that its activities with respect to Section 1256 Contracts and offsetting
positions to those Contracts (1) will not cause it or its shareholders to be
treated as receiving a materially greater amount of capital gains or
distributions than actually realized or received and (2) will permit it to use
substantially all of its losses for the fiscal years in which the losses
actually occur (to the extent it realizes corresponding gains in such years).

      Taxation of the Fund's Stockholders

      Dividends paid by the fund, other than dividends from taxable investments
and market discount on municipal obligations and from income or gain derived
from securities transactions and from the use of certain of the investment
techniques described under "Investment Objective and Management Policies --
Investment Techniques," are derived from interest on municipal obligations and
are exempt-interest dividends that may be excluded by shareholders from their
gross income for federal income tax purposes if the fund satisfies certain asset
percentage requirements. Distributions of the fund's net realized short-term
capital gains are taxable to shareholders of the fund as ordinary income, and
distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have held shares of common stock and whether the distributions are
received in cash or reinvested in additional shares. As a general rule, a
shareholder's gain or loss on a sale of his shares of common stock will be a
long-term gain or loss if he has held his shares for more than one year and will
be a short-term capital gain or loss if he has held his shares for one year or
less. Dividends and distributions paid by the fund do not qualify for the
federal dividends-received deduction for corporations.

      In general, investors should recognize that the benefits of the exemption
from state and local taxes, in addition to the exemption from federal taxes,
necessarily limits the fund's ability to diversify geographically.

      Exempt-Interest Dividends

      Interest on indebtedness incurred by a shareholder to purchase or carry
shares of common stock is not deductible for federal income tax purposes to the
extent it is deemed related to exempt-interest dividends. If a shareholder
receives exemptinterest dividends with respect to any share of common stock and
if the share is


34
<PAGE>

--------------------------------------------------------------------------------
Taxation (continued)
--------------------------------------------------------------------------------

held by the shareholder for six months or less, then any loss on the sale of the
share may, to the extent of the exempt-interest dividends, be disallowed. The
Code may also require a shareholder, if he receives exempt-interest dividends,
to treat as taxable income a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments. In addition, the portion of
any exempt-interest dividend paid by the fund that represents income derived
from private activity bonds held by the fund may not retain its tax-exempt
status in the hands of a shareholder who is a "substantial user" of a facility
financed by the bonds, or a "related person" of the substantial user. Although
the fund's exempt-interest dividends may be excluded by shareholders from their
gross income for federal income tax purposes, some or all of the fund's
exempt-interest dividends may be a specific preference item, or a component of
an adjustment item, for purposes of the federal individual and corporate
alternative minimum taxes. The receipt of dividends and distributions from the
Portfolio may affect a foreign corporate shareholder's federal "branch profits"
tax liability and the federal "excess net passive income" tax liability of a
shareholder of an S corporation. Shareholders should consult their own tax
advisors to determine whether they are (1) "substantial users" with respect to a
facility or "related" to those users within the meaning of the Code or (2)
subject to a federal alternative minimum tax, the federal "branch profits" tax,
or the federal "excess net passive income" tax.

      Dividend Reinvestment Plan

      A shareholder of the fund receiving dividends or distributions in
additional shares purchased in the open market pursuant to the plan should be
treated for federal income tax purposes as receiving a distribution in an amount
equal to the amount of money that a shareholder receiving cash dividends or
distributions receives, and should have a cost basis in the shares received
equal to that amount. With respect to distributions consisting of newly issued
shares of the fund, the amount of the distribution for tax purposes is the fair
market value of the issued shares on the payment date, and the difference
between such fair market value and the amount of cash the shareholder would
otherwise have received may be treated as a return of capital. In the case of
shares issued by the fund, the shareholder's tax basis in each share received is
its fair market value on the payment date, adjusted by any amount treated as a
return of capital to the shareholder.

      California Taxation

      California law relating to taxation of regulated investment companies and
their shareholders was generally conformed to federal law effective January 1,
1997. In any year in which the fund qualifies as a regulated investment company
under the Code and is exempt from federal income tax, (i) the fund will also be
exempt from the California corporate income and franchise taxes to the extent it
distributes its income and (ii) provided 50% or more of the value of the total
assets of the fund at


                                                                              35
<PAGE>

--------------------------------------------------------------------------------
Taxation (continued)
--------------------------------------------------------------------------------

the close of each quarter of its taxable year consists of "California
obligations, the interest on which (when held by an individual) is exempt from
personal income taxation under the laws of California, the fund will be
qualified under California law to pay exempt-interest dividends which will be
exempt from the California personal income tax.

      Individual shareholders of the fund who reside in California will not be
subject to the California personal income tax on distributions received from the
fund which are exempt-interest dividends. The portion of any distribution
constituting exempt-interest dividends is that (i) portion derived from
California obligations and (ii) designated as such by the fund. The total amount
of exempt-interest dividends paid by the fund to its shareholders with respect
to any taxable year cannot exceed the amount of interest received by the fund
during such year on California obligations less any expenses and expenditures
deemed to have been paid from such interest.

      Distributions from the fund that are attributable to sources other than
California obligations, generally will be taxable to such shareholders as
ordinary income. In addition, distributions of short-term capital gains realized
by the fund will be taxable to the shareholders as ordinary income.
Distributions of long-term capital gains will be taxable as such to the
shareholders regardless of how long they held their shares. Any dividends paid
to corporate shareholders subject to the California franchise tax will be taxed
to such shareholders.

      Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the fund will not be deductible for California personal
income tax purposes. As a result of California's incorporation of certain
provisions of the Code, a loss realized by a shareholder upon the sale of shares
held for six months or less may be disallowed to the extent of any
exempt-interest dividends received with respect to such shares. Any loss
realized upon the redemption of shares within 30 days before or after the
acquisition of other shares of the same series may be disallowed under the "wash
sale" rules. With respect to individual shareholders, California does not treat
tax-exempt interest as a tax preference item for purposes of its alternative
minimum tax. To the extent a corporate shareholder receives dividends which are
exempt from California taxation, a portion of such dividends may be subject to
the alternative minimum tax.

      Statements and Notices

      Statements as to the tax status of the dividends and distributions
received by shareholders of the fund are mailed annually. These statements show
the dollar amount of income excluded from federal income taxes and the dollar
amount, if any, subject to federal income taxes including the portion, if any,
of long-term capital gains distributions eligible for the reduced 20% maximum
capital gains tax rate. The statements will also designate the amount of
exempt-interest dividends that are a specific preference item for purposes of
the federal individual and


36
<PAGE>

--------------------------------------------------------------------------------
Taxation (continued)
--------------------------------------------------------------------------------

corporate alternative minimum taxes. The fund will notify shareholders annually
as to the interest excluded from federal income taxes earned by the fund with
respect to those states and possessions in which the fund has or had
investments. The dollar amount of dividends paid by the fund that is excluded
from federal income taxation and the dollar amount of dividends paid by the fund
that is subject to federal income taxation, if any, will vary for each
shareholder depending upon the size and duration of the shareholder's investment
in the fund. To the extent that the fund earns taxable net investment income, it
intends to designate as taxable dividends the same percentage of each day's
dividend as its taxable net investment income bears to its total net investment
income earned on that date. Therefore, the percentage of each day's dividend
designated as taxable, if any, may vary from day to day.

      Backup Withholding

      If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is not
subject to "backup withholding," the shareholder may be subject to a 31% "backup
withholding" tax with respect to (1) taxable dividends and distributions and (2)
the proceeds of any sales or repurchases of shares of common stock. An
individual's taxpayer identification number is his social security number. The
31% backup withholding tax is not an additional tax and may be credited against
a taxpayer's federal income tax liability.

--------------------------------------------------------------------------------
Description of Shares
--------------------------------------------------------------------------------

      The fund was incorporated under the laws of the State of Maryland on July
8, 1994 pursuant to its Articles of Incorporation. The Articles of Incorporation
authorize issuance of the common stock. The Articles of Incorporation provide
that the fund shall continue without limitation of time.

      Common Stock

                                                                 Amount
                                                               Outstanding
                                                           Exclusive of Shares
                                                        Held by the Fund for its
                                      Amount Held           Own Account as of
                     Shares       by the Fund for Its          December  ,
 Title of Class    Authorized         Own Account                 2000
================================================================================

Common Stock       500,000,000             0                    3,658,334

      No shares, other than those currently outstanding, are offered for sale,
pursuant to this prospectus. All shares of common stock have equal
non-cumulative voting


                                                                              37
<PAGE>

--------------------------------------------------------------------------------
Description of Shares (continued)
--------------------------------------------------------------------------------

rights and equal rights with respect to dividends, assets and liquidation.
Shares of common stock are fully paid and nonassessable when issued and have no
preemptive, conversion or exchange rights.

--------------------------------------------------------------------------------
Certain Provisions of the Articles of Incorporation
--------------------------------------------------------------------------------

      Anti-Takeover Provisions

      The fund's Articles of Incorporation include provisions that could have
the effect of limiting the ability of other entities or persons to acquire
control of the fund or to change the composition of its board of directors and
could have the effect of depriving shareholders of an opportunity to sell their
shares of common stock at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the fund.
Commencing with the first annual meeting of shareholders, the board of directors
will be divided into three classes. At the annual meeting of shareholders in
each year thereafter, the term of one class will expire and each director
elected to the class will hold office for a term of three years. The
classification of the board of directors in this manner could delay for up to
two years the replacement of a majority of the board. The Articles of
Incorporation provide that the maximum number of directors that may constitute
the fund's entire board is 12. A director may be removed from office, or the
maximum number of directors increased, only by vote of the holders of at least
75% of the shares of common stock entitled to be voted on the matter.

      The affirmative votes of at least 75% of the directors and the holders of
at least 75% of the shares of the fund are required to authorize any of the
following transactions (referred to individually as a business combination): (1)
a merger, consolidation or share exchange of the fund with or into any other
person (referred to individually as a reorganization transaction); (2) the
issuance or transfer by the fund (in one or a series of transactions in any
12-month period) of any securities of the fund to any other person or entity for
cash, securities or other property (or combination thereof) having an aggregate
fair market value of $1,000,000 or more, excluding sales of securities of the
fund in connection with a public offering, issuances of securities of the fund
pursuant to a dividend reinvestment plan adopted by the fund and issuances of
securities of the fund upon the exercise of any stock subscription rights
distributed by the fund; or (3) a sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the fund (in one or a series of transactions in
any 12-month period) to or with any person of any assets of the fund having an
aggregate fair market value of $1,000,000 or more, except for transactions in
securities effected by the fund in the ordinary course of its business (each
such sale, lease, exchange, mortgage, pledge, transfer or other disposition
being referred to


38
<PAGE>

--------------------------------------------------------------------------------
Certain Provisions of the Articles of Incorporation (continued)
--------------------------------------------------------------------------------

individually as a transfer transaction). The same affirmative votes are required
with respect to: any proposal as to the voluntary liquidation or dissolution of
the fund or any amendment to the fund's Articles of Incorporation to terminate
its existence (referred to individually as termination transaction); and any
shareholder proposal as to specific investment decisions made or to be made with
respect to the fund's assets.

      A 75% shareholder vote will not be required with respect to a business
combination if the transaction is approved by a vote of at least 75% of the
continuing directors (as defined below) or if certain conditions regarding the
consideration paid by the person entering into, or proposing to enter into, a
business combination with the fund and various other requirements are satisfied.
In such case, a majority of the votes entitled to be cast by shareholders of the
fund will be required to approve the transaction if it is a reorganization
transaction or a transfer transaction that involves substantially all of the
fund's assets and no shareholder vote will be required to approve the
transaction if it is any other business combination. In addition, a 75%
shareholder vote will not be required with respect to a termination transaction
if it is approved by a vote of at least 75% of the continuing directors, in
which case a majority of the votes entitled to be cast by shareholders of the
fund will be required to approve the transaction.

      The voting provisions described above could have the effect of depriving
shareholders of the fund of an opportunity to sell their common stock at a
premium over prevailing market prices by discouraging a third party from seeking
to obtain control of the fund in a tender offer or similar transaction. In view
of the fund's board of directors, however, these provisions offer several
possible advantages, including: (1) requiring persons seeking control of the
fund to negotiate with its management regarding the price to be paid for the
amount of common stock required to obtain control; (2) promoting continuity and
stability; and (3) enhancing the fund's ability to pursue long-term strategies
that are consistent with its investment objective and management policies. The
board of directors has determined that the voting requirements described above,
which are generally greater than the minimum requirements under Maryland law and
the 1940 Act, are in the best interests of shareholders generally.

      A "continuing director," as used in the discussion above, is a member of
the fund's board of directors (1) who is not a person or affiliate of a person
who enters or proposes to enter into a business combination with the fund (such
a person or affiliate being referred to individually as an interested party) and
(2) who has been a member of the board of directors for a period of at least 12
months (or since the commencement of the fund's operations, if less than 12
months), or is a successor of a continuing director who is unaffiliated with an
interested party and is recommended to succeed a continuing director by a
majority of the continuing directors then members of the board of directors.


                                                                              39
<PAGE>

--------------------------------------------------------------------------------
Certain Provisions of the Articles of Incorporation (continued)
--------------------------------------------------------------------------------

      Conversion to Open-End Fund

      The fund's Articles of Incorporation require the favorable vote of the
holders of at least two-thirds of the shares of common stock then entitled to be
voted to authorize the conversion of the fund from a closed-end to an open-end
investment company as defined in the 1940 Act, unless two-thirds of the
Continuing Directors (as defined above) approve such a conversion. In the latter
case, the affirmative vote of a majority of the shares outstanding will be
required to approve the amendment to the fund's Articles of Incorporation
providing for the conversion of the fund.

      Market Discount

      Shares of common stock of closed-end investment companies frequently trade
at a discount from net asset value, or in some cases trade at a premium. Shares
of closed-end investment companies investing primarily in fixed-income
securities tend to trade on the basis of income yield on the market price of the
shares and the market price may also be affected by trading volume, general
market conditions and economic conditions and other factors beyond the control
of the fund. As a result, the market price of the fund's shares may be greater
or less than the net asset value. Since the commencement of the fund's
operations, the fund's shares have traded in the market at prices that were at
times equal to, but generally were below, net asset value.

      Some closed-end investment companies have taken certain actions, including
the repurchase of common stock in the market at market prices and the making of
one or more tender offers for common stock at net asset value, in an effort to
reduce or mitigate the discount, and others have converted to an open-end
investment company, the shares of which are redeemable at net asset value.

      The fund's board of directors has seen no reason to adopt any of the steps
specified above, which some other closed-end funds have used to address the
discount. The experience of many closed-end funds suggests that the effect of
many of these steps (other than open-ending) on the discount may be temporary or
insignificant. Accordingly, there can be no assurance that any of these actions
will be taken or, if undertaken, will cause the fund's shares to trade at a
price equal to their net asset value. The fund's investment manager may
voluntarily waive its fees from time to time in order to increase the fund's
dividend yield in an effort to reduce the discount. Any such waiver may be
terminated at any time, and there can be no assurance that such actions would be
successful at reducing the discount.


40
<PAGE>

--------------------------------------------------------------------------------
Custodian, Transfer Agent, Dividend-Paying Agent, Registrar and Plan Agent
--------------------------------------------------------------------------------

      PNC Bank, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19103, acts as custodian of the fund's investments.

      PFPC, located at 101 Federal Street, Boston, Massachusetts 02110, serves
as the fund's transfer agent, dividend-paying agent and registrar. PFPC also
serves as purchasing agent in connection with the plan.

--------------------------------------------------------------------------------
Reports to Shareholders
--------------------------------------------------------------------------------

      The fund sends unaudited quarterly and audited annual reports, including a
list of investments held, to its stockholders.

--------------------------------------------------------------------------------
Independent Auditors
--------------------------------------------------------------------------------


      KPMG LLP, has been selected as the fund's independent auditor to examine
and report on the fund's financial statements and highlights for the fiscal year
ending August 31, 2001.


--------------------------------------------------------------------------------
Further Information
--------------------------------------------------------------------------------

      This prospectus does not contain all of the information set forth in the
registration statement filed with the SEC. The complete registration statement
may be obtained from the SEC upon payment of the fee prescribed by its Rules and
Regulations.


                                                                              41
<PAGE>

                          page left intentionally blank

<PAGE>

--------------------------------------------------------------------------------
Appendix A
--------------------------------------------------------------------------------

                  DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS

                 DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:

      Aaa -- Bonds that are rated Aaa are judged to be of the best quality,
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments with respect to these bonds are protected by a
large or by an exceptionally stable margin, and principal is secure. Although
the various protective elements applicable to these bonds are likely to change,
those changes are most unlikely to impair the fundamentally strong position of
these bonds.

      Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards and together with the Aaa group 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 other elements may be
present that make the long-term risks appear somewhat larger than in Aaa
securities.

      A -- Bonds that 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 with respect to these bonds are considered
adequate, but elements may be present that suggest a susceptibility to
impairment sometime in the future.

      Baa -- Bonds rated Baa are considered to be medium grade obligations, that
is they are neither highly protected nor poorly secured. Interest payment 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. These bonds lack outstanding investment characteristics and may
have speculative characteristics as well.

      Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

      DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:

      Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and for variable demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans


                                                                             A-1
<PAGE>

--------------------------------------------------------------------------------
Appendix A (continued)
--------------------------------------------------------------------------------

bearing the designation MIG 1/VMIG 1 are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both. Loans
bearing the description MIG 2/VMIG 2 are of high quality, with margins of
protection ample, although not as large as the preceding group. Loans bearing
the designation MIG 3/VMIG 3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the preceding
grades. Market access for refinancing, in particular, is likely to be less well
established.

      DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:

      The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rates Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations, normally evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.

      DESCRIPTION OF S&P MUNICIPAL BOND RATINGS:

      AAA -- These bonds are the obligations of the higher quality and have the
strongest capacity for timely payment of debt service.

      General Obligation Bonds rated AAA -- In a period of economic stress, the
issuers of these bonds will suffer the smallest declines in income and will be
least susceptible to autonomous decline. Debt burden is moderate. A strong
revenue structure appears more than adequate to meet future expenditure
requirements. Quality of management appears superior.

      Revenue Bonds Rated AAA -- Debt service coverage with respect to these
bonds has been, and is expected to remain, substantial. Stability of the pledged
revenues is also exceptionally strong due to the competitive position of the
municipal enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds, debt
service reserve requirements) are rigorous. There is evidence of superior
management.

      AA -- The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.


A-2
<PAGE>

--------------------------------------------------------------------------------
Appendix A (continued)
--------------------------------------------------------------------------------

      A -- Principal and interest payments on bonds in this category are
regarded as safe although the bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. This rating describes the third strongest capacity for payment
of debt service.

      General Obligation Bonds Rated A -- There is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.

      Revenue Bonds Rated A -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appearance appears adequate.

      BBB -- The bonds in this group are regarded as having an adequate capacity
to pay interest and repay principal. Whereas bonds in this group normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Bonds
rated BBB have the fourth strongest capacity or payment of debt service.

      S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating
categories, except in the AAA category.

      DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS:

      Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given the designation of SP-1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest.


                                                                             A-3
<PAGE>

--------------------------------------------------------------------------------
Appendix A (continued)
--------------------------------------------------------------------------------

      DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:

      Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is strong, but the
relative degree of safety is not as high as for issues designated A-1.

      DESCRIPTION OF FITCH/IBCA, Inc. MUNICIPAL BOND RATINGS:

      AAA -- Bonds rated AAA by Fitch have the lowest expectation of credit
risk. The obligor has an exceptionally strong capacity for timely payment of
financial commitments, which is highly unlikely to be adversely affected by
foreseeable events.

      AA -- Bonds rated AA by Fitch have a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.

      A -- Bonds rated A by Fitch are considered to have a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered to be strong, but may be more vulnerable to changes in economic
conditions and circumstances than bonds with higher ratings.

      BBB -- Bonds rated BBB by Fitch currently have a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered to
be adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to impair this capacity. This is the lowest investment grade
category assigned by Fitch.

      Plus and minus signs are used by Fitch to indicate the relative position
of a credit within a rating category. Plus and minus signs, however, are not
used in the AAA category.


A-4
<PAGE>

--------------------------------------------------------------------------------
Appendix A (continued)
--------------------------------------------------------------------------------

      DESCRIPTION OF FITCH/IBCA, Inc. SHORT-TERM RATINGS:

      Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

      The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet financial commitments in a timely
manner.

      Fitch's short-term ratings are as follows:

      F1+ -- Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments. The "+" denotes an
exceptionally strong credit feature.

      F1 -- Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments.

      F2 -- Issues assigned this rating have a satisfactory capacity for timely
payment of financial commitments, but the margin of safety is not as great as in
the case of the higher ratings.

      F3 -- The capacity for the timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.


                                                                             A-5
<PAGE>

                                                     SALOMON SMITH BARNEY
                                                     ---------------------------
                                                     A member of citigroup[LOGO]

                                                        Greenwich
                                                        Street
                                                        California
                                                        Municipal
                                                        Fund Inc.


                                                        Seven World Trade Center
                                                        New York, New York 10048


                                                        Common Stock

                                                        (Investment Company
                                                        Act File No. 811-7201)
                                                        FD0620

All dealers effecting transactions in the fund's securities, whether or not
participating in this distribution, may be required to give investors a
prospectus.

If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. This prospectus does not offer any
security other than the fund's shares of common stock. Neither the fund nor
Salomon Smith Barney is offering to sell shares of the fund to any person to
whom the fund may not lawfully sell its shares.

The fund will publish a supplement to the prospectus if there are any material
changes in its business after the date of this prospectus.




PART B
Statement of Additional Information is incorporated into Part A of this
Registration Statement


PART C
Information required to be included in Part C is set forth, under the
appropriate item so numbered, in Part C of this Registration Statement.


PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

	(1) Financial Statements

	Parts A and B
		(a)	Financial Highlights

	(b)	 The Registrant's Annual Report for the period ended
		August 31, 2000, and the Independent Auditors' Report
		dated October 13, 2000 are
		Incorporated by reference to the definitive N-30D filed on
		November 8, 2000 as accession number 0001005477-00-007605.

	Part C
		None

	(2)	Exhibits:

	Exhibit
	Number			Description

	(a)		Articles of Incorporation of Registrant*
	(b)		By-Laws*
	(c)		Not Applicable
	(d)		Form of Specimen Certificate representing shares of
			Common Stock, par value $.001 per share**
	(e)		Registrant's Dividend Reinvestment Plan****
	(f)		Not Applicable
	(g)(1)		Form of Investment Management Agreement**
	    (2)		Form of Transfer and Assumption of Investment
			Management Agreement between Registrant, Mutual
			Management Corp. and Smith Barney Mutual Funds
			Management Inc.***
	(h)(1)		Form of Purchase Agreement*
	    (2)		Form of Underwriting Agreement**
	(i)		Not Applicable
	(j)		Form of Custodian Services Agreement**
	(k)		Form of Transfer Agency and Registrar Agreement*
	(l)(1)		Opinion and consent of Willkie Farr &
Gallagher**
	   (2)		Opinion and consent of Venable, Baetjer and
Howard**
	(m)		Not Applicable.
	(n)		Consent of KPMG LLP (filed  herewith)
	(o)		Not Applicable.
	(p)		Code of Ethics (filed herewith)
	(q)		Not Applicable.
	(r)		Financial Data Schedule (filed herewith)

*   Previously filed by Registrant with its initial Registration
Statement (No. 33-54549) on July 12, 1994.

** Previously filed by Registrant with Pre-Effective Amendment No. 2 to
its Registration Statement (No. 33-54549) on September 22, 1994.

***Previously filed by Registrant with Post-Effective Amendment No. 2
to its Registration Statement on December 21, 1995.

****Previously filed by Registratn with Post-Effective Amendment No. 4
to its Registration Statement on
November 18, 1998.

Item 25. Marketing Arrangements

	Reference is made to the Purchase Agreement and the Underwriting
Agreement filed as Exhibits (h)(1) and (h)(2) by Registrant with Pre-
Effective
Amendment No. 2 to its Registration Statement.

Item 26. Other Expenses of Issuance and Distribution

			The following table sets forth the estimated expenses
to be incurred in
connection with the offering described in this Registration Statement:

Securities and Exchange Commission registration fees $N/A
Printing (other than stock
certificates).$ 9,000
Legal fees and
expenses.......................................................
 ..............$_________
Accounting fees and
expenses...............................................................
 .......
 ......$______
Miscellaneous..........................................................
 .......
 ...................................$________

	TOTAL............................................................
 ...........
 ........................... $9,000


Item 27. Person Controlled by or Under Common Control


	None.

Item 28. Number of Holders of Securities

	The number of record holders of Registrant as of October 25, 2000
  is as follows:

		(1)						(2)

	Title of Class:				Number of Record Holders:

	Shares of  Common Stock,		 	44
	$.001 Par Value

Item 29. Indemnification

	Under Article Seventh of Registrant's Articles of Incorporation,
any
past or present director or officer of Registrant is indemnified to the
fullest extent permitted by the Maryland General Corporation Law
("MGCL")
against liability and all expenses reasonable incurred by him in
connection
with any action, suit or proceeding to which he may be a party or
otherwise
involved by reason of his being or having been a Director or officer of
Registrant. This provision does not authorize indemnification when it
is
determined that the Director or officer would otherwise be liable to
Registrant or its shareholders by reason of willful misfeasance, bad
faith,
gross negligence or reckless disregard of his duties. Expenses may be
paid by
Registrant to its currently acting and its former Directors and
officers, to
the fullest extent that indemnification of directors is permitted by
the MGCL,
the 1933 Act and the 1940 Act, in advance of the final dispositions of
any
action, suit or proceeding. The Board may, by by-law, resolution or
agreement,
make further provision for indemnification of Directors, officers,
employees
and agents to the fullest extent permitted by MGCL.

	Insofar as indemnification for liabilities arising under the 1933
Act
may be permitted to directors, officers and controlling persons of
Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been
advised that, in the opinion of the SEC, such indemnification is
against
public policy as expressed in the 1933 Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other
than the payment by Registrant of expenses incurred or paid by a
director,
officer or controlling person of Registrant in the successful defense
of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has
been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against
public policy as expressed in the 1933 Act and will be governed by the
final
adjudication of such issue.


Item 30. Business and Other Connections of the Investment Adviser

	SSB Citi Fund Management LLC (successor to SSBC Fund Management
Inc.)
("SSB Citi"). SSB Citi was formed in 1968 and is
a wholly owned subsidiary of  Salomon Smith Barney Holdings Inc.
("Holdings"), which is
in turn a wholly owned subsidiary of Citigroup Inc. ("Citigroup").

	The list required by this Item 30 of officers and directors of
SSB Citi
together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such
officers and directors during the past two fiscal years, is
incorporated by
reference to Schedules A and D of FORM ADV filed by MMC pursuant to the
Investment Advisers Act of 1940, as amended (SEC File No. 801-8314).

Item 31. Location of Accounts and Records

	Each Person maintaining physical possession of accounts, books
and other
documents required to be maintained pursuant to Section 31(a) of the
1940 Act
is listed below:

		(1)	Salomon Smith Barney Inc.
			Seven World Trade Center
			New York, New York  10048

		(2)	Greenwich Street California Municipal Fund Inc.
			Seven World Trade Center
			New York, New York  10048

		(3)	SSB Citi Fund Management LLC
			Seven World Trade Center
	`		New York, New York 10048

		(4) 	PNC Bank, National Association
			17th and Chestnut Streets
			Philadelphia, Pennsylvania 19103

		(5) 	PFPC Global Fund Services
			101 Federal Street
			Boston, Massachusetts 02110

Item 32. Management Services

	Not applicable.

Item 33. Undertakings

	(1) Not Applicable.

	(2) Not Applicable.

	(3) Not applicable.

	(4) (a)	Registrant undertakes to file, during any period in
which
offers or sales are being made, a Post-Effective Amendment to the
Registration
Statement:

		(1) to include any prospectus required by Section 10(a)(3)
of
the 1933 Act;

		(2) to reflect in the prospectus any facts or events after
the
effective date of the Registration Statement (or the most recent Post-
Effective Amendment hereof) which, individually or in the aggregate,
represent
a fundamental change in the information set forth in the Registration
Statement; and

		(3) to include any material information with respect to the
plan
of distribution not previously disclosed in this Registration Statement
or any
material change to such information in this Registration Statement.

	(4) (b)	Registrant undertakes that, for the purpose of
determining
any liability under the 1933 Act, each subsequent Post-Effective
Amendment
shall be deemed to be a new Registration Statement relating to the
securities
offered therein, and the offering of those securities at that time
shall be
deemed to be the initial bona fide offering thereof.

	(4) (c)	Not applicable.

	(5)	Not applicable.

	(6)	Not Applicable


	SIGNATURES

 	Pursuant to the requirements of the Securities Act of 1933, as
amended,
and the Investment Company Act of 1940, as amended, the Registrant has
duly
caused this Post-Effective Amendment No. 7 to its Registration
Statement on
Form N-2 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, on the  8th day of December, 2000.


						GREENWICH STREET CALIFORNIA
						MUNICIPAL FUND INC.

						By	/s/ HEATH B. MCLENDON
							_________________
							Heath B. McLendon
							Chairman of the Board,
President and
							Chief Executive Officer

	Pursuant to the requirements of the Securities Act of 1933, as
amended,
this Post-Effective Amendment to the Registration Statement has been
signed by
the following persons in the capacities and on the dates indicated:

Signature				Title						Date

/s/ Heath B. McLendon			Chairman of the Board and
Heath B. McLendon 			Chief Executive Officer
	 12/08/00

/s/ Lee Abraham*			Director
12/08/00
Lee Abraham

/s/ Allan J. Bloostein*			Director
12/08/00
Allan J. Bloostein

/s/ Jane Dasher*			Director
12/08/00
Jane Dasher

/s/ Donald Foley*			Director
12/08/00
Donald Foley

/s/ Paul Hardin*				Director
12/08/00
Paul Hardin

/s/ Richard E. Hanson, Jr.*		Director
12/08/00
Richard E. Hanson, Jr.

/s/ Roderick C. Rasmussen*		Director
12/08/00
Roderick C. Rasmussen

/s/ John P. Toolan*			Director
12/08/00
John P. Toolan


/s/ Lewis E. Daidone			Senior Vice President,
	 12/08/00
Lewis E. Daidone			Treasurer (Chief Financial
and Accounting Officer)


*By: /s/ Lewis E. Daidone
        Lewis E. Daidone
        Pursuant to a Power of Attorney





GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.

EXHIBIT INDEX

Exhibit No.			Description of Exhibit

 (n)			Consent of KPMG LLP, independent
			auditors for the  Fund.

(p)			Code of Ethics

(r)			Financial Data Schedule