June 28, 2001

STATEMENT OF ADDITIONAL INFORMATION

SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.

Seven World Trade Center
New York, New York 10048
(800) 451-2010


This Statement of Additional Information ("SAI") is not a prospectus and
is meant to be read in conjunction with the prospectus of the Smith Barney
California Municipals Fund Inc. (the "fund"), dated June 28, 2001, as
amended or supplemented from time to time (the "prospectus"), and is
incorporated by reference in its entirety into the prospectus.  Additional
information about the fund's investments is available in the fund's annual
and semi-annual reports to shareholders that are incorporated herein by
reference.  The prospectus and copies of the reports may be obtained free
of charge by contacting a Salomon Smith Barney Financial Consultant, a PFS
Investments Registered Representative, a broker/dealer, financial
intermediary or financial institution (each called a "Service Agent"), or
by writing or calling the Company at the address or telephone number
above.

TABLE OF CONTENTS

Directors and Executive Officers of the Fund	2
Investment Objective and Management Policies	5
Investment Restrictions	15
Risk Factors	20
Portfolio Transactions	32
Portfolio Turnover	32
Purchase of Shares	33
PFS Accounts	39
Determination of Net Asset Value	40
Redemption of Shares	41
Investment Management and Other Services	46
Valuation of Shares	52
Exchange Privilege	52
Performance Data	54
Dividends, Distributions and Taxes	58
Additional Information	63
Financial Statements	63
Other Information	64
Appendix A	66



DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND

The names of the directors of the fund and executive officers of the fund,
together with information as to their principal business occupations, are
set forth below.  The executive officers of the fund are employees of
organizations that provide services to the fund.  Each director who is an
"interested person" of the fund, as defined in the Investment Company Act
of 1940 (the "1940 Act"), is indicated by an asterisk. The address of the
"non-interested" directors and executive officers of the fund is Seven
World Trade Center, New York, New York 10048, unless otherwise indicated.


Herbert Barg (Age 78).  Director
Private Investor.  Director or trustee of 16 investment companies
associated with Citigroup Inc. ("Citigroup") His address is 1460 Drayton
Lane, Wynnewood, Pennsylvania 19096.

*Alfred J. Bianchetti (Age 78).  Director
Retired; formerly Senior Consultant to Dean Witter Reynolds Inc. Director
or trustee of 11 investment companies associated with Citigroup. His
address is 19 Circle End Drive, Ramsey, New Jersey 07466.

Martin Brody (Age 79).  Director
Consultant, HMK Associates; Retired Vice Chairman of the Board of
Restaurant Associates Corp. Director or trustee of 20 investment companies
associated with Citigroup. His address is c/o HMK Associates, 30 Columbia
Turnpike, Florham Park, New Jersey 07932.

Dwight B. Crane (Age 63).  Director
Professor, Harvard Business School. Director or trustee of 23 investment
companies associated with Citigroup. His address is c/o Harvard Business
School, Soldiers Field Road, Boston, Massachusetts 02163.

Burt N. Dorsett (Age 70).  Director
Managing Partner of Dorsett McCabe Management. Inc., an investment
counseling firm; Director of Research Corporation Technologies, Inc., a
nonprofit patent clearing and licensing firm. Director or trustee of 11
investment companies associated with Citigroup. His address is 201 East
62nd Street, New York, New York 10021.

Elliot S. Jaffe (Age 75).  Director
Chairman of the Board and President of The Dress Barn, Inc. Director or
trustee of 11 investment companies associated with Citigroup.  His address
is 30 Dunnigan Drive, Suffern, New York 10901.

Stephen E. Kaufman (Age 69).  Director
Attorney. Director or trustee of 13 investment companies associated with
Citigroup. His address is 277 Park Avenue, New York, New York 10172.


Joseph J. McCann (Age 70).  Director
Financial Consultant; Retired Financial Executive, Ryan Homes, Inc.
Director or trustee of 11 investment companies associated with Citigroup.
His address is 200 Oak Park Place, Pittsburgh, Pennsylvania 15243.

*Heath B. McLendon (Age 68).  Chairman of the Board, President and Chief
Executive Officer
Managing Director of Salomon Smith Barney Inc.("Salomon Smith Barney");
President of Smith Barney Fund Management LLC ("SBFM" or the "manager"),
successor to SSB Citi Fund Management LLC, and Travelers Investment
Adviser, Inc. ("TIA"); Chairman or Co-Chairman of the Board and director
or trustee of 78 investment companies associated with Citigroup.

Cornelius C. Rose, Jr. (Age 67).  Director
President, Cornelius C. Rose Associates, Inc., financial consultants, and
Chairman and Director of Performance Learning Systems, an educational
consultant. Director or trustee of 11 investment companies associated with
Citigroup.  His address is Meadowbrook Village, Building 4, Apt 6, West
Lebanon, New Hampshire 03784.

Lewis E. Daidone (Age 43).  Senior Vice President and Treasurer
Managing Director of Salomon Smith Barney; Chief Financial Officer of the
Smith Barney Mutual funds; Director and Senior Vice President of SBFM and
TIA. Senior Vice President and Treasurer of 83 investment companies
associated with Citigroup.  His address is 125 Broad Street, New York, New
York 10004.

Joseph P. Deane (Age 53).  Vice President and Investment Officer
Investment Officer of SBFM;  Managing Director of Salomon Smith Barney.

David F. Fare (Age 39)  Investment Officer
Vice President of Salomon Smith Barney or its predecessor firms since
1989.

Paul Brook (Age 47). Controller
Director of Salomon Smith Barney; from 1997-1998 Managing Director of AMT
Capital Services Inc.; prior to 1997 Partner with Ernst & Young LLP.
Controller or Assistant Treasurer of 43 investment companies associated
with Citigroup.  His address is 125 Broad Street, New York 10004.

Christina T. Sydor (Age 50). Secretary
Managing Director of Salomon Smith Barney; General Counsel and Secretary
of SBFM and TIA. Secretary of 60 investment companies associated with
Citigroup.

As of June 8, 2001, the directors and officers of the fund, as a group,
owned less than 1% of the outstanding shares of beneficial interest of the
fund.

To the best knowledge of the directors, as of June 8, 2001, no single
shareholder or "group" (as such term is defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) beneficially owned more than
5% of the outstanding shares of the fund.

No officer, director or employee of Salomon Smith Barney or any of its
affiliates receives any compensation from the fund for serving as an
officer of the fund or director of the fund.  The fund pays each director
who is not an officer, director or employee of Salomon Smith Barney or any
of its affiliates a fee of $2,000 per annum plus $500 per in-person
meeting and $100 per telephonic meeting.  Each director emeritus who is
not an officer, director or employee of Salomon Smith Barney or its
affiliates receives a fee of $2000 per annum plus $250 per in-person
meeting and $50 per telephonic meeting.  All Directors are reimbursed for
travel and out-of-pocket expenses incurred to attend such meetings.  For
the fiscal year ended February 28, 2001, such out of pocket expenses
totaled $7,348.

For the fiscal year ended February 28, 2001, the directors of the fund
were paid the following compensation:






Name of Person




Aggregate
Compensati
on
from Fund
Total
Pension or
Retirement
Benefits
Accrued
As part of
Fund
Expenses


Compensati
on
From Fund
And Fund
Complex
Paid to
Directors


Number of
Funds for
Which
Directors
Serves
Within
Fund Complex

Herbert Barg **
$4,100
$0
$116,075
16
Alfred
Bianchetti * **
 4,009
  0
   58,900
11
Martin Brody **
 3,100
  0
 132,950
20
Dwight B. Crane
**
 4,109
  0
 153,175
23
Burt N. Dorsett
**
 4,109
  0
   59,500
11
Elliot S. Jaffe
**
 3,600
  0
   58,700
11
Stephen E.
Kaufman **
 4,109
  0
   114,400
13
Joseph J. McCann
**
 4,109
  0
    59,500
11
Heath B.
McLendon *
0
  0
0
78
Cornelius C.
Rose, Jr. **
 4,109
  0
   59,500
11

*	Designates an "interested" director.
**	Designates member of Audit Committee.
	Upon attainment of age 80, fund directors are required to change to
emeritus status. Directors emeritus are entitled to serve in
emeritus status for a maximum of 10 years.  A director emeritus may
attend meetings but has no voting rights. During the fund's last
fiscal year, aggregate compensation paid by the fund to directors
achieving emeritus status totaled $2,000.


INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The prospectus discusses the fund's investment objective and policies.
The following discussion supplements the description of the fund's
investment policies in the prospectus.  For purposes of this SAI,
obligations of non-California municipal issuers, the interest on which is
excluded from gross income for federal income tax purposes (but which may
nevertheless be subject to the federal alternative minimum tax), together
with obligations of the State of California, local governments in the
State of California and certain other municipal issuers such as the
Commonwealth of Puerto Rico, the Virgin Islands and Guam ("California
Municipal Securities"), are collectively referred to as "Municipal Bonds."
 SBFM serves as investment manager and administrator to the fund.

The fund will operate subject to an investment policy providing that,
under normal market conditions, the fund will invest at least 80% of its
net assets in California Municipal Securities, which pay interest that is
excluded from gross income for federal income tax purposes and is exempt
from California personal income taxes.  The fund may invest up to 20% of
its net assets in municipal securities of non-California municipal
issuers, the interest on which is excluded from gross income for federal
income tax purposes, but which is subject to California personal income
taxes.  When the manager believes that market conditions warrant adoption
of a temporary defensive investment posture, the fund may invest without
limit in non-California municipal issuers and in "Temporary Investments"
as described below.

Non-diversified Classification

The fund is classified as a non-diversified investment company under the
1940 Act, which means that 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 intends to conduct its operations, however, so as to
qualify as a "regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), which will relieve the fund
of any liability for federal income taxes to the extent its earnings are
distributed to shareholders.  To so qualify, among other requirements, the
fund will limit its investments so that, at the close of each quarter of
its taxable year, (a) 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 (b)
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 and the fund will not own more than 10% of
the outstanding voting securities of a single issuer.  The fund's
assumption of large positions in the obligations of a small number of
issuers may cause the fund's share price to fluctuate to a greater extent
than that of a diversified company as a result of changes in the financial
condition or in the market's assessment of the issuers.

Use of Ratings as Investment Criteria

In general, the ratings of Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group ("S&P") and other nationally recognized
statistical ratings organizations ("NRSROs") represent the opinions of
those agencies as to the quality of the Municipal Bonds and short-term
investments which they rate. It should be emphasized, however, that such
ratings are relative and subjective, are not absolute standards of quality
and do not evaluate the market risk of securities. These ratings will be
used by the fund as initial criteria for the selection of portfolio
securities, but the fund also will rely upon the independent advice of the
manager to evaluate potential investments. Among the factors that will be
considered are the long-term ability of the issuer to pay principal and
interest, as well as general economic trends.  To the extent the fund
invests in lower-rated and comparable unrated securities, the fund's
achievement of its investment objective may be more dependent on the
manager's credit analysis of such securities than would be the case for a
portfolio consisting entirely of higher-rated securities.  The Appendix
contains information concerning the ratings of Moody's, S&P and other
NRSROs and their significance.

Subsequent to its purchase by the fund, an issue of Municipal Bonds may
cease to be rated or its rating may be reduced below the rating given at
the time the securities were acquired by the fund. Neither event will
require the sale of such Municipal Bonds by the fund, but the manager will
consider such event in its determination of whether the fund should
continue to hold the Municipal Bonds. In addition, to the extent that the
ratings change as a result of changes in such organizations, or their
rating systems or because of a corporate restructuring of Moody's or S&P
or other NRSRO's, the fund will attempt to use comparable ratings as
standards for its investments in accordance with its investment objective
and policies.

The fund generally will invest at least 80% of its total assets in
investment grade debt obligations rated no lower than Baa, MIG 3 or Prime-
1 by Moody's or BBB,  SP-2 or A-1 by S&P, or have the equivalent rating by
another NRSRO or in unrated obligations of comparable quality.  Unrated
obligations will be considered to be of investment grade if deemed by the
manager to be comparable in quality to instruments so rated, or if other
outstanding obligations of the issuers thereof are rated Baa or better by
Moody's or BBB or better by S&P.  The balance of the fund's assets may be
invested in securities rated as low as C by Moody's or D by S&P or have
the equivalent rating by another NRSRO, or deemed by the manager to be
comparable unrated securities, which are sometimes referred to as "junk
bonds."  Securities in the fourth highest rating category, though
considered to be investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative and are in actual
default of interest and/or principal payments.

Low and Comparable Unrated Securities.  While the market values of low-
rated and comparable unrated securities tend to react less to fluctuations
in interest rate levels than the market values of higher rated securities,
the market values of certain low-rated and comparable unrated municipal
securities also tend to be more sensitive than higher-rated securities to
short-term corporate and industry developments and changes in economic
conditions (including recession) in specific regions or localities or
among specific types of issuers.  In addition, low-rated securities and
comparable unrated securities generally present a higher degree of credit
risk.  During an economic downturn or a prolonged period of rising
interest rates, the ability of issuers of low-rated and comparable unrated
securities to service their payment obligations, meet projected goals or
obtain additional financing may be impaired.  The risk of loss because of
default by such issuers is significantly greater because low-rated and
comparable unrated securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.  The fund may
incur additional expenses to the extent it is required to seek recovery
upon a default in payment of principal or interest on its portfolio
holdings.

While the market for municipal securities is considered to be generally
adequate, the existence of limited markets for particular low-rated and
comparable unrated securities may diminish the fund's ability to (a)
obtain accurate market quotations for purposes of valuing such securities
and calculating its net asset value and (b) sell the securities at fair
value either to meet redemption requests or to respond to changes in the
economy or in the financial markets.  The market for certain low-rated and
comparable unrated securities has not fully weathered a major economic
recession. Any such recession, however, would likely disrupt severely the
market for such securities and adversely affect the value of the
securities and the ability of the issuers of such securities to repay
principal and pay interest thereon.

Fixed-income securities, including low-rated securities and comparable
unrated securities, frequently have call or buy-back features that permit
their issuers to call or repurchase the securities from their holders,
such as the fund.  If an issuer exercises these rights during periods of
declining interest rates, the fund may have to replace the security with
a lower yielding security, thus resulting in a decreased return to the
fund.

Municipal Bonds.  Municipal Bonds generally are understood to include debt
obligations issued to obtain funds for various public purposes, including
construction of a wide range of public facilities, refunding of
outstanding obligations, payment of general operating expenses and
extensions of loans to public institutions and facilities.  Private
activity bonds issued by or on behalf of public authorities to finance
various privately operated facilities are included within the term
Municipal Bonds if the interest paid thereon qualifies as excluded from
gross income (but not necessarily from alternative minimum taxable income)
for federal income tax purposes in the opinion of bond counsel to the
issuer.

The yield on Municipal Bonds is dependent upon a variety of factors,
including general economic and monetary conditions, general money market
conditions, general conditions of the Municipal Bond market, the financial
condition of the issuer, the size of a particular offering, the maturity
of the obligation offered and the rating of the issue.

Municipal Bonds also are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors,
such as the federal Bankruptcy Code, and laws, if any, that may be enacted
by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to
levy taxes.  There is also the possibility that, as a result of litigation
or other conditions, the power or ability of any one or more issuers to
pay, when due, the principal of and interest on its or their Municipal
Bonds may be materially affected.

Municipal Leases.  The fund may invest without limit in "municipal
leases," which generally are participations in intermediate and short-term
debt obligations issued by municipalities consisting of leases or
installment purchase contracts for property or equipment.  Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses,
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose yearly.  In addition to the "non-appropriation" risk,
these securities represent a new type of financing that has not yet
developed the depth of marketability associated with more conventional
bonds.  Although "non-appropriation" lease obligations are often secured
by the underlying property, disposition of the property in the event of
foreclosure might prove difficult.  There is no limitation on the
percentage of the fund's assets that may be invested in municipal lease
obligations.  In evaluating municipal lease obligations, the manager will
consider such factors as it deems appropriate, which may include:  (a)
whether the lease can be canceled; (b) the ability of the lease obligee to
direct the sale of the underlying assets; (c) the general creditworthiness
of the lease obligor; (d) the likelihood that the municipality will
discontinue appropriating funding for the leased property in the event
such property is no longer considered essential by the municipality; (e)
the legal recourse of the lease obligee in the event of such a failure to
appropriate funding; (f) whether the security is backed by a credit
enhancement such as insurance; and (g) any limitations which are imposed
on the lease obligor's ability to utilize substitute property or services
rather than those covered by the lease obligation.

The fund may invest without limit in debt obligations which are repayable
out of revenue streams generated from economically-related projects or
facilities or debt obligations whose issuers are located in the same
state.  Sizeable investments in such obligations could involve an
increased risk to the fund should any of the related projects or
facilities experience financial difficulties.

Private Activity Bonds.  The fund may invest without limits in private
activity bonds.  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 the fund's dividends are derived from interest on those bonds.
Dividends derived from interest income on Municipal Bonds are a component
of the "current earnings" adjustment item for purposes of the federal
corporate alternative minimum tax.

Zero Coupon Bonds.  The fund may also invest in zero coupon bonds.  Zero
coupon securities are debt obligations which do not entitle the holder to
any periodic payments of interest prior to maturity or a specified cash
payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from
their face amounts or par values.  The discount varies depending on the
time remaining until maturity or cash payment date, prevailing interest
rates, liquidity of the security and the perceived credit quality of the
issuer.  The discount, in the absence of financial difficulties of the
issuer, decreases as the final maturity or cash payment date of the
security approaches.  The market prices of zero coupon securities
generally are more volatile than the market prices of other debt
securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do debt securities
having similar maturities and credit quality.  The credit risk factors
pertaining to low-rated securities also apply to low-rated zero coupon
bonds.  Such zero coupon bonds carry an additional risk in that, unlike
bonds which pay interest throughout the period to maturity, the fund will
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the fund may obtain no
return at all on its investment.

When-Issued Securities.  The fund may purchase Municipal Bonds on a "when-
issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield).  The payment obligation and the interest rate
that will be received on the Municipal Bonds purchased on a when-issued
basis are each fixed at the time the buyer enters into the commitment.
Although the fund will purchase Municipal Bonds on a when-issued basis
only with the intention of actually acquiring the securities, the fund may
sell these securities before the settlement date if it is deemed advisable
as a matter of investment strategy.

Municipal Bonds are subject to changes in value based upon the public's
perception of the creditworthiness of the issuers and changes, real or
anticipated, in the level of interest rates. In general, Municipal Bonds
tend to appreciate when interest rates decline and depreciate when
interest rates rise. Purchasing Municipal Bonds on a when-issued basis,
therefore, can involve the risk that the yields available in the market
when the delivery takes place may actually be higher than those obtained
in the transaction itself. To account for this risk, a separate account of
the fund consisting of cash or liquid debt securities equal to the amount
of the when-issued commitments will be established on the fund's books.
For the purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market or fair value.
If the market or fair value of such securities declines, additional cash
or securities will be placed in the account on a daily basis so the value
of the account will equal the amount of such commitments by the fund.
Placing securities rather than cash in the segregated account may have a
leveraging effect on the fund's net assets.  That is, to the extent the
fund remains substantially fully invested in securities at the same time
it has committed to purchase securities on a when-issued basis, there will
be greater fluctuations in its net assets than if it had set aside cash to
satisfy its purchase commitments. Upon the settlement date of the when-
issued securities, the fund will meet obligations from then-available cash
flow, sale of securities held in the segregated account, sale of other
securities or, although it normally would not expect to do so, from the
sale of the when-issued securities themselves (which may have a value
greater or less than the fund's payment obligations). Sales of securities
to meet such obligations may involve the realization of capital gains,
which are not exempt from federal income taxes or California state
personal income tax.

When the fund engages in when-issued transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the
fund's incurring a loss or missing an opportunity to obtain an
advantageous price.

Repurchase Agreements.  The fund may agree to purchase securities from a
bank or securities dealer and simultaneously commit to resell the
securities to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities ("repurchase agreements"). The fund
would maintain custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer to pay the
repurchase price on the agreed date would be, in effect, secured by such
securities.  If the value of such securities were less than the repurchase
price, plus interest, the other party to the agreement would be required
to provide additional collateral so that at all times the collateral is at
least 102% of the repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose the fund to possible loss because of
adverse market action, expenses and/or delays in connection with the
disposition of the underlying obligations. The financial institutions with
which the fund may enter into repurchase agreements will be banks and non-
bank dealers of U.S. government securities that are on the Federal Reserve
Bank of New York's list of reporting dealers, if such banks and non-bank
dealers are deemed creditworthy by the fund's manager.  The manager will
continue to monitor creditworthiness of the seller under a repurchase
agreement, and will require the seller to maintain during the term of the
agreement the value of the securities subject to the agreement to equal at
least 102% of the repurchase price (including accrued interest).  In
addition, the manager will require that the value of this collateral,
after transaction costs (including loss of interest) reasonably expected
to be incurred on a default, be equal to 102% or greater than the
repurchase price (including accrued premium) provided in the repurchase
agreement or the daily amortization of the difference between the purchase
price and the repurchase price specified in the repurchase agreement.  The
manager will mark-to-market daily the value of the securities.
Lending of Portfolio Securities.  Consistent with applicable regulatory
requirements, the fund may lend portfolio securities to brokers, dealers
and other financial organizations that meet capital and other credit
requirements or other criteria established by the fund's Board of
Directors ("Board of Directors" or "Board").  Loans of portfolio
securities will be collateralized by cash, letters of credit or U.S.
government securities, which are maintained at all times in an amount
equal to at least 102% of the current market value of the loaned
securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of
the fund.  From time to time, the fund may return 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 and any dividends on the loaned securities as well as
by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by
the borrower when U.S. government securities are used as collateral.
Although the generation of taxable income is not the primary investment
goal of the fund, income received could be used to pay the fund's expenses
and would increase an investor's total return. The fund will adhere to the
following conditions whenever its portfolio securities are loaned:
(i) the fund must receive at least 102% cash collateral or equivalent
securities of the type discussed in the preceding paragraph from the
borrower; (ii) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(iii) the fund must be able to terminate the loan at any time; (iv) 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; (v) the fund may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the
loaned securities may pass to the borrower, provided, however, that if a
material event adversely affecting the investment occurs, the Board must
terminate the loan and regain the right to vote the securities.  Loan
agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon the fund's
ability to recover the loaned securities or dispose of the collateral for
the loan.

Temporary Investments.  Under normal market conditions, the fund may hold
up to 20% of its total assets in cash or money market instruments,
including taxable money market instruments. When the fund is maintaining
a defensive position, the fund may invest in short-term investments
("Temporary Investments") consisting of: (a) tax-exempt securities in the
form of notes of municipal issuers having, at the time of purchase, a
rating within the three highest grades of Moody's, S&P or the equivalent
rating from another NRSRO or, if not rated, having an issue of outstanding
Municipal Bonds rated within the three highest grades by Moody's, S&P or
the equivalent rating from another NRSRO; and (b) the following taxable
securities: obligations of the United States government, its agencies or
instrumentalities ("U.S. government securities"), repurchase agreements,
other debt securities rated within the three highest grades by Moody's,
S&P or the equivalent rating from another NRSRO, commercial paper rated in
the highest grade by any of such rating services, and certificates of
deposit of domestic banks with assets of $1 billion or more. The fund may
invest in Temporary Investments for defensive reasons in anticipation of
a market decline. At no time will more than 20% of the fund's total assets
be invested in Temporary Investments unless the fund has adopted a
defensive investment policy. The fund intends, however, to purchase tax-
exempt Temporary Investments pending the investment of the proceeds of the
sale of portfolio securities or shares of the fund's common stock, or in
order to have highly liquid securities available to meet anticipated
redemptions. For the fiscal year ended February 28, 2001, the fund did
invest in taxable Temporary Investments.

Financial Futures and Options Transactions.  The fund may enter into
financial futures contracts and invest in options on financial futures
contracts traded on a domestic exchange or board of trade. Such
investments, if any, by the fund will be made for the purpose of hedging
against changes in the value of portfolio securities due to anticipated
changes in interest rates and market conditions and where the transactions
are economically appropriate to the reduction of risks inherent in the
management of the fund. 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 a municipal bond index or related to debt
securities, the prices of which are anticipated by the manager to
correlate with the prices of the California Municipal Securities 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 which 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.
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 a financial
futures contract 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 if the fund enters into futures contracts for speculative
purposes, that the aggregate initial margin deposits and premiums paid by
the fund will not 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
cash equivalents in an amount equal to the total market value of the
futures contracts, less the amount of initial margin on a deposit for the
contracts.

Municipal Bond Index Futures Contracts. A municipal bond index futures
contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specific dollar amount
multiplied by the difference between the value of the index at the close
of the last trading day of the contract and the price at which the index
contract was originally written. No physical delivery of the underlying
municipal bonds in the index is made. Municipal bond index futures
contracts based on an index of 40 tax-exempt, long-term municipal bonds
with an original issue size of at least $50 million and a rating of A- or
higher by S&P or A or higher by Moody's began trading in mid-1985.  The
purpose of the acquisition or sale of a municipal bond index futures
contract by the fund, as the holder of long-term municipal securities, is
to protect the fund from fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-term municipal
securities.

There are several risks in connection with the use of futures contracts as
a hedging device. Successful use of futures contracts by the fund is
subject to the manager's ability to predict correctly movements in the
direction of interest rates. Such predictions involve skills and
techniques which may be different from those involved in the management of
a long-term municipal bond portfolio. In addition, there can be no
assurance that there will be a correlation between movements in the price
of the municipal bond index and movements in the price of the Municipal
Bonds which are the subject of the hedge.  The degree of imperfection of
correlation depends upon various circumstances, such as variations in
speculative market demand for futures contracts and municipal securities,
technical influences on futures trading, and differences between the
municipal securities being hedged and the municipal securities underlying
the futures contracts, in such respects as interest rate levels,
maturities and creditworthiness of issuers. A decision of whether, when
and how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates.

Although the fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, there is no assurance that
a liquid market will exist for the contracts at any particular time.  Most
domestic futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading
day. The daily limit establishes the maximum amount the price of a futures
contract may vary either up or down from the previous day's settlement
price at the end of a trading session.  Once the daily limit has been
reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movement
during a particular trading day and, therefore, does not limit potential
losses because the limit may prevent the liquidation of unfavorable
positions. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of
adverse price movements, the fund would be required to make daily cash
payments of variation margin.  In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract. As described above,
however, there is no guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the municipal bond index
futures contract and thus provide an offset to losses on a futures
contract.

If the fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of the Municipal Bonds held in its
portfolio and rates decrease instead, the fund will lose part or all of
the benefit of the increased value of the Municipal Bonds it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements.  Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. The fund may have to sell
securities at a time when it may be disadvantageous to do so.

When the fund purchases municipal bond index futures contracts, an amount
of cash and U.S. government securities or other high grade debt securities
equal to the market value of the futures contracts will be deposited in a
segregated account with the fund's custodian (and/or such other persons as
appropriate) to collateralize the positions and thereby insure that the
use of such futures contracts is not leveraged.

Options on Financial Futures Contracts. The fund may purchase put and call
options on futures contracts which are traded on a domestic exchange or
board of trade as a hedge against changes in interest rates, and may enter
into closing transactions with respect to such options to terminate
existing positions. The fund will sell put and call options on interest
rate futures contracts only as part of closing sale transactions to
terminate its options positions. There is no guarantee that such closing
transactions can be effected.
Options on futures contracts, as contrasted with the direct investment in
such contracts, gives the purchaser the right, in return for the premium
paid, to assume a position in futures contracts at a specified exercise
price at any time prior to the expiration date of the options. 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 contract 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 interest rate
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
fund.

There are several risks relating to options on futures contracts.  The
ability to establish and close out positions on such options will be
subject to the existence of a liquid market. In addition, the fund's
purchase of put or call options will be based upon predictions as to
anticipated interest rate trends by the manager, which could prove to be
inaccurate.  Even if the manager's expectations are correct there may be
an imperfect correlation between the change in the value of the options
and of the fund's portfolio securities.

Other Investments.  The fund may invest up to an aggregate of 15% of its
total assets in securities with contractual or other restrictions on
resale and other instruments which are not readily marketable. The fund
also is authorized to borrow an amount of up to 10% of its total assets
(including the amount borrowed) valued at market less liabilities (not
including the amount borrowed) in order to meet anticipated redemptions
and to pledge its assets to the same extent in connection with the
borrowings.

INVESTMENT RESTRICTIONS

The fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 6 below may not be
changed without the approval of the holders of a majority of the
outstanding shares of the fund, defined as the lesser of (a) 67% of the
fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy or (b) more than 50%
of the fund's outstanding shares.  The remaining restrictions may be
changed by the fund's Board of Directors at any time.  The fund's
investment objective is fundamental and may not be changed without the
approval of the holders of a majority of the outstanding shares of the
fund.

The fund may not:

	1.	Issue "senior securities" as defined in the 1940 Act and the
rules, regulations and orders thereunder, except as permitted under the
1940 Act and the rules, regulations and orders thereunder.
	2.	Invest more than 25% of its total assets in securities, the
issuers of which are in the same industry. For purposes of this
limitation, U.S. government securities and securities of state or
municipal governments and their political subdivisions are not considered
to be issued by members of any industry.

	3. 	Borrow money, except that (a) the fund may borrow from banks
for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise require the untimely
disposition of securities, and (b) the fund may, to the extent consistent
with its investment policies, enter into reverse repurchase agreements,
forward roll transactions and similar investment strategies and
techniques.  To the extent that it engages in transactions described in
(a) and (b), the fund will be limited so that no more than 33 1/3% of the
value of its total assets (including the amount borrowed), valued at the
lesser of cost or market, less liabilities (not including the amount
borrowed) is derived from such transactions.

	4.	Make loans.  This restriction does not apply to: (a) the
purchase of debt obligations in which the fund may invest consistent with
its investment objectives and policies; (b) repurchase agreements; and (c)
loans of its portfolio securities, to the fullest extent permitted under
the 1940 Act.
	5.	Engage in the business of underwriting securities issued by
other persons, except to the extent that the fund may technically be
deemed to be an underwriter under the Securities Act of 1933 as amended,
in disposing of portfolio securities.

	6.	Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall not prevent
the fund from (a) investing in securities of issuers engaged in the real
estate business or the business of investing in real estate (including
interests in limited partnerships owning or otherwise engaging in the real
estate business or the business of investing in real estate) and
securities which are secured by real estate or interests therein; (b)
holding or selling real estate received in connection with securities it
holds or held; (c) trading in futures contracts and options on futures
contracts (including options on currencies to the extent consistent with
the fund's investment objective and policies); or (d) investing in real
estate investment trust securities.

	7. 	Purchase any securities on margin (except for such short-term
credits as are necessary for the clearance of purchases and sales of
portfolio securities) or sell any securities short (except "against the
box").  For purposes of this restriction, the deposit or payment by the
fund of underlying securities and other assets in escrow and collateral
agreements with respect to initial or maintenance margin in connection
with futures contracts and related options and options on securities,
indexes or similar items is not considered to be the purchase of a
security on margin.

8. Purchase or otherwise acquire any security if, as a result,
more than 15% of its net assets would be invested in
securities that are illiquid.

9. Purchase or sell oil and gas interests.

	10.	Invest more than 5% of the value of its total assets in the
securities of issuers having a record, including predecessors, of less
than three years of continuous operation, except U.S. government
securities.  For purposes of this restriction, issuers include
predecessors, sponsors, controlling persons, general partners, guarantors
and originators of underlying assets.

	11.	Invest in companies for the purpose of exercising control.

	12.	Engage in the purchase or sale of put, call, straddle or
spread options or in the writing of such options, except that the fund may
purchase and sell options on interest rate futures contracts.

Certain restrictions listed above permit the fund to engage in investment
practices that the fund does not currently pursue.  The fund has no
present intention of altering its current investment practices as
otherwise described in the prospectus and this SAI and any future change
in those practices would require Board approval and appropriate notice to
shareholders.  If a percentage restriction is complied with at the time of
an investment, a later increase or decrease in the percentage of assets
resulting from a change in the values of portfolio securities or in the
amount of the fund's assets will not constitute a violation of such
restriction.

RISK FACTORS

Alternative Minimum Tax

As long as the fund continues to qualify as a regulated investment company
under the federal Internal Revenue Code, it will incur no California
income or franchise tax liability on income and capital gains distributed
to shareholders. California personal income tax law provides that exempt-
interest dividends paid by a regulated investment company, or series
thereof, from interest on obligations that are exempt from California
personal income taxes are excludable from gross income.  For a fund to
qualify to pay exempt-interest dividends under California law, at least
50% of the value of its assets must consist of such obligations at the
close of each quarter of its fiscal year.  For purposes of California
personal income taxation, distributions to individual shareholders derived
from interest on other types of obligations and short-term capital gains
will be taxed as dividends, and long-term capital gain distributions will
be taxed as long-term capital gains.  California has an alternative
minimum tax similar to the federal alternative minimum tax described
above.  However, the tax base for the California alternative minimum tax
does not include interest from private activity municipal obligations as
an item of tax preference.  Interest on indebtedness incurred or continued
by a shareholder in connection with the purchase of shares of the fund
will not be deductible for California personal income tax purposes.
Corporate taxpayers should note that dividends will not be exempt from
California corporate income or franchise taxes.

Risk of Concentration In a Single State

The primary purpose of investing in a portfolio of a single state's
municipal securities is the special tax treatment accorded the state's
resident individual investors.  However, payment of interest and
preservation of principal is dependent upon the continuing ability of the
state's issuers and/or obligors on state, municipal and public authority
debt obligations to meet their obligations thereunder.  Investors should
be aware of certain factors that might affect the financial condition of
issuers of municipal securities, consider the greater risk of the
concentration of the fund versus the safety that comes with a less
concentrated investment portfolio and compare yields available in
portfolios of California's issues with those of more diversified
portfolios, including out-of-state issues, before making an investment
decision.

Municipal securities in which the fund's assets are invested may include
debt obligations of the municipalities and other subdivisions of
California issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports,
bridges, highways, schools, streets and water and sewer works.  Other
purposes for which municipal securities may be issued include the
obtaining of funds to lend to public or private institutions for the
construction of facilities such as educational, hospital, housing, and
solid waste disposal facilities.  The latter, including most alternative
minimum tax-Subject bonds, are generally payable from private sources
which, in varying degrees, may depend on local economic conditions, but
are not necessarily affected by the ability of the state and its political
subdivisions to pay their debts.  It is not possible to provide specific
details on each of these obligations in which fund assets may be invested.
However, all such securities, the payment of which is not a general
obligation of an issuer having general taxing power, must satisfy, at the
time of an acquisition by the fund, the minimum rating(s).  See "Appendix
A" for a description of ratings and rating criteria.  Some municipal
securities may be rated based on a "moral obligation" contract which
allows the municipality to terminate its obligation by deciding not to
make an appropriation.  Generally, no legal remedy is available against
the municipality that is a party to the "moral obligation" contract in the
event of such non-appropriation.

Municipal Market Volatility. Municipal securities can be affected
significantly by political changes as well as uncertainties in the
municipal market related to taxation, legislative changes, or the rights
of municipal security holders.  Because many municipal securities are
issued to finance similar projects, especially those relating to
education, health care, transportation and utilities, conditions in those
sectors can affect the overall municipal market.  In addition, changes in
the financial condition of an individual municipal insurer can affect the
overall municipal market.

Interest Rate Changes.  Debt securities have varying levels of sensitivity
to changes in interest rates. In general, the price of a debt security can
fall when interest rates rise and can rise when interest rates fall.
Securities with longer maturities can be more sensitive to interest rate
changes.  In other words, the longer the maturity of a security, the
greater the impact a change in interest rates could have on the security's
price.  In addition, short-term and long-term interest rates do not
necessarily move in the same amount or the same direction.  Short-term
securities tend to react to changes in short-term interest rates, and
long-term securities tend to react to changes in long-term interest rates.

Issuer-Specific Changes. Changes in the financial condition of an issuer,
changes in specific economic or political conditions that affect a
particular type of security or issuer, and changes in general economic or
political conditions can affect the credit quality or value of an issuer's
securities. Lower-quality debt securities (those of less than investment-
grade quality) tend to be more sensitive to these changes than higher-
quality debt securities.  Entities providing credit support or a maturity-
shortening structure also can be affected by these types of changes.
Municipal securities backed by current or anticipated revenues from a
specific project or specific assets can be affected negatively by the
discontinuance of the taxation supporting the project or assets or the
inability to collect revenues from the project or from the assets.  If the
Internal Revenue Service determines an issuer of a municipal security has
not complied with applicable tax requirements, or the structure of a
security fails to function as intended, interest from the security could
become taxable or the security could decline significantly in value.

Municipal Market Disruption Risk. The value of municipal securities may be
affected by uncertainties in the municipal market related to legislation
or litigation involving the taxation of municipal securities or the rights
of municipal securities holders in the event of a bankruptcy. Proposals to
restrict or eliminate the federal income tax exemption for interest on
municipal securities are introduced before Congress from time to time.
Proposals also may be introduced before the California legislature that
would affect the state tax treatment of a municipal fund's distributions.
 If such proposals were enacted, the availability of municipal securities
and the value of a municipal fund's holdings would be affected and the
Trustees would reevaluate the fund's investment objectives and policies.
 Municipal bankruptcies are relatively rare, and certain provisions of the
U.S. Bankruptcy Code governing such bankruptcies are unclear and remain
untested.  Further, the application of state law to municipal issuers
could produce varying results among the states or among municipal
securities issuers within a state.  These legal uncertainties could affect
the municipal securities market generally, certain specific segments of
the market, or the relative credit quality of particular securities.  Any
of these effects could have a significant impact on the prices of some or
all of the municipal securities held by a fund, making it more difficult
for a money market fund to maintain a stable net asset value per share.

Education. In general, there are two types of education-related bonds;
those issued to finance projects for public and private colleges and
universities, and those representing pooled interests in student loans.
 Bonds issued to supply educational institutions with funds are subject to
the risk of unanticipated revenue decline, primarily the result of
decreasing student enrollment or decreasing state and federal funding.
Among the factors that may lead to declining or insufficient revenues are
restrictions on students' ability to pay tuition, availability of state
and federal funding, and general economic conditions.  Student loan
revenue bonds are generally offered by state (or substate) authorities or
commissions and are backed by pools of student loans.  Underlying student
loans may be guaranteed by state guarantee agencies and may be subject to
reimbursement by the United States Department of Education through its
guaranteed student loan program.  Others may be private, uninsured loans
made to parents or students which are supported by reserves or other forms
of credit enhancement. Recoveries of principal due to loan defaults may be
applied to redemption of bonds or may be used to re-lend, depending on
program latitude and demand for loans.  Cash flows supporting student loan
revenue bonds are impacted by numerous factors, including the rate of
student loan defaults, seasoning of the loan portfolio, and student
repayment deferral periods of forbearance. Other risks associated with
student loan revenue bonds include potential changes in federal
legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.

Electric Utilities. The electric utilities industry has been experiencing,
and will continue to experience, increased competitive pressures.  Federal
legislation in the last two years will open transmission access to any
electricity supplier, although it is not presently known to what extent
competition will evolve.  Other risks include: (a) the availability and
cost of fuel, (b) the availability and cost of capital, (c) the effects of
conservation on energy demand, (d) the effects of rapidly changing
environmental, safety, and licensing requirements, and other federal,
state, and local regulations, (e) timely and sufficient rate increases,
and (f) opposition to nuclear power.

Health Care. The health care industry is subject to regulatory action by
a number of private and governmental agencies, including federal, state,
and local governmental agencies.  A major source of revenues for the
health care industry is payments from the Medicare and Medicaid programs.
As a result, the industry is sensitive to legislative changes and
reductions in governmental spending for such programs.  Numerous other
factors may affect the industry, such as general and local economic
conditions; demand for services; expenses (including malpractice insurance
premiums); and competition among health care providers. In the future, the
following elements may adversely affect health care facility operations:
adoption of legislation proposing a national health insurance program;
other state or local health care reform measures; medical and
technological advances which dramatically alter the need for health
services or the way in which such services are delivered; changes in
medical coverage which alter the traditional fee-for-service revenue
stream; and efforts by employers, insurers, and governmental agencies to
reduce the costs of health insurance and health care services.

Housing. Housing revenue bonds are generally issued by a state, county,
city, local housing authority, or other public agency.  They generally are
secured by the revenues derived from mortgages purchased with the proceeds
of the bond issue.  It is extremely difficult to predict the supply of
available mortgages to be purchased with the proceeds of an issue or the
future cash flow from the underlying mortgages.  Consequently, there are
risks that proceeds will exceed supply, resulting in early retirement of
bonds, or that homeowner repayments will create an irregular cash flow.
 Many factors may affect the financing of multi-family housing projects,
including acceptable completion of construction, proper management,
occupancy and rent levels, economic conditions, and changes to current
laws and regulations.

Transportation. Transportation debt may be issued to finance the
construction of airports, toll roads, highways, or other transit
facilities.  Airport bonds are dependent on the general stability of the
airline industry and on the stability of a specific carrier who uses the
airport as a hub.  Air traffic generally follows broader economic trends
and is also affected by the price and availability of fuel. Toll road
bonds are also affected by the cost and availability of fuel as well as
toll levels, the presence of competing roads and the general economic
health of an area.  Fuel costs and availability also affect other
transportation-related securities, as do the presence of alternate forms
of transportation, such as public transportation.

Water and Sewer. Water and sewer revenue bonds are often considered to
have relatively secure credit as a result of their issuer's importance,
monopoly status, and generally unimpeded ability to raise rates.  Despite
this, lack of water supply due to insufficient rain, run-off, or snow pack
is a concern that has led to past defaults. Further, public resistance to
rate increases, costly environmental litigation, and Federal environmental
mandates are challenges faced by issuers of water and sewer bonds.

CALIFORNIA RISK FACTORS

The following summaries are included for the purpose of providing certain
information regarding the economic climate and financial condition of the
State of California, Puerto Rico, Guam and the U.S. Virgin Islands, and
are based primarily on information from official statements made available
in connection with the issuance of certain securities and other documents
and sources and does not purport to be complete. The fund has not
undertaken to verify independently such information and the trust assumes
no responsibility for the accuracy of such information and will not update
it during the year.  These summaries do not provide information regarding
most securities in which the fund is permitted to invest and in particular
do not provide specific information on the issuers or types of municipal
securities in which the fund invests or the private business entities
whose obligations support the payments on Alternative Minimum Tax-Subject
bonds in which the fund will invest.  Therefore, the general risk factors
as to the credit of the state or its political subdivisions discussed
herein may not be relevant to the fund.  Although revenue obligations of
a state or its political subdivisions may be payable from a specific
project or source, there can be no assurance that future economic
difficulties and the resulting impact on state and local government
finances will not adversely affect the market value of the fund or the
ability of the respective obligors to make timely payments of principal
and interest on such obligations.  In addition, a number of factors may
adversely affect the ability of the issuers of municipal securities to
repay their borrowings that are unrelated to the financial or economic
condition of a state, and that, in some cases, are beyond their control.
 Furthermore, issuers of municipal securities are generally not required
to provide ongoing information about their finances and operations to
holders of their debt obligations, although a number of cities, counties
and other issuers prepare annual reports.

Economic Factors. According to the State's Legislative Analyst Office,
with a gross state product in excess of $1 trillion, California's economy
is the largest state economy in the United States, accounting for 13% of
the nation's output, and the sixth largest economy in the world, trailing
only the United States as a whole, Japan, Germany, England and France. In
addition to its size, California's economy is diverse, with no industry
sector accounting for more than one-quarter of the State's output.

While California's economy is broad, it does have major concentrations in
high technology, aerospace and defense related manufacturing,
entertainment, and real estate and financial services, and may be
sensitive to economic factors affecting those industries. One example of
such potential sensitivity occurred from mid-1990 to late 1993, when the
State suffered a recession. Construction, manufacturing (especially
aerospace), and financial services, among others, were all severely
affected, particularly in Southern California. More recently, reflective
of the nationwide economic slowdown, the high technology sector of the
State's economy has entered a cyclical downturn. Overall, following the
strongest growth in a decade in 1999 and 2000, the State's economy is
projected to grow more slowly in 2001.

In addition, widely publicized difficulties in California's energy
supplies, highlighted by the Governor of California declaring a state of
emergency in January 2001, pose risks to the economy, especially if there
are prolonged blackouts, shortages of natural gas or significant rate
increases. While these factors are partially mitigated by the fact that
California's economy is relatively energy-efficient (U.S. Department of
Energy statistics for 1999 revealed that California electricity usage per
capita was the lowest in the nation, forty-two percent (42%) below the
national average) it is not possible to predict at this time what the
long-term impact of these developments will have on the State"s economy,
and any significant interruptions in energy supplies or significant rate
increases could adversely affect the State's revenues.

State Finances. Under the State Constitution, money may be drawn from the
Treasury only through an appropriation made by law. The primary source of
the annual expenditure authorizations is the Budget Act as approved by the
Legislature and signed by the Governor. The 2000-01 Budget Act was signed
by the Governor on June 30, 2000.

The State's funds are segregated into the General Fund and over 900
special funds, including bond, trust and pension funds. The General Fund
consists of revenues received by the State Treasury that are not required
by law to be credited to any other fund, as well as earnings from the
investment of state moneys not allocable to another fund. The General Fund
is the principal operating fund for the majority of governmental
activities and is the depository of most of the major revenue sources of
the State. The General Fund may be expended as a consequence of
appropriation measures enacted by the Legislature and approved by the
Governor, as well as appropriations pursuant to various constitutional
authorizations and initiative statutes.

The principal sources of General Fund revenues in 1999-2000 were the
California personal income tax (55% of total revenues), the sales tax
(29%), bank and corporation taxes (9%), and the gross premium tax on
insurance (2%). An estimated 20% of personal income tax receipts (10% of
the total General Fund) is derived from capital gains realizations and
stock option income. While these sources have been extraordinarily strong
in the past few years, they are particularly volatile and are expected to
decrease dramatically in 2001. For example, the Governor of California, in
his May 2001 revision to his January 2001 budget proposal, forecasted that
revenues for the 2001-02 budget year would decrease by $5.3 billion
relative to the January projection. The single largest source of this
budget-year decline is personal income tax, which is being adversely
affected by falling stock options and capital gains. In recognition of the
decreased revenue projections, the May 2001 revision proposed reducing
State expenditures by more than $3 billion for the 2001-02 budget year.
Despite the economic turndown and revised revenue and expenditure
projections for the 2001- 02 budget year, the State had Cash and
Borrowables of approximately $14.9 billion on April 30, 2001.

The State maintains a Special Fund for Economic Uncertainties (the
"SFEU"), derived from General Fund revenues, as a reserve to protect the
State from unforeseen revenue reductions or unanticipated expenditure
increases, but which is required to be replenished as soon as sufficient
revenues are available. Year-end balances in the SFEU are included for
financial reporting purposes in the General Fund balance. The proposed
2001-02 budget, as revised, continues to fund the SFEU at greater than $1
billion, or approximately 1.4% of General Fund revenues.

Although the State's strong economy has produced record revenues to the
State government in recent years, the State's budget continues to be
marked by mandated spending of significant funds on education, a large
prison population, and social needs of a growing population with many
immigrants. These factors limit the growth of State spending in other
areas and also put pressure on local governments. There can be no
assurances that, if economic conditions continue to weaken, or other
factors intercede, the State will not experience budget gaps.

Obligations of the State of California. The California Constitution
prohibits the creation of general obligation indebtedness of the State
unless a bond law is approved by a majority of the electorate voting at a
general election or a direct primary. Several general obligation bond acts
exist, providing that debt service on general obligation bonds shall be
appropriated annually from the State's General Fund and all debt service
on general obligation bonds shall be paid from the General Fund. Certain
general obligation bond programs receive revenues from sources other than
the sale of bonds or the investment of bond proceeds. Under the California
Constitution, debt service on outstanding general obligation bonds is the
second charge to the General Fund after support of the public school
system and public institutions of higher education.

According to the State's Treasurer's Office, as of March 1, 2001,
California had outstanding approximately $19.1 billion of general
obligation bonds and approximately $6.5 billion in lease debt supported by
the State General Fund. As of March 1, 2001, the State had available
approximately $7.0 billion of authorized general obligation bonds which
had not yet been issued. In fiscal year 1999-2000, debt service on general
obligation bonds and lease debt was approximately 3.7% of General Fund
revenues. In addition to those State obligations supported by the General
Fund, certain State agencies and authorities issue revenue obligations for
which the General Fund has no liability. Revenue bonds represent
obligations payable from State revenue- producing enterprises and
projects, which are not payable from the General Fund, and conduit
obligations payable only from revenues paid by private users of facilities
financed by revenue bonds. As of February 1, 2001, State agencies and
authorities had $28.6 billion aggregate principal amount of revenue bonds
and notes which are non-recourse to the General Fund.

Constitutional Limitations on Taxes, Other Charges and Appropriations. In
California, certain constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives have
established tax, spending or appropriation limitations that could
potentially limit the financial flexibility of State and local governments
and ultimately impair their ability to repay their debt obligations. The
following constitutes a brief summary of some of these limitations.

Limitation on Property Taxes. Certain California Municipal Bonds may be
obligations of issuers which rely in whole or in part, directly or
indirectly, on ad valorem property taxes as a source of revenue. The
taxing powers of California local governments and districts are limited by
Article XIIIA of the California Constitution, enacted by the voters in
1978 and commonly known as "Proposition 13." Briefly, Article XIIIA limits
to 1% of full cash value of the rate of ad valorem property taxes on real
property and generally restricts the reassessment of property to 2% per
year, except under new construction or change of ownership (subject to a
number of exemptions). Taxing entities may, however, raise ad valorem
taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.

Under Article XIIIA, the basic 1% ad valorem tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or
as of March 1, 1975, if acquired earlier), subject to certain adjustments.
This system has resulted in widely varying amounts of tax on similarly
situated properties. Article XIIIA prohibits local governments from
raising revenues through ad valorem taxes above the 1% limit; it also
requires voters of any governmental unit to give two-thirds approval to
levy any "special tax."

Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds
are secured solely by the increase in assessed valuation of a
redevelopment project area after the start of redevelopment activity. In
the event that assessed values in the redevelopment project decline (for
example, because of a major natural disaster such as an earthquake), the
tax increment revenue may be insufficient to make principal and interest
payments on these bonds. Both Moody's and S&P suspended ratings on
California tax allocation bonds after the enactment of Articles XIIIA and
XIIIB of the California constitution, and only resumed such ratings on a
selective basis.

Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are
the issuers of tax allocation securities) no longer receive an increase in
tax increment when taxes on property in the project area are increased to
repay voter-approved bonded indebtedness.

Limitations on Other Taxes, Fees and Charges. Articles XIIIC and XIIID to
the State Constitution, added by Proposition 218 in 1996, contain a number
of provisions affecting the ability of local agencies to levy and collect
both existing and future taxes, assessments, fees and charges. Article
XIIIC requires that all new or increased local taxes be submitted to the
electorate before they become effective. Taxes for general governmental
purposes require a majority vote and taxes for specific purposes require
a two-thirds vote.

Article XIIID contains several provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for
municipal services and programs and also contains several provisions
affecting "fees" and "charges," defined for purposes of Article XIIID to
mean "any levy other than an ad valorem tax, a special tax, or an
assessment, imposed by a local government upon a parcel or upon a person
as an incident of property ownership, including a user fee or charge for
a property-related service." All new and existing property-related fees
and charges must conform to requirements prohibiting, among other things,
fees and charges which generate revenues exceeding the funds required to
provide the property-related service or are used for unrelated purposes.
Furthermore, no property-related fee or charge may be imposed or increased
without majority approval by the property owners subject to the fee or
charge or, at the option of the local agency, two-thirds voter approval by
the electorate residing in the affected area.

In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes,
assessments, fees and charges. Consequently, local voters could, by future
initiative, repeal, reduce or prohibit the future imposition or increase
of any local tax, assessment, fee or charge. It is unclear how this right
of local initiative may be used in cases where taxes or charges have been
or will be specifically pledged to secure debt issues.

The interpretation and application of Proposition 218 will ultimately be
determined by the courts with respect to a number of matters, and it is
not possible at this time to predict with certainty the outcome of such
determinations. Proposition 218 is generally viewed as restricting the
fiscal flexibility of local governments, and for this reason, some ratings
of California cities and counties have been affected.

Appropriations Limits. The State and its local governments are each
subject to an annual "appropriations limit" imposed by Article XIIIB of
the California Constitution. "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes," which consist of tax revenues
and certain other funds, including proceeds from regulatory licenses, user
charges or other fees, to the extent that such proceeds exceed the cost of
providing the product or service, but "proceeds of taxes" exclude most
State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such as
reasonable user charges or fees, and certain other non-tax funds,
including bond proceeds.

Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters, (2)
appropriations to comply with mandates of courts or the federal
government, (3) appropriations for certain capital outlay projects, (4)
appropriations by the State of post-1989 increases in gasoline taxes and
motor vehicle weight fees, and (5) appropriations made in certain cases of
emergency.

The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in the
State's economy.

Proposition 111 requires that each agency's actual appropriations be
tested against its limit every two years. If the aggregate "proceeds of
taxes" for the preceding two-year period exceeds the aggregate limit, the
excess must be returned to the agency's taxpayers through tax rate or fee
reductions over the following two years. If the State's aggregate
"proceeds of taxes" for the preceding two-year period exceeds the
aggregate limit, 50% of the excess is transferred to fund the State's
contribution to school and community college districts and the remainder
is refunded to the taxpayers. With more liberal annual adjustment factors
since 1988, and depressed revenues in the early 1990's because of the
recession, few governments have been operating near their spending limits,
but this condition may change over time. Local governments may by voter
approval exceed their spending limits for up to four years. For the last
ten years, appropriations subject to limitation have been under the
State's limit. However, because of extraordinary revenue receipts in
fiscal year 1999-2000, State appropriations were estimated to be about
$700 million above the limit. No refund will occur unless the State also
exceeds its limit in fiscal year 2000-01; the State Department of Finance
has estimated the State will be about $3.6 billion below its appropriation
limit in fiscal year 2000-01.

Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of
the California Constitution, the ambiguities and possible inconsistencies
in their terms, and the impossibility of predicting future appropriations
or changes in population and cost of living, and the probability of
continuing legal challenges, it is not currently possible to determine
fully the impact of these Articles on California Municipal Bonds or on the
ability of the State or local governments to pay debt service on such
California Municipal Bonds. It is not possible, at the present time, to
predict the outcome of any pending litigation with respect to the ultimate
scope, impact or constitutionality of these Articles or the impact of any
such determinations upon State agencies or local governments, or upon
their ability to pay debt service on their obligations. Furthermore, other
measures affecting the taxing or spending authority of California or its
political subdivisions may be approved or enacted in the future. Ballot
initiatives of legislation may be introduced which would modify existing
taxes or other revenue-raising measures or which either would further
limit or, alternatively, would increase the abilities of state and local
governments to impose new taxes or increase existing taxes. It is not
possible, at present, to predict the extent to which any such initiatives
or legislation will be enacted. Nor is it possible, at present, to
determine the impact of any such initiatives or legislation on California
Municipal Bonds in which the Fund may invest, future allocations of state
revenues to local governments or the abilities of state or local
governments to pay the interest on, or repay the principal of, such
California Municipal Bonds.

Bond Rating. Three major credit rating agencies, Moody's Investors
Service, Inc., S&P and Fitch IBCA, Inc., assign ratings to California
long-term general obligation bonds. A general description of Moody's,
S&P's and Fitch's ratings of municipal bonds is set forth in Appendix A to
this Statement of Additional Information. The ratings of Moody's, S&P and
Fitch represent their opinions as to the quality of the municipal bonds
they rate. It should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently, municipal bonds with
the same maturity, coupon and rating may have different yields while
obligations with the same maturity and coupon with different ratings may
have the same yield.

As of May 14, 2001, California general obligation bonds were assigned
ratings of "A+" from Standard & Poor's, "Aa2" from Moody's and "AA" from
Fitch. These ratings reflect a downgrade by Standard & Poor's in April
2001 and a downgrade by Moody's in May 2001. Both downgrades stem largely
from each ratings agency's concerns regarding the State's energy situation
and its impact on the State's finances. These recent reductions on the
State's credit rating, and any potential future reduction, could adversely
affect the market value and marketability of all outstanding notes and
bonds issued by the State, its agencies or its local governments and there
can be no assurance that current ratings will be maintained in the future.

Legal Proceedings. The State is involved in certain legal proceedings
(described in the State's recent financial statements) that, if decided
against the State, may require the State to make significant future
expenditures or may substantially impair revenues. If the State eventually
loses any of these cases, the final remedies may not have to be
implemented in one year.

Obligations of Other Issuers Other Issuers of California Municipal Bonds.
There are a number of State agencies, instrumentalities and political
subdivisions of the State that issue Municipal Obligations, some of which
may be conduit revenue obligations payable from payments from private
borrowers. These entities are subject to various economic risks and
uncertainties, and the credit quality of the securities issued by them may
vary considerably from the credit quality of obligations backed by the
full faith and credit of the State.

State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently,
the California Legislature enacted measures to provide for the
redistribution of the State's General Fund surplus to local agencies, the
reallocation of certain State revenues to local agencies and the
assumption of certain governmental functions by the State to assist
municipal issuers to raise revenues. Total local assistance from the
State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing
reductions in certain aid programs.

In 1997, a new program provided for the State to substantially take over
funding for local trial courts (saving cities and counties some $400
million annually). For the last several years, the State has also provided
$100 million annually to support local law enforcement costs. In 2000-01,
the State provided $200 million in unrestricted grants to cities and
counties.

To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other fiscal considerations, the absolute level, or the rate of growth, of
State assistance to local governments may be reduced. Any such reductions
in State aid could compound the serious fiscal constraints already
experienced by many local B-7 governments, particularly counties. Los
Angeles County, the largest in the State, was forced to make significant
cuts in services and personnel, particularly in the health care system, in
order to balance its budget in FY1995-96 and FY1996-97. Orange County,
which emerged from Federal Bankruptcy Court protection in June 1996, has
significantly reduced county services and personnel, and faces strict
financial conditions following large investment fund losses in 1994 which
resulted in bankruptcy. The ultimate financial impact on the County and
the State cannot be predicted with any certainty.

Counties and cities may face further budgetary pressures as a result of
changes in welfare and public assistance programs, which were enacted in
August, 1997, in order to comply with the federal welfare reform law.
Generally, counties play a large role in the new system, and are given
substantial flexibility to develop and administer programs to bring aid
recipients into the workforce. Counties are also given financial
incentives if either at the county or statewide level, the "Welfare-to-
Work" programs exceed minimum targets; counties are also subject to
financial penalties for failure to meet such targets. Counties remain
responsible to provide "general assistance" for able- bodied indigents who
are ineligible for other welfare programs. The long-term financial impact
of the new system on local governments is still unknown.

Land-Secured Bonds. California Municipal Bonds which are land-secured
bonds may be adversely affected by a general decline in real estate values
or a slowdown in real estate sales activity. In many cases, such bonds are
secured by land which is undeveloped at the time of issuance but
anticipated to be developed within a few years after issuance. In the
event of such reduction or slowdown, such development may not occur or may
be delayed, thereby increasing the risk of a default on the bonds. Because
the special assessments or special taxes securing these bonds are not the
personal liability of the owners of the property assessed, the lien on the
property is the only security for the bonds. Moreover, in most cases the
issuer of these bonds is not required to make payments on the bonds in the
event of delinquency in the payment of assessments or special taxes,
except from amounts, if any, in a reserve fund established for the bonds.
Although secured by real property, the judicial foreclosure process can be
lengthy and is sometimes unsuccessful.

California Long Term Lease Obligations. Based on a series of court
decisions, certain long-term lease obligations, though typically payable
from the general fund of the State or a municipality, are not considered
"indebtedness" requiring voter approval. Such leases, however, are subject
to "abatement" in the event the facility being leased is unavailable for
beneficial use and occupancy by the municipality during the term of the
lease. Abatement is not a default, and there may be no remedies available
to the holders of the certificates evidencing the lease obligation in the
event abatement occurs. The most common cases of abatement are failure to
complete construction of the facility before the end of the period during
which lease payments have been capitalized and uninsured casualty losses
to the facility (e.g., due to earthquake). In the event abatement occurs
with respect to a lease obligation, lease payments may be interrupted (if
all available insurance proceeds and reserves are exhausted) and the
certificates may not be paid when due. Although litigation is brought from
time to time which challenges the constitutionality of such lease
arrangements, the California Supreme Court issued a ruling in August,
1998, which reconfirmed the legality of these financing methods.

Other Considerations - Recent Developments Regarding Energy. California
has experienced difficulties with the supply and price of electricity and
natural gas in much of the State since mid-2000, which are likely to
continue for several years. In 1996 California deregulated the State's
power markets. While the transmission and distribution of electricity
remained regulated, the generation of electricity was opened up to
competition. Under the deregulation scheme, utilities were prohibited from
passing through all wholesale power costs to consumers until 2002. Energy
usage in the State has been rising sharply with the strong economy, but no
new power generating plants have been built since the 1980's. The three
major investor-owned utilities in the State ("IOUs") have been purchasing
electricity to meet their needs above their own generating capacity and
contracted supplies at fluctuating short-term and spot market rates, while
the retail prices they can charge their residential and small business
customers have been capped at specified levels. Starting in mid-2000,
power purchase costs exceeded retail charges, and the IOUs incurred
substantial losses and accumulated large debts to continue to purchase
power for their customers. As a result, the credit ratings of the IOUs
have deteriorated, making it difficult to continue to purchase power. The
two largest IOUs have reported they are in default in paying certain of
their obligations. On April 6, 2001, one of the IOUs filed for voluntary
protection under Chapter 11 of the federal Bankruptcy Code. The bankruptcy
proceedings are pending. While the bankruptcy court decides the allocation
of the IOU's available cash flow and assets among its creditors, the IOU
will continue operations under current management. No other IOU has sought
the protection of or been forced into bankruptcy, although this may change
in the future.

In 2001, there have been rolling electricity blackouts throughout
California affecting millions of customers. The Governor declared a state
of emergency under State law on January 17, 2001, and ordered the State's
Department of Water Resources ("DWR") to begin purchasing electricity for
resale to retail end use customers, to fill the gap in supplies resulting
from the inability of the IOUs to continue to purchase power. DWR also
started to enter into long-term power supply contracts to reduce reliance
on short-term and spot markets. DWR's purchases are initially being funded
by advances from the State's General Fund; about $1.8 billion was expended
in the first six weeks and as of May 2001 a total of $6.7 billion in
General Fund advances have been authorized. DWR is entitled to repayment
from a portion of retail end use customer's payments, remitted through the
IOUs, but these amounts will not equal the power purchase costs. In May
2001, state officials announced that the DWR is authorized to sell up to
$13.4 billion of revenue bonds in mid-August to help finance the State"s
plan to overcome the current energy shortages. Proceeds from the offering
would be used to buy more electricity and to pay back the General Fund for
purchases already made. State officials announced that the State expected
to sell about $12.5 billion of bonds, with approximately $8 billion of the
bonds sold as tax-exempt securities. The bonds are to be issued under a
trust indenture that will provide that the bonds are payable solely from
payments from retail customers for electricity. The revenue bonds will not
be a liability of or backed by the General Fund, and neither the faith and
credit nor the taxing power of the State will be pledged to pay the
revenue bonds. The State may make additional loans or other advances from
the General Fund to support the DWR power supply program subsequent to the
issuance of the DWR revenue bonds.

The State is intensifying programs for energy conservation, load
management and improved energy efficiency in government, businesses and
homes. Approval for construction of new power generating facilities,
especially smaller and "peaking" power facilities, has been accelerated.
A number of new larger power plants are under construction and in
permitting phase, and will come on line in 2001-2003. In addition, the
State is seeking longer term power supply contracts at lower costs. The
combination of these elements is expected to lower wholesale electricity
costs in the future and promote the financial recovery of the IOUs.

Natural gas prices in California have been increasing significantly as a
result of limited pipeline capacity into the State, and nationwide price
increases. The prices nationally may remain high for some time until
additional supplies are produced, as natural gas prices are not regulated.
One of the State's IOUs also supplies natural gas, and its credit
difficulties and bankruptcy filing have impaired its ability to obtain
supplies. Significant interruption in natural gas supplies could adversely
affect the economy, including generation of electricity, much of which is
fueled by natural gas.

A number of additional plans are under consideration by the State
Legislature, including the authorization of State agencies to own, build
or purchase power generation or transmission facilities and assist energy
conservation efforts. Plans are also being considered to assist the IOUs
repay their debts incurred in purchasing power; these may include a State
purchase of their transmission facilities, potentially funded with revenue
bonds.

A number of lawsuits are pending dealing with many aspects of the energy
situation in California, including disputes over the rates which the
California Public Utilities Commission ("PUC") may charge retail
customers, financial responsibility for purchases of power by the IOUs,
and various antitrust and fraud claims against energy suppliers. In May
2001 PUC approved a $5.7 billion energy rate increase that will impact
approximately nine million residential, industrial and agricultural
customers. PUC further acknowledged that more rate increases may be
necessary unless federal regulators find a way to control the wholesale
electricity market. A number of lawsuits have been filed concerning
various aspects of the current energy situation. These include disputes
over rates set by the PUC, responsibility for electricity and natural gas
purchases made by the utilities and the California Independent System
Operator, continuing contractual obligations of certain small power
generators, and antitrust and fraud claims against various parties.

Seismic Activity. Substantially all of California is within an active
geologic region subject to major seismic activity. Northern California in
1989 and Southern California in 1994 experienced major earthquakes causing
billions of dollars in damages. The federal government provided more than
$13 billion in aid for both earthquakes, and neither event has had any
long-term negative economic impact. Any California Municipal Obligation in
the Fund could be affected by an interruption of revenues because of
damaged facilities, or, consequently, income tax deductions for casualty
losses or property tax assessment reductions. Compensatory financial
assistance could be constrained by the inability of (i) an issuer to have
obtained earthquake insurance coverage rates; (ii) an insurer to perform
on its contracts of insurance in the event of widespread losses; or (iii)
the federal or State government to appropriate sufficient funds within
their respective budget limitations.

Water Supply and Flooding. Due to aspects of its geography, climate and
continually growing population, California is subject to certain risks
with regard to its water resources. Throughout the late 1980's and early
1990's California experienced a prolonged drought that strained the
State's water supply system. Some urban areas resorted to mandatory
rationing, farmers in several agricultural areas chose to leave part of
their acreage fallow, and ecosystems in certain regions endured harsh
impacts. On the opposite end of the spectrum, during the winter season of
1997-1998 California endured double its normal amount of rainfall and
about $550 million in flood and storm damage statewide. As with the
potential risks associated with seismic activity, any California Municipal
Obligation in the Fund could be affected by an interruption of revenues
because of damaged facilities or income tax deductions for casualty losses
or property tax assessment reductions.

PUERTO RICO RISK FACTORS

Puerto Rico is a commonwealth of the United States.  Its economy is based
on manufacturing, services, and tourism and generally paralleds the United
States's economy.  Historically, Puerto Rico's economy benefited from tax
incentives contained in Section 936 of the Internal Revenue Code.  These
tax incentives allow tax credit claims to U.S. domestic corporations that
operate a large amount of their business in Puerto Rico; however, these
incentives will be phased out by the year 2006.  This may decrease Puerto
Rico's competitive advantage for attracting new businesses in the future.
 Economic difficulties in the United States and natural disasters could
have a negative on the overall economy of Puerto Rico.

VIRGIN ISLANDS RISK FACTORS

The Virgin Islands are a self-governed territory of the United States and
include St. Thomas, St. John and St. Croix.  The islands are located in
the Lesser Antilles, southeast of Florida.  The Virgin Islands' economy is
heavily dependent on tourism for both revenue and employment.  Natural
disasters and economic difficulties in the United States could have a
negative impace on the tourism industry and may also have a negative
impact on the overall economy of the Virgin Islands.

GUAM RISK FACTORS

Guam is a self-governed territory of the United States located west-
southwest of Hawaii and southeast of Japan.  Guam's economy is dependent
on revenues from tourism, the U.S. military and service industries.  Its
employment is concentrated in local government and federal jobs.  A
decrease in U.S. military operations and natural disasters may have a
negative impact on Guam's economy.

PORTFOLIO TRANSACTIONS

Newly issued securities normally are purchased directly from the issuer or
from an underwriter acting as principal.  Other purchases and sales
usually are placed with those dealers from which it appears that the best
price or execution will be obtained; those dealers may be acting as either
agents or principals.  The purchase price paid by the fund to underwriters
of newly issued securities usually includes a concession paid by the
issuer to the underwriter, and purchases of after-market securities from
dealers normally are executed at a price between the bid and asked prices.
 For the 1999, 2000 and 2001 fiscal years, the fund has paid no brokerage
commissions.

Allocation of transactions, including their frequency, to various dealers
is determined by the manager in its best judgment and in a manner deemed
fair and reasonable to shareholders.  The primary considerations are
availability of the desired security and the prompt execution of orders in
an effective manner at the most favorable prices.  Subject to these
considerations, dealers that provide supplemental investment research and
statistical or other services to the manager may receive orders for
portfolio transactions by the fund.  Information so received is in
addition to, and not in lieu of, services required to be performed by the
manager, and the fees of the manager are not reduced as a consequence of
its use of such supplemental information.  Such information may be useful
to the manager in serving both the fund and other clients and, conversely,
supplemental information obtained by the placement of business of other
clients may be useful to the manager in carrying out its obligations to
the fund.

The fund will not purchase Municipal Obligations during the existence of
any underwriting or selling group relating thereto of which Salomon Smith
Barney is a member, except to the extent permitted by the Securities and
Exchange Commission ("SEC").  Under certain circumstances, the fund may be
at a disadvantage because of this limitation in comparison with other
investment companies which have a similar investment objective but which
are not subject to such limitation.  The fund also may execute portfolio
transactions through Salomon Smith Barney and its affiliates in accordance
with rules promulgated by the SEC.

While investment decisions for the fund are made independently from those
of the other accounts managed by the manager, investments of the type the
fund may make also may be made by those other accounts.  When the fund and
one or more other accounts managed by the manager are prepared to invest
in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
manager to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the fund or the size of the
position obtained or disposed of by the fund.

PORTFOLIO TURNOVER

The fund's portfolio turnover rate (the lesser of purchases or sales of
portfolio securities during the year, excluding purchases or sales of
short-term securities, divided by the monthly average value of portfolio
securities) generally is not expected to exceed 100%, but the portfolio
turnover rate will not be a limiting factor whenever the fund deems it
desirable to sell or purchase securities. Securities may be sold in
anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold.
 In addition, a security may be sold and another security of comparable
quality may be purchased at approximately the same time in order to take
advantage of what the fund believes to be a temporary disparity in the
normal yield relationship between the two securities.  These yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates,
such as changes in the overall demand for or supply of various types of
tax-exempt securities.  For the 1999, 2000 and 2001 fiscal years, the
fund's portfolio turnover rates were 13%, 29% and 29%, respectively.

PURCHASE OF SHARES

Sales Charge Alternatives

The following classes of shares are available for purchase.  See the
prospectus for a discussion of factors to consider in selecting which
Class of shares to purchase.

Class A Shares.  Class A shares are sold to investors at the public
offering price, which is the net asset value plus an initial sales charge
as follows:



Amount of
Investment

Sales Charge as
a %
Of Transaction

Sales Charge as
a %
of Amount
Invested
Dealers'
Reallowance as %
of Offering Price
Less than $25,000
4.00%
4.17%
3.60%
$ 25,000 - 49,999

3.50

3.63

3.15
50,000 - 99,999

3.00

3.09

2.70
100,000 - 249,999

2.50

2.56

2.25
250,000 - 499,999

1.50

1.52

1.35
500,000 and over

 *

 *

 *

*  Purchases of Class A shares of $500,000 or more will be made at net
asset value without any initial sales charge, but will be subject to a
deferred sales charge of 1.00% on redemptions made within 12 months of
purchase. The deferred sales charge on Class A shares is payable to
Salomon Smith Barney, which compensates Salomon Smith Barney Financial
Consultants and other dealers whose clients make purchases of $500,000
or more. The deferred sales charge is waived in the same circumstances
in which the deferred sales charge applicable to Class B and Class L
shares is waived. See "Purchase of Shares-Deferred Sales Charge
Alternatives" and "Purchase of Shares-Waivers of Deferred Sales Charge."

Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the fund as defined in the 1933 Act.
 The reduced sales charges shown above apply to the aggregate of purchases
of Class A shares of the fund made at one time by "any person," which
includes an individual and his or her immediate family, or a trustee or
other fiduciary of a single trust estate or single fiduciary account.

Class B Shares.  Class B shares are sold without an initial sales charge
but are subject to a deferred sales charge payable upon certain
redemptions.  See "Deferred Sales Charge Provisions" below.

Class L Shares.  Class L shares are sold with an initial sales charge of
1.00% (which is equal to 1.01% of the amount invested) and are subject to
a deferred sales charge payable upon certain redemptions.  See "Deferred
Sales Charge Provisions" below.  Until June 22, 2002 purchases of Class L
shares by investors who were holders of Class C shares of the fund on June
12, 1998 will not be subject to the 1% initial sales charge.

Class Y Shares.  Class Y shares are sold without an initial sales charge
or deferred sales charge and are available only to investors investing a
minimum of $15,000,000 (except purchases of Class Y shares by Smith Barney
Allocation Series Inc., for which there is no minimum purchase amount).

General

Investors may purchase shares from a Service Agent.  In addition, certain
investors may purchase shares directly from the fund.  When purchasing
shares of the fund, investors must specify whether the purchase is for
Class A, Class B, Class L or Class Y shares.  A Service Agent may charge
their customers an annual account maintenance fee in connection with a
brokerage account through which an investor purchases or holds shares.
Accounts held directly at PFPC Global Fund Services ("PFPC") and Primerica
Shareholder Services (each, a "sub-transfer agent") are not subject to a
maintenance fee.

Investors in Class A, Class B and Class L shares may open an account in
the fund by making an initial investment of at least $1,000 for each
account in the fund. Investors in Class Y shares may open an account by
making an initial investment of $15,000,000.  Subsequent investments of at
least $50 may be made for all Classes.  For shareholders purchasing shares
of the fund through the Systematic Investment Plan on a monthly basis, the
minimum initial investment requirement for Class A, Class B and Class L
shares and subsequent investment requirement for all Classes is $25. For
shareholders purchasing shares of the fund through the Systematic
Investment Plan on a quarterly basis, the minimum initial investment
required for Class A, Class B and Class L shares and the subsequent
investment requirement for all Classes is $50.  There are no minimum
investment requirements for Class A shares for employees of Citigroup Inc.
("Citigroup") and its subsidiaries, including Salomon Smith Barney,
unitholders who invest distributions from a Unit Investment Trust ("UIT")
sponsored by Salomon Smith Barney, and directors/trustees of any of the
Smith Barney Mutual Funds, and their spouses and children.  The fund
reserves the right to waive or change minimums, to decline any order to
purchase its shares and to suspend the offering of shares from time to
time.  Shares purchased will be held in the shareholder's account by a
sub-transfer agent. Share certificates are issued only upon a
shareholder's written request to a sub-transfer agent.  It is not
recommended that the fund be used as a vehicle for Keogh, IRA or other
qualified retirement plans.

Purchase orders received by the fund or a Service Agent prior to the close
of regular trading on the NYSE, on any day the fund calculates its net
asset value, are priced according to the net asset value determined on
that day (the ''trade date'').  Orders received by a Service Agent prior
to the close of regular trading on the New York Stock Exchange ("NYSE") on
any day the fund calculates its net asset value are priced according to
the net asset value determined on that day, provided the order is received
by the fund or the fund's agent prior to its close of business.  For
shares purchased through a Service Agent purchasing through Salomon Smith
Barney, payment for shares of the fund is due on the third business day
after the trade date.  In all other cases, payment must be made with the
purchase order.

Systematic Investment Plan.  Shareholders may make additions to their
accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan.  Under the Systematic Investment Plan,
shareholders can invest at least $25 on a monthly basis or at least $50 on
a quarterly basis (not available to PFS Accounts) to charge the
shareholder's account held with a bank or other financial institution on
a monthly (not available to PFS Accounts) or quarterly basis as indicated
by the shareholder, to provide for systematic additions to the
shareholder's fund account. A shareholder who has insufficient funds to
complete the transfer will be charged a fee of up to $25 by Salomon Smith
Barney or a sub-transfer agent.  The Systematic Investment Plan also
authorizes Salomon Smith Barney to apply cash held in the shareholder's
Salomon Smith Barney brokerage account or redeem the shareholder's shares
of a Smith Barney money market fund to make additions to the account.
Additional information is available from the fund or a Service Agent.

Sales Charge Waivers and Reductions

Initial Sales Charge Waivers.  Purchases of Class A shares may be made at
net asset value without a sales charge in the following circumstances: (a)
sales to (i) Board members and employees of Citigroup and its subsidiaries
and any Citigroup affiliated funds including the Smith Barney Mutual Funds
(including retired Board members and employees); the immediate families of
such persons (including the surviving spouse of a deceased Board member or
employee); and to a pension, profit-sharing or other benefit plan for such
persons and (ii) employees of members of the National Association of
Securities Dealers, Inc., provided such sales are made upon the assurance
of the purchaser that the purchase is made for investment purposes and
that the securities will not be resold except through redemption or
repurchase; (b) offers of Class A shares to any other investment company
to effect the combination of such company with the fund by merger,
acquisition of assets or otherwise; (c) purchases of Class A shares by any
client of a newly employed Salomon Smith Barney Financial Consultant (for
a period up to 90 days from the commencement of the Financial Consultant's
employment with Salomon Smith Barney), on the condition the purchase of
Class A shares is made with the proceeds of the redemption of shares of a
mutual fund which (i) was sponsored by the Financial Consultant's prior
employer, (ii) was sold to the client by the Financial Consultant and
(iii) was subject to a sales charge; (d) purchases by shareholders who
have redeemed Class A shares in the fund (or Class A shares of another
Smith Barney Mutual Fund that is offered with a sales charge) and who wish
to reinvest their redemption proceeds in the fund, provided the
reinvestment is made within 60 calendar days of the redemption; (e)
purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) investments of distributions from or
proceeds from a sale of a UIT sponsored by Salomon Smith Barney; and (g)
purchases by investors participating in a Salomon Smith Barney fee-based
arrangement.  In order to obtain such discounts, the purchaser must
provide sufficient information at the time of purchase to permit
verification that the purchase would qualify for the elimination of the
sales charge.

Right of Accumulation.  Class A shares of the fund may be purchased by
''any person'' (as defined above) at a reduced sales charge or at net
asset value determined by aggregating the dollar amount of the new
purchase and the total net asset value of all Class A shares of the fund
and of other Smith Barney Mutual Funds that are offered with a sales
charge then held by such person and applying the sales charge applicable
to such aggregate.  In order to obtain such discount, the purchaser must
provide sufficient information at the time of purchase to permit
verification that the purchase qualifies for the reduced sales charge.
The right of accumulation is subject to modification or discontinuance at
any time with respect to all shares purchased thereafter.

Letter of Intent - Class A Shares.  A Letter of Intent for an amount of
$25,000 or more provides an opportunity for an investor to obtain a
reduced sales charge by aggregating investments over a 13 month period,
provided that the investor refers to such Letter when placing orders.  For
purposes of a Letter of Intent, the ''Amount of Investment'' as referred
to in the preceding sales charge table includes (i) all Class A shares of
the fund and other Smith Barney Mutual Funds offered with a sales charge
acquired during the term of the letter plus (ii) the value of all Class A
shares previously purchased and still owned.  Each investment made during
the period receives the reduced sales charge applicable to the total
amount of the investment goal.  If the goal is not achieved within the
period, the investor must pay the difference between the sales charges
applicable to the purchases made and the charges previously paid, or an
appropriate number of escrowed shares will be redeemed.  The term of the
Letter will commence upon the date the Letter is signed, or at the option
of the investor, up to 90 days before such date.  Please contact your
Service Agent or Citi Fiduciary Trust Company (the "transfer agent") to
obtain a Letter of Intent application.

Letter of Intent - Class Y Shares.  A Letter of Intent may also be used as
a way for investors to meet the minimum investment requirement for Class
Y shares (except purchases of Class Y shares by Smith Barney Allocation
Series Inc., for which there is no minimum purchase amount).  Such
investors must make an initial minimum purchase of $5,000,000 in Class Y
shares of the fund and agree to purchase a total of $15,000,000 of Class
Y shares of the fund within 13 months from the date of the Letter.  If a
total investment of $15,000,000 is not made within the 13-month period,
all Class Y shares purchased to date will be transferred to Class A
shares, where they will be subject to all fees (including a service fee of
0.15%) and expenses applicable to the fund's Class A shares, which may
include a deferred sales charge of 1.00%.  Please contact a Salomon Smith
Barney Financial Consultant or a sub-transfer agent for further
information.




Deferred Sales Charge Provisions

"Deferred Sales Charge Shares" are: (a) Class B shares; (b) Class L
shares; and (c) Class A shares that were purchased without an initial
sales charge but are subject to a deferred sales charge.  A deferred sales
charge may be imposed on certain redemptions of these shares.

Any applicable deferred sales charge will be assessed on an amount equal
to the lesser of the original cost of the shares being redeemed or their
net asset value at the time of redemption. Deferred Sales Charge Shares
that are redeemed will not be subject to a deferred sales charge to the
extent the value of such shares represents: (a) capital appreciation of
fund assets; (b) reinvestment of dividends or capital gain distributions;
(c) with respect to Class B shares, shares redeemed more than five years
after their purchase; or (d) with respect to Class L shares and Class A
shares that are Deferred Sales Charge Shares, shares redeemed more than 12
months after their purchase.

Class L shares and Class A shares that are Deferred Sales Charge Shares
are subject to a 1.00% deferred sales charge if redeemed within 12 months
of purchase.  In circumstances in which the deferred sales charge is
imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which
the amount is being redeemed.  Solely for purposes of determining the
number of years since a purchase payment, all purchase payments made
during a month will be aggregated and deemed to have been made on the last
day of the preceding Salomon Smith Barney statement month.  The following
table sets forth the rates of the charge for redemptions of Class B shares
by shareholders.


Year Since Purchase Payment Was Made

Deferred sales charge

First

4.50%

Second

4.00

Third

3.00

Fourth

2.00

Fifth

1.00

Sixth and thereafter

0.00

Class B shares will convert automatically to Class A shares eight years
after the date on which they were purchased and thereafter will no longer
be subject to any distribution fees.  There will also be converted at that
time such proportion of Class B Dividend Shares owned by the shareholder
as the total number of his or her Class B shares converting at the time
bears to the total number of outstanding Class B shares (other than Class
B Dividend Shares) owned by the shareholder.

In determining the applicability of any deferred sales charge, it will be
assumed that a redemption is made first of shares representing capital
appreciation, next of shares representing the reinvestment of dividends
and capital gain distributions and finally of other shares held by the
shareholder for the longest period of time.  The length of time Deferred
Sales Charge Shares acquired through an exchange have been held will be
calculated from the date the shares exchanged were initially acquired in
one of the other Smith Barney Mutual Funds, and fund shares being redeemed
will be considered to represent, as applicable, capital appreciation or
dividend and capital gain distribution reinvestments in such other funds.
 For federal income tax purposes, the amount of the deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the
amount realized on redemption.  The amount of any deferred sales charge
will be paid to Salomon Smith Barney.

To provide an example, assume an investor purchased 100 Class B shares of
the fund at $10 per share for a cost of $1,000.  Subsequently, the
investor acquired 5 additional shares of the fund through dividend
reinvestment.  During the fifteenth month after the purchase, the investor
decided to redeem $500 of his or her investment.  Assuming at the time of
the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per
share).  The deferred sales charge would not be applied to the amount
which represents appreciation ($200) and the value of the reinvested
dividend shares ($60).  Therefore, $240 of the $500 redemption proceeds
($500 minus $260) would be charged at a rate of 4.00% (the applicable rate
for Class B shares) for a total deferred sales charge of $9.60.

Waivers of Deferred Sales Charge

The deferred sales charge will be waived on: (a) exchanges (see ''Exchange
Privilege''); (b) automatic cash withdrawals in amounts equal to or less
than 1.00% per month of the value of the shareholder's shares at the time
the withdrawal plan commences (see ''Automatic Cash Withdrawal Plan'')
(however, automatic cash withdrawals in amounts equal to or less than
2.00% per month of the value of the shareholder's shares will be permitted
for withdrawal plans established prior to November 7, 1994); (c)
redemptions of shares within 12 months following the death or disability
of the shareholder; (d) involuntary redemptions; and (e) redemptions of
shares to effect a combination of the fund with any investment company by
merger, acquisition of assets or otherwise.  In addition, a shareholder
who has redeemed shares from other Smith Barney Mutual Funds may, under
certain circumstances, reinvest all or part of the redemption proceeds
within 60 days and receive pro rata credit for any deferred sales charge
imposed on the prior redemption.

Deferred sales charge waivers will be granted subject to confirmation (by
Salomon Smith Barney in the case of shareholders who are also Salomon
Smith Barney clients or by a sub-transfer agent in the case of all other
shareholders) of the shareholder's status or holdings, as the case may be.

Volume Discounts

The schedule of sales charges on Class A shares described in the
prospectus applies to purchases made by any "purchaser," which is defined
to include the following: (a) an individual; (b) an individual's spouse
and his or her children purchasing shares for their own account; (c) a
trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account; and (d) a trustee or other professional
fiduciary (including a bank, or an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended) purchasing
shares of the fund for one or more trust estates or fiduciary accounts.
 Purchasers who wish to combine purchase orders to take advantage of
volume discounts on Class A shares should contact a Salomon Smith Barney
Financial Consultant.

PFS Accounts

Initial purchase of shares of the fund must be made through a PFS
Investments Registered Representative by completing the appropriate
application found in the prospectus.  The completed application should be
forwarded to Primerica Shareholder Services, P.O. Box 9662, Providence, RI
02940-5016.  Checks drawn on foreign banks must be payable in U.S. dollars
and have the routing number of the U.S. bank encoded on the check.
Subsequent investments may be sent directly to Primerica Shareholder
Services.  In processing applications and investments, Primerica
Shareholder Services acts as agent for the investor and for PFS
Investments Inc. ("PFSI") and also as agent for the distributor, in
accordance with the terms of the prospectus.  If the transfer agent ceases
to act as such, a successor company named by the fund will act in the same
capacity so long as the account remains open.

Shares purchased will be held in the shareholder's account by Primerica
Shareholder Services.  Share certificates are issued only upon a
shareholder's written request to a sub-transfer agent. A shareholder that
has insufficient funds to complete any purchase will be charged a fee of
up to $30 per returned purchase by Primerica Shareholder Services.

Investors in Class A and Class B shares may open an account by making an
initial investment of at least $1,000 for each account in each Class
(except for Systematic Investment Plan accounts. Subsequent investments of
at least $50 may be made for each Class.  For the fund's Systematic
Investment Plan, the minimum initial investment requirement for Class A
and Class B shares and the subsequent investment requirement for each
Class is $25.  There are no minimum investment requirements in Class A
shares for employees of Citigroup and its subsidiaries, including Salomon
Smith Barney, Directors or Trustees of any of the Smith Barney Mutual
Funds, and their spouses and children.  The fund reserves the right to
waive or change minimums, to decline any order to purchase its shares and
to suspend the offering of shares from time to time.  Purchase orders
received by the transfer agent or sub-transfer agent prior to the close of
regular trading on the NYSE, on any day the fund calculates its net asset
value, are priced according to the net asset value determined on that day.

Initial purchases of fund shares may be made by wire.  The minimum
investment that can be made by wire is $10,000. Before sending the wire,
the PFS Investments Registered Representative must contact the Primerica
Shareholder Services at (800) 665-8677 to obtain proper wire instructions.
 Once an account is open, a shareholder may make additional investments by
wire.  The shareholder should contact Primerica Shareholder Services at
(800) 544-5445 to obtain proper wire instructions.

Upon completion of certain automated systems, shareholders who establish
telephone transaction authority on their account and supply bank account
information may make additions to their accounts at any time.
Shareholders should contact Primerica Shareholder Services at (800) 544-
5445 between 8:00 a.m. and 8:00 p.m. eastern time any day that the NYSE is
open.  If a shareholder does not wish to allow telephone subsequent
investments by any person in his account, he should decline the telephone
transaction option on the account application.  The minimum telephone
subsequent investment is $250 and can be up to a maximum of $10,000.  By
requesting a subsequent purchase by telephone, you authorize Primerica
Shareholder Services to transfer funds from the bank account provided for
the amount of the purchase.  A shareholder that has insufficient funds to
complete the transfer will be charged a fee of up to $30 by Primerica
Shareholder Services.  A shareholder who places a stop payment on a
transfer or the transfer is returned because the account has been closed,
will also be charged a fee of up to $30 by Primerica Shareholder Services.
 Subsequent investments by telephone may not be available if the
shareholder cannot reach Primerica Shareholder Services whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the fund's regular subsequent investment
procedure described above.

Redemption proceeds can be sent by check to the address of record, by wire
transfer to a bank account designated on the application or to a bank
account designated on the application via the Automated Clearinghouse
(ACH).  A shareholder will be charged a $25 service fee for wire transfers
and a nominal service fee for transfers made directly to the shareholder's
bank by the ACH. Primerica Shareholder Services will process and mail a
shareholder's redemption check usually within two to three business days
after receiving the redemption request in good order.  The shareholder may
request the proceeds to be mailed by two-day air express for an $8 fee
that will be deducted from the shareholder's account or by one-day air
express for a $15 fee that will be deducted from the shareholder's
account.

An Account Transcript is available at a shareholder's request, which
identifies every financial transaction in an account since it has opened.
 To defray administrative expenses involved with providing multiple years
worth of information, there is a $15 charge for each Account Transcript
requested.  Additional copies of tax forms are available at the
shareholder's request.  A $10 fee for each tax form will be assessed.

Additional information regarding Primerica Shareholder Services may be
obtained by contacting the Client Services Department at (800) 544-5445.

DETERMINATION OF NET ASSET VALUE

Each class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed.  The NYSE
currently is scheduled to be closed on New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively.  Because of the differences in distribution fees and
class-specific expenses, the per share net asset value of each class may
differ.  The following is a description of the procedures used by the fund
in valuing its assets.

Generally, the fund's investments are valued at market value or, in the
absence of a market value with respect to any securities, at fair value as
determined by or under the direction of the Board of Directors.  A
security that is primarily traded on a domestic or foreign exchange is
valued at the last sale price on that exchange or, if there were no sales
during the day, at the mean between the bid and asked price.  Over-the-
counter securities are valued at the mean between the bid and asked price.
If market quotations for those securities are not readily available, they
are valued at fair value, as determined in good faith by the fund's Board
of Directors.  An option is generally valued at the last sale price or, in
the absence of a last sale price, the last offer price.

U.S. government securities will be valued at the mean between the closing
bid and asked prices on each day, or, if market quotations for those
securities are not readily available, at fair value, as determined in good
faith by the fund's Board of Directors.

Short-term investments maturing in 60 days or less are valued at amortized
cost whenever the Board of Directors determines that amortized cost
reflects fair value of those investments.  Amortized cost valuation
involves valuing an instrument at its cost initially 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 instrument.

All other securities and other assets of the fund will be valued at fair
value as determined in good faith by the fund's Board of Directors.

Determination of Public Offering Price

The fund offers its shares to the public on a continuous basis.  The
public offering price per Class A and Class Y share of the fund is equal
to the net asset value per share at the time of purchase plus, for Class
A shares, an initial sales charge based on the aggregate amount of the
investment.  The public offering price per Class B and Class L share (and
Class A share purchases, including applicable rights of accumulation,
equaling or exceeding $500,000) is equal to the net asset value per share
at the time of purchase and no sales charge is imposed at the time of
purchase.  The method of computing the public offering price is shown in
the fund's financial statements, incorporated by reference in their
entirety into this SAI.

REDEMPTION OF SHARES

The fund is required to redeem the shares of the fund tendered to it, as
described below, at a redemption price equal to their net asset value per
share next determined after receipt of a written request in proper form at
no charge other than any applicable deferred sales charge.  Redemption
requests received after the close of regular trading on the NYSE are
priced at the net asset value next determined.

If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed.  In the event of a
failure to specify which Class, or if the investor owns fewer shares of
the Class than specified, the redemption request will be delayed until the
transfer agent receives further instructions from Salomon Smith Barney, or
if the shareholder's account is not with Salomon Smith Barney, from the
shareholder directly.  The redemption proceeds will be remitted on or
before the third business day following receipt of proper tender, except
on any days on which the NYSE is closed or, as permitted under the 1940
Act, in extraordinary circumstances.  Generally, if the redemption
proceeds are remitted to a Salomon Smith Barney brokerage account, these
funds will not be invested for the shareholder's benefit without specific
instruction and Salomon Smith Barney will benefit from the use of
temporarily uninvested funds.  Redemption proceeds for shares purchased by
check, other than a certified or official bank check, will be remitted
upon clearance of the check, which may take up to fifteen days or more.

Distributions in Kind.  If the fund's Board of Directors determines that
it would be detrimental to the best interests of the remaining
shareholders of the fund to make a redemption payment wholly in cash, the
fund may pay, in accordance with SEC rules, any portion of a redemption in
excess of the lesser of $250,000 or 1.00% of the fund's net assets by a
distribution in kind of portfolio securities in lieu of cash.  Securities
issued as a distribution in kind may incur brokerage commissions when
shareholders subsequently sell those securities.

a. Salomon Smith Barney Accounts

Shares held by Salomon Smith Barney as custodian must be redeemed by
submitting a written request to a Salomon Smith Barney Financial
Consultant. Shares other than those held by Salomon Smith Barney as
custodian may be redeemed through an investor's Service Agent or by
submitting a written request for redemption to:

Smith Barney California Municipals Fund Inc.
Class A, B, L or Y (please specify)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699

A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account
number and (c) be signed by each registered owner exactly as the shares
are registered.  If the shares to be redeemed were issued in certificate
form, the certificates must be endorsed for transfer (or be accompanied by
an endorsed stock power) and must be submitted to the transfer agent
together with the redemption request.  Any signature appearing on a share
certificate, stock power or written redemption request in excess of
$50,000 must be guaranteed by an eligible guarantor institution, such as
a domestic bank, savings and loan institution, domestic credit union,
member bank of the Federal Reserve System or member firm of a national
securities exchange.  Written redemption requests of $50,000 or less do
not require a signature guarantee unless more than one such redemption
request is made in any 10-day period. Redemption proceeds will be mailed
to an investor's address of record.  The  transfer agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, directors or guardians.  A redemption request
will not be deemed properly received until the transfer agent receives all
required documents in proper form.  Redempton proceeds will be mailed to
shareholder's address of record.

Telephone Redemption and Exchange Program.  Shareholders who do not have
a brokerage account may be eligible to redeem and exchange shares by
telephone.  To determine if a shareholder is entitled to participate in
this program, he or she should contact the transfer agent at 1-800-451-
2010.  Once eligibility is confirmed, the shareholder must complete and
return a Telephone/Wire Authorization Form, along with a signature
guarantee, that will be provided by a sub-transfer agent upon request.
(Alternatively, an investor may authorize telephone redemptions on the new
account application with the applicant's signature guarantee when making
his/her initial investment in the fund.)

Redemptions.   Redemption requests of up to $50,000 of any class or
classes of shares of the fund may be made by eligible shareholders by
calling the transfer agent at 1-800-451-2010.  Such requests may be made
between 9:00 a.m. and 4:00 p.m. (New York City time) on any day the NYSE
is open. Redemptions of shares for which certificates have been issued are
not permitted under this program.

A shareholder will have the option of having the redemption proceeds
mailed to his/her address of record or wired to a bank account
predesignated by the shareholder.  Generally, redemption proceeds will be
mailed or wired, as the case may be, on the next business day following
the redemption request.  In order to use the wire procedures, the bank
receiving the proceeds must be a member of the Federal Reserve System or
have a correspondent relationship with a member bank.  The fund reserves
the right to charge shareholders a nominal fee for each wire redemption.
 Such charges, if any, will be assessed against the shareholder's account
from which shares were redeemed.  In order to change the bank account
designated to receive redemption proceeds, a shareholder must complete a
new Telephone/Wire Authorization Form and, for the protection of the
shareholder's assets, will be required to provide a signature guarantee
and certain other documentation.

Exchanges.  Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical
to the registration of the shares of the fund exchanged.  Such exchange
requests may be made by calling the transfer agent at 1-800-451-2010
between 9:00 a.m. and 4:00 p.m. (New York City time) on any day on which
the NYSE is open.

Additional Information Regarding Telephone Redemption and Exchange
Program.   Neither the fund nor its agents will be liable for following
instructions communicated by telephone that are reasonably believed to be
genuine.  The fund and its agents will employ procedures designed to
verify the identity of the caller and legitimacy of instructions (for
example, a shareholder's name and account number will be required and
phone calls may be recorded).  The fund reserves the right to suspend,
modify or discontinue the telephone redemption and exchange program or to
impose a charge for this service at any time following at least seven (7)
days' prior notice to shareholders.

Redemptions in Kind.  In conformity with applicable rules of the SEC,
redemptions may be paid in portfolio securities, in cash or any
combination of both, as the Board of Directors may deem advisable;
however, payments shall be made wholly in cash unless the Board of
Directors believes economic conditions exist that would make such a
practice detrimental to the best interests of the fund and its remaining
shareholders.  If a redemption is paid in portfolio securities, such
securities will be valued in accordance with the procedures described
under "Share Price" in the prospectus and a shareholder would incur
brokerage expenses if these securities were then converted to cash.

b.	PFS Investments Accounts

Shareholders may redeem for cash some or all of their shares of the fund
at any time by sending a written request in proper form directly to a sub-
transfer agent, Primerica Shareholder Services, at P.O. Box 105033,
Atlanta, Georgia 30348-5033. If you should have any questions concerning
how to redeem your account after reviewing the information below, please
contact Primerica Shareholder Services at (800) 544-5445, Spanish-speaking
representatives (800) 544-7278 or TDD Line for the Hearing Impaired (800)
824-1721.

The request for redemption must be signed by all persons in whose names
the shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not paid to the record owner(s) at the record address, if the
shareholder(s) has had an address change within 45 days or less of the
shareholder's redemption request, or if the shareholder(s) is a
corporation, sole proprietor, partnership, trust or fiduciary,
signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.

Generally, a properly completed Redemption Form with any required
signature guarantee is all that is required for a redemption. In some
cases, however, other documents may be necessary. For example, in the case
of shareholders holding certificates, the certificates for the shares
being redeemed must accompany the redemption request. Additional
documentary evidence of authority is also required by Primerica
Shareholder Services in the event redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator.
Additionally, if a shareholder requests a redemption from a Retirement
Plan account (IRA or SEP), such request must state whether or not federal
income tax is to be withheld from the proceeds of the redemption check.
Redemption from a 403(b)(7) account requires completion of a special form.
 Please call Primerica Shareholder Services at (800) 544-5445 between 8:00
a.m. and 8:00 p.m. eastern standard time to obtain the proper forms.

A shareholder may utilize Primerica Shareholder Services Telephone
Redemption service to redeem his or her account as long as they have
authorized the telephone redemption option.  If a shareholder does not
wish to allow telephone redemptions by any person in his account, he
should decline the telephone transaction option on the account
application.  The telephone redemption option can be used only if: (a) the
redemption proceeds are to be mailed to the address of record and there
has been no change of address of record within the preceding 45 days; (b)
the shares to be redeemed are not in certificate form; (c); the person
requesting the redemption can provide proper identification information;
and (d) the proceeds of the redemption do not exceed $50,000.  403(b)(7)
accounts and accounts not registered in the name of individual(s) are not
eligible for the telephone redemption option.  Telephone redemption
requests can be made by contacting Primerica Shareholder Services at (800)
544-5445 between 9:00 a.m. and 6:00 p.m. eastern time any day that the
NYSE is open.  Telephone redemption may not be available if the
shareholder cannot reach Primerica Shareholder Services whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the fund's regular redemption procedure
described above.

A shareholder may utilize Primerica Shareholder Services FAX to redeem the
shareholder's account as long as a signature guarantee or other
documentary evidence is not required. Redemption requests should be
properly signed by all owners of the account and faxed to Primerica
Shareholder Services at (800) 554-2374. Facsimile redemptions may not be
available if the shareholder cannot reach Primerica Shareholder Services
by FAX, whether because all telephone lines are busy or for any other
reason; in such case, a shareholder would have to use the fund's regular
redemption procedure described above. Facsimile redemptions received by
Primerica Shareholder Services  prior to 4:00 p.m. Eastern time on a
regular business day will be processed at the net asset value per share
determined that day.

Redemption proceeds can be sent by check to the address of record, by wire
transfer to a bank account designated on the application or to a bank
account designated on the application via the Automated Clearinghouse
(ACH).  A shareholder will be charged a $25 service fee for wire transfers
and a nominal service fee for transfers made directly to the shareholder's
bank by the ACH. Primerica Shareholder Services will process and mail a
shareholder's redemption check usually within two to three business days
after receiving the redemption request in good order.  The shareholder may
request the proceeds to be mailed by two-day air express for an $8 fee
that will be deducted from the shareholder's account or by one-day air
express for a $15 fee that will be deducted from the shareholder's
account.

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares with a value of at least $10,000 and who wish
to receive specific amounts of cash monthly or quarterly.  Withdrawals of
at least $50 may be made under the Withdrawal Plan by redeeming as many
shares of the fund as may be necessary to cover the stipulated withdrawal
payment.  Any applicable deferred sales charge will not be waived on
amounts withdrawn by shareholders that exceed 1.00% per month of the value
of a shareholder's shares at the time the Withdrawal Plan commences.
(With respect to Withdrawal Plans in effect prior to November 7, 1994, any
applicable deferred sales charge will be waived on amounts withdrawn that
do not exceed 2.00% per month of the value of a shareholder's shares at
the time the Withdrawal Plan commences.)  To the extent withdrawals exceed
dividends, distributions and appreciation of a shareholder's investment in
the fund, there will be a reduction in the value of the shareholder's
investment, and continued withdrawal payments will reduce the
shareholder's investment and may ultimately exhaust it.  Withdrawal
payments should not be considered as income from investment in the fund.
 Furthermore, as it generally would not be advantageous to a shareholder
to make additional investments in the fund at the same time he or she is
participating in the Withdrawal Plan, purchases by such shareholder in
amounts of less than $5,000 ordinarily will not be permitted.

The fund offers shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at least $10,000 may
elect to receive cash payments of at least $50 monthly or quarterly.
Retirement plan accounts are eligible for automatic cash withdrawal plans
only where the shareholder is eligible to receive qualified distributions
and has an account value of at least $5,000.  The withdrawal plan will be
carried over on exchanges between Classes of the fund.

Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates
with a sub-transfer agent as agent for Withdrawal Plan members.  All
dividends and distributions on shares in the Withdrawal Plan are
reinvested automatically at net asset value in additional shares of the
fund.  For additional information, shareholders should contact a Salomon
Smith Barney Financial Consultant or a sub-transfer agent. Withdrawal
Plans should be set up with a Salomon Smith Barney Financial Consultant or
a sub-transfer agent.  A shareholder who purchases shares directly through
a sub-transfer agent may continue to do so and applications for
participation in the Withdrawal Plan must be received by a sub-transfer
agent no later than the eighth day of the month to be eligible for
participation beginning with that month's withdrawals.  For additional
information, shareholders should contact a Salomon Smith Barney Financial
Consultant or a sub-transfer agent.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Investment Adviser and Administrator - SBFM (Manager)

SBFM serves as investment adviser to the fund pursuant to an investment
advisory agreement (the "Investment Advisory Agreement") with the fund
which was approved by the Board of Directors, including a majority of
directors who are not "interested persons" of the fund or of SBFM.  SBFM
is a wholly owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"), which in turn, is a wholly owned subsidiary of Citigroup.
Subject to the supervision and direction of the fund's Board of Directors,
SBFM manages the fund's portfolio in accordance with the fund's stated
investment objective and policies, makes investment decisions for the
fund, places orders to purchase and sell securities, and employs
professional portfolio managers and securities analysts who provide
research services to the fund.  The Manager pays the salary of any officer
and employee who is employed by both it and the fund.  SBFM bears all
expenses in connection with the performance of its services.  The Manager
(through its predecessor entities) has been in the investment counseling
business since 1968 and renders investment advice to a wide variety of
individual, institutional and investment company clients that had
aggregate assets under management as of May 31, 2001 of approximately $129
billion.

As compensation for investment advisory services, the fund pays the
manager a fee computed daily and payable monthly at 0.30% of the value of
the fund's average daily net assets.  For the fiscal years ended February
28, 1999, February 29, 2000 and February 28, 2001, the fund paid the
manager $2,989,089, $2,983,546 and $2,641,613, respectively, in investment
advisory fees.

SBFM also serves as administrator to the fund pursuant to a written
agreement (the "Administration Agreement").  The manager pays the salary
of all officers and employees who are employed by both it and the fund and
bears all expenses in connection with the performance of its services.

As administrator, SBFM: (a) assists in supervising all aspects of the
fund's operations; b) supplies the fund with office facilities (which may
be in SBFM's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but
not limited to, the calculation of (i) the net asset value of shares of
the fund, (ii) applicable deferred sales charges and similar fees and
charges and (iii) distribution fees, internal auditing and legal services,
internal executive and administrative services, and stationary and office
supplies; and (c) prepares reports to shareholders of the fund, tax
returns and reports to and filings with the SEC and state Blue Sky
authorities.

As compensation for administrative services rendered to the fund, the
manager receives a fee computed daily and payable monthly at the following
annual rates of average daily net assets: 0.20% up to $500 million; and
0.18% in excess of $500 million.  For the fiscal years ended February 28,
1999, February 29, 2000, and February 28, 2001, the fund paid the manager
$1,893,181,  $1,890,814 and $1,684,969, respectively, in administration
fees.

The fund bears expenses incurred in its operations including: taxes,
interest, brokerage fees and commissions, if any; fees of directors of the
fund who are not officers, directors, shareholders or employees of Salomon
Smith Barney or the manager; SEC fees and state Blue Sky notice fees;
charges of custodians; transfer and dividend disbursing agent's fees;
certain insurance premiums; outside auditing and legal expenses; costs of
maintaining corporate existence; costs of investor services (including
allocated telephone and personnel expenses); costs of preparing and
printing of prospectuses for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and shareholder
meetings; and meetings of the officers or Board of Directors of the fund.

Code of Ethics

Pursuant to Rule 17j-1 of  the 1940 Act, the fund, its investment advisers
and principal underwriter have adopted codes of ethics that permit
personnel to invest in securities for their own accounts, including
securities that may be purchased or held by the fund.  All personnel must
place the interests of clients first and avoid activities, interests and
relationships that might interfere with the duty to make decisions in the
best interests of the clients.  All personal securities transactions by
employees must adhere to the requirements of the codes and must be
conducted in such a manner as to avoid any actual or potential conflict of
interest, the appearance of such a conflict, or the abuse of an employee's
position of trust and responsibility.  A copy of the fund's Code of Ethics
is on file with the SEC.

Counsel

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel to the fund.

Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038,
serves as counsel to the directors who are not "interested persons" of the
fund.

Auditors

KPMG LLP, 757 Third Avenue, New York, New York 10017, has been selected to
serve as independent auditor of the fund and to render an opinion on the
fund's financial statements for the fiscal year ending February 28, 2002.

Custodian, Transfer Agent and Sub-Transfer Agents

PFPC Trust Company, located at 8800 Tinicum Blvd., Philadelphia,
Pennsylvania 19153, serves as the fund's custodian.  Under the custody
agreement, PFPC Trust Company holds the fund's portfolio securities and
keeps all necessary accounts and records.  For its services, PFPC Trust
Company receives a monthly fee based upon the month-end market value of
securities held in custody and also receives securities transaction
charges.  The assets of the fund are held under bank custodianship in
compliance with the 1940 Act.

Citi Fiduciary Trust Company, located at 125 Broad Street, New York, New
York 10004, serves as the fund's transfer and dividend-paying agent.
Under the transfer agency agreement, the transfer agent maintains the
shareholder account records for the fund, handles certain communications
between shareholders and the fund, distributes dividends and distributions
payable by the fund and produces statements with respect to account
activity for the fund and its shareholders.  For these services, the
transfer agent receives fees from the fund computed on the basis of the
number of shareholder accounts that the transfer agent maintains for the
fund during the month and is reimbursed for out-of-pocket expenses.

PFPC Global Fund Services, located at P.O. Box 9699, Providence, RI 02940-
9699, serves as a sub-transfer agent to the fund.  Under the transfer
agency agreement, PFPC maintains the shareholder account records for the
fund, handles certain communications between shareholders and the fund,
and distributes dividends and distributions payable by the fund.  For
these services, PFPC receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for the fund during the month,
and is reimbursed for out-of-pocket expenses.

The fund has also engaged the services of Primerica Shareholder Services
as a sub-transfer agent for PFS Accounts.  This sub-transfer agent is
located at 3100 Breckinridge Blvd., Bldg 200, Duluth, GA 30099.

Distributors

Salomon Smith Barney, Inc., located at 388 Greenwich Street, New York, New
York 10013 and PFS Distributors serve as the fund's co-distributors
pursuant to a written agreement dated June 5, 2000 (the "Distribution
Agreement") which was approved by the fund's Board of Directors, including
a majority of the independent directors, on April 17, 2000 and July 12,
2000.  Until June 5, 2000, CFBDS, Inc. ("CFBDS") served as the Fund's
Distributor.

The Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, the Distributor, or PFS or its
affiliates may also pay for certain non-cash sales incentives provided to
PFS Investments Registered Representatives. Such incentives do not have
any effect on the net amount invested.  In addition to the reallowances
from the applicable public offering price described above, PFS may, from
time to time, pay or allow additional reallowances or promotional
incentives, in the form of cash or other compensation to PFS Investments
Registered Representatives that sell shares of the fund.

The Distributor has entered into a selling agreement with PFS and PFS has
entered into an agreement with PFSI giving PFSI the right to sell shares
of the fund on behalf of the Distributor.  The Distributor's obligation is
an agency or "best efforts" arrangement under which the Distributor is
required to take and pay only for such shares of each portfolio as may be
sold to the public.  The Distributor is not obligated to sell any stated
number of shares.  The Distribution Agreement is renewable from year to
year if approved (a) by the directors or by a vote of a majority of the
fund's outstanding voting securities, and (b) by the affirmative vote of
a majority of directors who are not parties to the Distribution Agreement
or interested persons of any party by votes cast in person at a meeting
called for such purpose.  The Distribution Agreement provides that it will
terminate if assigned, and that it may be terminated without penalty by
either party on 60 days' written notice.

For the period March 1, 1998 through October 7, 1998 the aggregate dollar
amount of sales charges on Class A shares was $1,039,000 all of which was
paid to Salomon Smith Barney.  For the period October 8, 1998 through
February 28, 1999 the aggregate dollar amount of sales charges on Class A
shares was $779,000, $701,100 of which was paid to Salomon Smith Barney.
 For the 2000 fiscal year, the aggregate dollar amount of sales charges on
Class A shares was $823,000, $740,700 of which was paid to Salomon Smith
Barney.  For the 2001 fiscal year, $876,000 was paid to Salomon Smith
Barney, a portion of which was paid to CFBDS.

For the period June 12, 1998 through October 7, 1998 the aggregate dollar
amount of sales charges on Class L shares was $29,000, all of which was
paid to Salomon Smith Barney.  For the period October 8, 1998 through
February 28, 1999 the aggregate dollar amount of sales charges on Class L
shares was $ 70,000, $63,000 of which was paid to Salomon Smith Barney.
 For the 2000 fiscal year, the aggregate dollar amount of sales charges on
Class L shares was $68,000, of which $61,200 was paid to Salomon Smith
Barney.  For the 2001 fiscal year, the aggregate dollar amount of sales
charges on Class L shares was $80,000 was paid to Salomon Smith Barney, a
portion of which was paid to CFBDS.

For the fiscal years ended February 28, 1999, February 29, 2000, and
February 28, 2001, Salomon Smith Barney received from shareholders
$45,000, $31,000 and $13,000, respectively, in deferred sales charges on
the redemption of Class A shares.  For the fiscal years ended February 28,
1999, February 29, 2000, and February 28, 2001, Salomon Smith Barney
received from shareholders $212,000, $503,000 and $325,000, respectively,
in deferred sales charges on the redemption of Class B shares.  For the
fiscal years ended February 28, 1999, February 29, 2000, and February 28,
2001, Salomon Smith Barney or its predecessor received from shareholders
$8,000, $15,000 and $4,000, respectively, in deferred sales charges on
redemption of Class L shares.

When payment is made by the investor before the settlement date, unless
otherwise noted by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Salomon Smith Barney may
benefit from the temporary use of the funds.  The fund's Board of
Directors has been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will take such benefits
into consideration when reviewing the Investment Management Agreement for
continuance.

Distribution Arrangements.  To compensate each of Salomon Smith Barney and
PFSI for the service it provides and for the expense it bears, the fund
has adopted a services and distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act.  The only Classes of shares being offered for
sale through PFSI are Class A shares and Class B shares.  Under the Plan,
Salomon Smith Barney is paid a fee with respect to shares of each
portfolio sold through Salomon Smith Barney and PFSI is paid a fee with
respect to shares of each portfolio sold through PFS.  Under the Plan, the
fund pays Salomon Smith Barney or PFSI (who pays its Registered
Representative), as the case may be, a service fee, accrued daily and paid
monthly, calculated at the annual rate of 0.15% of the value of the fund's
average daily net assets attributable to the Class A, Class B and Class L
shares.  The service fee is primarily used to pay Salomon Smith Barney
Financial Consultants (and PFS Investment Representatives) for servicing
shareholder accounts.  In addition, the fund pays Salomon Smith Barney a
distribution fee with respect to Class B and Class L shares (and pays PFSI
with respect to Class A and B shares) to cover expenses primarily intended
to result in the sale of those shares.  These expenses include:
advertising expenses; the cost of printing and mailing prospectuses to
potential investors; payment to and expenses of Salomon Smith Barney
Financial Consultants, PFS Investment Representatives, and other persons
who provide support services in connection with the distribution of
shares; interest and/or carrying charges; and indirect and overhead costs
of Salomon Smith Barney and PFSI associated with the sale of fund shares,
including lease, utility, communications and sales promotion expenses.
The Class B and Class L distribution fee is calculated at the annual rate
of 0.50% and 0.55%, respectively, of the value of the fund's average net
assets attributable to the shares of each Class.

For the fiscal year ended February 28, 2001, Salomon Smith Barney incurred
distribution expenses totaling $2,022,160 consisting of $132,418 for
advertising, $15,499 for printing and mailing of prospectuses, $998,773
for support services, $873,116 to Salomon Smith Barney Financial
Consultants, and $2,354 in accruals for interest on the excess of Salomon
Smith Barney expenses incurred in distributing the fund's shares over the
sum of the distribution fees and deferred sales charge received by Salomon
Smith Barney from the fund.

Payments under each Plan are not tied exclusively to the distribution and
shareholder services expenses actually incurred by Salomon Smith Barney or
PFSI and the payments may exceed distribution expenses actually incurred.
 The Fund's Board of Directors will evaluate the appropriateness of each
Plan and its payment terms on a continuing basis and in so doing will
consider all relevant factors, including expenses borne by Salomon Smith
Barney and PFSI, amounts received under the Plan and proceeds of the
deferred sales charges.

The following service and distribution fees were incurred pursuant to a
Distribution Plan during the periods indicated:



Distribution Plan Fees






Fiscal Year
Ended 2/28/99

Fiscal Year
Ended 2/29/00

Fiscal Year
Ended 2/28/01

Class A

$  1,077,263

$  1,081,175

$  971,948

Class B

$  1,519,558

$  1,481,570

$  1,237,675

Class L*

$     274,706

$   319,733

$   293,851

* Class L shares were called Class C shares until June 12, 1998.


Each of PFSI and Salomon Smith Barney will pay for the printing, at
printer's overrun cost, of prospectuses and periodic reports after they
have been prepared, set in type and mailed to shareholders, and will also
pay the cost of distributing such copies used in connection with the
offering to prospective investors and will also pay for supplementary sales
literature and other promotional costs.  Such expenses incurred by Salomon
Smith Barney are distribution expenses within the meaning of the Plan and
may be paid from amounts received by Salomon Smith Barney from the fund
under the Plan.

From time to time, PFSI or its affiliates may also pay for certain non-cash
sales incentives provided to PFS Investments Representatives.  Such
incentives do not have any effect on the net amount invested.  In addition
to the reallowances from the applicable public offering price described
above, PFSI may from time to time, pay or allow additional reallowances or
promotional incentives, in the form of cash or other compensation to PFS
Investments Representatives that sell shares of the fund.

Under its terms, each Plan continues from year to year, provided such
continuance is approved annually by vote of the Board of Directors,
including a majority of the independent directors.  The Plan may not be
amended to increase the amount of the service and distribution fees
without shareholder approval, and all material amendments of the Plan also
must be approved by the directors and independent directors in the manner
described above.  The Plan may be terminated with respect to a Class of
the fund at any time, without penalty, by vote of a majority of the
independent directors or by a vote of a majority of the outstanding voting
securities of the Class (as defined in the 1940 Act).  Pursuant to the
Plans, Salomon Smith Barney and PFSI will provide the fund's Board of
Directors with periodic reports of amounts expended under the Plan and the
purpose for which such expenditures were made.



VALUATION OF SHARES

The fund's net asset value per share is determined as of the close of
regular trading on the NYSE on each day that the NYSE is open by dividing
the value of the fund's net assets attributable to each Class by the total
number of shares of that Class outstanding.

When, in the judgment of the pricing 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 and asked prices.  Investments for which, in the judgment of the
pricing service, there is no readily obtainable market quotation (which
may constitute a majority of the portfolio securities) are carried at fair
value of securities of similar type, yield and maturity.  Pricing services
generally determine value by reference to transactions in municipal
obligations, quotations from municipal bond dealers, market transactions
in comparable securities and various relationships between securities.
Short-term investments that mature in 60 days or less are valued at
amortized cost whenever the Board of Directors determines that amortized
cost is fair value.  Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
instrument.  Securities and other assets that are not priced by a pricing
service and for which market quotations are not available will be valued
in good faith at fair value by or under the direction of the fund's Board
of Directors.

EXCHANGE PRIVILEGE

Shares of each Class of the fund may be exchanged for shares of the same
Class of certain Smith Barney Mutual Funds, to the extent shares are
offered for sale in the shareholder's state of residence. Exchanges of
Class A, Class B and Class L shares are subject to minimum investment
requirements and all shares are subject to the other requirements of the
fund into which exchanges are made.

Class B Exchanges.  If a Class B shareholder wishes to exchange all or a
portion of his or her shares in any of the funds imposing a higher
deferred sales charge than that imposed by the fund, the exchanged Class
B shares will be subject to the higher applicable deferred sales charge.
 Upon an exchange, the new Class B shares will be deemed to have been
purchased on the same date as the Class B shares of the fund that have
been exchanged.

Class L Exchanges.  Upon an exchange, the new Class L shares will be
deemed to have been purchased on the same date as the Class L shares of
the fund that have been exchanged.

Class A and Class Y Exchanges.  Class A and Class Y shareholders of the
fund who wish to exchange all or a portion of their shares for shares of
the respective Class in any of the funds identified above may do so
without imposition of any charge.

Additional Information Regarding the Exchange Privilege.  Although the
exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to the fund's performance and its
shareholders.  The manager may determine that a pattern of frequent
exchanges is excessive and contrary to the best interests of the fund's
other shareholders.  In this event, the fund may, at its discretion,
decide to limit additional purchases and/or exchanges by the shareholder.
 Upon such a determination, the fund will provide notice in writing or by
telephone to the shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the shareholder will be
required to (a) redeem his or her shares in the fund or (b) remain
invested in the fund or exchange into any of the funds of the Smith Barney
Mutual Funds ordinarily available, which position the shareholder would be
expected to maintain for a significant period of time.  All relevant
factors will be considered in determining what constitutes an abusive
pattern of exchanges.

Certain shareholders may be able to exchange shares by telephone.  See
''Redemption of Shares-Telephone Redemption and Exchange Program.''
Exchanges will be processed at the net asset value next determined.
Redemption procedures discussed below are also applicable for exchanging
shares, and exchanges will be made upon receipt of all supporting
documents in proper form.  If the account registration of the shares of
the fund being acquired is identical to the registration of the shares of
the fund exchanged, no signature guarantee is required.  An exchange
involves a taxable redemption of shares, subject to the tax treatment
described in "Dividends, Distributions and Taxes" below, followed by a
purchase of shares of a different fund.  Before exchanging shares,
investors should read the current prospectus describing the shares to be
acquired.  The fund reserves the right to modify or discontinue exchange
privileges upon 60 days' prior notice to shareholders.
The exchange privilege enables shareholders to acquire shares of the same
class in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision.  This
privilege is available to shareholders residing in any state in which the
fund shares being acquired may legally be sold.  Prior to any exchange,
the shareholder should obtain and review a copy of the current prospectus
of each fund into which an exchange is being considered. Prospectuses may
be obtained from a Service Agent.

Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current
net asset value and the proceeds are immediately invested at a price as
described above in shares of the fund being acquired.  Salomon Smith
Barney and PFS reserve the right to reject any exchange request.  The
exchange privilege may be modified or terminated at any time after written
notice to shareholders.  As stated in the prospectus for shares
distributed through PFS, the exchange privilege is limited.

Additional Information Regarding Telephone Redemption and Exchange Program

Neither the fund nor its agents will be liable for instructions
communicated by telephone that are reasonably believed to be genuine.  The
fund or its agents will employ procedures designed to verify the identity
of the caller and legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may be recorded).
 The fund reserves the right to suspend, modify or discontinue the
telephone redemption and exchange program or to impose a charge for this
service at any time following at least seven (7) days' prior notice to
shareholders.

PERFORMANCE DATA

From time to time, the fund may quote total return of a class in
advertisements or in reports and other communications to shareholders.
The fund may include comparative performance information in advertising or
marketing the fund's shares.  Such performance information may be included
in the following industry and financial publications: Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investor's Business Daily, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The Wall Street
Journal.  To the extent any advertisement or sales literature of the fund
describes the expenses or performance of any Class it will also disclose
such information for other Classes.

Yield and Equivalent Taxable Yield

A Class' 30-day yield figure described below is calculated according to a
formula prescribed by the SEC. The formula can be expressed as follows:

YIELD =2 [(a-b +1)6-1]
						        cd

Where:	 a 	= 	dividends and interest earned during the period.
		 b	= 	expenses accrued for the period (net of
reimbursement).
 c	= 	the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
	 d 	= 	the maximum offering price per share on the last
day of the period.

For the purpose of determining the interest earned (variable "a'' in the
formula) on debt obligations that were purchased by the fund at a discount
or premium, the formula generally calls for amortization of the discount
or premium.  The amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.

The fund's equivalent taxable 30-day yield for a Class of shares is
computed by dividing that portion of the Class' 30-day yield which is tax-
exempt by one minus a stated income tax rate and adding the product to
that portion, if any, of the Class' yield that is not tax-exempt.

The yields on municipal securities are dependent upon a variety of
factors, including general economic and monetary conditions, conditions of
the municipal securities market, size of a particular offering, maturity
of the obligation offered and rating of the issue.  Investors should
recognize that in periods of declining interest rates the fund's yield for
each Class of shares will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the fund's yield for
each Class of shares will tend to be somewhat lower.  Also, when interest
rates are falling, the inflow of net new money to the fund from the
continuous sale of its shares will likely be invested in portfolio
instruments producing lower yields than the balance of the fund's
portfolio, thereby reducing the current yield of the fund.  In periods of
rising interest rates, the opposite can be expected to occur.

The fund's yield for Class A, Class B and Class L shares for the 28-day
period ended February 28, 2001 was 4.35%, 4.07% and 3.90%, respectively.
 The equivalent taxable yield for Class A, Class B and Class L shares for
that same period was 7.88%, 7.37% and 7.06%, respectively, assuming the
payment of federal income taxes at a rate of 39.1% and California taxes at
a rate of 9.30%.

Average Annual Total Return

"Average annual total return," as described below, is computed according
to a formula prescribed by the SEC.  The formula can be expressed as
follows:

	P (1+T)n = ERV

Where:		 	P 	= 	a hypothetical initial payment of
$1,000.
T 	= 	average annual total return.
n 	=	number of years.
ERV	=	Ending Redeemable Value of a hypothetical
$1,000 investment made at the beginning of
a 1-, 5-, or 10-year period at the end of a
1-, 5-, or 10-year period (or fractional
portion thereof), assuming reinvestment of
all dividends and distributions.

The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period.  A fund's net investment income changes in
response to fluctuations in interest rates and the expenses of the fund.


Average Annual Total Return for the
fiscal year ended February 28, 2001



Class of Shares
1-Year
5-Year
10-Year
Since
Inceptio
n1
Class A2
10.09%
5.34%
6.94%
8.12%
Class B3
9.56%
5.49%
N/A
6.79%
Class L4
11.99%
5.39%
N/A
8.00%
 	1	Class A, B and L shares commenced operations on April 9, 1984,
November 6, 1992 and November 14, 1994, respectively.
	2	The average annual total return figure assumes that the maximum
4.00% sales charge has been deducted from the investment at the time
of purchase.  If the maximum sales charge had not been deducted, the
average annual total return for Class A shares for the same period
would have been 14.70%, 6.21% 7.38% and 8.38% for those same
periods.
	3	The average annual total return figure assumes that the maximum
applicable deferred sales charge has been deducted from the
investment at the time of redemption.  If the maximum deferred sales
charge had not been deducted, the average annual total return for
Class B shares for the same period would have been 14.06%, 5.65% and
6.79%, for those same periods.
	4	The average annual total return figure assumes that the maximum
applicable initial and deferred sales charges have been deducted
from the investment at the time of redemption.  If the maximum
initial and deferred sales charges have not been deducted, the
average annual total return for Class L shares for the same period
would have been 14.09%, 5.60% and 8.16%.for those same periods.

Aggregate Total Return

"Aggregate total return" represents the cumulative change in the value of
an investment in the Class for the specified period and is computed by the
following formula:

	ERV-P
	P

Where: 	P =	a hypothetical initial payment of $10,000.
ERV=	Ending Redeemable Value of a hypothetical $10,000
investment made at the beginning of a 1-, 5-, or 10-year
period at the end of a 1-, 5-, or 10-year period (or
fractional portion thereof), assuming reinvestment of
all dividends and distributions.

The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period.



Aggregate Annual Total Return for the
fiscal year ended February 28, 2001



Class of Shares
1-Year
5-Year
10-Year
Since
Inceptio
n1
Class A2
10.09%
29.73%
95.68%
273.77%
Class B3
9.56%
30.60%
N/A
  72.58%
Class L4
11.99%
30.04%
N/A
  62.23%
Class Y5
10.61%
N/A
N/A
  6.34%
_______________________
	1	Classes A, B, L and Y shares commenced operations on April 4, 1984,
November  6, 1992, November 14, 1994 and September 22, 1998,
respectively.
	2	The aggregate total return figure assumes that the maximum 4.00%
sales charge has been deducted from the investment at the time of
purchase.  If the maximum sales charge had not been deducted, the
aggregate annual total return for Class A shares for the same period
would have been 14.70%, 35.14%, 103.81% and 289.24%, for the same
periods.
	3	The aggregate annual total return figure assumes that the maximum
applicable deferred sales charge has been deducted from the
investment at the time of redemption.  If the maximum deferred sales
charge had not been deducted, the aggregate annual total return for
Class B shares for the same period would have been 14.06%, 31.60%
and 72.58% for the same periods.
4	The aggregate annual total return figure assumes that the maximum
applicable initial and deferred sales charges have been deducted
from the investment at the time of redemption.  If the maximum
initial and deferred sales charges had not been deducted, the
aggregate annual total return for Class L shares for the same period
would have been 14.09%, 31.32% and 63.83% for the same periods.
5	Class Y shares do not incur sales charges or deferred sales charges.




Performance will vary from time to time depending on market conditions,
the composition of the fund's portfolio and operating expenses and the
expenses exclusively attributable to the Class. Consequently, any given
performance quotation should not be considered as representative of the
Class' performance for any specified period in the future.  Because
performance will vary, it may not provide a basis for comparing an
investment in the Class with certain bank deposits or other investments
that pay a fixed yield for a stated period of time.  Investors comparing
a Class' performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

It is important to note that the total return figures set forth above are
based on historical earnings and are not intended to indicate future
performance.  Each Class' net investment income changes in response to
fluctuations in interest rates and the expenses of the fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions.  The fund's policy is to declare and pay
exempt-interest dividends monthly.  Dividends from net realized capital
gains, if any, will be distributed annually.  The fund may also pay
additional dividends shortly before December 31 from certain amounts of
undistributed ordinary income and capital gains in order to avoid a
federal excise tax liability.  If a shareholder does not otherwise
instruct, exempt-interest dividends and capital gain distributions will be
reinvested automatically in additional shares of the same Class at net
asset value, with no additional sales charge or deferred sales charge.

The per share amounts of the exempt-interest dividends on Class B and
Class L shares may be lower than on Class A and Class Y shares, mainly as
a result of the distribution fees applicable to Class B and Class L
shares.  Similarly, the per share amounts of exempt-interest dividends on
Class A shares may be lower than on Class Y shares, as a result of the
service fee attributable to Class A shares. Capital gain distributions, if
any, will be the same across all Classes of fund shares (A, B, L and Y).


Taxes. The following is a summary of the material United States federal
income tax considerations regarding the purchase, ownership and
disposition of shares of the fund.  Each prospective shareholder is urged
to consult his own tax adviser with respect to the specific federal, state
and local consequences of investing in the fund.  The summary is based on
the laws in effect on the date of this SAI, which are subject to change.

The fund and its investments

As described in the fund's prospectus, the fund is designed to provide
shareholders with current income which is excluded from gross income for
federal income tax purposes and which is exempt from California personal
income taxes.  The fund is not intended to constitute a balanced
investment program and is not designed for investors seeking capital gains
or maximum tax-exempt income irrespective of fluctuations in principal.
Investment in the fund would not be suitable for tax-exempt institutions,
qualified retirement plans, H.R. 10 plans and individual retirement
accounts because such investors would not gain any additional tax benefit
from the receipt of tax-exempt income.

The fund intends to continue to qualify to be treated as a regulated
investment company each taxable year under the Code.  To so qualify, the
fund must, among other things: (a) derive at least 90% of its gross income
in each taxable year from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including, but not
limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the end of each
quarter of the fund's taxable year, (i) at least 50% of the market value
of the fund's assets is represented by cash, securities of other regulated
investment companies, United States government securities and other
securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's assets and not
greater than 10% of the outstanding voting securities of such issuer and
(ii) not more than 25% of the value of its assets is invested in the
securities (other than United States government securities or securities
of other regulated investment companies) of any one issuer or any two or
more issuers that the fund controls and which are determined to be engaged
in the same or similar trades or businesses or related trades or
businesses.

As a regulated investment company, the fund will not be subject to federal
income tax on its investment company taxable income, (i.e., taxable income
other than any excess of its net realized long-term capital gains over its
net realized short-term capital losses ("net realized capital gains")) and
its net realized capital gains, if any, that it distributes to its
shareholders, provided that an amount equal to at least 90% of its
investment company taxable income, plus or minus certain other adjustments
as specified in the Code, and 90% of its net tax-exempt income for the
taxable year is distributed in compliance with the Code's timing and other
requirements but will be subject to tax at regular corporate rates on any
taxable income or gains that it does not distribute.

The Code imposes a 4% nondeductible excise tax on the fund to the extent
it does not distribute by the end of any calendar year at least 98% of its
net investment income for that year and 98% of the net amount of its
capital gains (both long-term and short-term) for the one-year period
ending, as a general rule, on October 31 of that year.  For this purpose,
however, any income or gain retained by the fund that is subject to
corporate income tax will be considered to have been distributed by year-
end.  In addition, the minimum amounts that must be distributed in any
year to avoid the excise tax will be increased or decreased to reflect any
underdistribution or overdistribution, as the case may be, from the
previous year.  The fund anticipates that it will pay such dividends and
will make such distributions as are necessary in order to avoid the
application of this tax.

If, in any taxable year, the fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution
requirement, it would be taxed in the same manner as an ordinary
corporation and distributions to its shareholders would not be deductible
by the fund in computing its taxable income.  In addition, in the event of
a failure to qualify, the fund's distributions, to the extent derived from
the fund's current or accumulated earnings and profits, would constitute
dividends (eligible for the corporate dividends-received deduction) which
are taxable to shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have been treated in the
shareholders' hands as tax-exempt interest.  If the fund fails to qualify
as a regulated investment company in any year, it must pay out its
earnings and profits accumulated in that year in order to qualify again as
a regulated investment company.  In addition, if the fund failed to
qualify as a regulated investment company for a period greater than one
taxable year, the fund may be required to recognize any net built-in gains
with respect to certain of its assets (the excess of the aggregate gains,
including items of income, over aggregate losses that would have been
realized if it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.

The fund's transactions in municipal bond index and interest rate futures
contracts and options on these futures contracts (collectively, "section
1256 contracts") will be subject to special provisions of the Code
(including provisions relating to "hedging transactions" and "straddles")
that, among other things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains or losses are
ordinary or capital), accelerate recognition of income to the fund and
defer fund losses.  These rules could therefore affect the character,
amount and timing of distributions to shareholders.  These provisions also
(a) will require the fund to mark-to-market certain types of the positions
in its portfolio (i.e., treat them as if they were closed out) and (b) may
cause the fund to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes.  The fund
will monitor its transactions, will make the appropriate tax elections and
will make the appropriate entries in its books and records when it engages
in these transactions in order to mitigate the effect of these rules and
prevent disqualification of the fund as a regulated investment company.

All section 1256 contracts held by the fund at the end of its taxable year
are required to be marked to their market value, and any unrealized gain
or loss on those positions will be included in the fund's income as if
each position had been sold for its fair market value at the end of the
taxable year.  The resulting gain or loss will be combined with any gain
or loss realized by the fund from positions in section 1256 contracts
closed during the taxable year.  Provided such positions were held as
capital assets and were not part of a "hedging transaction" nor part of a
"straddle," 60% of the resulting net gain or loss will be treated as long-
term capital gain or loss, and 40% of such net gain or loss will be
treated as short-term capital gain or loss, regardless of the period of
time the positions were actually held by the fund.


At February 28, 2001, the unused capital loss carryovers of the fund were
approximately $18,793,000.  For federal income tax purposes, these amounts
are available to be applied against future realized capital gains, if any.
 The carryovers expire as follows:

 February 28,        February 29,
	February 28,

2007
2008
     2009
Carryforward Amount
$2,923,000
$10,985,00
0

$4,885,000


Taxation of Shareholders

Because the fund will distribute exempt-interest dividends, interest on
indebtedness incurred by a shareholder to purchase or carry fund shares is
not deductible for federal income tax purposes and California personal
income tax purposes.  If a shareholder receives exempt-interest dividends
with respect to any share and if such share is held by the shareholder for
six months or less, then, for federal income tax purposes, any loss on the
sale or exchange of such share may, to the extent of exempt-interest
dividends, be disallowed.  In addition, the Code may require a
shareholder, if he or she receives exempt-interest dividends, to treat as
federal taxable income a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments.  Furthermore, that
portion of any exempt-interest dividend paid by the fund which represents
income derived from certain private activity bonds held by the fund may
not retain its federal tax-exempt status in the hands of a shareholder who
is a "substantial user" of a facility financed by such bonds or a "related
person" thereof.  Moreover, some or all of the fund's 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.  In addition, the receipt of the fund's dividends and distributions
may affect a foreign corporate shareholder's federal "branch profits" tax
liability and federal "excess net passive income" tax liability of a
shareholder of a Subchapter S corporation.  Shareholders should consult
their own tax advisors to determine whether they are (a) substantial users
with respect to a facility or related to such users within the meaning of
the Code or (b) subject to a federal alternative minimum tax, the federal
branch profits tax or the federal "excess net passive income" tax.

The fund does not expect to realize a significant amount of capital gains.
 Net realized short-term capital gains are taxable to a United States
shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital gains, if any, that the fund
designates as capital gains dividends are taxable as long-term capital
gains, whether paid in cash or in shares and regardless of how long a
shareholder has held shares of the fund.

Upon the sale or exchange of his shares, a shareholder will realize a
taxable gain or loss equal to the difference between the amount realized
and his basis in his shares.  Such gain or loss will be treated as capital
gain or loss, if the shares are capital assets in the shareholder's hands,
and will be long-term capital gain or loss if the shares are held for more
than one year and short-term capital gain or loss if the shares are held
for one year or less.  Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains
distributions in the fund, within a 61-day period beginning 30 days before
and ending 30 days after the disposition of the shares.  In such a case,
the basis of the shares acquired will be increased to reflect the
disallowed loss.  Any loss realized by a shareholder on the sale of a fund
share held by the shareholder for six months or less (to the extent not
disallowed pursuant to the six-month rule described above relating to
exempt-interest dividends) will be treated for federal income tax purposes
as a long-term capital loss to the extent of any distributions or deemed
distributions of long-term capital gains received by the shareholder with
respect to such share.

If a shareholder incurs a sales charge in acquiring shares of the fund,
disposes of those shares within 90 days and then acquires shares in a
mutual fund for which the otherwise applicable sales charge is reduced by
reason of a reinvestment right (e.g., an exchange privilege), the original
sales charge will not be taken into account in computing gain or loss on
the original shares to the extent the subsequent sales charge is reduced.
 Instead, the disregarded portion of the original sales charge will be
added to the tax basis in the newly acquired shares.  Furthermore, the
same rule also applies to a disposition of the newly acquired shares made
within 90 days of the second acquisition.  This provision prevents a
shareholder from immediately deducting the sales charge by shifting his or
her investment in a family of mutual funds.

Backup Withholding.  The fund may be required to withhold, for federal
income tax purposes, 31% of dividends, distributions and redemption
proceeds payable to shareholders who fail to provide the fund with their
correct taxpayer identification number or to make required certifications,
or who have been notified by the IRS that they are subject to backup
withholding.  Certain shareholders are exempt from backup withholding.
Backup withholding is not an additional tax and any amount withheld may be
credited against a shareholder's federal income tax liabilities.

Notices.  Shareholders will be notified annually by the fund as to the
federal income tax and California personal income tax status of the
dividends and distributions made by the fund to its shareholders.  These
statements also will designate the amount of exempt-interest dividends
that is a preference item for purposes of the federal individual and
corporate alternative minimum taxes. The dollar amount of dividends
excluded from gross income for federal income tax purposes and exempt from
California personal income taxes and the dollar amount of dividends
subject to federal income taxation and California personal income taxes,
if any, will vary for each shareholder depending upon the size and
duration of each shareholder's investment in the fund.  To the extent 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 day.

The foregoing is only a summary of certain material federal tax
consequences affecting the fund and its shareholders.  Shareholders are
advised to consult their own tax advisers with respect to the particular
federal income tax consequences to them of an investment in the fund, as
well as with respect to the State and local tax consequences to them of an
investment in the fund.

ADDITIONAL INFORMATION

The fund was incorporated under the laws of the State of Maryland on
February 17, 1984, and is registered with the SEC as a non-diversified,
open-end management investment company.

Each Class of the fund represents an identical interest in the fund's
investment portfolio.  As a result, the Classes have the same rights,
privileges and preferences, except with respect to:  (a) the designation
of each Class; (b) the effect of the respective sales charges for each
Class; (c) the distribution and/or service fees borne by each Class; (d)
the expenses allocable exclusively to each Class; (e) voting rights on
matters exclusively affecting a single Class; (f) the exchange privilege
of each Class; and (g) the conversion feature of the Class B shares.  The
Board of Directors does not anticipate that there will be any conflicts
among the interests of the holders of the different Classes. The
directors, on an ongoing basis, will consider whether any such conflict
exists and, if so, take appropriate action.

The fund does not hold annual shareholder meetings.  There normally will
be no meetings of shareholders for the purpose of electing directors
unless and until such time as less than a majority of the directors
holding office have been elected by shareholders.  The directors will call
a meeting for any purpose upon written request of shareholders holding at
least 10% of the fund's outstanding shares, and the fund will assist
shareholders in calling such a meeting as required by the 1940 Act. When
matters are submitted for shareholder vote, shareholders of each Class
will have one vote for each full share owned and a proportionate,
fractional vote for any fractional share held of that Class. Generally,
shares of the fund will be voted on a fund-wide basis on all matters
except matters affecting only the interests of one Class.

The fund sends to each of its shareholders a semi-annual report and an
audited annual report, which include listings of the investment securities
held by the fund at the end of the reporting period.  In an effort to
reduce the fund's printing and mailing costs, the fund plans to
consolidate the mailing of its semi-annual and annual reports by
household.  This consolidation means that a household having multiple
accounts with the identical address of record will receive a single copy
of each report.  Shareholders who do not want this consolidation to apply
to their account should contact their Financial Consultants or the
transfer agent.

The fund was incorporated on February 17, 1984 under the name Shearson
California Municipals Inc. On December 15, 1988, November 19, 1992, July
30, 1993 and October 14, 1994, the fund changed its name to SLH California
Municipals Fund Inc., Shearson Lehman Brothers California Municipals Fund
Inc., Smith Barney Shearson California Municipals Fund Inc. and Smith
Barney California Municipals Fund Inc., respectively.

FINANCIAL STATEMENTS

The fund's annual report for the fiscal year ended February 28, 2001 was
filed on May 9, 2001 and is incorporated in its entirety by reference,
Accession Number 0001133228-01-500061.

OTHER INFORMATION

In an industry where the average portfolio manager has seven years of
experience (source: ICI, 1998), the portfolio managers of Smith Barney
Mutual Funds average 21 years in the industry and 15 years with the firm.


Smith Barney Mutual Funds offers more than 60 mutual funds.  We understand
that many investors prefer an active role in allocating the mix of funds
in their portfolio, while others want the asset allocation decisions to be
made by experienced managers.

That's why we offer five "styles" of fund management that can be tailored
to suit each investor's unique financial goals.

	Classic Series  - our portfolio manager driven funds
Our Classic Series lets investors participate in mutual funds whose
investment decisions are determined by experienced portfolio
managers, based on each fund's investment objectives and guidelines.
 Classic Series funds invest across asset classes and sectors,
utilizing a range of strategies in order to achieve their
objectives.

	Index Series - funds that track the market
Our Index funds are designed to provide investment results that
track, as closely as possible, the performance of a stock or bond
market index.  This strategy distinguishes an index fund from an
"actively managed" mutual fund.  Instead of trying to outperform a
market or segment, a portfolio manager looks to an index to
determine which securities the fund should own.

	Premier Selections Series - our best ideas, concentrated funds
We offer a series of Premier Selections funds managed by several of
our most experienced and proven managers.  This series of funds is
built on a unique strategy of combining complementary investment
management styles to create broader, multiclass and multicap
products that are distinguished by a highly concentrated focus.

Research Series - driven by exhaustive fundamental securities
analysis
Built on a foundation of substantial buy-side research under the
direction of our Citibank Global Asset Management (CGAM) colleagues,
our Research funds focus on well-defined industries, sectors and
trends.

Style Pure Series - our solution to funds that stray
Our Style Pure Series funds are the building blocks of asset
allocation.  The funds stay fully invested within their asset class
and investment style, enabling you to make asset allocation
decisions in conjunction with your financial professional.

APPENDIX A

Description of S&P and Moody's ratings:

S&P Ratings for Municipal Bonds

S&P's Municipal Bond ratings cover obligations of states and political
subdivisions.  Ratings are assigned to general obligation and revenue
bonds.  General obligation bonds are usually secured by all resources
available to the municipality and the factors outlined in the rating
definitions below are weighed in determining the rating.  Because revenue
bonds in general are payable from specifically pledged revenues, the
essential element in the security for a revenue bond is the quantity and
quality of the pledged revenues available to pay debt service.

Although an appraisal of most of the same factors that bear on the quality
of general obligation bond credit is usually appropriate in the rating
analysis of a revenue bond, other factors are important, including
particularly the competitive position of the municipal enterprise under
review and the basic security covenants.  Although a rating reflects S&P's
judgment as to the issuer's capacity for the timely payment of debt
service, in certain instances it may also reflect a mechanism or procedure
for an assured and prompt cure of a default, should one occur, i.e., an
insurance program, federal or state guarantee or the automatic withholding
and use of state aid to pay the defaulted debt service.

	AAA

Prime - These are obligations of the highest quality.  They have the
strongest capacity for timely payment of debt service.

General Obligation Bonds - In a period of economic stress, the issuers
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 - Debt service coverage 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, and debt service
reserve requirements) are rigorous. There is evidence of superior
management.

	AA

High Grade - The investment characteristics of general obligation and
revenue 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

Good Grade - Principal and interest payments on bonds in this category are
regarded as safe.  This rating describes the third strongest capacity for
payment of debt service.  It differs from the two higher ratings because:

General Obligation Bonds - 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 - 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 appears adequate.

	BBB

Medium Grade - Of the investment grade ratings, this is the lowest.

General Obligation Bonds - Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of
debt service.  The difference between "A'' and "BBB" ratings is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.

Revenue Bonds - Debt coverage is only fair.  Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time.  Basic security provisions are no more
than adequate.  Management performance could be stronger.

	BB, B, CCC and CC

Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation.  BB indicates the lowest
degree of speculation and CC the highest degree of speculation.  While
such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.

	C

The rating C is reserved for income bonds on which no interest is being
paid.




	D

Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

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-Prime Grade category.

S&P Ratings for Municipal Notes

Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1, -2 or -3) by S&P 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.

Moody's Ratings for Municipal Bonds

	Aaa

Bonds that are Aaa are judged to be of the best quality.  They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge.'' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure.  While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.

	Aa

Bonds that are rated Aa are judged to be of high quality by all standards.
 Together with the Aaa group they comprise what are generally known as
high grade bonds.  They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

	A

Bonds 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 are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.



Baa

Bonds that are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured; interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time.  Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

	Ba

Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured.  Often the protection of
interest and principal payments may be very moderate and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

	B

Bonds that are rated B generally lack characteristics of the desirable
investment.  Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

	Caa

Bonds that are rated Caa are of poor standing.  These issues may be in
default or present elements of danger may exist with respect to principal
or interest.

	Ca

Bonds that are rated Ca represent obligations that are speculative in a
high degree.  These issues are often in default or have other marked
short-comings.

	C

Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's Ratings for Municipal Notes

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG).  This
distinction is in recognition of the differences between short- and long-
term credit risk.  Loans bearing the designation MIG 1 or VMIG 1 are of
the best quality, enjoying strong protection by established cash flows of
funds for their servicing, from established and broad-based access to the
market for refinancing, or both.  Loans bearing the designation MIG 2 or
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 or
VMIG 3 are of favorable quality, with all security elements accounted for
but lacking the undeniable strength of the preceding grades.  Liquidity
and cash flow may be narrow and market access for refinancing is likely to
be less well established.

Description of S&P A-1+ and A-1 Commercial Paper Rating

The rating A-1+ is the highest, and A-1 the second highest, commercial
paper rating assigned by S&P.  Paper rated A-1+ must have either the
direct credit support of an issuer or guarantor that possesses excellent
long-term operating and financial strengths combined with strong liquidity
characteristics (typically, such issuers or guarantors would display
credit quality characteristics which would warrant a senior bond rating of
"AA-'' or higher), or the direct credit support of an issuer or guarantor
that possesses above-average long-term fundamental operating and financing
capabilities combined with ongoing excellent liquidity characteristics.
 Paper rated A-1 by S&P has the following characteristics: liquidity
ratios are adequate to meet cash requirements; long-term senior debt is
rated "A'' or better; the issuer has access to at least two additional
channels of borrowing; basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within
the industry; and the reliability and quality of management are
unquestioned.

Description of Moody's Prime-1 Commercial Paper Rating

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's.  Among the factors considered by Moody's in assigning ratings are
the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition
and customer acceptance; (4) liquidity; (5) amount and quality of long-
term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the
issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations.


SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.



Statement of


Additional
Information























June 28, 2001




Smith Barney California Municipals Fund Inc.
Seven World Trade Center
New York, NY  10048
									SALOMON SMITH BARNEY
									A Member of Citigroup
[Symbol]


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