Strategy And Objective

The Fund seeks income that is exempt from Federal and California income tax and is consistent with preservation of capital. Under normal market circumstances, The Fund invests at least 80% of its net assets (plus borrowings for investment purposes, if any) in California Municipal Securities, which are defined as debt obligations issued by the State of California, local governments and other authorities in California, and their agencies and instrumentalities, or by other issuers, all of which pay interest income exempt from Federal and California personal income tax. The policy of the Fund to invest at least 80% of its net assets in California Municipal Securities is fundamental, which means that it may be changed only with shareholder approval. The Fund may invest up to 20% of its net assets in municipal Securities, which are defined as debt obligations issued by state and local governments,territories and possessions of the United States, regional government authorities, and their agencies and instrumentalities and which pay interest income exempt from Federal income tax. However, the interest income which may be paid by either the California Municipal Securities or the Municipal securities, may in each case be subject to the Federal alternative minimum tax.