Fitch Rates $1B State of California General Obligation VRBs, 2004A & 2004B.

NEW YORK -- Fitch Ratings has assigned ratings to the $1,000,000,000 State of California, variable-rate general obligation bonds consisting of $600,000,000 series 2004A and $400,000,000 series 2004B, as described herein. The ratings are based on irrevocable, direct-pay letters of credit (LOCs) as

--Series 2004A bonds 'AA+/F1+' based on the LOC severally provided by Citibank, N.A. and the California State Teachers' Retirement System;

--Series 2004B bonds 'AA/F1+' based on the LOC severally provided by Citibank, N.A., State Street Bank and Trust Company and National Australia Bank Limited, New York branch.

Pursuant to the LOCs, the banks are obligated to make payments of principal of and interest on the bonds upon maturity and redemption and purchase price for tendered bonds. The ratings will expire on the earliest of: Oct. 20, 2009, the stated expiration date of the LOCs unless such date is extended; any prior termination of the LOCs; and defeasance of the bonds. The LOCs provide full coverage of principal plus an amount equal to 35 days of interest at a maximum rate of 11% based on a 365-day year and purchase price for tendered bonds. Goldman, Sachs & Co. is the representative of the underwriters for the transaction. The bonds are expected to be delivered on or about Oct. 21, 2004.

The bonds will be issued in the interest rate modes as follows: $350,000,000 of the series 2004A bonds and $240,000,000 of the series 2004B bonds will be issued in the daily rate mode and $250,000,000 of the series 2004A bonds and $160,000,000 of the series 2004B bonds will be issued in the weekly rate mode. The bonds may bear interest in daily, weekly, flexible, term, or auction interest rate modes. While the bonds bear interest in the daily and weekly rate modes, interest is payable on the first business day of each month, commencing Nov. 1, 2004. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The bonds of each series are subject to mandatory tender: on the effective date of any change in interest rate period, including the first day of a term rate period; on the day following the last day of each flexible rate period; and upon the expiration, adjustment, termination, or substitution of the LOC relating to a series of bonds on the date selected by the California state treasurer. The bonds are also subject to mandatory redemption and optional redemption as provided in the resolution authorizing the bonds.

Bond proceeds will be used to repay the state's outstanding general obligation commercial paper notes and provide additional funds for authorized projects.