SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

PACIFIC AMERICAN INCOME SHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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PACIFIC AMERICAN INCOME SHARES, INC.
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 10, 2001
------------------------

To the Stockholders of
PACIFIC AMERICAN INCOME SHARES, INC.

The Annual Meeting of Stockholders of Pacific American Income Shares, Inc.
(the "Company") will be held in the Wentworth Room, The Ritz Carlton-Huntington
Hotel, 1401 South Oak Knoll Avenue, Pasadena, California, on Thursday, May 10,
2001 at 8:00 a.m., California time, for the following purposes:

(1) Electing a Board of Directors; and

(2) Transacting such other business as may properly come before the
Annual Meeting and any adjournment thereof.

The Board of Directors has fixed the close of business on March 12, 2001 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment thereof.

By Order of the Board of Directors

Lisa G. Hathaway, Secretary

Pasadena, California
March 29, 2001

STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
URGED TO DATE, FILL IN, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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PACIFIC AMERICAN INCOME SHARES, INC.

------------------------

PROXY STATEMENT

The accompanying Proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held on May 10, 2001
at 8:00 a.m., California time, and at any adjournment or postponement thereof.
Unless otherwise specified, Proxies will be voted for the election as directors
of the nominees of the Board of Directors. The Company's principal office
address is 117 E. Colorado Boulevard, Pasadena, California 91105. This Proxy
Statement and the form of proxy were first mailed to stockholders on or about
March 29, 2001.

The close of business on March 12, 2001 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of March 12, 2001, there were
9,389,431 shares of the Company's Common Stock outstanding and entitled to one
vote per share with respect to each matter to be voted on at the Annual Meeting.
The outstanding shares of Common Stock constitute the only outstanding voting
securities of the Company entitled to be voted at the Annual Meeting. At that
date no person owned of record, or to the Company's knowledge, beneficially more
than 5% of the Company's Common Stock, except that Cede & Co., a securities
depository, owned of record 80% of the Company's Common Stock. A majority of the
Company's outstanding shares as of March 12, 2001, must be represented in person
or by proxy to constitute a quorum for the Annual Meeting.

Each stockholder has the right to revoke his or her proxy at any time
before it is voted. A proxy may be revoked by filing with the Secretary of the
Company a written revocation or a properly executed proxy bearing a later date
or voting in person at the Annual Meeting. Any stockholder may attend the Annual
Meeting, whether or not he or she has previously given a proxy.

The solicitation of Proxies for the Annual Meeting will be made primarily
by mail. However, if necessary to ensure satisfactory representation at the
Annual Meeting, additional solicitation may take place in writing or by
telephone or personal interview by officers and employees of the Company, who
will not receive additional compensation for such services. As the date of the
meeting approaches, if we have not received your Proxies, you may receive a
telephone call from our proxy solicitor, Corporate Investor Communication, Inc.
("CIC"), which has been retained to assist stockholders in the voting process.
For these services, the Company will pay CIC a fee estimated to be $1,725. The
Company will reimburse brokers and other nominees, in accordance with New York
Stock Exchange approved reimbursement rates,

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for their expenses in forwarding solicitation material to the beneficial owners
of stock of the Company. All expenses incurred in connection with the
solicitation of Proxies, including the services of CIC, will be borne by the
Company.

In all matters other than the election of directors, the affirmative vote
of the majority of shares of the Company's Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the subject
matter will be the act of the stockholders. Directors will be elected by a
plurality vote of the shares of the Company's Common Stock present in person or
represented by proxy and entitled to vote on the election of directors.
Discretionary authority is provided in the Proxy as to any matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Annual Meeting. However,
if any such matters properly come before the Annual Meeting, it is understood
that the Proxy holders are fully authorized to vote thereon in accordance with
their judgment and discretion.

Abstentions will be treated as the equivalent of a negative vote for the
purpose of determining whether a proposal has been adopted and will have no
effect for the purpose of determining whether a director has been elected. As to
certain matters other than the election of directors, New York Stock Exchange
rules generally require that, when shares are registered in street or nominee
name, its member brokers receive specific instructions from the beneficial
owners in order to vote on such a proposal. If a member broker indicates on the
proxy that such broker does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will be counted for purposes
of determining a quorum, but will not be counted as having been voted on that
matter.

PROXIES

James W. Hirschmann III, Lisa G. Hathaway and Scott F. Grannis, the persons
named as proxies on the Proxy card accompanying this Proxy Statement, were
selected by the Board of Directors to serve in such capacity. Messrs. Hirschmann
and Grannis and Ms. Hathaway are each officers of the Company. Each executed and
returned Proxy will be voted in accordance with the directions indicated thereon
or, if no direction is indicated, such Proxy will be voted in accordance with
the recommendations of the Board of Directors contained in the Proxy Statement.
Unless instructions to the contrary are given, the shares represented by a Proxy
at the Annual Meeting will be voted for the Board of Directors' nominees.

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PROPOSAL

ELECTION OF DIRECTORS

Seven directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to serve until the next Annual Meeting or until
their successors have been duly elected and qualified. The names and ages of the
nominees, their principal occupations during the past five years and certain of
their other affiliations and their ownership of the Company's Common Stock are
given below. All seven of the nominees are presently directors of the Company.
The period of service of each as a director is as follows: Mr. McGagh since his
election at the Annual Meeting of stockholders in 1984; Mr. Bryson since his
appointment by the Board of Directors on February 12, 1987; Mr. Olson since his
appointment by the Board on November 11, 1987; Mr. Simpson since his appointment
by the Board of Directors on November 10, 1994; Mr. Siart since his election at
the Annual Meeting of Stockholders in April, 1997; Mr. Arnault since his
appointment by the Board of Directors in September, 1997; and Ms. DeFrantz since
her appointment by the Board of Directors in February, 1998. No director of the
Company serves as an officer of the Company. Each of the nominees has agreed to
serve if elected at the Annual Meeting. Messrs. Bryson, McGagh and Olson (since
August, 1990), Mr. Simpson (since November, 1994), Mr. Siart (since April,
1997), Mr. Arnault (since September, 1997), and Ms. DeFrantz (since February,
1998) are members of the Board of Directors of LM Institutional Fund Advisors I,
Inc. ("LMIFA I"), an open-end management investment company registered with the
Securities and Exchange Commission which is sponsored by the same Investment
Adviser (as hereinafter defined) as the Company. It is the intention of the
persons designated as proxies in the Proxy, unless otherwise directed therein,
to vote at the Annual Meeting for the election of the nominees named below as
the entire Board of Directors. If any

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nominee is unable or unavailable to serve, the persons named in the Proxies will
vote the Proxies for such other person as the Board of Directors may recommend.

SHARES OF COMMON
STOCK BENEFICIALLY
PRINCIPAL OCCUPATION OWNED ON
NAME AGE AND OTHER AFFILIATIONS MARCH 12, 2001
---- --- ---------------------- ------------------

Ronald J. Arnault(2)(6) 57 President of RJA Consultants 1,000
(energy industry financial
consulting), since 1997, and
a member of the Board of
Governors of the Music Center
of Los Angeles, the Center
Theatre Group and Occidental
College. Retired (1996)
Executive Vice President,
Chief Financial Officer and
member of the Board of
Directors of ARCO.
John E. Bryson(1)(3)(4)(6) 57 Chairman and Chief Executive 1,000
Officer of Edison
International, since 1990.
Former Chairman and Chief
Executive Officer of Southern
California Edison Company,
1990-1999. Also a director of
The Boeing Company, The Walt
Disney Company and the W.M.
Keck Foundation.

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SHARES OF COMMON
STOCK BENEFICIALLY
PRINCIPAL OCCUPATION OWNED ON
NAME AGE AND OTHER AFFILIATIONS MARCH 12, 2001
---- --- ---------------------- ------------------

Anita L. DeFrantz(2)(6) 48 President of the Amateur 420
Athletic Foundation of Los
Angeles, since 1987;
President of Kids in Sports,
since 1994; Vice President of
the International Olympic
Committee, since 1997, and
Vice President, FISA, the
International Rowing
Federation, since 1993. Also
a board member of the Amateur
Athletic Foundation of Los
Angeles, since 1987;
International Olympic
Committee, since 1986; United
States Olympic Committee
Executive Board, since 1977,
and National Museum of
American History, since 1999.
William G. McGagh(1)(4)(6) 71 Former Senior Vice President 1,000
and Chief Financial Officer
(1980-1988) of Northrop
Grumman Corporation (military
aircraft).
Ronald L. Olson(1)(3)(5)(6) 59 Partner, law firm of Munger, 1,000
Tolles & Olson, Attorneys,
Los Angeles (since 1968).
Also a director of Edison
International, Rand
Corporation and Berkshire
Hathaway, Inc.

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SHARES OF COMMON
STOCK BENEFICIALLY
PRINCIPAL OCCUPATION OWNED ON
NAME AGE AND OTHER AFFILIATIONS MARCH 12, 2001
---- --- ---------------------- ------------------

William E. B. Siart 54 Chairman of the Board, Walt 70,000
(1)(2)(3)(4)(6) Disney Concert Hall I, Inc.
(since 1998). Chairman of the
Board, Excellent Education
Development (since 2000),
President and Chief Executive
Officer (1998-2000). Former
Chairman and Chief Executive
Officer of First Interstate
Bancorp (1996). Also a member
of the Board of Trustees of
the University of Southern
California; Board of
Directors of the Performing
Arts Center of Los Angeles
County; Director of the Los
Angeles Philharmonic.
Louis A. Simpson (2)(3)(4)(6) 64 President and Chief Executive 10,000
Officer of Capital Operations
(since 1993), Vice Chairman
(1985-1993), Senior Vice
President and Chief
Investment Officer
(1979-1985) of Government
Employees Insurance Company
(GEICO Corporation). Former
President and CEO of Western
Asset Management Company.
Also a director of AT&T and
Science Applications
International Corporation
(SAIC).

- ---------------
(1) Member of the Executive Committee of the Board of Directors.

(2) Member of the Audit Committee of the Board of Directors.

(3) Member of the Nominating Committee of the Board of Directors.

(4) Member of the Compensation Committee of the Board of Directors.

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(5) Because Mr. Olson's law firm provides legal services to the Investment
Adviser, Mr. Olson is an "interested person", as defined in the Investment
Company Act of 1940, as amended, of the Company and the Investment Adviser
("Interested Person").

(6) No nominee owns 1% or more of the outstanding shares of Common Stock.

As of March 12, 2001, all directors and officers of the Company as a group
beneficially owned 112,111 shares of the Company's Common Stock, which is less
than 2% of the outstanding shares calculated on the basis of the amount of
outstanding shares of Common Stock (9,389,431) on such date.

The Company's Board of Directors has established an Audit Committee, an
Executive Committee, a Nominating Committee and a Compensation Committee. The
Audit Committee meets with the Company's independent accountants to review the
financial statements of the Company, the adequacy of internal controls and the
accounting procedures and policies of the Company, and reports on such matters
to the Board of Directors. The Executive Committee meets from time to time to
determine and declare dividends on the Common Stock and determine the net asset
value of the Company. The Nominating Committee meets to select nominees for
election as Directors of the Company by the stockholders at the Annual Meeting.
It is not the policy of the Nominating Committee to consider nominees
recommended by stockholders. The Compensation Committee meets to review and
determine director compensation for services to the Company. During 2000, the
Board of Directors held four meetings, the Audit Committee held three meetings,
the Executive Committee held no meetings, the Nominating Committee held one
meeting and the Compensation Committee held no meetings. (All Directors attended
at least 75% of the aggregate meetings of the Board of Directors and the
Committees of the Board of Directors on which they served.)

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The following table sets forth compensation received by the Company's
directors for their services as directors during 2000:

AGGREGATE PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS ANNUAL FROM THE COMPANY
FROM THE PART OF COMPANY'S BENEFITS UPON AND ITS FUND COMPLEX
NAME OF PERSON COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS(1)
-------------- ------------ --------------------- --------------- --------------------

Ronald J. Arnault............ $11,500 -- -- $32,500
John E. Bryson............... $10,000 -- -- $30,000
Anita L. DeFrantz............ $11,500 -- -- $33,000
William G. McGagh............ $12,500 -- -- $37,500
Ronald L. Olson.............. $10,000 -- -- $30,000
William E. B. Siart.......... $10,500 -- -- $32,000
Louis A. Simpson............. $11,000 -- -- $32,000

- ---------------
(1) Includes amounts received from both the Company and from LM Institutional
Fund Advisors I, Inc., which is sponsored by the same investment adviser as
the Company.

During 2000, the Company paid no remuneration to its officers, all of whom
were also officers or employees of Western Asset Management Company, the
Company's investment adviser ("Investment Adviser") and administrator.

The Company may not invest in securities of Legg Mason, Inc., the parent of
the Investment Adviser, or in any securities of its subsidiaries, but may invest
in securities of other corporations of which directors of the Company are
directors or officers. No nominee for director has purchased or sold more than
1% of the outstanding class of securities issued by Legg Mason, Inc. or the
Investment Adviser or any of their subsidiaries during the last fiscal year.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
Officers, directors and greater than ten percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

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Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during 2000, all filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with.

INFORMATION CONCERNING THE INVESTMENT
ADVISER AND THE COMPANY'S OFFICERS

The Investment Adviser is a subsidiary of Legg Mason, Inc., a holding
company which, through its subsidiaries, is engaged in providing securities
brokerage, investment advisory, corporate and public finance, and mortgage
banking services to individuals, institutions, corporations and municipalities,
and the provision of other financial services. The address of Legg Mason, Inc.
is 110 Light Street, Baltimore, Maryland 21202.

The executive officers of the Company and their relationship to the
Investment Adviser are as follows:

SHARES OF COMMON
STOCK BENEFICIALLY
NAME AND POSITION PRINCIPAL OCCUPATION AND OWNED ON
WITH THE COMPANY AGE OTHER AFFILIATIONS MARCH 12, 2001
----------------- --- ------------------------ ------------------

James W. Hirschmann III 40 President and Chief Executive 10,000
President Officer of the Investment Adviser
since 1999; Managing Director of
Western Asset Management Company
Limited (since 1996); Director of
Marketing for the Investment
Adviser 1991-1996. President of
LM Institutional Fund Advisors I,
Inc.; Director and Director of
Marketing of Arroyo Seco, Inc.;
President Legg Mason Institution
Fund Advisors. Member, Board of
Directors of Independent Colleges
and Universities; Member, Board
of Trustees of Widener College
Scott F. Grannis 51 Economist of the Investment 4,000
Vice President Adviser; Vice President of LM
Institutional Fund Advisors I,
Inc.

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Ilene S. Harker 46 Secretary and Director, 2,191
Vice President Compliance & Controls of the
Investment Adviser; Vice
President of LM Institutional
Fund Advisors I, Inc.; Director,
Chief Executive Officer and
Director of Training and
Compliance of Arroyo Seco, Inc.
Lisa G. Hathaway 38 Senior Compliance Officer of the None
Corporate Secretary Investment Advisor since 1999;
Assistant Vice President, Fund
Business Management Group,
Capital Research and Management
Company 1990-1999. Corporate
Secretary of LM Institutional
Fund Advisors I, Inc.; Corporate
Secretary of Arroyo Seco, Inc.
Member of the Board of Directors,
Southern California Dollars for
Scholars.
S. Kenneth Leech 46 Director and Chief Investment 11,500
Vice President Officer of the Investment
Adviser; Vice President of LM
Institutional Fund Advisors I,
Inc.
Steven T. Saruwatari 35 Senior Financial Officer of the None
Treasurer Investment Adviser; Assistant
Treasurer of LM Institutional
Fund Advisors I, Inc.; Chief
Financial Officer of Arroyo Seco,
Inc.
Stephen A. Walsh 42 Deputy Chief Investment Officer None
Vice President of the Investment Adviser; Vice
President of LM Institutional
Fund Advisors I, Inc.

No director of the Company is, or during the last five years has been, an
employee, officer, director, general partner or shareholder of the Investment
Adviser or Legg Mason, Inc. or has, or had during the last five years, any
material direct or indirect interest in the Investment Adviser or Legg Mason,
Inc. or any of their subsidiaries.

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STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING

Proposals that stockholders wish to present to the 2002 Annual Meeting and
to be included in the Company's proxy materials relating to such meeting must be
delivered to the Secretary of the Company not less than 120 days prior to March
29, 2002.

Stockholders who wish to make a proposal at the 2002 Annual
Meeting -- other than one that will be included in the Company's proxy
materials -- should notify the Company no later than February 12, 2002.

ANNUAL REPORT TO STOCKHOLDERS

The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2000, contains financial and other information pertaining to the
Company. The Company will furnish without charge to each person whose Proxy is
being solicited, upon request of such person, a copy of the Annual Report to
Stockholders. Requests for copies of the Annual Report to Stockholders should be
directed to Pacific American Income Shares, Inc., Attention: Investor Relations,
117 E. Colorado Boulevard, Pasadena, California 91105 or you may call
800-426-5523.

INDEPENDENT ACCOUNTANTS

The Board of Directors has selected PricewaterhouseCoopers LLP as the
independent public accountants of the Company for the fiscal year ending
December 31, 2001 subject to removal by a majority of the outstanding shares of
the Company. Representatives of PricewaterhouseCoopers LLP will attend the
meeting, and will, as they see fit, make a statement and/or respond to
appropriate questions.

The following table sets forth the aggregate fees billed for professional
services rendered by PricewaterhouseCoopers LLP:

FINANCIAL INFORMATION
SYSTEMS DESIGN AND
AUDIT FEES IMPLEMENTATION FEES ALL OTHER FEES
- ---------- --------------------- --------------

$26,000 $0 $288,000

The fees disclosed in the table above under the caption "Audit Fees" are
the aggregate fees billed for professional services rendered for the audit of
the Company's annual financial statements for the most recent fiscal year. The
fees disclosed under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" include fees billed for services, if
any, rendered for the

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Company's most recent fiscal year to the Company, to the Investment Adviser and
to any entity controlling, controlled by or under common control with the
Investment Adviser that provides services to the Company.

From time to time, in connection with the selection of the Company's
auditors and for other purposes, the Audit Committee has considered whether the
provision of the services covered in the table above under "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" is
compatible with maintaining the independence of PricewaterhouseCoopers LLP.

AUDIT COMMITTEE

The members of the Audit Committee of the Company include only Directors
who are not "interested persons" (as defined in the Investment Company Act of
1940, as amended) of the Company or Investment Adviser. Each member of the Audit
Committee is "independent" as defined in Sections 303.01(B)(2)(a) and (3) of the
listing standards of the New York Stock Exchange. The Directors have adopted a
written charter for the Audit Committee, a copy of which is attached to this
Proxy Statement as Appendix A. The Audit Committee currently consists of Ms.
DeFrantz and Messrs. Arnault (Chairman), Siart and Simpson.

The Audit Committee of the Company has submitted the following report:

The Audit Committee has reviewed and discussed with management of the
Company the audited financial statements for the last fiscal year. The Audit
Committee has discussed with the Company's independent accountants the matters
required to be discussed by Statements on Auditing Standards No. 61 (SAS 61).
SAS 61 requires independent accountants to communicate to the Audit Committee
matters including, if applicable: (1) methods used to account for significant
unusual transactions; (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative
guidance or consensus; (3) the process used by management in formulating
particularly sensitive accounting estimates and the basis for the accountant's
conclusions regarding the reasonableness of those estimates; and (4)
disagreements with management over the application of accounting principles and
certain other matters. The Audit Committee has received the written disclosures
and the letter from the Company's independent accountants required by
Independence Standards Board Standard No. 1 (requiring accountants to make
written disclosures to and discuss with the Audit Committee various matters
relating to the accountant's independence), and has discussed with such
accountants the independence of such accountants. Based on the foregoing review
and discussions, the Audit Committee recommends to the

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Directors that the inclusion of the audited financial statements for the last
fiscal year in the Company's annual report to shareholders be ratified.

Ronald J. Arnault (Chairman)
Anita L. DeFrantz
William E. B. Siart
Louis A. Simpson

ADJOURNMENT

In the absence of a quorum at the Annual Meeting or any adjournment
thereof, a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat or, in the absence therefrom of all the
stockholders, any officer entitled to preside at, or to act as secretary of, the
Annual Meeting, may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.

OTHER BUSINESS

Management is not aware of any other matters to be presented for action at
the Annual Meeting. However, if any such other matters are properly presented,
it is the intention of the persons designated in the enclosed Proxy to vote in
accordance with their best judgment.

By Order of the Board of Directors

Lisa G. Hathaway, Secretary

March 29, 2001

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APPENDIX A

PACIFIC AMERICAN INCOME SHARES, INC.

AUDIT COMMITTEE CHARTER

The Audit Committee of the Board of Directors of Pacific American Income
Shares, Inc. ("PAI") shall be composed entirely of the directors who are not
interested persons (as defined in the Investment Company Act of 1940, as
amended) who satisfy the independence and experience requirements of the New
York Stock Exchange.

The purposes of the Audit Committee shall be:

(a) to oversee generally PAI's accounting and financial reporting
policies and practices, their internal controls and, as appropriate, the
internal controls of certain service providers;

(b) to oversee generally the quality and objectivity of PAI's
financial statements and the independent audit thereof; and

To carry out its purposes, the Audit Committee shall have the following
duties and powers:

(a) to recommend to the Board auditors to be retained for the next
fiscal year;

(b) to obtain formal written reports periodically from the auditors
regarding the auditors' independence, including a delineation of all
relationships between the auditors and PAI (including the nature and extent
of any consulting services the auditors or their affiliates may provide to
Western Asset Management Company ("Western Asset") or its affiliates),
discuss with the auditors any disclosed relationships or services that may
impact the objectivity and independence of the auditors, and if so
determined by the Audit Committee, recommend that the Board of Directors
take appropriate action to satisfy itself of the independence of the
auditors;

(c) to meet with PAI's independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of the
annual audit and any special audits; (ii) to discuss any matters of concern
relating to PAI's financial statements, including any adjustments to such
statements recommended by the independent auditors, or other results of
said audit; (iii) to consider the independent auditors comments with
respect to PAI's financial policies, procedures and internal accounting
controls and Western Asset's responses thereto; and (iv) to review the form
of opinion the auditors propose to render to the Board and shareholders;

A-1
17

(d) to consider the effect upon PAI of any changes in accounting
principles or practices proposed by Western Asset or the auditors;

(e) to review the fees charged by the auditors for audit and non-audit
services;

(f) to prepare a report for inclusion in PAI's annual proxy statement
that describes the Audit Committee's composition and responsibilities and
how they were discharged;

(g) to review and reassess the adequacy of this charter annually and
submit it to the Board of Directors for approval;

(h) to investigate improprieties or suspected improprieties in Fund
operations; and

(i) to report its activities to the full Board on a regular basis and
to make such recommendations with respect to the above and other matters as
the Audit Committee may deem necessary or appropriate.

The independent auditors of PAI shall be ultimately accountable to the
Board of Directors, as assisted by the Audit Committee. The Board of Directors,
with the assistance of the Audit Committee, shall have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace the
independent auditors.

The Audit Committee shall meet on a regular basis and be empowered to hold
special meetings, as circumstances require. Any member of the Audit Committee
may call a meeting of the Audit Committee upon due notice to each other member.
Any action of the Audit Committee shall be taken by the affirmative vote of a
majority of the members. Any action of the Audit Committee may be taken without
a meeting if all members of the Audit Committee consent thereto in writing.

The Audit Committee shall regularly meet with the Treasurer of PAI and may
seek to meet with internal auditors, if any, for Western Asset as circumstances
warrant.

The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of PAI.

Nothing in this Charter shall be construed to reduce the responsibilities
or liabilities of Western Asset or PAI's independent auditors. The function of
the Audit Committee shall be oversight; it shall be the responsibility of
Western Asset to maintain appropriate systems for accounting and internal
control, and the independent auditors' responsibility to plan and carry out a
proper audit and report thereon to the Board and shareholders, as required by
law.

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PACAM-PS-01
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PACIFIC AMERICAN INCOME SHARES, INC.

ANNUAL MEETING OF STOCKHOLDERS - MAY 10, 2001

THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF PACIFIC AMERICAN INCOME SHARES, INC.

The undersigned, revoking all prior proxies, hereby appoints James W. Hirschmann
III, Lisa G. Hathaway and Scott F. Grannis and each of them, attorneys and
proxies of the undersigned, each with full power of substitution, to attend the
Annual Meeting of the Stockholders of Pacific American Income Shares, Inc., a
Delaware corporation (the "Company"), to be held in the Wentworth Room, The Ritz
Carlton-Huntington Hotel, 1401 South Oak Knoll Avenue, Pasadena, California, on
May 10, 2001, at 8:00 a.m., California time, and at any adjournments thereof,
and thereat to vote as indicated all shares of the Common Stock of the Company
which the undersigned would be entitled to vote if personally present with
respect to the matters listed on the reverse, which are more fully described in
the Proxy Statement of the Company dated March 29, 2001, receipt of which is
acknowledged by the undersigned.

- --------------------------------------------------------------------------------
PLEASE VOTE, DATE, SIGN ON REVERSE AND
RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Please sign this Proxy exactly as your name(s) appear(s) on the reverse side.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

____________________________________ ____________________________________

____________________________________ ____________________________________
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

====================================== 1. Election of directors,
PACIFIC AMERICAN INCOME SHARES, INC. For All With- For All
====================================== Nominees hold Except
(01)RONALD J. ARNAULT (05)RONALD L. OLSON
(02)JOHN E. BRYSON (06)WILLIAM E.B. SIART
Mark box at right if an address [ ] (03)ANITA L. DEFRANTZ (07)LOUIS A. SIMPSON
change or comment has been noted (04)WILLIAM G. MCGAGH [ ] [ ] [ ]
on the reverse side of this card.

CONTROL NUMBER: INSTRUCTION: To withhold authority to vote for any individual
RECORD DATE SHARES: nominee(s), mark the "For All Except" box and strike a line
through the nominee(s) name(s) in the list above.

With discretionary power upon such other matters as may properly
come before the meeting or any adjournment thereof.
___________
Please be sure to sign and date this Proxy. Date THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
- ------------------------------------------------------- MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS
OF THE NOMINEES OF THE BOARD OF DIRECTORS
_______________________________________________________
Stockholder sign here Co-owner sign here

DETACH CARD DETACH CARD

PACIFIC AMERICAN INCOME SHARES, INC.

Dear Stockholder,

Please take note of the important information enclosed with this Proxy Ballot.
There is an issue related to the management and operation of your Corporation
that requires your immediate attention and approval. This is discussed in detail
in the enclosed proxy materials.

Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.

Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope. Your vote must be received prior to the Annual Meeting
of Stockholders, May 10, 2001.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

Pacific American Income Shares, Inc.