SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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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)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Thornburg Limited Term Municipal Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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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PRELIMINARY COPY
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
Notice of Special Meeting of Shareholders
To the Shareholders of Thornburg Limited Term Municipal Fund, Inc.:
A Special Meeting of Shareholders of Thornburg Limited Term Municipal
Fund National Portfolio ("National Fund") and Thornburg Limited Term
Municipal Fund California Portfolio ("California Fund"), separate investment
portfolios of Thornburg Limited Term Municipal Fund, Inc. (the "Company")
will be held at 119 East Marcy Street, Suite 202, Santa Fe, New Mexico on
April 16, 1996 at 9:30 a.m. prevailing Mountain Time, to act on the matters
described below.
(1) For the National Fund and for the California Fund, to
consider a restatement of the Company's Investment Advisory
Agreement and adoption of an Administrative Services Agreement, to
reallocate the services performed and the fees paid to the
investment adviser so that a portion of these services will be
performed and fees associated with them will be paid pursuant to
the new Administrative Services Agreement. The approval of this
proposal would permit the payment of an annual fee of up to .125%
of Class A and Class C assets to provide administrative services.
Upon approval of this proposal, management fees would decrease by
approximately the same amount at current asset levels, and this
reallocation would not cause Fund expenses to increase at current
asset levels.
(2) For Class A shares of each Fund, to consider the approval
of an amendment to the Plan and Agreement of Distribution pursuant
to Rule 12b-1 (Class A Service Plan) between the Company and its
investment adviser to increase the amount of the annual maximum
reimbursement from .125 of 1% to .25 of 1% of assets attributable
to Class A shares. Upon approval of this proposal, the fee charged
under the Investment Advisory Agreement would decrease by the same
amount at current asset levels and the amendment of the Service
Plan would not cause Fund expenses to increase at current asset
levels.
(3) To consider ratification of the appointment by the Board
of Directors of McGladrey & Pullen, LLP, as independent auditors of
the Company for the current fiscal year.
(4) To transact such other business as may properly come
before the Meeting and any adjournments thereof.
Only shareholders of record on January 19, 1996 will be entitled to notice
of, and to vote at the meeting or any adjournments thereof.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND
SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
By Order of the Board of Directors
DAWN B. SHAPLAND, Secretary
Santa Fe, New Mexico
February 1, 1996
PROXY STATEMENT PRELIMINARY COPY
SPECIAL MEETING OF SHAREHOLDERS
OF
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Thornburg Limited Term Municipal Fund
National Portfolio ("National Fund") and Thornburg Limited Term Municipal
Fund California Portfolio ("California Fund"), separate investment portfolios
of Thornburg Limited Term Municipal Fund, Inc. (the "Company") for use at the
Company's Special Meeting of Shareholders (the "Meeting") to be held at 119
East Marcy Street, Suite 202, Santa Fe, New Mexico, on April 16, 1996 at 9:30
a.m. prevailing Mountain Time, and at any postponement or adjournment
thereof.
The Proxy Statement and the accompanying Notice of Special Meeting of
Shareholders and form of proxy are being mailed on or about February 12, 1996
to shareholders of record on the record date.
General Matters
Any person giving a proxy may revoke it at any time prior to its use.
Signed proxies received by the Company in time for voting and not so revoked
will be voted in accordance with the directions specified in the proxy. If
no instructions are given, the proxy will be voted in favor of all proposals,
and at the discretion of the proxy holders, on any other matters which may
properly come before the Meeting or any postponement or adjournment thereof.
The Board of Directors does not know of any actions to be considered at the
Meeting other than those referred to in the Notice of Special Meeting.
One-third of the outstanding shares of the Company represented in person
or by proxy will be required to constitute a quorum at the Meeting.
Abstentions and broker non-votes (i.e., proxies from brokers or nominees
indicating that they have not received instructions from the beneficial
owners on an item for which the brokers or nominees do not have discretionary
power to vote) will be treated as present for determining the existence of a
quorum. If a proposal must be approved by a percentage of votes cast on the
proposal, abstentions and broker non-votes will not be counted and will have
no effect on the result of the vote. If the proposal must be approved by a
percentage of voting securities present at the Meeting, abstentions will be
counted as votes against the proposal and broker non-votes will not be
counted and will have no effect on the result of the vote. The required vote
for each proposal and the manner of counting votes is described below under
the caption "Required Votes."
If a quorum is present at the Meeting, but sufficient votes to approve
any of the proposals are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will be approved if the votes
cast in favor of adjournment exceed the votes cast opposing the adjournment.
It is anticipated that the persons named as proxies will vote in favor of any
such adjournment.
Costs of soliciting proxies will be borne by the Company. In addition
to solicitation of proxies by use of the mails, some of the officers of the
Company and persons affiliated with Thornburg Management Company, Inc., the
investment adviser to the Company, and Thornburg Securities Corporation, the
distributor of shares of the Company, may, without remuneration, solicit
proxies personally or by telephone, telegram or facsimile transmission. The
Company also may retain D. F. King & Co., Inc., a professional proxy
solicitor, or another professional solicitor, to assist in soliciting
proxies. The solicitor's fee is estimated at $5,000 to $10,000, plus
expenses, depending upon the extent of the solicitor's activities.
On January 19, 1996, the record date for the determination of
shareholders entitled to vote at the Meeting, there were an aggregate of
76,961,404 shares entitled to vote, constituting all of the outstanding
voting securities of the Company, and the issued and outstanding shares for
each Fund and their respective classes on the record date were as follows:
Limited Term Municipal Fund Limited Term Municipal Fund
National Portfolio California Portfolio
- --------------------------- ---------------------------
Class A 68,163,898 Class A 7,777,234
Class C 900,651 Class C 119,620
Each full share of the Company outstanding on the record date is entitled to
one full vote and each fractional share outstanding on that date is entitled
to a proportionate share of one vote.
Shareholders may vote only on matters which concern the Fund in which
they hold shares, and where a proposal concerns only shares of a specific
class of shares of the Fund, only persons holding shares of the class may
vote on the proposal. The following table summarizes which shareholders may
vote on the proposals.
National Fund California Fund
Proposals: Class A Class C Class A Class C
1. Restatement of Advisory Agreement and
Adopt Administrative Services Agreement X X X X
2. Amend Class A Service Plan X X
3. Appointment of Independent Auditors X X X X
4. Other Business X X X X
Required Votes
Votes will be counted separately for each of the National Fund and the
California Fund and the Funds' respective classes. Proposal 1 must be
approved by affirmative vote of a majority of the outstanding voting
securities of each Fund, which is defined as the lesser of (i) a majority of
the outstanding shares of each Fund, or (ii) 67% or more of the shares of the
Fund represented in person or by proxy at the Meeting if more than 50% of the
outstanding shares of the Fund are represented. The voting requirement for
Proposal 1 also must be satisfied as to each of the classes of shares of each
of the Funds. Proposal 2 similarly requires the affirmative vote of the
lesser of (i) a majority of the outstanding Class A shares of each Fund, or
(ii) 67% or more of the Class A shares of each Fund represented in person or
by proxy at the Meeting if more than 50% of the outstanding Class A shares of
each Fund are represented. Proposal 3 requires the affirmative vote of a
majority of the outstanding voting securities of the Company. If any
proposal is not so approved, the Board of Directors will consider what
appropriate action may be taken.
The effectiveness of the matters considered in Proposal 1 and Proposal
2 are CONDITIONED UPON APPROVAL OF BOTH PROPOSALS. That is, the restatement
of the Investment Advisory Agreement and the adoption of Administrative
Services Agreements contemplated in Proposal 1 will not occur unless Proposal
2 is approved, and the amendment to the Class A Service Plans and further
reduction in the Investment Advisory fee contemplated in Proposal 2 will not
occur unless Proposal 1 is approved.
THE COMPANY WILL FURNISH A COPY OF THE FUNDS' MOST RECENT ANNUAL REPORTS
AND SEMIANNUAL REPORTS WITHOUT CHARGE TO ANY SHAREHOLDER REQUESTING THE
REPORTS BY TELEPHONING THE COMPANY AT (800) 847-0200.
INTRODUCTION AND SUMMARY OF PROPOSALS
The Company's Board of Directors determined at a meeting held on
December 11, 1995 to revise the manner in which certain investment management
and administrative services are provided to each class of shares offered by
each of the Company's two portfolios, Limited Term Municipal Fund National
Portfolio ("National Fund") and Limited Term Municipal Fund California
Portfolio ("California Fund"). Briefly described, the Directors determined
to separate the investment management services provided by Thornburg
Management Company, Inc. ("TMC") from the basic administrative services TMC
provides. Upon approval of these proposals, the investment management
services will continue to be provided to each Fund by TMC for a reduced fee
in the same manner those services are provided today. The administrative
services will be provided for each class of shares under a new, separate
Administrative Services Agreement. The reason for these changes is to better
associate the provision of existing and future services to shareholders with
the expenditures made to obtain these services. These changes also will
permit greater flexibility in creating new classes of shares with different
expense structures. The Board of Directors believes that this will broaden
the Company's appeal in the marketplace, increase the Company's size, and
enhance its operating efficiencies so that shareholders may enjoy lower fees
and costs over time because of improved economies of scale, described below.
In connection with the restatement of the Investment Advisory Agreement and
the adoption of the proposed Administrative Services Agreement, it is further
proposed in Proposal 2 that the maximum reimbursement percentage under the
Class A Service Plan for the National Fund and the California Fund be changed
to an annual rate of .25 of 1% of average daily net assets from the current
annual rate of .125 of 1% applicable to Class A shares of these Funds.
Existing shareholders are not expected to pay higher fees or costs at
current asset levels because of the proposed revisions. The aggregate fees
charged by TMC for its services under the Investment Advisory Agreement in
the Funds' fiscal year ended June 30, 1995 were $6,822,100 for the National
Fund and $786,812 for the California Fund. If the proposed restructuring had
been in effect for the year, the fees for the National Fund and the
California Fund would have been $4,386,325 and $524,344 under the Investment
Advisory Agreement or 64.3% and 66.6%, respectively, of the actual amounts
charged. These amounts are decreases of approximately $2,435,775 and
$262,468, respectively, for the National Fund and the California Fund. These
decreases in management fees would have been largely offset by increases in
Administrative Services Agreement fees and Class A Service Plan fees if
Proposals 1 and 2 had been in effect, totalling approximately $2,423,594 for
the National Fund and $260,028 for the California Fund for the fiscal year
ended June 30, 1995. A table comparing current Fund fees and expenses and
pro forma fees and expenses assuming approval of Proposals 1 and 2
accompanies this Proxy Statement as Exhibit A.
PROPOSAL 1
RESTATEMENT OF INVESTMENT ADVISORY AGREEMENT
AND
APPROVAL OF ADMINISTRATIVE SERVICES AGREEMENT
Description of Proposal
TMC currently provides both investment management and administrative
services under the Investment Advisory Agreement. It is proposed to amend
the Investment Advisory Agreement to limit its scope to investment management
services and related activities only, and to adopt for each class of shares
offered by the Funds an Administrative Services Agreement governing
administrative services. The fee paid under the Investment Advisory
Agreement will be reduced in order to accommodate the fee specified in the
Administrative Services Agreement. A table comparing current Fund fees and
expenses assuming approval of Proposals 1 and 2 accompanies this Proxy
Statement as Exhibit A. The restated Investment Advisory Agreement and the
form of Administrative Services Agreement accompany this Proxy Statement as
Exhibits B and C, respectively.
TMC currently provides combined investment management and administrative
services to each of the Company's Funds pursuant to an Investment Advisory
Agreement between the Company and TMC dated September 28, 1984 (the "Advisory
Agreement"). The Advisory Agreement was approved as to the National Fund by
a vote of the majority of the outstanding voting securities of the Fund at
the Company's annual meeting of shareholders on October 16, 1985, and was
similarly approved as to the California Fund at a special meeting of the
California Fund's shareholders on December 29, 1993. The Investment Advisory
Agreement has been continued on an annual basis by an annual affirmative vote
of the Board of Directors of the Company, including a majority of the
Directors who are not interested persons of TMC or its affiliates, or
officers or employees of the Company, cast in person at a meeting called for
the purpose of voting on that approval. The Investment Advisory Agreement
was most recently continued to September 1, 1996 by the Board of Directors at
a meeting on June 19, 1995.
Investment management services provided by TMC under the Directors'
supervision comprise the largest part of TMC's duties under the current
Investment Advisory Agreement, and include the review and selection of
portfolio securities, periodic evaluations of the credit quality of portfolio
securities and issuers, market research and evaluation of general economic
conditions. Investment management services and related activities are
separable from administrative functions currently provided under the
Investment Advisory Agreement. These administrative functions include
bookkeeping and accounting for class income and expenses and the allocation
of those items, review and administration of functions provided by outside
service providers such as the custodian and transfer agents and the conduct
of shareholder communications through written reports, telephone advice and
other means.
The Directors have determined, subject to shareholder approval, to
restate the Investment Advisory Agreement so that it applies only to the
investment management services common to all classes of the Company's Funds.
The rate of the investment advisory fee charged each Fund will be reduced
accordingly, ASSUMING APPROVAL OF PROPOSALS 1 AND 2, as shown in the
following table:
Net Assets of Fund Old Rate* New Rate*
------------------ --------- ---------
0 to $500 million .75% .50%
$500 million to $1 billion .65% .40%
$1 billion to $1.5 billion .55% .30%
$1.5 billion to $2 billion .50% .25%
Over $2 billion .40% .225%
* Rates are calculated on average daily net assets and are paid monthly.
The restated Investment Advisory Agreement will continue to provide that
the Company will pay all of its expenses, subject to TMC's reimbursement
obligation described below. These expenses include, but are not limited to,
taxes, brokerage fees and commissions, commitment fees, distribution
expenses, certain insurance premiums, interest charges, fees and expenses of
the custodian, transfer agent and dividend disbursing agent,
telecommunications expenses, auditing and legal expenses, costs of forming
the Company and maintaining its corporate existence, compensation of officers
and employees of the Company, fees and travel expenses of outside Directors,
costs of other personnel performing services for the Company who are not
officers of TMC or its affiliates, costs of federal and state registration
fees and expenses, expenses of printing and distributing the Company's
prospectus and stock certificates, and printing applications for shareholder
accounts, and the fees payable under the Advisory Agreement, the
Administrative Services Agreement and applicable Rule 12b-1 plans and
agreements.
The Board of Directors also has adopted, subject to shareholder
approval, an Administrative Services Agreement for Class A and Class C shares
of each of the Funds under which TMC will provide to each class the
administrative functions which will no longer be provided by TMC under the
restated Investment Advisory Agreement. These administrative functions
include bookkeeping and accounting for Fund income and expenses and the
allocation of those items, review and administration of functions provided by
outside service providers such as the custodian and transfer agents and the
conduct of shareholder communications through written reports and telephone
advice. The fee paid to TMC for these functions is calculated at an annual
percentage of .125 of 1% of each class's average daily net assets, paid
monthly. TMC will attempt to maintain or improve the quality of the
administrative services performed under the Administrative Services Agreement
for Class A and Class C shareholders of the Funds with no anticipated
increases in the costs to the holders of these classes of shares at current
asset levels.
The reason for this reorganization of functions is to better allocate
costs for specific services. In addition, this improved allocation will
permit each Fund to create one or more new classes of shares which will pay
the same cost of investment management under the restated Investment Advisory
Agreement, but may pay a different administrative fee under an Administrative
Services Agreement specific to each new class, depending upon the
administrative functions required for the new class.
The Board of Directors believes that the ability of each Fund to offer
new classes of shares more closely tailored to specific purchasers may
increase the total assets of the Funds. Increases in total assets can have
the following benefits for shareholders:
(a) increases in total assets will reduce the investment management fee
charged to each share as assets of a Fund increase beyond each step in the
investment advisory fee schedule displayed above;
(b) other expenses also tend to decline with increases in a mutual
fund's total assets;
(c) a mutual fund may obtain the benefit of increased bargaining power
that increased size brings in dealing for reduced brokerage commissions or
dealer spreads on purchase and sale of securities;
(d) developments within the mutual fund industry including networking
systems, innovative methods of share distribution and new modes for
delivering shareholder services may favor larger mutual funds, and may be
denied completely to smaller mutual funds; and
(e) larger mutual funds or mutual funds which are members of fund
"families" may have advantages in managing and disposing of assets in
declining markets.
The restated Investment Advisory Agreement provides that it may be
terminated at any time without penalty by vote of the Board of Directors or
by vote of a majority of the outstanding voting securities of the Company on
60 days' notice by the Company to TMC, or by TMC on 60 days' notice to the
Company, and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of TMC, or of reckless disregard of
its obligations thereunder, the Company shall not hold TMC liable for any
action or failure to act in accordance with its duties thereunder.
The Administrative Services Agreement provides that it may be terminated
at any time without penalty by vote of the Board of Directors or by vote of
a majority of the outstanding voting securities of the share class to which
the Agreement relates, on 60 days' notice to the Company. The Administrative
Services Agreement provides that in the absence of willful misfeasance, bad
faith or gross negligence on the part of TMC, or of reckless disregard of its
obligations under the Agreement, the Company will not hold TMC liable for any
action or failure to act in accordance with its duties thereunder.
ADDITIONAL INFORMATION ABOUT TMC
Thornburg Management Company, Inc., a Delaware corporation, is an
investment adviser registered under the Investment Company Act of 1940. All
of the voting capital stock of TMC is owned by Mr. H. Garrett Thornburg, Jr.,
who is president and sole director of TMC and is Chairman, Treasurer and a
Director of the Company. The principal office of TMC and Mr. Thornburg is
119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501.
The officers of the Company who are officers or directors of TMC are as
follows:
Name Position With Company Position With TMC
- ------------------------- --------------------- -----------------
H. Garrett Thornburg, Jr. Chairman, Director, Director, President
Treasurer
Brian J. McMahon President Managing Director
Steven J. Bohlin Vice President Managing Director
Ken Ziesenheim Vice President Managing Director
Dawn B. Shapland Secretary Secretary,
Managing Director
John Ariola Assistant Vice President Employee
Susan Rossi Assistant Vice President Employee
Jonathan Ullrich Assistant Vice President Employee
Christine Thompson Assistant Vice President Employee
The address of each individual is 119 East Marcy Street, Suite 202, Santa Fe,
New Mexico 87501.
TMC is also investment adviser to the following mutual funds having
investment objectives similar in certain respects to those of the Company.
Asset Size
Fund Advisory Fee Rate (as of December 31, 1995)
- ---------------------- ----------------- -------------------------
Thornburg Limited Term .50% $145,350,000
U.S. Government Fund
Thornburg Limited Term .625% $ 24,800,000
Income Fund
Thornburg Intermediate .625% $240,600,000
Municipal Fund
Thornburg New Mexico .625% $135,780,000
Intermediate Municipal Fund
Thornburg Florida Intermediate .625% $ 37,000,000
Municipal Fund
Each of the foregoing mutual funds are separate series or portfolios of
Thornburg Investment Trust, a registered series investment company. Each of
these funds has an agreement with TMC which provides for a declining advisory
fee rate with increases in asset size; the fee rates shown above are based
upon the respective asset sizes shown above for each fund. For the fiscal
year of the funds ending September 30, 1995, TMC reduced its investment
advisory fee for Thornburg Limited Term Income Fund and Thornburg Florida
Intermediate Municipal Fund. TMC is also investment subadviser to Daily Tax
Fund, Inc., a mutual fund having assets of approximately $622,000,000 as of
December 31, 1995, and receives an annual fee of approximately .10% of the
Fund's assets for its services.
TMC agrees to waive portions of its fee under the Investment Advisory
Agreement or assume certain Company expenses so that total Company expenses
(including advisory fees and distribution expenses paid pursuant to the
proposed plan and agreement of distribution, but exclusive of interest,
taxes, brokerage and extraordinary expenses) do not in any year exceed the
limits prescribed by any state in which the Company's shares are qualified
for sale. The Company believes that currently the most restrictive expense
ratio limitation imposed by any state is the lesser of (i) 2.5% of the first
$30,000,000 of the Company's average daily net assets, 2% of the next $70
million in assets and 1.5% of any additional net assets in excess of $100
million. For the purpose of this obligation to reimburse expenses, the
Company's annual expenses are estimated and accrued daily, and any
appropriate estimated payments are made to it by TMC. The Company may from
time to time hire its own employees or contract to have services performed by
third parties, and the management of the Company intends to do so whenever it
appears advantageous to the Company. The Company's expenses for employees
and such services are among the expenses subject to the expense limitation.
TMC performs for the Company certain telephone answering services
previously performed by the Company's transfer agent, National Financial Data
Services, Inc. ("NFDS"). These telephone services include answering
telephone calls placed to the Company or its transfer agent by shareholders,
securities dealers and others through the Company's toll fee number, and
responding to those telephone calls by answering questions, effecting certain
shareholder transactions described in the Company's current prospectus, and
performing such other, similar functions as the Company may reasonably
prescribe from time to time. The Company pays one dollar for each telephone
call, which was the charge previously imposed by the Company's transfer agent
for this service. The Company paid reimbursements to TMC under this
arrangement of $43,685 for the National Fund and $4,492 for the California
Fund during the fiscal year ended June 30, 1995.
RULE 12B-1 PLANS
Class A of each Fund has adopted a Service Plan under which TMC makes
payments to securities dealers and other financial institutions and
organizations to obtain various shareholder related services. The Class A
Service Plans are described below in detail in connection with Proposal 2.
Class C shares of each Fund have adopted a Class C Service Plan which is
substantially similar to the Class A Service Plan for each Fund, under which
TMC makes payments to securities dealers and other financial institutions and
organizations to obtain various shareholder related services. The Class C
Service Plans permit each of these Funds to reimburse TMC for these payments
at an annual rate up to .25% of the Fund's net assets attributable to Class
C shares. Each Fund also has adopted a Class C Distribution Plan applicable
to Class C shares under which the Fund will pay to Thornburg Securities
Corporation ("TSC") on a monthly basis an annual distribution fee of up to
.75% of the average daily net assets attributable to Class C shares of the
Fund. This distribution fee is in addition to the service fee described
above and is charged to and reduces the income allocated to Class C shares.
TSC uses these amounts principally to compensate dealers (including banks)
who sell Class C shares. For the year ended June 30, 1995, the National Fund
paid to TMC and TSC $24,226 under its Class C Service and Distribution Plans
and the California Fund paid to TMC and TSC $4,302 under its Class C Service
and Distribution Plans, representing .62% and .63% of the Funds' average net
assets attributable to Class C shares for the period.
The rates of payment and the services provided under the Class C Service
Plans and the Class C Distribution Plans will not be affected by approval of
Proposal 1.
DISTRIBUTION AGREEMENT
Thornburg Securities Corporation ("TSC") acts as principal underwriter
of the Funds' shares and has its offices at 119 East Marcy, Suite 202, Santa
Fe, New Mexico 87501. All of the issued and outstanding shares of TSC's
voting stock are owned by H. Garrett Thornburg, Jr., the controlling
shareholder of TMC. The Distribution Agreement provides that TSC will use
its best efforts to distribute the Funds' shares, and that TSC will pay
certain costs incurred in the distribution of shares including the printing
and distribution of prospectuses and other marketing materials, commissions
and advertising costs. For the year ended June 30, 1995, gross commissions
of $1,199,224 and $$168,930 were paid to TSC for sales of National Fund
shares and California Fund shares, respectively. From these gross
commissions TSC paid $1,021,354 and $144,691 to dealers and others selling
the Company's shares for sales of National Fund shares and California Fund
shares, respectively, as compensation for selling shares.
The Board of Directors of the Company recommends a vote FOR Proposal 1.
PROPOSAL 2
APPROVAL OF AMENDMENT TO CLASS A SERVICE PLAN
Description of Proposal
In connection with the approval of the restated Investment Advisory
Agreement, the Board of Directors has proposed an amendment to increase the
maximum annual rate of reimbursement under the Class A Service Plan (the
"Plan") applicable to each Fund from .125 of 1% to .25 of 1%. The investment
adviser (TMC) has agreed to reduce the fee it may charge under the restated
Investment Advisory Agreement by a further amount in order to accommodate the
proposed increase in the fee under the Class A Service Plan. Consequently,
the Board of Directors and TMC do not anticipate that the shareholders'
approval of the increase will increase the overall fees and costs charged to
Class A shareholders at current asset levels. A table comparing current Fund
fees and expenses and pro forma fees and expenses assuming approval of
Proposals 1 and 2 accompanies this Proxy Statement as Exhibit A. The form of
amended Class A Service Plan accompanies this Proxy Statement as Exhibit D.
The amended Plan permits payments to be made by a Fund to TMC up to an
amount on an annual basis not exceeding .25 of 1% of the assets of Class A
shares of the applicable Fund to reimburse TMC for particular expenditures
incurred by it to obtain certain services from securities dealers and other
financial institutions and organizations, including banks. Since the Plan's
inception in 1987, TMC has made payments at annualized rates of (1) .10 of 1%
to the brokerage firm or other financial institution of record with respect
to each shareholder account opened for less than one year, and (2) .25 of 1%
for all accounts opened for more than one year. Because such payments (and
other distribution expenses incurred by TMC) have exceeded the .125 of 1%
maximum amount under the current Plan, TMC has paid the excess amounts from
its own resources.
For the year ended June 30, 1995, the National Fund paid to TMC
$1,211,797 under the Class A Service Plan and the California Fund paid to TMC
$130,014 under its Class A Service Plan. Had the proposed changes been in
effect for that year, the National Fund and the California Fund would have
paid TMC $2,423,594 and $260,028, respectively, representing a 100% increase.
The proposed increase would have been offset by a decrease in management
fees, however. Please see the comparison of overall current expenses and
fees to the overall expenses and fees assuming adoption of Proposals 1 and 2,
displayed in Exhibit A accompanying this Proxy Statement.
The Plan provides that TMC may make additional unreimbursed payments
from its own resources, for advertising, promotion and marketing of shares.
It has been, and likely will continue to be, the practice of TMC to spend
more than the full amount it receives under the Class A Service Plan. TMC
will determine in its sole discretion the amount of unreimbursed expenses it
may incur and pay from its own resources, provided that TMC's incurring the
additional costs will not increase the maximum amount reimbursable under the
Plan for any year.
TMC also may make payments for services or as incentives to banks,
savings and loan associations and other depository institutions to the extent
permissible under applicable provisions of federal banking laws.
No fees charged to a class of shares under any Class A Service Plan will
be used to reimburse expenses attributable to any other class. The
reimbursement to TMC under the Plan will be reduced by the amount, if any,
that the reimbursement would cause the total expenses of the applicable Fund
of the Company to exceed the expense limitation applicable to it as provided
in the restated Investment Advisory Agreement.
The current Plan was initially approved by a majority of the Board of
Directors, including the affirmative vote of a majority of the Directors who
have no direct or indirect financial interest in the operations of the Plan
or in any agreement thereunder, on August 3, 1987 at a meeting called for the
purpose, among other things, of voting on the approval. The shareholders
subsequently approved the adoption of the Plan on October 23, 1987. In
reviewing the Plan, the Board of Directors concluded that it was necessary to
encourage the furnishing of services to shareholders and to promote the
distribution of shares. In its annual review of the Plan since its initial
adoption, the Board of Directors has received and considered all pertinent
information and determined that there was a reasonable likelihood that
adoption of the Plan would benefit each Fund's Class A shareholders.
Specifically, the Directors reviewed among other things (i) the nature and
current extent of services to be provided by TMC and TSC, the Company's
principal underwriter, (ii) the quality of past services provided by TSC,
(iii) the expenses of the Company as compared with those of similar mutual
funds, (iv) the aggregate value of economic benefits received by TMC and TSC
from the Company, (v) the possible disadvantages to Class A shareholders of
insufficient future increases in total shares of the class, (vi) the expenses
incurred in distributing shares of the class and dealer feedback, (vii) the
revenues, expenses and financial condition of TMC, and (viii) the merits of
possible alternative plans to reduce net redemptions and increase sales of
shares of the class.
The Plan provides that it will continue in effect from year to year if
the continuance is specifically approved at least annually (i) either by a
vote of the "majority of the outstanding voting securities" (as that term is
defined in the 1940 Act) or by the Board of Directors and (ii) by a vote of
the majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan, cast in person at a meeting called for the purpose of
voting on the Plan.
Shareholder approval will be required before the reimbursement
percentage paid to TMC under the Plan may be materially increased. The Plan
may not be amended otherwise unless the amendment is approved by a majority
of the Board of Directors and a majority of the Directors who are not
"interested persons" of the Company or by a majority of the shares of the
relevant class of shares. The Plan may be terminated as to any class at any
time without payment of any penalty by vote of a majority of the Directors
who are not "interested persons" of the Company or a majority vote of the
shares of the class.
So long as the Plan is in effect, the Board of Directors will receive
and review, at least quarterly, a written report of the amounts expended
pursuant to each such Plan and the purposes for which such expenditures were
made; the selection and nomination of the Directors who are not "interested
persons" of the Company shall be committed to the Directors who are not
"interested persons" of the Company; the Directors will at least annually
request and evaluate and TMC will furnish, information reasonably necessary
to an informed determination of whether the Plan should be continued; and the
Plan's continuance will be approved as to any class only if the Directors
conclude, in the exercise of reasonable judgment and in light of their
duties, that there is a reasonable likelihood that the Plan will benefit the
class and the shareholders of that class.
The Board of Directors of the Company recommends a vote FOR Proposal 2.
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
Description of Proposal
The firm of McGladrey & Pullen, LLP, has been selected as independent
auditors for the fiscal year ending June 30, 1996 by the Board of Directors
of the Company. The ratification of the selection of independent auditors is
to be voted on at the Meeting. It is not expected that a representative of
the independent auditors will be present at the Meeting.
For the fiscal year of the Company ended June 30, 1995, McGladrey &
Pullen, LLP performed both audit and non-audit services for the Company.
Audit services consisted of examinations of the Company's financial
statements and review and consultation in connection with the filings with
the Securities and Exchange Commission. Non-audit services consisted of
preparation of the Company's federal and state income tax returns.
The Board of Directors of the Company recommends a vote FOR Proposal 3.
ALLOCATION OF PORTFOLIO BROKERAGE
The Company's purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker. The Company has paid
no brokerage commissions since its formation. Any transaction for which a
Fund pays a brokerage commission will be effected at the best price
available. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
Allocation of transactions, including their frequency, to various
dealers is determined by TMC in its best judgment and in a manner deemed to
be in the best interest of shareholders of the Funds rather than by any
formula. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price.
TMC also acts as investment adviser to Thornburg Investment Trust and
investment sub-adviser to Daily Tax Free Income Fund, Inc., both registered
investment companies. Investment decisions for the Funds will be made
independently from those for any other accounts or investment companies which
may be or become managed by TMC or its affiliates. If, however, the Funds
and other investment companies or accounts managed by TMC are
contemporaneously engaged in the purchase or sale of the same security, the
transaction may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Funds or the size of the position obtainable for the Funds.
In addition, when purchases or sales of the same security of the Funds and
for other investment companies managed by TMC occur contemporaneously, the
purchase or sale may be aggregated in order to obtain any price advantages
available to large denomination purchasers or sellers.
No portfolio transactions were executed with TMC, or with any affiliate
of TMC acting either as principal or as broker, during the fiscal year ended
June 30, 1995.
SECURITIES OWNERSHIP OF CERTAIN PERSONS
As of December 31, 1995, directors and executive officers of the Company
beneficially owned, directly or indirectly, less than 1% of any Fund's
outstanding voting securities.
OTHER MATTERS
The Directors know of no other matters to come before the Meeting. If
any other matters properly come before the Meeting, it is the intention of
the persons acting pursuant to the enclosed proxy card to vote the shares
represented by those proxies in accordance with their best judgment with
respect to those matters.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be presented at the 1997 Annual Meeting of
Shareholders, if such a meeting is held, must be received by the Company at
its address stated above on or before October 31, 1996.
By Order of the Board of Directors
DAWN B. SHAPLAND
Secretary
Santa Fe, New Mexico
February 1, 1996
EXHIBIT A
<TABLE> Expense Information
<CAPTION>
Current Annual Pro Forma Operating Expenses
Operating Expenses Assuming Approval of
(as a percentage of Proposals 1 and 2
average net assets (as a percentage of average net
as of June 30, 1995) assets)
-------------------- ------------------------------
Class A Class C Class A Class C
------- ------- ------- -------
<S> <C> <C> <C> <C>
National Fund
- ----------------------------------------
Management Fees .70% .70% .45% .45%
Administrative Services Fee .13% .13%
12b-1 Fees (after fee waivers for Class C) .13%<FN1> .50%<FN1> .25%<FN3> .60%<FN3>
Other Expenses
(after expense reimbursements for Class C) .14%<FN1> .13%<FN1> .14%<FN3> .13%<FN3>
----- ----- ----- -----
Total Fund Operating Expenses .97% 1.33% .97% 1.31%
California Fund
- ----------------------------------------
Management Fees (after fee waivers) .72%<FN2> .72%<FN2> .47%<FN4> .47%<FN4>
Administrative Services Fee .13% .13%
12b-1 Fees (after fee waivers for Class C) .13%<FN2> .50%<FN2> .25%<FN4> .60%<FN4>
Other Expenses (after expense reimbursements) .15%<FN2> .15%<FN2> .15%<FN4> .15%<FN4>
----- ----- ----- -----
Total Fund Operating Expenses 1.00% 1.37% 1.00% 1.35%
<FN>
<FN1> Amounts shown have been restated to reflect current fees. Amounts
shown for Class C shares of the National Fund are based upon
waiver of a portion of the Class C 12b-1 fee and assumption of
certain Class C operating expenses. Had TMC not undertaken such
action, the Class C 12b-1 fees and operating expenses would have
been 1.00% and .14%, respectively, and the total Fund operating
expenses would have been 1.84% for the Class C shares.
<FN2> Expenses reflect rounding. Amounts shown have been restated to
reflect current fees. Amounts shown for Class A of the California
Fund are based upon a management fee waiver and assumption of
certain Fund operating expenses. Had TMC not undertaken such
action, the management fee and the Fund operating expenses would
have been .75% and .16%, respectively, and the total Fund
operating expenses would have been 1.04%. Amounts shown for Class
C of the Limited Term California Fund are based upon a management
fee waiver, a waiver of a portion of the Class C 12b-1 fees, and
assumption of certain Class C operating expenses. Had TMC not
undertaken such action, the Class C management fees, 12b-1 fees,
and operating expenses would have been .75%, 1.00%, and 1.46%,
respectively, and total Fund operating expenses would have been
3.21%.
<FN3> Expenses reflect rounding. Amounts shown have been restated to
reflect estimated fees for the current fiscal year, assuming
approval of Proposals 1 and 2. Amounts shown for Class C shares
of the National Fund in the Pro Forma are based upon waiver of a
portion of the Class C 12b-1 fee and assumption of certain Class
C operating expenses. Absent the waivers and reimbursements,
Class C 12b-1 fees and operating expenses would be 1.00% and .14%,
respectively, and the total Fund operating expenses would be
1.72%. TMC and TSC are not obligated to continue any waiver of
fees or payment of other Fund expenses.
<FN4> Amounts shown have been restated to reflect estimated fees for the
current fiscal year. Expenses reflect rounding. Amounts shown
for Class A of the California Fund reflect a management fee waiver
and assumption of certain Fund operating expenses. Amounts shown
for Class C shares of the California Fund are based upon waiver of
a portion of the management fee and Class C 12b-1 fee and
assumption of certain Class C operating expenses. Absent the
waivers and reimbursements, Class A management fees and other
expenses would be .50% and .16%, respectively, and total Class A
operating expenses would be 1.04%; Class C management fees, Class
C Rule 12b-1 fees and other expenses would be .50%, 1.00% and
1.46%, respectively, and total Class C operating expenses would be
3.09%. TMC and TSC are not obligated to continue any waiver of
fees or payment of other expenses.
</FN>
</TABLE>
<TABLE>
Examples:
Assuming each Fund's expense percentage remains the same,
an investor making a $1,000 investment will pay the following
cumulative expenses, assuming a 5% annual return.
<CAPTION>
Current Operating Expense Levels Pro Forma Operating Expense Levels
Assuming Adoption of Proposals 1 and 2
Class A Class C Class C <FN1> Class A Class C Class C <FN1>
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <S> <C> <C> <C>
National Fund National Fund
- ------------- -------------
After 1 year $ 35 $ 14 $ 19 After 1 year $ 35 $ 18 $ 18
After 3 years $ 55 $ 42 $ 42 After 3 years $ 55 $ 42 $ 42
After 5 years $ 77 $ 73 $ 73 After 5 years $ 77 $ 72 $ 72
After 10 years $140 $161 $161 After 10 years $141 $158 $158
California Fund California Fund
- --------------- ---------------
After 1 year $ 35 $ 14 $ 19 After 1 year $ 35 $ 14 $ 19
After 3 years $ 56 $ 44 $ 44 After 3 years $ 56 $ 43 $ 43
After 5 years $ 79 $ 76 $ 76 After 5 years $ 79 $ 74 $ 74
After 10 years $144 $167 $167 After 10 years $144 $182 $182
<FN>
<FN1> Assumes redemption prior to end of one year.
</FN>
</TABLE>
EXHIBIT B
RESTATED
INVESTMENT ADVISORY AGREEMENT
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
Thornburg Management Company, Inc.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. We are engaged in the business of investing and reinvesting our
assets in securities of the type, and in accordance with the limitations,
specified in our Articles of Incorporation, By-Laws and Registration
Statement filed with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the "Act") and the Securities Act of 1933,
including the Prospectus forming a part thereof (the "Registration
Statement"), and in such manner and to such extent as may from time to time
be authorized by our Board of Directors. We have furnished copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you to manage the investment and reinvestment
of the assets of our respective series and to perform related functions, and
without limiting the generality of the foregoing, to provide the investment
management services specified below.
(b) You will make decisions with respect to all purchases and sales
of portfolio securities by the Company's respective series. To carry out
such decisions, you are hereby authorized, as our agent and attorney in fact,
for our account and at our risk and in our name, to place orders for the
investment and reinvestment of our assets. In all purchases, sales and other
transactions in our portfolio securities you are authorized to exercise full
discretion and act for us in the same manner and with the same force and
effect as our Company itself or its respective series might or could do with
respect to such purchases, sales, or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(c) You will report to our Board of Directors at each meeting
thereof all changes in our series' portfolios since your prior report, and
will also keep us apprised of important developments affecting our portfolios
and, on your own initiative, will furnish to us from time to time such
information as you may believe appropriate for this purpose, whether
concerning the individual entities whose securities are included in our
portfolios, the individual banks and other third parties from which
securities have been purchased for inclusion in our portfolios, the
activities in which the entities or the banks and other third parties engage,
federal income tax policies applicable to our investments, or the conditions
prevailing in the municipal market or the economy generally. You will also
furnish us with such statistical and analytical information with respect to
our portfolio securities as you may believe appropriate or as we reasonably
may request. In making such purchases and sales of our portfolio securities,
you will bear in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Articles of Incorporation
and by the provisions of the Internal Revenue Code relating to regulated
investment companies and the limitations contained in our Registration
Statement.
(d) It is understood that you will from time to time employ or
associate with yourself, entirely at your expense, such persons as you
believe to be particularly fitted to assist you in the execution of your
duties hereunder. While this Agreement is in effect, you or persons
affiliated with you, other than us ("your affiliates"), will provide persons
satisfactory to our Board of Directors to be elected or appointed officers or
employees of our corporation. These shall be a president, a secretary, a
treasurer, and such additional officers and employees as may reasonably be
necessary for the conduct of our business.
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses other than those expressly stated to be payable by you hereunder.
Expenses payable by us shall include, but not be limited to: (a) brokerage
and commission expenses, (b) federal, state or local taxes, including issue
and transfer taxes incurred by or levied on us, (c) commitment fees,
(d) interest charges on borrowings, (e) charges and expenses of our
custodian, (f) charges and expenses of persons performing issuance,
redemption, registrar, transfer and dividend disbursing functions for us,
(g) telecommunication expenses, (h) recurring and non-recurring legal and
accounting expenses (including disbursements), (i) insurance premiums,
(j) costs of organizing and maintaining our existence as a corporation, (k)
compensation and travel expenses, including directors' fees, of any of our
directors, officers or employees who are not your officers or officers of
your affiliates (provided that such officers who serve as our directors will
be reimbursed by us for travel and out-of-pocket expenses incurred in
attending board meetings), and costs of other personnel providing services to
us, (l) costs of stockholders' services and portfolio valuation services,
(m) costs of stockholders' reports, proxy solicitations, distribution of
prospectuses to existing stockholders, and corporate meetings, (n) costs of
personnel (other than your officers or officers of your affiliates) competent
to perform administrative, clerical and shareholder relations functions,
including travel expenses if necessarily related to shareholder relations
functions, (o) costs of any reports to government agencies, (p) fees and
expenses of registering our shares under the appropriate federal securities
laws and of qualifying our shares under applicable state securities laws,
including expenses attendant upon the initial registration and qualification
of our shares and attendant upon renewals of, or amendments to, those
registrations and qualifications, (q) expenses of printing our prospectuses,
(r) the cost of printing or engraving of stock certificates representing our
shares, (s) postage, (t) membership dues in any industry associations,
(u) payment of the investment advisory fee provided for herein, and (v) all
other charges and costs of our operation unless otherwise explicitly provided
herein. Our obligation for the foregoing expenses is limited by your
agreement to be responsible for any amount by which our operating expenses
(excluding taxes, brokerage, interest and, to the extent permitted by
applicable law, extraordinary expenses) accrued for any period during which
this Agreement is in effect exceed an amount equal to, in the case of
expenses accrued with respect to any of our fiscal years during which this
Agreement is in effect, the limits prescribed by any state in which the
Company's shares are qualified for sale.
4. We will expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree as
an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause provided that
nothing herein shall be deemed to protect, or purport to protect, you against
any liability to us or to our security holders to which you would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at the
annual percentage rate of the daily average of the net assets of each series
to which this Agreement is applicable, as set forth below:
Net Assets of Series Rate
-------------------- ----
0 to $500 million .5%
$500 million to $1 billion .4%
$1 billion to $1.5 billion .3%
$1.5 billion to $2 billion .25%
More than $2 billion .225%
Your fee will be accrued by us daily and will be payable in arrears on the
last day of each calendar month for services performed hereunder during that
month. Any reimbursement of our expenses, to which we may become entitled
pursuant to paragraph 3 hereof, will be paid to us at the end of the month
for which those expenses are accrued, at the same time as we pay you your fee
for that month.
6. This Restated Agreement will become effective and supersede the
existing Investment Advisory Agreement on the date of its execution after
approval by the majority vote of holder of the outstanding voting securities
(as defined in the Act) of the respective series of this Company at a special
meeting, shall continue in effect for one year from the date of execution
hereof and thereafter for successive twelve-month periods, provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities (as defined in the Act) and, in either case, by a majority of
those of our directors who are neither a party to this Agreement nor, other
than by their service as directors of our corporation, interested persons, as
defined in the Act, of any such person who is party to this Agreement. Upon
the effectiveness of this Agreement, it shall supersede all previous
agreements between us covering the subject matter hereof. This Agreement may
be terminated at any time as to any series, without the payment of any
penalty, by vote of a majority of the outstanding voting securities of that
series, as defined in the Act, or by a vote of a majority of our entire Board
of Directors, on sixty days' written notice to you, or by you on sixty days'
written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer," "assignment" and
"sale" as used in this paragraph shall have the meanings ascribed thereto by
governing law and in applicable rules or regulations of the Securities and
Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, you will
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
LIMITED TERM MUNICIPAL FUND, INC.
By:________________________________
BRIAN J. McMAHON, President
ACCEPTED:_________________________, 1996
THORNBURG MANAGEMENT COMPANY, INC.
By:___________________________
H. GARRETT THORNBURG, JR.,
President
EXHIBIT C
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made as of the _____ day of ______________, 1996 by
and between THORNBURG LIMITED TERM MUNICIPAL FUND, INC., a Maryland
corporation (the "Company"), in respect of Thornburg Limited Term Municipal
Fund National Portfolio and Thornburg Limited Term Municipal Fund California
Portfolio, series of the Company (collectively, the "Funds"), and THORNBURG
MANAGEMENT COMPANY, INC., a Delaware corporation ("Thornburg").
Recitals
1. The Company engages in business as an open-end management investment
company and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
2. The Company seeks to obtain described administrative services from
Thornburg for the class or classes of the Funds' shares hereinafter
specified.
3. Thornburg seeks to be retained to perform services in accordance
with this Agreement.
4. This Agreement has been approved by a vote of the Directors of the
Company, including a majority of the Directors who are not interested persons
of the Company, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of this Agreement (sometimes the
"Disinterested Directors"), cast in person at a meeting called for the
purpose of voting on this Agreement.
Agreement
NOW THEREFORE, the Company hereby enters into this Agreement with
Thornburg, and the parties provide and agree as follows:
1. Subject to the continuing supervision of the Directors, the Company
hereby retains and appoints Thornburg as its agent to perform certain
administrative services and engage in activities beyond those specifically
required by the investment advisory agreement between the Company and
Thornburg, and to provide related services. The activities and services to
be provided by Thornburg hereunder shall include shareholder communication
and informational functions, share accounting, asset, income and expense
bookkeeping and accounting, performance of clerical, regulatory and office
functions associated with share and shareholder accounting and
administration, and such other related or similar administrative functions as
the Company and Thornburg may from time to time agree. Thornburg or its
affiliates will also provide persons who shall not be officers or officers of
Thornburg's affiliates, to render such clerical, accounting,
shareholder-related and other office services to the Company as the Company
may from time to time request of Thornburg. These personnel may be employees
of Thornburg or its affiliates. Thornburg also will furnish to the Company
without charge such administrative and management supervision and assistance
and such office facilities as Thornburg believes appropriate or as the
Company may reasonably request.
2. The Company will pay for the services described in the preceding
Paragraph 1, on a monthly basis, and shall pay Thornburg monthly, a fee
computed at an annual rate of up to .125 of 1% of the average daily net
assets attributable to each class of shares to which this Agreement applies
from time to time, together with any applicable gross receipts tax, sales
tax, value-added tax, compensating tax or similar exaction imposed by any
federal, state or local government, but the aggregate of those taxes will not
exceed 10% of the basic fee. In addition, the Company will pay Thornburg for
the cost of personnel provided in accordance with the preceding Paragraph 1
to provide the described clerical, accounting, shareholder-related and other
office services requested by the Company. Thornburg and the Company agree
and acknowledge that the Company will pay expenses payable by the Company in
accordance with Paragraph 3 of the investment advisory agreement between the
Company and Thornburg.
3. The Company and Thornburg shall provide to the Company's Directors,
at least quarterly, a written report of all amounts expended by the Company
pursuant to this Agreement. Each report will itemize the types of expenses
incurred for which payment is being made and the purposes and the amounts of
the expenses. Thornburg shall provide to the Directors upon request such
information as may reasonably be required for the Directors to review the
continuing appropriateness of this Agreement.
4. This Agreement will become effective immediately as to a Fund upon
approval by vote of at least a majority of the outstanding shares of the
class of a Fund and shall continue in effect for a period of one year from
the date of that approval unless terminated as provided below. Thereafter,
the Agreement will continue in effect from year to year, provided that
continuance is approved at least annually by a vote of the Directors,
including a majority of the Disinterested Directors, cast in person at a
meeting called for the purpose of voting on the continuance. This Agreement
may be terminated as to a class of shares of a Fund at any time, without
penalty, by the vote of a majority of the Disinterested Directors or by the
vote of a majority of the outstanding shares of the class. The Company may
discontinue Thornburg's services under this Agreement and name another
service provider, or Thornburg may assign this Agreement or delegate part or
all of its obligations hereunder (to a related or unrelated entity) upon a
vote of the Directors including a majority of the Disinterested Directors or
a vote of the holders of a majority of a Fund's outstanding shares, without
any penalty, upon 60 days written notice to Thornburg. Thornburg may
terminate its services under this Agreement upon 60 days written notice to
the Company.
5. All material amendments to this Agreement must be approved by the
vote of the Directors, including a majority of the Disinterested Directors,
cast in person at a meeting called for the purpose of voting on the
amendment.
6. This Agreement applies to Class ___ shares of the Funds of the
Company specified in the preamble to this Agreement. The parties acknowledge
and agree that this Agreement may from time to time be made applicable to one
or more Funds and one or more classes of shares of those Funds, but that the
Agreement applies separately to each class of shares and is severable in all
respects. Consequently, the Agreement may be modified, continued or
terminated as to one class of shares of a Fund without affecting any other
class of shares of that Fund or any other Fund.
7. The Company will preserve in an easily accessible place copies of
this Agreement and all reports made pursuant to this Agreement, together with
minutes of all Directors' meetings at which the adoption, amendment or
continuance of this Agreement were considered (describing the factors
considered and the basis for decision), for a period of not less than 6 years
from the date of this Agreement.
8. This Agreement will be construed in accordance with the laws of the
State of New Mexico and applicable provisions of the 1940 Act. To the extent
the applicable law of the State of New Mexico or any provisions herein
conflict with the applicable provisions of the 1940 Act, the latter will
control. If any provision of this Agreement is determined by a court or
governmental agency having jurisdiction to be invalid or unenforceable, the
balance of this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in Santa Fe, New Mexico.
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
By:__________________________________________
THORNBURG MANAGEMENT COMPANY, INC.
By:__________________________________________
EXHIBIT D
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION
PURSUANT TO RULE 12b-1
(Class A Service Plan)
THIS PLAN AND AGREEMENT is made as of the _____ day of _______________,
1996, by and between Thornburg Limited Term Municipal Fund, Inc., a Maryland
corporation (the "Company"), in respect of Thornburg Limited Term Municipal
Fund National Portfolio and Thornburg Limited Term Municipal Fund California
Portfolio, series of the Company (collectively the "Funds"), and Thornburg
Management Company, Inc., a Delaware corporation ("Thornburg").
RECITALS
1. The Company engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940,
as amended (the "1940 Act").
2. The Company wishes to adopt a revised Plan and Agreement, on behalf
of each of the Funds (the "Plan and Agreement") to authorize the use of the
Fund's assets to finance certain activities as permitted under Rule 12b-1
adopted under the 1940 Act, and in this regard seeks to enter into an
agreement to retain Thornburg in accordance with the terms hereunder. This
Plan and Agreement supersedes that certain Plan and Agreement of Distribution
Pursuant to Rule 12b-1 dated October 23, 1987.
3. Thornburg seeks to be retained to perform services in accordance
with the Plan and Agreement.
4. This Plan and Agreement has been approved by a vote of the Directors
of the Company, including a majority of the Directors who are not interested
persons of the Company, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of this Plan and Agreement
(sometimes the "Disinterested Directors"), cast in person at a meeting called
for the purpose of voting on this Plan and Agreement.
AGREEMENT
NOW, THEREFORE, the Company hereby adopts this Plan in respect of each
of the Funds, and the Company and Thornburg hereby enter into this Agreement
pursuant to the Plan in accordance with the requirements of Rule 12b-1 under
the 1940 Act, and provide and agree as follows:
1. The Company is hereby authorized to utilize the assets of each of
the Funds to finance certain activities in connection with distribution of
the Fund's shares and providing shareholder services.
2. Subject to the supervision of the Directors, the Company hereby
retains and appoints Thornburg as its agent to obtain shareholder services
and to promote the distribution of each Fund's Class A shares by providing
services and engaging in activities beyond those specifically required by the
Distribution Agreement between the Company and Thornburg Securities
Corporation ("TSC") and to provide related services. The activities and
services to be provided by Thornburg hereunder shall include one or more of
the following: (a) the payment of compensation (including incentive
compensation) to securities dealers, financial institutions and other
organizations which render services to the Fund's Class A shareholders as the
Company may from time to time agree, and which render distribution,
shareholder account services, and administrative services in connection with
the distribution of shares of the Fund all as the Company may from time to
time agree; (b) the printing and distribution of reports and prospectuses for
the use of potential investors in the Fund; (c) preparing and distributing
sales literature; (d) providing advertising and engaging in other promotional
activities, including direct mail solicitation, and television, radio,
newspaper and other media advertisements; and (e) such other services and
activities as may from time to time be agreed upon by the Company including,
but not limited to, providing personal services to shareholders, maintaining
shareholder accounts, providing shareholder liaison services and providing
information to shareholders.
3. Thornburg hereby undertakes to use its best efforts to promote sales
of Class A shares of each Fund to investors and to promote shareholder
services by engaging in those activities specified in paragraph 2 above as
may be necessary and as it from time to time believes will best further sales
of such shares. In so doing, Thornburg may utilize the services of TSC.
4. The Company is hereby authorized to expend, out of the assets of
each Fund, on a monthly basis, and shall reimburse Thornburg monthly to such
extent, for its actual direct expenditures incurred in engaging in the
activities and providing the services specified in paragraph 2 above, an
amount computed at an annual rate of up to .25 of 1% of the Fund's average
daily net assets attributable to Class A shares, together with any applicable
gross receipts tax, sales tax, value added tax, compensating tax or similar
exaction imposed by any federal, state or local government, but the aggregate
of those taxes will not exceed 10%.
5. To the extent that expenditures made by Thornburg out of its own
resources to finance any activity primarily intended to result in the sale of
shares of a Fund, pursuant to this Plan and Agreement or otherwise, may be
deemed to constitute the indirect use of the Fund's assets, such indirect use
of the Fund's assets is hereby authorized in addition to, and not in lieu of,
any other payments authorized under this Plan and Agreement.
6. The Treasurer of the Company shall provide and the Directors shall
review, at least quarterly, a written report of all amounts expended pursuant
to the Plan and Agreement. Each such report shall itemize the types of
expenses incurred for which payment is being made and the purposes and the
amounts of such expenses. Upon request, Thornburg shall provide to the
Directors such information as may reasonably be required for it to review the
continuing appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall become effective immediately as to a
Fund upon approval by a vote of at least a majority of the outstanding Class
A shares of the Fund, and shall continue in effect for a period of one year
from the date of such approval unless terminated as provided below.
Thereafter, the Plan and Agreement shall continue in effect from year to
year, provided that continuance is approved at least annually by a vote of
the Directors, including a majority of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on such continuance.
The Plan may be terminated as to Class A shares of a Fund at any time,
without penalty, by the vote of a majority of the Disinterested Directors or
by the vote of a majority of the outstanding Class A shares of the Fund.
Thornburg, or the Company by vote of a majority of the Disinterested
Directors or of the holders of a majority of the Fund`s outstanding Class A
shares, may terminate the Agreement under this Plan, without penalty, upon 30
days' written notice to the other party.
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as Directors of the Company who are not "interested
persons" of the Company shall be committed to the discretion of the Directors
then in office who are not "interested persons" of the Company. However,
nothing contained herein shall prevent the participation of other persons in
the selection and nomination process, provided that a final decision on any
such selection or nomination is within the discretion of, and approved by, a
majority of the Directors then in office who are not "interested persons" of
the Company.
9. This Plan may not be amended to increase materially the amount to be
spent by the Company hereunder without approval of the Class A shareholders
of the affected Fund. All material amendments to the Plan and to the
Agreement must be approved by the vote of the Directors, including a majority
of the Disinterested Directors, cast in person at a meeting called for the
purpose of voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act it shall
remain in effect as such, so as to authorize the use by the Company of the
Funds' assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an assignment, as defined by the 1940 Act
and the rules thereunder. To the extent it constitutes an agreement pursuant
to a plan, it shall terminate automatically in the event of an attempted
assignment. Upon a termination of the Agreement as to any Fund, the Company
may continue to make payments on behalf of the Fund pursuant to the Plan only
upon the approval of a new Agreement, which may or may not be with Thornburg,
or the adoption of other arrangements regarding the use of the amounts
authorized to be paid by the Company hereunder, by the Directors in
accordance with the procedures set forth in paragraph 7 above.
11. The Company shall preserve in an easily accessible place copies of
this Plan and Agreement and all reports made pursuant to this Plan and
Agreement, together with minutes of all Directors' meetings at which the
adoption, amendment or continuance of the Plan were considered (describing
the factors considered and the basis for decision), for a period of not less
than six years from the date of this Plan and Agreement.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of New Mexico and applicable provisions of the 1940 Act.
To the extent the applicable law of the State of New Mexico or any provisions
herein conflict with the applicable provisions of the 1940 Act, the latter
shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan and Agreement on the day and year first above written in Santa Fe, New
Mexico.
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
(Thornburg Limited Term Municipal Fund National Portfolio and
Thornburg Limited Term Municipal Fund California Portfolio)
By:__________________________________________________
THORNBURG MANAGEMENT COMPANY, INC.
By: _______________________________________________
THORNBURG LIMITED TERM MUNICIPAL FUND, INC. Preliminary Copy
PROXY
for
SPECIAL MEETING OF SHAREHOLDERS
Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
April 16, 1995
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WE NEED YOUR VOTE BEFORE APRIL 16, 1996
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Your vote is important and, as a shareholder, you are asked to be at the
Special Meeting either in person or by proxy. If you are unable to attend
the Meeting in person, we urge you to complete, sign, date, and return this
proxy card using the enclosed postage prepaid envelope. Your prompt return
of the proxy will help assure a quorum at the Meeting and avoid additional
expenses to your Fund associated with further solicitation. Sending in your
proxy will not prevent you from personally voting your shares at the Meeting
and you may revoke your proxy by advising the Secretary of the Funds in
writing (by subsequent proxy or otherwise) of such revocation at any time
before it is voted.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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The undersigned hereby constitutes and appoints Brian J. McMahon, Dawn
B. Shapland and Steven J. Bohlin as proxies, each with power to appoint his
or her substitute, and hereby authorizes them to represent and to vote, as
designated below, all shares of stock of the Company which the undersigned
is entitled to vote at the Special Meeting of Shareholders to be held at
119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501, on April 16,
1996, at 9:30 a.m., local time, and any adjournments thereof, with respect
to the matters set forth below and described in the Notice of Special
Meeting and Proxy Statement dated February ___, 1996, receipt of which is
hereby acknowledged.
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This proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED IN FAVOR OF ALL PROPOSALS AND IN THE DISCRETION OF THE
PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Please indicate by filling in the appropriate box below, as shown, using
blue or black ink or dark pencil. Do not use red ink. <darkened box>
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1. To restate the Investment Advisory Agreement and adopt an
Administrative Services Agreement.
FOR <box> AGAINST <box> ABSTAIN <box>
2. To amend the Class A Service Plan.
FOR <box> AGAINST <box> ABSTAIN <box>
3. To ratify selection of independent auditors.
FOR <box> AGAINST <box> ABSTAIN <box>
<3.5 inch x 2.5 inch box for Date___________________________
shareholder information>
NOTE: Please sign exactly as your
name appears on this Proxy. If joint
owners, either owner may sign this
Proxy. When signing as attorney,
executor, administrator, trustee,
guardian or corporate officer, please
give your full title.
_______________________________
Signature
_______________________________
Title (if applicable)
