THORNBURG
MUNICIPAL FUNDS
Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
Thornburg Intermediate Municipal Fund
Thornburg Florida Intermediate Municipal Fund
Thornburg New Mexico Intermediate Municipal Fund
PROSPECTUS
February 1, 1996
TABLE OF CONTENTS
Expense Information
Financial Highlights
Management Discussion of Fund Performance
Investment Objectives and Policies
Your Account - Buying Fund Shares
Selling Fund Shares
Investor Services, Transaction Services,
Shareholder and Account Policies
Taxes
Service and Distribution Plans
Transaction Details
Exchange Restrictions
Performance
Organization of the Funds
TMC and TSC
Additional Information
THORNBURG MUNICIPAL FUNDS
The Thornburg Municipal Funds are separate investment portfolios ("Funds")
offered through this combined prospectus by Thornburg Limited Term Municipal
Fund, Inc. and Thornburg Investment Trust:
LIMITED TERM MUNICIPAL FUNDS
(series of Thornburg Limited Term Municipal Fund, Inc.):
Thornburg Limited Term Municipal Fund National Portfolio
("Limited Term National Fund")
Thornburg Limited Term Municipal Fund California Portfolio
("Limited Term California Fund")
INTERMEDIATE TERM MUNICIPAL FUNDS (series of Thornburg Investment Trust):
Thornburg Intermediate Municipal Fund ("Intermediate National Fund")
Thornburg Alabama Intermediate Municipal Fund
("Intermediate Alabama Fund")*
Thornburg Arizona Intermediate Municipal Fund
("Intermediate Arizona Fund")*
Thornburg Florida Intermediate Municipal Fund
("Intermediate Florida Fund")
Thornburg New Mexico Intermediate Municipal Fund
("Intermediate New Mexico Fund")
Thornburg Pennsylvania Intermediate Municipal Fund
("Intermediate Pennsylvania Fund")*
Thornburg Tennessee Intermediate Municipal Fund
("Intermediate Tennessee Fund")*
Thornburg Texas Intermediate Municipal Fund
("Intermediate Texas Fund")*
Thornburg Utah Intermediate Municipal Fund
("Intermediate Utah Fund")*
* Funds marked with an asterisk are not currently active, and propose to
commence investment operations in the future.
All of the Funds are managed by Thornburg Management Company, Inc. ("TMC").
Each active Fund offers a choice to investors of two classes of shares:
"Class A shares," sold at net asset value plus an initial sales charge
imposed at the time of sale; and "Class C shares," sold without an initial
sales charge but subject to a sales charge if redeemed within one year of
purchase and an annual distribution fee. The different classes are described
under the heading "Your Account-Buying Fund Shares," beginning on page 16.
Each Fund has the objective of providing, through investment in a
professionally managed portfolio of Municipal Obligations, as high a level of
current income exempt from federal income tax as is consistent, in the view
of the Funds' investment adviser, with preservation of capital.
Each of the Funds having a state's name will invest primarily in Municipal
Obligations of the state having the same name, with the objective of having
interest dividends paid to its state's shareholders exempt from any
individual income taxes imposed by that state. Each of the Limited Term
Funds will maintain a portfolio having a dollar-weighted average maturity of
normally not more than five years, with the objective of reducing
fluctuations in its net asset value relative to municipal bond portfolios
with longer average maturities while expecting lower yields than those
received on portfolios with longer average maturities. Each of the
Intermediate Funds will maintain a portfolio having a dollar-weighted average
maturity of normally three to ten years, with the objective of reducing
fluctuations in net asset value relative to long-term municipal bond
portfolios. The Intermediate Funds will expect lower yields than those
received on long term bond portfolios, while seeking higher yields and
expecting higher share price volatility than the Limited Term Funds. During
temporary periods the portfolio maturity of the Intermediate Funds may be
reduced for defensive purposes. There is no limitation on the maturity of any
specific security a Fund may purchase, subject to the limitation on the
average maturity of each Fund. There can be no assurance that the Funds'
respective objectives will be achieved.
This Prospectus sets forth concisely the information a prospective investor
should know about the Funds before investing. It should be read and retained
for further reference. Additional information about the Limited Term Funds
is contained in a Statement of Additional Information - Thornburg Limited
Term Municipal Funds dated November 1, 1995, and additional information about
the Intermediate Funds is contained in a Statement of Additional Information
- - Thornburg Intermediate Municipal Funds dated February 1, 1996. Each of
these Statements of Additional Information has been filed with the Securities
and Exchange Commission and may be obtained at no charge by contacting
Thornburg Securities Corporation, 119 East Marcy Street, Suite 202, Santa Fe,
New Mexico 87501, 800-847-0200. This Prospectus incorporates by reference
the entire Statements of Additional Information.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
FUND SHARES INVOLVE INVESTMENT RISKS (INCLUDING POSSIBLE LOSS OF PRINCIPAL),
AND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE
NOT INSURED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY GOVERNMENT AGENCY.
EXPENSE INFORMATION
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
<CAPTION>
Limited Term Municipal Funds Thornburg Intermediate Municipal Funds
---------------------------- --------------------------------------
Class A Class C Class A Class C
<F1>
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases 2.50% none 3.50% none
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50 <F2> 0.50% <F3> 0.50 <F2> 0.60% <F3>
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
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>
Class A Class C Class A Class C Class C
<F1>
------- ------- ------- ------- -------
<S> <C> <C> <S> <C> <C> <C>
Limited Term National Fund
- --------------------------
Management Fees .70% .70% After 1 year $ 35 $ 14 $ 19
12b-1 Fees (after fee waivers for Class C) <F4> .13% .50% After 3 years $ 55 $ 42 $ 42
Other Expenses (after expense reimbursements for Class C) <F4> .14% .13% After 5 years $ 77 $ 73 $ 73
----- ----- After 10 years $140 $161 $161
Total Fund Operating Expenses .97% 1.33%
Limited Term California Fund
- ----------------------------
Management Fees (after fee waivers) <F5> .72% .72% After 1 year $ 35 $ 14 $ 19
12b-1 Fees (after fee waivers for Class C) <F5> .13% .50% After 3 years $ 56 $ 44 $ 44
Other Expenses (after expense reimbursements) <F5> .15% .15% After 5 years $ 79 $ 76 $ 76
----- ----- After 10 years $144 $167 $167
Total Fund Operating Expenses 1.00% 1.37%
Intermediate National Fund
- --------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F6> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%
Intermediate New Mexico Fund
- ----------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F7> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%
Intermediate Florida Fund
- -------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F8> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) <F8> .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%
<FN>
<F1> Assumes redemption at end of period
<F2> Imposed only on redemptions of purchases greater than $1 million
in the event of a redemption within 12 months of purchase.
<F3> Imposed only on redemptions within 12 months of purchase, for
Class C shares purchased on or after October 2, 1995.
<F4> Expenses reflect rounding. Amounts shown for Class C shares
of Limited Term National Fund are based upon waiver of a portion
of the Class C 12b-1 fee and assumption of certain Class C
operating expenses. Amounts shown have been restated to reflect
current fees; absent the waiver, 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.
<F5> Expenses reflect rounding. Expenses reflect rounding.
Amounts shown have been restated to reflect current fees.
Amounts shown for Class A of the Limited Term 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%.
<F6> Expenses reflect rounding. Amounts shown have been restated to
reflect current fees. Amounts shown for Class A of the
Intermediate National Fund are based upon a reimbursement of expenses;
absent the reimbursement, other expenses would be .20%
and total Fund operating expenses would be 1.08%. Amounts shown for
Class C of the Intermediate National Fund are based upon
a reimbursement of expenses and a partial waiver of Rule 12b-1 fees;
absent the reimbursement and waiver, the Class C other
expenses would be .625%, the Class C 12b-1 fees would be 1.00%,
and the total Fund operating expenses would be 2.35%
<F7> Expenses reflect rounding. Amounts shown have been restated to reflect
current fees. Amounts shown for Class A of the
Intermediate New Mexico Fund are based upon a reimbursement of expenses;
absent the reimbursement, other expenses would be
.18% and total Fund operating expenses would be 1.06%.
Amounts shown for Class C of the Intermediate New Mexico Fund are
based upon a reimbursement of expenses and a partial waiver of
Rule 12b-1 fees; absent the reimbursement and waiver, the
Class C other expenses would be 14.23%, the Class C 12b-1 fees would
be 1.00%, and the total Fund operating expenses would
be 15.86%.
<F8> Expenses reflect rounding. Amounts shown have been restated to
reflect current fees. Amounts shown for Class A of the
Intermediate Florida Fund are based upon a reimbursement of expenses;
absent the reimbursement, other expenses would be 1.06%
and total Fund operating expenses would be 1.44%. Amounts shown
for Class C of the Fund are based upon reimbursement of
expenses and a partial waiver of the 12b-1 fees; absent the
reimbursement and the waiver, other expenses would be 17.35%,
the Class C 12b-1 fees would be 1.00%, and the total Fund operating
expenses for the Class C shares would be 19.08%.
</FN>
</TABLE>
EXPLANATION OF TABLES
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The expense figures
shown in the table opposite are presented to assist the investor in
understanding the various costs that an investor in a Fund will bear,
directly or indirectly. Long-term Class C shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
regulations of the National Association of Securities Dealers, Inc. The
Funds' investment adviser may not waive its fee or assume Fund expenses in
the future.
FINANCIAL HIGHLIGHTS
The table on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated.
The information for the years ended June 30, 1989, 1990, 1991, 1992, 1993,
1994, and 1995 for the Limited Term National Fund and the Limited Term
California Fund, and all information for the Intermediate Funds, has been
audited by McGladrey & Pullen, LLP, independent auditors, whose reports
thereon are incorporated by reference in the registration statements for the
respective Funds. The information should be read in conjunction with the
1995 Annual Report for each Fund.
<TABLE>
Net
Ratio of Ratio of Ratio of Assets
Expenses Expenses Net at end
Net Distri- to to Investment of
Realized butions Average Average Income Period
Net Asset and Total from Distri- Net Net (Loss) ('000's
Value Unrealized from Net butions Net Asset Assets Assets to omitted)
Beginning Net Gain Investment Invest- from Value Total After Before Average Rate of
Fiscal Year of Investment (Loss) Operations ment Net End of Return Expense Expense Net Portfolio
or Period Period Income Investments Income Gains Period <F2> Reductions Reductions Assets Turnover
- ------------- ------ --------- -------- ---------- ------- ------- ------- ------ ---------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Limited Term
Municipal Fund
- --------------
Class A
Year ended:
June 30, 1986 $12.25 $ .92 $ .43 $1.35 $( .92) $12.68 10.90% 1.00% (1.47)% 6.92% 53.00% $ 60,141
June 30, 1987 12.68 .83 .02 .85 ( .83) $( .01) 12.69 6.87 (1.00) (1.10) 6.27 47.00 127,074
June 30, 1988 12.69 .84 .06 .90 ( .84) 12.75 7.37 (1.10) (1.20) 6.58 66.00 164,489
June 30, 1989 12.75 .85 .05 .90 ( .85) 12.80 7.29 (1.15) (1.15) 6.66 69.96 184,139
June 30, 1990 12.80 .86 (.06) .80 ( .86) 12.74 6.48 (1.11) (1.11) 6.73 67.51 217,325
June 30, 1991 12.74 .85 .09 .94 ( .85) 12.83 7.60 (1.07) (1.07) 6.58 32.36 312.882
June 30, 1992 12.83 .79 .26 1.05 ( .79) 13.09 8.40 (1.04) (1.04) 5.96 27.63 521,683
June 30, 1993 13.09 .68 .50 1.18 ( .68) 13.59 9.24 (1.01) (1.01) 5.03 19.30 895,500
June 30, 1994 13.59 .63 (.32) .31 ( .63) 13.27 2.25 (0.95) (0.95) 4.60 15.63 1,030,293
June 30, 1995 13.27 .64 .10 .74 ( .64) 13.37 5.76 (0.97) (0.97) 4.86 23.02 931,987
Class B <F4>
9/1/94 <F1> $13.29 $ .46 $ .09 $ .55 $( .46) $13.38 4.14% (1.57)% (2.30)% 4.24% 23.02% $2,823
to 6/30/95 <F3> <F3> <F3>
Class C
9/1/94 <F1> $13.29 $ .46 $ .11 $ .57 $( .46) $13.40 4.25% (1.60)% (1.84)% 4.21% 23.02% $6,469
to 6/30/95 <F3> <F3> <F3>
Limited Term
California Fund
- ---------------
Class A
2/20/87 <F1> $12.13 $ .26 $(.12) $ .14 $( .26) $12.01 1.10% (0.67)% (.81)% 5.73% 74.00% $ 6,041
to 6/30/87 <F3> <F3> <F3>
Year ended:
June 30, 1988 12.01 .78 .07 .85 ( .78) 12.08 7.10 (0.85) (1.73) 6.30 29.00 11,641
June 30, 1989 12.08 .77 .07 .84 ( .77) 12.15 7.17 (1.00) (1.38) 6.27 58.80 12,794
June 30, 1990 12.15 .76 (.04) .72 ( .76) 12.11 6.15 (1.00) (1.22) 6.16 49.05 26,517
June 30, 1991 12.11 .75 .13 .88 ( .75) 12.24 7.45 (1.00) (1.20) 6.08 39.66 33,487
June 30, 1992 12.24 .72 .24 .96 ( .72) 12.48 8.10 (1.00) (1.10) 5.80 30.56 53,130
June 30, 1993 12.48 .65 .37 1.02 ( .65) 12.85 8.36 (1.00) (1.06) 5.07 20.81 81,874
June 30, 1994 12.85 .58 (.28) .30 ( .58) 12.57 2.37 (1.00) (1.03) 4.51 15.26 111,723
June 30, 1995 12.57 .58 .04 .62 ( .58) 12.61 5.12 (1.00) (1.04) 4.69 18.54 98,841
Class B <F4>
9/1/94 <F1> $12.55 $ .43 $ .07 $ .50 $( .43) $12.62 3.99% (1.60)% (4.51)% 4.10% 18.54% $590
to 6/30/95 <F3> <F3> <F3>
Class C
9/1/94 <F1> $12.55 $ .42 $ .07 $ .49 $( .42) $12.62 3.98% (1.63)% (3.21)% 4.07% 18.54% $790
to 6/30/95 <F3> <F3> <F3>
Intermediate
National Fund
- -------------
Class A
7/23/91 <F1> $12.06 $ .16 $ .05 $ .21 $( .16) $12.11 1.77% (0.25)% (2.78)% 5.80% 3.40% $9,719
to 9/30/91 <F3> <F3> <F3>
Year ended:
Sept. 30, 1992 12.11 .78 .48 1.26 ( .78) 12.59 10.76 (0.48) (1.19) 6.15 46.15 81,428
Sept. 30, 1993 12.59 .71 .88 1.59 ( .71) 13.47 13.01 (0.70) (1.06) 5.37 14.29 182,319
Sept. 30, 1994 13.47 .67 (.72) (.05) ( .67) $( .02) 12.73 (.38) (0.95) (1.05) 5.23 27.3 207,718
Sept. 30, 1995 12.73 .68 .45 1.13 ( .68) 13.18 9.16 (1.00) (1.08) 5.31 32.20 227,881
Class B <F4>
9/1/94 <F1> $12.91 $ .05 $(.18) $(.13) $( .05) $12.73 (.99)% (1.70)% 1.70% 4.57% 27.37% $342
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.73 .59 .40 .99 ( .59) 13.13 8.30 (1.65) (2.86) 4.59 32.20 0
Class C
9/1/94 <F1> $12.91 $ .05 $(.18) $(.13) $( .05) $12.73 (.97)% (1.76)% 1.76% 4.51% 27.37% $ 139
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.73 .60 .47 1.07 ( .60) 13.20 8.60 (1.66) (2.35) 4.62 32.20 4,001
Intermediate
New Mexico Fund
- ---------------
Class A
6/21/91 <F1> $12.06 $ .23 $ .15 $ .38 $( .23) $12.21 3.18% (0.25)% (1.32)% 6.57% 49.67% $20,511
to 9/30/91 <F3> <F3> <F3>
Year ended:
Sept. 30, 1992 12.21 .74 .43 1.17 ( .74) 12.64 9.98 (0.42) (1.12) 5.76 32.15 71,034
Sept. 30, 1993 12.64 .65 .72 1.37 ( .65) 13.36 10.96 (0.61) (1.01) 4.95 10.33 128,590
Sept. 30, 1994 13.36 .60 (.63) (.03) ( .60) $( .01) 12.72 (.26) (0.90) (1.04) 4.58 6.87 143,910
Sept. 30, 1995 12.72 .60 .40 1.00 ( .60) 13.12 8.10 (1.00) (1.06) 4.71 17.06 136,742
Class B <F4>
9/1/94 <F1> $12.87 $ .05 $(.15) $(.10) $( .05) $12.72 (0.80)% (1.71)% 1.71% 3.47% 6.87% $ 81
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.72 .52 .37 .89 ( .52) 13.09 7.42 (1.64) (4.71) 4.06 17.06 0
Class C
9/1/94 <F1> $12.87 $ .04 $(.16) $(.12) $( .04) $12.71 (0.90)% (1.74)% 1.74% 3.49% 6.87% $ 59
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.71 .52 .41 .93 ( .52) 13.12 7.48 (1.66) (15.86) 4.05 17.06 141
Intermediate
Florida Fund
- ------------
Class A
2/1/94 <F1> $12.06 $ .40 $(.52) $(.12) $( .40) $11.54 (0.95)% (0.25)% (1.95)% 5.09% 19.94% $ 8,076
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 11.54 .63 .29 .92 ( .63) 11.83 8.22 (0.38) (1.68) 5.41 89.60 14,822
Class B <F4>
9/1/94 <F1> $11.72 $ .05 $(.17) $(.12) $( .05) $11.55 (1.02)% (1.05)% (1.05)% 4.80% 19.94% $ 20
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 11.55 .55 .28 .83 ( .55) 11.83 7.55 (1.08) (5.35) 4.69 89.60 0
Class C
9/1/94 <F1> $11.72 $ .05 $(.18) $(.13) $( .05) $11.54 (1.10)% (1.10)% (1.10)% 4.89% 19.94% $109
to 9/30/94 <F3> <F3> <F3>
Year ended
Sept. 30, 1995 11.54 .55 .32 .87 ( .55) 11.86 7.74 (1.08) (19.08) 4.65 89.60 259
<FN>
<F1> Commencement of operations.
<F2> Sales charges are not reflected in computing total return,
which is not annualized for periods less than one year.
<F3> Annualized
<F4> Class B shares are no longer offered by the Funds, and all outstanding
Class B shares were converted into Class A shares
on September 28, 1995.
</FN>
</TABLE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The following graphs compare how $10,000 would have appreciated if invested
in shares of the named Fund, a broad based securities market index, and the
Consumer Price Index, a general measure of inflation. The table accompanying
each graph shows average annual total return for the Fund for the designated
period. Class A total return figures assume an investment of $10,000 at the
public offering price for purchases up to $10,000; Class C total return
figures assume an investment of $10,000.
Comparison of Fund performance to widely used indices is imperfect, because
the indices do not reflect the ladder ed maturity strategy each Fund uses.
Each index shown attempts to model the total return of a constant maturity
bond portfolio, including bonds from throughout the United States. Each index
also assumes no trading costs for buying and selling bonds, no custodial or
accounting costs, and coupons are immediately reinvested at no transactional
cost. Consequently, the reader should remain aware of the inherent
limitations in comparing a theoretical index to actual results of a Fund
portfolio.
Each Fund "ladders" or arrays the maturities of its bonds. The Limited Term
Municipal Funds maintain a weighted average maturity using this technique
which is normally no more than five years, while the Intermediate Municipal
Funds' weighted average maturity is normally no more than 10 years. Interest
rates during 1994 generally increased, allowing interest dividends to
increase somewhat as Fund cash flow was reinvested at higher rates, and
causing the value of the Funds' portfolios to decrease relative to their
expected values in a flat interest rate environment. In the first half of
1995, slowing economic growth has led to falling interest rates and
increasing bond prices.
After hitting bottom in November 1994, bond prices in the U.S. have risen
dramatically over most of 1995 to date. For example, as interest rates on the
6.25% U.S. Treasury bond due in August 2023 increased from 5.99% to 8.23%,
between October 1, 1993 and November 7, 1994, the market value of the bond
decreased by approximately 25.3%. Since November 1994, the interest rate on
the bond has fallen back down to 6.65% as of September 30, 1995, and the
price has risen by 21.3%. Similarly, market values of U.S. Treasury bonds due
in 1999 and 2004 have risen by 6.7% and 12.7%, respectively since November 7,
1994. Municipal bond prices also increased across the spectrum of maturities
as market yields on municipal bonds decreased. Rising bond prices produced
total returns of 9.26% and 10.30% respectively, for the Lehman Brothers 5
year general obligation bond index and the Merrill Lynch Municipal Bond
(7-12) year Index for the 6 months ending September 30, 1995. The net asset
values of Intermediate National Fund, Intermediate New Mexico Fund and
Intermediate Florida Fund, increased by 3.35%, 3.14% and 3.51% respectively
over this same six month period. The net asset values of Limited Term
National Fund and Limited Term California Fund increased by 3.51% and 3.90%
respectively over the six month period ending June 30, 1995. If interest
rates continue to fall, the net asset values of all the Funds should continue
to increase. However, over time, dividend income would decrease.
LIMITED TERM NATIONAL FUND
Index Comparison
Compares performance of the Limited Term National Fund, the Lehman 5-Year
General Obligation Bond Index and the Consumer Price Index for the period
October 1, 1984 to June 30, 1995. On June 30, 1995, the weighted average
securities ratings of the Index an d the Fund were AA and AA, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
5.01 years and 3.9 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund ma}y not be
indicative of future performance.
<TABLE> <This appears as a graph in the prospectus.>
Limited Term National Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
9/84 $ 9,746 $10,000 $10,000
12/84 9,928 10,448 10,151
3/85 10,232 10,852 10,283
6/85 10,677 11,400 10,355
9/85 10,747 11,355 10,417
12/85 11,226 11,741 10,564
3/86 11,739 12,628 10,522
6/86 11,842 12,636 10,553
9/86 12,177 13,103 10,616
12/86 12,471 13,447 10,702
3/87 12,741 13,755 10,852
6/87 12,656 13,629 10,983
9/87 12,683 13,347 11,104
12/87 12,988 13,857 11,204
3/88 13,402 14,289 11,294
6/88 13,589 14,350 11,430
9/88 13,838 14,514 11,545
12/88 14,013 14,601 11,649
3/89 14,168 14,559 11,789
6/89 14,580 15,244 11,955
9/89 14,783 15,421 12,027
12/89 15,105 15,881 12,172
3/90 15,239 15,959 12,404
6/90 15,524 16,316 12,529
9/90 15,715 16,488 12,781
12/90 16,085 17,034 12,948
3/91 16,400 17,402 13,026
6/91 16,704 17,706 13,117
9/91 17,073 18,336 13,222
12/91 17,470 18,952 13,355
3/92 17,628 18,904 13,435
6/92 18,107 19,519 13,543
9/92 18,509 20,010 13,624
12/92 18,822 20,328 13,747
3/93 19,341 20,808 13,858
6/93 19,780 21,298 13,941
9/93 20,264 21,761 14,010
12/93 20,481 22,028 14,123
3/94 20,050 21,332 14,208
6/94 20,225 21,619 14,293
9/94 30,324 21,784 14,408
12/94 20,178 21,713 14,466
3/95 20,896 22,592 14,582
6/95 21,390 23,168 14,699
9/95 23,801 14,743
</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
Limited Term National Fund C Shares
<CAPTION>
FUND Lehman CPI
C Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,952 9,925 10,020
10/94 9,894 9,869 10,030
11/94 9,792 9,806 10,040
12/94 9,858 9,893 10,060
1/95 9,969 9,988 10,090
2/95 10,120 10,132 10,121
3/95 10,193 10,293 10,141
4/95 10,245 10,321 10,181
5/95 10,405 10,547 10,212
6/95 10,424 10,556 10,222
7/95 10,703 10,232
8/95 10,812 10,243
9/95 10,844 10,253
</TABLE>
Average Annual Total Return
A Shares
One Year (12 Mos. ended 6/30/95): 3.11%
Five Year: 6.08%
From Inception (9/28/84): 7.32%
C Shares
From Inception (9/1/94): 5.16% (annualized)
LIMITED TERM CALIFORNIA FUND
Index Comparison
Compares performance of the Limited Term California Fund, the Lehman 5-Year
General Obligation Bond Index and the Consumer Price Index for the period
February 28, 1987 to June 30, 1995. On June 30, 1995, the weighted average
securities ratings of the Index and the Fund were AA and AA, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
5.01 years and 4.1 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.
<TABLE> <This appears as a graph in the prospectus.>
California Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
1/87 $ 9,750 $10,000 $10,000
3/87 9,786 10,034 10,080
6/87 9,857 9,942 10,202
9/87 9,924 9,737 10,314
12/87 10,100 10,108 10,407
3/88 10,375 10,424 10,491
6/88 10,557 10,469 10,617
9/88 10,733 10,588 10,724
12/88 10,885 10,651 10,820
3/89 10,994 10,620 10,951
6/89 11,313 11,121 11,105
9/89 11,469 11,249 11,172
12/89 11,704 11,585 11,306
3/90 11,814 11,642 11,522
6/90 12,009 11,902 11,638
9/90 12,140 12,028 11,872
12/90 12,496 12,426 12,027
3/91 12,707 12,694 12,099
6/91 12,904 12,916 12,184
9/91 13,121 13,376 12,282
12/91 13,436 13,825 13,405
3/92 13,566 17,790 12,480
6/92 13,950 14,239 12,580
9/92 14,261 14,597 12,655
12/92 14,448 14,829 12,770
3/93 14,813 15,179 12,872
6/93 15,116 15,537 12,949
9/93 15,437 15,874 13,014
12/93 15,634 16,069 13,119
3/94 15,308 15,562 13,197
6/94 15,474 15,771 13,277
9/94 15,495 15,891 13,383
12/94 15,300 15,839 13,437
3/95 15,877 16,481 13,545
6/95 16,266 16,901 13,653
9/95 17,363 13,694
</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
Limited Term California Fund C Shares
<CAPTION>
FUND Lehman CPI
C Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,952 9,925 10,020
10/94 9,894 9,869 10,030
11/94 9,792 9,806 10,040
12/94 9,858 9,893 10,060
1/95 9,969 9,988 10,090
2/95 10,120 10,132 10,121
3/95 10,193 10,293 10,141
4/95 10,245 10,321 10,181
5/95 10,405 10,547 10,212
6/95 10,424 10,556 10,222
7/95 10,703 10,232
8/95 10,812 10,243
9/95 10,844 10,253
</TABLE>
Average Annual Total Return
A Shares
One Year (12 mos. ended 6/30/95): 2.49%
Five Years: 5.72%
From Inception (2/19/87): 5.99%
C Shares
From Inception (9/1/94): 4.82% (annualized)
INTERMEDIATE NATIONAL FUND
Index Comparison
Compares performance of the Intermediate National Fund, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, July 23, 1991
to September 30, 1995. On September 30, 1995, the weighted average securities
ratings of the Index and the Fund were AA and A+, respectively, and the
weighted average portfolio maturities of the Index and the Fund were 8.5
years and 8.2 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.
<TABLE> <This appears as a graph in the prospectus.>
Intermediate National Fund A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
6/91 $ 9,648 $10,000 $10,000
7/91 9,675 10,136 10,030
9/91 9,819 10,428 10,080
11/91 9,943 10,498 10,151
1/92 10,113 10,695 10,192
3/92 10,207 10,593 10,243
5/92 10,429 10,732 10,284
7/92 10,904 11,259 10,345
9/92 10,876 11,220 10,387
11/92 10,976 11,369 10,460
1/93 11,223 11,611 10,501
3/93 11,496 11,834 10,565
5/93 11,662 12,016 10,617
7/93 11,872 12,111 10,639
9/93 12,291 12,456 10,681
11/93 12,238 12,449 10,745
1/94 12,598 12,797 10,767
3/94 12,039 12,114 10,832
5/94 12,197 12,200 10,864
7/94 12,305 12,473 10,929
9/94 12,244 12,306 10,984
11/94 11,965 12,050 11,006
1/95 12,385 12,408 11,061
3/95 12,742 12,860 11,117
5/95 13,090 13,348 11,195
7/95 13,162 13,418 11,217
9/95 13,365 13,573 11,239
</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
Intermediate National Fund C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,903 9,848 10,020
10/94 9,791 9,786 10,030
11/94 9,689 9,643 10,040
12/94 9,813 9,785 10,060
1/95 10,009 9,930 10,090
2/95 10,199 10,215 10,121
3/95 10,286 10,291 10,141
4/95 10,313 10,317 10,181
5/95 10,555 10,682 10,212
6/95 10,530 10,671 10,222
7/95 10,593 10,738 10,232
8/95 10,698 10,895 10,243
9/95 10,754 10,862 10,253
</TABLE>
Average Annual Total Return
A Shares
One Year (12 Mos. ended 9/30/95): 5.34%
From Inception (7/23/91): 7.16%
C Shares
One Year (12 Mos. ended 9/30/95: 8.60%
From Inception (9/1/94): 6.96% (annualized)
INTERMEDIATE NEW MEXICO FUND
Index Comparison
Compares performance of the Intermediate New Mexico Fund shares, the Merrill
Lynch Municipal Bond (7-12 year) Index and the Consumer Price Index, June 21,
1991 to September 30, 1995. On September 30, 1995, the weighted average
securities ratings of the Index and the Fund were AA and AA, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
8.5 years and 6.9 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.
<TABLE> <This appears as a graph in the prospectus.>
New Mexico A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
5/91 $ 9,650 $10,000 $10,000
7/91 9,764 10,064 10,050
9/91 9,957 10,375 10,100
11/91 10,075 10,444 10,171
1/92 10,311 10,640 10,212
3/92 10,329 10,539 10,263
5/92 10,541 10,677 10,304
7/92 10,985 11,201 10,366
9/92 10,950 11,162 10,408
11/92 11,034 11,311 10,480
1/93 11,282 11,551 10,522
3/93 11,490 11,773 10,586
5/93 11,628 11,955 10,639
7/93 11,782 12,049 10,660
9/93 12,150 12,392 10,703
11/93 12,113 12,385 10,767
1/94 12,416 12,731 10,788
3/94 11,936 12,052 10,853
5/94 12,040 12,138 10,886
7/94 12,143 12,410 10,951
9/94 12,119 12,243 11,006
11/94 11,877 11,988 11,028
1/95 12,272 12,345 11,083
3/95 12,593 12,794 11,139
5/95 12,888 13,280 11,217
7/95 12,958 13,349 11,239
9/95 13,100 13,504 11,262
</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
New Mexico C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,910 9,848 10,020
10/94 9,808 9,786 10,030
11/94 9,700 9,643 10,040
12/94 9,845 9,785 10,060
1/95 10,021 9,930 10,090
2/95 10,206 10,215 10,121
3/95 10,264 10,291 10,141
4/95 10,283 10,317 10,181
5/95 10,493 10,682 10,212
6/95 10,464 10,671 10,222
7/95 10,547 10,738 10,232
8/95 10,615 10,895 10,243
9/95 10,651 10,862 10,253
</TABLE>
Average Annual Total Return
A Shares
One Year (12 Mos. ended 9/30/95): 4.31%
From Inception (6/21/91): 6.50%
C Shares
One Year (12 Mos. ended 9/30/95): 7.48%
From Inception (9/1/94): 6.02% (annualized)
INTERMEDIATE FLORIDA FUND
Index Comparison
Compares performance of Intermediate Florida Fund shares, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, February 1,
1994 to September 30, 1995. On September 30, 1995, the weighted average
securities ratings of the Index and the Fund were AA and AA+, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
8.5 years and 7.5 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.
<TABLE> <This appears as a graph in the prospectus.>
Florida A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
1/94 $ 9,648 $10,000 $10,000
2/94 9,568 9,726 10,030
3/94 9,350 9,466 10,060
4/94 9,433 9,512 10,070
5/94 9,507 9,534 10,090
6/94 9,481 9,524 10,121
7/94 9,602 9,747 10,151
8/94 9,653 9,765 10,181
9/94 9,557 9,617 10,202
10/94 9,502 9,556 10,213
11/94 9,346 9,416 10,222
12/94 9,492 9,555 10,243
1/95 9,660 9,697 10,273
2/95 9,849 9,975 10,304
3/95 9,936 10,049 10,325
4/95 9,929 10,074 10,366
5/95 10,137 10,431 10,397
6/95 10,148 10,420 10,408
7/95 10,227 10,485 10,418
8/95 10,297 10,638 10,428
9/95 10,342 10,607 10,439
</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
Florida C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,890 9,848 10,020
10/94 9,826 9,786 10,030
11/94 9,658 9,643 10,040
12/94 9,831 9,785 10,060
1/95 9,999 9,930 10,090
2/95 10,188 10,215 10,121
3/95 10,272 10,291 10,141
4/95 10,259 10,317 10,181
5/95 10,466 10,682 10,212
6/95 10,472 10,671 10,222
7/95 10,548 10,738 10,232
8/95 10,614 10,895 10,243
9/95 10,655 10,862 10,253
</TABLE>
Total Return
A Shares
One Year (12 Mos. ended 9/30/95): 4.44%
From Inception (2/01/94): 2.05%
C Shares
One Year (12 Mos. ended 9/30/95): 7.74%
From Inception (9/1/94): 6.05% (annualized)
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of each Fund is to obtain as high a level of
current income exempt from federal income tax as is consistent, in the view
of TMC, with preservation of capital. Each single state Fund will invest
primarily in Municipal Obligations originating in its state with the object
of obtaining exemption of interest dividends from any income taxes imposed by
that state on individuals. The Intermediate Florida Fund and the Intermediate
Pennsylvania Fund have the additional objective of obtaining exemption from
ad valorem taxes imposed by those states on securities held by individuals.
The secondary objective of the Limited Term Funds is to minimize expected
fluctuations in net asset value relative to longer intermediate and long-term
bond portfolios. The secondary objective of the Intermediate Funds is to
reduce fluctuations in net asset value relative to long-term municipal bond
portfolios, while seeking higher yields than the Limited Term Municipal Funds
expect to receive. There is a risk in all investments, however, and there is
no assurance that the Funds' objectives will be achieved. Income otherwise
exempt from federal income tax may be subject to the federal alternative
minimum tax, and distributions from gains attributable to market discount are
characterized as ordinary income for federal income tax purposes. The primary
and secondary investment objectives of each Fund are fundamental policies of
that Fund, and may not be changed without a vote of the Fund's shareholders.
Each Fund will pursue its primary objective by investing in a portfolio of
investment grade or equivalent obligations which are issued by states and
state agencies, and local governments and agencies, and by United States
territories and possessions ("Municipal Obligations"). Each single state Fund
will invest primarily in Municipal Obligations originating in the state of
the same name. Municipal Obligations are discussed below under the caption
"Municipal Obligations," and investment grade ratings are discussed below
under the caption "Investment Ratings." Each of the Limited Term Funds will
seek to achieve its secondary objective of minimizing fluctuations in net
asset value by maintaining a portfolio of investments with a dollar-weighted
average maturity normally not exceeding five years. Each Intermediate Fund
will seek to achieve its secondary objective of obtaining lower share price
fluctuation than a long-term portfolio and obtaining higher yields than a
limited term portfolio by maintaining a dollar-weighted average portfolio
maturity normally between three and ten years. Any Intermediate Fund may
maintain a portfolio maturity shorter than three years as a defensive
strategy during abnormal market conditions. If your sole objective is
preservation of capital, then the Funds may not be suitable for you because
their net asset values will vary as market interest rates fluctuate.
Investors whose sole objective is preservation of capital may wish to
consider a high quality money market fund.
Except to the extent a Fund is invested in temporary investments for
defensive purposes, the objective of each Fund under normal conditions is to
invest 100% of its net assets in Municipal Obligations. As a fundamental
policy which may not be changed without a vote of the Fund's shareholders,
each Fund must normally invest at least 80% of its net assets in Municipal
Obligations. Under normal conditions each single state Fund will invest 100%,
and as a matter of fundamental policy, will invest at least 65% of its total
assets in Municipal Obligations which originate in the state having the same
name as the Fund. Any Fund may purchase obligations issued by or on behalf of
territories or possessions of the United States and their agencies and
instrumentalities.
The Funds have reserved the right to invest up to 20% of each Fund's net
assets in "temporary investments" in taxable securities (of comparable
quality to the above tax-exempt investments) that would produce interest not
exempt from federal income tax. Such temporary investments, which may include
repurchase agreements with dealers, banks or recognized financial
institutions that in the opinion of TMC represent minimal credit risk, may be
made due to market conditions, pending investment of idle funds or to afford
liquidity. Such investments are, like any investment, subject to market risks
and fluctuations in value. In addition, each Fund's temporary taxable
investments may exceed 20% of its net assets when made for defensive purposes
during periods of abnormal market conditions. The Funds do not expect to find
it necessary to make temporary investments in taxable investments.
MUNICIPAL OBLIGATIONS
Municipal Obligations are obligations bearing interest exempt from federal
income taxes, which are issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities. Municipal
Obligations include notes (including tax-exempt commercial paper), bonds,
municipal leases and participation interests in these obligations. Interest
on Municipal Obligations may be subject to the alternative minimum tax or
state income taxes. See "Federal Taxes."
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The market value of outstanding
Municipal Obligations will vary with changes in prevailing interest rate
levels and as a result of changing evaluations of the ability of their
issuers to meet interest and principal payments. Variations in market value
of Municipal Obligations held in a Fund's portfolio arising from these or
other factors will cause changes in the net asset value of that Fund's
shares. See "How Fund Shares Are Priced." Municipal Obligations often grant
the issuer the option to pay off the obligation prior to its final maturity.
Prepayment of Municipal Obligations may reduce the expected yield on invested
funds, the net asset value of a Fund, or both if interest rates have declined
below the level prevailing when the obligation was purchased. If interest
rates have declined, reinvestment of the proceeds from the prepayment of
Municipal Obligations may result in a lower yield to a Fund. In addition, the
federal income tax treatment of gains from market discount as ordinary income
may increase the price volatility of Municipal Obligations.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the United States Bankruptcy Code. In addition, the
obligations of such issuers may become subject to the laws enacted in the
future by Congress, state legislatures or referenda extending the time for
payment of principal or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There
is also the possibility that, as a result of legislation or other conditions,
the power or ability of any issuer to pay, when due, the principal of and
interest on its Municipal Obligations may be materially affected.
VARIABLE RATE SECURITIES; INVERSE FLOATERS; AND DEMAND INSTRUMENTS
The Funds may purchase variable rate Municipal Obligations. These variable
rate securities bear rates of interest that are adjusted periodically
according to formulas intended to reflect market rates of interest, and these
may include "inverse floaters," whose rates vary inversely with changes in
market rates of interest. The values of inverse floaters will tend to be more
volatile than fixed rate municipal securities having similar credit quality,
redemption provisions, and maturity. No Fund will invest more than 10% of
its total assets in securities whose rates vary inversely with changes in
market rates of interest. Each Fund also may purchase variable rate demand
instruments and also may purchase fixed rate municipal demand instruments
either in the public market or privately from banks, insurance companies and
other financial institutions. These instruments provide for periodic
adjustment of the interest rate paid to the holder. The "demand" feature
permits the holder to demand payment of principal and interest prior to the
final stated maturity, either from the issuer or by drawing on a bank letter
of credit, a guarantee or insurance issued with respect to the instrument.
MUNICIPAL LEASES
Each Fund may invest in Municipal Leases. These obligations are used by state
and local governments to acquire a wide variety of equipment and facilities.
Many such obligations include "non-appropriation" clauses which provide that
the governmental issuer has no obligation to make payments unless money is
appropriated for that purpose. If an issuer stopped making payment on a
Municipal Lease held by a Fund, the Lease would lose some or all of its
value. Often, a Fund will not hold the obligation directly, but will purchase
a "participation interest" in the obligation, which gives the Fund an
undivided interest in the underlying Municipal Lease. Some Municipal Leases
may be illiquid under certain circumstances, and TMC will evaluate the
liquidity of each Municipal Lease upon its acquisition by a Fund and
periodically while it is held.
SECURITIES RATINGS AND CREDIT QUALITY
Each Fund's assets will normally consist of (1) Municipal Obligations
(including Municipal Leases) or participation interests therein that are
rated at the time of purchase within the four highest grades by Moody's
Investors Service ("Moody's"), Fitch Investors Service ("Fitch"), or Standard
& Poor's Corporation ("S&P"), (2) Municipal Obligations (including Municipal
Leases) or participation interests therein that are not rated by a rating
agency, but are issued by obligors that either have other comparable debt
obligations that are rated within the four highest grades (Baa or BBB or
better) by Moody's or S&P or Fitch or, in the case of obligors whose
obligations are unrated, are deemed by the Adviser to be comparable with
issuers having such debt ratings, and (3) cash. Securities rated in the
described categories are described as "investment grade," and are regarded as
having a capacity to pay interest and repay principal that varies from
"extremely strong" to "adequate." According to S&P, for example, BBB bonds
normally exhibit adequate protection parameters, although adverse economic
conditions or other changes are more likely to lead to a weakened capacity
compared to higher rated categories, and AAA bonds exhibit extremely strong
capacity. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. Securities rated BBB by Fitch are considered to
have adequate capacity, although adverse changes in economic conditions and
circumstances are more likely to have an adverse impact than for higher rated
categories. Please see the Statement of Additional Information for Thornburg
Investment Trust - Intermediate Municipal Funds or the Statement of
Additional Information for Thornburg Limited Term Municipal Fund, Inc. for
detailed descriptions of these ratings. Investments in Municipal Obligations
may also include (i) variable rate demand instruments that are rated within
the two highest grades of either rating agency or, if unrated, are deemed by
TMC to be of high quality and minimal credit risk, (ii) tax-exempt
commercial paper that is rated within the two highest grades of a rating
agency, and (iii) municipal notes that are rated within the two highest
grades of a rating agency or, if unrated, are deemed by TMC to be of
comparable quality to such rated municipal notes. To the extent that unrated
Municipal Obligations may be less liquid, there may be somewhat greater risk
in purchasing unrated Municipal Obligations than in purchasing comparable,
rated Municipal Obligations. If a Fund experienced unexpected net
redemptions, it could be forced to sell such unrated Municipal Obligations at
disadvantageous prices without regard to the Obligations' investment merits,
depressing the Fund's net asset value and possibly reducing the Fund's
overall investment performance.
Credit ratings do not reflect the risk that market values of Municipal
Obligations will fluctuate with changes in interest rates, and credit rating
firms may fail to change credit ratings in a timely fashion to reflect events
subsequent to initial ratings. Accordingly, in addition to using credit
rating information, TMC subjects each issue under consideration for
investment to its own credit analysis in an effort to assess the issuer's
financial soundness. This analysis is performed on a continuing basis for all
issues held by the Funds, and TMC may determine to dispose of portfolio
securities upon a change in ratings or adverse events or market conditions
not reflected in ratings. TMC evaluates the credit quality of unrated
Municipal Obligations purchased by each Fund under the general supervision of
its Directors or Trustees, and determines the equivalency of unrated
obligations to rated obligations.
WHEN-ISSUED TRANSACTIONS
Each Fund may purchase Municipal Obligations on a "when-issued" or delayed
delivery basis, which means that the securities are not delivered until a
future date that may be as many as 45 days after the Fund has agreed to the
purchase. These transactions may involve an element of risk because the
value of the securities is subject to market fluctuation, no interest accrues
to the purchaser before delivery of the securities, and at the time of
delivery the market value may be less than cost. When the Fund agrees to
purchase Municipal Obligations on a "when-issued" basis, it will maintain
high grade liquid debt assets equal in value to the purchase price of the
"when-issued" securities in a segregated account with its custodian bank.
INVESTMENT RESTRICTIONS
Each of the Funds is subject to the restriction that it will not purchase
any investment or enter into any transactions if, as a result, more than 10%
of the Fund's net assets will be illiquid investments. Each of the Funds is
subject to other investment restrictions, which are described in that Fund's
Statement of Additional Information.
SPECIAL CONSIDERATIONS AFFECTING SINGLE-STATE FUNDS
Each of the single-state Intermediate Municipal Funds is a non-diversified
series of Thornburg Investment Trust, and each therefore may invest more than
five percent of its portfolio assets in the securities of a single issuer,
provided that it may not purchase any security (other than securities issued
or guaranteed as to principal or interest by the United States or its
instrumentalities) if, as a result, more than five percent of the Trust's
total assets would be invested in securities of a single issuer. All other
Funds are diversified series. Because each of the single state Funds will
purchase primarily Municipal Obligations originating from within its state,
an investment in a single state Fund may be riskier than an investment in
either the Limited Term National Fund or the Intermediate National Fund,
which purchase Municipal Obligations from throughout the United States.
Local economic factors could have varying effects on the obligations owned by
each single state Fund. In particular, economic developments in California
could impair the ability of certain California state and municipal issuers
to pay their obligations in some situations. Taxpayer initiatives, weakness
in tax collections and reallocation of certain revenues previously
available to county and local governments could reduce the revenues
available to some California issuers. The State of New Mexico anticipates
budget shortfalls in the current year. Lower taxes available in some New
Mexico locales, and reductions in staffing at research and military
facilities at Los Alamos, White Sands and Albuquerque could adversely affect
the ability of nearby municipalities to meet their obligations. Florida has
experienced rapid economic growth. While the economy has broadened, this
growth has brought pressure for more infrastructure, educational facilities,
and other improvements. Although recent state budgets have been balanced,
over-dependence on the sensitive sales tax creates vulnerability to recession
and to slower growth in the tax base in the future. Also, health care cost
increases or increased burdens for funding current programs at the state
level could affect revenues available to all levels of government.
YOUR ACCOUNT
BUYING FUND SHARES IN GENERAL
Each Fund offers two classes of shares with varying annual expenses and
sales charge structures. Class A shares are sold subject to a sales charge
which is deducted at the time you purchase your shares. This class also pays
a service fee. Class C shares are sold at net asset value, subject to payment
of a sales charge if redeemed within one year of purchase. They also pay both
a service and a distribution fee. The various service or service and
distribution fees are Fund expenses which are deducted from each class'
annual income. Each Fund also may allocate among its classes certain
expenses, to the extent allocable to specific classes. If you do not specify
a class of shares in your order, your money will be invested in Class A
shares of the Fund you purchase.
Financial advisors and others who sell shares of the Fund receive different
compensation for selling different classes of the Funds' shares. Shares of
the Funds may be purchased through investment dealers, brokers or agents
("financial advisors") who have agreements with the Funds' distributor,
Thornburg Securities Corporation ("TSC"), or through TSC in those states
where TSC is registered. Although shares of the National Funds generally are
available in most states, shares of the single state Funds are or will be
available only in their respective states and certain other states where
those Funds are qualified for sale. The Funds and TSC reserve the right to
refuse any order in whole or in part.
NET ASSET VALUE
The net asset value (NAV) stated for each class of each Fund is the value of
a single share of that class. The NAV is computed at least once each day the
Fund conducts business, by adding the value of the class' investments, cash,
and other assets, subtracting its liabilities, and then dividing the result
by the number of shares outstanding. Shares are purchased at the next share
price calculated after your investment is received and accepted. Share price
is normally calculated at 4 p.m. Eastern time.
BUYING CLASS A SHARES
When you buy Class A shares the sales charge applicable to your investment is
deducted from the price you pay and the balance is invested at NAV. The sales
charge is shown in the table below.
Because the fees for Class A shares of each Fund are lower than the fees for
Class C shares of the same Fund, Class A shares of each Fund pay higher
dividends than Class C shares of the same Fund. The deduction of the initial
sales charge, however, means that you purchase fewer Class A shares than
Class C shares of each Fund for a given amount invested.
If you are in any of the special classes of investors who can buy Class A
shares at net asset value or at a reduced sales charge, you should consider
buying Class A shares. If you are planning a large purchase or purchases
under the Right of Accumulation or Letter of Intent you should consider if
your overall costs will be lower by buying Class A shares, particularly if
you plan to hold your shares for an extended period of time.
<TABLE>
Class A Shares Dealer Concession
Total Sales Charge or Agency Commission
As Percentage As Percentage As Percentage
of Offering Price of Net Asset Value of Offering Price
<S> <C> <C> <C>
Limited Term Municipal Funds
- ----------------------------
Less than $50,000.00 2.50% 2.56% 2.10%
$50,000 to 99,999.99 2.25% 2.30% 1.85%
$100,000 to 249,999.99 1.75% 1.78% 1.50%
$250,000 to 499,999.99 1.50% 1.52% 1.25%
$500,000 to 999,999.99 1.00% 1.01% .85%
$1,000,000 and up 0.00% 0.00% <F1>
Intermediate Municipal Funds
- ----------------------------
Less than $50,000.00 3.50% 3.63% 3.00%
$50,000 to 99,999.99 3.00% 3.09% 2.75%
$100,000 to 249,999.99 2.50% 2.56% 2.25%
$250,000 to 499,999.99 2.00% 2.04% 1.75%
$500,000 to 999,999.99 1.50% 1.52% 1.25%
$1,000,000 and up 0.00% 0.00% <F1>
<FN>
<F1> No sales charge will be payable at the time of purchase on investments
of $1 million of more made by a purchaser. A contingent deferred sales
charge will be imposed on these investments in the event of a share
redemption within 1 year following the share purchase at the rate of
1/2 of 1% of the value of the shares redeemed. In determining whether
such a sales charge is payable and the amount of any charge, it is
assumed that shares not subject to the charge are the first
redeemed followed by other shares held for the longest period of time.
The applicability of these charges will be unaffected
by transfers of registration. TSC or TMC intend to pay a commission of
up to 1/2 of 1% to dealers who place orders of $1 million or more for
a single purchaser.
At certain times, for specific periods, TSC may reallow up to the full
sales charge to all dealers who sell Fund shares. These "full
reallowances" may be based upon the dealer reaching specified minimum
sales goals. TSC will reallow the full sales charge only after notifying
all dealers who sell Fund shares. During such periods, dealers may be
considered underwriters under securities laws. TMC or TSC also may pay
additional cash or non-cash compensation to dealer firms which
have selling agreements with TSC. Those firms may pay additional
compensation to financial advisors who sell Fund shares.
Non-cash compensation may include travel and lodging in connection
with seminars or other educational programs.
</FN>
</TABLE>
LETTERS OF INTENT. If you intend to invest, over the course of 13 or fewer
months, an amount of money that would qualify for a reduced sales charge if
it were made in one investment, you can qualify for the reduced sales charge
on the entire amount of your investment by signing a "Letter of Intent"
(LOI). Each investment you make during the 13 months will be charged the
reduced sales commission applicable to the amount stated in your LOI. You do
not have to reach the goal you set. If you don't, you will have to pay the
difference between the sales charge you would have paid and the sales charge
you did pay. You may pay this amount directly to TSC, or TSC will redeem a
sufficient number of your shares in the Fund to obtain the difference.
RIGHTS OF ACCUMULATION. Each time the value of your account plus the amount
of any new investment passes one of the breakpoints illustrated in the table
on page 16, the amount of your new investment in excess of the breakpoint
will be charged the reduced sales charge applicable to that range.
WAIVERS. You may purchase Class A shares of each Fund with no sales charge if
you notify TSC or the Funds' transfer agent, NFDS, at the time you purchase
shares that you belong to one of the categories below. If you do not provide
such notification at the time of purchase, your purchase will not qualify for
the waiver of sales charge.
A SHAREHOLDER WHO REDEEMED CLASS A SHARES OF A THORNBURG FUND. For two years
after such a redemption you will pay no sales charge on amounts that you
reinvest in Class A shares of one of the Funds covered by this prospectus, up
to the amount you previously redeemed.
AN OFFICER, TRUSTEE, DIRECTOR, OR EMPLOYEE OF TMC (or any investment company
managed by TMC), TSC, any affiliated Thornburg Company, the Fund's Custody
Bank or Transfer Agent and members of their families.
EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the
National Association of Securities Dealers, Inc. (NASD); employees of
financial planning firms who p lace orders for the Fund through a member in
good standing with NASD; the families of both types of employees. Orders must
be placed through an NASD member firm who has signed an agreement with TSC to
sell Fund shares.
CUSTOMERS of bank trust departments, companies with trust powers and
investment advisors who charge a fee for service, including investment
dealers who utilize wrap fee arrangements.
INVESTORS PURCHASING $1 MILLION OR MORE. However, a contingent deferred sales
charge of 1/2 of 1% applies to shares redeemed within one year of purchase.
THOSE PERSONS WHO ARE DETERMINED BY THE DIRECTORS OR TRUSTEES OF THE FUND to
have acquired their shares under special circumstances not involving any
sales expenses to the Funds or Distributor.
PURCHASES PLACED THROUGH A BROKER THAT MAINTAINS ONE OR MORE OMNIBUS ACCOUNTS
WITH THE FUNd provided that such purchases are made by: (i) investment
advisers or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other
fee for their services; (ii) clients of such investment advisers or financial
planners who place trades for their own accounts if the accounts are linked
to the master account of such investment adviser or financial planner on the
books and records of the broker or agent; and (iii) retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Sections 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts." Investors may be charged a fee if they
effect transactions in Fund shares through a broker or agent.
PROCEEDS FROM A LOAD FUND REDEMPTION. You may purchase shares of any Fund at
net asset value without a sales charge to the extent that the purchase
represents proceeds from a redemption (within the previous 60 days) of shares
of another mutual fund which has a sales charge. When making a direct
purchase at net asset value under this provision, the Fund must receive one
of the following with your direct purchase order: (i) the redemption check
representing the proceeds of the shares redeemed, endorsed to the order of
the Fund, or (ii) a copy of the confirmation from the other fund, showing the
redemption transaction. Standard back office procedures should be followed
for wire order purchases made through broker dealers. Purchases with
redemptions from money market funds are not eligible for this privilege. This
provision may be terminated anytime by TSC or the Fund
without notice.
BUYING CLASS C SHARES
You can buy Class C shares at NAV but you will pay a contingent deferred
sales charge (CDSC) of 1/2 of 1% on Limited Term Funds and 6/10 of 1% on
Intermediate Term Funds if you redeem your shares within one year of
purchase. The CDSC applies only to Class C shares purchased on or after
October 2, 1995. The CDSC will be imposed upon the lower of the purchase
price or net asset value at redemption of each share redeemed. The CDSC is
not imposed upon shares you buy by reinvesting dividends or capital gain
distributions. Maximum purchase amount for Class C shares is less than $1
million. Class C shares are charged higher annual expenses than Class A
shares.
If your investment horizon is relatively short and you do not qualify to
purchase Class A shares at a reduced sales charge, you should consider
purchasing Class C shares.
OPENING AN ACCOUNT
___________________________________________________________________________
Buying Shares To Open an Account To Add to an Account
- ---------------------------------------------------------------------------
In Minimum Minimum
- -- ------- -------
Regular Accounts $5,000 $ 100
Automatic Investment
Plans $ 100 $ 100
Through Your Financial Consult with your Consult with your
Advisor financial advisor. financial advisor
By Telephone Exchange from another Exchange from another
1-800-847-0200 Thornburg Fund account Thornburg Fund account
with the same registra- with the same registra-
tion, including name, tion, including name,
address, and taxpayer address, and taxpayer
ID number. ID number.
By Mail Complete and sign the Make your check payable
application. Make your to the applicable
check payable to the Thornburg Fund. Indicate
applicable Thornburg your Fund account number
Fund. Mail to the on your check and mail to
address indicated on the the address printed on
application. your account statement.
Automatic Investment Use one of the above Use Automated Clearing
Plan procedures to open your House funds. Sign up for
account. Obtain an this service when opening
Automatic Investment your account, or call
Plan form to sign up 1-800-847-0200 to add
for this service. to it.
Complete and sign an account application and give it, along with your check,
to your financial advisor. You may also open your account by wire or mail as
described above. If there is no application accompanying this prospectus,
call 1-800-847-0200.
If you buy shares by check and then redeem those shares, the payment may be
delayed for up to 15 business days to ensure that your previous investment
has cleared.
STREET NAME OWNERSHIP OF SHARES
Some securities dealers offer to act as owner of record of Fund shares as a
convenience to investors who are clients of those firms and shareholders of
an individual Fund. Neither the Fund nor the Transfer Agent can be
responsible for failures or delays in crediting shareholders for dividends or
redemption proceeds, or for delays in reports to shareholders if a
shareholder elect s to hold Fund shares in street-name through a brokerage
firm account rather than directly in the shareholder's own name. Further,
neither the Fund nor the Transfer Agent will be responsible to the investor
for any loss to the investor due to the brokerage firm's failure, its loss of
property or funds, or its acts or omissions. Prospective investors are urged
to confer with their financial advisor to learn about the different options
available for owning mutual fund shares. You may receive share certificates
or hold shares in your name with the Transfer Agent upon request.
SELLING FUND SHARES
You can withdraw money from your Fund account at any time by redeeming some
or all of your shares (by selling them back to the Fund or by selling the
shares through you r financial advisor). Your shares will be purchased by the
Fund at the next share price (NAV) calculated after your order is received in
proper form and accepted. The amount of the CDSC, if any, will be deducted
and the remaining proceeds sent to you. No CDSC is imposed on the amount by
which the value of a share may have appreciated. Similarly, no CDSC is
imposed on shares obtained through reinvestment of dividends or capital
gains. Shares not subject to a CDSC will be redeemed first. Share price is
normally calculated at 4 p.m. Eastern time.
To sell shares in an account, you may use any of the methods described on the
following page.
If you are selling some but not all of your shares, leave at least $1,000
worth of shares in the account to keep it open.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and your Fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
* You wish to redeem more than $10,000 worth of shares,
* Your account registration has changed within the last 30 days,
* The check is being mailed to a different address than the one on your
account (record address),
* The check is being made payable to someone other than the account owner,
or
* The redemption proceeds are being transferred to a Thornburg account with
a different registration.
You should be able to obtain a signature guarantee from a bank, broker
dealer, credit union (if authorized under state law), securities exchange or
association, clearing agency, savings association or participant in the
Securities Transfer Agent Medallion Program (STAMP). A notary public cannot
provide a signature guarantee.
TELEPHONE REDEMPTION. If you completed the telephone redemption section of
your application when you first purchased your shares, you may easily redeem
any class of shares of any Fund by telephone simply by calling a Fund
Customer Service Representative before 2:30 p.m. Money can be wired directly
to the bank account designated by you on the application or sent to you in a
check. The Funds' Transfer Agent may charge a fee for a bank wire. This fee
will be deducted from the amount wired.
If you did not complete the telephone redemption section of your application,
you may add this feature to your account by calling the Fund for a telephone
redemption application. Once you receive it, please fill it out, have it
signature guaranteed and send it to:
NFDS
c/o Thornburg Funds
P.O. Box 419017
Kansas City, MO 64141-6017
The Funds, TSC, TMC and the Funds' Transfer Agent are not responsible for,
and will not be liable for, the authenticity of withdrawal instructions
received by telephone or the delivery or transmittal of the redemption
proceeds if they follow instructions communicated by telephone that they
reasonably believe to be genuine. By electing telephone redemption you are
giving up a measure of security you otherwise may have by redeeming shares
only with written instructions, and you may bear the risk of any losses
resulting from telephone redemption. The Funds' Transfer Agent will attempt
to implement reasonable procedures to prevent unauthorized transactions and
the Funds or their Transfer Agent could be liable if these procedures are not
employed. These procedures will include recording of telephone transactions,
providing written confirmation of such transactions within 5 days, and
requesting certain information to better confirm the identity
of the caller at the time of the transaction.
____________________________________________________________________________
Redeeming Shares Account Type Special Requirements
- ----------------------------------------------------------------------------
Through Your Financial All account types Consult with your financial
Advisor advisor. Your financial
advisor may charge a fee.
By Mail Individual, Joint The letter of instruction
Tenant, Sole Pro- must be signed by all
prietorship, UGMA, persons required to sign
UTMA for transactions, exactly as
Send to: NFDS their names appear on the
c/o Thornburg Funds account, and must include:
P.O. Box 419017 * Your name,
Kansas City, MO * The Fund's name,
64141-6017 * Your Fund account number,
* The dollar amount or
number of shares to be
redeemed,
* Any other applicable
requirements listed
above,
* Signature guarantee, if
required.
Trust In addition to the above
requirements, the trustee
must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
Business or In addition to the above
Organization requirements, at least one
person authorized by
corporate resolution to act
on the account must sign the
letter which must be
signature guaranteed.
Include a corporate
resolution with corporate
seal.
Executor, Call 1-800-847-0200 for
Administrator, instructions.
Conservator, Guardian
By Telephone All account types You must sign up for the
1-800-847-0200 except Street-Name telephone redemption feature
before using it.
Minimum Wire $1,000
Minimum Check $50.00
By Systematic Withdrawal All account types You must sign up for this
Plan feature to use it.
Minimum Account Balance
$10,000
Minimum Check $50.00
INVESTOR SERVICES
Thornburg Funds provides a variety of services to help you manage your
account.
Information Services
Thornburg Funds' telephone representatives are available Monday through
Friday from 9:30 am to 6:30 pm Eastern time. Whenever you call, you can speak
with someone equipped to provide the information or service you need.
Thornburg Funds' Audio Response system is available 24 hours a day, 365 days
a year. This computerized system gives you instant access to your account
information and up-to-date figures on all of the Thornburg Funds.
Statements and reports that Thornburg Funds send to you include the
following:
* Account statements after every transaction affecting your account
* Monthly account statements
* Financial reports (every six months)
* Cost basis statement (at the end of any year in which you redeem shares)
TRANSACTION SERVICES
Automatic Investment Plan. One easy way to pursue your financial goals is to
invest money regularly. Thornburg Funds let you transfer as little as $100
from your bank account into your Fund account on a weekly, monthly or
quarterly basis, automatically. Because the Fund's Automatic Investment Plan
has a lower minimum than a regular purchase, it is an ideal way for beginning
investors to invest in a Fund.
While regular investment plans do not guarantee a profit and will not protect
you against loss in a declining market, they can be an excellent way to
invest for retirement, a home, educational expenses, and other long-term
financial goals. Call 1-800-847-0200 and speak to a Fund Customer Service
Representative for more information.
Exchange Privilege. You may exchange Class A shares of any other Thornburg
Fund for Class A shares of one of the Thornburg Municipal Funds.
If you are exchanging from one of the Funds covered by this prospectus into
another Thornburg Fund, you may (i) have to pay the difference between the
front end sales charge you paid on the Fund out of which you are exchanging
and the front end sales charge applicable to the Fund into which you are
exchanging; or (ii) you may qualify for a reduced sales charge or no sales
charge on that Fund. Please consult the exchange an d reinvestment privilege
information in the Prospectus of the other Thornburg Fund.
Note that exchanges out of a Fund may have tax consequences for you. For
details on policies and restrictions governing exchanges, including
circumstances under which a shareholder's exchange privilege may be suspended
or revoked, see page 25.
Systematic withdrawal plans let you set up periodic redemptions from your
account. Because of the sales charge on Class A shares of each Fund, you may
not want to set up a systematic withdrawal plan during a period when you are
buying Class A shares on a regular basis.
SHAREHOLDER AND ACCOUNT POLICIES
Dividends, Capital Gains, and Taxes
The Funds distribute substantially all of their net income and realized
capital gains, if any, to shareholders each year. Each Fund declares its net
investment income daily and distributes it monthly. Each Fund will distribute
net realized capital gains, if any, at least annually. Capital gain
distributions normally will be declared and payable in December.
Distribution Options
Each Fund earns interest from bond, money market, and other investments.
These are passed along as dividend distributions. Each Fund realizes capital
gains whenever it sells securities for a higher price than it paid for them.
These are passed along as capital gain distributions.
When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers four options, (which you can change at
any time).
Dividends
1. Reinvestment Option. Your dividend distributions will be automatically
invested in additional shares of your Fund. If you do not indicate a
choice on your application, you will be assigned this option. You may also
instruct the Fund to invest your dividends in the shares of any other
Thornburg Fund.
2. Cash Option. You will be sent a check for your dividend distributions.
Cash distribution checks are normally mailed on the third business day
after the month-end.
Capital Gain
1. Reinvestment Option. Your capital gain distributions, if any, will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
You may also instruct the Fund to re invest your capital gain
distributions in shares of any other Thornburg Fund.
2. Cash Option. You will be sent a check for any capital gain distributions.
Shares of any Thornburg Fund purchased through reinvestment of dividend and
capital gain distributions are not subject to sales charges or contingent
deferred sales charges.
Turnover and Capital Gains
The Funds do not intend to engage in short-term trading for profits.
Nevertheless, when a Fund believes that a security will no longer contribute
towards its reaching its goal, it will normally sell that security.
When a Fund sells a security at a profit it realizes a capital gain. When it
sells a security at a loss it realizes a capital loss. A fund must, by law,
distribute capital gains, net of any losses, to its shareholders. Whether you
reinvest your capital gain distributions or take them in cash, the
distribution is taxable.
To minimize taxable capital gain distributions, each Fund will realize
capital losses, if available, when, in the judgment of the portfolio manager,
the integrity and income generating aspects of the portfolio would be
unaffected by doing so.
TAXES
Federal Taxes
The Limited Term National Fund, Limited Term California Fund, Intermediate
National Fund, Intermediate New Mexico Fund and Intermediate Florida Fund
each have qualified under Subchapter M of the Internal Revenue Code (the
"Code ") for tax treatment as a regulated investment company, and each of
these Funds intends to continue its qualification so long as qualification is
in the best interests of the shareholders. The other Funds also intend to
qualify for this treatment under Subchapter M. This tax treatment relieves a
Fund from paying federal income tax on income which is currently distributed
to its shareholders. Each Fund also intends to satisfy conditions that will
enable it to designate distributions from the interest income generated by
its investments in Municipal Obligations, which are exempt from federal
income tax when received by the Fund, as Exempt Interest Dividends.
Shareholders receiving Exempt Interest Dividends will not be subject to
federal income tax on the amount of such dividends, except to the extent the
alternative minimum tax may be imposed.
The Fund's counsel, White, Koch, Kelly & McCarthy, Professional Association,
has not made and normally will not make any review of the proceedings
relating to the issuance of the Municipal Obligations or the basis for any
opinions issued in connection therewith. In the case of certain Municipal
Obligations, federal tax exemption is dependent upon the issuer (and other
users) complying with certain ongoing requirements. There can be no assurance
that the issuer (and other users) will comply with these requirements, in
which event the interest on such Municipal Obligations could be determined to
be taxable, in most cases retroactively from the date of issuance. Certain
matters under the Code, including certain exceptions to the foregoing, are
discussed more specifically below.
Each Fund will receive the opinion of its counsel or other assurances before
commencing investment operations that such distributions will constitute
Exempt Interest Dividends under the Code if certain conditions are satisfied.
Distributions by each Fund of net interest income received from certain
temporary investments (such as certificates of deposit, corporate commercial
paper and obligations of the United States government, its agencies and
instrumentalities) and net short-term capital gains realized by each Fund, if
any, will be taxable to shareholders as ordinary income whether received in
cash or additional shares. Distributions to shareholders will not qualify for
the dividends received deduction for corporations. Any net long-term capital
gains realized by a Fund, whether or not distributed, will be taxable to
shareholders as long-term capital gains regardless of the length of time
investors have held their shares, although gains attributable to market
discount on portfolio securities will be characterized as ordinary income.
Each year each Fund will, where applicable, mail to shareholders information
on the tax status of dividends and distributions, including the respective
percentages of tax-exempt and taxable income and an allocation of tax-exempt
income on a state-by-state basis. The exemption of interest income for
federal income tax purposes does not necessarily result in an exemption under
the income or other tax laws of any state or local taxing authorities. (See
"State Taxes," below). Shareholders are advised to consult their own tax
advisers for more detailed information concerning the federal, state and
local taxation of each Fund and the income tax consequences to its
shareholders.
The Code treats interest on certain Municipal Obligations which are private
activity bonds under the Code as a preference item for purposes of the
alternative minimum tax on individuals and corporations. The Funds may
purchase without limitation private activity bonds the interest on which is
subject to treatment under the Code as a preference item for purposes of the
alternative minimum tax on individuals and corporations, although the
frequency and amounts of these purchases are presently uncertain. Some
portion of Exempt Interest Dividends may, as a result of these purchases, be
treated as a preference item for purposes of the alternative minimum tax on
individuals and corporations. Shareholders are advised to consult their own
tax advisers as to the extent and effect of this treatment.
State Taxes
Distributions of interest income from Municipal Obligations will not
necessarily be exempt from taxes under the income or other tax laws of any
state or local taxing authority. Distributions to individuals attributable to
interest on Municipal Obligations originating in Alabama, California,
Arizona, New Mexico, and Tennessee will not be subject to personal income
taxes imposed by the state of the same name as the Fund. For example, an
individual resident in New Mexico, who owns shares in the New Mexico Fun d,
will not be required by New Mexico to pay income taxes on interest dividends
attributable to obligations originating in that state. Capital gain
distributions are taxable by these states, irrespective of the origins of the
obligations from which the gains arise. Individual shareholders in
Pennsylvania will not be subject to Pennsylvania income tax on distributions
attributable to interest on obligations originating in Pennsylvania, or
distributions attributable to gains on dispositions of obligations of
Pennsylvania and its political subdivisions and obligations of the United
States and its territories and possessions. Additionally, individual
shareholders will be exempt from Pennsylvania personal property tax on their
Pennsylvania Fund shares to the extent the Fund's assets consist of
obligations described in the preceding sentence. Individual residents in
Pittsburgh will enjoy a similar exemption from personal property taxes
imposed by the City and School District of Pittsburgh.
Florida, Texas and Utah do not currently impose an income tax on individuals
or do not impose an income tax on distributions to individuals attributable
to Municipal Obligations, although capital gain distributions will be subject
to personal income tax in Utah. Florida imposes a personal property or
"intangibles" tax which is generally applicable to securities owned by
individual residents in Florida, but the intangibles tax will not apply to
Florida Fund shares if the Funds' assets as of the close of the preceding
taxable year consist only of obligations of Florida and its political
subdivisions and obligations of the United States, Puerto Rico, Guam or the
United States Virgin Islands.
With respect to distributions of interest income from the Limited Term
National Fund and the Intermediate National Fund, the laws of the several
states and local taxing authorities vary with respect to the taxation of such
distributions, and shareholders of these Funds are advised to consult their
own tax advisers in that regard. The Limited Term National Fund and the
Intermediate National Fund will advise shareholders approximately 60 day s
after the end of each calendar year as to the percentage of income derived
from each state as to which it has any Municipal Obligations in order to
assist shareholders in the preparation of their state and local tax returns.
Prospective investors are urged to confer with their own tax advisers for
more detailed information concerning state tax consequences. In particular,
corporations should note that the preceding outline of state taxes pertains
principally to individuals, and tax treatment of corporations may be
different.
SERVICE AND DISTRIBUTION PLANS
Service Plan - Both Classes. Each class 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 Service Plans applicable to the Limited Term Municipal Funds
permit each of these Funds to reimburse TMC for these payments at annual
rates up to .125% of the Fund's net assets attributable to Class A shares and
up to .25% of the Fund's net assets attributable to Class C shares; the
Service Plans applicable to each class of the Intermediate Municipal Funds
provides for reimbursement at annual rates of up to .25% of each class' net
assets. No assets of any class of any Fun d will be used to reimburse
expenses attributable to any other class of the same, or any other Fund.
Class C Distribution Plan. Each Fund has adopted a Class C Distribution Plan
applicable to Class C shares, under which the Fund will pay to 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 an addition to the service fee described above under "Service Plan - All
Classes" and is charged to and reduces the income allocated to Class C
shares. TSC intends to use these amounts principally to compensate
dealers (including banks) who sell Class C shares. TSC also will engage in
other distribution related activities, including advertising and other
promotional activities. However, the distribution fee paid to TSC is not
computed with respect to TSC's actual expenses, and the fees received by TSC
may be more or less than its actual distribution expenses. TSC may, but is
not obligated to, waive any part or all of its compensation provided for
under the Class C Distribution Plan.
The Glass-Steagall Act prohibits certain banks from underwriting mutual fund
shares. The Funds do not believe that this prohibition will apply to the
commissions described beginning on page 16 or to the plans described above.
However, no assurance can be given that the Glass-Steagall Act will not be
interpreted so as to prohibit these arrangements. In that event, the ability
of the Funds to market their shares could be impaired to a small extent. In
addition, state securities laws on this issue may differ from
interpretations of federal law, and banks and financial institutions may be
required to register as dealers pursuant to state law.
TRANSACTION DETAILS
The Funds are open for business each day the New York Stock Exchange (NYSE)
is open. Each class of shares of the Fund normally calculates its NAV (and
offering price for Class A shares) as of the close of business of the NYSE,
normally 4 p.m. Eastern time. Each Fund's assets are valued on the basis of
valuations obtained from independent pricing services.
When you sign your account application, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
You may initiate many transactions by telephone. Note that a Fund will not be
responsible for any losses resulting from unauthorized transactions if it
follows reasonable procedures designed to verify the identity of the caller.
The Fund will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you want the ability to
redeem and exchange by telephone, fill in the appropriate section
of the application. If you have an existing account to which you wish to add
this feature, call the Fund for a telephone redemption
application. If you are unable to reach the Fund by phone (for
example, during periods of unusual market activity), consider placing your
order by mail or by using your financial advisor.
The Funds reserve the right to suspend the offering of shares for a period of
time. Each Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions "
on page 25. Purchase orders may be refused if, in TMC's opinion, they would
disrupt management of a Fund.
When you place an order to buy shares, your order will be processed at the
next share price calculated after your order is received and accepted. If you
open or add to your account yourself rather than through your financial
advisor please note the following:
* All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks.
* The Funds do not accept cash.
* If your check does not clear, your purchase will be cancelled and you
could be liable for any losses or fees the Fund or its Transfer Agent has
incurred.
When you buy shares of a Fund or sell them through your financial advisor,
you may be charged a fee for this service. Please read your financial
advisor's program materials for any additional procedures, service features
or fees that may apply.
Certain financial institutions that have entered sales agreements with TSC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the Fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
When you place an order to sell shares, your shares will be sold at the next
NAV calculated after your request is received and accepted. (Except that a
CDSC will be deducted from Class C shares within one year of purchase and a
CDSC of 1/2 of 1% will be deducted from redemptions of Class A shares within
one year of purchase where no sales charge was imposed on the purchase
because it exceeded $1,000,000). Note the following:
* Consult your financial advisor for procedures governing redemption through
his or her firm.
* If you redeem by mail the proceeds will normally be mailed to you on the
next business day, but if making immediate payment could adversely affect
your Fund, it may take up to 7 days to pay you.
* Telephone redemptions over the wire generally will be credited to your
bank account on the business day after your phone call.
* Each Fund may hold payment on redemptions until it is reasonably satisfied
that investments previously made by check have been collected, which can
take up to 15 business days.
* Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
* To the extent consistent with state and federal law, a Fund may make
payments of the redemption price either in cash or in kind. The Funds have
elected to pay in cash all requests for redemption by any shareholder.
They may, however, limit such cash in respect to each shareholder during
any 90 day period to the lesser of $250,000 or 1% of the net asset value
of a Fund at the beginning of such period. This election has been made
pursuant to Rule 18f-1 under the Investment Company Act of 1940 and is
irrevocable while the Rule is in effect unless the Securities and Exchange
Commission, by order, permits its withdrawal. In the case of a redemption
in kind, securities delivered in payment for shares would be valued at the
same value assigned to them in computing the net asset value per share of
the Fund. A shareholder receiving such securities would incur brokerage
costs when selling the securities.
EXCHANGE RESTRICTIONS
* The Fund you are exchanging into must be registered for sale in your
state.
* You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
* Before exchanging into a Fund, read its prospectus.
* If you exchange Class A shares into a Fund with a higher sales charge, you
may have to pay the percentage-point difference between that Fund's sales
charge and any sales charge you h ave previously paid in connection with
the shares you are exchanging. For example, if you had already paid a
sales charge of 2.5% on your shares and you exchange them into a Fund with
a 4.5% sales charge, you would pay an additional 2% sales charge.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt performance and shareholders, each Fund
reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of a Fund
in any calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification number, will be
counted together for purposes of the four exchange limit.
* Each Fund reserves the right to refuse exchange purchases by any person or
group if, in TMC's judgement, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
* Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the
Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund.
Although a Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time. The Funds
reserve the right to terminate or modify the exchange privilege in the
future.
PERFORMANCE
YIELD COMPUTATION AND TOTAL RETURN
The Funds may quote their yields and returns in reports, sales literature and
advertisements. Yield and return information are computed separately for
Class A and Class C shares. Yield and return for Class C shares of a Fund
ordinarily will be less than t hat of Class A shares of the same Fund because
of the additional distribution fees imposed upon Class C shares.
Additionally, yield and return could differ in minor respects among classes
of the same Fund because of allocation of certain expenses to one or more
specific classes to which the expenses relate. Any return quoted should not
be considered a representation of the return in the future since return
figures are based upon historical earnings. Actual performance will vary.
Current yield quotations will include a standardized calculation which
computes yield for a 30-day or one-month period by dividing a Fund's net
investment income per share during the period by the maximum offering price
on the last day of the period and annualizing the result. Provided that any
such quotation is also accompanied by the standardized calculation referred
to above, any of the Funds also may quote non-standardized yields for a
specified period by dividing the net investment income per share of that Fund
f or that period by either the Fund's average public offering price per share
for that same period or the offering price per share on the first or last day
of the period and annualizing the result. The primary differences between the
yield calculations obtain ed using the standardized performance measure and
any non-standardized performance measure will be caused by the following
factors: (1)The non-standardized calculation may cover periods other than the
30-day or one month period required by the standardize d calculation; (2)The
non-standardized calculations may reflect amortization of premium based upon
historical cost rather than market value; (3)The non-standardized calculation
may reflect the average offering price per share for the period or the
beginning offering price per share for the period, whereas the standardized
calculation will always reflect the maximum offering price per share on the
last day of the period; (4)The non-standardized calculation may reflect an
offering price per share other than the maximum offering price, provided
that any time any Fund's return is quoted in reports, sales literature or
advertisements using a public offering price which is less than the Fund's
maximum public offering price, the return computed by using the Fund's
maximum public offering price also will be quoted in the same piece; (5)The
non-standard return quotation may include the effective return obtained by
compounding the monthly dividends.
Average annual total return quotations show the average annual percentage
change in value of $1,000 for one, five and ten-year periods unless the class
has been in existence for a shorter period. Average annual total return
includes the effect of paying the maximum sales charge (Class A shares) or
the deduction of the applicable CDSC (Class C shares) and assumes the
reinvestment of all dividends. The Funds also may furnish average annual
total return quotations for other periods, or based upon investments at
various sales charge levels or at net asset value. Total return quotations
show the total of all income and capital gain paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in the value of
the original investment, expressed as a percentage of the purchase price.
Yields and returns described in this section may also be quoted on a
"taxable equivalent yield" basis by computing the taxable yield or return
which a hypothetical investor subject to a specified income tax rate must
realize to receive the same yield or return after taxes. When a taxable
equivalent yield is quoted, the following additional information will be
furnished: (1) a standardized current yield; (2) the length of and the last
day of the base period used in computing the quotation; and (3) a description
of the method by which the quotation is computed.
Yield and return information may be useful in reviewing the
performance of the Funds and for providing a basis for comparison with other
investment alternatives. Comparative information about the yield or
distribution rate of the shares of a Fund and a bout average rates of return
on certificates of deposit, bank money market deposit accounts, money market
mutual funds and other short-term investments may also be included in
advertisements and communications of the Fund. Any such comparison will
contain information about the differences between the Funds
and those investments.
From time to time, in advertisements and other types of literature, the
performance of the Funds may be compared to other groups of mutual funds.
This comparative performance ma y be expressed as a ranking or a rating
prepared by Lipper Analytical Services, Inc., Donoghue Organization, Inc.,
Morningstar, Inc., Value Line or other widely recognized independent services
which monitor the performance of mutual funds. Performance rankings and
ratings reported periodically in national financial publications such as
MONEY Magazine, FORBES, BARRON's, VALUE LINE, the WALL STREET JOURNAL and
MORNINGSTAR, and other such publications may also be used. The Funds may
illustrate performance or the characteristics of their respective investment
portfolios through graphs, tabular data, or other displays which describe (i)
the average portfolio maturity of a Fund's portfolio securities relative to
the maturities of other investments, (ii) the relationship of yield and
maturity of the Fund to the yield and maturity of other investments (either
as a comparison or through use of standard benchmarks or indices such as the
Treasury yield curve), (iii) changes in the Funds' share price or net asset
value relative to changes in the value of other investments, and
(iv) the relationship over time of changes in the Funds' (or other
investments) net asset values or prices and the Funds' (or other
investments') investment returns. The Funds also may illustrate or refer to
their respective investment portfolios, investment techniques and strategies,
and general market or economic trends in advertising or communications to
shareholders or prospective shareholders, including reprints of interviews or
articles written by or about, and including comments by, Fund managers. These
illustrations, references and comments ordinarily will relate to
topics addressed in the Funds' Prospectus and Statements of Additional
Information.
ORGANIZATION OF THE FUNDS
Each of the Limited Term Municipal Funds are diversified series of Thornburg
Limited Term Municipal Fund, Inc., a Maryland corporation organized as a
diversified, open-end management investment company. The Limited Term
Municipal Funds are managed by their investment adviser, Thornburg Management
Company, Inc., under the supervision of the Board of Directors of Thornburg
Limited Term Municipal Fund, Inc. (the "Company" ). The Company currently
offers two series of stock, referred to in this Prospectus as Limited Term
National Fund and Limited Term California Fund, each in multiple classes, and
the Board of Directors is authorized to divide authorized but unissued shares
into additional series and classes.
Each of the Intermediate Municipal Funds are series of Thornburg Investment
Trust, a Massachusetts business trust (the "Trust") organized as a
diversified, open-end management investment company under a Declaration of
Trust (the "Declaration" ). Each of the single-state Intermediate Funds is a
non-diversified series of the Trust, and the Intermediate Municipal Funds are
managed by their investment adviser, Thornburg Management Company, Inc. under
the supervision of the Trust's Trustees. The Trust currently has 12
authorized Funds, nine of which are described in this Prospectus. The
Trustees are authorized to divide the Trust's shares into additional series
and classes.
No Fund is liable for the liabilities of any other Fund. However, because the
Company and the Trust share this Prospectus with respect to the Funds, there
is a possibility that one of these companies could be liable for any
misstatements, inaccuracies or incomplete disclosure in the Prospectus
respecting Funds offered by the other company. The Company and the Trust do
not concede, and specifically disclaim, any such liability.
Each Fund may hold special shareholder meetings and mail proxy materials.
These meetings may be called to elect or remove Directors or Trustees, change
fundamental investment policies, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Each Fund will mail
proxy materials in advance, including a voting card and information about the
proposals to be voted on. The number of votes you are entitled to is based
upon the number of shares you own. Shares do not have cumulative voting
rights or preemptive rights.
TMC and TSC
The Funds are managed by Thornburg Management Company, Inc., ("TMC") which
chooses each Fund's investments and handles its business affairs. TMC was
established in 1982. Today, the Thornburg Funds include Thornburg Value Fund,
Thornburg Limited Term U.S. Government Fund and Thornburg Limited Term Income
Fund in addition to the Funds covered by this Prospectus. The Thornburg
Funds total over $1.6 billion in assets. Thornburg Management Company Inc. is
known as a provider of conservative investment products. For more than a
decade the Thornburg Funds have been committed to preserving and increasing
the real wealth of their shareholders. The key to growing real wealth is
increasing buying power after taxes, inflation, and investment related
expenses.
For each of the Funds, TMC receives a management fee computed according to
the following scale and paid monthly as a percentage of each Fund's average
daily assets.
<TABLE>
Limited Term Intermediate
Municipal Funds Municipal Funds
Net Assets Annual Rate Annual Rate
<S> <C> <C>
0 to $500 million .75% .625%
$500 million to $1 billion .65% .575%
$1 billion to $1.5 billion .55% .525%
$1.5 billion to $2 billion .50% .475%
Over $2 billion .40% .400%
</TABLE>
The management fee on the portion of each Limited Term Municipal Fund's net
assets up to $500 million is higher than the fee paid to the adviser of most
other mutual funds; however, the overall expense rate of each of the Limited
Term Municipal Funds is comparable to many funds sold through securities
dealers.
Brian J. McMahon, a Managing Director of TMC, has primary responsibility for
the day-to-day management of each of the Fund portfolios. He has held this
responsibility for each of the Limited Term National Fund and the Limited
Term California Fund since their respective inceptions in 1984 and 1987. He
has held the same responsibility for the Intermediate National Fund and the
Intermediate New Mexico Municipal Fund, which commenced operations in 1991,
and for the Intermediate Florida Fund, which commenced operations in February
1994. Mr. McMahon is assisted by other employees of TMC in managing the
Funds.
TMC may, from time to time, agree to waive its fees or to reimburse any Fund
for expenses above a specified percentage of average daily net assets. TMC
retains the ability to be repaid by the Fund receiving these reimbursements
for these expense reimbursements if expenses fall below the limit prior to
the end of the fiscal year. Fee waivers or expenses by the Fund will lower
its yield.
In addition to TMC's fees, each Fund will pay all other costs and expenses of
its operations. Funds will not bear any costs of sales or promotion incurred
in connection with the distribution of their shares, except as provided for
under the service and distribution plans applicable to each Fund class, as
described above under "Service and Distribution Plans."
Thornburg Securities Corporation (TSC) distributes and markets the Thornburg
Funds.
H. Garrett Thornburg, Jr. a Trustee and President of the Trust and a Director
and Chairman of the Fund, is the controlling stockholder of both TMC and TSC.
Thornburg Funds provides shareholders account inquiry service 24 hours a day,
365 days a year, through its Audio Response telephone service. To reach
Thornburg Funds for general information, please call 1-800-847-0200. If you
would prefer to speak with a Thornburg Funds representative, please call
during business hours and follow the simple instructions you will receive.
ADDITIONAL INFORMATION
Reports to Shareholders
Shareholders will receive annual reports of their Fund containing financial
statements audited by the Funds' independent auditors, and also will receive
unaudited semi-annual reports. In addition, each shareholder will receive an
account statement no less often than quarterly.
Custodian and Transfer Agent
The custodian of each Fund's assets is State Street Bank & Trust Co. National
Financial Data Services is the transfer agent for the Funds and
performs bookkeeping, data processing and administrative services incident to
the maintenance of shareholder accounts.
General Counsel
Legal matters in connection with the issuance of shares of the Funds are
passed upon by White, Koch, Kelly & McCarthy, Professional Association, Post
Office Box 787, Santa Fe, New Mexico 87504-0787.
Investment Adviser
Thornburg Management Company, Inc.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
Distributor
Thornburg Securities Corporation
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
Auditor
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017
Custodian
State Street Bank & Trust Co.
Boston, Massachusetts
Transfer Agent
State Street Bank & Trust Co.
c/o NFDS Servicing Agent
Post Office Box 419017
Kansas City, Missouri 64141-6017
No dealer, sales representative or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, the information or representation must not
be relied upon as having been authorized by any Fund or Thornburg Securities
Corporation. This Prospectus constitutes an offer to sell securities of a
Fund only in those states where the Fund's shares have been registered or
otherwise qualified for sale. A Fund will not accept applications from
persons residing in states where the Fund's shares are not registered.
<logo>
Thornburg Funds
Investing With Integrity
Thornburg Securities Corporation, Distributor
119 East Marcy Street, Santa Fe, New Mexico 87501
(800) 847-0200
