THORNBURG LIMITED TERM MUNICIPAL FUND-
CALIFORNIA PORTFOLIO CLASS SHARES
FUND FACTS
Thornburg Thornburg
Limited Term Municipal Limited Term Municipal
Fund-California Fund-California
A Shares C Shares
SEC Yield 3.86% 3.54%
Taxable Equiv. Yields 7.05% 6.46%
NAV $12.74 $12.75
Max. Offering Price $13.07 $12.75
TOTAL RETURNS
(Annual Average - After Subtracting Maximum Sales Charge)
1 Year Ending 1.68% 3.89%
5 Years Ending 5.01% NA
Since Inception 5.89% 4.87%
Inception Date (2/19/87) (9/1/94)
(a) Taxable equivalent yields assume a 39.6% marginal federal tax rate, and an
9.30% state of California marginal tax rate. Portions of the income of the
municipal funds may be subject to the alternative minimum tax. (b) The data
quoted represents past performance, and the investment return and principal
value of an investment in the fund will fluctuate. An investor's shares, when
redeemed, may be worth more or less than their original cost. (c) The total
return data reflects the deduction of the maximum sales charge of the Class A
Shares of 2.50%.
What Double Tax - Free Income Means to You:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIND YOUR TAXABLE INCOME Combined To Equal a California
AND READ ACROSS Income Tax-Free Yield Of*
Tax 3.75% 4.00% 4.25% 4.50% 4.75% 5.00%
$24,000 - 25,484 $40,100 - 50,968 32.32% 5.54% 5.91% 6.28% 6.65% 7.02% 7.39%
$25,484 - 32,207 $50,968 - 64,414 33.76% 5.66% 6.04% 6.42% 6.79% 7.17% 7.55%
$32,207 - 58,150 $64,414 - 96,900 34.70% 5.74% 6.13% 6.51% 6.89% 7.27% 7.66%
$58,150 - 121,300 $96,900 - 147,700 37.42% 5.99% 6.39% 6.79% 7.19% 7.59% 7.99%
$121,300 -263,750 $147,700 - 263,750 41.95% 6.46% 6.89% 7.32% 7.75% 8.18% 8.61%
$263,750 - and up** $263,750 - and up** 45.22% 6.85% 7.30% 7.76% 8.21% 8.67% 9.13%
<FN>
*The yields listed are for illustration only and not necessarily representative
of any class of shares of the Limited Term Municipal Fund - California
Portfolio.
**1996 maximum Federal tax bracket of 39.6%. Maximum California tax
bracket of 9.30%. Taxable equivalent yields do not take the federal alternative
minimum tax, to which investors may or may not be subject, into account.
</FN>
</TABLE>
Dear Shareholder:
After rising to their highest levels in several years in 1994, interest rates
fell steadily during 1995. During 1996, interest rates in the U.S. increased
again, although interest rates in most of the world fell sharply. The net asset
value of Thornburg Limited Term Municipal Fund California Portfolio A shares
decreased 9 cents per share to $12.74 during 1996. If you were with us for the
entire period, you received dividends of 57.7 cents per share. If you reinvested
your dividends, you received 58.8 cents per share.
Investors who owned C Shares received dividends of 52.6 and 53.6 cents per
share, respectively.
Strong forces are acting in opposite ways on U.S. interest rates at this time.
The U.S. economy is generally firm and the economies of many developing
countries are growing as well. Americans have been net sellers of individual
municipal and U.S. government bonds, preferring instead to pour money into
stocks, money market funds and, recently, emerging market debt funds. By
themselves, these forces should put upward pressure on our interest rates.
However, most other developed countries have sluggish economies, much lower
interest rates than ours, and currencies that have been depreciating relative to
the U.S. dollar. As a result, foreign money has been pouring into the U.S. bond
market, lifting bond prices and lowering yields from the levels that would
otherwise exist. In the last 2 years, foreign purchases of U.S. Treasury bonds
have accounted for more than 100% of the net issuance of Treasury bonds, up from
an average of approximately 20% between 1980-1994. The graph below illustrates
this trend, which does not appear to be subsiding.
Your Limited Term Municipal Fund California Portfolio currently holds
approximately 130 obligations from California municipal borrowers. Approximately
87% of the bonds are rated A or better by one of the major rating agencies. As
you know, we "ladder" the maturities of the bonds in your portfolio so that some
bonds are scheduled to mature at par during each of the next 10 years. Today,
your fund's weighted average maturity is approximately 3.8 years, and we always
keep it below 5 years. Percentages of the portfolio maturing within each of the
next 10 years are summarized as follows.
% of portfolio maturing within Cumulative % maturing by end of
1 year = 13% year 1 = 13%
1 to 2 years = 13% year 2 = 26%
2 to 3 years = 12% year 3 = 38%
3 to 4 years = 19% year 4 = 57%
4 to 5 years = 8% year 5 = 65%
5 to 6 years = 15% year 6 = 80%
6 to 7 years = 7% year 7 = 87%
7 to 8 years = 6% year 8 = 93%
8 to 9 years = 5% year 9 = 98%
9 to 10 years = 1% year 10 = 99%
I believe that a laddered portfolio of municipal bonds such as yours can usually
outperform a single municipal bond investment, and that it can offer the
additional benefits of convenience, diversification and more favorable balance
of price risk and reinvestment risk. It is not possible to measure every
individual bond from every conceivable starting and ending date against your
fund, however, it is possible to make some comparison. On January 1, 1992 a
representative yield for a $1 million (or more) national market block of AA
rated municipal bonds maturing January 1, 1997 was 4.90%, according to Delphis
Hanover Corporation. (A California bond would typically have had a slightly
lower yield due). Let's assume an investor purchased such a municipal bond at
that time and held it to maturity. On January 1, 1997, this investor's average
annual total return from that bond would have been 4.68%, assuming reinvestment
of the 1992 to 1996 interest payments at prevailing money market rates. The
average annual return would have been 4.90% if the investor was somehow able to
reinvest the interest payments at 4.90%. Your average annual total return on a
purchase of up to $50,000 of Thornburg Limited Term Municipal Fund California
was 5.01% for the 5 year period ended January 1, 1997. Your fund return was
higher if you made a larger quantity purchase. Of course, past performance is no
guarantee of future results and returns may be higher or lower in the future.
Currently, Limited Term Municipal Fund California Portfolio is ranked 5 stars by
Morningstar.* Over the eighty-one month time frame that it has been ranked by
Morningstar, the fund has an average rating of 4.9 stars, making it the highest
ranked California tax-free fund during that time period. I would like to
attribute this to capable execution of a thoroughly sensible investment strategy
over time. Thank you for investing in Thornburg Limited Term Municipal
Fund-California Portfolio.
Sincerely,
Brian J. McMahon
Managing Director
[GRAPHIC OMITTED]
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
December 31, 1996
(unaudited)
ASSETS
Investments, at value (cost $96,725,034) $98,959,644
Cash 66,640
Receivable for fund shares sold 58,216
Interest receivable 1,717,918
Prepaid expenses and other assets 14,612
TOTAL ASSETS 100,817,030
LIABILITIES
Payable for securities purchased 2,719,666
Dividends payable 124,784
Payable for fund shares redeemed 5,000
Accounts payable and accrued expenses 80,635
Accounts payable investment adviser (Note 3) 62,055
TOTAL LIABILITIES 2,992,140
NET ASSETS $97,824,890
NET ASSET VALUE:
Class A Shares:
Net asset value and redemption price per share
($93,941,397 applicable to 7,371,948 shares of beneficial
interest outstanding - Note 4) $12.74
Maximum sales charge, 2.50% of offering
price (2.57% of net asset value per share) .33
Maximum Offering Price Per Share $13.07
Class C Shares:
Net asset value and offering price per share*
($3,883,493 applicable to 304,492 shares of beneficial
interest outstanding - Note 4) $12.75
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge. See notes to financial statements.
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
Six Month Period Ended December 31, 1996
(unaudited)
INVESTMENT INCOME
Interest income (net of premium amortized $2,701,410
of $116,752)
EXPENSES
Investment advisory fees (Note 3) 246,096
Administration Fees (Note 3)
Class A Shares 59,576
Class C Shares 1,948
Distribution and service fees (Note 3):
Class A Shares 119,153
Class C Shares 9,738
Transfer agent fees 32,594
Custodian fees 30,237
Professional fees 10,904
Accounting Fees 5,262
Other expenses 6,918
TOTAL EXPENSES 522,426
Less:
Expenses reimbursed by investment adviser (Note 3) (24,009)
NET EXPENSES 498,417
NET INVESTMENT INCOME 2,202,993
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS - NOTE 5
Net realized loss on investments sold (5,802)
Increase in unrealized appreciation of investments 806,115
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 800,313
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,003,306
See notes to financial statements.
n o t e s t o f i n a n c i a l s t a t e m e n t s
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
(unaudited)
Six Month Period Year Ended
Ended December 31, 1996 June 30, 1996
----------
INCREASE (DECREASE) IN
NET ASSETS FROM:
OPERATIONS:
Net investment income $2,202,993 $4,574,926
Net realized gain (loss) on investments sold (5,802) 13,209
Increase in unrealized
appreciation of investments 806,115 196,447
NET INCREASE IN NET ASSETS
RESULTING FROM 3,003,306 4,784,582
DIVIDENDS TO SHAREHOLDERS:
From net investment income
Class A Shares (2,139,265) (4,504,908)
Class B Shares -- (6,799)
Class C Shares (63,728) (63,219)
FUND SHARE TRANSACTIONS-- (Note 4)
Class A Shares (1,212,493) (4,674,335)
Class B Shares -- (594,362)
Class C Shares 1,414,069 1,661,567
NET INCREASE (DEACREASE) IN NET ASSETS 1,001,889 (3,397,474)
NET ASSETS:
Beginning of period 96,823,001 100,220,475
End of period $97,824,890 $96,823,001
See notes to financial statements.
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
Note 1 - ORGANIZATION
Thornburg Limited Term Municipal Fund, Inc. (the "Fund") was incorporated in
Maryland on February 14, 1984. The Fund was reorganized in 1986 as a series
investment company with separate investment portfolios. The current portfolios
are as follows: National Portfolio and California Portfolio (the "Portfolio").
The Fund is an open-end diversified management investment company, registered
under the Investment Company Act of 1940, as amended. The primary investment
objective of the Fund is to obtain as high a level of current income exempt from
federal income tax as is consistent with preservation of capital. In addition,
the California Portfolio will invest primarily in Municipal Obligations
originating in California with the object of obtaining exemption of interest
dividends from any income taxes imposed by California on individuals.
The Fund currently offers two classes of shares of beneficial interest in the
portfolio, Class A and Class C shares. The Fund no longer offers Class B shares.
Each class of shares of a Portfolio represents an interest in the same portfolio
of investments of the Fund, except that (i) Class A shares are sold subject to a
front-end sales charge collected at the time the shares are purchased and bear a
service fee, (ii) Class B shares were sold at net asset value without a sales
charge at the time of purchase, but were subject to a contingent deferred sales
charge upon redemption, and bore both a service fee and a distribution fee,
(iii) Class C shares are sold at net asset value without a sales charge at the
time of purchase, but are subject to a contingent deferred sales charge upon
redemption within one year, and bear both a service fee and a distribution fee,
and (iv) the respective classes have different reinvestment privileges.
Additionally, the Portfolio may allocate among its classes certain expenses, to
the extent allowable to specific classes, including transfer agent fees,
government registration fees, certain printing and postage costs, and
administrative and legal expenses. Currently, class specific expenses of the
Portfolio are limited to distribution fees, administration fees and transfer
agent expenses.
Note 2 - SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of the
Fund are as follows:
Valuation of Investments: In determining the net asset value of the portfolio,
the Fund utilizes an independent pricing service approved by the Board of
Directors. Debt investment securities have a primary market over the counter and
are valued on the basis of valuations furnished by the pricing service. The
pricing service values portfolio securities at quoted bid prices or the yield
equivalents when quotations are not readily available. Securities for which
quotations are not readily available are valued at fair value as determined by
the pricing service using methods which include consideration of yields or
prices of municipal obligations of comparable quality, type of issue, coupon,
maturity and rating; indications as to value from dealers and general market
conditions. The valuation procedures used by the pricing service and the
portfolio valuations received by the Portfolio are reviewed by the officers of
the Fund under the general supervision of the Board of Directors. Short-term
obligations having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
Federal Income Taxes: It is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable (if any) and tax exempt income to its
shareholders. Therefore, no provision for Federal income tax is required.
Dividends paid by the Portfolio for the period ended December 31, 1996 represent
exempt interest dividends which are excludable by shareholders from gross income
for Federal income tax purposes.
When-Issued and Delayed Delivery Transactions: The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Portfolio
engages in such transactions, it will do so for the purpose of acquiring
portfolio securities consistent with its investment objectives and not for the
purpose of investment leverage or to speculate on interest rate changes. At the
time the Fund makes a commitment to purchase a security for the portfolio on a
when-issued basis, it will record the transaction and reflect the value in
determining its net asset value. When effecting such transactions, assets of the
Portfolio of an amount sufficient to make payment for the portfolio securities
to be purchased will be segregated on the Portfolio's records on the trade date.
Securities purchased on a when-issued or delayed delivery basis do not earn
interest until the settlement date.
Dividends: Net investment income of the Portfolio is declared daily as a
dividend on shares for which the Fund has received payment. Dividends are paid
monthly and are reinvested in additional shares of the Portfolio at net asset
value per share at the close of business on the dividend payment date, or at the
shareholder's option, paid in cash. Net capital gains, to the extent available,
will be distributed annually.
General: Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and original issue discounts on
securities purchased are amortized to call dates or maturity dates of the
respective securities. Realized gains and losses from the sale of securities are
recorded on an identified cost basis.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Note 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Management Company, Inc.
(the "Adviser") serves as the investment adviser and performs services for which
the fees are payable at the end of each month. For the period ending December
31, 1996, these fees were payable at annual rates ranging from 1/2 of 1% to 9/40
of 1% of the average daily net assets of the Portfolio. Also, the Portfolio
entered into an Administrative Service agreement with the Advisor, whereby the
Adviser will perform certain administrative services for the shareholders of
each class of the Portfolio's shares, and for which fees will be payable at an
annual rate of up to 1/8 of 1% of the average daily net assets attributable to
each class of shares.
In the event normal operating expenses of the Portfolio, exclusive of brokerage
commissions, taxes, interest, and extraordinary expenses, exceed the limits
prescribed by any state in which the Portfolio's shares are qualified for sale,
the Adviser will reimburse the Portfolio for such excess. No such reimbursement
was required as a result of this limitation. For the period ended December 31,
1996, the Adviser voluntarily reimbursed certain operating expenses amounting to
$24,009. These expenses may be repaid to the Adviser by the Portfolio, however
such repayment will depend upon the overall level of Portfolio expenses for the
entire fiscal year ending June 30, 1997.
The Fund has an underwriting agreement with Thornburg Securities Corporation
(the "Distributor"), which acts as the Distributor of Portfolio shares. For the
period ended December 31, 1996, the Distributor earned commissions aggregating
$12,142 from the sale of Class A shares, and collected contingent deferred sales
charges aggregating $875 from redemptions of Class C shares of the Portfolio.
Pursuant to a Service Plan under Rule 12b-1 of the Investment Company Act of
1940, the Fund may reimburse to the Adviser amounts not to exceed .25 of 1% per
annum of the average net assets attributable to each class of shares of the
Portfolio for payments made by the Adviser to securities dealers and other
financial institutions to obtain various shareholder related services. The
Adviser may pay out of its own funds additional expenses for distribution of the
Portfolio's shares.
The Fund also has adopted a Distribution Plan pursuant to Rule 12b-1, applicable
only to the Portfolio's Class C shares, under which the Fund can compensate the
Distributor for services in promoting the sale of Class C shares of the
Portfolio at an annual rate of up to .75% of the average daily net assets
attributable to Class C shares. Total fees incurred by each class of shares of
the Portfolio under their respective service and distribution plans for the
period ended December 31, 1996 are set forth in the statement of operations.
Certain officers and directors of the Fund are also officers and /or directors
of the Adviser and the Distributor. The compensation of unaffiliated directors
of the Fund is borne
by the Fund.
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
Note 4 - SHARES OF BENEFICIAL INTEREST:
At December 31, 1996, there were 600,000,000 shares of the Fund (including
115,000,000 for the Portfolio) of $.001 par value common stock authorized and
capital paid-in aggregated $96,513,092. Transactions in shares of beneficial
interest were as follows:
Six Month Period Year Ended
Ended December 31, 1996 June 30, 1996
----------------- -------------
Class A Shares Shares Amount Shares Amount
Shares sold 485,676 $6,164,500 1,028,241 $13,063,252
Shares issued to shareholders
in reinvestment of
distributions 109,148 1,387,803 227,171 2,885,798
Shares repurchased (690,039) (8,764,796) (1,626,759) (20,623,385)
Net Decrease (95,215) ($1,212,493) (371,347) ($4,674,335)
Class B Shares
Shares sold -- -- 17,477 $220,496
Shares issued to shareholders
in reinvestment of
distributions -- -- 352 4,458
Shares repurchased -- -- (64,623) (819,316)
Net Increase -- -- (46,794) ($594,362)
Class C Shares
Shares sold 127,465 $1,619,512 164,199 $2,090,620
Shares issued to shareholders
in reinvestment of
distributions 3,554 45,258 4,010 50,090
Shares repurchased (19,691) (250,701) (37,612) (479,143)
Net Increase 111,328 $1,414,069 130,597 $1,661,567
Note 5 - SECURITIES TRANSACTIONS
Purchases and proceeds from maturities or sales of investment securities of the
Portfolio, other than short-term securities, aggregated $11,396,746 and
$8,788,820, respectively. The cost of investments is the same for financial
reporting and Federal income tax purposes. At December 31, 1996, the aggregate
gross unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, were $2,428,858 and $194,248, respectively.
Accumulated net realized losses from security transactions included in net
assets at December 31, 1996 aggregated $922,812.
For Federal income tax purposes, the Portfolio has realized capital loss
carryforwards of $917,010 from prior fiscal years available to offset future
realized capital gains. To the extent that such carryforwards are used, no
capital gains distributions will be made. The carryforwards expire as follows:
June 30, 1997 - $45,141, June 30, 1998 - $60,181, June 30, 1999 - $14,395, June
30, 2000 - $410, June 30, 2002 - $315,597, and June 30, 2003 -$481,286.
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
Per share operating performance
(for a share outstanding
throughout the period)
Six Month Period
Ending December 31, Year Ended June 30,
1996 1996 1995 1994 1993 1992
(unaudited)
Class of Shares: A A A A A A
Net asset value, beginning of period $12.64 $12.61 $12.57 $12.85 $12.48 $12.24
Income from investment operations:
Net investment income .29 .58 .58 .58 .65 .72
Net realized and unrealized
gain (loss) on investments .10 .03 .04 (.28) .37 .24
Total from investment operations .39 .61 .62 .30 1.02 .96
Less dividends from
Net investment income (.29) (.58) (.58) (.58) (.65) (.72)
Change in net asset value .10 .03 .04 (.28) .37 .24
Net asset value, end of period $12.74 $12.64 $12.61 $12.57 $12.85 $12.48
Total return (a) 3.09% 4.94% 5.12% 2.37% 8.36% 8.10%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income 4.49(b) 4.59% 4.69% 4.51% 5.07% 5.80%
Expenses, after expense reductions 1.00(b) 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before expense reductions 1.03(b) 1.05% 1.04% 1.03% 1.06% 1.10%
Portfolio turnover rate 9.33% 22.68% 18.54% 15.26% 20.81% 30.56%
Net assets
at end of period (000) $93,941 $94,379 $98,841 $111,723 $81,874 $53,130
(a) Sales loads are not reflected in computing total return, which is not
annualized for periods less than one year.
(b) Annualized.
Thornburg Limited Term Municipal Fund, Inc. - California Portfolio
Per share operating performance
(for a share outstanding
throughout the period) Period from
Six Month Period Year Ended Sept. 1, 1994 (a)
Ending December 31, June 30, to June 30,
1996 1996 1995
(unaudited)
Class of Shares: C B* C B C
Net asset value, beginning of period $12.65 $12.62 $12.62 $12.55 $12.55
Income from investment operations:
Net investment income .26 .13 .53 .43 .42
Net realized and unrealized
gain on investments .10 .06 .03 .07 .07
Total from investment operations .36 .19 .56 .50 .49
Less dividends from:
Net investment income (.26) (.13) (.53) (.43) (.42)
Change in net asset value .10 .06 .03 .07 .07
Net asset value, end of period $12.75 $12.68 $12.65 $12.62 $12.62
Total return (b) 2.88% 1.59% 4.46% 3.99% 3.98%
Ratios/Supplemental Data Ratios to average net assets:
Net investment income 4.09%(c) 4.15%(c) 4.16% 4.10%(c) 4.07%(c)
Expenses, after expense reductions 1.40%(c) 1.63%(c) 1.43% 1.60%(c) 1.63%(c)
Expenses, before expense reductions 1.96%(c) 3.67%(c) 2.92% 4.51%(c) 3.21%(c)
Portfolio turnover rate 9.33% 22.68% 22.68% 18.54% 18.54%
Net assets
at end of period (000) $3,883 $0 $2,444 $590 $790
(a) Commencement of sales of Class B and Class C shares.
(b) Sales loads are not reflected in computing total return, which is not
annualized for periods less than one year. The total return for Class B
shares reflects a period of 90 days.
(c) Annualized.
* Period from July 1, 1995 to September 28, 1995, on which date all Class B
shares were converted into Class A shares
<TABLE>
<CAPTION>
Principal Credit Rating+
Amount Issuer-Description Moody's/S&P Value
<S> <C> <C> <C>
$ 615,000 Alameda-Contra Costa Transit District Refunding Certificate of Participation
Series 1989, 7.20% due 8/1/00 Baa/BBB- $ 658,511
370,000 Albany Public Facilities Financing Authority Lease Revenue, 6.60% due 9/1/00
(Library Community Center Project) Baa1/NR 390,694
165,000 Antioch Unified School District Certificate of Participation, 0% due 7/1/05 (Insured: FSA) Aaa/AAA 95,844
1,300,000 Berkeley Health Facility Revenue Refinancing Series A, 5.70% due 12/1/98
(Alta Bates Medical Center Project) Baa/BBB+ 1,305,044
500,000 California Counties Lease Finance Authority Certificate of Participation, 7.30% due 10/1/98 A/NR 504,370
835,000 California Educational Facilities Authority Revenue, 5.60% due 10/1/00 (U.S.C. Project) Aa3/AA 859,875
1,805,000 California Educational Facilities Authority Revenue, 5.60% due 10/1/02 (U.S.C. Project) Aa3/AA 1,868,446
500,000 California Educational Facilities Authority Revenue Series 1993, 5.15% due 9/1/03
(Santa Clara University Project) A1/NR 514,910
670,000 California HFA Revenue Series 1985-B, 9.875% due 2/1/17 Aa/AA- 699,862
30,000 California HFA Single Family Mortgage Revenue Series 1982-A, 10.00% due 2/1/02
(LOC: Citibank) Aa/AA- 30,012
145,000 California HFA Revenue Series 1990-A, 0% due 8/1/01 Aa/AA- 105,269
500,000 California HFA, 7.80% due 7/1/06 (Episcopal Homes Project; Insured: Cal. Mortgage) NR/A 514,040
1,000,000 California HFA Secured Revenue Series 1991, 6.65% due 9/1/01
(Good Samaritan Hospital Project) Baa/A- 1,065,310
505,000 California HFA Financing Authority, 5.25% due 8/1/00
(Marin General Hospital Project; Insured: FSA) Aaa/AAA 521,771
760,000 California Public Capital Improvement Finance Auth. Rev. Series 1988-E, 8.25% due 3/1/98 Baa/NR 790,028
1,000,000 California State General Obligation, 6.50% due 10/1/99 A1/A+ 1,060,930
200,570 California State Veterans General Obligation Bonds Amortizing Coupon M-COATES,
7.30% due 10/1/01 *Aaa/AAA* 215,898
1,000,000 California Veterans Affairs Home Purchase Revenue Series A, 7.40% due 8/1/97 Aa/A+ 1,017,440
250,000 California Veterans Affairs Home Purchase Revenue Series A, 7.50% due 8/1/98 Aa/A+ 261,597
1,390,000 California Veterans Affairs Home Purchase Revenue Series A, 6.55% due 8/1/01 Aa/A+ 1,454,913
850,000 California State University Revenue, 6.40% due 11/1/02, crossover refunded 11/1/00 @ 102 A1/A- 924,639
730,000 California Statewide Community Development Authority Insured Health
(Eskaton Properties Incorporated Phase II Project) NR/A 761,653
1,000,000 California Statewide Community Development Authority Certificate of Participation, 2.56%
(inverse floater) due 1/1/00 (Motion Picture and Television Fund Project; Insured: AMBAC) Aaa/AAA 944,070
1,000,000 California Statewide Community Development Authority Certificate of Participation, 2.85%
(inverse floater) due 1/1/01 (Motion Picture and Television Fund Project; Insured: AMBAC) Aaa/AAA 928,150
1,000,000 California Statewide Community Development Authority Insured Health Facilities Revenue
Series 1996-A, 6.00% due 9/1/04 (San Gabriel Medical Center Project; Insured: Cal Health) NR/A 1,048,040
130,000 Cerritos-Compton Glendale College District General Obligation
Certificate of Participation, 8.00% due 2/1/98 NR/NR 134,935
1,905,000 Chula Vista Variable Rate Multifamily Housing Refunding Revenue Series 1985,
5.75% due 11/1/07, put 11/1/97 (Eucalyptus Grove Project; Continental Casualty Surety Bond) NR/A+ 1,909,420
250,000 Clovis & Fresno Unified School District Certificate of Participation Series A, 6.70% due 5/1/97 NR/A 252,237
700,000 Coachella Valley Water District # 71 Certificate of Participation, 5.75% due 10/1/00
(Storm Water District Project) A/NR 727,874
660,000 Cupertino Public Facilities Corporation Certificate of Participation Series 1992-B, 5.60%
due 7/1/00 A1/A+ 682,407
60,000 El Paso de Robles Newark Water District Certificate of Participation
Association of Bay Area Governments Finance Corporation, 7.40% due 6/1/98 NR/NR 61,414
350,000 Foothill-De Anza Community College District Certificate of Participation, 7.35% due 3/1/07 NR/A- 388,455
600,000 Fresno Multifamily Housing Revenue Refunding, 5.10% due 10/1/05, put 4/1/99
(Maple Leaf Project; Insured: Continental Insurance) NR/A- 598,062
560,000 Fruitvale School District Certificate of Participation, 7.60% due 6/1/99 Baa/NR 597,162
2,000,000 Glendale Hospital Revenue Refunding Series 1994, 7.625% due 1/1/05
(Verdugo Hills Project; LOC: Industrial Indemnity) NR/A+ 2,189,500
200,000 Hayward Unified School District Certificate of Participation, 7.60% due 10/1/00 Baa/NR 208,476
200,000 Hermosa Beach Lynwood and Vernon Certificate of Participation,
7.10% due 9/1/99, partially pre-refunded NR/BBB 207,042
2,895,000 Huntington Beach City School District 1995 Capital Certfificates, 6.25% due 4/1/97 NR/NR 2,913,962
605,000 Inglewood Certificate of Participation, 6.70% due 8/1/00 (Civic Center Improvement Project) A/BBB 640,683
635,000 Inglewood Certificate of Participation, 6.80% due 8/1/01 (Civic Center Improvement Project) A/BBB 679,926
690,000 Inglewood Certificate of Participation, 6.90% due 8/1/02 (Civic Center Improvement Project) A/BBB 731,103
200,000 Irvine Ranch Improvement Board, 5.00% due 9/2/15, put 1/2/97 (daily demand notes)
(LOC: National Westminister) Aa2/AA 200,000
300,000 Irvine Ranch Water District. 5.00% due 8/1/16, put 1/2/97 (daily demand notes)
(LOC: National Westminster) VMIG1/A1 300,000
360,000 Irvine Ranch Water District Joint Powers Agency Revenue, 7.00% due 2/15/98 NR/A+ 372,254
480,000 Lake Elsinore Public Financing Authority Tax Allocation Revenue Series 1992-C,
6.15% due 2/1/01 (Insured: FGIC) Aaa/AAA 510,691
2,000,000 Lancaster Redevelopment Agency Lease Revenue Series 1995, 4.90% due 12/1/00
(Public Improvement Project; LOC: Sumitomo - Dai Ichi Kangyo) NR/A 1,983,500
1,500,000 Los Angeles Equipment Acquisition Program L Certificate of Participation, 5.80% due 12/1/98 A/A+ 1,537,020
1,000,000 Los Angeles Municipal Improvement Corporation Lease Revenue, 5.00% due 2/1/00 A/A+ 1,006,870
1,500,000 Los Angeles Unified School District Certificate of Participation, 6.30% due 6/1/02 A/A- 1,601,790
1,000,000 Los Angeles County Certificate of Participation Mobile Digital Comm., 7.70% due 7/15/01 Baa1/BBB+ 1,021,580
245,000 Los Angeles County Certificate of Participation, 0% due 10/1/02 Baa1/BBB 174,396
700,000 Los Angeles County Certificate of Participation, 0% due 4/1/03 Baa1/BBB 479,381
350,000 Los Angeles County Housing Authority Multifamily Housing Revenue, 7.625% due 12/1/29,
mandatory put 12/1/99 (Monrovia Project A; Insured: Continental Casualty) NR/A- 353,829
1,000,000 Los Angeles County Transit Finance Corporation Certificate of Participation
Series 1992-B, 5.70% due 7/1/99 A1/NR 1,027,130
250,000 Lynwood Unified School District Certificate of Participation, 7.20% due 11/1/98
(Capital Improvement Project) Baa/NR 259,912
2,000,000 MSR Public Power Agency Series 1987-C, 6.70% due 7/1/02 (San Juan Project) A/A 2,044,300
375,000 Marysville Hospital Revenue, 6.00% due 1/1/04 (Fremont-Rideout Health Group
Project; Insured: AMBAC) Aaa/AAA 401,947
200,000 Midpeninsula Regional Open Space District Certificate of Participation, 7.20%
due 9/1/00, refunded 9/1/99 *Aaa/A 219,170
360,000 Midpeninsula Regional Open Space District Certificate of Participation, 4.75% due 9/1/99 NR/A 364,291
460,000 Midpeninsula Regional Open Space District Certificate of Participation, 4.80% due 9/1/00 NR/A 464,899
1,230,000 Morgan Hill Unified School District Certificate of Participation Series 1993, 4.70% due 8/1/98 A1/NR 1,241,722
1,000,000 Morgan Hill Unified School District Certificate of Participation Series 1993, 4.80% due 8/1/99 A1/NR 1,012,550
835,000 Morgan Hill Unified School District Certificate of Participation Series 1993, 5.00% due 8/1/00 A1/NR 848,644
660,000 Mountain View Shoreline Reg. Park Community Tax Allocation Series 1993-A, 4.70% due 8/1/99 A/A 666,851
810,000 National City Community Development Commission Tax Allocation Series
1992-A, 5.70% due 8/1/99 (Downtown Redevelopment Project; Insured: AMBAC) Aaa/AAA 842,035
500,000 National City Community Development Commission Tax Allocation Series
1992-A, 5.90% due 8/1/00 (Downtown Redevelopment Project; Insured: AMBAC) Aaa/AAA 527,305
330,000 New Haven Unified School District Certificate of Participation, 7.30% due 12/1/01 NR/A- 349,473
355,000 New Haven Unified School District Certificate of Participation, 7.30% due 12/1/02 NR/A- 374,880
380,000 New Haven Unified School District Certificate of Participation, 7.40% due 12/1/03 NR/A- 400,999
410,000 New Haven Unified School District Certificate of Participation, 7.40% due 12/1/04 NR/A- 431,890
930,000 Ontario Individual Development Revenue Series 1990-A, 7.75% due 9/1/20,
put 8/31/00 (Great Western Foam Project; LOC: Wells Fargo Bank) NR/A 941,216
1,000,000 Orange Multifamily Housing Revenue, 5.60% due 10/1/27
(Villa Santiago Rehab Project; Insured: FNMA) NR/AAA 1,016,870
1,100,000 Orange County Refunding Recovery, 5.10% due 6/1/02 (Insured: MBIA) Aaa/AAA 1,130,360
1,000,000 Orange County Refunding Recovery, 5.20% due 6/1/03 (Insured: MBIA) Aaa/AAA 1,034,150
2,000,000 Orange County Refunding Recovery, 6.50% due 6/1/04 (Insured: MBIA) Aaa/AAA 2,224,460
2,000,000 Orange County Refunding Recovery, 6.50% due 6/1/05 (Insured: MBIA) Aaa/AAA 2,234,520
900,000 Orange County Local Transportation Authority Sales Tax Rev., 5.50% due 2/15/01
(Measure M Sales Tax Project) Aa/AA 934,155
1,550,000 Orange County Local Transportation Authority Sales Tax Rev., 5.70% due 2/15/03
(Measure M Sales Tax Project) Aa/AA 1,636,350
1,050,000 Orange County Local Transportation Authority Sales Tax Rev., 5.75% due 2/15/04
(Measure M Sales Tax Project) Aa/AA 1,112,108
510,000 Orange County Local Transportation Authority Sales Tax Rev., 6.00% due 2/15/06
(Measure M Sales Tax Project) Aa/AA 548,117
1,000,000 Orange County Local Transportation Authority Sales Tax Revenue 2nd Series,
2.60% (inverse floater) due 2/15/99 (Insured: FGIC) Aaa/AAA 970,350
2,000,000 Orange County Recovery Certificate of Participation Series A, 5.50% due 7/1/02
(Insured: MBIA) Aaa/AAA 2,090,440
200,000 Orange County Sanitation District, 3.55% due 8/1/15, put 1/2/97 (daily demand notes)
(LOC: National Westminster) Aa2/VMIG1 200,000
1,175,000 Oxnard Harbor District Refunding Revenue, 6.60% due 8/1/00 (Capital Guaranty) Aaa/AAA 1,235,172
300,000 Oxnard IDA IDRB, 9.50% due 10/1/97 (Green Foods Project; LOC: Mitsubishi Bank Ltd.) Aa2/NR 302,946
510,000 Paramount Unified School District Certificate of Patricipation, 0% due 9/1/14 (Insured: FSA) Aaa/AAA 406,496
100,000 Perris School District Certificate of Participation, 5.10% due 3/1/00 (Insured: FSA) Aaa/AAA 102,518
980,000 Redwood City Multifamily Housing Revenue Series 1985-B, 5.20% due 10/1/08, put 10/1/00
(Redwood Shores Apartments Project; Insured: Continental Casualty) NR/A+ 979,922
465,000 Riverside County Housing Authority Revenue Series A, 7.75% due 10/1/00 Baa/NR 477,820
295,000 Sacramento Financing Authority Series 1991, 6.30% due 11/1/02 A1/A+ 318,237
550,000 Sacramento Municipal Utility District Electric Refunding Revenue Series R, 6.60% due 2/1/97 A/A- 551,336
1,000,000 Sacramento Regional Transportation Authority Certificate of Participation, 6.00% due 3/1/99 A1/NR 1,034,530
1,000,000 Sacramento Regional Transportation Authority Certificate of Participation, 6.25% due 3/1/01 A1/NR 1,061,450
940,000 Sacramento MFHR, 5.875% due 2/1/08, put 2/1/03 (Fairways I Apartments Project;
Insured: FNMA) NR/AAA 954,918
450,000 San Diego County Regional Trans. Community Sales Tax Rev. Series A,
6.125% due 4/1/98 (Escrowed to Maturity) AAA/AA- 463,567
255,000 San Francisco City & County Agency Redevelopment Agency Lease Revenue, 0% due 7/1/00 A/A- 216,584
225,000 San Francisco City & County Agency Refunding Series Sec 8, 6.125%
due 7/1/02 (Insured: MBIA / FHA) Aaa/AAA 225,405
400,000 San Jacinto IDA IDRB Series 1990, 7.20% due 6/1/98 (Edelbrock Foundry
Corporation Project; LOC: Bank of America) NR/AA- 417,948
2,000,000 San Joaquin County Certificate of Participation, 5.25% due 9/1/98 (General Hospital Project) A/A- 2,019,220
1,440,000 San Joaquin County Certificate of Participation, 5.60% due 9/1/00 (General Hospital Project) A/A- 1,465,128
895,000 San Joaquin County Certificate of Participation, 5.90% due 9/1/03 (General Hospital Project) A/A- 922,074
1,310,000 San Marcos Public Facility Authority Capital Improvement Series 1991, 0% due 1/1/99, ETM Aaa/NR 1,201,964
410,000 San Marcos Public Facility Authority Capital Improvement Series 1991, 0% due 1/1/00, ETM Aaa/NR 358,340
440,000 Santa Ana Community Development Agency Series D, 6.50% due 12/15/14, pre-refunded
12/15/00 @ 102 Aaa/AAA 464,644
500,000 Santa Ana Community Red. Agency Tax Allocation Series 1989-B, 7.10% due 9/1/98 NR/BB+ 513,550
315,000 Santa Monica Community College District Certificate of Participation, 7.65% due 5/1/01,
put 11/1/97 (Rancho Corrales Project) NR/A 323,146
810,000 Sonoma County Certificate of Participation Public Works Improvement Program,
5.40% due 8/1/00 (Integrated Waste Project) NR/A+ 837,095
950,000 Sonoma County Certificate of Participation Public Works Improvement Program,
5.80% due 8/1/03 (Integrated Waste Project) NR/A+ 988,637
150,000 South Coast Air Quality Management District Building Corporation
Installment Sale Revenue, 9.75% due 8/1/98 (Escrowed to Maturity) Aaa/AAA 163,606
1,435,000 South Orange County Public Finance Authority Special Tax Revenue, 7.00% due 9/1/05
(Insured: MBIA) Aaa/AAA 1,646,691
700,000 Stanislaus Waste to Energy Finance Agency Solid Waste Facility Revenue Certificate,
7.20% due 1/1/97, (Ogden Martin Systems Project) NR/BBB+ 700,000
250,000 Stanislaus Waste to Energy Finance Agency Solid Waste Facility Revenue Certificate,
7.30% due 1/1/98, (Ogden Martin Systems Project) NR/BBB+ 255,885
340,000 Suisun City Redevelopment Agency 1990 Tax Allocation,
7.20% due 10/1/01, pre-refunded 4/1/00 *Aaa/A- 377,199
500,000 Sulphur Springs Union School District General Obligation Series B, 5.70% due 3/1/01 NR/A 523,500
450,000 Sunline Transit Agency Certificate of Participation California Transit Finance Corporation
Series A, 5.50% due 7/1/02 NR/A 466,168
900,000 Sweetwater Union High School District Certificate of Participation, 6.40% due 11/1/01 Baa1/BBB+ 949,680
190,000 Temecula Community Services Certificate of Participation Series 1992,
6.00% due 10/1/98 (Community Recreation Center Project) NR/A 195,827
200,000 Temecula Community Services Certificate of Participation Series 1992,
6.00% due 10/1/99 (Community Recreation Center Project) NR/A 208,398
210,000 Temecula Community Services Certificate of Participation Series 1992,
6.00% due 10/1/00 (Community Recreation Center Project) NR/A 219,929
255,000 Torrance Unified School District Certificate of Participation, 6.10% due 10/1/00 Baa1/NR 259,883
275,000 Trinity County Public Utilities District Certificate of Participation, 5.25% due 4/1/98 NR/BBB- 276,694
290,000 Trinity County Public Utilities District Certificate of Participation, 5.50% due 4/1/99 NR/BBB- 292,474
750,000 Turlock Irrigation District Certificate of Participation, 6.80% due 1/1/00
(1991 Capital Improvements Project), pre-refunded 1/1/98 @ 102 Baa1/A- 788,370
365,000 Turlock Irrigation District Certificate of Participation, 7.00% due 1/1/01
(1991 Capital Improvements Project), pre-refunded 1/1/98 @ 102 Baa1/A- 384,382
420,000 Turlock Irrigation District Certificate of Participation, 7.15% due 1/1/03
(1991 Capital Improvements Project), pre-refunded 1/1/98 @ 102 Baa1/A- 442,919
1,600,000 University of California Regents Certificate of Participation Series 1996,
5.45% due 6/1/03 (Various Capital Projects; Insured: MBIA) Aaa/AAA 1,673,040
635,000 University of California Research Facilities Revenue, 11.00% due 9/1/98 NR/A- 703,948
870,000 University of California Research Facilities Revenue, 5.25% due 9/1/02 NR/A- 887,261
625,000 Vallejo Public Financing Authority Local Agency Revenue Series A, 5.00% due 9/2/98 NR/A- 631,038
495,000 Yorba Linda Public Financing Authority Certificate of Participation,
7.00% due 11/1/00 (Recycling Equipment Project) A/NR 513,726
TOTAL INVESTMENTS $98,959,644
<FN>
* Indicates rating on other debt issued by the same issuer,
rather than on the security held by the Fund. These
securities are deemed by the Adviser to be comparable with
those of issuers having debt ratings in the 4 highest grades
by Moody's or S&P. +Credit ratings are unaudited.
See notes to financial statements.
</FN>
</TABLE>
Thornburg Limited Term Municipal Fund
California Portfolio-A Shares+
Outperformed Taxable and Tax - Free Money Market Funds
INVESTORS SOMETIMES ASK US TO COMPARE LIMITED TERM MUNICIPAL FUND TO MONEY
MARKET FUND RETURNS. THESE INVESTMENTS HAVE CERTAIN DIFFERENCES, AND INVESTORS
IN LIMITED TERM
MUNICIPAL FUND TOOK MORE RISK THAN MONEY MARKET FUND INVESTORS TO EARN THEIR
HIGHER RETURNS
[GRAPHIC OMITTED]
Increase In a $100,000 Investment
1/1/92 through 12/31/96
(After Sales Charge and Fund Expenses)
Donoghue's Taxable Money
Market Fund Average
California Tax-Free Money
Market Fund Average
Limited Term Municipal Fund
California Portfolio-A Shares
+On September 1, 1994 Thornburg Limited Term Municipal Fund- California
Portfolio began offering Class C Shares of the Fund. The chart above is for the
Fund's Class A Shares only. Class C Shares have different sales charges and
expenses. See the inside front cover page for the 30 day SEC yield and the total
returns at the maximum offering prices for one year, five years, and since
inception for each class of shares of the Fund.
Note 1: Future increases, if any, of any of these investments may bear no
relationship to prior increases. Quotations for the money fund averages are
based upon 30 day yield quotations for taxable and tax-exempt money funds as
quoted in "Donoghue's Money Fund Report" for the months covered by this
analysis. The increase for the Class A Shares of Limited Term Municipal Fund -
California Portfolio is based upon the dividends paid for the months covered by
this analysis, the beginning offering price at $12.38 per share and the ending
NAV at $12.74 per share. These investments returned the $100,000 initial
investment in addition to the amounts shown above.
Note 2: This analysis does not take into account the effect, if any, of the
federal alternative minimum tax. This analysis assumes the income from the
taxable money fund was taxed at a 31% federal tax rate through 1992 and a 39.6%
rate from 1993 to 1995. It also assumes that the income from the taxable money
fund is taxed by the state of California at 11% from 1991 to 1995, and 9.3% in
1996. The portion of the increase of Limited Term Municipal Fund, California
Portfolio representing appreciation of the share price is assumed to be taxed at
a 28% federal tax rate and a11% California tax rate. The average money market
fund increases shown above may differ from the return of a particular money
market fund. It is not possible to invest in these money fund averages.
Note 3: The net asset value of the money funds did not fluctuate. The net asset
value of the Class A Shares of LTCAX did vary from time to time, and will
continue to vary in the future. The analysis assumes that the investor received
the net asset value of the shares owned, plus accrued income, at time of sale.
Due to the effect of sales commissions, the net asset value of the Limited Term
Municipal Fund's Class A Shares is less than the offering price of the shares.
Redemptions are made at the then current net asset value which may give you a
gain or loss when you sell your shares.
Note 4: This analysis assumes that the dividends from each of these investment
vehicles were reinvested and compounded monthly. Most money funds declare
dividends daily and pay them monthly. Limited Term Municipal Fund also declares
dividends daily and pays them monthly.
INVESTMENT MANAGER
Thornburg Management Company, Inc.
119 East Marcy Street
Santa Fe, NM 87501
(800) 847-0200
PRINCIPAL UNDERWRITER
Thornburg Securities Corporation
119 East Marcy Street
Santa Fe, NM 87501
(800) 847-0200
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information. Performance data
quoted represent past performance and are not indicative of future results.
Thornburg
Limited Term
Municipal Fund--
California Portfolio
Semi-Annual Report
December 31, 1996
[GRAPHIC OMITTED]
