THORNBURG LIMITED TERM MUNICIPAL FUND INC, 485APOS, 1999-04-02

THORNBURG LIMITED TERM MUNICIPAL FUND INC
485APOS, 1999-04-02

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As Filed with the Securities and Exchange Commission
April 2, 1999

Registration No. 2-89526

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. ____

Post-Effective Amendment No. 32
----
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 34
----
(Check appropriate box or boxes)

THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
- --------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

119 East Marcy Street, Suite 202, Santa Fe, NM 87501
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (505) 984-0200
--------------
H. Garrett Thornburg, Jr.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
---------------------------------------
(Name and Address of Agent for Service)

copy to:
Charles W. N. Thompson, Jr.
White, Koch, Kelly & McCarthy, P. A.
Post Office Box 787
Santa Fe, New Mexico 87504-0787

Approximate date of Proposed Public Offering: June 1, 1999
------------
It is proposed that this filing will become effective
(check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (February 1, 1999) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[ ] On [date] pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2)

If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

<PAGE>
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.

(i) Thornburg Limited Term Municipal Fund National Portfolio

(ii) Thornburg Limited Term Municipal Fund California Portfolio

CONTENTS

Facing Sheet
Contents
Cross Reference Sheets (Thornburg Limited Term Municipal Fund
National Portfolio [Class A and Class C
shares];
Thornburg Limited Term Municipal Fund
California Portfolio [Class A and Class C
shares]);
(Thornburg Limited Term Municipal Fund
National Portfolio [Institutional Class
shares]);
(Thornburg Limited Term Municipal Fund
California Portfolio [Institutional Class
shares])

Prospectus (Thornburg Limited Term Municipal Fund
National Portfolio [Class A and Class C
shares];
Thornburg Limited Term Municipal Fund
California Portfolio [Class A and Class C
shares])

Prospectus (Thornburg Limited Term Municipal Fund
National Portfolio [Institutional Class
shares]);
Thornburg Limited Term Municipal Fund
California Portfolio [Institutional Class
shares])

Statement of (Thornburg Limited Term Municipal Fund
Additional Information National Portfolio [Class A and Class C
shares];
Thornburg Limited Term Municipal Fund
California Portfolio [Class A and Class C
shares])

Statement of (Thornburg Limited Term Municipal Fund
Additional Information National Portfolio [Institutional Class
shares])
Thornburg Limited Term Municipal Fund
California Portfolio [Institutional Class
shares])

Part C

Signature Page

Exhibits

CROSS REFERENCE SHEET

(i) Thornburg Limited Term Municipal Fund National Portfolio
[Class A and Class C shares]
(ii) Thornburg Limited Term Municipal Fund California Portfolio
[Class A and Class C shares]

Form N-1A Item Number
- ---------------------
Part A Prospectus Caption
- ------ ------------------
1(a). . . . . . . . . . . . . . . . . .Front Cover Page
(b). . . . . . . . . . . . . . . . . . Back Cover Page
2(a). . . . . . . . . . . . . . . . . . . . . THE FUNDS
(b). . . . . . . . . . . . . . . . . . . . . THE FUNDS
3 . . . . . . . . . . . . . . . . . . . . . . THE FUNDS
4 . . . . . . . . . . . . . . . . . . . . . . THE FUNDS
5 . . . . . . . .FUND PERFORMANCE AND INDEX COMPARISONS
6(a) . . . . . . . . . . . . . . . . INVESTMENT ADVISER
(b) . . . . . . . . . . . . . . . . . .(Not Applicable)
7(a) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES
(b) . .YOUR ACCOUNT - BUYING FUND SHARES; Buying Class
A Shares; Buying Class C Shares
(c) . . . . . . . . . . . . . . . .SELLING FUND SHARES
(d) . . . . . . . . . . . .DIVIDENDS AND DISTRIBUTIONS
(e) . . . . . . . . . . . . . . . . . . . . . . .TAXES
(f) . . . . . . . . . . . . . . . . . .(Not Applicable)
8(a) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES
(b) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES
9 . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS

Part B Statement of Additional Information
- ------ -----------------------------------
10(a) . . . . . . . . . . . . . . . . .Front Cover Page
10(b) . . . . . . . . . . . . . . . . TABLE OF CONTENTS
11(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
12(a) . . . . . . . . . . . . ORGANIZATION OF THE FUNDS
(b) . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES
(c) . . . . . . . INVESTMENT OBJECTIVES AND POLICIES;
INVESTMENT LIMITATIONS
(d) . . . . . . . . . . . . . . . . . . . .Prospectus
(e) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
13(a) . . . . . . ORGANIZATION OF THE FUNDS; MANAGEMENT
(b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES
(c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES
(d) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES
14(a) . . . . . . . . . . . . . . . . . (Not Applicable)
(b) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES
(c) . . . . . . .MANAGEMENT AND HOLDERS OF SECURITIES
15(a) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(c) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(d) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(e) . . . . . . . . . . . . . . . . . (Not Applicable)
(f) . . . . . . . . . . . . . Prospectus; DISTRIBUTOR
(g) . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS
(h) . . . . . . . . . . . . . . . . . (Not Applicable)
16(a) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
(c) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
(d) . . . . . . . . . . . . . . . . . (Not Applicable)
(e) . . . . . . . . . . . . . . . . . (Not Applicable)
17(a) . . . . . . Prospectus; ORGANIZATION OF THE FUNDS
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
18(a) . . . . . . . Prospectus; PURCHASE OF FUND SHARES
(b) . . . . . . . . . . . . . PURCHASE OF FUND SHARES
(c) . . .Prospectus; DETERMINATION OF NET ASSET VALUE
(d) . . . . . . . . . . . . . . . . . . . .Prospectus
19(a) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS
(b) . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS
20(a) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(C) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
21(a) . . . . . . . . . . . . . . . . . (Not Applicable)
(b) . . . . . . . . . . YIELD AND RETURN COMPUTATION;
REPRESENTATIVE PERFORMANCE INFORMATION
22(a) . Financial Statements (incorporated by reference)
(b) . Financial Statements (incorporated by reference)

CROSS REFERENCE SHEET

(i) Thornburg Limited Term Municipal Fund National Portfolio
[Institutional Class shares]

(ii) Thornburg Limited Term Municipal Fund California Portfolio
[Institutional Class shares]

Form N-1A Item Number
- ---------------------
Part A Prospectus Caption
- ------ ------------------
1(a). . . . . . . . . . . . . . . . . .Front Cover Page
(b). . . . . . . . . . . . . . . . . . Back Cover Page
2(a). . . . . . . . . . . . . . . . . . . . . THE FUNDS
(b). . . . . . . . . . . . . . . . . . . . . THE FUNDS
3 . . . . . . . . . . . . . . . . . . . . . . THE FUNDS
4 . . . . . . . . . . . . . . . . . . . . . . THE FUNDS
5 . . . . . . . .FUND PERFORMANCE AND INDEX COMPARISONS
6(a) . . . . . . INVESTMENT ADVISER AND MANAGEMENT FEES
(b) . . . . . . . . . . . . . . . . . .(Not Applicable)
7(a) . . . . . . . . YOUR ACCOUNT - BUYING FUND SHARES;
TRANSACTION DETAILS
(b) . .YOUR ACCOUNT - BUYING FUND SHARES; Buying Class
A Shares; Buying Class C Shares
(c) . . . . . . . . . . . . . . . .SELLING FUND SHARES
(d) . . . . . . . . . . . .DIVIDENDS AND DISTRIBUTIONS
(e) . . . . . . . . . . . . . . . . . . . . . . .TAXES
(f) . . . . . . . . . . . . . . . . . .(Not Applicable)
8(a) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES
(b) . . . . . . . . .YOUR ACCOUNT - BUYING FUND SHARES
9 . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS

Part B Statement of Additional Information

10(a) . . . . . . . . . . . . . . . . .Front Cover Page
10(b) . . . . . . . . . . . . . . . . TABLE OF CONTENTS
11(a) . . . . . . . . . . . . .DESCRIPTION OF THE TRUST
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
12(a) . . . . . . . . . . . . .DESCRIPTION OF THE TRUST
(b) . . . . . . . INVESTMENT POLICIES AND LIMITATIONS
(c) . . . . . . . INVESTMENT POLICIES AND LIMITATIONS
(d) . . . . . . . . . . . . . . . . . . . .Prospectus
(e) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
13(a) . . . . . . . . . . . . .DESCRIPTION OF THE TRUST
(b) . . . . . . . . . . . . . . TRUSTEES AND OFFICERS
(c) . . . . . . . . . . . . . . TRUSTEES AND OFFICERS
(d) . . . . . . . . . . . . . . TRUSTEES AND OFFICERS
14(a) . . . . . . . . . . . . . . . . . (Not Applicable)
(b) . . . . . . . . . PRINCIPAL HOLDERS OF SECURITIES
(c) . . . . . . . . . PRINCIPAL HOLDERS OF SECURITIES
15(a) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(c) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(d) . . . . . . . . . . . . . INVESTMENT ADVISORY AND
ADMINISTRATIVE SERVICES AGREEMENTS
(e) . . . . . . . . . . . . . . . . . (Not Applicable)
(f) . . . . . . . . . . . . . Prospectus; DISTRIBUTOR
(g) . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS
(h) . . . . . . . . . . . . . . . . . (Not Applicable)
16(a) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
(c) . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
(d) . . . . . . . . . . . . . . . . . (Not Applicable)
(e) . . . . . . . . . . . . . . . . . (Not Applicable)
17(a) . . . . . . .Prospectus; DESCRIPTION OF THE TRUST
(b) . . . . . . . . . . . . . . . . . (Not Applicable)
18(a) . . . . . . . Prospectus; ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION
(b) . .ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
(c) . . . . . . . . . . . . . . . . . . . .Prospectus
(d) . . . . . . . . . . . . . . . . . . . .Prospectus
19(a) . . . . . . . . . . . . . DISTRIBUTIONS AND TAXES
(b) . . . . . . . . . . . . . DISTRIBUTIONS AND TAXES
20(a) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(b) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
(C) . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
21(a) . . . . . . . . . . . . . . . . . (Not Applicable)
(b) . . . . . . . . . . . PERFORMANCE; REPRESENTATIVE
PERFORMANCE INFORMATION
22(a) . Financial Statements (incorporated by reference)
(b) . Financial Statements (incorporated by reference)

<PAGE>
PART A
<OUTSIDE FRONT COVER>
THORNBURG MUNICIPAL FUNDS
Prospectus
June 1, 1999

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 Florida Intermediate Municipal Fund
("Intermediate Florida Fund")
Thornburg New Mexico Intermediate Municipal Fund
("Intermediate New Mexico Fund")
Thornburg New York Intermediate Municipal Fund
("Intermediate New York Fund")

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.

NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE

<PAGE>
TABLE OF CONTENTS

__ Limited Term National Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Limited Term California Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Intermediate National Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Intermediate New Mexico Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Intermediate Florida Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Intermediate New York Fund
Investment Goals
Principal Investment Strategies
Principal Risks of Investing in the Fund
Past Performance of Fund
Fees and Expenses

__ Management Discussion of Fund Performance and Index Comparisons

__ Additional Information About Fund Investments

__ Your Account - Buying Fund Shares

__ Selling Fund Shares

__ Investor Services, Transaction Services

__ Dividends and Distributions

__ Taxes

__ Transaction Details

__ Exchange Restrictions

__ Organization of the Funds

__ Investment Adviser

__ Financial Highlights

__ Additional Information

<PAGE>
Limited Term National Fund

Investment Goals
- ----------------

The primary investment goal of Limited Term National Fund is to obtain as
high a level of current income exempt from federal individual income tax as
is consistent, in the view of the Fund's investment adviser, with
preservation of capital. The secondary goal of the Fund is to reduce
expected changes in its share price compared to longer intermediate and
long-term bond portfolios. The Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of the
Fund's shareholders.

Principal Investment Strategies
- ------------------------------

The Fund pursues its primary goal by investing in investment grade or
equivalent municipal obligations issued by states and state agencies, local
governments and their agencies and by certain United States territories and
possessions. Thornburg Management Company, Inc. (TMC) actively manages the
Fund's portfolio, and investment decisions are based upon general economic
and financial trends, outlooks for interest rates and securities markets,
the supply of debt securities, and analysis of specific securities. The
Fund invests in obligations which are rated as investment grade or, if
unrated, which are issued by obligors which have comparable investment
grade obligations outstanding or which are deemed by TMC to be comparable
to obligors with outstanding investment grade obligations.

The Fund seeks to enhance its income by taking advantage of yield
disparities, trends or other factors in the fixed income markets. Although
the Fund ordinarily will acquire securities for investment rather than for
realization of gains on market fluctuations, it may dispose of any security
prior to its scheduled maturity to enhance income or reduce loss, to change
the portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent the Fund from
obtaining the highest yields available.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. The Fund may invest up to 20% of its net
assets in taxable securities which produce income not exempt from federal
income tax. These investments may be made due to market conditions,
pending investment of idle funds or to afford liquidity. The Fund's
temporary taxable investments may exceed 20% of its net assets when made
for defensive purposes during periods of abnormal market conditions.

Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with a
dollar-weighed average maturity normally less than five years. There is no
limitation on the maturity of any specific security the Fund may purchase.
The Fund may dispose of any security before it matures. The Fund also
attempts to reduce changes in it share value through credit analysis,
selection and diversification.

Principal Risks of Investing in the Fund
- -----------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
During periods of declining interest rates the Fund's dividends decline.
The value of Fund shares also could be reduced if municipal obligations
held by the Fund were downgraded by rating agencies, or went into default,
or if legislation or other government action reduces the ability of issuers
to pay principal and interest when due or changes the tax treatment of
interest on municipal obligations. The loss of money is a risk of
investing in the Fund, and when you sell your shares they may be worth more
or less than what you paid for them.

An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Past Performance of the Fund
- ----------------------------

The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown, and the average annual total return
figures compare Class A and Class C share performance to the Lehman
Five-Year General Obligation Bond Index, a broad measure of market
performance.

The sales charge for Class A shares is not reflected in the returns shown
in the bar charts, and the returns would be less if the charge was taken
into account. The figures shown in the average annual total return table
do reflect maximum sales charges imposed, assuming a redemption at the end
of each period shown. Performance in the past is not necessarily an
indication of how the Fund will perform in the future.

<The following are presented as bar graphs in the Prospectus>
Limited Term National Fund Annual Total Returns Class A Shares
- ---------------------------------------------------------------
15%

10% 9.97
7.79 8.61 8.81
5% 6.48 7.74 5.47
3.97
0%
(1.48)
- -5
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Year to date return, period ending 3/31/99: 0.57%.

Highest quarterly results for time period shown: 3.56% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: (2.10)% (quarter ended
3/31/94).

Limited Term National Fund Average Annual Total Returns
- -----------------------------------------------------
(periods ended 12/31/98)

One Year Five Years Ten Years Since Inception
-------- ---------- --------- ---------------
Class A Shares 3.20% 6.78% 6.01% 6.86% (9/28/84)
Lehman Index 5.85% 5.36% 6.99% 7.67%

Class C Shares 3.86% N/A N/A 4.76% (9/1/94)
Lehman Index 5.85% N/A N/A 6.28%

<PAGE>
FEES AND EXPENSES OF THE FUND

Class A Class C
------- -------
Maximum Sales Charge (Load) imposed on 1.50% none
purchases (as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%* 0.50%**
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million in
the event of a redemption within 12 months of purchase.
** Imposed only on redemptions of Class C shares within 12 months
of purchase.

Annual Fund Operating Expenses (expenses that are deducted
- ------------------------------ from Fund assets)

Thornburg Limited Term Municipal Fund-National Portfolio
Class A Class C
Management Fee .45% .45%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .27% .38%
---- -----
Total Annual Operating Expenses .97% 1.83%

Thornburg Management Company, Inc. (TMC) intends to reimburse a portion of
the Class C other expenses, and Thornburg Securities Corporation intends to
waive a portion of the Class C 12b-1 fees, so that actual Class C other
expenses are .30%, actual Class C 12b-1 fees are .63%, and so that actual
total Fund operating expenses are 1.38% for Class C shares. TMC's and
TSC's reimbursement of expenses and waiver of these fees may be terminated
at any time.

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and redeem all of your shares at the end of these
periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your
costs would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $248 $456 $602 $1,331
Class C Shares 238 581 1,001 2,175

You would pay the following expenses if you did not redeem your shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $248 $456 $602 $1,331
Class C Shares 188 581 1,002 2,175

<PAGE>
Limited Term California Fund

Investment Goals
- -----------------

The primary investment goal of Limited Term California Fund is to obtain as
high a level of current income exempt from federal and California state
individual income taxes as is consistent, in the view of the Fund's
investment adviser, with preservation of capital. The secondary goal of
the Fund is to reduce expected changes in its share price compared to
longer intermediate and long-term bond portfolios. The Fund's primary and
secondary goals are fundamental policies, and may not be changed without a
majority vote of the Fund's shareholders.

Principal Investment Strategies
- --------------------------------

The Fund pursues its primary goal by investing principally in municipal
obligations issued by California state and California state agencies, local
governments and their agencies and by certain United States territories and
possessions. Thornburg Management Company, Inc. (TMC) actively manages the
Fund's portfolio, and investment decisions are based upon general economic
and financial trends, outlooks for interest rates and securities markets,
the supply of debt securities, and analysis of specific securities. The
Fund invests in obligations which are rated as investment grade or, if
unrated, which are issued by obligors which have comparable investment
grade obligations outstanding or which are deemed by TMC to be comparable
to obligors with outstanding investment grade obligations.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. Under normal conditions the Fund invests
100% of its assets in obligations originating in California or issued by
United States territories and possessions, and as a matter of fundamental
policy, invests at least 65% of its total assets in Municipal obligations
originating in California. The Fund may invest up to 20% of its net assets
in taxable securities which would produce income not exempt from federal or
California income tax. These investments may be made due to market
conditions, pending investment of idle funds or to afford liquidity. The
Fund's temporary taxable investments may exceed 20% of its net assets when
made for defensive purposes during periods of abnormal market conditions.

Principal Risks of Investing in the Fund
- ----------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
During periods of declining interest rates the Fund's dividends decline.
The value of Fund shares also could be reduced if municipal obligations
held by the Fund were downgraded by rating agencies, or went into default,
or if legislation or other government action reduces the ability of issuers
to pay principal and interest when due or changes the tax treatment of
interest on municipal obligations. Because the Fund invests primarily in
obligations originating in California, the Fund's share value may be more
sensitive to adverse economic or political developments in that state. A
portion of the Fund's dividends could be subject to the federal alternative
minimum tax. The loss of money is a risk of investing in a Fund, and when
you sell your shares they may be worth more or less than what you paid for
them.

An investment in a Fund is not a deposit in any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Past Performance of the Fund
- ----------------------------

The sales charge for Class A shares is not reflected in the returns shown
in the bar charts, and the returns would be less if the charge was taken
into account. The figures shown in the average annual total return table
reflect maximum sales charges imposed, assuming a redemption at the end of
each period shown. Performance in the past is not necessarily an
indication of how the Fund will perform in the future.

<The following are presented as bar graphs in the Prospectus>
Limited Term California Fund Annual Total Returns Class A Shares
- -----------------------------------------------------------------

15%

10% 8.21 10.27
7.52 7.52 7.53 5.84
5% 6.77 4.81 4.97

0%
(2.13)
- -5
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Year to date return, period ending 3/31/99: 0.80%.

Highest quarterly results for time period shown: 3.77% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: (2.08)% (quarter ended
3/31/94).

Limited Term California Fund Average Annual Total Returns
- -------------------------------------------------------
(periods ended 12/31/98)

One Year Five Years Ten Years Since Inception
-------- ---------- --------- ---------------
Class A Shares 3.37% 4.25% 5.87% 5.90% (2/19/87)
Lehman Index 5.85% 5.36% 6.99% 6.39%

Class C Shares 4.46% N/A N/A 4.96% (9/1/94)
Lehman Index 5.85% N/A N/A 6.28%

<PAGE>
FEES AND EXPENSES OF THE FUND

SHAREHOLDER FEES (Fees paid directly from your investment)

Limited Term Municipal Funds
Class A Class C
------- -------
Maximum Sales Charge on Purchases 1.50% none
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%* 0.50%**
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million in
the event of a redemption within 12 months of purchase.
** Imposed only on redemptions of Class C shares within 12 months
of purchase.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

Thornburg Limited Term Municipal Fund-California Portfolio
Class A Class C
Management Fee .50% .50%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .29% .47%
---- -----
Total Annual Operating Expenses 1.04% 1.97%

Expenses reflect rounding. Thornburg Management Company, Inc. (TMC)
intends to reimburse a portion of the Class A other expenses, so that
actual Class A other expenses are .25%, and actual total fund operating
expenses are 1.00%. TMC and Thornburg Securities Corporation (TSC) intend
to waive a portion of the Class C 12b-1 fees, and TMC intends to reimburse
a portion of the Class C other expenses, so that actual Class C 12b-1
expenses are .63%, actual Class C other expenses are .27%, and actual total
fund operating expenses for Class C are 1.40%. TMC's and TSC's waiver of
fees and TMC's reimbursement of expenses may be terminated at any time.

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

You would pay the following expenses if you did not redeem your shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $255 $478 $720 $1,414
Class C Shares 202 625 1,075 2,326

<PAGE>
Intermediate National Fund

Investment Goals
- ----------------

The primary investment goal of Intermediate National Fund is to obtain as
high a level of current income exempt from federal individual income tax as
is consistent, in the view of the Fund's investment adviser, with
preservation of capital. The secondary goal of the Fund is to reduce
expected changes in its share price compared to long-term bond portfolios.
The Fund's primary and secondary goals are fundamental policies, and may
not be changed without a majority vote of the Fund's shareholders.

Principal Investment Strategies
- ------------------------------

The Fund pursues its primary goal by investing principally in municipal
obligations issued by states and state agencies, local governments and
their agencies and by certain United States territories and possessions.
Thornburg Management Company, Inc. (TMC) actively manages the Fund's
portfolio, and investment decisions are based upon general economic and
financial trends, outlooks for interest rates and securities markets, the
supply of debt securities, and analysis of specific securities. The Fund
invests in obligations which are rated as investment grade or, if unrated,
which are issued by obligors which have comparable investment grade
obligations outstanding or which are deemed by TMC to be comparable to
obligors with outstanding investment grade obligations.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. The Fund may invest up to 20% of its net
assets in taxable securities which would produce income not exempt from
federal income tax. These investments may be made due to market
conditions, pending investment of idle funds or to afford liquidity. The
Fund's temporary taxable investments may exceed 20% of its net assets when
made for defensive purposes during periods of abnormal market conditions.

Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with a
dollar-weighed average maturity of normally three to ten years. During
temporary periods the Fund's portfolio maturity may be reduced for
defensive purposes. There is no limitation on the maturity of any specific
security the Fund may purchase. The Fund may dispose of any security
before it matures. The Fund also attempts to reduce changes in its share
value through credit analysis, selection and diversification.

Principal Risks of Investing in the Fund
- -----------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
Dividends also will vary over time. During periods of declining interest
rates the Fund's dividends decline. The value of Fund shares also could be
reduced if municipal obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations. A
portion of the Fund's dividends could be subject to the federal alternative
minimum tax. The loss of money is a risk of investing in the Fund, and
when you sell your shares they may be worth more or less than what you paid
for them.

An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Past Performance of the Fund
- ----------------------------

The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown, and the average annual total return
figures compare Class A and Class C share performance to the Merrill Lynch
Municipal (7-12 years) Bond Index, a broad measure of market performance.

The sales charge for Class A shares is not reflected in the returns shown
in the bar charts, and the returns would be less if the charge was taken
into account. The figures shown in the average annual total return table
does reflect maximum sales charges imposed, assuming a redemption at the
end of each period shown. Performance in the past is not necessarily an
indication of how the Fund will perform in the future.

<The following are presented as bar graphs in the Prospectus>
Intermediate National Fund Annual Total Returns Class A Shares
- ------------------------------------------------------------

15%
12.29 13.22
10% 9.81
5.47
5%
4.45
0% 0.72
(2.48)
- -5
1992 1993 1994 1995 1996 1997 1998

Year to date return, period ending 3/31/99: 0.55%.

Highest quarterly results for time period shown: 4.91% (quarter ended
3/31/95)
Lowest quarterly results for time period shown: (3.33)% (quarter ended
3/31/94).

Intermediate National Fund Average Annual Total Returns
- -------------------------------------------------------
(periods ended 12/31/98)

One Year Five Years Since Inception
-------- ---------- ---------------
Class A Shares 3.34% 5.03% 6.95% (7/23/91)
Merrill Lynch Index 6.83% 6.27% 7.48%

Class C Shares 5.04% N/A 6.04% (9/1/94)
Merrill Lynch Index 6.83% N/A 7.63%

<PAGE>
FEES AND EXPENSES OF THE FUND

SHAREHOLDER FEES (Fees paid directly from your investment)

Class A Class C
------- -------
Maximum Sales Charge on Purchases 2.00% none
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%* 0.60%**
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million in
the event of a redemption within 12 months of purchase.
** Imposed only on redemptions of Class C shares within 12 months
of purchase.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

Thornburg Intermediate Municipal Fund
Class A Class C
------- -------
Management Fee .50% .50%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .29% .43%
----- -----
Total Annual Fund Operating Expenses 1.04% 1.93%

Expenses reflect rounding. Thornburg Management Company, Inc. (TMC)
intends to reimburse a portion of the Class A other expenses, so that
actual Class A other expenses are .25%, and actual total fund operating
expenses are 1.00%. TMC and Thornburg Securities Corporation (TSC) intend
to waive a portion of the Class C 12b-1 fees, and TMC intends to reimburse
a portion of the Class C other expenses, so that actual Class C 12b-1
expenses are .60%, actual Class C other expenses are .30%, and actual total
fund operating expenses for Class C are 1.40%. TMC's and TSC's waiver of
fees and TMC's reimbursement of expenses may be terminated at any time.

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $304 $526 $777 $1,458
Class C Shares 258 613 1,054 2,283

You would pay the following expenses if you did not redeem your shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $304 $526 $777 $1,458
Class C Shares 198 613 1,054 2,283

<PAGE>
Intermediate New Mexico Fund

Investment Goals
- ----------------

The primary investment goal of Intermediate New Mexico Fund is to obtain as
high a level of current income exempt from federal and New Mexico state
individual income taxes as is consistent, in the view of the Fund's
investment adviser, with preservation of capital. The secondary goal of
the Fund is to reduce expected changes in its share price compared to
long-term bond portfolios. The Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of the
Fund's shareholders.

Principal Investment Strategies
- --------------------------------

The Fund pursues its primary goal by investing principally in municipal
obligations issued by the State of New Mexico and by New Mexico state
agencies, local governments and their agencies and by certain United States
territories and possessions. Thornburg Management Company, Inc. TMC
actively manages the Fund's portfolio, and investment decisions are based
upon general economic and financial trends, outlooks for interest rates and
securities markets, the supply of debt securities, and analysis of specific
securities. The Fund invests in obligations which are rated as investment
grade or, if unrated, which are issued by obligors which have comparable
investment grade obligations outstanding or which are deemed by TMC to be
comparable to obligors with outstanding investment grade obligations.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. Under normal conditions the Fund invests
100% of its assets in obligations originating in New Mexico or issued by
United States territories or possessions, and as a matter of fundamental
policy, invests at least 65% of its total assets in municipal obligations
originating in New Mexico. The Fund may invest up to 20% of its net assets
in taxable securities which produce income not exempt from federal or New
Mexico income tax. These investments may be made due to market conditions,
pending investment of idle funds or to afford liquidity. The Fund's
temporary taxable investments may exceed 20% of its net assets when made
for defensive purposes during periods of abnormal market conditions.

Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with a
dollar-weighed average maturity of normally three to ten years. During
temporary periods the Fund's portfolio maturity may be reduced for
defensive purposes. There is no limitation on the maturity of any specific
security the Fund may purchase. The Fund may dispose of any security
before it matures. The Fund also attempts to reduce changes in it share
value through credit analysis, selection and diversification.

Principal Risks of Investing in the Fund
- ---------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
During periods of declining interest rates the Fund's dividends decline.
The value of Fund shares also could be reduced if municipal obligations
held by the Fund were downgraded by rating agencies, or went into default,
or if legislation or other government action reduces the ability of issuers
to pay principal and interest when due or changes the tax treatment of
interest on municipal obligations. Because the Fund invests primarily in
obligations originating in New Mexico, the Fund's share value may be more
sensitive to adverse economic or political developments in that state. A
portion of the Fund's dividends could be subject to the federal alternative
minimum tax. The loss of money is a risk of investing in the Fund, and
when you sell your shares they may be worth more or less than what you paid
for them.

An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund is a nondiversified investment company, and means that it may
invest a greater proportion of its assets in the securities of a single
issuer. This may be riskier, because a default or other adverse condition
affecting such an issuer could cause the Fund's share price to decline to a
greater degree.

Past Performance of the Fund
- -----------------------------

The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown, and the average annual total return
figures compare Class A share performance to the Merrill Lynch Municipal
(7-12 years) Bond Index, a broad measure of market performance. No figures
are shown for Class C shares, which became available on ____________.

<The following are presented as bar graphs in the Prospectus>
Intermediate New Mexico Fund Annual Total Returns Class A Shares
- --------------------------------------------------------------
15%
10.31 11.15
10%
8.63 6.49
5% 4.89

0% 0.42

- -5 (1.19)
1992 1993 1994 1995 1996 1997 1998

Year to date return, period ending 3/31/99: 0.61%.

Highest quarterly results for time period shown: 4.43% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: (2.91)% (quarter ended
3/31/94).

Intermediate New Mexico Fund Average Annual Total Returns
- -------------------------------------------------------
(periods ending 12/31/98)

One Year Five Years Since Inception
(6/21/91)
-------- ---------- --------------
Class A Shares 2.81% 4.46% 6.29%
M-L Bond Index 6.83% 6.27% 7.32%

<PAGE>
FEES AND EXPENSES OF THE FUND

SHAREHOLDER FEES (Fees paid directly from your investment)

Class A Class C
------- -------
Maximum Sales Charge on Purchases 2.00% 0.00%
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%* 0.60%**
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million in
the event of a redemption within 12 months of purchase.
** Imposed only on redemptions of Class C shares within 12 months of
purchase.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

Thornburg New Mexico Intermediate Municipal Fund
Class A Class C
------- -------
Management Fee .50% .50%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .26% .43%
----- -----
Total Annual Fund Operating Expenses 1.01% 1.93%

Expenses reflect rounding and are restated to reflect current expenses.
Thornburg Management Company, Inc. (TMC) intends to reimburse a portion of
the Class A other expenses, so that actual Class A other expenses are .25%,
and actual total fund operating expenses are 1.00%. TMC and Thornburg
Securities Corporation (TSC) intend to waive a portion of the Class C 12b-1
fees, and TMC intends to reimburse a portion of the Class C other expenses,
so that actual class C 12b-1 expenses are .50, actual Class C other
expenses .30, and actual total fund operating expenses for Class C are
1.30%. Reimbursement of expenses and waivers of fees may be terminated at
any time.

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $304 $517 $751 $1,423
Class C Shares 198 613 1,054 2,283

You would pay the following expenses if you did not redeem your shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $304 $517 $751 $1,423
Class C Shares 148 613 1,054 2,283

<PAGE>
Intermediate Florida Fund

Investment Goals
- ----------------

The primary investment goal of Intermediate Florida Fund is to obtain as
high a level of current income exempt from federal individual income tax as
is consistent, in the view of the Fund's investment adviser, with
preservation of capital. The Fund also seeks exemption of its shares from
the Florida "intangibles" tax on securities owned by individuals. The
secondary goal of the Fund is to reduce expected changes in its share price
compared to long-term bond portfolios. The Fund's primary and secondary
goals are fundamental policies, and may not be changed without a majority
vote of the Fund's shareholders.

Principal Investment Strategies
- -------------------------------

The Fund pursues its primary goal by investing principally in municipal
obligations issued by the State of Florida and Florida State agencies,
local governments and their agencies and by certain United States
territories and possessions. Thornburg Management Company, Inc. (TMC)
actively manages the Fund's portfolio, and investment decisions are based
upon general economic and financial trends, outlooks for interest rates and
securities markets, the supply of debt securities, and analysis of specific
securities. The Fund invests in obligations which are rated as investment
grade or, if unrated, which are issued by obligors which have comparable
investment grade obligations outstanding or which are deemed by TMC to be
comparable to obligors with outstanding investment grade obligations.

The Fund seeks to enhance its income by taking advantage of yield
disparities, trends or other factors in the fixed income markets. Although
the Fund ordinarily will acquire securities for investment rather than for
realization of gains on market fluctuations, it may dispose of any security
prior to its scheduled maturity to enhance income or reduce loss, to change
the portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may preclude the Fund from
obtaining the highest yields available.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. Under normal conditions the Fund invests
100% of its total assets in municipal obligations originating in Florida or
issued by United States territories and possessions. As a matter of
fundamental policy, the Fund invests at least 65% of its total assets in
municipal obligations originating in Florida. The Fund may invest up to
20% of its net assets in taxable securities which would produce income not
exempt from federal income tax. These investments may be made due to
market conditions, pending investment of idle funds or to afford liquidity.
The Fund's temporary taxable investments may exceed 20% of its net assets
when made for defensive purposes during periods of abnormal market
conditions.

Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with a
dollar-weighed average maturity of normally three to ten years. During
temporary periods the Fund's portfolio maturity may be reduced for
defensive purposes. There is no limitation on the maturity of any specific
security the Fund may purchase. The Fund may dispose of any security
before it matures. The Fund also attempts to reduce changes in its share
value through credit analysis, selection and diversification.

Principal Risks of Investing in the Fund
- -----------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
During periods of declining interest rates the Fund's dividends decline.
The value of Fund shares also could be reduced if municipal obligations
held by the Fund were downgraded by rating agencies, or went into default,
or if legislation or other government action reduces the ability of issuers
to pay principal and interest when due or changes the tax treatment of
interest on municipal obligations. Because the Fund invests primarily in
obligations originating in Florida, the Fund's share value may be more
sensitive to adverse political or economic developments in that state. A
portion of the Fund's dividends may be subject to the federal alternative
minimum tax. The loss of money is a risk of investing in the Fund, and
when you sell your shares they may be worth more or less than what you paid
for them.

An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Past Performance of the Fund
- ----------------------------

The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown, and the average annual total return
figures compare Class A share performance to the Merrill Lynch Municipal
(7-12 years) Bond Index, a broad measure of market performance.

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart, and the returns would be less if the charge was taken
into account. The figures shown in the average annual total return table
do reflect maximum sales charges imposed, assuming a redemption at the end
of each period shown. Performance in the past is not necessarily an
indication of how the Fund will perform in the future.

<The following are presented as bar graphs in the Prospectus>
Intermediate Florida Fund Annual Total Returns Class A Shares
- -----------------------------------------------------------
15%
12.19
10%
7.28
5% 5.81
4.67
0%

- -5
1995 1996 1997 1998

Year to date return, period ending 3/31/99: 0.60%.

Highest quarterly results for time period shown: 4.68% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: (3.09)% (quarter ended
3/31/94).

Intermediate Florida Fund Average Annual Total Returns
- ----------------------------------------------------
(periods ended 12/31/98)

One Year Since Inception
(2/1/94)
-------- --------------
Class A Shares 3.08% 4.99%
M-L Bond Index 6.83% 6.18%

SHAREHOLDER FEES (Fees paid directly from your investment)

Class A
-------
Maximum Sales Charge on Purchases 2.00%
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%*
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million in
the event of a redemption within 12 months of purchase.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

Thornburg Florida Intermediate Municipal Fund
Class A
-------
Management Fee .50%
Distribution and Service (12b-1) Fees .25%
Other Expenses .36%
-----
Total Annual Fund Operating Expenses 1.11%

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $311 $458 $804 $1,538

<PAGE>
Intermediate New York Fund

Investment Goals
- ----------------

The primary investment goal of Intermediate New York Fund is to obtain as
high a level of current income exempt from federal, New York State and New
York City individual income taxes as is consistent, in the view of the
Fund's investment adviser, with preservation of capital. The secondary
goal of the Fund is to reduce expected changes in its share price compared
to long-term bond portfolios. The Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of the
Fund's shareholders.

Principal Investment Strategies
- -------------------------------

The Fund pursues its primary goal by investing principally in municipal
obligations issued by New York State and by New York State agencies, local
governments and their agencies and by certain United States territories and
possessions. Thornburg Management Company, Inc. (TMC) actively manages the
Fund's portfolio, and investment decisions are based upon general economic
and financial trends, outlooks for interest rates and securities markets,
the supply of debt securities, and analysis of specific securities. The
Fund invests in obligations which are rated as investment grade or, if
unrated, which are issued by obligors which have comparable investment
grade obligations outstanding or which are deemed by TMC to be comparable
to obligors with outstanding investment grade obligations.

The Fund normally invests 100% of its net assets in municipal obligations.
As a fundamental policy, the Fund normally invests at least 80% of its
assets in municipal obligations. Under normal conditions the Fund invests
100% of its total assets in Municipal obligations originating in New York
or issued by United States territories and possessions, and as a matter of
fundamental policy, invests at least 65% of its total assets in municipal
obligations originating in New York. The Fund may invest up to 20% of its
net assets in taxable securities which would produce income not exempt from
federal or New York income tax. These investments may be made due to
market conditions, pending investment of idle funds or to afford liquidity.
The Fund's temporary taxable investments may exceed 20% of its net assets
when made for defensive purposes during periods of abnormal market
conditions.

Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with a
dollar-weighed average maturity of normally three to ten years. During
temporary periods the Fund's portfolio maturity may be reduced for
defensive purposes. There is no limitation on the maturity of any specific
security the Fund may purchase. The Fund may dispose of any security
before it matures. The Fund also attempts to reduce changes in it share
value through credit analysis, selection and diversification.

Principal Risks of Investing in the Fund
- ----------------------------------------

The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of
the Fund's investments declines and the Fund's share value is reduced.
When interest rates decline, the value of the Fund's investments increases.
During periods of declining interest rates the Fund's dividends decline.
The value of Fund shares also could be reduced if municipal obligations
held by the Fund were downgraded by rating agencies, or went into default,
or if legislation or other government action reduces the ability of issuers
to pay principal and interest when due or changes the tax treatment of
interest on municipal obligations. Because the Fund invests primarily in
obligations originating in New York, the Fund's share value may be more
sensitive to adverse economic or political developments in that state. A
portion of the Fund's dividends could be subject to the federal alternative
minimum tax. The loss of money is a risk of investing in a Fund, and when
you sell your shares they may be worth more or less than what you paid for
them.

An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Past Performance of the Fund
- ----------------------------

The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary.
The bar chart shows annual total returns for Class A shares, and the
average annual total return figures compare Class A share performance to
the Merrill Lynch Municipal (7-12 years) Bond Index, a broad measure of
market performance.

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart, and the returns would be less if the charge was taken
into account. The figures shown in the average annual total return table
does reflect maximum sales charges imposed, assuming a redemption at the
end of each period shown. Performance in the past is not necessarily an
indication of how the Fund will perform in the future.

<The following are presented as bar graphs in the Prospectus>
Intermediate New York Fund Annual Total Returns Class A Shares
- -------------------------------------------------------------

15%

10%

5% 5.88

- -5
1998

Year to date return, period ending 3/31/99: 0.02%.

Highest quarterly results for time period shown: 2.61% (quarter ended
9/30/98).
Lowest quarterly results for time period shown: 0.42% (quarter ended
12/31/98).

Intermediate New York Fund Average Annual Total Returns
- ------------------------------------------------------
(periods ended 12/31/98)

One Year Since Inception
(9/4/97)
-------- --------------
Class A Shares 3.75% 5.23%
M-L Bond Index 6.83% 8.21%

FEES AND EXPENSES OF THE FUND

The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund.

SHAREHOLDER FEES (Fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

Thornburg New York Intermediate Municipal Fund
Class A
-------
Management Fee .50%
Distribution and Service (12b-1) Fees .25%
Other Expenses .44%
-----
Total Annual Fund Operating Expenses 1.19%

Expenses reflect rounding and are restated to reflect current expenses.
Thornburg Management Company, Inc. (TMC) intends to reimburse the Class A
other expenses, so that actual Class A other expenses are 0%, and actual
total fund operating expenses are .75%. TMC's reimbursement of expenses
may be terminated at any time.

Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $320 $573 $846 $1,629

MANAGEMENT DISCUSSION OF FUND PERFORMANCE AND INDEX COMPARISONS

The graphs on the next page 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 laddered 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 three to ten years.

In general, interest rates have continued, with some fluctuations, to
decline over the one-year period ended September 30, 1998. Interest rates
have dropped more for intermediate-term bonds than for short-term bonds or
long-term bonds, leading to a flatter yield curve. For instance, 30-year
treasury bond yields fell 1.43% to 4.97% while five-year bond yields fell
1.76% to 4.21% and one-year bond yields dropped 1.03% to 4.39%.

The municipal bond market, facing the largest volume of supply in several
years, has underperformed the treasury bond market. Thirty-year AA-rated
municipal bond yields declined by 0.38% to 4.89% over the one-year period
ended September 30, 1998. Meanwhile, five-year AA-rated municipal yields
declined by 0.44% to 3.88% and ten-year AA-rated municipal bond yields
declined by 0.45% to 4.25%. These yield declines have caused price
increases of 1.61% and 3.34% for the five-year and ten-year bonds,
respectively. Over the same one-year period, the net asset values of
Limited Term National and California Portfolios have increased 0.97% and
1.68%, respectively. The net asset values of the Intermediate National
Fund has similarly increased by 2.30%. While the net asset values of all
the Funds rose over the period described, the dividend yields of all
declined slightly. If interest rates continue to fall, the net asset
values of all the Funds should continue to rise, but the dividend yields
would be expected to 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 periods
ending June 30, 1998. On June 30, 1998, 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 5.0
years and 4.1 years, respectively. Past performance of the Index and the
Fund may not be indicative of future performance.

<TABLE> <The following tables appear as side-by-side graphs in the
prospectus.>
Class 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 14,011
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 22,677 14,582
6/95 21,390 23,254 14,713
9/95 21,755 23,890 14,772
12/95 22,190 24,327 14,861
3/96 22,232 24,403 15,010
6/96 22,374 24,510 15,116
9/96 22,703 24,909 15,237
12/96 23,070 25,452 15,374
3/97 23,150 25,411 15,451
6/97 23,595 26,044 15,498
9/97 24,007 26,612 15,591
12/97 24,332 27,102 15,653
3/98 24,552 27,420 15,669
6/98 24,787 27,698 15,763
</TABLE>

Average Annual Total Returns (at max. offering price)
A Shares One Year (12 mos. ended 6/30/98): 2.46%
Five Years: 4.09%
Ten Years: 5.92%
From Inception (9/28/84): 6.82%

<TABLE>
<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 10,110
3/95 10,193 10,293 10,141
4/95 10,245 10,321 10,171
5/95 10,405 10,547 10,202
6/95 10,425 10,556 10,232
7/95 10,483 10,703 10,243
8/95 10,550 10,812 10,263
9/95 10,586 10,844 10,273
10/95 10,663 10,890 10,304
11/95 10,740 10,982 10,314
12/95 10,786 11,043 10,335
1/96 10,848 11,174 10,376
2/96 10,838 11,136 10,408
3/96 10,788 11,077 10,439
4/96 10,786 11,060 10,470
5/96 10,808 11,047 10,501
6/96 10,847 11,125 10,512
7/96 10,910 11,199 10,544
8/96 10,932 11,222 10,565
9/96 11,004 11,307 10,596
10/96 11,067 11,412 10,628
11/96 11,163 11,570 10,660
12/96 11,161 11,553 10,692
1/97 11,192 11,584 10,703
2/97 11,257 11,667 10,735
3/97 11,197 11,535 10,746
4/97 11,228 11,592 10,756
5/97 11,309 11,719 10,767
6/97 11,391 11,822 10,778
. . .
9/97 11,578 12,080 10,843
12/97 11,723 12,302 10,886
3/98 11,817 12,446 10,897
6/98 11,927 12,573 11,229
</TABLE>

Average Annual Total Returns
C Shares One Year (12 mos. ended 6/30/98): 4.70%
From Inception (9/1/94): 4.71%

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 periods
ending June 30, 1998. On June 30, 1998, 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 5.0
years and 4.8 years, respectively. Past performance of the Index and the
Fund may not be indicative of future performance.

Class A Shares Class C Shares
<CAPTION>
FUND Lehman CPI FUND Lehman CPI
A Shares Government C Shares Government
-------- ---------- ------- -------- ---------- -------
<S> <C> <C> <C> <S> <C> <C> <C>
1/87 $ 9,750 $10,000 $10,000 8/94 $10,000 $10,000 $10,000
3/87 9,786 10,034 10,080 9/94 9,950 9,925 10,020
6/87 9,857 9,942 10,202 10/94 9,887 9,869 10,030
9/87 9,924 9,737 10,314 11/94 9,792 9,806 10,040
12/87 10,100 10,108 10,407 12/94 9,818 9,893 10,060
3/88 10,375 10,424 10,491 1/95 9,926 9,988 10,090
6/88 10,557 10,469 10,617 2/95 10,099 10,132 10,110
9/88 10,733 10,588 10,724 3/95 10,164 10,293 10,141
12/88 10,885 10,651 10,820 4/95 10,231 10,321 10,171
3/89 10,994 10,620 10,951 5/95 10,380 10,547 10,202
6/89 11,313 11,121 11,105 6/95 10,398 10,556 10,232
9/89 11,469 11,249 11,172 7/95 10,441 10,703 10,243
12/89 11,704 11,585 11,306 8/95 10,509 10,812 10,263
3/90 11,814 11,642 11,522 9/95 10,561 10,844 10,273
6/90 12,009 11,902 11,638 10/95 10,640 10,890 10,304
9/90 12,140 12,028 11,872 11/95 10,719 10,982 10,314
12/90 12,496 12,426 12,027 12/95 10,756 11,043 10,335
3/91 12,707 12,694 12,099 1/96 10,833 11,174 10,376
6/91 12,904 12,916 12,184 2/96 10,828 11,136 10,408
9/91 13,121 13,376 12,282 3/96 10,781 11,076 10,439
12/91 13,436 13,825 13,405 4/96 10,793 11,060 10,470
3/92 13,566 17,790 12,480 5/96 10,805 11,047 10,502
6/92 13,950 14,239 12,580 6/96 10,861 11,125 10,512
9/92 14,261 14,597 12,655 7/96 10,925 11,199 10,544
12/92 14,448 14,829 12,770 8/96 10,953 11,222 10,565
3/93 14,813 15,179 12,872 9/96 11,017 11,307 10,596
6/93 15,116 15,537 12,949 10/96 11,089 11,412 10,628
9/93 15,437 15,874 13,014 11/96 11,189 11,570 10,660
12/93 15,634 16,069 13,119 12/96 11,174 11,553 10,692
3/94 15,308 15,562 13,197 1/97 11,195 11,584 10,703
6/94 15,474 15,771 13,277 2/97 11,260 11,667 10,735
9/94 15,495 15,891 13,383 3/97 11,200 11,535 10,746
12/94 15,300 15,839 13,437 4/97 11,228 11,592 10,756
3/95 15,877 16,542 13,545 5/97 11,328 11,719 10,767
6/95 16,266 16,964 13,667 6/97 11,410 11,822 10,778
9/95 16,549 17,427 13,722 7/97 11,564 12,036 10,799
12/95 16,871 17,746 13,804 8/97 11,521 11,972 10,821
3/96 16,927 17,802 13,943 9/97 11,613 12,080 10,843
6/96 17,670 17,880 14,040 10/97 11,641 12,154 10,864
9/96 17,332 18,171 14,153 11/97 11,679 12,192 10,875
12/96 17,597 18,567 14,281 12/97 11,789 12,302 10,886
3/97 17,655 18,537 14,352 1/98 11,854 12,410 10,886
6/97 18,004 18,999 14,395 2/98 11,883 12,425 10,897
9/97 18,342 19,413 14,482 3/98 11,893 12,446 10,897
12/97 18,625 19,771 14,540 4/98 11,857 12,387 10,919
3/98 18,808 20,002 14,555 5/98 11,959 12,534 10,951
6/98 19,006 20,206 14,642 6/98 11,997 12,573 10,962

Average Annual Total Returns Average Annual Total Returns
(at max. offering price)
A Shares One Year (12 mos. ended C Shares One Year (12 mos. ended
6/30/98): 2.90% 6/30/98): 5.14%
Five Years: 4.16% From Inception (9/1/94): 4.87%
Ten Years: 5.79%
From Inception (2/19/87): 5.81%
</TABLE>

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, for periods
ending September 30, 1998. On September 30, 1998, 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 9.5 years and 8.4 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> <appears as two graphs side-by-side in the prospectus>
Class A Shares Class C Shares
<CAPTION>
FUND ML Muni CPI FUND ML Muni CPI
A Shares 7-12 Yrs. C Shares 7-12 Yrs.
-------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <S> <C> <C> <C>
6/91 $ 9,648 $10,000 $10,000
9/91 9,819 10,428 10,080
12/91 10,099 10,647 10,181
3/92 10,207 10,593 10,243
6/92 10,586 10,982 10,325
9/92 10,876 11,220 10,387
12/92 11,090 11,440 10,480
3/93 11,496 11,834 10,565
6/93 11,847 12,164 10,628
9/93 12,291 12,456 10,681
12/93 12,453 12,682 10,767
3/94 12,039 12,114 10,832
6/94 12,160 12,187 10,897 8/94 $10,000 $10,000 $10,000
9/94 12,244 12,306 10,984 9/94 9,903 9,848 10,020
12/94 12,145 12,227 11,028 12/94 9,813 9,785 10,060
3/95 12,742 12,860 11,117 3/95 10,286 10,291 10,141
6/95 13,066 13,334 11,217 6/95 10,530 10,671 10,232
9/95 13,365 13,573 11,262 9/95 10,754 10,862 10,273
12/95 13,751 14,054 11,330 12/95 11,052 11,247 10,335
3/96 13,699 14,059 11,443 3/96 11,000 11,251 10,439
6/96 13,814 14,107 11,524 6/96 11,082 11,290 10,512
9/96 14,120 14,398 11,616 9/96 11,307 11,523 10,596
12/96 14,363 14,762 11,721 12/96 11,499 11,814 10,692
3/97 14,413 14,729 11,779 3/97 11,528 11,787 10,746
6/97 14,772 15,218 11,815 6/97 11,803 12,179 10,778
9/97 15,094 15,682 11,886 9/97 12,048 12,550 10,843
12/97 15,397 16,087 11,933 12/97 12,227 12,874 10,886
3/98 15,567 16,276 11,945 3/98 12,391 13,025 10,897
6/98 15,759 16,508 12,017 6/98 12,541 13,211 10,962
9/98 16,162 17,104 12,065 9/98 12,839 13,688 11,006

Average Annual Total Returns Average Annual Total Returns
(at max. offering price)
A Shares One Year (12 mos. ended C Shares One Year (12 mos. Ended
9/30/98): 3.32% 9/30/98): 6.57%
5 Years: 4.88% From Inception (9/1/94): 6.31%
From Inception (7/23/91): 6.90% </TABLE

INTERMEDIATE NEW MEXICO FUND

Index Comparison

Compares performance of the Intermediate New Mexico Fund, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, June 18, 1991
to September 30, 1998. On March 31, 1998, 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 9.5
years and 7.0 years, respectively. Past performance of the Index and the Fund
may not be indicative of future performance.

</TABLE>
<TABLE> <This appears as a graph in the prospectus.>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
5/91 $ 9,650 $10,000 $10,000
9/91 9,957 10,375 10,100
12/91 10,260 10,593 10,202
3/92 10,329 10,539 10,263
6/92 10,686 10,926 10,345
9/92 10,950 11,162 10,408
12/92 11,145 11,381 10,501
3/93 11,490 11,773 10,586
6/93 11,789 12,102 10,649
9/93 12,150 12,392 10,703
12/93 12,294 12,617 10,788
3/94 11,936 12,052 10,853
6/94 12,012 12,125 10,919
9/94 12,119 12,243 11,006
12/94 12,059 12,164 11,050
3/95 12,593 12,794 11,139
6/95 12,859 13,266 11,239
9/95 13,100 13,504 11,284
12/95 13,404 13,982 11,352
3/96 13,358 13,987 11,466
6/96 13,450 14,035 11,547
9/96 13,713 14,325 11,639
12/96 13,967 14,687 11,744
3/97 14,012 14,653 11,803
6/97 14,305 15,141 11,838
9/97 14,606 15,602 11,910
12/97 14,874 16,005 11,957
3/98 15,012 16,193 11,969
6/98 15,203 16,424 12,041
9/98 15,494 17,016 12,089
</TABLE>

Average Annual Total Returns (at max. offering price)
A Shares One Year (12 mos. ended 9/30/98): 1.25%
5 Years: 4.14%
From Inception (6/21/91): 6.07%

<PAGE>
INTERMEDIATE FLORIDA FUND

Index Comparison

Compares performance of Intermediate Florida Fund, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, February 1,
1994 to September 30, 1998. On September 30, 1998, 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
9.5 years and 8.5 years, respectively. Past performance of the Index and the
Fund may not be indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
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
6/94 9,481 9,524 10,121
9/94 9,557 9,617 10,202
12/94 9,492 9,555 10,243
3/95 9,936 10,049 10,325
6/95 10,148 10,420 10,418
9/95 10,342 10,607 10,460
12/95 10,595 10,982 10,523
3/96 10,607 10,987 10,628
6/96 10,716 11,024 10,703
9/96 10,897 11,252 10,789
12/96 11,090 11,536 10,886
3/97 11,153 11,510 10,940
6/97 11,387 11,892 10,973
9/97 11,665 12,255 11,039
12/97 11,897 12,572 11,083
3/98 12,011 12,719 11,095
6/98 12,168 12,901 11,161
9/98 12,437 13,366 11,206
</TABLE>

Average Annual Total Returns (at max. offering price)
A Shares One Year (12 mos. ended 9/30/98): 2.89%
From Inception (2/01/94): 4.79%

INTERMEDIATE NEW YORK FUND

Index Comparison

Compares performance of Intermediate New York Fund, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, September 4,
1997 to June 30, 1998. On June 30, 1998, 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 9.5
years and 10 years, respectively. Past performance of the Index and the Fund
may not be indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
9/4/97 10,000 10,000 10,000
9/97 11,153 11,510 10,940
10/97 11,387 11,892 10,973
11/97 11,665 12,255 11,039
12/97 11,897 12,572 11,083
. . .
3/98 12,011 12,719 11,095
6/98 12,168 12,901 11,161
</TABLE>

Average Annual Total Returns (at max. offering price)
From Inception (9/04/97): 1.03%

<PAGE>
ADDITIONAL INFORMATION ABOUT FUND 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.

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. 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 and adversely
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. 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.

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 TMC 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 a 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.

YEAR 2000

The inability of some computer systems to recognize dates after December 31,
1999 could cause some disruptions in the securities industry.

Thornburg Fund's Transfer Agent and Custody Bank National Financial Data
Services/DST (Transfer Agent) and State Street Bank (Custodian) have been
preparing for year 2000 conversion since 1988. Beta testing has been done
using 1999/2000 conversions all the way out to 2009/2010 conversions
(including leap year calculations). Firewalls have been built to isolate
non-complaint third party transmissions and testing has begun with all third
party electronic communicators. Detailed Y2K information is available over
the Internet at www.dstsystems.com. DST's stated goal is to be Y2K Ready by
the end of 1998.

The Funds' internal systems take no electronic downloads other than from DST
Systems. We do, however, purchase information and research delivered
electronically. We also use analytical programs provided by such vendors,
e.g. bond analytics. Failure of such externally supplied services would
impact our efficiency, and that of our entire industry. It would not,
however, preclude our ability to analyze securities or monitor and adjust
portfolios.

In addition, although we don't expect it to be the case, issuers of
securities owned by the Funds might have difficulties that would delay or
disrupt their payments of interest or dividends to the Funds.

PORTFOLIO TURNOVER

Each Fund anticipates that is annual portfolio turnover rate will be less
than 100%. TMC does not consider portfolio turnover rate a limiting factor
in making investment decisions. High rates of turnover may result in
increased transaction costs, and could result in increased capital gains
distributions to shareholders.

BUYING FUND SHARES IN GENERAL

Each Fund offers Class A shares, and Limited Term National Fund, Limited
California Fund and Intermediate National Fund offer Class C shares. Each of
a Fund's shares represents an equal undivided interest in the Fund's assets,
and each Fund has common investment objectives and a common investment
portfolio. Each class may have varying annual expenses and sales charge
structures, which may affect performance. 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. All orders are subject to acceptance by
the Funds, and the Funds and TSC reserve the right to refuse any order in
whole or in part.

Each Fund also may issue one or more other classes of shares not offered
through this Prospectus. Different classes may have different sales charges
and other expenses which may affect performance. Investors may telephone the
Funds' distributor, TSC, at (800) 847-0200 to obtain more information
concerning the various classes of shares which may be available to them
through their sales representatives. Investors may also obtain information
respecting the different classes of shares through their sales representative
or other person who is offering or making available shares of the Funds.

NET ASSET VALUE

When you purchase shares, the price is based on the net asset value (NAV)
next determined after receipt of your order. The net asset value is the
value of a share, and is computed for each class of a Fund by adding the
value of investments, cash and other assets for the class, subtracting
liabilities, and then dividing by the number of shares outstanding. Share
price is normally calculated at 4:00 p.m. Eastern time on each day the New
York Stock Exchange is open for business.

BUYING CLASS A SHARES**

Class A shares are sold subject to a front-end sales charge. The sales
charge is deducted from the offering price when you purchase shares, and the
balance is invested at net asset value (NAV). The sales charge is not
imposed on shares that are purchased with reinvested dividends or other
distributions. Class A shares are also subject to a Rule 12b-1 Service Plan,
which provides for the Fund's payment to TMC of up to 1/4 of 1% of the
class's net assets each year, to obtain various shareholder related services.
Because this service fee is paid out of the class's assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost more than paying other types of sales charges.

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
Total Sales Charge
As Percentage As Percentage
of Offering Price of Net Asset Value
<S> <C> <C>
Limited Term Municipal Funds
- ----------------------------
Less than $250,000.00 1.50% 1.52%
$250,000 to 499,999.99 1.25% 1.27%
$500,000 to 999,999.99 1.00% 1.01%
$1,000,000 and up 0.00% 0.00%*

Intermediate Municipal Funds
- ----------------------------
Less than $250,000.00 2.00% 2.04%
$250,000 to 499,999.99 1.50% 1.52%
$500,000 to 999,999.99 1.25% 1.27%
$1,000,000 and up 0.00% 0.00%
</TABLE>

* 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 one year following the share
purchase at the rate of 1/2 of 1%. 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.

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
above, 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
Funds' Custodian bank or Transfer Agent and members of their families
including trusts established for the benefit of the foregoing.

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,
investment dealers and investment advisors who charge fees for service,
including investment dealers who utilize wrap fee or similar
arrangements. Accounts established through these persons are subject to
conditions, fees and restrictions imposed by these persons.

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 FUNDS provided that such purchases are made by: (i)
investment advisors 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
advisors or financial planners who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor 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 Funds
without notice.

BUYING CLASS C SHARES

Class C shares are sold at the NAV next determined after your order is
received. Class C shares are subject to a 1% contingent deferred sales
charge (CDSC) if the shares are redeemed within one year of purchase. The
percentage is calculated on the amount of the redemption proceeds for each
share, or the original purchase price, whichever is lower. Shares not
subject to the CDSC are considered redeemed first. The CDSC is not imposed
on shares purchased with reinvested dividends or other distributions. Class
C shares are subject to a Rule 12b-1 Service Plan providing for payment of a
service fee of up to 1/4 of 1% of the class's net assets each year, to obtain
shareholder related services. Class C shares are also subject to a Rule 12b-
1 Distribution Plan providing for payment of a distribution fee of up to 3/4
of 1% of the class's net assets each year, to pay for commissions and other
distribution expenses. Because these service and distribution fees are paid
out of the class's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost more than paying other
types of sales charges. Purchases of $1,000,000 or more of Class C shares
will not be accepted.

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

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. 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. 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

Internet redemption. You may redeem shares of any Fund by contacting
Thornburg at its Website, www.thornburg.com and following the instructions.

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
Accounts 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

Internet All Account Types www.thornburg.com
____________________________________________________________________________

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 a.m. to 6:30 p.m. 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.

Thornburg Website. Thornburg's Website on the Internet provides you with
helpful information 24 hours a day, at: www.thornburg.com

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

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 28.

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.

DIVIDENDS AND DISTRIBUTIONS

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 Gains
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. No interest is accrued or paid on amounts
represented by uncashed distribution checks.

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

Each Fund 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 the individual 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 Funds' 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.

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"). 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 California, New Mexico and
New York 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 Intermediate New Mexico Fund, will not be required by
New Mexico to pay income taxes on interest dividends attributable to
obligations originating in that state. Individual shareholders of the
Intermediate New York Fund, who are residents of New York City, will not be
required to pay New York State income taxes on interest dividends
attributable to obligations originating in New York State. Capital gain
distributions are taxable by these states, irrespective of the origins of the
obligations from which the gains arise.

Florida does not currently impose an income tax on individuals. 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 days
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.

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 28. 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. 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.

Each Fund may authorize certain securities brokers to accept on its behalf
purchase and redemption orders received in good form, and some of those
brokers may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. Provided the order is
promptly transmitted to the Fund, the Fund will be deemed to have received a
purchase or redemption order at the time it is accepted by such an
authorized broker or its designee, and customer orders will be priced based
upon the Fund's net asset value next computed after the order is accepted by
the authorized broker or its designee.

The minimum account size is $1,000. Each Fund reserves the right to redeem
the shares of any shareholder whose shares have a net asset value of less
than $1,000. The Fund will notify the shareholder before performing the
redemption.

When you place an order to sell shares, your shares will be sold at the next
NAV calculated after your request is received in proper form. (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.
* No interest or earnings will accrue or be paid on amounts represented by
uncashed distribution or redemption checks.
* 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

As a shareholder you have the privilege of exchanging Class A shares of the
Funds for Class A shares of other Thornburg Funds. However, you should note
the following:

* 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 have 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.

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 13
authorized Funds, four 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.

INVESTMENT ADVISER AND MANAGEMENT FEES

The Funds are managed by Thornburg Management Company, Inc. (TMC). TMC
performs investment management services for each Fund under the terms of an
Investment Advisory Agreement which specifies that TMC will select
investments for the Fund, monitor those investments and the markets
generally, and perform related services. TMC also performs administrative
services specific to each class of shares of each Fund under an
Administrative Services Agreement which requires that TMC will supervise,
administer and perform certain administrative services necessary for the
maintenance of each class' shareholders. TMC's services to the Limited Term
Municipal Funds are supervised by the Directors of Thornburg Limited Term
Municipal Fund, Inc., and TMC's services to the Intermediate Municipal Funds
are supervised by the Trustees of Thornburg Investment Trust.

For each of the Funds, TMC receives a management fee and an administrative
services fee, computed according to the following scales and paid monthly as
a percentage of each Fund's average daily net assets.

<TABLE>
Limited Term Intermediate Term All Funds
Municipal Funds Municipal Funds Annual
Net Assets Annual Investment Annual Investment Administrative
Management Fee Management Fee Fee
- ---------- ----------------- ----------------- --------------
<S> <C> <C> <C>
0 to $500 million .50% .50% .125%
$500 million to $1 billion .40% .45% .125%
$1 billion to $1.5 billion .30% .40% .125%
$1.5 billion to $2 billion .25% .35% .125%
Over $2 billion .225% .275% .125%
</TABLE>

For the most recent fiscal year of Limited Term National Fund, Limited Term
California Fund and Intermediate New York Fund, ended June 30, 1998, the
investment management fee percentage was .45%, .50% and .50%, respectively.
For the most recent fiscal year of Intermediate National fund, Intermediate
New Mexico Fund and Intermediate Florida Fund, ended September 30, 1998, the
investment management fee percentage was .50% for each Fund.

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 $2.2 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.

Brian J. McMahon and George Strickland, both of whom are managing directors
of TMC, are the portfolio managers for each of the Fund portfolios. Mr.
McMahon has managed municipal bond portfolios for TMC since 1984 and Mr.
Strickland has performed municipal bond credit analysis and management since
joining TMC in 1991. Mr. McMahon and Mr. Strickland are 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
if expenses fall below the limit prior to the end of the fiscal year. Fee
waivers and expense reimbursements will increase a Fund's yield, and
repayment of waivers or reimbursements will lower the Fund's 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 "Your Account - Buying Fund Shares."

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 Company, is the controlling stockholder of both TMC and
TSC.

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand each
Fund's financial performance for the past five years (or if shorter, the
period of the Fund's operations). Certain information reflects financial
results for a single Fund share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). Information
for all period except the six month periods ended December 31, 1998 for
Limited Term National Fund, Limited Term California Fund and Intermediate New
York Fund has been audited by McGladrey & Pullen, LLP, independent auditors,
whose report, along with each Fund's financial statements, are included in
the Fund's Annual Report, which is available upon request.

<TABLE>
- ------------------------------------
THORNBURG LIMITED TERM NATIONAL FUND
- ------------------------------------
---------------------------------------------------------------------------------------------------------
CLASS A CLASS C
--------------------------------------------------- -------------------------------------------------
Period
Six Six from
Months Month 9/1/94 <F(a)>
Ended Year Ended June 30: Ended Year Ended June 30: to
12/31/98 1998 1997 1996 1995 1994 12/31/98 1998 1997 1996 6/30/95
-------- ------ ------ ------ ------ ------ -------- ----- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.50 $13.44 $13.35 $13.37 $13.27 $13.59 $13.53 $13.46 $13.37 $13.40 $13.29

Income from Investment
Operations:
Net Investment Income 0.30 .61 .62 .63 .64 .63 0.27 .55 .57 .57 .46
Net Gains (or Losses) on
Securities 0.09 .06 .09 (.02) .10 (.32) 0.08 .07 .09 (.03) .11
(Realized and
Unrealized) ------- ------ ------ ------ ------ ------ -------- ------ ------ ------ ------
Total from Investment
Operations 0.39 .67 .71 .61 .74 .31 (0.35) .62 .66 .54 .57

Less Distributions:
Dividends
(from Net Investment
Income) (0.39) (.61) (.62) (.63) (.64) (.63) (0.27) (.55) (.57) (.57) (.46)
Distributions
(from Capital Gains) - - - - - - - - - - -
Total Distributions (0.39) (.61) (.62) (.63) (.64) (.63) (0.27) (.55) (.57) (.57) (.46)

Net Asset Value,
End of Period $13.59 $13.50 $13.44 $13.35 $13.37 $13.27 $13.61 $13.53 $13.46 $13.37 $13.40

Total Return <FN(b)> 4.80% 5.05% 5.46% 4.60% 5.76% 2.25% 4.36% 4.70% 5.02% 4.05% 4.25%

Ratios/Supplemental Data:
Net Assets, End of Period
(000's omitted) $821,913 836,947 837,621 917,831 931,987 1,030,293 25,011 $22,729 19,475 15,948 6,469
Ratio of Expenses to

Average Net Assets (0.96)(c) (0.97)% (0.96) (0.97)% (0.97)% (0.95)% (1.38)%(c) (1.38)% (1.38)% (1.41)% (1.60)%<F(c)>
(After Expense
Reimbursements)
Ratio of Net Income
to Average Net Assets 4.31(c) 4.50% 4.65% 4.66% 4.86% 4.60% 3.89%(c) 4.08% 4.24% 4.22% 4.22% <F(c)>
(After Expense
Reimbursements)
Ratio of Expenses to
Average Net Assets (0.96)(c) (0.97)% (0.96)% (0.97)% (0.97)% (0.95)% (1.78)%(c) (1.45)% (1.86)% (1.63)% (1.84)%<F(c)>
(Before Expense
Reimbursements)

Portfolio Turnover Rate 10.20% 24.95% 23.39% 20.60% 23.02% 15.63% 10.20% 24.95% 23.39% 20.60% 23.02%

- ------------------------------------
THORNBURG LIMITED TERM NATIONAL FUND
- ------------------------------------
---------------------------------------------------------------------------------------------------------
CLASS A CLASS C
--------------------------------------------------- -------------------------------------------------
Period
Six Six from
Months Month 9/1/94 <F(a)>
Ended Year Ended June 30: Ended Year Ended June 30: to
12/31/98 1998 1997 1996 1995 1994 12/31/98 1998 1997 1996 6/30/95
-------- ------ ------ ------ ------ ------ -------- ----- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.90 $12.75 $12.64 $12.61 $12.57 $12.85 $12.91 $12.76 $12.65 $12.62 $12.55

Income from Investment
Operations:
Net Investment Income .27 .55 .57 .58 .58 .58 .24 .50 .52 .53 .42
Net Gains (or Losses) on
Securities .10 .15 .11 .03 .04 (.28) .10 .15 .11 .03 .07
(Realized and
Unrealized) ------- ------ ------ ------ ------ ------ ------- ------ ------ ------ ------
Total from Investment
Operations .37 .70 .68 .61 .62 .30 .34 .65 .63 .56 .49

Less Distributions:
Dividends
(from Net Investment
Income) (.27) (.55) (.57) (.58) (.58) (.58) (.24) (.50) (.52) (.53) (.42)
Distributions
(from Capital Gains) - - - - - - - - - - -
Total Distributions (.27) (.55) (.57) (.58) (.58) (.58) (.24) (.50) (.52) (.53) (.42)

Net Asset Value,
End of Period $13.00 $12.90 $12.75 $12.64 $12.61 $12.57 $13.01 $12.91 $12.76 $12.65 $12.62

Total Return <FN(b)> 4.97% 5.57% 5.47% 4.49% 5.12% 2.37% 4.46% 5.14% 5.06% 4.46% 3.98%

Ratios/Supplemental Data:
Net Assets, End of Period
(000's omitted) $116,395 122,231 94,253 94,379 98,841 111,723 8,156 7,843 5,882 2,444 790
Ratio of Expenses to
Average Net Assets (0.99)(c) (1.00)% (1.00)% (1.00)% (1.00)% (1.00)% (1.40)%(c) (1.40)% (1.40)% (1.43)% (1.63)%<F(c)>

- ------------------------------------
THORNBURG LIMITED TERM NATIONAL FUND
- ------------------------------------
---------------------------------------------------------------------------------------------------------
CLASS A CLASS C
--------------------------------------------------- -------------------------------------------------
Period
Six Six from
Months Month 9/1/94 <F(a)>
Ended Year Ended June 30: Ended Year Ended June 30: to
12/31/98 1998 1997 1996 1995 1994 12/31/98 1998 1997 1996 6/30/95
-------- ------ ------ ------ ------ ------ -------- ----- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(After Expense
Reimbursements)
Ratio of Net Income
to Average Net Assets 4.08(c) 4.25% 4.47% 4.59% 4.69% 4.51% 3.67%(c) 3.85% 4.06% 4.16% 4.07% <F(c)>
(After Expense
Reimbursements)
Ratio of Expenses to
Average Net Assets (1.02)(c) (1.04)% (1.03)% (1.05)% (1.04)% (1.03)% (1.92%)(c) (1.60)% (2.15)% (2.92)% (3.21)%<F(c)>
(Before Expense
Reimbursements)

Portfolio Turnover Rate 9.52% 21.21% 20.44% 22.68% 18.54% 15.26% 9.52% 22.21% 20.44% 22.68% 18.54%

- ------------------------------------
THORNBURG INTERMEDIATE NATIONAL FUND
- ------------------------------------
---------------------------------------------------------------------------------------
CLASS A CLASS C
------------------------------------------ ------------------------------------------
Period
from
9/1/94
<F(a)>
Year Ended September 30: Year Ended September 30: to
1998 1997 1996 1995 1994 1998 1997 1996 1995 9/30/94
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.46 $13.23 $13.18 $12.73 $13.47 $13.48 $13.24 $13.20 $12.73 $12.91

Income from Investment Operations:
Net Investment Income .63 .66 .68 .68 .67 .58 .61 .63 .60 .05
Net Gains (or Losses) on Securities .30 .23 .05 .45 (.72) .29 .24 .04 .47 (.18)
(Realized and Unrealized) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations .93 .89 .73 1.13 (.05) .87 .85 .67 1.07 (.13)

Less Distributions:
Dividends (from Net Investment Income) (.63) (.66) (.68) (.68) (.67) (.58) (.61) (.63) (.60) (.05)
Distributions (from Capital Gains) - - - - (.02) - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (.63) (.66) (.68) (.68) (.69) (.58) (.61) (.63) (.60) (.05)

Net Asset Value, End of Period $13.76 $13.46 $13.23 $13.18 $12.73 $13.77 $13.48 $13.24 $13.20 $12.73

Total Return <FN(b)> 7.08% 6.90% 5.64% 9.16% (0.38)% 6.57 6.55% 5.14% 8.60% (0.97)%

Ratios/Supplemental Data:
Net Assets, End of Period (000's omitted) $368,108 309,293 246,128 227,881 207,718 $20,852 11,292 7,586 4,001 139
Ratio of Expenses to Average Net Assets (1.00)% (1.00)% (1.00)% (1.00)% (.95)% (1.40)% (1.40)% (1.40)% (1.66)% (1.76)%
(After Expense Reimbursements) <F(c)>
Ratio of Net Income to Average Net Assets 4.65% 4.96% 5.12% 5.31% 5.23% 4.23% 4.55% 4.73% 4.62% 4.51%
(After Expense Reimbursements) <F(c)>
Ratio of Expenses to Average Net Assets (1.04)% (1.05)% (1.09)% (1.08)% (1.05)% (1.53)% (1.99)% (1.97)% (2.35)% (1.76)%
(Before Expense Reimbursements) <F(c)>

Portfolio Turnover Rate 16.28% 15.36% 12.64% 32.20% 27.37% 16.28% 15.36% 12.64% 32.20% 27.37%

- --------------------------------------
THORNBURG INTERMEDIATE NEW MEXICO FUND
- --------------------------------------
------------------------------------------
CLASS A
------------------------------------------
Year Ended September 30:
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.28 $13.09 $13.12 $12.72 $13.36

Income from Investment Operations:
Net Investment Income .62 .64 .63 .60 .60
Net Gains (or Losses) on Securities .17 .19 (.03) .40 (.63)
(Realized and Unrealized) ------ ------ ------ ------ ------
Total from Investment Operations .79 .83 .60 1.00 (.03)

Less Distributions:
Dividends (from Net Investment Income) (.62) (.64) (.63) (.60) (.60)
Distributions (from Capital Gains) - - - - -
------ ------ ------ ------ ------
Total Distributions (.62) (.64) (.63) (.60) (.60)

Net Asset Value, End of Period $13.45 $13.28 $13.09 $13.12 $12.72

Total Return <FN(b)> 6.08% 6.51% 4.68% 8.10% (0.26)%

Ratios/Supplemental Data:
Net Assets, End of Period (000's omitted) $153,118 145,850 131,307 136,742 143,910
Ratio of Expenses to Average Net Assets (1.00)% (1.00)% (1.00)% (1.00)% (.90)%
(After Expense Reimbursements)
Ratio of Net Income to Average Net Assets 4.64% 4.88% 4.81% 4.71% 4.85%
(After Expense Reimbursements)
Ratio of Expenses to Average Net Assets (1.02)% (1.05)% (1.07)% (1.06)% (1.04)%
(Before Expense Reimbursements)

Portfolio Turnover Rate 13.74% 10.06% 10.88% 17.06% 6.87%

- -----------------------------------
THORNBURG INTERMEDIATE FLORIDA FUND
- -----------------------------------
------------------------------------------
CLASS A
------------------------------------------
Period
from
2/01/94
<F(a)>
Year Ended September 30: to
1998 1997 1996 1995 9/30/94
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.14 $11.88 $11.83 $11.54 $12.06

Income from Investment Operations:
Net Investment Income .56 .56 .57 .63 .40
Net Gains (or Losses) on Securities .23 .26 .05 .29 (.52)
(Realized and Unrealized) ------ ------ ------ ------ ------
Total from Investment Operations .79 .82 .62 .92 (.12)

Less Distributions:
Dividends (from Net Investment Income) (.56) (.56) (.57) (.63) (.40)
Distributions (from Capital Gains) - - - - -
------ ------ ------ ------ ------
Total Distributions (.56) (.56) (.57) (.63) (.40)

Net Asset Value, End of Period $12.37 $12.14 $11.88 $11.83 $11.54

Total Return <FN(b)> 6.62% 7.04% 5.37% 8.22% (0.95)%

Ratios/Supplemental Data:
Net Assets, End of Period (000's omitted) $28,091 24,663 19,501 14,822 8,076
Ratio of Expenses to Average Net Assets (.98)% (.83)% (.61)% (.38)% (.25)%
(After Expense Reimbursements) <F(c)>
Ratio of Net Income to Average Net Assets 4.54% 4.65% 4.80% 5.41% 5.09%
(After Expense Reimbursements) <F(c)>
Ratio of Expenses to Average Net Assets (1.11)% (1.13)% (1.34)% (1.44)% (1.95)%
(Before Expense Reimbursements) <F(c)>

Portfolio Turnover Rate 70.91% 51.48% 77.12% 89.60% 19.94%

- ------------------------------------
THORNBURG INTERMEDIATE NEW YORK FUND
- ------------------------------------
--------
CLASS A
--------
Period
from
Six 9/04/97
Months <F(a)>
Ended to
12/31/98 6/30/98
-------- -------
<S> <C> <C>
Net Asset Value, Beginning of Period $12.71 $12.50

Income from Investment Operations:
Net Investment Income .32 .52
Net Gains (or Losses) on Securities .09 .21
(Realized and Unrealized) ------- ------
Total from Investment Operations .41 .73

Less Distributions:
Dividends (from Net Investment Income) (.32) (.52)
Distributions (from Capital Gains) (.02) -
------ ------
Total Distributions (.34) (.52)

Net Asset Value, End of Period $12.78 $12.71

Total Return <FN(b)> 5.88% 5.92%

Ratios/Supplemental Data:
Net Assets, End of Period (000's omitted) $25,392 $25,472
Ratio of Expenses to Average Net Assets (0.75)%(c) (.78)%<F(c)>
(After Expense Reimbursements)
Ratio of Net Income to Average Net Assets 4.96%(c) 4.90%<F(c)>
(After Expense Reimbursements)
Ratio of Expenses to Average Net Assets (1.20)%(c) (1.19)%<F(c)>
(Before Expense Reimbursements)

Portfolio Turnover Rate 3.04% 42.27%
</TABLE>

[FN]
<F(a)> Commencement of operations.
<F(b)> Sales charges are not reflected in computing total return,
which is not annualized for periods less than one year.
<F(c)> Annualized.

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

<OUTSIDE BACK COVER>
The current Statement of Additional Information (SAI) for each of the
Funds includes additional information about the Funds, and additional
information about each Fund's investments is available in the Fund's annual
and semiannual reports to shareholders.

Shareholder inquiries and requests for copies of the Funds' SAI, annual and
semiannual reports, and other Fund information may be made to Thornburg
Securities Corporation at 119 East Marcy Street, Suite 202, Santa Fe, New
Mexico 87501 (800) 847-0200. SAIs and annual and semiannual reports are
furnished at no charge.

Information about the Funds (including the SAI) may be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Funds are also available on the Commission's Internet
site at http://www.sec.gov and copies of information may be obtained, upon
payment of a duplicating fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-6009.

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
www.thornburg.com email: [email protected]

Securities and Exchange Commission Investment Company Act of 1940 file
numbers:
Thornburg Investment Trust: 811-05201
Thornburg Limited Term Municipal Fund, Inc.: 811-4302

<PAGE>
PART B

THORNBURG LIMITED TERM MUNICIPAL FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

Thornburg Limited Term Municipal Fund National Portfolio ("Limited Term
National Fund") and Thornburg Limited Term Municipal Fund California
Portfolio ("Limited Term California Fund")are separate investment portfolios
or "Funds" established by Thornburg Limited Term Municipal Fund, Inc. (the
"Company"). This Statement of Additional Information relates to the
investments made by the funds, the Fund's management, and other issues of
interest to a prospective purchaser of shares in the Funds.

This Statement of Additional Information of Thornburg Limited Term
Municipal Fund, Inc. (the "Company") is not a prospectus but should be read
in conjunction with the Company's Prospectus dated June 1, 1999, (the
"Prospectus"). A copy of the Prospectus, and copies of the Funds' most recent
Annual and Semiannual Reports to Shareholders, may be obtained, without
charge, by writing to Thornburg Securities Corporation (the "Distributor"),
119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501. Prior to June
28, 1985, the Company's name was "Tax-Free Municipal Lease Fund, Inc.;" and
the Company operated under the name "Limited Term Municipal Fund, Inc." from
June 28, 1985 to November 1, 1992.

The date of this Statement of Additional Information is June 1, 1999.

<PAGE> i
TABLE OF CONTENTS

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . i

ORGANIZATION OF THE FUNDS . . . . . . . . . . . . . . . . __

INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . __
Ratings . . . . . . . . . . . . . . . . . . . . . . __
Temporary Investments. . . . . . . . . . . . . . . . __
Repurchase Agreements. . . . . . . . . . . . . . . . __
U.S. Government Obligations. . . . . . . . . . . . . __

INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . __

PERFORMANCE COMPUTATION . . . . . . . . . . . . . . . . . __
Performance Computations - In General. . . . . . . . __
Representative Performance Figures -
Limited Term National Fund (Classes A and C). . __
Representative Performance Figures -
Limited Term California Fund
(Classes A and C). . . . . . . . . . . . . __

DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . __
Distributions. . . . . . . . . . . . . . . . . . . . __
Tax Matters . . . . . . . . . . . . . . . . . . . . __
State and Local Tax Aspects. . . . . . . . . . . . . __
Special Risks Affecting the California Portfolio . . __
Accounts of Shareholders . . . . . . . . . . . . . . __

INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . __
Investment Management Services . . . . . . . . . . . __
Administrative Services Agreement. . . . . . . . . . __

SERVICE AND DISTRIBUTION PLANS. . . . . . . . . . . . . . __
Service Plan - All Classes . . . . . . . . . . . . . __
Class C Distribution Plan. . . . . . . . . . . . . . __
General Matters Relating to Service and
Distribution Plans . . . . . . . . . . . . . . . __

PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . __

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . __
i
<PAGE> ii
PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . __

HOW TO PURCHASE FUND SHARES . . . . . . . . . . . . . . . __

NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . __

REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . __

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . __

INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . __

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . __
ii

<PAGE>
ORGANIZATION OF THE FUNDS

The Company currently offers two separate investment portfolios or
Funds: Thornburg Limited Term Municipal Fund National Portfolio ("Limited
Term National Fund") and Thornburg Limited Term Municipal Fund California
Portfolio ("Limited Term California Fund"). Each Fund currently offers two
classes of shares, Class A shares and Class C shares.

Each of the Funds is a diversified series of Thornburg Limited Term
Municipal Fund, Inc. (the "Company"), a Maryland corporation organized as a
diversified, open-end management company. The Company was originally
organized in 1984. Limited Term National Fund and Limited Term California
Fund were created on the same date. Limited Term National Fund commenced
investment operations on September 28, 1984, and Limited Term California
Fund commenced investment operations on February 19, 1987. The Limited
Term Municipal Funds are managed by their investment adviser, Thornburg
Management Company, Inc., under the supervision of the Board of Directors
of 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 Fund may hold special shareholder meetings and mail proxy
materials. These meetings may be called to elect or remove Directors,
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 rights or preemptive rights.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Funds is to provide for their respective
shareholders as high a level of current interest income exempt from federal
income tax as is consistent, in the view of the Funds' management, with
preservation of capital. Additionally, the Limited Term California Fund
seeks to provide as high a level of current interest income exempt from
California state income tax as is consistent in the view of the Fund's
management with preservation of capital. Investors should recognize,
however, that income otherwise exempt from federal income tax may be subject
to the federal minimum tax and state income taxes. See "DISTRIBUTIONS AND
TAXES", below.

A secondary investment objective of the Funds is to minimize expected
fluctuations in net asset value per share relative to municipal bond
portfolios with longer average maturities by maintaining a portfolio with a
dollar-weighted average maturity that will normally not exceed five years.
There is a risk in all investments, however, and there can be no assurance
that the Funds' objectives will be achieved. The objective of preservation
of capital may preclude the Funds from obtaining the highest available
yields.

The Funds will seek to achieve their objective by investing in a
diversified portfolio of obligations issued by state and local governments
the interest on which is exempt from federal income tax ("Municipal
Obligations"). Each Fund may invest its assets in Municipal Obligations (or
participation interest therein) that constitute leases or installment
purchase or conditional sale contracts by state or local governments or
authorities to obtain property or equipment ("Municipal Leases").

Municipal Obligations include debt obligations issued by states, cities
and local authorities to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which Municipal
Obligations may be issued include the refunding of outstanding obligations,
the obtaining of funds for general operating expenses and the obtaining of
funds to lend to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide privately-operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal. Municipal Obligations have also been issued
to finance single-family mortgage loans and to finance student loans. Such
obligations are included within the term Municipal Obligations if the
interest paid thereon is exempt from federal income tax. Municipal
Obligations also include obligations issued by or on behalf of territories or
possessions of the United States and their agencies and instrumentalities.

The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a specific revenue source. Industrial development bonds
are in most cases revenue bonds and are generally not secured by the pledge
of the credit or taxing power of the issuer of such bonds. There are, of
course, variations in the security of Municipal Obligations, both within a
particular classification and between classifications, depending on numerous
factors.

The Funds' assets will normally consist of (1) Municipal Obligations
(including municipal Leases) or participations therein that are rated at the
time of purchase within the four highest grades by Moody's or S&P and
(2) Municipal Obligations (including Municipal Leases) or participations
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 Investors Service
("Moody's") Standard & Poor's Corporation ("S&P") or Fitch Investors Service
("Fitch") or, in the case of obligors whose obligations are unrated, are
deemed by the Funds' investment adviser, Thornburg Management Company, Inc.
("TMC"), to be comparable with issuers having such debt ratings, (3) cash and
receivables. 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 either rating agency;
(iii) municipal notes that are rated within the two highest grades of either
rating agency or, if unrated, are deemed by TMC to be of comparable quality
to such rated municipal notes; and (iv) other municipal demand instruments
rated within the three highest grades of either rating agency or, if unrated,
are deemed by TMC to be of comparable quality to such rated municipal demand
instruments. Unrated Municipal Leases will be purchased only subject to
certain restrictions described in the Prospectus under the caption
"Investment Objectives and Policies -- Municipal Obligations". 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. Except to the extent that a Fund is
invested in temporary investments for defensive purposes, the Fund will,
under normal conditions, invest 100% of its net assets in Municipal
Obligations, and as a matter of fundamental policy normally will not invest
less than 80% in Municipal Obligations. Under normal conditions the Limited
Term California Fund will attempt to invest 100% and as a matter of
fundamental policy, will invest at least 65% of its net assets in Municipal
Obligations (and participation interests therein) issued by public entities
located in the State of California.

In some cases, investments by a Fund in Municipal Leases will take the
form of purchases of participation interests therein from banks and other
responsible parties. A participation interest gives the Fund a specified
undivided interest in the obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the Municipal
Lease.

The foregoing restrictions and other limitations discussed herein and
under "Investment Limitations" will apply only at the time of purchase of
securities and will not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of an acquisition of
securities.

Each Fund has reserved the right to invest up to 20% of its net assets
in "temporary" investments in taxable securities, but does not expect to find
it necessary to do so. See "Temporary Investments" and "Repurchase
Agreements" below.

Portfolio trading will be undertaken to accomplish the Funds' investment
objectives in relation to actual and anticipated movements in interest rates.

The Funds also may engage to a limited extent in short-term trading
consistent with their investment objectives. Securities may be sold in
anticipation of a market decline (a rise in interest rates) or purchased in
anticipation of a market rise (a decline in interest rates) and later sold,
but the Funds will not engage in trading solely to recognize a gain. In
addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what a Fund believes to
be a temporary disparity in the normal yield relationship between the two
securities. Yield disparities may occur for reasons not directly related to
the investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for or supply of
various types of Municipal Obligations or changes in the investment
objectives of investors. With respect to income tax consequences to the
Funds and their shareholders resulting from short-term trading by the Funds,
see "Distributions and Taxes".

Subject to the foregoing, each Fund will attempt to achieve its
investment objective by prudent selection of Municipal Obligations with a
view to holding them for investment. While there can be no assurance
thereof, each Fund anticipates that its annual portfolio turnover rate
generally will not exceed 100%. However, each Fund reserves the right to
make changes in its portfolio whenever it deems such action advisable, and
the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Therefore, depending upon market
conditions, each Fund's annual portfolio turnover rate may exceed 100% in
particular years.

Except as expressly set forth in this Statement of Additional
Information or in the Prospectus, the investment objective and the
permissible investments set forth herein under the caption "Investment
Objective and Policies" are not fundamental policies and may be changed by
the Board of Directors of the Company without approval by Fund shareholders.
Any fundamental policy may be changed only with the approval of a majority of
the outstanding shares of each Fund which would be affected by the change.
See "Investment Limitations".

Each Fund may invest a portion of its assets in Municipal Leases and
participation interests therein. Such obligations, which may take the form
of a lease or an installment purchase of conditional sale contract, are
issued by state and local governments and authorities to acquire a wide
variety of equipment and facilities, such as fire and sanitation vehicles,
telecommunications equipment and other capital assets. Interest payments on
qualifying Municipal Leases are exempt from federal income taxes.

Municipal Leases have special risks not normally associated with general
obligation or revenue bonds. The constitutions and statutes of all states
contain requirements that the state or a municipality must meet to incur
debt. These often include voter referenda, interest rate limits and public
sale requirements. Leases and installment purchase or conditional sale
contracts (which normally provide for title to the leased asset to pass
eventually to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting their
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations are deemed to be inapplicable because of the
inclusion in many leases or contracts of "non-appropriation" clauses which
provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other periodic
basis.

Although Municipal Leases typically will be secured by the leased
property, the disposition of the property in the event of non-appropriation
or foreclosure might, in some cases, prove difficult. In addition, in
certain instances the tax-exempt status of the obligations will not be
subject to the legal opinion of a nationally recognized "bond counsel," as is
customarily required in larger issues of Municipal Obligations. However, in
all cases the Company will require that a Municipal Lease purchased by a Fund
be covered by a legal opinion (typically from the issuer's counsel) to the
effect that, as of the effective date of such Lease, the Lease is the valid
and binding obligation of the governmental issuer.

TMC will evaluate the liquidity of each Municipal Lease upon its
acquisition by a Fund and periodically while it is held based upon factors
established by the Fund's board of directors, including (i) the frequency of
trades and quotes for the obligation, (ii) the number of dealers who will buy
or sell the obligation and the potential buyers of the obligation, (iii) the
willingness of dealers to make a market for the obligation, and (iv) the
nature and timing of marketplace trades. For purposes of the preceding
sentences, an unrated Municipal Lease with non-appropriation risk that is
backed by an irrevocable bank letter of credit or an insurance policy, issued
by a bank or insurer deemed by TMC to be of high quality and minimal credit
risk, will not be deemed to be "illiquid" solely because the underlying
Municipal Lease is unrated, if TMC determines that the Municipal Lease is
readily marketable because it is backed by such letter of credit or insurance
policy.

Each Fund will seek to reduce further the special risks associated with
investment in Municipal Leases by investing in Municipal Leases only where,
in TMC's opinion, certain factors established by the Fund's directors have
been satisfied, including (1) the nature of the leased equipment or property
is such that its ownership or use is deemed essential to a governmental
function of the governmental issuer, (2) the Municipal Lease has a shorter
term to maturity than the estimated useful life of the leased property and
the lease payments will commence amortization of principal at an early date,
(3) appropriate covenants will be obtained from the governmental issuer
prohibiting the substitution or purchase of similar equipment for a specified
period (usually 60 days or more) in the event payments are not appropriated,
(4) the underlying equipment has elements of portability or use that enhance
its marketability in the event foreclosure on the underlying equipment was
ever required, and (5) the governmental issuer's general credit is adequate.
The enforceability of the "non-substitution" provisions referred to in (3)
above has not been tested by the courts. Investments not meeting certain of
these criteria (such as the absence of a non-substitution clause) may be made
if the Municipal Lease is subject to an agreement with a responsible party
(such as the equipment vendor) providing warranties to the Fund that satisfy
such criteria.

Each Fund 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. In some cases these
demand instruments may be in the form of units, each of which consists of
(i) a Municipal Obligation and (ii) a separate put option entitling the
holder to sell to the issuer of the option the Municipal Obligation in such
unit, or an equal aggregate principal amount of another Municipal Obligation
of the same issuer, issue and maturity as the Municipal Obligation, at a
fixed price on specified dates during the term of the put option. In those
cases, each unit taken as a whole will be considered a Municipal Obligation.
The demand option may or may not increase the liquidity of the underlying
Municipal Obligation at any point in time. The issuer of the demand option
may or may not guarantee payments of principal and interest on the underlying
Municipal Obligation. However, as long as the issuer of the option honors
its obligation, or is perceived to be able to do so, the option should
decrease the risk of downward price fluctuation of the underlying Municipal
Obligation at any point in time by establishing a fixed price for which the
Municipal Obligation can be sold before its final maturity. In order to
reduce further the risk associated with this type of investment, a Fund will
invest in a fixed rate municipal demand instrument only if the instrument or
the letter of credit, guarantee or insurance associated therewith is rated
within the three highest grades of a nationally recognized rating agency, or
if unrated, is deemed by TMC to be of comparable quality with issues having
these debt ratings. The credit quality of such investments will be reviewed
on a periodic basis by TMC under the supervision of the Fund's directors.
When a Fund holds an investment in a Municipal Obligation together with a put
option relating to it, the maturity of the Municipal Obligation for purposes
of calculating the Fund's dollar-weighted average portfolio maturity will be
deemed to be the shorter of (1) the final maturity of the Municipal
Obligation, or (2) the next date that the Fund may demand payment for the
Municipal Obligation from the issuer of the put option.

Each Fund may purchase participation interests in Municipal Leases
principally from banks or other responsible parties (such as equipment
vendors, insurance companies, broker-dealers and other financial
institutions) which have entered into a "remarketing agreement" with the Fund
providing that the other party will either remarket or repurchase the
Municipal Leases within seven days after demand by the Fund on certain
conditions described below within seven days after demand by the Fund. Such
agreements are referred to herein as "remarketing agreements" and the party
that agrees to remarket or repurchase a Municipal Lease is referred to herein
as a "remarketing party.") The agreement will provide for a remarketing
price equal to the current value of the Fund's participation interest in the
obligation as determined by the Fund's portfolio valuation service as of the
demand date (plus accrued interest). The Funds anticipate that, in most
cases, the agreement will also provide for the seller of the participation
interest or the remarketing party to service the Municipal Lease, often for a
servicing fee. The conditions to a Fund's right to require the remarketing
party to remarket the obligation are that the Fund must certify at the time
of remarketing that (1) payments under the Municipal Lease are current and
the Fund has no knowledge of any default thereunder by the governmental
issuer, (2) such remarketing is necessary in TMC's sole opinion to meet the
Fund's liquidity needs and (3) the governmental issuer has not notified the
Fund of termination of the Municipal Lease.

A Fund will enter into remarketing agreements only with banks or other
responsible parties (such as equipment vendors, insurance companies,
broker-dealers and other financial institutions) that in the opinion of TMC
are capable of meeting their obligations to the Fund. TMC will monitor on a
continuous basis the ability of remarketing parties to meet their obligations
to the Fund. Although each Fund expects to deal with a variety of
remarketing parties, it reserves the right to enter into such agreements
covering up to 25% of its net assets with any particular remarketing party
meeting TMC's normal credit criteria. In addition, up to 50% of its net
assets may be covered by a remarketing agreement with a remarketing party
that is deemed by TMC to be of high quality and minimal credit risk. The
Company received an interpretation from the staff of the Securities and
Exchange Commission on January 18, 1985, enabling the Funds to enter into
remarketing agreements with a broker-dealer, provided the broker-dealer has
sold a participation interest in the underlying Municipal lease and the Fund
reflects the investment on its balance sheet as a participation interest.

The "remarketing" feature of the remarketing agreement entitles the
remarketing party to attempt to resell a Fund's participation interest in the
Lease within seven days after demand; however, the remarketing party will be
obligated to repurchase the Lease for its own account within the seven-day
period if the Lease has not been resold. The remarketing agreement will
often be entered into with the party who has sold a participation interest in
the Municipal Lease to the Fund, but remarketing agreements may also be
entered into with a separate remarketing party of the same type and meeting
the same criteria as described above. A Fund will not invest in unrated
Municipal Leases with non-appropriation risk that are not subject to a
remarketing agreement if, as a result of such investment, more than 10% of
its net assets would be invested in (1) unrated Municipal Leases with
non-appropriation risk not covered by such agreements and (2) other
investments not considered readily marketable by the Fund (including unrated
Municipal Leases not currently subject to remarketing pursuant to any such
agreement then in effect).

The Funds will enter into remarketing agreements solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. Remarketing agreements ordinarily will not be transferable
or assignable by a Fund, although the Fund will be entitled to sell the
underlying Municipal Obligation to another party at any time. If the Fund is
unable to exercise its rights under a remarketing agreement, it may be
required to hold the underlying Municipal Lease to maturity or treat the
Municipal Lease as an "illiquid" investment (see "Municipal Obligations",
below), unless it is able to place the investment with a new remarketing
party.

A Fund also may purchase and sell Municipal Obligations on a when-issued
or delayed delivery basis. When-issued and delayed delivery transactions
arise when securities are purchased or sold with payment and delivery beyond
the regular settlement date. (When-issued transactions normally settle
within 30-45 days.) On such transactions the payment obligation and the
interest rate are fixed at the time the buyer enters into the commitment.
The commitment to purchase securities on a when-issued or delayed delivery
basis may involve an element of risk because the value of the securities is
subject to market fluctuation, no interest accrues to the purchaser prior to
settlement of the transaction, and at the time of delivery the market value
may be less than cost. At the time a Fund makes the commitment to purchase a
Municipal Obligation on a when-issued or delayed delivery basis, it will
record the transaction and reflect the value of the security in determining
its net asset value. The Fund also will maintain liquid assets at least
equal in value to commitments for when-issued or delayed delivery securities,
such assets to be segregated by State Street Bank & Trust Co., the Funds'
custodian, specifically for the settlement of such commitments. The value of
the segregated assets will be marked to the market daily so that the Fund
will at all times maintain assets in the segregated account equal in value to
the amount of these commitments. The Fund only will make commitments to
purchase Municipal Obligations on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities, but the Fund
reserves the right to sell these securities before the settlement date if it
is deemed advisable. If a when-issued security is sold before delivery any
gain or loss would not be tax-exempt.

No Fund will invest in illiquid securities if, as a result of such
investment, more than 10% of its net assets will be invested in illiquid
securities. For purposes of this limitation, "illiquid securities" shall be
deemed to include (1) Municipal Leases subject to non-appropriation risk
which are not rated at the time of purchase within the four highest grades by
Moody's or S&P and not subject to remarketing agreements (or not currently
subject to remarketing, pursuant to the conditions of any such agreement then
in effect, with a responsible remarketing party, deemed by TMC to be capable
of performing its obligations), (2) repurchase agreements maturing in more
than seven days, (3) securities which the Fund is restricted from selling to
the public without registration under the Securities Act of 1933, and
(4) other securities or participations not considered readily marketable by
the Fund, provided that for purposes of the foregoing an unrated Municipal
Lease which is backed by an irrevocable bank letter of credit or an insurance
policy, issued by a bank or insurer deemed by TMC to be of high quality and
minimal credit risk, will not be deemed to be "illiquid" solely because the
underlying Municipal Lease is readily marketable because it is backed by the
letter of credit or insurance policy.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption
for interest on municipal securities. Similar proposals may be introduced in
the future. These proposals, if enacted, may have the effect of reducing the
availability of investments for the Funds. Moreover, the value of the
Fund's portfolio may be affected. Each of the Funds might be compelled to
reevaluate its investment objective and policies and submit possible changes
in the structure of the Funds for the approval of their shareholders.

The yields on Municipal Obligations are dependent on a variety of
factors, including the condition of the general market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's, S&P and
Fitch represent their opinions as to the quality of the Municipal Obligations
which they undertake to rate. See "Ratings". It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields, while Obligations of the same maturity and coupon
with different ratings may have the same yield. 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. Such variations in
market value of Municipal Obligations held in the Funds' portfolios arising
from these or other factors will cause changes in the net asset value of the
Funds' shares.

The ability of the Funds to achieve their investment objectives is
dependent upon the continuing ability of issuers of Municipal Obligations in
which the Funds invest to meet their payment obligations. In addition to
using public rating agencies, TMC will use its own credit analysis to assess
each issuer's financial soundness. Such analysis will include reliance upon
information from various sources including, if available, reports by the
rating agencies, research, analysis and appraisals of brokers, dealers and
commercial banks, and the views of the Funds' directors and others regarding
economic developments and the credit worthiness of particular issuers.

Ratings

Tax-Exempt Bonds. The four highest ratings of Moody's for tax-exempt
bonds are Aaa, Aa, A and Baa. Tax-exempt bonds rated Aaa are judged to be of
the "best quality". The rating of Aa is assigned to tax-exempt bonds which
are of "high quality by all standards," but as to which margins of protection
or other elements make long-term risks appear somewhat larger than Aaa rated
tax-exempt bonds. The Aaa and Aa rated tax-exempt bonds comprise what are
generally known as "high grade bonds". Tax-exempt bonds which are rated A by
Moody's possess many favorable investment attributes and are considered
"upper medium grade obligations". Factors giving security to principal and
interest of A-rated tax-exempt bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. Tax-exempt bonds rated Baa are considered as "medium grade"
obligations. They are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such tax-exempt bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well. The foregoing ratings are sometimes presented in parentheses preceded
with "Con." indicating the bonds are rated conditionally. Bonds for which
the security depends upon the completion of some act or the fulfillment of
some condition are rated conditionally. These are bonds secured by
(a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when facilities
are completed, or (d) payments to which some other limiting condition
attaches. The parenthetical rating denotes the probable credit status upon
completion of construction or elimination of the basis of the condition.

The four highest ratings of S&P and Fitch for tax-exempt bonds are AAA,
AA, A, and BBB. Tax-exempt bonds rated AAA bear the highest rating assigned
by S&P to a debt obligation and indicates an extremely strong capacity to pay
principal and interest. Tax-exempt bonds rated AA also qualify as
high-quality debt obligations. Capacity to pay principal and interest is
very strong, and in the majority of instances they differ from AAA issues
only in small degree. Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions. The BBB rating,
which is the lowest "investment grade" security rating by S&P, indicates an
adequate capacity to pay principal and interest. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in the A
category. The foregoing ratings are sometimes followed by a "p" indicating
that the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion of
the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion.

Municipal Notes. The ratings of Moody's for municipal notes are MIG 1,
MIG 2, MIG 3 and MIG 4. Notes bearing the designation MIG 1 are judged to be
of the best quality, enjoying strong protection from established cash flows
of funds for their servicing or from established and broad-based access to
the market for refinancing, or both. Notes bearing the designation MIG 2 are
judged to be of high quality, with margins of protection ample although not
so large as in the preceding group. Notes bearing the designation of MIG 3
are judged to be of favorable quality, with all security elements accounted
for but lacking the undeniable strength of the preceding grades. Market
access for refinancing, in particular, is likely to be less well established.
Notes bearing the designation MIG 4 are judged to be of adequate quality,
carrying specific risk but having protection commonly regarded as required of
an investment security and not distinctly or predominantly speculative.

The S&P ratings for municipal notes are SP-1+, SP-1, SP-2 and SP-3.
Notes bearing an SP-1+ rating are judged to possess overwhelming safety
characteristics, with either a strong or very strong capacity to pay
principal and interest. Notes rated SP-1 are judged to have either a strong
or very strong capacity to pay principal and interest but lack the
overwhelming safety characteristics of notes rated SP-1+. Notes bearing an
SP-2 rating are judged to have a satisfactory capacity to pay principal and
interest, and notes rated SP-3 are judged to have a speculative capacity to
pay principal and interest.

Tax-Exempt Demand Bonds. The rating agencies may assign dual ratings to
all long term debt issues that have as part of their provisions a demand or
multiple redemption feature. The first rating addresses the likelihood of
repayment of principal and interest as due and the second rating addresses
only the demand feature. The long term debt rating symbols are used for
bonds to denote the long term maturity and the commercial paper rating
symbols are used to denote the put option (for example, "AAA/A-1+). For
newer "demand notes" maturing in 3 years or less, the respective note rating
symbols, combined with the commercial paper symbols, are used (for example.
"SP-1+/A-1+").

Commercial Paper. The ratings of Moody's for issuers of commercial
paper are Prime-1, Prime-2 and Prime-3. Issuers rated Prime-1 are judged to
have superior ability for repayment which is normally evidenced by
(i) leading market positions in well established industries, (ii) high rates
of return on funds employed, (iii) conservative capitalization structures
with moderate reliance on debt and ample asset protection, (iv) broad margins
in earnings coverage of fixed financial charges and high internal cash
generation, and (v) well established access to a range of financial markets
and assured sources of alternate liquidity. Issuers rated Prime-2 are judged
to have a strong capacity for repayment which is normally evidenced by many
of the characteristics cited under the discussion of issuers rated Prime-1
but to a lesser degree. Earnings trends, while sound will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample adequate liquidity is
maintained. Issuers rated Prime-3 are judged to have an acceptable capacity
for repayment. The effect of industry characteristics and market composition
may be more pronounced. Variability of earnings and profitability may result
in changes in the level of debt-protection measurements and the requirement
for relatively high financial leverage. Adequate alternate liquidity is
maintained.

The ratings of S&P for commercial paper are A (which is further
delineated by Categories A-1+, A-1, A-2 and A-3), B, C and D. Commercial
paper rated A is judged to have the greatest capacity for timely payment.
Commercial paper rated A-1+ is judged to possess overwhelming safety
characteristics. Commercial paper rated A-1 is judged to possess an
overwhelming or very strong degree of safety. Commercial paper rated A-2 is
judged to have a strong capacity for payment although the relative degree of
safety is not as high as for paper rated A-1. Commercial paper rated A-3 is
judged to have a satisfactory capacity for timely payment but is deemed to be
somewhat more vulnerable to the adverse changes in circumstances than paper
carrying the higher ratings. Commercial paper rated B is judged to have an
adequate capacity for timely payment but such capacity may be damaged by
changing conditions or short-term adversities. Commercial paper rated C is
judged to have a doubtful capacity for payment and commercial paper rated D
is either in default or is expected to be in default upon maturity.

Temporary Investments

Each Fund has reserved the right to invest up to 20% of its net assets
in "temporary investments" in taxable securities that would produce interest
not exempt from federal income tax. See "Distributions and Tax Matters".
Such temporary investments may be made due to market conditions, pending
investment of idle funds or to afford liquidity. These investments are
limited to the following short-term, fixed-income securities (maturing in one
year or less from the time of purchase): (i) obligations of the United
States government or its agencies, instrumentalities or authorities;
(ii) prime commercial paper within the two highest ratings of Moody's or S&P;
(iii) certificates of deposit of domestic banks with assets of $1 billion or
more; and (iv) repurchase agreements with respect to the foregoing types of
securities. Repurchase agreements will be entered into only with dealers,
domestic banks or recognized financial institutions that in the opinion of
TMC represent minimal credit risk. Investments in repurchase agreements are
limited to 5% of the Fund's net assets. See "Repurchase Agreements". In
addition, temporary taxable investments may exceed 20% of the Fund's net
assets when made for defensive purposes during periods of abnormal market
conditions. The Fund does not expect to find it necessary to make such
temporary investments.

Repurchase Agreements

Each Fund may enter into repurchase agreements with respect to taxable
securities constituting "temporary investments" in its portfolio. A
repurchase agreement is a contractual agreement whereby the seller of
securities agrees to repurchase the same security at a specified price on a
future date agreed upon by the parties. The agreed upon repurchase price
determines the yield during the Fund's holding period. Repurchase agreements
may be viewed as loans collateralized by the underlying security that is the
subject of the repurchase agreement. The Fund will not enter into a
repurchase agreement if, as a result, more than 5% of the value of its net
assets would then be invested in repurchase agreements. The Fund will enter
into repurchase agreements only with dealers, banks or recognized financial
institutions that in the opinion of TMC represent minimal credit risk. The
risk to the Fund is limited to the ability of the seller to pay the agreed
upon repurchase price on the delivery date; however, although the value of
the underlying collateral at the time the transaction is entered into always
equals or exceeds the agreed upon repurchase price, if the value of the
collateral declines there is a risk of loss of both principal and interest if
the seller defaults. In the event of a default, the collateral may be sold
but the Fund might incur a loss if the value of the collateral declines, and
might incur disposition costs or experience delays in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization upon the
collateral by the Fund may be delayed or limited. TMC will monitor the value
of the collateral at the time the transaction is entered into and
continuously during the term of the repurchase agreement in an effort to
determine that the value always equals or exceeds the agreed upon repurchase
price. In the event the value of the collateral declined below the
repurchase price, TMC will demand additional collateral from the seller to
increase the value of the collateral to at least that of the repurchase
price.

U.S. Government Obligations

The Funds' temporary investments in taxable securities may include
obligations of the U.S. government. These include bills, certificates of
indebtedness, notes and bonds issued or guaranteed as to principal or
interest by the United States or by agencies or authorities controlled or
supervised by and acting as instrumentalities of the U.S. government
established under the authority granted by the Congress, including, but not
limited to, the Government National Mortgage Association, the Tennessee
Valley Authority, the Bank for Cooperatives, the Farmers Home Administration,
Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land
Banks, Farm Credit Banks and the Federal National Mortgage Association. Some
obligations of U.S. government agencies, authorities and other
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others only by the credit of the issuing agency, authority or other
instrumentality. In the latter case of securities not backed by the full
faith and credit of the United States, the investor must look principally to
the agency issuing or guaranteeing the obligation for ultimate repayment, and
may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitments.

INVESTMENT LIMITATIONS

The Company has adopted the following fundamental investment policies
which may not be changed unless approved by a majority of the outstanding
shares of each Fund that would be affected by such change. Each Fund may
not:

(1) Invest in securities other than Municipal Obligations (including
participations therein) and temporary investments within the percentage
limitations specified in the Prospectus under the caption "Investment
Objective and Policies";

(2) Purchase any security if, as a result, more than 5% of its total
assets would be invested in securities of any one issuer, excluding
obligations of, or guaranteed by, the United States government, its agencies,
instrumentalities and authorities;

(3) Borrow money, except for temporary or emergency purposes and not
for investment purposes, and then only in an amount not exceeding 5% of the
value of the Fund's total assets at the time of borrowing;

(4) Pledge, mortgage or hypothecate its assets, except to secure
borrowings permitted by subparagraph (3) above;

(5) Issue senior securities as defined in the Investment Company Act
of 1940, except insofar as the Fund may be deemed to have issued a senior
security by reason of (a) entering into any repurchase agreement;
(b) purchasing any securities on a when-issued or delayed delivery basis; or
(c) borrowing money in accordance with the restrictions described above;

(6) Underwrite any issue of securities, except to the extent that, in
connection with the disposition of portfolio securities, it may be deemed to
be an underwriter under the federal securities laws;

(7) Purchase or sell real estate and real estate mortgage loans, but
this shall not prevent the Fund from investing in Municipal Obligations
secured by real estate or interests therein;

(8) Purchase or sell commodities or commodity futures contracts or
oil, gas or other mineral exploration or development programs;

(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations;

(10) Make short sales of securities or purchase any securities on
margin, except for such short-term credits as are necessary for the clearance
of transactions;

(11) Write or purchase puts, calls, straddles, spreads or other
combinations thereof, except to the extent that securities subject to a
demand obligation or to a remarketing agreement may be purchased as set forth
in the Prospectus or this Statement of Additional Information under the
captions "Investment Objective and Policies -- Municipal Obligations" and --
"Municipal Leases";

(12) Invest more than 5% of its total assets in securities of
unseasoned issuers which, together with their predecessors, have been in
operation for less than three years excluding (i) obligations of, or
guaranteed by, the United States government, its agencies, instrumentalities
and authorities and (ii) obligations secured by the pledge of the faith,
credit and taxing power of any entity authorized to issue Municipal
Obligations;

(13) Invest more than 5% of its total assets in securities which the
Fund is restricted from selling to the public without registration under the
Securities Act of 1933;

(14) Purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of any such issuer
to be held by the Fund;

(15) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets;

(16) Purchase securities (other than securities of the United States
government, its agencies, instrumentalities and authorities) if, as a result,
more than 25% of the Fund's total assets would be invested in any one
industry; or

(17) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those officers and
directors of the Fund, or those officers and directors of TMC, who
individually own beneficially more than 1/2 of 1% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
outstanding securities.

For the purpose of applying the limitations set forth in paragraphs (2)
and (12) above, an issuer shall be deemed a separate issuer when its assets
and revenues are separate from other governmental entities and its securities
are backed only by its assets and revenues. Similarly, in the case of a
nongovernmental user, such as an industrial corporation or a privately owned
or operated hospital, if the security is backed only by the assets and
revenues of the nongovernmental user, then such nongovernmental user would be
deemed to be the sole issuer. Where a security is also guaranteed by the
enforceable obligation of another entity it shall also be included in the
computation of securities owned that are issued by such other entity. In
addition, for purposes of paragraph (2) above, a remarketing party entering
into a remarketing agreement with a Fund as described in the Prospectus under
the caption "Investment Objective and Policies -- Municipal Obligations"
shall not be deemed an "issuer" of a security or a "guarantor" of a Municipal
Lease subject to such agreement.

Neither of the Funds will purchase securities if, as a result, more than
25% of the Fund's total assets would be invested in any one industry.
However, this restriction will not apply to purchases of (i) securities of
the United States government and its agencies, instrumentalities and
authorities, or (ii) tax exempt securities issued by different governments,
agencies, or political subdivisions, because these issuers are not considered
to be members of any one industry.

With respect to temporary investments, in addition to the foregoing
limitations, a Fund will not enter into a repurchase agreement if, as a
result thereof, more than 5% of its net assets would be subject to repurchase
agreements.

Although each of the Funds has the right to pledge, mortgage or
hypothecate its assets in order to comply with certain state statutes on
investment restrictions, a Fund will not, as a matter of operating policy
(which policy may be changed by the Board of Directors without shareholder
approval), pledge, mortgage or hypothecate its portfolio securities to the
extent that at any time the percentage of pledged securities will exceed 10%
of its total assets.

In the event a Fund acquires disposable assets as a result of the
exercise of a security interest relating to Municipal Obligations, the Fund
will dispose of such assets as promptly as possible.

Under the Investment Company Act of 1940 (the "Act"), a "vote of the
majority of the outstanding voting securities" of the Company or of a
particular Fund means the affirmative vote of the lessor of (1) more than 50%
of the outstanding shares of the Company or of such Fund or (2) 67% or more
of the shares of the Company or of such Fund present at a shareholders'
meeting if more than 50% of the outstanding shares of the Company or of such
Fund are represented at the meeting in person or by proxy.

Rule 18f-2 under the Act provides that any matter required to be
submitted by the provisions of the Act or applicable state law, or otherwise,
to the holder of the outstanding voting securities of a series investment
company such as the Company shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each Fund affected by such matter. Rule 18f-2 further provides
that a Fund shall be deemed to be affected by a matter unless it is clear
that the interests of each Fund in the matter are substantially identical or
that the matter does not affect any interest of that Fund. However, the Rule
exempts the selection of independent public accountants, the approval of
principal distribution contracts and the election of directors from the
separate voting requirements of the Rule.

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
for 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 obtained 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) 30-day or one month period
required by the standardized calculation; (4) The non-standardized
calculation may reflect the 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.

REPRESENTATIVE PERFORMANCE FIGURES - LIMITED TERM NATIONAL FUND (CLASSES A
AND C)

THE FOLLOWING DATA FOR THE LIMITED TERM NATIONAL FUND REPRESENT 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.

Standardized Method of Computing Yield. The Limited Term National
Fund's yields for the 30-day period ended on December 31, 1998, computed in
accordance with the standardized calculation described above, were 3.30% and
2.93% for Class A shares and Class C shares, respectively. This method of
computing yield does not take into account changes in net asset value.

Taxable Equivalent Yield. The Limited Term National Fund's taxable
equivalent yield, for the 30 day period ended on December 31, 1998 computed
in accordance with the standardized method described above using a maximum
federal tax rate of 39.6%, was 5.46% and 4.85% for Class A and Class C
shares, respectively.

Average Annual Total Return. The average annual total return for
Limited Term National Fund for Class A and Class C shares are set forth below
for the periods shown ending December 31, 1998. Shares denoted as Class A
were first offered on September 28, 1984, and Class C shares were first
offered on September 1, 1994. This computation assumes that an investor
reinvested all dividends, and further assumes the deduction of the maximum
sales commission of 1.50% imposed on Class A shares. Class C shares
purchased on or after October 2, 1995 are subject to a contingent deferred
sales charge if redeemed within one year of purchase, and the one-year return
figure below reflects deduction of the sales charge.

Although the maximum Class A sales charge imposed at the commencement of
investment operations on September 28, 1984 was 4.75%, the charge was reduced
three times to 1.50% as of June 1, 1999. Consequently, the computation for
Class A shares assumes today's maximum sales charge of 1.50%. "Total
return," unlike the standardized yield and non-standardized yield figures
shown above, takes into account changes in net asset value over the periods
shown.

since
1 year 5 years 10 years inception
------ ------- -------- ---------
Class A 3.20% 4.16% 6.01% 6.86% (9/28/84)
Class C 3.86% N/A N/A 4.76% (9/1/94)

REPRESENTATIVE PERFORMANCE FIGURES - LIMITED TERM CALIFORNIA FUND (CLASSES A
AND C)

THE FOLLOWING DATA FOR THE LIMITED TERM CALIFORNIA FUND REPRESENT 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.

Standardized Method of Computing Yield. The Limited Term California
Fund's yields for the 30-day period ended on December 31, 1998, computed in
accordance with the standardized calculation described above, were 3.06% and
2.72% for Class A shares and Class C shares, respectively. This method of
computing yield does not take into account changes in net asset value.

Taxable Equivalent Yield. The Limited Term California Fund's taxable
equivalent yield, for the 30 day period ended December 31, 1998, computed in
accordance with the standardized method described above using a maximum
federal tax rate of 39.6% and a maximum California tax rate of 9.3%, was
5.59% and 4.97% for Class A and Class C shares, respectively. <R/>

Average Annual Total Return. The average annual total returns for
Limited Term California Fund for Class A and Class C shares are set forth
below for the periods shown ending December 31, 1998. Shares denoted as
Class A were first offered on February 19, 1987, and Class C shares were
first offered on September 1, 1994. This computation assumes that an
investor reinvested all dividends, and further assumes the deduction of the
maximum sales charge of 1.50% imposed upon purchases of Class A shares.
Class C shares purchased on or after October 2, 1995 are subject to a
contingent deferred sales charge if redeemed within one year of purchase, and
the one-year return figure below reflects deduction of the sales charge.
"Total return" unlike the standardized yield and non-standardized yield
figures shown above, takes into account changes in net asset value over the
periods shown.

since
1 year 5 years 10 years inception
------ ------- -------- ---------
Class A 3.37% 4.25% 5.87 5.90% (2/19/87)
Class C 4.46% N/A N/A 4.96% (9/1/94)

DISTRIBUTIONS AND TAXES

Distributions

All of the net income of each Fund is declared daily as a dividend on
shares for which the Fund has received payment. Net income of a Fund
consists of all interest income accrued on portfolio assets less all expenses
of the Fund. Expenses of the Fund are accrued each day. Dividends are paid
monthly and are reinvested in additional shares of the Fund at the 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 realized capital gains, if any,
will be distributed annually and reinvested in additional shares of the Fund
at the net asset value per share at the close of business on the distribution
date. See "Accounts of shareholders."

Tax Matters

The Funds qualified under Subchapter M of the Internal Revenue Code (the
"Code") for tax treatment as regulated investment companies for the fiscal
year ended June 30, 1998, and intend to continue this qualification so long
as this qualification is in the best interest of the shareholders. This tax
treatment relieves the Funds from paying federal income tax on income which
is currently distributed to their shareholders. The Funds also intend to
satisfy conditions (including requirements as to the proportion of its assets
invested in Municipal Obligations) which will enable each Fund 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
those dividends, except to the extent the alternative minimum tax may
apply.<R/>

Under the Code, interest on indebtedness incurred or continued to
purchase or carry shares is not deductible. Under rules issued by the
Department of the Treasury for determining when borrowed funds are considered
used for the purpose of purchasing or carrying particular assets, the
purchase of shares may be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to the purchase of
shares. Investors with questions regarding this issue should consult with
their own tax advisers.

Shares of a Fund may not be an appropriate investment for persons who
are "substantial users" of facilities financed by industrial development
bonds (including any Municipal Lease that may be deemed to constitute an
industrial development bond) or persons related to such "substantial users".
Such persons should consult their own tax advisers before investing in
shares.

Distributions by each Fund of net interest income received from certain
temporary investments (such as certificates of deposit, commercial paper and
obligations of the United States government, its agencies, instrumentalities
and authorities), short-term capital gains realized by the Fund, if any, and
realized amounts attributable to market discount on bonds, 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 in cash or reinvested in additional shares, must be treated as
long-term capital gains by shareholders regardless of the length of time
investors have held their shares. If the Fund should have net undistributed
capital gain in any year, the Fund would pay the tax on such gains and each
shareholder would be deemed, for federal tax purposes, to have paid his or
her pro rata share of such tax.

If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, (i) the Fund would incur a
regular corporate federal income tax upon its net interest income, other than
interest income from Municipal Obligations, for that year, and
(ii) distributions to its shareholders out of net interest income from
Municipal Obligations or other investments, or out of net capital gains,
would be taxable to shareholders as ordinary dividend income for federal
income tax purposes to the extent of the Fund's current or accumulated
earnings or profits. A Fund would fail to qualify under Subchapter M if,
among other requirements, in any year (i) 30% or more of its gross income
were derived from the sale or other disposition of securities held for less
than three months, (ii) less than 90% of the Fund's gross income were derived
from specified income sources such as dividends, interest and gains from the
disposition of stock or securities or (iii) the Fund failed to satisfy the
diversification of investments requirement of the Code and failed to timely
cure such failure. Furthermore, the Fund would be unable to make Exempt
Interest Dividends if, at the close of any quarter of its taxable year, more
than 50% of the value of the Fund's total assets consisted of assets other
than Municipal Obligations. Additionally, if in any year the Fund qualified
as a regulated investment company but failed to distribute all of its net
income, the Fund would be taxable on the undistributed portion of its net
income. Although each Fund intends to distribute all of its net income
currently, it could have undistributed net income if, for example, expenses
of the Fund were reduced or disallowed on audit.

If a Fund has both tax-exempt and taxable interest, it will use the
"actual earned method" for determining the designated percentage that is
taxable income and designate the use of such method within 45 days after the
end of the Fund's taxable year. Under this method the ratio of taxable
income earned during the period for which a distribution was made to total
income earned during the period determines the percentage of the distribution
designated taxable. The percentages of income, if any, designated as taxable
will under this method vary from distribution to distribution.

The Tax Reform Act of 1986 imposes a nondeductible excise tax on
regulated investment companies if they fail to satisfy certain minimum
distribution requirements. This excise tax should not have a material
adverse effect on the Funds' operation, because each Fund intends to
distribute all of its net income currently.

Although the Company currently intends to have two investment Funds
outstanding, each authorized to issue multiple classes of shares, the
Company's Board of Directors is authorized to divide the Company's authorized
shares into additional Funds and classes. Each additional series of Fund
stock would relate to a separate investment Fund that would be different from
the other Funds. Each Fund may be divided into multiple classes, each of
which would represent an interest in the same investment portfolio of that
Fund, and subject to the same investment objectives, policies and limitations
in common with the other classes of that Fund, but may differ from other
classes of the Fund with respect to sales charges, distribution fees, the
possible allocation of some expenses, and some voting rights. Separate Funds
will be treated under the Code as separate corporations except with respect
to the definitional requirements under Section 851(a) of the Code.

As is the case with other types of income, including other tax-exempt
interest income, Exempt Interest Dividends received by an individual
shareholder will be added to his or her "modified adjusted gross income" in
determining what portion, if any, of the individual's Social Security
benefits will be subject to federal income taxation. Shareholders are
advised to consult their own advisors as to the effect of this treatment.

The Code treats interest on certain Municipal Obligations which are
private activity bonds under the code issued after August 7, 1986 (in certain
cases, after September 1, 1986) as a preference item for purposes of the
alternative minimum tax on individuals and corporations. Each Fund may
purchase private activity bonds which are 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 those
purchases are uncertain. Some portion of Exempt Interest Dividends may, as a
result of such 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 advisors as to the extent and effect of such
treatment.

In addition, the Code provides that a portion of the adjusted current
earnings of a corporation reported on its financial statement and not
otherwise included in the minimum tax base will be included for purposes of
calculating the alternative minimum tax for such years. The adjusted current
earnings of a corporation will include Exempt Interest Dividends in
calculating the alternative minimum tax on corporations to the extent that
such Dividends are not otherwise treated as a preference item for the reasons
discussed above. An environmental tax is imposed on the excess of a
corporation's modified alternative minimum taxable income (minimum taxable
base, discussed above, with certain modifications) over $2 million. Modified
alternative minimum taxable income includes Exempt Interest Dividends. The
environmental tax applies with respect to taxable years beginning after
December 31, 1986 and before January 1, 1996. Exempt Interest Dividends are
included in effectively connected earnings and profits for purposes of
computing the branch profits tax on certain foreign corporations doing
business in the United States.

With respect to property and casualty companies, the amount of certain
cost deductions otherwise allowed is reduced (in certain cases below zero) by
a specified percentage of, among other things, Exempt Interest Dividends
received on shares acquired after August 7, 1986, for taxable years beginning
after 1986. Commercial banks, thrift institutions and other financial
institutions may not deduct their cost of carrying shares acquired after
August 7, 1986, for taxable years ending after December 31, 1986.

Redemption or resale of shares will be a taxable transaction for federal
income tax purposes and the shareholder will recognize gain or loss in an
amount equal to the difference between the shareholder's basis in the shares
and the amount realized by the shareholder on the redemption or resale. If
the redemption or resale occurs after 1997, and the shareholder held the
shares as capital assets, the gain or loss will be long-term if the shares
were held for more than 12 months, and any such long-term gain will be
subject to a maximum federal income tax rate of 20% to the extent that gain
exceeds any net short-term capital losses realized by the taxpayer. <R/>

The foregoing is a general and abbreviated summary of the provisions of
the Code and Treasury Regulations presently in effect as they directly govern
the taxation of the Funds and their shareholders. For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Shareholders are advised to consult their
own tax advisers for more detailed information concerning the Federal
taxation of the Fund and the income tax consequences to its shareholders. In
particular, prospective investors who are not individuals are advised that
the preceding discussion relates primarily to tax consequences affecting
individuals, and the tax consequences of an investment by a person which is
not an individual may be very different.

State and Local Tax Aspects

The exemption from federal income tax for distributions of interest
income from Municipal Obligations which are designated Exempt Interest
Dividends will not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority.

The exemption from the State of California personal income taxes for
distributions of interest income in the Limited Term California Fund applies
only to shareholders who are residents of the State of California, and only
to the extent such income qualifies as "exempt-interest dividends" under
Section 17145 of the California Revenue and Taxation Code and is not derived
from interest on obligations from any state other than from California or its
political subdivisions.

The laws of the several states and local taxing authorities vary with
respect to the taxation of such distributions, and shareholders of the Fund
are advised to consult their own tax advisers in that regard. Each Fund will
advise shareholders within 60 days of the end of each calendar year as to the
percentage of income derived from each state in which the Fund has any
Municipal Obligations in order to facilitate shareholders in the preparation
of their state and local tax returns.

Special Risks Affecting the Limited Term California Fund<R/>

Due to the Limited Term California Fund's policy of concentrating its
investments in municipal securities exempt from California personal income
taxes, this Fund will invest primarily in California state, municipal, and
agency obligations. For this reason, an investment in the Limited Term
California Fund may be considered riskier than an investment in the Limited
Term National Fund, which buys Municipal Obligations from throughout the
United States. Prospective investors should consider the risks inherent in
the investment concentration of the Limited Term California Fund before
investing.

California's economy is the largest among the 50 states and one of the
largest in the world. The state's July 1, 1995 population of approximately
32.1 million represents 12.2 percent of the total United States population
and total personal income in the state, at an estimated $810 billion in 1996,
accounts for 12.6 percent of all personal income in the nation. Total
employment is about 14.5 million, the majority of which is in the service,
trade and manufacturing sectors.

Changes in California constitutional and other laws raise questions
about the ability of California state and municipal issuers to obtain
sufficient revenue to pay their bond obligations in all situations. In 1978,
California voters approved an amendment to the California Constitution known
as Proposition 13, which has had an affect on California issuers that rely in
whole or in part, directly or indirectly, on ad valorem real property taxes
as a source of revenue. Proposition 13 limits ad valorem taxes on real
property and restricts the ability of taxing entities to increase real
property taxes. In 1979, California voters approved another constitutional
amendment, Article XIIIB, which may have an adverse impact on California
state and municipal issuers. Article XIIIB prohibits government agencies and
the state from spending "appropriations subject to limitation" in excess of
the appropriations limit imposed. "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes", which consist of tax revenues,
certain state subventions and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service". No limit is imposed on appropriations of
funds which are not "proceeds of taxes", such as debt service on indebtedness
existing or authorized before January 1, 1979, or subsequently authorized by
the voters, appropriations required to comply with mandates of the courts or
the federal government, reasonable user charges or fees and certain other
non-tax funds. The amendment restricts the spending authority of state and
local government entities. If revenues exceed such appropriations limits,
such revenues must be returned either as revisions in the tax rate or fee
schedules.

California obtains roughly 45% of general fund revenues from personal
income taxes (individual and corporate) compared to an average of only 30%
for other states. Income taxes serve as a bellwether which is frequently a
leading indicator of economic weakness. Much of California's recent deficit
was caused by lower than projected income tax receipts. California's other
principal revenue source is sales taxes.

A recession began in mid-1990 due largely to job losses in the aerospace
and defense-related industries. The 1993 unemployment rate of 9.4% was 135%
of the national rate. The recession affected California's General Fund
revenues, and increased expenditures above initial budget appropriations due
to greater health and welfare costs. The state's budget problems in recent
years have also been caused by a structural imbalance in that the largest
General Fund Programs -- K-14 education, health, welfare and corrections --
were increasing faster than the revenue base, driven by the state's rapid
population growth. These pressures are expected to continue as population
trends maintain strong demand for health and welfare services, as the school
age population continues to grow, and as the state's corrections program
responds to a "Three-Strikes" law enacted in 1994, which requires mandatory
life prison terms for certain third-time felony offenders.

As a result of these factors and others, from the late 1980's until
1992-'93, the state had a period of budget imbalance. During this period,
expenditures exceeded revenues in four out of six years, and the state
accumulated and sustained a budget deficit approaching $2.8 billion at its
peak at June 30, 1993. Starting in the 1990-'91 fiscal year and for each
fiscal year thereafter, each budget required multibillion dollar actions to
bring projected revenues and expenditures into balance. The Legislature and
Governor agreed on the following principal steps to produce Budget Acts in
the years 1991-'92 to 1994-'95, including:

- significant cuts in health and welfare program expenditures;
- transfers of program responsibilities and funding from the state to
local governments (referred to as "realignment"), coupled with some reduction
in mandates on local government;
- transfer of about $3.6 billion in local property tax revenues from
cities, counties, redevelopment agencies and some other districts to local
school districts, thereby reducing state funding for schools under
Proposition 98;
- reduction in growth of support for higher education programs, coupled
with increases in student fees;
- maintenance of the minimum Proposition 98 funding guarantee for K-14
schools, and the disbursement of additional funds to keep a constant level of
about $4,200 per K-12 pupil;
- revenue increases (particularly in the 1991-'92 fiscal year budget),
most of which were for a short duration;
- increased reliance on aid from the federal government to offset the
costs of incarcerating, educating and providing health and welfare services
to illegal immigrants, although during this time frame most of the additional
aid requested by the administration was not received; and
- various one-time adjustments and accounting changes.

Despite these budget actions as noted, the effects of the recession led to
large, unanticipated deficits in the budget reserve as compared to projected
positive balances. By the 1993-'94 fiscal year, the accumulated deficit was
so large that it was impractical to budget to retire it in one year, so a
two-year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year.
When the economy failed to recover sufficiently in 1993-'94, a second two-
year plan was implemented in 1994-'95, again using cross-fiscal year revenue
anticipation warrants to partly finance the deficit into the 1995-'96 fiscal
year.

With strengthening revenues and reduced caseload growth based on an
improving economy, the state entered the 1995-'96 fiscal year budget
negotiations with the smallest nominal "budget gap" to be closed in many
years. Nonetheless, serious policy differences between the Governor and
Legislature prevented timely enactment of the budget. The 1995-'96 Budget
Act was signed by the Governor on August 3, 1995, 34 days after the start of
the fiscal year. Due to an economy which was stronger than expected, the
General Fund received $2.2 billion more tax revenues than planned for in the
1995-'96 budget. This allowed the state to increase school, health and
welfare spending and still post a positive balance of $685 million to the
Adjusted fund Balance as of June 30, 1996.

The state continues to see healthy growth. Personal income is estimated
to be growing, and revenues and transfers for the state in the most recent
fiscal year continued to expand so that the State is enjoying a current
surplus. Economic difficulties in Asia, however, may have a negative impact
upon business and employment in California, which would potentially reduce
tax revenues and increase government expenditures for social programs. The
magnitude of these influences is difficult to quantify.

Accounts of Shareholders

When an investor makes an initial investment in shares of a Fund, the
Transfer Agent will open an account on the books of the Fund, and the
investor will receive a confirmation of the opening of the account.
Thereafter, whenever a transaction, other than the reinvestment of interest
income, takes place in the account - such as a purchase of additional shares
or redemption of shares or a withdrawal of shares represented by certificates
- - the investor will receive a confirmation statement giving complete details
of the transaction. Shareholders will also receive at least quarterly
statements setting forth all distributions of interest income and other
transactions in the account during the period and the balance of full and
fractional shares. The final statement for the year will provide the
information for income tax purposes described in the Prospectus.

The monthly distributions of interest income, net of expenses, and the
annual distributions of net realized capital gains, if any, will be credited
to the accounts of a Fund's shareholders in full and fractional shares of the
Fund at net asset value on the payment or distribution date, as the case may
be. Upon written notice to the Transfer Agent, a shareholder may elect to
receive monthly distributions of net interest income in cash. This election
will remain in effect until changed by written notice to the Transfer Agent,
which change may be made at any time in the sole discretion of the
shareholder.

The issuance and delivery of certificates for shares is unnecessary, and
shareholders are thereby relieved of the responsibility of safekeeping. Upon
written request to the Transfer Agent, a certificate will be issued for any
or all of the full shares credited to a shareholder's account. Certificates
which have been issued to a shareholder may be returned at any time for
credit to his or her account. Shares so held will be redeemed as described
in the Prospectus under the caption "How to Redeem Fund Shares".

INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS

Investment Management Services

Pursuant to the Investment Advisory Agreement, Thornburg Management
Company, Inc., 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501
("TMC"), will act as the investment adviser for, and will manage the
investment and reinvestment of the assets of, the Funds in accordance with
the Funds' investment objectives and policies, subject to the general
supervision and control of the Company's Board of Directors.

TMC is (i) investment adviser for Thornburg Investment Trust (a
registered investment company having eight separate funds, four of which have
investment objectives and policies for tax-exempt income similar to those of
the Fund) and (ii) sub-adviser for Daily Tax Free Income Fund, Inc. (a
registered investment company with investment objectives and policies for
tax-exempt income similar to those of the Fund).

TMC will provide continuous professional investment supervision in
accordance with the Investment Advisory Agreement. In addition to managing
the Funds' investments, TMC will administer the Funds' business affairs,
provide office facilities and related services. Pursuant to the Investment
Advisory Agreement, the Fund will pay to TMC a monthly management fee
described in the Prospectus in consideration of the services and facilities
furnished by TMC. All fees and expenses are accrued daily and deducted
before payment of dividends to investors.

In addition to the fee of TMC under the Investment Advisory Agreement,
the Funds will pay all other costs and expenses of their operations. The
Funds will not bear any sales or promotion expenses incurred in connection
with the offering of their shares, except for payments made under the
distribution and service plans described below, which might be considered
sales or promotional expenses, but expenses of registering and qualifying the
Funds and the shares for distribution under federal and state securities laws
(including legal fees) will not be deemed to be sales or promotion expenses.

For the three most recent fiscal periods ended June 30, 1996, 1997 and
1998 with respect to each Fund, the amounts paid to TMC by each Fund were as
follows:

1996 1997 1998
---- ---- ----
Limited Term National $6,584,836 $4,159,938 $4,213,345
Limited Term California $748,077 $496,821 $649,445

TMC waived its rights to fees in the same periods, as follows:
1996 1997 1998
---- ---- ----
Limited Term National $29,691 - 0 - - 0 -
Limited Term California $75,198 $27,360 - 0 -

The foregoing fees do not reflect the fee reduction effected by the
restatement of the Investment Advisory Agreement, described below. TMC may
(but is not obligated to) waive its rights to any portion of its fee in the
future, and may use any portion of its fee for purposes of shareholder and
administrative services and distribution of Fund shares. The expense ratio
of each Fund will fluctuate in the future as Fund expenses increase or
decrease. During the fiscal year ended June 30, 1998, the Funds reimbursed
TMC in the amounts of $101,150 (National) and $13,836 (California) for
certain accounting expenses incurred by TMC on behalf of the Funds.

The Investment Advisory Agreement was originally approved on July 10,
1984, by the Company's Board of Directors, including a majority of the
directors who are not "interested persons" (as defined in the Act) of the
Fund or TMC. The Investment Advisory Agreement was approved by the
shareholders at their first annual meeting on October 16, 1985 and ratified
by the shareholders of the Limited Term California Fund on December 29, 1993.
The initial term of the Agreement extended until September 28, 1986, and
thereafter for successive 12-month periods, provided that such continuation
is specifically approved at least annually by the Board of Directors or by a
vote of a majority of the outstanding voting securities, and, in either case,
by a majority of the directors who are not "interested directors" within the
meaning of the Investment Company Act of 1940. The directors restated the
Investment Advisory Agreement to reduce the management fees provided for
thereunder, and to provide that TMC would no longer furnish certain
administrative services associated with shareholder maintenance under the
Investment Advisory Agreement. Instead, TMC will furnish those
administrative services under the terms of an Administrative Services
Agreement specific to each class of each of the Funds. See "Administrative
Services Agreement," below. The restatement of the Investment Advisory
Agreement was approved by the shareholders on April 16, 1996, and became
effective on July 1, 1996. The directors most recently determined on
June 22, 1998 to extend the term of the Agreement, as restated, for another
12 months. The Agreement may be terminated by either party, at any time,
without penalty, upon 60 days' written notice, and will automatically
terminate in the event of its assignment. Termination will not affect the
right of TMC to receive payments on any unpaid balance of the compensation
earned prior to termination. The Investment Advisory Agreement provides that
in the absence of willful misfeasance, bad faith or gross negligence on the
part of TMC, or of reckless disregard of its obligations and duties
thereunder, TMC shall not be liable for any action or failure to act in
accordance with its duties thereunder.

Administrative Services Agreement

Effective July 1, 1996, TMC furnishes to each class of shares certain
administrative services necessary for the maintenance of the shareholders of
that class. These services are performed under the terms of an
Administrative Services Agreement, and TMC is paid a fee for the services
under the Agreement applicable to Class A and Class C shares of the Funds
which is described in the Prospectus applicable to Class A and Class C shares
of the Funds. These services were previously performed under the terms of
the Investment Advisory Agreement until its restatement, as described above.

For the years ended June 30, 1997 and 1998, each class paid
administrative fees as follows:

Limited Term National Fund 1997 1998
---- ----
Class A $1,013,060 $1,067,228
Class C $21,000 $25,308

Limited Term California Fund
Class A $108,917 $144,672
Class C $4,366 $9,139

The Administrative Services Agreement provides for successive 12-month
terms, provided that continuation is approved by the Board of Directors in
the same manner pertaining to the Investment Advisory Agreement. The
Agreement may be terminated by either party, at any time, without penalty on
60 days' written notice. The Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence of TMC, or of reckless
disregard of its obligations thereunder, TMC shall not be liable for any
action or failure to act in accordance with its duties thereunder.

H. Garrett Thornburg, Jr., Chairman, Treasurer and a Director of the
Company, is also Director and controlling stockholder of TMC.

SERVICE AND DISTRIBUTION PLANS

Service Plan - All Classes

The Funds have adopted a Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Service Plan")
which is applicable to Class A and Class C shares of each Fund. The Plan
permits payments to be made by each Fund in respect of its Class A and Class
C shares to TMC up to an amount on an annual basis not to exceed .25 of 1% of
the average daily net assets of Class A and Class C shares of the applicable
Fund, to reimburse TMC for particular expenditures incurred by it to obtain
certain services from securities dealers and other financial institutions and
organizations, including banks. No assets of any class or Fund will be used
to reimburse expenses attributable to any other class or Fund. Such services
likely will include answering shareholder questions and furnishing of
information to shareholders, preparing and transmitting to the transfer agent
computer processable tapes of customer transactions, obtaining proxies,
effecting redemptions, and other activities in connection with servicing
shareholder accounts. In addition, TMC may make payments under the Service
Plan, including incentive compensation, in connection with the distribution
of shares. Payments may be made by TMC to banks, savings and loan
associations and other depository institutions to the extent permissible
under applicable provisions of federal banking laws. TMC currently makes
payments described in the first sentence of this paragraph to the brokerage
firm of record with respect to each shareholder account in the following
manner: TMC intends to pay at an annual rate of (1) .10% based upon the
average daily net asset value of the account for all accounts opened less
than one year, and (2) .25% based upon the average daily net asset value of
the account, for all accounts opened more than one year.

The Service Plan permits accrued but unpaid reimbursements to be carried
over and reimbursed to TMC in later years. That is, payments by a Fund in
later years may be used to reimburse TMC for expenses incurred in a prior
year but not paid because the amount of those expenses exceeded the Service
Plan's annual percentage limitation. TMC will not charge interest or
carrying charges on any carry over amounts, and a Fund is not obligated to
pay TMC any carry over amounts if the Service Plan is terminated or not
renewed. Current distribution expenses will be paid first, then carryovers
would be paid. TMC has waived repayment of any carryovers accumulated to
June 30, 1998, but is under no obligation to waive any carryovers in the
future. Carryovers not waived are contingent and would not be reflected as
liabilities on a Fund balance sheet. Any carryover paid in a future period
would be treated for accounting purposes as a current expense for that
period, reducing income for the period. The Funds' management believes that
it is unlikely that the Funds will be called upon to pay any such carryovers
of expenses described in the Service Plan; furthermore, proposed Securities
and Exchange Commission regulations may reduce or prohibit such carryovers in
the future.

For the fiscal year ended June 30, 1998, the Funds paid the following
amounts to TMC under the Service Plans:

Class A Class C
------- -------
Limited Term National $2,134,444 $50,626
Limited Term California $ 289,344 $18,292

All amounts paid to TMC under the Service Plans were paid by TMC to brokerage
firm or other securities dealer of record for providing shareholder services
as described above.

Class C Distribution Plan

Each Fund has adopted a plan and agreement of distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, applicable only to the
Class C shares of that Fund ("Class C Distribution Plan"). The Class C
Distribution Plan provides for the Fund's payment to TSC on a monthly basis
of an annual distribution fee of .75% of the average daily net assets
attributable to the Fund's Class C shares.

The purpose of the Class C Distribution Plan is to compensate TSC for
its services in promoting the sale of Class C shares of the Fund. TSC
expects to pay compensation to dealers and others selling Class C shares from
amounts it receives under the Class C Distribution Plan. TSC also may incur
additional distribution-related expenses in connection with its promotion of
Class C share sales, including payment of additional incentives to dealers,
advertising and other promotional activities and the hiring of other persons
to promote the sale of shares.

For the fiscal year ended June 30, 1998, the Funds paid the following
amounts to TSC under the Class C Distribution Plan:

Limited Term National (Class C only) $75,916
Limited Term California (Class C only) $63,985

General Matters Relating to Service and Distribution Plans

In reviewing the foregoing service and distribution plans, the Company's
Board of Directors received and considered all pertinent information and
determined that there was a reasonable likelihood that adoption of the Plans
would benefit each class and its shareholders. Specifically, the Directors
reviewed among other things (i) the nature and current extent of services to
be provided by TMC and TSC, (ii) the quality of past services provided by
TSC, (iii) the expenses of each Fund and class as compared with those of
similar mutual funds, (iv) the aggregate value of economic benefits received
by TMC and TSC from the Funds, (v) the possible disadvantages to shareholders
of the Funds of insufficient future increases in total shares of the Funds,
(vi) the expenses incurred in distributing shares of the Funds and dealer
feedback, (vii) the financial condition of TMC, and (viii) the merits of
possible alternative plans to reduce net redemptions and increase sales of
Fund shares.

Each Plan provides that if will continue in effect from year to year if
the continuance is specifically approved at least annually (i) either by a
vote of the "majority of the outstanding voting securities" (as that term is
defined in the 1940 Act) or the class or classes affected by the Plan or by
the Company's Board of Directors of the Fund and (ii) by a vote of the
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) and have no direct or indirect financial interest in the operation
of the Plan, cast in person at a meeting called for the purpose of voting on
the Plan.

Approval by the shareholders of a class will be required before the
reimbursement percentage paid under a Plan to TMC or TSC, as the case may be,
for any class may be materially increased. A Plan may not be amended unless
the amendment is approved by a majority of the Board of Directors and a
majority of the Directors who are not "interested persons" of the Fund or by
a majority of the shares of the relevant class or classes of the Fund. A
Plan may be terminated as to any class at any time without the payment of any
penalty by vote of a majority of the Directors who are not "interested
persons" of the Company or a majority vote of the shares of the affected
class or classes.

So long as a Plan is in effect, the Board of Directors will receive and
review, at least quarterly, a written report of the amounts expended pursuant
to each such Plan and the purposes for which such expenditures were made; the
selection and nomination of the Directors who are not "interested persons" of
the Company shall be committed to the discretion of the Directors who are not
"interested persons" of the Company; the Directors will at least annually
request and evaluate and TMC will furnish information reasonably necessary to
an informed determination of whether the Plan should be continued; and the
Plan's continuance will be approved as to any class only if the Directors
conclude, in the exercise of reasonable judgment and light of their duties,
that there is a reasonable likelihood that the Plan will benefit the class
and the shareholders of the class.

PORTFOLIO TRANSACTIONS

TMC, in effecting purchases and sales of portfolio securities for the
accounts of the Funds, will place orders in such manner as, in the opinion of
TMC, will offer the best price and market for the execution of each
transaction. Participations in Municipal Leases will normally be purchased
from banks or other parties such as equipment vendors, insurance companies
and broker-dealers on a principal basis. Other portfolio securities will
normally be purchased directly from an underwriter or in the over-the-counter
market from the principal dealers in such securities, unless it appears that
a better price or execution may be obtained elsewhere. Purchases from
underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers will include the spread between
the bid and asked price. Given the best price and execution obtainable, it
will be the practice of the Company to select dealers which, in addition,
furnish research information (primarily credit analyses of issuers) and
statistical and other services to TMC. It is not possible to place a dollar
value on information and statistical and other services received from
dealers. Since it is only supplementary to TMC's own research efforts, the
receipt of research information is not expected significantly to reduce TMC's
expenses. In selecting among the firms believed to meet the criteria for
handling a particular transaction, TMC may also give consideration to those
firms which have sold or are selling shares of the Funds. While TMC will be
primarily responsible for the placement of the Funds' business, the policies
and practices of TMC in this regard must be consistent with the foregoing and
will at all times be subject to review by the Board of Directors of the
Company. For the Funds' fiscal year ended June 30, 1997, the Funds did not
pay any brokerage commissions to TSC.

TMC reserves the right to manage other investment companies and
investment accounts for other clients which may have investment objectives
similar to those of the Funds. Subject to applicable laws and regulations,
TMC will attempt to allocate equitably portfolio transactions among the Funds
and the portfolios of its other clients purchasing securities whenever
decisions are made to purchase or sell securities by the Funds and one or
more of such other clients simultaneously. In making such allocations the
main factors to be considered will be the respective investment objectives of
the Funds and such other clients, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment by
the Funds and such other clients, the size of investment commitments
generally held by the Funds and such other clients and opinions of the
persons responsible for recommending investments to the Funds and such other
clients. While this procedure could have a detrimental effect on the price
or amount of the securities available to the Funds from time to time, it is
the opinion of the Company's Board of Directors that the benefits available
from TMC's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions. The Company's Board of Directors will
review simultaneous transactions.

The Funds' portfolio turnover rates for the two fiscal years ending
June 30, 1998 are as follows:
1997 1998
---- ----
Limited Term National Fund 20.44% 24.95%
Limited Term California Fund 23.39% 21.21%

MANAGEMENT

The management of the Company and its Funds, including general
supervision of the duties performed by TMC under the Investment Advisory
Agreement, is the responsibility of the Board of Directors. There are five
Directors of the Company, one of whom is an "interested person" (as the term
"interested" is defined in the Investment Company Act of 1940) and four of
whom are "disinterested" persons. The names of the Directors and officers
and their principal occupations and other affiliations during the past five
years are set forth below, with those Directors who are "interested persons"
of the Company indicated by an asterisk:

Name of Director / Position / Principal Occupation During Past 5 Years
- ----------------------------------------------------------------------

H. Garrett Thornburg, Jr.,* 52 / Director, Chairman and Treasurer / Trustee
of Thornburg Investment Trust (mutual fund) since June, 1987, Chairman of
Trustees since September 1998 and President from June 1987 to September 1998;
Chairman and Director Thornburg Mortgage Advisory Corporation since its
formation in 1989; Chairman and Director of Thornburg Mortgage Asset
Corporation (real estate investment trust) since its formation in 1993;
Executive Vice President of Daily Tax Free Income Fund, Inc. (mutual fund)
since its formation in 1982 and a Director from 1982 to June 1993; a Director
of TMC since its formation in 1982 and President from 1982 to August 1997.

J. Burchenal Ault, 70 /Director / Consultant to and fundraiser for charities,
1990 to present; Trustee of Thornburg Investment Trust (Mutual Fund) since
June 1987; Director of Farrar, Strauss & Giroux (publishers) since 1968.

Eliot R. Cutler, 50 / Director / Partner, Cutler & Stanfield, Attorneys,
Washington, D.C. since 1988.

James E. Monaghan, Jr., 49 / Director / President, Monaghan & Associates,
Inc. and Strategies West, Inc. Denver, Colorado, (business consultants) since
1983.

A.G. Newmyer III, 48 / Director / President, from 1983 to December 1992, and
Senior Officer from January 1993, Newmyer Associates, Inc., Washington, D.C.,
(business consultants).

Richard M. Curry, 57 / Advisory Director / Senior Vice President McDonald &
Co., Cleveland, Ohio (securities dealers) since May 1984.

Brian J. McMahon, 42 / President / President of the Company since January,
1987; Vice President of the Company from 1984 to 1987; President of Thornburg
Investment Trust (mutual fund) since September 1998, Vice President from June
1987 to September 1998 and a Trustee from June, 1996 to August 1997; Managing
Director of TMC since December 1985, Vice President from April 1984 to July
1997 and President from August 1997.

Steven J. Bohlin, 38 / Vice President / Assistant Vice President of the
Company from July, 1985 to October 1989; Vice President of Thornburg
Investment Trust (mutual fund) since June 1987 and Treasurer since 1989;
Managing Director and Vice President of TMC since April 1991.

Dawn B. Fischer, 50 / Secretary / Secretary of the Company since its
formation; Secretary and Assistant Treasurer of Thornburg Investment Trust
(mutual fund) since June 1987; Managing Director of TMC since December 1985
and Vice President and Secretary of TMC since January 1984.

George Strickland, 34 / Assistant Vice President / Assistant Vice President
of the Company since July 1992; Assistant Vice President of Thornburg
Investment Trust (mutual fund) since June 1992; Associate of TMC from 1991 to
1996 and a Managing Director since 1996.

Jonathan Ullrich, 28 / Assistant Vice President / Assistant Vice President of
the Company since July 1992; Assistant Vice President of Thornburg Investment
Trust (mutual fund) since 1992; Associate of TMC since September 1991.

Jack Lallement, 59 / Assistant Vice President / Assistant Vice President of
the Company since September 1997; Assistant Vice President of Thornburg
Investment Trust since September 1997; Fund Accountant for TMC since March
1997; Chief Financial Officer/Controller for Zuni Rental, Inc. (equipment
leasing and sales), Albuquerque, New Mexico from February 1995 to March 1997;
Chief Financial Officer/Controller, Montgomery & Andrews, P.A. (law firm),
Santa Fe, New Mexico from March 1987 to August 1994.

Thomas Garcia, 27 / Assistant Vice President / Assistant Vice President of
the Company since September 1997; Assistant Vice President of Thornburg
Investment Trust since September 1997; Fund Accountant for TMC since 1993;
BBA, University of New Mexico, 1993.

Van Billops, 32 / Assistant Vice President / Assistant Vice President of the
Company since September 1997; Assistant Vice President of Thornburg
Investment Trust since September 1997; Fund Accountant for TMC since 1992; BA
(Business Administration), University of New Mexico.

Leigh Moiola, 31 / Assistant Vice President / Assistant Vice President of the
Company since June 1998; Assistant Vice President of Thornburg Investment
Trust since November 1995; Associate of TMC since December 1991, Vice
President of TMC since November 1995, and Managing Director since December
1998.

Sophia Franco, 27 / Assistant Vice President / Assistant Vice President of
the Company since June 1998; Associate of TMC since August 1994.

Claiborne Booker, 36 / Assistant Vice President / Assistant Vice President of
the Company since June 1998; Assistant Vice President of Thornburg Investment
Trust since June 1998.

Kerry Lee, 31 / Assistant Vice President / Assistant Vice President of the
Company since June 1998; Associate of TMC since November 1995.

Richard Brooks, 51 / Assistant Vice President / Assistant Vice President of
the Company since June 1998; Associate of TMC since September 1994.

Dale Van Scoyk, 50 / Assistant Vice President / Assistant Vice President of
the Company since September 1997; Assistant Vice President of Thornburg
Investment Trust since September 1997; Account Manager for TMC since 1997;
National Account Manager for the Heartland Funds, 1993 to 1997.

The business address of each person listed is 119 East Marcy Street,
Suite 202, Santa Fe, New Mexico 87501. Mr. Thornburg is a Director and the
President of TSC, and Executive Vice President of Daily Tax-Free Income Fund,
Inc. Ms. Fischer is the Secretary of TSC.

The officers and Directors affiliated with TMC will serve without any
compensation from the Company. The Company pays each Director and Advisory
Director who is not an employee of TMC or an affiliated company a quarterly
fee of $1,000 plus a $500 fee for each meeting of the Board of Directors
attended by the Director. In addition, the Company pays a $1,000 annual
stipend to each member of the audit committee, and reimburses all Directors
and Advisory Directors for travel and out-of-pocket expenses incurred in
connection with attending such meetings. The Company paid fees to the
Directors during the year ended June 30, 1998 as follows:

<TABLE>
Pension or
Retirement Estimated Total
Aggregate Benefits Annual Compensation
Name of Compensation Accrued as Benefits from Company and
Person, from Part of Upon Fund Complex
Position Company Fund Expenses Retirement Paid to Directors
- -------- ------------ ------------- ------------- -----------------
<C> <C> <C> <C> <C>
H. Garrett - 0 - - 0 - - 0 - - 0 -
Thornburg,
Jr.

J. Burchenal $ 7,000 - 0 - - 0 - $14,000
Ault

Eliot R. $ 6,000 - 0 - - 0 - $ 6,000
Cutler

James E. $ 7,000 - 0 - - 0 - $ 7,000
Monaghan, Jr.

A. G. $ 7,000 - 0 - - 0 - $ 7,000
Newmyer, III

Richard M. $ 6,000 - 0 - - 0 - $ 6,000
Curry
</TABLE>

PRINCIPAL HOLDERS OF SECURITIES

As of March 31, 1999, Limited Term National Fund had 68,929,007.0810
shares outstanding, and Limited Term California Fund had 10,587,023.896
shares outstanding.

No persons are known to have held of record or beneficially 5% or more
of any Fund's outstanding shares on March 31, 1999.

At March 31, 1999, the officers, Directors and related persons of the
Fund, as a group, owned less than one percent of the outstanding shares of
either Fund.

HOW TO PURCHASE FUND SHARES

Determination of Purchase Price for Shares
- ------------------------------------------

Each of the Funds offers Class A and Class C shares. Class A shares are
sold subject to a sales charge which is deducted at the time you purchase
shares. The Funds' distributor deducts the Class A sales charge shown in the
sales charge table in the Prospectus and invests the balance of your
investment at net asset value. The Class A sales charge is typically used to
compensate financial advisors and others who sell Fund shares; and the
distributor retains the balance to pay for its own operations. 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. Class C shares are sold at net asset value, but
are subject to a deferred sales charge if redeemed within one year of
purchase. Class A and Class C shares are subject to a service fee charged
under a "Rule 12b-1 plan," and Class C shares are also subject to a
distribution fee charged under a separate Rule 12b-1 plan. These fees are
described in the Prospectus. See also the discussion of Service and
Distribution Plans in this Statement of Additional Information.

Share prices are determined by reference to the "net asset value" of
shares next determined after receipt of a purchase order for the shares. The
net asset value is the value of the underlying assets represented by each
share, and is computed separately for each class of a Fund by adding the
value of investments, cash and other assets for the class, and dividing by
the number of shares outstanding. The value of assets is determined by
independent valuation services employed by each Fund. The trustees
periodically review the performance of each valuation service. Share price
is normally calculated at 4:00 p.m. Eastern time on each day the New York
Stock Exchange is open for business.

The Prospectus states that certain classes of investors, specified
below, may purchase Class A shares of a Fund at variations to the Public
Scale. The Company may change or eliminate these variations at any time.

(1) Existing shareholders of a Fund may purchase shares upon the
reinvestment of dividends and capital gains distributions with no sales
charge. This practice is followed by many investment funds that charge sales
loads for new investments.

(2) Shareholders of a Fund who have redeemed all or any portion of
their investment in Class A shares of a Fund may purchase Class A shares of
the Fund with no sales charge up to the maximum dollar amount of their shares
redeemed within 24 months of the redemption date, provided that the
shareholder's dealer or the shareholder must notify TSC or the Transfer Agent
at the time an order is placed that such a purchase would qualify for this
variation to the Public Scale. Similar notifications must be made in writing
by the dealer, the broker, or the shareholder when the order is placed by
mail. The sales charge will not be eliminated if notification is not
furnished at the time of the order or a review of TSC's or the Transfer
Agent's records fails to confirm the investor's represented previous
holdings.

(3) Persons may purchase Class A shares of a Fund at no sales charge
if they redeem Class A shares of the Fund or any other series of Thornburg
Limited Term Municipal Fund, Inc., or of any series of Thornburg Investment
Trust, and reinvest some or all of the proceeds within 24 months. The
shareholder's dealer or the shareholder must notify TSC or the Transfer Agent
at the time an order is placed that the purchase qualifies for this variation
to the Public Scale.

The special classes of shareholders in subsections (2) and (3) above
were created as a convenience for those shareholders who invest in a Fund and
subsequently make a decision to redeem all or part of their investment for a
temporary period. In some cases, the existence of this special class of
shareholders will act as further inducement for certain individuals to make
an initial investment in a Fund, particularly if those investors feel that
they might have a temporary need to redeem all or part of their investment in
the coming years. Shareholders who have previously invested in a Fund are
more familiar than the general public with the Fund, its investment
objectives, and its results. The costs to TSC of its marketing to these
individuals and maintaining the records of their prior investment are minimal
compared to the costs of marketing the Fund to the public at large.

(4) Officers, trustees, directors and employees of the Company, TMC,
TSC and the Custodian and Transfer Agent, while in such capacities, and
members of their families, including trusts for the benefit of the foregoing,
may purchase shares of a Fund with no sales charge, provided that they notify
TSC or the Transfer Agent at the time an order is placed that a purchase will
qualify for this variation from the Public Scale. The sales charge will not
be eliminated if the notification is not furnished at the time of the order
or a review of Fund records fails to confirm that the investor's
representation is correct. The reduced sales charge to these persons is
based upon the Company's view that their familiarity with and loyalty to the
Funds will require less selling effort by the Fund, such as a solicitation
and detailed explanation of the conceptual structure of the Funds, and less
sales-related expenses, such as advertising expenses, computer time, paper
work, secretarial needs, postage and telephone costs, than are required for
the sale of shares to the general public. Inclusion of the families of these
persons is based upon the Company's view that the same economies exist for
sales of shares to family members.

(5) 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 place orders for a Fund placed directly with the
Transfer Agent or TSC and through a broker/dealer who is a member in good
standing with the NASD, and employees of eligible non-NASD members which
accept orders for shares of the Fund on an agency basis and clear those
orders through a broker/dealer who is a member in good standing with NASD,
and their families, including trusts for the benefit of the foregoing, may
purchase shares of the Funds for themselves with no sales charge, provided
that (i) the order must be through a NASD member firm which has entered into
an agreement with TSC to distribute shares of the Fund, and (ii) the
shareholder's broker/dealer or the shareholder must notify TSC or the
Transfer Agent at the time an order is placed that the purchase would qualify
for this variation to the Public Scale. Similar notification must be made in
writing by the dealer, the broker, or the shareholder when such an order is
placed by mail. The reduced sales charge will not apply if the notification
is not furnished at the time of the order or a review of TSC's, the dealer's
the broker's or the Transfer Agent's records fails to confirm that the
investor's representation is correct.

Because they sell the Funds' shares, these individuals tend to be much
more aware of the Funds than the general public. Any additional costs to TSC
of marketing to these individuals are minimal.

(6) Bank trust departments, companies with trust powers, and
investment advisors who charge fees for service, including investment dealers
who utilize wrap fee or similar arrangements, may purchase shares of a Fund
for their customers at no sales charge, provided that these persons notify
TSC or the Transfer Agent, at the time an order qualifying for this reduced
charge is placed, that such a purchase would qualify for this variation to
the Public Scale.

(7) Purchases of Class A shares of any Fund may be made at net asset
value provided that such purchases are placed through a broker that maintains
one or more omnibus accounts with the Funds and 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)
through 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.

These organizations may charge fees to clients for whose accounts they
purchase shares of a Fund in a fiduciary capacity. Where the reduced sales
charge applies, notification is required at the time the order is received,
and a review of TSC's or Transfer Agent's records must confirm that the
investor's representation is correct.

(8) No sales charge will be payable at the time of purchase on
investments of $1 million or more made by a purchaser. A contingent deferred
sales charge (CDSC) 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 a CDSC
is payable and the amount of any fee, 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.

(9) Such persons as are determined by the Directors to have acquired
shares under special circumstances, not involving any sales expense to the
Fund or to TSC, may purchase shares of the Fund with no sales charge. This
variation from the Public Scale contemplates circumstances where a relatively
large sale can be made at no distribution cost to a large investor or a
number of smaller investors who are similarly situated. In the contemplated
circumstances, there would be no cost of distribution, or any costs would be
paid by TMC.

(10) Investors may purchase shares of either 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
the 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 Funds without notice.

REDEMPTION OF SHARES

Procedures with respect to redemption of Fund shares are set forth in
the Prospectus under the caption "Selling Fund Shares."

A Fund may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit for protection of the shareholders of the
Fund.

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Fund, Thornburg Securities
Corporation ("TSC") acts as the principal underwriter of Fund shares in a
continuous offering of those shares. The Funds do not bear selling expenses
except (i) those involved in registering shares with the Securities and
Exchange Commission and qualifying them or the issuing Fund with state
regulatory authorities, and (ii) expenses paid under the Service and
Distribution Plans and which might be considered selling expenses. Terms of
continuation, termination and assignment under the Distribution Agreement are
identical to those described above with regard to the Investment Advisory
Agreement, except that termination other than upon assignment requires six
months' notice.

H. Garrett Thornburg, Jr. President, Treasurer and a Director of the
Company, is also Director and controlling stockholder of TSC.

The following table shows the commissions and other compensation
received by TSC from each of the Funds for the most recent fiscal year ending
June 30, 1998, except for compensation or amounts paid under Rule 12b-1
plans, which are described above under the caption "Service and Distribution
Plans."

<TABLE>
Fiscal Year Ended
June 30, 1998
- -----------------
<CAPTION> Net Underwriting
Aggregate Discounts and Compensation on
Underwriting Commissions Redemptions and Brokerage Other
Commissions Paid to TSC Repurchases Commissions Compensation
------------ ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Limited Term $669,745 $104,037 $2,946 - 0 - *
National Fund
Limited Term 89,135 11,884 1,807 - 0 - *
California Fund
* See "Service and Distribution Plans."
</TABLE>

Limited Term National Fund paid aggregate underwriting commissions with
respect to sales of its shares in the fiscal years ending June 30, 1996 and
June 30, 1997 of $904,416 and $794,624, respectively; and TSC received net
underwriting commissions with respect to sales of Limited Term National Fund
shares in fiscal years ending June 30, 1996 and June 30, 1997 of $124,901 and
$110,311, respectively. Limited Term California Fund paid aggregate
underwriting commissions with respect to sales of its shares in the fiscal
years ending June 30, 1996 and June 30, 1997 of $132,164 and $117,747,
respectively; and TSC received net underwriting commissions with respect to
sales of Limited Term California Fund shares in fiscal years ending June 30,
1996 and June 30, 1997 of $16,639 and $22,159, respectively.

INDEPENDENT AUDITORS

McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, is
the independent auditor of the Funds for the fiscal year ending June 30,
1999. The financial statements of the Funds have been audited by McGladrey &
Pullen, LLP, for the periods indicated in their reports thereon.
Shareholders will receive semi-annual unaudited financial statements and
annual financial statements audited by the independent accountants.

FINANCIAL STATEMENTS

Statements of Assets and Liabilities, including Schedules of
Investments, as of June 30, 1998, Statements of Operations for the year ended
June 30, 1998 and Statements of Changes in Net Assets for the two years in
the period ended June 30, 1998, Notes to Financial Statements and Financial
Highlights, Schedules of Investments as of June 30, 1998 and Independent
Auditor's Report dated July 24, 1998, for Limited Term National Fund and
Limited Term California Fund are incorporated herein by reference from the
Funds' respective Annual Reports to Shareholders, June 30, 1997.

Statement of Assets and Liabilities, including Schedules of Investments,
as of December 31, 1998, Statement of Operations for the six months ended
December 31, 1998 and Statements of Changes in Net Assets for the six month
periods ended December 31, 1997, and December 31, 1998, Notes to Financial
Statements and Financial Highlights for Limited Term National Fund (Class A
and Class C shares) and for Limited Term California Fund (Class A and Class C
shares) are incorporated herein by reference from the Funds' respective
Semiannual Reports to Shareholders of Class A and Class C shares, December
31, 1998.

<PAGE>
PART C

OTHER INFORMATION

Item 23 & 24. Financial Statements and Exhibits

(a) Financial Statements.

(1) Statements of Assets and Liabilities as of June 30, 1998; Schedules
of Investments as of June 30, 1998; Statements of Operations for the year
ended June 30, 1998; Statements of Changes in Net Assets for the years ended
June 30, 1997 and June 30, 1998; Notes to Financial Statements; Financial
Highlights; Reports of Independent Accountants dated July 24, 1998:
incorporated by reference from the Registrant's Annual Reports for the fiscal
year ended June 30, 1998, previously filed with Securities and Exchange
Commission.

(2) Statements of Assets and Liabilities as of December 31, 1998;
Schedules of Investments as of December 31, 1998; Statements of Operations
for the six months ended December 31, 1998, Statements of Changes in Net
Assets for the six month periods ended December 31, 1997 and December 31,
1998; Notes to Financial Statements; Financial Highlights: incorporated by
reference from the Registrant's Semiannual Reports for Class A and Class C
shares for the six months ended December 31, 1998, previously filed with the
Securities and Exchange Commission.

(j.1) The following Exhibits are filed herewith:

(j.2) Consent of Counsel to Registrant

n.1 Financial data schedules (4) as of December 31, 1998 for Class A
and Class C shares of Thornburg Limited Term Municipal Fund-
National Portfolio and Thornburg Limited Term Municipal Fund-
California Portfolio.

n.2 Schedules of performance computations (4) as of December 31, 1998
for Class A and Class C shares of Thornburg Limited Term Municipal
Fund-National Portfolio and Thornburg Limited Term Municipal Fund-
California Portfolio.

Item 24. Persons Controlled By or Under Common Control With Registrant

Not applicable.

Item 25. Indemnification

Reference is made to Article EIGHTH and paragraphs (e) and (f) of
Article SEVENTH of the Registrant's Articles of Incorporation previously
filed as Exhibit 1, to Article X of the Registrant`s By-Laws previously filed
as Exhibit 2 and to section 2-418 of the Maryland General Corporation Law.

Reference is also made to Section 7 of the Distribution Agreement
previously filed as Exhibit 6(a).

The directors and officers (the "insureds") of both the Registrant
and the Adviser are insured under a joint directors and officers liability
policy. The policy covers amounts which the insureds become legally
obligated to pay by reason of any act, error, omission, misstatement,
misleading statement or neglect or breach of duty in the performance of their
duties as directors, trustees and officers. In addition, the policy covers
the Registrant and the Adviser to the extent that they have legally
indemnified the insureds for amounts incurred by the insureds as described in
the preceding sentence. The coverage excludes amounts that the insureds
become obligated to pay by reason of conduct which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of the
insured's duty.

The application of the foregoing provisions is limited by the
following undertaking set forth in the rules promulgated by the Securities
and Exchange Commission:

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policies
expressed in such Act and that if a claim for indemnification
against such liabilities other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.

Item 26. Business and Other Connections of the Investment Adviser

See "Management" in the Statement of Additional Information and
"Management of the Fund" in the Prospectus.

Item 27. Principal Underwriters

(a) The principal underwriter for the Registrant is Thornburg
Securities Corporation (the "Distributor"). The Distributor is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The Distributor has
been formed for the purpose of distributing the shares of the Fund and other
registered investment companies sponsored by its affiliates, and does not
currently engage in the general securities business.

(b) The address of each of the directors and officers of the
Distributor is 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501.

Positions and Offices Positions and Offices
Name with Distributor with Registrant
- ------------------------- --------------------- ---------------------
H. Garrett Thornburg, Jr. Director Chairman, Director
and Treasurer

Kenneth Ziesenheim President

Dawn B. Fischer Secretary Secretary

Item 28. Location of Accounts and Records

All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained at the offices of State Street Bank and Trust
Company, 470 Atlantic Avenue, Fifth Floor, Boston, Massachusetts 02210.

Item 29. Management Services

The Registrant and Thornburg Management Company, Inc. ("TMC")
have agreed that TMC will perform for the Registrant certain
telephone answering services previously performed by the
Registrant's transfer agent, National Financial Data Services,
Inc. ("NFDS"). These telephone services include answering
telephone calls placed to the Registrant or its transfer agent
by shareholders, securities dealers and others through the
Registrant's toll free number, and responding to those
telephone calls by answering questions, effecting certain
shareholder transactions described in the Registrant's current
prospectuses, and performing such other, similar functions as
the Registrant may reasonably prescribe from time to time.
The Registrant will pay one dollar for each telephone call,
which was the charge previously impose by the Registrant's
transfer agent for this service. The Registrant's transfer
agent will no longer charge for this service. The Registrant
understands that (i) the telephone answering service provided
by TMC will be superior to that previously provided by the
transfer agent because TMC will devote greater attention to
training the telephone personnel, and those personnel will
have immediate access to the Registrant's and TMC's
management, (ii) the per-call charge imposed upon the
Registrant for this service will be no greater than that
charged by the Registrant's transfer agent, and (iii) TMC will
not receive any profit from providing this service. It is not
believed that this arrangement constitutes a management-
related services agreement.

Item 30. Undertakings

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 32 to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Santa Fe,
and State of New Mexico on the 1st day of April, 1999.

THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
Registrant

By *
---------------------------------------
Brian J. McMahon, President

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 32 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.

* *
- -------------------------------- ------------------------------------
Brian J. McMahon, President H. Garrett Thornburg, Jr., Chairman,
and Principal Executive Officer Director, Treasurer and Principal
Financial and Accounting Officer

*
- --------------------------------
J. Burchenal Ault, Director

*
- --------------------------------
Eliot R. Cutler, Director

*
- --------------------------------
James E. Monaghan, Jr., Director

*
- --------------------------------
A. G. Newmyer III, Director

* By: /s/
____________________________
Charles W. N. Thompson, Jr. April 1, 1999
As Attorney-In-Fact (Date)

INDEX TO EXHIBITS

Exhibit
Number Exhibit
- ------- -----------------------------------------------------------

j.1 Consent of Counsel to be named in registration statement

j.2 Consent of Independent Auditors to be named in registration
statement

n.1 Financial data schedules (4) as of December 31, 1998 for
Class A and Class C shares of Thornburg Limited Term
Municipal Fund-National Portfolio and Thornburg Limited Term
Municipal Fund-California Portfolio.

n.2 Schedules of performance computations (4) as of December 31,
1998 for Class A and Class C shares of Thornburg Limited
Term Municipal Fund-National Portfolio and Thornburg Limited
Term Municipal Fund-California Portfolio.

<PAGE>
EXHIBIT j.1

WHITE Attorneys and Counselors at Law
KOCH, KELLY William Booker Kelly Julie A. Wittenberger
& John F. McCarthy, Jr.
McCARTHY Benjamin Phillips
A Professional Association David F. Cunningham
Albert V. Gonzales Special Counsel
Janet Clow Paul L. Bloom
Kevin V. Reilly
C.W.N. Thompson, Jr.
M. Karen Kilgore
Sandra J. Brinck
Aaron J. Wolf
Mary E. Walta
Rebecca Dempsey

April 1, 1999

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 VIA EDGAR FILING

Re: Thornburg Limited Term Municipal Fund, Inc.
Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
Registration Number Under the Securities Act of 1933: 2-89526
Registration Number Under the Investment Company Act of 1940: 811-4302

Ladies and Gentlemen:

We hereby consent to the references made to t his firm in the post-
effective amendment no. 32 to the registration statement of Thornburg Limited
Term Municipal Fund, Inc. and the prospectus which is a part of that
registration statement. In giving this consent, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.

Very truly yours,

/S/ Charles W.N. Thompson, Jr.

CHARLES W. N. THOMPSON, JR.

433 Paseo de Peralta Post Office Box 787 Santa Fe, NM 87504-0787
Phone (505) 982-4374 Fax (505) 983-0350; 984-8631 e-mail [email protected]

<PAGE>
EXHIBIT j.2

McGLADREY & PULLEN, LLP
--------------------------------------------
Certified Public Accountants and Consultants

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference of our reports
dated October 23, 1998 on the financial statements of Thornburg Limited
Term Income Fund, Thornburg Limited Term U.S. Government Fund, Thornburg
Intermediate Municipal Fund, Thornburg Florida Intermediate Municipal Fund,
Thornburg New Mexico Intermediate Municipal Fund, Thornburg Value Fund and
Thornburg Global Value Fund, series of Thornburg Investment Trust, and our
reports dated July 24, 1998 on the financial statements of the National
Portfolio and the California Portfolio of Thornburg Limited Term Municipal
Fund, Inc. and the financial statements of Thornburg New York Intermediate
Municipal Fund series of Thornburg Investment Trust, referred to therein in
Post-Effective Amendment No. 38 to the Registration Statement of Thornburg
Investment Trust on Form N-1A, File No. 33-14905 and Post-Effective
Amendment No. 32 to the Registration Statement of Thornburg Limited Term
Municipal Fund, Inc. on Form N-1A, File No. 2-89526 as filed with the
Securities and Exchange Commission.

We also consent to the reference to our firm in the Prospectuses under
the captions "Financial Highlights" and "Additional Information" and in the
Statements of Additional Information under the caption "Independent
Auditors."

/s/ McGladrey & Pullen, LLP

McGLADREY & PULLEN, LLP

New York, New York
April 1, 199

<PAGE>
EXHIBIT N.1

[ARTICLE] 6
[CIK] 0000740843
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
[SERIES]
[NUMBER] 1
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, NATIONAL PORT (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 934,631,718
[INVESTMENTS-AT-VALUE] 970,869,700
[RECEIVABLES] 16,293,410
[ASSETS-OTHER] 2,457,700
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 989,620,810
[PAYABLE-FOR-SECURITIES] 57,555,960
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 6,550,215
[TOTAL-LIABILITIES] 64,106,175
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 893,264,049
[SHARES-COMMON-STOCK] 60,493,696
[SHARES-COMMON-PRIOR] 61,974,316
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,987,396)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 36,237,982
[NET-ASSETS] 925,514,635
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 24,767,842
[OTHER-INCOME] 0
[EXPENSES-NET] (4,412,009)
[NET-INVESTMENT-INCOME] 20,355,833
[REALIZED-GAINS-CURRENT] 433,513
[APPREC-INCREASE-CURRENT] 5,175,562
[NET-CHANGE-FROM-OPS] 25,964,908
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (18,026,847)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,025,373
[NUMBER-OF-SHARES-REDEEMED] (5,493,278)
[SHARES-REINVESTED] 987,285
[NET-CHANGE-IN-ASSETS] (1,480,620)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (4,420,909)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,131,547
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,457,861
[AVERAGE-NET-ASSETS] 932,239,501
[PER-SHARE-NAV-BEGIN] 13.50
[PER-SHARE-NII] .30
[PER-SHARE-GAIN-APPREC] .09
[PER-SHARE-DIVIDEND] (.30)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.59
[EXPENSE-RATIO] .96
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>
[ARTICLE] 6
[CIK] 0000740843
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
[SERIES]
[NUMBER] 1
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, NATIONAL PORT (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 934,631,718
[INVESTMENTS-AT-VALUE] 970,869,700
[RECEIVABLES] 16,293,410
[ASSETS-OTHER] 2,457,700
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 989,620,810
[PAYABLE-FOR-SECURITIES] 57,555,960
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 6,550,215
[TOTAL-LIABILITIES] 64,106,175
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 893,264,049
[SHARES-COMMON-STOCK] 1,837,677
[SHARES-COMMON-PRIOR] 1,680,141
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,987,396)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 36,237,982
[NET-ASSETS] 925,514,635
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 24,767,842
[OTHER-INCOME] 0
[EXPENSES-NET] (4,412,009)
[NET-INVESTMENT-INCOME] 20,355,833
[REALIZED-GAINS-CURRENT] 433,513
[APPREC-INCREASE-CURRENT] 5,175,562
[NET-CHANGE-FROM-OPS] 25,964,908
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (472,999)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 334,924
[NUMBER-OF-SHARES-REDEEMED] (209,753)
[SHARES-REINVESTED] 32,365
[NET-CHANGE-IN-ASSETS] 2,282,090
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (4,420,909)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,131,547
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,457,861
[AVERAGE-NET-ASSETS] 932,239,501
[PER-SHARE-NAV-BEGIN] 13.53
[PER-SHARE-NII] .27
[PER-SHARE-GAIN-APPREC] .08
[PER-SHARE-DIVIDEND] (.27)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.61
[EXPENSE-RATIO] 1.38
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>
[ARTICLE] 6
[CIK] 0000740843
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
[SERIES]
[NUMBER] 2
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, CALIFORNIA PORT (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 128,934,352
[INVESTMENTS-AT-VALUE] 134,803,005
[RECEIVABLES] 3,172,003
[ASSETS-OTHER] 132,730
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 138,107,738
[PAYABLE-FOR-SECURITIES] 1,001,574
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,280,125
[TOTAL-LIABILITIES] 2,281,699
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 130,766,307
[SHARES-COMMON-STOCK] 8,955,930
[SHARES-COMMON-PRIOR] 9,477,582
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (808,921)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5,868,653
[NET-ASSETS] 135,826,039
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 3,501,936
[OTHER-INCOME] 0
[EXPENSES-NET] (686,855)
[NET-INVESTMENT-INCOME] 2,815,081
[REALIZED-GAINS-CURRENT] 14,511
[APPREC-INCREASE-CURRENT] 1,010,410
[NET-CHANGE-FROM-OPS] 3,840,002
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2,467,204)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 609,927
[NUMBER-OF-SHARES-REDEEMED] (1,286,774)
[SHARES-REINVESTED] 155,195
[NET-CHANGE-IN-ASSETS] (5,835,975)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (823,431)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 345,133
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 730,611
[AVERAGE-NET-ASSETS] 137,563,249
[PER-SHARE-NAV-BEGIN] 12.90
[PER-SHARE-NII] .27
[PER-SHARE-GAIN-APPREC] .10
[PER-SHARE-DIVIDEND] (.27)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.00
[EXPENSE-RATIO] .99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>
[ARTICLE] 6
[CIK] 0000740843
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
[SERIES]
[NUMBER] 2
[NAME] THORNBURG LIMITED TERM MUNICIPAL FUND, CALIFORNIA PORT (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 128,934,352
[INVESTMENTS-AT-VALUE] 134,803,005
[RECEIVABLES] 3,172,003
[ASSETS-OTHER] 132,730
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 138,107,738
[PAYABLE-FOR-SECURITIES] 1,001,574
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,280,125
[TOTAL-LIABILITIES] 2,281,699
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 130,766,307
[SHARES-COMMON-STOCK] 626,935
[SHARES-COMMON-PRIOR] 607,567
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (808,921)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5,868,653
[NET-ASSETS] 135,826,039
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 3,501,936
[OTHER-INCOME] 0
[EXPENSES-NET] (686,855)
[NET-INVESTMENT-INCOME] 2,815,081
[REALIZED-GAINS-CURRENT] 14,511
[APPREC-INCREASE-CURRENT] 1,010,410
[NET-CHANGE-FROM-OPS] 3,840,002
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (147,613)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 73,090
[NUMBER-OF-SHARES-REDEEMED] (63,606)
[SHARES-REINVESTED] 9,885
[NET-CHANGE-IN-ASSETS] 313,086
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (823,431)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 345,133
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 730,611
[AVERAGE-NET-ASSETS] 137,563,249
[PER-SHARE-NAV-BEGIN] 12.91
[PER-SHARE-NII] .24
[PER-SHARE-GAIN-APPREC] .10
[PER-SHARE-DIVIDEND] (.24)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.01
[EXPENSE-RATIO] 1.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>
EXHIBIT N.2

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES

THORNBURG LIMITED TERM MUNICIPAL FUND - NATIONAL PORTFOLIO

Standardized yield calculation - Dec-98 = 3.30%
------ -----
Yield = 2[({[(a-b)/cd]+1}to the 6th power)-1]
Where: a = $2,978,907.43 net interest income attributable to outstanding
share
b = $666,384.85 expenses accrued for the period net of
reimbursements
c = 60,744,897.723 average daily number of shares of beneficial
interest outstanding during period
d = $13.94 maximum offering price per share of beneficial
interest on: 12/31/98

Total Return for the year ended* 12/31/98 = 3.20%
--------- -----
p(1+T)to the nth power = erv
p = $1,000.00
n = 1
erv = $1,032.00
T = 3.20% Total Return

Average annual return for the period from inception* 9/28/84 - 12/31/98
-----------------
p(1+A)to the nth power = erv 5,207 days = 6.86%
p = $1,000.00
n = 14.27 (Total days since inception/365 days)
erv = $2,576.74
A = 6.86% Average Annual Return

* Assumes 1.50% sales load at inception

<PAGE>

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES

THORNBURG LIMITED TERM MUNICIPAL FUND - NATIONAL PORTFOLIO

Standardized yield calculation - Dec-98 = 2.93%
------ -----
Yield = 2[({[(a-b)/cd]+1}to the 6th power)-1]
Where: a = $92,346.47 net interest income attributable to outstanding
share
b = $30,059.66 expenses accrued for the period net of
reimbursements
c = 1,883,098.837 average daily number of shares of beneficial
interest outstanding during period
d = $13.61 maximum offering price per share of beneficial
interest on: 12/31/98

Total Return for the year ended* 12/31/98 = 4.36%
--------- -----
p(1+T)to the nth power = erv
p = $1,000.00
n = 1
erv = $1,043.60
T = 4.36% Total Return

Average annual return for the period from inception 9/1/94 - 12/31/98
-----------------
p(1+A)to the nth power = erv 1,583 days = 4.76%
p = $1,000.00
n = 4.34 (Total days since inception/365 days)
erv = $1,223.45
A = 4.76% Average Annual Return

<PAGE>

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES

THORNBURG LIMITED TERN MUNICIPAL FUND - CALIFORNIA PORTFOLIO

Standardized yield calculation - Dec-98 = 3.06%
------ -----
Yield = 2[({[(a-b)/cd]+1}to the 6th power)-1]
Where: a = $405,906.34 net interest income attributable to outstanding
share
b = $99,550.81 expenses accrued for the period net of
reimbursements
c = 9,062,259.772 average daily number of shares of beneficial
interest outstanding during period
d = $13.33 maximum offering price per share of beneficial
interest on: 12/31/98

Total Return for the year ended* 12/31/98 = 3.37%
-------- -----
p(1+T)to the nth power = erv
p = $1,000.00
n = 1
erv = $1,033.70
T = 3.37% Total Return

Average annual return for the period from inception* 2/20/87 - 12/31/98
------------------
p(1+A)to the nth power = erv 4,332 days = 5.90%
p = $1,000.00
n = 11.87 (Total days since inception/365 days)
erv = $1,974.59
A = 5.90% Average Annual Return

* Assumes 1.50% sales load at inception

<PAGE>

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES

THORNBURG LIMITED TERM MUNICIPAL FUND - CALIFORNIA PORTFOLIO

Standardized yield calculation - Dec-98 = 2.72%
------ -----
Yield = 2[({[(a-b)/cd]+1}to the 6th power)-1]
Where: a = $28,042.96 net interest income attributable to outstanding
share
b = $ 9,696.20 expenses accrued for the period net of
reimbursements
c = 626,086.702 average daily number of shares of beneficial
interest outstanding during period
d = $13.01 maximum offering price per share of beneficial
interest on: 12/31/98

Total Return for the year ended* 12/31/98 = 4.46%
--------- -----
p(1+T)to the nth power = erv
p = $1,000.00
n = 1
erv = $1,044.60
T = 4.46% Total Return

Average annual return for the period from inception* 9/1/94 - 12/31/98
-----------------
p(1+A)to the nth power = erv 1,583 days = 4.92%
p = $1,000.00
n = 4.34 (Total days since inception/365 days)
erv = $1,231.58
A = 4.92% Average Annual Return