THORNBURG LIMITED TERM MUNICIPAL FUND INC, 497, 1999-06-07

THORNBURG LIMITED TERM MUNICIPAL FUND INC
497, 1999-06-07

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<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

__ Dividends and Distributions

__ Taxes

__ Transaction Details

__ Exchange

__ 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 a laddered maturity
portfolio of 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. Investment decisions are based upon
outlooks for interest rates and securities markets, the supply of municipal
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.

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.

The Fund ordinarily will acquire securities for investment rather than for
realization of gains on market fluctuations. However, 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.
The Fund may invest up to 20% of its net assets in taxable securities which
produce income not exempt from federal income tax because 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.
If the Fund found it necessary to own taxable investments, some of its
income would be subject to federal income tax.

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

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. 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)
- -3
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).

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.

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% 4.16% 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, that dividends and distributions are reinvested, 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 Class C
shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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 a laddered
maturity portfolio of municipal obligations issued by the State of
California 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. Investment decisions are based upon outlooks for interest rates
and securities markets, the supply of municipal 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.

Although the Fund ordinarily will acquire securities for investment rather
than for realization of gains on market fluctuations. However, 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
originating in California or issued by United States territories and
possessions. 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. If
the Fund found it necessary to own taxable investments, some of its income
would be subject to federal and California income taxes.

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.
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. In
particular, the California economy's dependence on Asian markets, an
employment rate which exceeds the national average, increases in
governmental expenditures and projected declines in the growth of
governmental revenues could impair the ability of some governmental issuers
to meet their debt payment 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 a Fund, and when you sell your shares they may be
worth 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 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)
- -3
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).

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.

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%*

*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 Class C
shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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 a laddered
maturity portfolio of 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. Investment decisions are based upon
outlooks for interest rates and securities markets, the supply of municipal
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.

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.

The Fund normally invests 100% of its net 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, because of 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.
If the Fund found it necessary to own taxable investments, some of its
income would be subject to federal income tax.

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

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.
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)
- -3
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).

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.

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

The following tables describe the fees and expenses you may pay if you buy
and hold shares 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%*

*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.

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, dividends and distributions are reinvested, 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 $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 Class C
shares:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
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 a laddered
maturity portfolio of 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. Investment decisions are based upon outlooks for interest rates
and securities markets, the supply of municipal 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.

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.

The Fund normally invests 100% of its net assets in municipal obligations
originating in New Mexico or issued by United States territories or
possessions. 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. If
the Fund found it necessary to own taxable investments, some of the Fund's
income would be subject to federal and New Mexico income taxes.

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.
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.
Revenues of the state and certain political subdivisions may be
particularly dependent in some periods on fluctuating natural resource
severance taxes federal funding of research facilities such as Los Alamos
and Sandia Laboratories, and a relatively undiversified economy in some
regions. 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 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 D shares, which became available on June 1, 1999.
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 Mexico Fund Annual Total Returns Class A Shares
- --------------------------------------------------------------
15%
10.31 11.15
10%
8.63 6.49
5% 4.89

0% 0.42

- -3 (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).

The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.

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

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)

Class A Class D
------- -------
Maximum Sales Charge on Purchases 2.00% 0.00%
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%* 0.00%
(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 New Mexico Intermediate Municipal Fund
Class A Class D
------- -------
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%*

Class A expenses are restated to reflect current expenses. Class D
expenses are estimated. 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 D 12b-1 fees, and TMC intends to reimburse a portion
of the Class D other expenses, so that actual Class D 12b-1 expenses are
.50%, actual Class D other expenses are .30%, and actual total fund
operating expenses for Class D 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.

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, dividends and distributions are reinvested, 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 $304 $517 $751 $1,423
Class D 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 a laddered
maturity portfolio of 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. Investment
decisions are based upon outlooks for interest rates and securities
markets, the supply of municipal 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.

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.

The Fund ordinarily will acquire securities for investment rather than for
realization of gains on market fluctuations. However, 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
originating in Florida or issued by United States territories and
possessions. The Fund may invest up to 20% of its net assets in taxable
securities which would produce income not exempt from federal income tax
because of 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. If the Fund found it necessary to own taxable
investments, some of the Fund's income would be subject to federal income
tax and the Florida intangibles tax could apply.

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.
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.
Rapid growth in Florida has increased the need for educational facilities
and other government infrastructure. Although recent government revenues
have increased, some slowing in revenue growth is expected, and
overdepedence on the sales tax increases the vulnerability to recession and
possible slower growth in the tax base. 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 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. 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%

- -3
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).

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.

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%

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)

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%*

*Expenses 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 .23%, and actual total
fund operating expenses are .98%. 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.

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, dividends and distributions are reinvested, 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 $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 a laddered
maturity portfolio of 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. Investment
decisions are based upon outlooks for interest rates and securities
markets, the supply of municipal 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.

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.

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
originating in New York or issued by United States territories and
possessions. 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 because of 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. If the Fund found it necessary to
own taxable investments, some of the Fund's income would be subject to
federal and New York State and City income taxes.

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.
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.
Because of higher revenues from income taxes, New York State has not
addressed proposed spending reductions. Recession or adverse conditions
which affect specific industries such as financial services could have a
significant negative impact on New York public finance. 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 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. 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

- -3
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).

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.

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%*

*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.

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, dividends and distributions are reinvested, 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 $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. The Class A total return figures assume an
investment of $10,000 at the public offering price for purchases up to
$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.

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
market value of investments, cash and other assets for the class, subtracting
liabilities, and then dividing by the number of shares outstanding. The
market values of Fund investments are obtained from independent pricing
services. 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 pay for the sale and distribution of the
Fund's shares and 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 D SHARES

Class D shares are sold at the NAV next determined after your order is
received. Class D shares are currently available only for Intermediate New
Mexico Fund. Class D shares are not subject to a CDSC upon redemption.
Class D 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 D 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.

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 D 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. 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.

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. You should verify the accuracy of your
confirmations when you receive them. 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.

- ---------------------------------------------------------------------------
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)

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

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 receive on its behalf
purchase and redemption orders received in good form, and some of those
brokers may be authorized to designate other intermediaries to receive
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 received 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 received by the
authorized broker or its designee.

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.

EXCHANGES

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.
* You may qualify for a reduced or no sales charge on the Fund into which
you are exchanging.
* 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

- ------------------------------------
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>
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)

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)% (1.38)%(c) (1.38)% (1.38)% (1.41)% (1.60)%<F(c)>
(After 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 CALIFORNIA 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 (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)

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 (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)>
(After 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 (1.04)% (1.05)% (1.09)% (1.08)% (1.05)% (1.53)% (1.99)% (1.97)% (2.35)% (1.76)%
(Before 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%
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)>

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 (1.02)% (1.05)% (1.07)% (1.06)% (1.04)%
(Before Expense Reimbursements)
Ratio of Net Income to Average Net Assets 4.64% 4.88% 4.81% 4.71% 4.85%
Ratio of Expenses to Average Net Assets (1.00)% (1.00)% (1.00)% (1.00)% (.90)%
(After 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 (1.11)% (1.13)% (1.34)% (1.44)% (1.95)%
(Before Expense Reimbursements) <F(c)>
Ratio of Net Income to Average Net Assets 4.54% 4.65% 4.80% 5.41% 5.09%
Ratio of Expenses to Average Net Assets (.98)% (.83)% (.61)% (.38)% (.25)%
(After 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 (1.20)%(c) (1.19)%<F(c)>
(Before Expense Reimbursements)
Ratio of Net Income to Average Net Assets 4.96%(c) 4.90%<F(c)>
Ratio of Expenses to Average Net Assets (0.75)%(c) (.78)%<F(c)>
(After 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>
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. Certain
financial information is incorporated by reference into this Statement of
Additional Information, as specifically described at the end of this
Statement of Additional Information under the heading "Financial
Statements."

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. . . . . . . . . . . . . . . . . . __
PORTFOLIO TURNOVER. . . . . . . . . . . . . . . . . . . . __
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 net of
any fee waivers 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 fees for the fiscal year ended June 30, 1996 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 years shown below, the Funds paid the following amounts
to TMC under the Service Plans:

Year ended June 30, 1996
Class A Class C
------- -------
Limited Term National $1,154,408 $28,391
Limited Term California $ 122,572 $ 3,628

Year ended June 30, 1997
Class A Class C
------- -------
Limited Term National $2,134,444 $50,626
Limited Term California $ 289,344 $18,292

Year ended June 30, 1998
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 yeas shown below, the Funds paid the following amounts
to TSC under the Class C Distribution Plan:

Year ended June 30, 1996
Class C
-------
Limited Term National (Class C only) $35,489
Limited Term California (Class C only) $ 4,534

Year ended June 30, 1997
Class C
-------
Limited Term National (Class C only) $75,916
Limited Term California (Class C only) $63,985

Year ended June 30, 1998
Class C
-------
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 years ended June 30, 1996, 1997 and 1998, the Funds did not pay any
brokerage commissions to the Funds' principal underwriter, Thornburg
Securities Corporation.

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.

PORTFOLIO TURNOVER

Each Fund anticipates that its annual turnover rate normally be less
than 100%. A 100% turnover rate would occur, for example, if all of the
securities held in the portfolio were sold and replaced within one year.
TMC does not consider the portfolio turnover rate a limiting factor in
making investment decisions a Fund which are otherwise consistent with that
Fund's investment objectives and management policies. However, a high rate
of portfolio turnover may result in increased transaction costs to that
Fund, and could result in increased capital gains distributions to
shareholders.

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 Trustee of Thornburg Investment
Chairman Trust (mutual fund) since June,
Treasurer 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President 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 Assistant Vice President of the
Vice President Company since June 1998;
Associate of TMC since August
1994.

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

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

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

Dale Van Scoyk, 50 Assistant Assistant Vice President of the
Vice President 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.