THORNBURG INVESTMENT TRUST, 485APOS, 1995-12-01

THORNBURG INVESTMENT TRUST
485APOS, 1995-12-01

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33-14905

Filed with the Securities and Exchange Commission
December 1, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 24 [x]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 27 [x]

THORNBURG INVESTMENT TRUST (formerly "Thornburg Income Trust"
(Exact Name of Registrant as Specified in Charter)

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

Registrant's Telephone Number, including Area Code
(505) 984-0200

H. Garrett Thornburg, Jr.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
(Name and Address of Agent for Service

It is proposed that this filing will become effective (check
appropriate box):

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to Paragraph (a)
[x] On February 1, 1996 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485

The Registrant has registered an indefinite number or amount of
securities in accordance with Rule 24 under the Securities Act of
1933, and filed a Rule 24f-2 Notice for its most recent fiscal year
on November 29, 1995.

THORNBURG INVESTMENT TRUST

(i) Thornburg Limited Term U.S. Government Fund
(ii) Thornburg Intermediate Municipal Fund
(iii) Thornburg New Mexico Intermediate Municipal Fund
(iv) Thornburg Texas Intermediate Municipal Fund
(v) Thornburg Limited Term Income Fund
(vi) Thornburg Alabama Intermediate Municipal Fund
(vii) Thornburg Arizona Intermediate Municipal Fund
(viii) Thornburg Pennsylvania Intermediate Municipal Fund
(ix) Thornburg Florida Intermediate Municipal Fund
(x) Thornburg Tennessee Intermediate Municipal Fund
(xi) Thornburg Utah Intermediate Municipal Fund
(xii) Thornburg Value Fund

CONTENTS

Facing Sheet
Contents

Cross Reference Sheets (Thornburg Limited Term U.S. Government
Fund;
Thornburg Limited Term Income Fund)

Cross Reference Sheets (Thornburg Intermediate Municipal Fund;
Thornburg New Mexico Intermediate
Municipal Fund;
Thornburg Texas Intermediate Municipal
Fund;
Thornburg Alabama Intermediate Municipal
Fund;
Thornburg Arizona Intermediate Municipal
Fund
Thornburg Pennsylvania Intermediate
Municipal Fund;
Thornburg Florida Intermediate Municipal
Fund;
Thornburg Tennessee Intermediate
Municipal Fund;
Thornburg Utah Intermediate Municipal
Fund)

Cross Reference Sheets (Thornburg Value Fund)

Prospectus (Thornburg Limited Term U.S. Government
Fund;
Thornburg Limited Term Income Fund)

Prospectus (Thornburg Intermediate Municipal Fund;
Thornburg New Mexico Intermediate
Municipal Fund;
Thornburg Texas Intermediate Municipal
Fund;
Thornburg Alabama Intermediate Municipal
Fund;
Thornburg Arizona Intermediate Municipal
Fund
Thornburg Pennsylvania Intermediate
Municipal Fund;
Thornburg Florida Intermediate Municipal
Fund;
Thornburg Tennessee Intermediate
Municipal Fund;
Thornburg Utah Intermediate Municipal
Fund)

Prospectus (Thornburg Value Fund)

Statement of Additional (Thornburg Limited Term U.S. Government
Information Fund;
Thornburg Limited Term Income Fund)

Statement of Additional (Thornburg Intermediate Municipal Fund;
Information Thornburg New Mexico Intermediate
Municipal Fund;
Thornburg Texas Intermediate Municipal
Fund;
Thornburg Texas Intermediate Municipal
Fund;
Thornburg Alabama Intermediate Municipal
Fund;
Thornburg Arizona Intermediate Municipal
Fund
Thornburg Pennsylvania Intermediate
Municipal Fund;
Thornburg Florida Intermediate Municipal
Fund;
Thornburg Tennessee Intermediate
Municipal Fund;
Thornburg Utah Intermediate Municipal
Fund)

Statement of Additional (Thornburg Value Fund)
Information

Part C

Signature Page

Exhibits

THORNBURG INVESTMENT TRUST
CROSS REFERENCE SHEET
("Thornburg Limited Term Income Funds")
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund

Form N-1A Item Number
Part A Prospectus Caption

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
2 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . EXPENSE INFORMATION
2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE FUNDS
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .FINANCIAL HIGHLIGHTS
4 (a)(i) . . . . . . . . . . . . . . . . . . . . . ORGANIZATION OF THE FUNDS
(a)(ii), (b) & (c). . . . . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES
5 . . . . . . . . . . . . . . . . . . . . INFORMATION ABOUT THE FUNDS
(a) . . . . . . . . . . . . . . . . .Organization of the Funds; TMC and TSC
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
Outside Cover
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Cover
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
5 A . . . . . . . . . . . . . . . . MANAGEMENT DISCUSSION OF FUND PERFORMANCE
6 (a) . . . . . . . . . . . . . . . . . . . . . . . Organization of the Funds
Organization of the Funds
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . Cover Page; INVESTOR SERVICES
(f) . . . . . . . . . . . . . . . . . . . SHAREHOLDER AND ACCOUNT POLICIES
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAXES
(h) . . . . . . . . . . . . . . . . . . . YOUR ACCOUNT; Buying Fund Shares
7 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Cover
(b), (c), (d) . . . . . . . . . . . . . . YOUR ACCOUNT / Buying Fund Shares
(e) . . . . . . . . . . . . . SERVICE AND DISTRIBUTION PLANS; Service Plan
(f) . . . . . . . . . . . . . . . . . . . . SERVICE AND DISTRIBUTION PLANS
8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(a), (b) . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction Details
9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

Part B Statement of Additional Information

10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS
12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
13
(a) . . . . . . . . . . . . . . . . . . INVESTMENT OBJECTIVES AND POLICIES
(b) . . . . . . . . . . . . . . . . . . . . . . . . .INVESTMENT LIMITATIONS
(c) . . . . . . . . . . . . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES
(d) . . . . . . . . . . . . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES
14 (a), (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .MANAGEMENT
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
16 (a), (b), (c). . . . . . . . . . . . . . . . . . . .INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT;
MANAGEMENT
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(f) . . . . . . . . . . . . . . . . . . . . . . . . INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT;
SERVICE AND DISTRIBUTION PLANS
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(h) . . . . . . . . . . . . . . . . . . . .Prospectus; INDEPENDENT AUDITORS
(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
17 . . . . . . . . . . . . . . . . . . . . . . . . . PORTFOLIO TRANSACTIONS
18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus
19 . . . . . . . . . . . . . . . . . . . Prospectus; PURCHASE OF FUND SHARES
20 . . . . . . . . . . . . . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS
21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
22 . . . . . . . . . . . . . . . . . . . . DETERMINATION OF NET ASSET VALUE;
YIELD COMPUTATION
23 . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL STATEMENTS

THORNBURG INVESTMENT TRUST
CROSS REFERENCE SHEET
("Thornburg Intermediate Municipal Funds")
Thornburg Intermediate Municipal Fund
Thornburg New Mexico Intermediate Municipal Fund
Thornburg Texas Intermediate Municipal Fund
Thornburg Alabama Intermediate Municipal Fund
Thornburg Arizona Intermediate Municipal Fund
Thornburg Pennsylvania Intermediate Municipal Fund
Thornburg Florida Intermediate Municipal Fund
Thornburg Tennessee Intermediate Municipal Fund
Thornburg Utah Intermediate Municipal Fund

Form N-1A Item Number
Part A Prospectus Caption

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
2 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . EXPENSE INFORMATION
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL HIGHLIGHTS
4 (a)(i). . . . . . . . . . . . . . . . . . .Special Considerations Affecting
Single-State Funds;
Organization of the Funds
Organization of the Funds
(a)(ii), (b) & (c). . . . . . . . . . . .INVESTMENT OBJECTIVES AND POLICIES
5 . . . . . . . . . . . . . . . . . . . . . . . . INFORMATION ABOUT THE FUNDS
(a) . . . . . . . . . . . . . . . . .Organization of the Funds; TMC and TSC
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
Outside Cover
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Cover
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TMC and TSC
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
5 A . . . . . . . . . . . . . . . . MANAGEMENT DISCUSSION OF FUND PERFORMANCE
6 (a) . . . . . . . . . . . . . . . . . . . . . . . Organization of the Funds
Organization of the Funds
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . Cover Page; INVESTOR SERVICES
(f) . . . . . . . . . . . . . . . . . . . SHAREHOLDER AND ACCOUNT POLICIES
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAXES
(h) . . . . . . . . . . . . . . . . . . . YOUR ACCOUNT; Buying Fund Shares
7 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Cover
(b), (c), (d) . . . . . . . . . . . . . . YOUR ACCOUNT / Buying Fund Shares
(e) . . . . . . . . . . . . . SERVICE AND DISTRIBUTION PLANS; Service Plan
(f) . . . . . . . . . . . . . . . . . . . . SERVICE AND DISTRIBUTION PLANS
8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(a), (b) . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction Details
9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

Part B Statement of Additional Information

10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS
12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
13
(a) . . . . . . . . . . . . . . . . . . INVESTMENT OBJECTIVES AND POLICIES
(b) . . . . . . . . . . . . . . . . . . . . . . . . INVESTMENT LIMITATIONS
(c) . . . . . . . . . . . . . . . . . . INVESTMENT OBJECTIVES AND POLICIES
(d) . . . . . . . . . . . . . . . . . . INVESTMENT OBJECTIVES AND POLICIES
Investment Policies and Techniques
14 (a), (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENT
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
16 (a), (b), (c) INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT;
MANAGEMENT
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(f) . . . . . . . . . . . . . . . . . . . . . . . . .INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT
. . . . . . . . . . . . . . . . . . . . . . . .SERVICE AND DISTRIBUTION PLANS
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(h) . . . . . . . . . . . . . . . . . . . Prospectus; INDEPENDENT AUDITORS
(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
17. . . . . . . . . . . . . . . . . . . . . . . . . . PORTFOLIO TRANSACTIONS
18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus
19 . . . . . . . . . . . . . . . . . . . Prospectus; PURCHASE OF FUND SHARES
20 . . . . . . . . . . . . . . DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS
21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
22 . . . . . . . . . . . . . . . . . . . . DETERMINATION OF NET ASSET VALUE;
YIELD COMPUTATION
23 . . . . . . . . . . . . . . . . . . . . . . . . Incorporated by reference

THORNBURG INVESTMENT TRUST
CROSS REFERENCE SHEET
Thornburg Value Fund

Form N-1A Item Number
Part A Prospectus Caption
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KEY FACTS
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KEY FACTS
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
4 (a)(i). . . . . . . . . . . . . . . . . . . . . . . . . THE FUND IN DETAIL
Organization of the Fund
(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . KEY FACTS
The Fund at a Glance
INVESTMENT PRINCIPLES AND RISKS;
SECURITIES AND INVESTMENT PRACTICES;
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
(b). . . . . . . . . . . . . . . . . . . .INVESTMENT PRINCIPLES AND RISKS;
SECURITIES AND INVESTMENT PRACTICES
5 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . THE FUND IN DETAIL
Organization of the Fund
(b), (c). . . . . . . . . . . . . . . . . . . . . . . . .THE FUND IN DETAIL
TMC and TSC
Management Fee
5 A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
6 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . THE FUND IN DETAIL
Organization of the Fund
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . .THE FUND IN DETAIL
TMC and TSC
(f), (g). . . . . . . . . . . . . . . . . SHAREHOLDER AND ACCOUNT POLICIES
(h) . . . . . . . . . . . . . . . . . . . . . . . . . . BUYING FUND SHARES
7 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . .THE FUND IN DETAIL
TMC and TSC
(b), (c), (d) . . . . . . . . . . . . . . . . . . . . . BUYING FUND SHARES
(e), (f). . . . . . . . . . . . . . . . . . SERVICE AND DISTRIBUTION PLANS
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . .BUYING FUND SHARES
Class B Shares;
SELLING FUND SHARES
8 (a), (b), (c) . . . . . . . . . . . . . . . . . . . . . SELLING FUND SHARES
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . TRANSACTION DETAILS
9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

Part B Statement of Additional Information

10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS
12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
13
(a) . . . . . . . . . . . . . . . . . . INVESTMENT POLICIES AND LIMITATIONS
(b) . . . . . . . . . . . . . . . . . . INVESTMENT POLICIES AND LIMITATIONS
(c) . . . . . . . . . . . . . . . . . . INVESTMENT POLICIES AND LIMITATIONS
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus
14 (a), (b) . . . . . . . . . . . . . . . . . . . . . . TRUSTEES AND OFFICERS
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
16 (a), (b), (c). . . . . . . . . . . . . . . . . . . INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT
(d) INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(f) . . . . . . . . . . . . . . . . . . . . . . . . INVESTMENT ADVISER AND
INVESTMENT ADVISORY AGREEMENT
SERVICE AND DISTRIBUTION PLANS
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(h) . . . . . . . . . . . . . . . . . . . Prospectus; INDEPENDENT AUDITORS
(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
17. . . . . . . . . . . . . . . . . . . . . . . . . . PORTFOLIO TRANSACTIONS
18 . . . . . . . . . . . . . . . . Prospectus; CONVERSION OF CLASS B SHARES
19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prospectus;
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
20 . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTIONS AND TAXES
21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DISTRIBUTOR
22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PERFORMANCE
23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

THORNBURG LIMITED TERM INCOME FUNDS
February 1, 1996

PROSPECTUS

Table of Contents

Fees and Expenses
Financial Highlights
Management Discussion of Fund Performance
Investment Objectives and Policies
Description of Share Classes
How to Purchase Fund Shares
How Redeem Shares
Management of the Funds
Service and Distribution Plans
Distributions and Taxes
Supplementary Information

PROSPECTUS

Thornburg Limited Term Income Funds (the "Funds") are series of Thornburg
Investment Trust (formerly Thornburg Income Trust) (the "Trust"), each with
a separate investment portfolio, and each having its own series of shares:

Thornburg Limited Term U.S. Government Fund ("Government Fund")
Thornburg Limited Term Income Fund ("Income Fund")

Each Fund has the primary investment objective of providing, through
investment in a professionally managed portfolio of fixed income obligations,
as high a level of current income as is consistent, in the view of the Funds'
investment adviser, with safety of capital. The Government Fund will seek to
achieve its primary investment objective by investing primarily in
obligations issued or guaranteed by the United States Government or by its
agencies or instrumentalities and in participations in such obligations or in
repurchase agreements secured by such obligations. The Income Fund will seek
to achieve its primary investment objective by investing in investment grade
short and intermediate maturity bonds and asset backed securities such as
mortgage backed securities and collateralized mortgage obligations. The
Income Fund also may invest in or utilize other investment strategies to
hedge market risks, manage cash positions or to enhance potential gain. See
"Income Fund" and "Other Investment Strategies", below.

Additionally, each Fund will seek to reduce fluctuations in its net asset
value compared to longer term portfolios by investing in obligations with an
expected dollar-weighted average maturity of normally not more than five
years. If your sole objective is preservation of capital, then the Funds may
not be suitable for you because their net asset values will vary as market
interest rates fluctuate. Investors whose sole objective is preservation of
capital may wish to consider a high quality money market fund. Each of the
Funds are divided into multiple classes. See "Description of Classes."

This Prospectus concisely sets forth the information a prospective investor
should know about the Funds before investing. It should be retained for
future reference.

Additional information about the Funds is contained in a Statement of
Additional Information dated February 1, 1996, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information
may be obtained at no charge by contacting Thornburg Securities Corporation,
119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501, (800) 847-0200.
This Prospectus incorporates by reference the entire Statement of Additional
Information.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

FUND SHARES INVOLVE INVESTMENT RISKS (INCLUDING POSSIBLE LOSS OF PRINCIPAL),
AND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE
NOT INSURED BY, ANY BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY GOVERNMENT AGENCY.

EXPENSE INFORMATION
<TABLE>
SHAREHOLDER TRANSACTION COSTS
<CAPTION>
Class A Class C
------- -------
<S> <C> <C>
Maximum sales charge on sales 2.50% none
(as a percentage of offering price)

Maximum deferred sales charge on
redemptions 0.50% <F1> 0.50 <F2>
(as a percentage of redemption proceeds
or original price, whichever is lower)

<FN>
<F1> Imposed only on redemptions of purchases greater than $1 million in the
event of a redemption within 12 months of purchase.

<F2> Imposed only on redemptions within 12 months of purchase, for Class C
shares purchased on or after October 2, 1995.
</FN>
</TABLE>

<TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<CAPTION>

GOVERNMENT FUND Class A Class C
- --------------- ------- -------
<S> <C> <C>
Management Fees .50% .50%
12b-1 Fees
(after fee waiver for Class C) .25% .75%
Other Expenses .24% .60%
Total Fund Operating Expenses .99% 1.35%

Amounts shown for Class C shares of the Government Fund are based upon a
waiver of a portion of the Class C distribution fees. Absent the waiver, the
Class C distribution fee would be 1.00%, and the total fund operating
expenses for Class C shares would be 2.30%. See "Service and Distribution
Plans." Long-term Class C shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by regulations of
the National Association of Securities Dealers, Inc.

INCOME FUND Class A Class C
- ----------- ------- -------
<S> <C> <C>
Management Fees (after fee waiver) .50% .50%
12b-1 Fees
(after fee waiver for Class C) .25% .75%
Other Expenses (after reimbursement) .25% .25%
Total Fund Operating Expenses 1.00% 1.50%

Amounts shown for Class A of the Income Fund are based upon a management fee
waiver and reimbursement of other expenses; absent the waiver and
reimbursement, the management fee percentage would be .625%, other expenses
would be .605%, and total fund operating expenses would be 1.48%. Amounts
shown for Class C shares of the Income Fund are based upon a management fee
waiver, reimbursement of expenses and partial waiver of the Class C
distribution fees; absent these waivers and reimbursements, management fees
would be .625%, other expenses would be 3.125%, the Class C Distribution fees
would be 1.00%, and total fund operating expenses for Class C shares would be
4.75%. See "Service and Distribution Plans." Long-term Class C
shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by regulations of the National Association
of Securities Dealers, Inc.

</TABLE>

<TABLE>
EXAMPLES OF EXPENSES

Assuming that the expense percentage ratios in the Annual Fund Operating
Expenses table remain the same in the future, an investor who makes a $1,000
investment would pay the following expenses, assuming a 5% annual return:
<CAPTION>

Government Fund 1 Year 3 Years 5 Years 10 Years
- --------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $35 $56 $78 $143
Class C shares $19 N/A N/A N/A
(assuming redemption at end
of each period)
Class C shares $14 $43 $74 $162
(assuming no redemptions)

Income Fund 1 Year 3 Years 5 Years 10 Years
- ----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $35 $56 $79 $144
Class C shares $19 N/A N/A N/A
(assuming redemption at end
of each period)
Class C shares $14 $43 $74 $162
(assuming no redemptions)

The expense figures shown above are presented pursuant to regulatory
requirements for the purpose of illustrating the cumulative effect over
various time periods of the annual Fund operating expense ratios shown above.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAT THOSE SHOWN. the Funds'
investment adviser may not waive its fee or assume Fund expenses in the
future. The Class A examples for both Funds assume payment of the maximum
sales charge by the investor.
</TABLE>

THE FUNDS

The Funds seek as high a level of current income as is consistent with safety
of capital. The Government Fund will attempt to realize this objective by
investing primarily in obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities, and in participations in
such obligations or in repurchase agreements secured by such obligations.
The Income Fund will attempt to realize this objective by investing primarily
in investment grade short and intermediate maturity bonds and in asset backed
securities. The Income Fund also may invest in or utilize other investment
strategies to hedge market risks, manage cash positions or to enhance
potential gain. No assurance can be given that the Funds will achieve this
objective.

Each Fund's name derives from its policy of maintaining an overall portfolio
of investments with a dollar-weighted average maturity of normally not more
than five years, with the objective of reducing fluctuations in the Fund's
net asset value per share compared to longer maturity portfolios. Normally,
the Funds expect to offer greater price stability than a higher yielding
long-term bond fund and higher yields than most short-term investments.
Historically, intermediate-term government bonds enjoyed higher returns,
compounded annually over the period 1926-1994, as compared to long-term
government bonds and 90-day U.S. Treasury Bills. Intermediate-term bonds
outperformed longer-term issues because intermediate-term bonds did not
suffer the large capital losses which befell higher yielding long-term bonds
when bond yields rose. Intermediate-term bonds, which have less price
stability than short-term obligations, nonetheless outperformed short-term
bills because the yield on intermediate-term obligations typically is higher
than the yield on short-term obligations. The combination of price stability
and relatively high yield enjoyed by intermediate-term bonds caused these
bonds to out perform normally higher yielding long-term bonds and normally
more stable short-term bills during the periods described. The relationship
between interest rates and the values of obligations, as shown by the
foregoing study, applies to all types of debt securities and has been
consistently demonstrated in the portfolios managed by the Funds' investment
adviser and the markets observed by the Adviser. However, no assurance can
be given that each Fund's short and intermediate-term obligations will
perform as well in the future as intermediate-term government bonds have in
the past.

The Funds' investment policies may involve special considerations for an
investor. For example, each Fund's net asset value will fluctuate in
response to changes in short-term interest rates, although these changes
should be less than the changes in values of obligations which have
maturities longer than the five year dollar-weighted average the Funds will
seek to maintain. No assurance can be given that the fluctuations in each
Fund's net asset value will be less than those experienced by longer term
portfolios. Additionally, variations in interest rates may result in
prepayment of certain obligations the Funds will acquire. These prepayments
could require a Fund to reinvest at a lower rate of return; and the
prepayment right of obligors may reduce a Fund's net asset value because the
value of such securities may not appreciate as rapidly as the price of
non-callable debt securities. See "INVESTMENT OBJECTIVES AND POLICIES,"
beginning at page ___.

On any day on which the New York Stock Exchange, Inc. is open for trading
("Fund Business Day"), investors may initiate purchases and redemptions of a
Fund's shares at its next determined public offering price, which will be
determined daily. (See "BUYING FUND SHARES IN GENERAL," page __ and "SELLING
FUND SHARES," page __.) For classes of investors who may purchase shares at
reduced sales charges, see "BUYING CLASS A SHARES," page __. Dividends from
accumulated net income are declared by the Funds on each Fund Business Day.
The Funds pay interest dividends monthly, normally on the last day of each
month, or if the last day is not a Fund Business Day, on the previous Fund
Business Day. Interest dividends are automatically invested in additional
shares of the appropriate Fund at the next determined net asset value unless
a shareholder has elected by written notice to the Fund to receive monthly
dividend distributions in cash. Net capital gains, if any, will be
distributed annually, normally within 45 days after the end of each Fund's
fiscal year. All distributions of capital gains are automatically invested
in additional shares of the appropriate Fund at the next determined net asset
value or at the shareholder's option, paid in cash. (See "DISTRIBUTIONS AND
TAXES," page __.)

The Funds are diversified series of Thornburg Investment Trust, an open-end
investment company organized as a Massachusetts business trust. Each of a
Fund's shares represents an equal undivided interest in that Fund's assets.
The Funds' principal office is located at Thornburg Management Company, Inc.,
119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501. (Telephone
(505) 984-0200 or (800) 847-0200.)

FINANCIAL HIGHLIGHTS

The following information through September 30, 1995 has been audited by
McGladrey & Pullen, LLP independent auditors, whose report is incorporated by
reference in the Funds' registration statement. This information should be
read in conjunction with the 1995 Annual Report for each Fund.

<TABLE>
Thornburg Limited Term U.S. Government Fund
Per share operating performance
(for share outstanding throughout period)
<CAPTION>
9 Mos. Year
Year Ended Ended Ended
Sept. 30, Sept. 30, Dec. 30
1995 1994 1993 1992 1991 1990
---------------------------- ---------------------------- -------- -------- -------- -------
Class of Shares A B <F1> C A B <F2> C <F2> A A A A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.03 $12.07 $12.08 $12.92 $12.21 $12.21 $12.83 $12.36 $12.08 $12.04
Income from investment operations:
Net investment income .75 .69 .69 .67 .06 .06 .73 .84 .71 .99
Net realized and unrealized
gain (loss) on investments .37 .35 .37 (.89) (.14) (.13) .09 .47 .28 .04
---- ---- ---- ----- ----- ----- ---- ---- ---- ----
Total from investment operations 1.12 1.04 1.06 (.22) (.08) (.07) .82 1.31 .99 1.03
Less distributions from:
Net investment income (.75) (.69) (.69) (.67) (.06) (.06) (.73) (.84) (.71) (.99)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Change in net asset value .37 .35 .37 (.89) (.14) (.13) .09 .47 .28 .04
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $12.40 $12.42 $12.45 $12.03 $12.07 $12.08 $12.92 $12.83 $12.36 $12.08

TOTAL RETURN <F3> 9.66% 9.19% 9.07% (1.72%) (.60%) (.50%) 6.61% 11.01% 8.41% 8.95%

RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income 6.23% 5.70% 5.68% 5.38% 5.63%<F4> 5.45%<F4> 5.61% 6.56% 7.70%<F4> 8.20%
Expenses, after expense reductions .99% 1.51% 1.52% .95% 1.43%<F4> 1.63%<F4> 1.01% 1.00% 1.00%<F4> 1.00%
Expenses, before exp. reductions .99% 3.79% 2.30% .95% 1.43%<F4> 1.63%<F4> 1.01% 1.10% 1.20%<F4> 1.25%

Portfolio turnover rate 28.31% 28.31% 28.31% 80.58% 80.58% 80.58% 38.88% 34.82% 33.15% 69.42%
Net assets at end of -------- -------- -------- -------- -------- -------- -------- -------- -------- -------
period ('000's) $142,849 $0 $2,217 $177,439 $27 $1,005 $201,443 $126,095 $49,876 $33,607

<FN>
<F1> On September 28, 1995, all Class B shares were converted into Class A shares.
<F2> Sales of Class B and Class C shares commenced on September 1, 1994.
<F3> Sales loads are not reflected in computing total return, which is not annualized for periods less than one year.
<F4> Annualized.
</FN>

Thornburg Limited Term U.S. Government Fund
Per share operating performance
(for share outstanding throughout period)
<CAPTION>
Year Ended Period from
December 31, 11/18/87 <F5>
1989 1988 to 12/31/87
-------- -------- -------------
Class of Shares A A A
<S> <C> <C> <C>
Net asset value,
beginning of period $11.87 $12.17 $12.22
Income from investment operations:
Net investment income 1.03 1.02 0.13
Net realized and unrealized
gain (loss) on investments .17 (0.30) (0.05)
---- ---- ----
Total from investment operations 1.20 0.72 0.08
Less distributions from:
Net investment income (1.03) (1.02) (0.13)
----- ----- -----
Change in net asset value .17 (0.30) (0.05)
------- ------- -------
Net asset value, end of period $12.04 $11.87 $12.17

TOTAL RETURN <F3> 10.58% 6.14% 0.62%

RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income 9.61% 9.14% 6.66% <F4>
Expenses, after expense reductions 1.00% 0.90% 0.54%
Expenses, before exp. reductions 1.51% 1.52% 1.50%

Portfolio turnover rate 101.66% 217.11% 44.19% <F4>
Net Assets at end of -------- -------- --------
period ('000's) $25,336 $17,336 $2,122

Thornburg Limited Term Income Fund
Per share operating performance
(for share outstanding throughout period)
<CAPTION>
Year Ended
Sept. 30,
1995 1994 1993
---------------------------- ---------------------------- --------
Class of Shares A B <F1> C A B <F2> C <F2> A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.83 $11.82 $11.78 $12.55 $11.92 $11.92 $12.22
Income from investment operations:
Net investment income .76 .72 .70 .67 .06 .06 .77
Net realized and unrealized
gain (loss) on investments .28 .28 .30 (.69) (.10) (.14) .33
---- ---- ---- ----- ----- ----- ----
Total from investment operations 1.04 1.00 1.00 (.02) (.04) (.08) 1.10
Less distributions from:
Net investment income (.76) (.72) (.70) (.67) (.06) (.06) (.77)
Realized Capital Gain (.03)
----- ----- ----- ----- ----- ----- -----
Change in net asset value .28 .28 .30 (.72) (.10) (.14) .33
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $12.11 $12.10 $12.08 $11.83 $11.82 $11.78 $12.55

TOTAL RETURN <F3> 9.22% 9.22% 8.87% (.14%) (.37%) (.72%) 9.35%

RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income 6.50% 5.95% 6.03% 5.51% 5.13%<F4> 5.14%<F4> 5.85%
Expenses, after expense reductions .83% 1.40% 1.36% .66% 1.14%<F4> 1.20%<F4> .37%
Expenses, before exp. reductions 1.48% 19.72% 4.75% 1.47% 1.14%<F4> 1.20%<F4> 2.10%

Portfolio turnover rate 43.12% 43.12% 43.12% 84.35% 84.35% 84.35% 93.88%
Net assets at end of -------- -------- -------- -------- -------- -------- --------
period ('000's) $23,222 $0 $1,032 $21,683 $10 $53 $20,065

MANAGEMENT DISCUSSION OF FUND PERFORMANCE

The graphs below compare how $10,000 would have appreciated if invested in
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 a shareholder purchases shares at the
public offering price applicable to investments of $10,000.

Comparison of Fund performance to widely used indices is imperfect, because
the indices do not reflect the laddered maturity strategy each Fund uses.
Each index shown below 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.

GOVERNMENT FUND

Index Comparison

Compares performance of the Government Fund Class A shares, the Lehman
Brothers Intermediate Government Bond Index, and the Consumer Price Index for
the period November 16, 1987 to September 30, 1995. On September 30, 1995,
the weighted average securities ratings of the Index and the Fund were AAA
and AAA, respectively, and the weighted average portfolio maturities of the
Index and the Fund were 3.8 years and 3.5 years, respectively. Class C
shares became available on September 1, 1994. Past performance of the Index
and the Fund may not be indicative of future performance.

<TABLE> <In the prospectus, this table appears as a graph>
Thornburg Limited Term U.S. Government Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
10/87 $ 9,750 $10,000 $10,000
2/88 10,127 10,520 10,110
6/88 10,202 10,577 10,263
10/88 10,554 10,890 10,397
2/89 10,465 10,868 10,533
6/89 11,026 11,645 10,734
10/89 11,357 12,024 10,799
2/90 11,552 12,148 11,071
6/90 11,918 12,545 11,249
10/90 12,255 12,965 11,545
2/91 12,745 13,563 11,684
6/91 13,046 13,866 11,778
10/91 13,755 14,690 11,908
2/92 14,068 15,124 12,015
6/92 14,523 15,648 12,160
10/92 14,946 16,137 12,282
2/93 15,569 16,825 12,418
6/93 15,847 17,219 12,517
10/93 16,136 17,624 12,618
2/94 16,069 17,540 12,719
6/94 15,917 17,187 12,834
10/94 15,816 17,322 12,950
2/95 16,298 17,924 13,067
6/95 17,037 18,866 13,198
9/95 17,353 19,161 13,237

</TABLE> <In the prospectus, this table appears as a graph>

<TABLE>
Thornburg Limited Term U.S. Government Fund C Shares
<CAPTION>
FUND Lehman CPI
C Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,950 9,917 10,020
10/94 9,938 9,919 10,030
11/94 9,884 9,875 10,040
12/94 9,891 9,908 10,060
1/95 10,041 10,069 10,090
2/95 10,223 10,264 10,121
3/95 10,274 10,320 10,141
4/95 10,374 10,440 10,181
5/95 10,619 10,734 10,212
6/95 10,668 10,803 10,222
7/95 10,683 10,808 10,232
8/95 10,750 10,897 10,243
9/95 10,852 10,972 10,253
</TABLE>

Average Annual Total Return

A Shares
One Year: (12 mos. ended 9/30/95): 6.92%
Five Years: 6.88%
From Inception (11/16/87): 7.25%

C Shares
One Year (12 mos. ended 9/30/95): 9.07%
From Inception (9/1/94): 7.87%

INCOME FUND

Index Comparison

Compares performance of the Income Fund, the Lehman Brothers Intermediate
Government Corporate Bond Index, and the Consumer Price Index for the period
October 1, 1992 to September 30, 1995. On September 30, 1995, the weighted
average securities ratings of the Index and the Fund were A and AA,
respectively, and the weighted average portfolio maturities of the Index and
the Fund were 4.2 years and 4.8 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> <In the prospectus, this table appears as a graph>
Thornburg Limited Income Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
9/92 $ 9,750 $10,000 $10,000
12/92 9,778 9,964 10,090
3/93 10,168 10,359 10,171
6/93 10,374 10,583 10,232
9/93 10,661 10,821 10,284
12/93 10,715 10,839 10,366
3/94 10,550 10,544 10,428
6/94 10,506 10,480 10,491
9/94 10,646 10,566 10,575
12/94 10,385 10,554 10,618
3/95 10,802 11,017 11,017
6/95 11,328 11,568 10,789
9/95 11,627 11,759 10,821
</TABLE>

<TABLE> <In the prospectus, this table appears as a graph>
Thornburg Limited Income Fund C Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,928 9,908 10,020
10/94 9,851 9,907 10,030
11/94 9,748 9,862 10,040
12/94 9,688 9,896 10,060
1/95 9,772 10,064 10,090
2/95 10,004 10,273 10,121
3/95 10,065 10,331 10,141
4/95 10,221 10,459 10,181
5/95 10,483 10,775 10,212
6/95 10,543 10,847 10,222
7/95 10,542 10,848 10,232
8/95 10,720 10,947 10,243
9/95 10,808 11,027 10,253
</TABLE>

Average Annual Total Return

A Shares
One Year: (12 mos. ended 9/30/95): 6.49%
From Inception (10/01/92): 5.16%

C Shares
One Year: (12 mos. ended 9/30/95): 8.87%
From Inception: (9/1/94): 7.47%

Subject to keeping the average portfolio maturity within five years, each
Fund "ladders" or arrays the maturities of its bonds so that some investments
mature in each of the succeeding ten years.

The net asset values of Limited Term U. S. Government Fund and Limited Term
Income Fund increased by 3.08% and 2.37%, respectively over the year ending
September 30, 1995. Corporate and municipal bond prices fluctuated across
the spectrum of maturities as market yields on corporate and municipal bonds
increased in 1994, before falling in 1995.

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of each Fund is to provide for its
shareholders as high a level of current income as is consistent with safety
of capital. The secondary investment objective of each Fund is to reduce
fluctuations in the Fund's net asset value per share compared to longer
maturity bond portfolios. However, no assurance can be given that the Funds
will realize either of these investment objectives.

The Government Fund will seek to achieve its primary objective by investing
in obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities, and in readily marketable participations in
such obligations or in repurchase agreements secured by such obligations. The
Income Fund will seek to achieve its primary objective by investing primarily
in investment grade, short and intermediate maturity bonds and other income
securities which are described below under "Income Fund" beginning on page
11. The object of preserving a Fund's capital may preclude that Fund from
obtaining the highest possible yields available.

Thornburg Management Company, Inc. ("TMC") actively manages the Funds'
portfolios in attempting to meet the Funds' primary investment objective.
Investment decisions are based upon general economic and financial trends,
such as domestic and international economic development, outlooks for
securities markets, interest rates and inflation, the supply and demand for
debt securities, and other factors. The Funds' portfolios are determined by
individual security analyses, and TMC's credit analysts actively monitor the
credit quality of the Funds' portfolios.

The Funds will seek to achieve their secondary objective of reducing
fluctuations in the Fund's net asset value per share primarily by maintaining
portfolios of obligations with a dollar-weighted average maturity or
estimated average life which normally will be not more than five years.
There is no limitation on the maturity of any specific security a Fund may
purchase, subject to the five-year limitation of the preceding sentence.
"Estimated average life" is the estimated maturity of a mortgage backed
security, and ordinarily will be substantially shorter than the security's
stated maturity because of estimated mortgage prepayments. Because the
magnitude of the changes in market value of interest bearing obligations
ordinarily is greater for obligations of longer terms, each Fund believes
that it can reduce the magnitude of fluctuations in the values of its assets
by investing in a portfolio of obligations normally having a dollar-weighted
average maturity or estimated average life of not more than five years.
However, the trustees may lower each Fund's dollar-weighted average maturity
for temporary defensive purposes if conditions or expectations for the
behavior of interest rates indicate that lower average maturity will be
advantageous. Such conditions could include increasing inflation or a market
in which short-term obligations temporarily have higher yields than
longer-term obligations. TMC also will attempt to minimize principal
fluctuations in the Funds' portfolios through, among other things,
diversification, careful credit analyses and security selection.

Changes in the values of a Fund's assets will tend to be less than the
changes in values of obligations which have maturities longer than the five
year dollar-weighted average maturity each Fund will seek to maintain.
However, because each Fund's net asset value will fluctuate in response to
changes in short-term interest rates, increasing in value if rates decrease
and decreasing if rates increase, the Funds may not be suitable for persons
seeking a short-term money market investment.

Each Fund's primary and secondary investment objective is a fundamental
policy which may be changed only by a majority vote of that Fund's
shareholders. Any other investment policy, technique or limitation described
in this Prospectus or the Statement of Additional Information, unless
identified as a "fundamental policy," may be changed by the trustees without
a shareholders' vote.

Each Fund will seek to enhance its income by taking advantage of yield
disparities, trends or other factors in the fixed income markets. Although
each Fund ordinarily will acquire securities for investment rather than for
realization of gains on market fluctuations, a Fund 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. In addition, the Funds may utilize other techniques,
discussed below, to enhance a Fund's investment income.

TYPES OF OBLIGATIONS EACH FUND INTENDS TO ACQUIRE; INVESTMENT POLICIES

GOVERNMENT FUND

The Government Fund will invest at least 65% of its total assets in
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities, and will invest at least 80% of its total
assets in such obligations and in readily marketable participations in such
obligations or in repurchase agreements secured by such obligations. See
"Repurchase Agreements," below. Although the Fund will acquire obligations
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities, neither the Fund's net asset value nor its dividends are
so guaranteed.

U.S. Government securities include U.S. Treasury obligations such as U.S.
Treasury Bills, U.S. Treasury Notes, and U.S. Treasury Bonds, with various
interest rates, maturities and dates of issuance. These U.S. Treasury
securities are direct obligations of the U.S. Treasury, backed by the full
faith and credit of the U.S. Government.

Government National Mortgage Association certificates are mortgage-backed
securities of the modified pass-through type, each of which evidences an
interest in a specific pool of mortgage loans insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. The National
Housing Act provides that the full faith and credit of the U.S. Government is
pledged to the timely payment of amounts due for principal and interest by
the GNMA on these certificates. Variations in interest rates and other
factors may result in prepayment of some mortgages underlying these
certificates, so that the resulting term of the certificates will change.
During periods of rising interest rates, mortgage backed securities may have
a greater risk of capital depreciation because of decreased prepayments and
increased effective maturity, and during periods of declining interest rates
these securities may have less potential for capital appreciation because of
increased prepayments. The Funds' investment adviser continually will
evaluate any investment in these certificates in light of market conditions
and the Funds' policy of maintaining a portfolio normally having a
dollar-weighted average maturity or estimated average life of not more than
five years.

U.S. Government agency obligations the Government Fund may purchase, in
addition to GNMA certificates, include, but may not be limited to,
obligations issued by the Banks for Cooperatives; the Export-Import Bank of
the U.S.; the Farmers Home Administration; the Federal Deposit Insurance
Corporation; the Federal Financing Bank; the Federal Home Loan Banks; the
Federal Home Loan Mortgage Corporation; the Federal Housing Administration;
the Federal Intermediate Credit Banks; the Federal Land Banks; the Federal
National Mortgage Association; and the General Services Administration; the
Small Business Administration; the Student Loan Marketing Association; and
the U.S. Maritime Administration. Obligations issued by the Farmers Home
Administration, Federal Financing Bank, General Services Administration, and
the Small Business Administration are backed by the full faith and credit of
the United States or the agency has the authority to borrow from the U. S.
Treasury. Other agency obligations are supported by discretionary authority
of the Treasury to purchase obligations of the agency.

Participations, CMOs. To facilitate its investment in any of the types
of obligations which the Fund may acquire, the Fund may purchase
"participations" in any of these obligations. Participations are undivided
interests in pools of securities which are assembled by certain banks or
other responsible persons, such as securities broker/dealers and investment
banking houses, where the underlying government credit support passes through
or is otherwise available to the participants or the trustee for all
participants. Similarly, the Fund may acquire collateralized mortgage
obligations ("CMOs"), which are obligations issued by a trust or other entity
organized to hold a pool of U.S. Government insured mortgage-backed
securities (such as GNMA certificates) or mortgage loans. The Fund will
acquire a CMO when TMC believes that the CMO is more attractive than the
underlying securities in pursuing the Fund's primary and secondary investment
objectives. Participations and privately issued CMO's are not considered
U.S. Government securities, and are not considered part of the 65% of the
total assets of the Government Fund which will be invested in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.

Other Securities. The Government Fund may under certain market conditions
invest up to 20% of its assets in (i) time certificates of deposit maturing
in one year or less after the date of acquisition which are issued by United
States banks having assets of one billion dollars or more, or (ii) time
certificates of deposit insured as to principal by the Federal Deposit
Insurance Corporation. If any certificate of deposit (whether insured in
whole or in part) is nonnegotiable, and it matures in more than seven days,
it will be considered illiquid and subject to the Fund's fundamental
investment restriction that no more than 10% of the Fund's net assets will be
placed in illiquid investments.

Repurchase Agreements. When the Government Fund purchases securities, it may
enter into a repurchase agreement with the seller in which the seller agrees,
at the time of sale, to repurchase the security at a mutually agreed-upon
time and price. The resale price will be in excess of the purchase price
reflecting an agreed-upon market rate effective for the period of time the
Fund's money will be invested in the securities, and will not be related to
the coupon rate of the purchased securities. At the time the Fund enters
into a repurchase agreement, the value of the underlying securities,
including accrued interest, will be equal to or exceed the value of the
repurchase agreement, and, for repurchase agreements which mature in more
than one day, the seller will agree to furnish additional security if the
value of the underlying security falls below the value of the repurchase
agreement. If the seller of the repurchase agreement enters a bankruptcy or
other insolvency proceeding, or the seller fails to repurchase the underlying
security as agreed, the Fund could experience losses, including loss of
rights to the security. The Fund will not enter into a repurchase agreement
if, as a result, more than 10% of the value of its net assets would then be
invested in repurchase agreements maturing in more than seven days and other
securities which are considered illiquid.

Securities Lending. The Fund may from time to time lend securities on a
short-term basis to banks, brokers, dealers and certain financial
institutions and receive as collateral cash, government securities, or
irrevocable bank letters of credit. The borrowers will be required to
deposit and maintain collateral at least equal to 102% of the current value
of the loaned securities plus accrued interest. Securities loans will not be
made by the Fund if as a result the aggregate of all such outstanding loans
exceeds one-third of the value of the Fund's total assets. The Fund will
continue to be entitled to the interest payable on the loaned securities and
will either receive as income a portion of the interest on the investment of
any cash loan collateral or, in the case of collateral other than cash, a fee
negotiated with the borrower. The terms of these loans will provide that
they are terminable at any time. Loans of securities involve risks of delay
in receiving additional collateral or in recovering the securities loaned or
even loss of rights in the collateral in the event of the insolvency of the
borrower of the securities.

When-Issued and Delayed Delivery Transactions. The Fund may purchase or sell
government securities in when-issued or delayed delivery transactions. In
such transactions, instruments are bought or sold with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price to the Fund at the time of entering into the
transactions. In such transactions, the payment obligation and the interest
rate are fixed at the time the buyer enters into the commitment, although no
interest accrues to the purchaser prior to settlement of the transaction.
Because the value of the security may be more or less than the transaction
price at the time of the delivery of the security, depending upon interest
rate fluctuations prior to the settlement date, the Fund will maintain
designated high grade liquid debt assets in a segregated account with the
Custodian at least equal in value to its purchase commitments for when-issued
or delayed delivery transactions, which assets will be earmarked specifically
for the settlement of such commitments. The Fund will only make commitments
to purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities and not for the purpose of
investment leverage, but the Fund reserves the right to sell the securities
before the settlement date if it is deemed advisable.

Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements to obtain short-term liquidity. In such a transaction the Fund
would sell a security to a purchaser and agree to repurchase the security in
the future. The Fund will enter into reverse repurchase agreements only with
dealers, banks or recognized financial institutions. These agreements are
subject to the risk that the underlying security will decline in value during
the period when the Fund is obligated to repurchase it. If the Fund enters
into any such transaction, it will deposit high grade liquid debt assets in
a segregated account with its Custodian in an amount sufficient to meet the
Fund's obligations to the purchaser. The Fund will not enter into any
reverse repurchase agreement if, as a result, more than 5% of its total
assets would be subject to such obligations.

Dollar Roll Transactions. The Fund may enter into dollar roll transactions
with selected banks and broker-dealers. Dollar roll transactions are treated
as reverse repurchase agreements for purposes of the Fund's borrowing
restrictions and consist of the sale by the Fund of mortgage-backed
securities, together with a commitment to purchase similar, but not
identical, securities at a future date, at the same price. If the Fund
enters into any such transaction, it will deposit high grade liquid assets
in a segregated account with the custodian in an amount sufficient to meet
the Fund's obligations to the purchaser. The Fund is paid a fee as
consideration for entering into the commitment to purchase. If the
broker-dealer to whom the Fund sells the security underlying a dollar roll
transaction becomes insolvent, the Fund's right to purchase or repurchase the
security may be restricted. Additionally, the value of the security may
change adversely over the term of the dollar roll and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.

INCOME FUND

In general, the Income Fund may purchase securities permissible for the
Government Fund, except that the Income Fund may not enter into a repurchase
agreement or purchase any security deemed illiquid if as a result, more than
15% of the value of its net assets would be invested in repurchase agreements
maturing in more than seven days and other securities which are considered
illiquid. The Income Fund also may invest in other types of debt securities,
such that at least 65% of its net assets are invested in a managed portfolio
of securities consisting of:

U.S. Government securities, including bonds, notes, and bills issued by the
U.S. Treasury, and securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government;
Corporate debt securities, such as bonds, notes and debentures;
Mortgage-backed securities;
Other asset-backed securities;
Municipal securities;
Money market instruments which are comprised of commercial paper, bank
obligations (i.e., certificates of deposit and bankers' acceptances) and
repurchase agreements;
Privately-placed securities (restricted securities); and
Foreign securities, including non-U.S. dollar-denominated securities and U.S.
dollar-denominated debt securities issued by Foreign issuers and foreign
branches of U.S. banks.

In addition, the Income Fund may use investment techniques such as purchasing
securities on a when-issued or forward delivery basis; entering into
interest-rate, securities-index, and currency futures contracts, and
purchasing and selling options thereon; purchasing and selling options on
securities and currencies, and entering into forward contracts. See "Other
Investment Strategies," page ___, for more information.

The Income Fund's securities generally offer less current yield than
securities of lower quality (rated below BBB/Baa) or longer maturity, but
lower-quality securities generally have less liquidity. Both lower quality
securities and longer maturity securities have greater credit and market
risk, and consequently more price volatility than higher quality securities
or shorter maturity securities.

U.S. Government Securities. The Income Fund may invest in government
securities as described before under "Investment Objectives and Policies -
Government Fund".

Mortgage and Other Asset-Backed Securities. The Fund may also invest in
mortgage-backed securities which are securities representing interests in
pools of mortgage loans. The securities provide shareholders with payments
consisting of both interest and principal as the mortgages in the underlying
mortgage pools are paid off. See description under "Investment Objectives and
Policies-Government Fund". The Fund may agree to purchase or sell these
securities with payment and delivery taking place on a future date. Some
mortgage-backed securities which the Fund may purchase will not be backed by
the full faith and credit of the U.S. Government

The Income Fund may also invest in securities representing interests in pools
of certain other consumer loans, such as automobile loans and credit card
receivables. Variations in interest rates and other factors may result in
prepayments of the loans underlying these securities, reducing the potential
for capital appreciation and requiring reinvestment of the prepayment
proceeds by the Fund at lower interest rates. Additionally, in periods of
rising interest rates these activities may suffer capital depreciation
because of decreased prepayments.

Municipal Securities. The Income Fund may invest in municipal securities,
which include obligations issued by states, territories and possessions of
the United States, and their political subdivisions, agencies and
instrumentalities. Municipal securities may be "general obligation" bonds or
"revenue bonds." General obligation bonds are backed by the credit of the
issuing political subdivision or agency, and revenue bonds are repaid from
the revenues derived from a specific project such as a waste treatment plant
or stadium. Although investments in municipal obligations will be made
subject to the Fund's emphasis on purchases of investment grade securities (
described below under "Securities Ratings"), municipal obligations are
subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors. In addition, these obligations could
become subject to actions by state legislatures or voter referenda extending
the time for repayment of principal or imposing other constraints upon
enforcement of the obligations or upon political subdivisions to levy taxes
to pay the obligations.

Foreign Securities. While the Income Fund generally emphasizes investments in
U.S. Government securities and other issuers domiciled in the United States,
it may invest in foreign securities of the same types and quality as the
domestic securities in which the Income Fund may invest when the anticipated
performance of foreign securities is believed by TMC to offer more potential
than domestic alternatives in keeping with the investment objectives of the
Income Fund. Foreign securities may be denominated either in U.S. dollars or
foreign currencies.

The Income Fund may also invest in instruments offered by brokers which
combine forward contracts, options and securities in order to reduce foreign
currency exposure. The Income Fund may enter into multiple futures, options
and foreign currency transactions or a combination of these transactions,
instead of a single transaction, as part of a hedging strategy.

Investments in foreign securities involve special risks due to more limited
information, higher brokerage costs, different accounting standards, thinner
trading markets and the likely impact of foreign taxes on the yield from debt
securities. They may also entail other risks, such as the possibility of one
or more of the following: imposition of dividend or interest withholding or
confiscatory taxes; currency blockages or transfer restrictions;
expropriation, nationalization or other adverse political or economic
developments; less government supervision and regulation of securities
exchanges, brokers and listed companies; and the difficulty of enforcing
obligations in other countries. Purchases of foreign securities are usually
made in foreign currencies and, as a result, the Income Fund may incur
currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar. Further,
it may be more difficult for the Income Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the United States and foreign countries
may be less reliable than within the United States, thus increasing the risk
of delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. The Income Fund's ability and decisions to purchase
and sell portfolio securities may be affected by laws or regulations relating
to the convertibility and repatriation of assets. These risks may be more
acute in the case of developing countries.

Securities Ratings. The Income Fund emphasizes "investment grade"
investments. At least 65% of the Income Fund's net assets will be invested
in (1) obligations of the U.S. Government, its agencies, or instrumentalities
and in (2) debt securities rated at the time of purchase in one of the three
highest categories of Standard & Poor's Corporation (AAA, AA, or A) or
Moody's Investors Service, Inc. (Aaa, Aa, or A) or, if not rated, judged to
be of comparable quality by TMC. In addition, the Fund will not invest in any
debt security rated at the time of purchase lower than BBB by Standard &
Poor's or Baa by Moody's, or of equivalent quality as determined by TMC.
Should the rating of a portfolio security be downgraded TMC will determine
whether it is in the best interest of the Income Fund to retain or dispose of
the security.

Securities rated BBB by Standard & Poor's or Baa by Moody's are neither
highly protected nor poorly secured. These securities normally pay higher
yields but involve potentially greater price variability than higher-quality
securities. These securities are regarded as having adequate capacity to
repay principal and pay interest, although adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to do
so. Such securities may have speculative elements as well as
investment-grade characteristics.

Other Investment Strategies. The Income Fund may, but is not required to,
utilize various other investment strategies described below to hedge various
market risks such as the effective maturity or duration of fixed-income
securities, or to enhance potential gain. Such strategies are generally
accepted by modern portfolio managers and are regularly utilized by many
mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.

Strategic Positions. In the course of pursuing these investment strategies,
the Income Fund may purchase and sell exchange-listed and over-the-counter
put and call options on securities, financial futures, equity and
fixed-income indices and other financial instruments, purchase and sell
financial futures contracts, enter into various interest rate transactions
such as swaps, caps, floors or collars, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currency or currency futures (collectively, all
the above are called "Strategic Positions"). Strategic Positions may be used
to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Income Fund's portfolio
resulting from securities markets or currency exchange rate fluctuations, to
protect the Income Fund's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Income Fund's
portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. The
Fund may manage its portfolio maturity or duration by using options, futures
and swaps to acquire and dispose of specific securities having maturities
which are then considered desirable in managing the Fund's maturity or
duration. "Duration" is a measure of an obligation's life, based upon the
present value of the obligor's payments of principal and interest, and is
usually shorter than the obligation's maturity. Some Strategic Positions may
also be used to enhance potential gain, although no more than 5% of the
Fund's assets will be committed to Strategic Positions entered into for
purposes other than bona fide hedging, risk management or portfolio
management. Any or all of these investment techniques may be used at any
time and there is no particular strategy that dictates the use of one
technique rather than another, because use of any Strategic Transaction is a
function of numerous variables including market conditions. The ability of
the Income Fund to utilize these Strategic Positions successfully will depend
on TMC's ability to predict pertinent market movements, which cannot be
assured. The Income Fund will comply with applicable regulatory requirements
when implementing these strategies, techniques and instruments.

Strategic Positions involve certain risks including possible default by the
other party to the transaction, illiquidity and, to the extent TMC's view as
to certain market movements is incorrect, the risk that the use of such
Strategic Positions could result in losses greater than if they had not been
used. Use of put and call options may result in losses to the Income Fund,
force the purchase or sale of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the
case of call options) current market values, limit the amount of appreciation
the Income Fund can realize on its investments or cause the Income Fund to
hold a security it might otherwise sell. The use of currency transactions
can result in the Income Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency.
The use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of a
futures contract and price movements in the related portfolio position of the
Income Fund creates the possibility that losses on the hedging instrument may
be greater than gains in the value of the Income Fund's position.
In addition, futures and options markets may not be liquid in all
circumstances, and over-the-counter options and certain other Strategic
Positions (e.g. caps and floors) are considered to be illiquid securities. As
a result, in certain markets, the Income Fund might not be able to close out
a transaction without incurring substantial losses, if at all. Although the
contemplated use of these futures contracts and options should tend to
minimize the risk of loss due to a decline in the value of the hedged
position, at the same time they tend to limit any potential gain resulting
from an increase in the position's value. The Income Fund will not invest in
any over-the-counter option, cap, rate swap, currency swap, floor or other
illiquid security, if, as a result of that investment, more than 15% of its
net assets would be invested in securities which are not readily marketable
by the Income Fund. The Fund will segregate cash or high grade liquid debt
assets sufficient to meet its obligation to purchase and deliver securities
or currencies under any futures contract or option or to pay any amount owed
upon the expiration of an index-based futures contract. Finally, the daily
margin requirements for futures contracts may create a greater ongoing
potential financial risk than would purchases of options, where the exposure
is limited to the cost of the initial premium. Losses resulting from the use
of Strategic Positions would reduce net asset value, and possibly income, and
such losses can be greater than if the Strategic Positions had not been
utilized. The Strategic Positions that the Fund may use and some of their
risks are described more fully in the Income Fund's Statement of Additional
Information.

When-Issued Securities. The Income Fund may purchase securities on a
when-issued or forward delivery basis, for payment and delivery at a later
date. The price and yield are generally fixed on the date of commitment to
purchase. During the period between purchase and settlement, no interest
accrues to the Fund. At the time of settlement, the market value of the
security may be more or less than the purchase price.

Covered Short Sales. The Income Fund may make short sales of securities, but
will only do so in circumstances where it owns securities of the type sold,
or the Income Fund owns securities giving it the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except in connection
with arbitrage transactions, and except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.

Repurchase Agreements. As a means of earning income for periods as short as
overnight, the Income Fund may enter into repurchase agreements with selected
banks and broker-dealers. See description under "Investment Objectives and
Policies - Government Fund".

Reverse Repurchase Agreements and Dollar Roll Transactions. The Income Fund
may enter into reverse repurchase agreements and dollar roll transactions
with selected banks and broker-dealers. See description under "Investment
Objectives and Policies - Government Fund".

Securities Lending. The Income Fund may seek to increase its income by
lending portfolio securities on a short-term basis to certain banks, brokers,
dealers and financial institutions. See the description of securities lending
under " Investment Objectives and Policies-Government Fund. " These loans
will be made only to borrowers believed by TMC to be of good financial
standing, and the value of securities loaned will not exceed 30% of the value
of the Income Fund's total assets at the time any loan is made.
Segregated Accounts. The Income Fund may be required to segregate high grade
debt assets in order to provide coverage consistent with applicable
regulatory policies on reverse repurchase agreements, covered call and put
options written by the Fund, to cover forward foreign currency exchange
contracts that require the Fund to purchase or sell foreign currency for
hedging purposes, or in an amount equal to the value of the instruments
underlying any futures contracts and options on futures.

CERTAIN INVESTMENT RESTRICTIONS

Each Fund is subject to certain investment restrictions which, as described
in more detail in the Statement of Additional Information, may generally be
changed only with the approval of the holders of a majority of that Fund's
outstanding shares. For a more complete description of the investment
restrictions summarized below and the other investment restrictions to which
a Fund is subject, please see the Statement of Additional Information.
The Funds have the authority to borrow money from banks and other persons as
a temporary measure, and then only in amounts not exceeding 5% of the value
of a Fund's total assets unless the borrowing is from banks, in which case
the percentage limitation is 10% . For this purpose, reverse repurchase
agreements are considered as borrowings by a Fund. In connection with such
borrowing, a Fund may pledge, hypothecate, or otherwise encumber its assets.
The Funds do not intend to borrow for investment leverage purposes but solely
for extraordinary or emergency purposes or to facilitate management of a Fund
by enabling that Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be disadvantageous or not possible.

DESCRIPTION OF POTENTIAL INVESTORS AND ADVANTAGES

The Funds are designed as a convenient and economic vehicle for investors
seeking to obtain the yields available on intermediate and short-term
securities. Although the Funds are particularly designed for individual
investors, the Funds also may be appropriate for the investment of funds held
or managed by corporations, employee benefit plans, insurance companies,
investment counselors, savings and loan associations, credit unions,
educational, religious and charitable organizations, municipalities,
investment bankers, brokers and others. In each case, prospective
shareholders should determine if an investment in a Fund is consistent with
their investment objectives through consultation with their advisers and
investigation of applicable state and federal laws and regulations.

Counsel to the Funds has advised that in their view shares of the Government
Fund are a legal investment for, among other investors, commercial banks and
credit unions chartered under the laws of the United States. This advice is
based upon a review of this Prospectus and the Fund's Statement of Additional
Information, and upon counsel's receipt of undertakings by TMC and the
Government Fund respecting investment policies. In addition, the Government
Fund believes that the Government Fund is currently a legal investment for
savings and loan associations and commercial banks chartered under the laws
of certain states.

Investment in a Fund relieves the investor of many investment management and
administrative burdens usually associated with the direct purchase and sale
of fixed income debt securities. These include: (i) selection of portfolio
investments; (ii) surveying the market for the best price at which to buy and
sell; (iii) valuation of portfolio securities; (iv) selecting and scheduling
of maturities and reinvestments; (v) receipt, delivery and safekeeping of
securities; and (vi) portfolio recordkeeping.
In addition, each Fund gives smaller investors access to investments in
certain obligations, such as GNMA certificates, which these smaller investors
would not otherwise have because of the relatively high minimum purchase
amounts for such securities. In the same regard, investment in a Fund
permits the smaller investor to diversify an investment among a variety of
obligations.

PORTFOLIO TURNOVER

For its fiscal year ended September 30, 1995, the Government Fund's
portfolio turnover rate was 28.31%. The Income Fund's portfolio turnover
rate was 43.12%. Each Fund anticipates that its annual turnover rate
normally will 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 for a Fund which are
otherwise consistent with that Fund's investment objectives and management
policies. However, a higher rate of portfolio turnover may result in
increased transaction costs to that Fund.

YOUR ACCOUNT

BUYING FUND SHARES IN GENERAL

Each Fund offers two classes of shares with varying annual expenses and
sales charge structures. Class A shares are sold subject to a sales charge
which is deducted at the time you purchase your shares. This class also pays
a service fee. Class C shares are sold at net asset value, subject to payment
of a sales charge if redeemed within one year of purchase. They also pay both
a service and a distribution fee. The various service or service and
distribution fees are Fund expenses which are deducted from each class'
annual income. Each Fund also may allocate among its classes certain
expenses, to the extent allocable to specific classes. If you do not specify
a class of shares in your order, your money will be invested in Class A
shares of the Fund you purchase.

Financial advisors and others who sell shares of the Fund receive different
compensation for selling different classes of the Funds' shares. Shares of
the Funds may be purchased through investment dealers, brokers or agents
("financial advisors") who have agreements with the Funds' distributor,
Thornburg Securities Corporation ("TSC"), or through TSC in those states
where TSC is registered. Although shares of the National Funds generally are
available in most states, shares of the single state Funds are or will be
available only in their respective states and certain other states where
those Funds are qualified for sale. The Funds and TSC reserve the right to
refuse any order in whole or in part.

NET ASSET VALUE

The net asset value (NAV) stated for each class of each Fund is the value of
a single share of that class. The NAV is computed at least once each day the
Fund conducts business, by adding the value of the class' investments, cash,
and other assets, subtracting its liabilities, and then dividing the result
by the number of shares outstanding. Shares are purchased at the next share
price calculated after your investment is received and accepted. Share price
is normally calculated at 4 p.m. Eastern time.

BUYING CLASS A SHARES

When you buy Class A shares the sales charge applicable to your investment is
deducted from the price you pay and the balance is invested at NAV. The sales
charge is shown in the table below.

Because the fees for Class A shares of each Fund are lower than the fees for
Class C shares of the same Fund, Class A shares of each Fund pay higher
dividends than Class C shares of the same Fund. The deduction of the initial
sales charge, however, means that you purchase fewer Class A shares than
Class C shares of each Fund for a given amount invested.

If you are in any of the special classes of investors who can buy Class A
shares at net asset value or at a reduced sales charge, you should consider
buying Class A shares. If you are planning a large purchase or purchases
under the Right of Accumulation or Letter of Intent you should consider if
your overall costs will be lower by buying Class A shares, particularly if
you plan to hold your shares for an extended period of time.

<TABLE>
Class A Shares Dealer Concession
Total Sales Charge or Agency Commission
As Percentage As Percentage As Percentage
of Offering Price of Net Asset Value of Offering Price
<S> <C> <C> <C>
Less than $50,000.00 2.50% 2.56% 2.10%
$50,000 to 99,999.99 2.25% 2.30% 1.85%
$100,000 to 249,999.99 1.75% 1.78% 1.50%
$250,000 to 499,999.99 1.50% 1.52% 1.25%
$500,000 to 999,999.99 1.00% 1.01% 0.85%
$1,000,000 to 1,999,999.99 0.625% 0.625% 0.625%
$2,000,000 and up 0.50% 0.50% 0.50%
</TABLE>

LETTERS OF INTENT. If you intend to invest, over the course of 13 or fewer
months, an amount of money that would qualify for a reduced sales charge if
it were made in one investment, you can qualify for the reduced sales charge
on the entire amount of your investment by signing a "Letter of Intent"
(LOI). Each investment you make during the 13 months will be charged the
reduced sales commission applicable to the amount stated in your LOI. You do
not have to reach the goal you set. If you don't, you will have to pay the
difference between the sales charge you would have paid and the sales charge
you did pay. You may pay this amount directly to TSC, or TSC will redeem a
sufficient number of your shares in the Fund to obtain the difference.

RIGHTS OF ACCUMULATION. Each time the value of your account plus the amount
of any new investment passes one of the breakpoints illustrated in the table
on page ___, the amount of your new investment in excess of the breakpoint
will be charged the reduced sales charge applicable to that range.

WAIVERS. You may purchase Class A shares of each Fund with no sales charge if
you notify TSC or the Funds' transfer agent, NFDS, at the time you purchase
shares that you belong to one of the categories below. If you do not provide
such notification at the time of purchase, your purchase will not qualify for
the waiver of sales charge.

A SHAREHOLDER WHO REDEEMED CLASS A SHARES OF A THORNBURG FUND. For two years
after such a redemption you will pay no sales charge on amounts that you
reinvest in Class A shares of one of the Funds covered by this prospectus, up
to the amount you previously redeemed.

AN OFFICER, TRUSTEE, DIRECTOR, OR EMPLOYEE OF TMC (or any investment company
managed by TMC), TSC, any affiliated Thornburg Company, the Fund's Custody
Bank or Transfer Agent and members of their families.

EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the
National Association of Securities Dealers, Inc. (NASD); employees of
financial planning firms who place orders for the Fund through a member in
good standing with NASD; the families of both types of employees. Orders must
be placed through an NASD member firm who has signed an agreement with TSC to
sell Fund shares.

CUSTOMERS of bank trust departments, companies with trust powers and
investment advisors who charge a fee for service, including investment
dealers who utilize wrap fee arrangements.

INVESTORS PURCHASING $1 MILLION OR MORE. However, a contingent deferred sales
charge of 1/2 of 1% applies to shares redeemed within one year of purchase.

THOSE PERSONS WHO ARE DETERMINED BY THE TRUSTEES OF THE FUND to have acquired
their shares under special circumstances not involving any sales expenses to
the Funds or Distributor.

PURCHASES PLACED THROUGH A BROKER THAT MAINTAINS ONE OR MORE OMNIBUS ACCOUNTS
WITH THE FUND provided that such purchases are made by: (i) investment
advisers or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other
fee for their services; (ii) clients of such investment advisers or financial
planners who place trades for their own accounts if the accounts are linked
to the master account of such investment adviser or financial planner on the
books and records of the broker or agent; and (iii) retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Sections 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts." Investors may be charged a fee if they
effect transactions in Fund shares through a broker or agent.

PROCEEDS FROM A LOAD FUND REDEMPTION. You may purchase shares of a Fund at
net asset value without a sales charge to the extent that the purchase
represents proceeds from a redemption (within the previous 60 days) of shares
of another mutual fund which has a sales charge. When making a direct
purchase at net asset value under this provision, the Fund must receive one
of the following with your direct purchase order: (i) the redemption check
representing the proceeds of the shares redeemed, endorsed to the order of
the Fund, or (ii) a copy of the confirmation from the other fund, showing the
redemption transaction. Standard back office procedures should be followed
for wire order purchases made through broker dealers. Purchases with
redemptions from money market funds are not eligible for this privilege. This
provision may be terminated anytime by TSC or the Fund
without notice.

BUYING CLASS C SHARES

You can buy Class C shares at NAV but you will pay a contingent deferred
sales charge (CDSC) of 1/2 of 1% if you redeem your shares within one year of
purchase. The CDSC applies only to Class C shares purchased on or after
October 2, 1995. The CDSC will be imposed upon the lower of the purchase
price or net asset value at redemption of each share redeemed. The CDSC is
not imposed upon shares you buy by reinvesting dividends or capital gain
distributions. Maximum purchase amount for Class C shares is less than $1
million. Class C shares are charged higher annual expenses than Class A
shares.

If your investment horizon is relatively short and you do not qualify to
purchase Class A shares at a reduced sales charge, you should consider
purchasing Class C shares.

OPENING AN ACCOUNT
___________________________________________________________________________
Buying Shares To Open an Account To Add to an Account
- ---------------------------------------------------------------------------
In Minimum Minimum
- -- ------- -------
Regular Accounts $5,000 $ 100
Automatic Investment
Plans $ 100 $ 100

Through Your Financial Consult with your Consult with your
Advisor financial advisor. financial advisor

By Telephone Exchange from another Exchange from another
1-800-847-0200 Thornburg Fund account Thornburg Fund account
with the same registra- with the same registra-
tion, including name, tion, including name,
address, and taxpayer address, and taxpayer
ID number. ID number.

By Mail Complete and sign the Make your check payable
application. Make your to the applicable
check payable to the Thornburg Fund. Indicate
applicable Thornburg your Fund account number
Fund. Mail to the on your check and mail to
address indicated on the the address printed on
application. your account statement.

Automatic Investment Use one of the above Use Automated Clearing
Plan procedures to open your House funds. Sign up for
account. Obtain an this service when opening
Automatic Investment your account, or call
Plan form to sign up 1-800-847-0200 to add
for this service. to it.
- ----------------------------------------------------------------------------

Complete and sign an account application and give it, along with your check,
to your financial advisor. You may also open your account by wire or mail as
described above. If there is no application accompanying this prospectus,
call 1-800-847-0200.

If you buy shares by check and then redeem those shares, the payment may be
delayed for up to 15 business days to ensure that your previous investment
has cleared.

STREET NAME OWNERSHIP OF SHARES

Some securities dealers offer to act as owner of record of Fund shares as a
convenience to investors who are clients of those firms and shareholders of
an individual Fund. Neither the Fund nor the Transfer Agent can be
responsible for failures or delays in crediting shareholders for dividends or
redemption proceeds, or for delays in reports to shareholders if a
shareholder elect s to hold Fund shares in street-name through a brokerage
firm account rather than directly in the shareholder's own name. Further,
neither the Fund nor the Transfer Agent will be responsible to the investor
for any loss to the investor due to the brokerage firm's failure, its loss of
property or funds, or its acts or omissions. Prospective investors are urged
to confer with their financial advisor to learn about the different options
available for owning mutual fund shares. You may receive share certificates
or hold shares in your name with the Transfer Agent upon request.

SELLING FUND SHARES

You can withdraw money from your Fund account at any time by redeeming some
or all of your shares (by selling them back to the Fund or by selling the
shares through you r financial advisor). Your shares will be purchased by the
Fund at the next share price (NAV) calculated after your order is received in
proper form and accepted. The amount of the CDSC, if any, will be deducted
and the remaining proceeds sent to you. No CDSC is imposed on the amount by
which the value of a share may have appreciated. Similarly, no CDSC is
imposed on shares obtained through reinvestment of dividends or capital
gains. Shares not subject to a CDSC will be redeemed first. Share price is
normally calculated at 4 p.m. Eastern time.

To sell shares in an account, you may use any of the methods described on the
following page.

If you are selling some but not all of your shares, leave at least $1,000
worth of shares in the account to keep it open.

CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and your Fund from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:

* You wish to redeem more than $10,000 worth of shares,
* Your account registration has changed within the last 30 days,
* The check is being mailed to a different address than the one on your
account (record address),
* The check is being made payable to someone other than the account owner,
or
* The redemption proceeds are being transferred to a Thornburg account with
a different registration.

You should be able to obtain a signature guarantee from a bank, broker
dealer, credit union (if authorized under state law), securities exchange or
association, clearing agency, savings association or participant in the
Securities Transfer Agent Medallion Program (STAMP). A notary public cannot
provide a signature guarantee.

TELEPHONE REDEMPTION. If you completed the telephone redemption section of
your application when you first purchased your shares, you may easily redeem
any class of shares of any Fund by telephone simply by calling a Fund
Customer Service Representative before 2:30 p.m. Money can be wired directly
to the bank account designated by you on the application or sent to you in a
check. The Funds' Transfer Agent may charge a fee for a bank wire. This fee
will be deducted from the amount wired.

If you did not complete the telephone redemption section of your application,
you may add this feature to your account by calling the Fund for a telephone
redemption application. Once you receive it, please fill it out, have it
signature guaranteed and send it to:

NFDS
c/o Thornburg Funds
P.O. Box 419017
Kansas City, MO 64141-6017

The Funds, TSC, TMC and the Funds' Transfer Agent are not responsible for,
and will not be liable for, the authenticity of withdrawal instructions
received by telephone or the delivery or transmittal of the redemption
proceeds if they follow instructions communicated by telephone that they
reasonably believe to be genuine. By electing telephone redemption you are
giving up a measure of security you otherwise may have by redeeming shares
only with written instructions, and you may bear the risk of any losses
resulting from telephone redemption. The Funds' Transfer Agent will attempt
to implement reasonable procedures to prevent unauthorized transactions and
the Funds or their Transfer Agent could be liable if these procedures are not
employed. These procedures will include recording of telephone transactions,
providing written confirmation of such transactions within 5 days, and
requesting certain information to better confirm the identity
of the caller at the time of the transaction.
____________________________________________________________________________
Redeeming Shares Account Type Special Requirements
- ----------------------------------------------------------------------------
Through Your Financial All account types Consult with your financial
Advisor advisor. Your financial
advisor may charge a fee.

By Mail Individual, Joint The letter of instruction
Tenant, Sole Pro- must be signed by all
prietorship, UGMA, persons required to sign
UTMA for transactions, exactly as
Send to: NFDS their names appear on the
c/o Thornburg Funds account, and must include:
P.O. Box 419017 * Your name,
Kansas City, MO * The Fund's name,
64141-6017 * Your Fund account number,
* The dollar amount or
number of shares to be
redeemed,
* Any other applicable
requirements listed
above,
* Signature guarantee, if
required.

Trust In addition to the above
requirements, the trustee
must sign the letter
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.

Business or In addition to the above
Organization requirements, at least one
person authorized by
corporate resolution to act
on the account must sign the
letter which must be
signature guaranteed.
Include a corporate
resolution with corporate
seal.

Executor, Call 1-800-847-0200 for
Administrator, instructions.
Conservator, Guardian

By Telephone All account types You must sign up for the
1-800-847-0200 except Street-Name telephone redemption feature
before using it.
Minimum Wire $1,000
Minimum Check $50.00

By Systematic Withdrawal All account types You must sign up for this
Plan feature to use it.
Minimum Account Balance
$10,000
Minimum Check $50.00
- ----------------------------------------------------------------------------

INVESTOR SERVICES

Thornburg Funds provide a variety of services to help you manage your
account.

Information Services

Thornburg Funds' telephone representatives are available Monday through
Friday from 9:30 am to 6:30 pm Eastern time. Whenever you call, you can speak
with someone equipped to provide the information or service you need.

Thornburg Funds' Audio Response system is available 24 hours a day, 365 days
a year. This computerized system gives you instant access to your account
information and up-to-date figures on all of the Thornburg Funds.

Statements and reports that Thornburg Funds send to you include the
following:
* Account statements after every transaction affecting your account
* Monthly account statements
* Financial reports (every six months)
* Cost basis statement (at the end of any year in which you redeem shares)

Individual Retirement Accounts and Retirement Plans

Shares of the Funds may be purchased by retirement plans and in connection
with individual retirement plans ("IRA's"). The purchase of shares may be
limited by the governing instrument of any such plan. The minimum initial
investment imposed by the Funds in connection with an IRA is $2,000.

A standardized IRA is available through TSC for individuals wishing to open
an IRA. The cost to open an IRA under this program is $10, and the annual
fee is $10. State Street Bank and Trust Company, as custodian for the
program, may amend the provisions of the IRA's opened through the program to
assure continued qualification under the Internal Revenue Code or for other
reasons.

If you are considering establishing a retirement plan or purchasing a Fund's
shares in connection with a retirement plan, you should consult with your
attorney or tax adviser with respect to plan requirements and tax aspects
pertaining to you.

TRANSACTION SERVICES

Automatic Investment Plan. One easy way to pursue your financial goals is to
invest money regularly. Thornburg Funds let you transfer as little as $100
from your bank account into your Fund account on a weekly, monthly or
quarterly basis, automatically. Because the Fund's Automatic Investment Plan
has a lower minimum than a regular purchase, it is an ideal way for beginning
investors to invest in a Fund.

While regular investment plans do not guarantee a profit and will not protect
you against loss in a declining market, they can be an excellent way to
invest for retirement, a home, educational expenses, and other long-term
financial goals. Call 1-800-847-0200 and speak to a Fund Customer Service
Representative for more information.

Exchange Privilege. You may exchange Class A shares of any other Thornburg
Fund for Class A shares of one of the Thornburg Income Funds.

If you are exchanging from one of the Funds covered by this prospectus into
another Thornburg Fund, you may (i) have to pay the difference between the
front end sales charge you paid on the Fund out of which you are exchanging
and the front end sales charge applicable to the Fund into which you are
exchanging; or (ii) you may qualify for a reduced sales charge or no sales
charge on that Fund. Please consult the exchange an d reinvestment privilege
information in the Prospectus of the other Thornburg Fund.

Note that exchanges out of a Fund may have tax consequences for you. For
details on policies and restrictions governing exchanges, including
circumstances under which a shareholder's exchange privilege may be suspended
or revoked, see page ___.

Systematic withdrawal plans let you set up periodic redemptions from your
account. Because of the sales charge on Class A shares of each Fund, you may
not want to set up a systematic withdrawal plan during a period when you are
buying Class A shares on a regular basis.

SHAREHOLDER AND ACCOUNT POLICIES

Dividends, Capital Gains, and Taxes

The Funds distribute substantially all of their net income and realized
capital gains, if any, to shareholders each year. Each Fund declares its net
investment income daily and distributes it monthly. Each Fund will distribute
net realized capital gains, if any, at least annually. Capital gain
distributions normally will be declared and payable in December.

Distribution Options

Each Fund earns interest from bond, money market, and other investments.
These are passed along as dividend distributions. Each Fund realizes capital
gains whenever it sells securities for a higher price than it paid for them.
These are passed along as capital gain distributions.

When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers four options, (which you can change at
any time).

Dividends

1. Reinvestment Option. Your dividend distributions will be automatically
invested in additional shares of your Fund. If you do not indicate a
choice on your application, you will be assigned this option. You may also
instruct the Fund to invest your dividends in the shares of any other
Thornburg Fund.

2. Cash Option. You will be sent a check for your dividend distributions.
Cash distribution checks are normally mailed on the third business day
after the month-end.

Capital Gain

1. Reinvestment Option. Your capital gain distributions, if any, will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
You may also instruct the Fund to re invest your capital gain
distributions in shares of any other Thornburg Fund.

2. Cash Option. You will be sent a check for any capital gain distributions.

Shares of any Thornburg Fund purchased through reinvestment of dividend and
capital gain distributions are not subject to sales charges or contingent
deferred sales charges.

Turnover and Capital Gains

The Funds do not intend to engage in short-term trading for profits.
Nevertheless, when a Fund believes that a security will no longer contribute
towards its reaching its goal, it will normally sell that security.

When a Fund sells a security at a profit it realizes a capital gain. When it
sells a security at a loss it realizes a capital loss. A fund must, by law,
distribute capital gains, net of any losses, to its shareholders. Whether you
reinvest your capital gain distributions or take them in cash, the
distribution is taxable.

To minimize taxable capital gain distributions, each Fund will realize
capital losses, if available, when, in the judgment of the portfolio manager,
the integrity and income generating aspects of the portfolio would be
unaffected by doing so.

TAXES

Federal Taxes

The Funds have elected and intend to continue qualification as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986
(the "Code"). Distributions representing net investment income and net
short-term capital gains will be taxable to the recipient shareholders as
ordinary income, whether the distributions are actually taken in cash or are
reinvested by the recipient shareholders in additional shares. Fund
distributions will not be eligible for the dividends-received deduction for
corporations. Distributions of net long-term capital gains, if any, will be
treated as long-term capital gains to the distributee shareholders,
regardless of the length of time the shareholder has owned the shares, and
whether received as cash or in additional shares.

Redemption or resale of shares by a shareholder will be a taxable transaction
for federal income tax purposes, and the shareholder will recognize a gain or
loss in an amount equal to the difference between the shareholder's basis in
the shares and the amount received on the redemption or resale. If the
shares sold or redeemed are a capital asset, the gain or loss will be a
capital gain or loss and will be long-term if the shares were held for more
than one year.

Each shareholder will be notified annually by the shareholder's Fund as to
the amount and characterization of distributions paid to or reinvested by the
shareholder for the preceding taxable year. A Fund may be required to
withhold federal income tax at a rate of 31% from distributions otherwise
payable to a shareholder if (i) the shareholder has failed to furnish that
Fund with his or her taxpayer identification number, (ii) that Fund is
notified that the shareholder's number is incorrect, (iii) the Internal
Revenue Service notifies that Fund that the shareholder has failed properly
to report certain income, or (iv) when required to do so, the shareholder
fails to certify under penalty of perjury that he is not subject to this
withholding.

The tax discussion set forth above is for general information only.
Prospective investors should consult their own tax advisers regarding the
federal, state, local and other tax consequences to investors of investment
in the Funds.

SERVICE AND DISTRIBUTION PLANS

Class C Distribution Plan. Each Fund has adopted a Class C Distribution Plan
applicable to Class C shares, under which the Fund will pay to TSC on a
monthly basis an annual distribution fee of up to .75% of the average daily
net assets attributable to Class C shares of the Fund. This distribution fee
is an addition to the service fee described above under "Service Plan - Both
Classes" and is charged to and reduces the income allocated to Class C
shares. TSC intends to use these amounts principally to compensate
dealers (including banks) who sell Class C shares. TSC also will engage in
other distribution related activities, including advertising and other
promotional activities. However, the distribution fee paid to TSC is not
computed with respect to TSC's actual expenses, and the fees received by TSC
may be more or less than its actual distribution expenses. TSC may, but is
not obligated to, waive any part or all of its compensation provided for
under the Class C Distribution Plan.

The Glass-Steagall Act prohibits certain banks from underwriting mutual fund
shares. The Funds do not believe that this prohibition will apply to the
commissions described beginning on page 16 or to the plans described above.
However, no assurance can be given that the Glass-Steagall Act will not be
interpreted so as to prohibit these arrangements. In that event, the ability
of the Funds to market their shares could be impaired to a small extent. In
addition, state securities laws on this issue may differ from
interpretations of federal law, and banks and financial institutions may be
required to register as dealers pursuant to state law.

TRANSACTION DETAILS

The Funds are open for business each day the New York Stock Exchange (NYSE)
is open. Each class of shares of the Fund normally calculates its NAV (and
offering price for Class A shares) as of the close of business of the NYSE,
normally 4 p.m. Eastern time. Each Fund's assets are valued on the basis of
valuations obtained from independent pricing services.

When you sign your account application, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require your Fund to
withhold 31% of your taxable distributions and redemptions.

You may initiate many transactions by telephone. Note that a Fund will not be
responsible for any losses resulting from unauthorized transactions if it
follows reasonable procedures designed to verify the identity of the caller.
The Fund will request personalized security codes or other information, and
may also record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them. If you want the ability to
redeem and exchange by telephone, fill in the appropriate section
of the application. If you have an existing account to which you wish to add
this feature, call the Fund for a telephone redemption
application. If you are unable to reach the Fund by phone (for
example, during periods of unusual market activity), consider placing your
order by mail or by using your financial advisor.

The Funds reserve the right to suspend the offering of shares for a period of
time. Each Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions "
on page 25. Purchase orders may be refused if, in TMC's opinion, they would
disrupt management of a Fund.

When you place an order to buy shares, your order will be processed at the
next share price calculated after your order is received and accepted. If you
open or add to your account yourself rather than through your financial
advisor please note the following:

* All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks.
* The Funds do not accept cash.
* If your check does not clear, your purchase will be cancelled and you
could be liable for any losses or fees the Fund or its Transfer Agent has
incurred.

When you buy shares of a Fund or sell them through your financial advisor,
you may be charged a fee for this service. Please read your financial
advisor's program materials for any additional procedures, service features
or fees that may apply.

Certain financial institutions that have entered into sales agreements with
TSC may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the Fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.

When you place an order to sell shares, your shares will be sold at the next
NAV calculated after your request is received and accepted. (Except that a
CDSC will be deducted from Class C shares purchased on or after October 2,
1995 and sold within one year of purchase, and a CDSC of 1/2 of 1% will be
deducted from redemptions of Class A shares within one year of purchase where
no sales charge was imposed on the purchase because it exceeded $1,000,000).
Note the following:

* Consult your financial advisor for procedures governing redemption through
his or her firm.
* If you redeem by mail the proceeds will normally be mailed to you on the
next business day, but if making immediate payment could adversely affect
your Fund, it may take up to 7 days to pay you.
* Telephone redemptions over the wire generally will be credited to your
bank account on the business day after your phone call.
* Each Fund may hold payment on redemptions until it is reasonably satisfied
that investments previously made by check have been collected, which can
take up to 15 business days.
* Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
* To the extent consistent with state and federal law, a Fund may make
payments of the redemption price either in cash or in kind. The Funds have
elected to pay in cash all requests for redemption by any shareholder.
They may, however, limit such cash in respect to each shareholder during
any 90 day period to the lesser of $250,000 or 1% of the net asset value
of a Fund at the beginning of such period. This election has been made
pursuant to Rule 18f-1 under the Investment Company Act of 1940 and is
irrevocable while the Rule is in effect unless the Securities and Exchange
Commission, by order, permits its withdrawal. In the case of a redemption
in kind, securities delivered in payment for shares would be valued at the
same value assigned to them in computing the net asset value per share of
the Fund. A shareholder receiving such securities would incur brokerage
costs when selling the securities.

EXCHANGE RESTRICTIONS

* The Fund you are exchanging into must be registered for sale in your
state.
* You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
* Before exchanging into a Fund, read its prospectus.
* If you exchange Class A shares into a Fund with a higher sales charge, you
may have to pay the percentage-point difference between that Fund's sales
charge and any sales charge you h ave previously paid in connection with
the shares you are exchanging. For example, if you had already paid a
sales charge of 2.5% on your shares and you exchange them into a Fund with
a 4.5% sales charge, you would pay an additional 2% sales charge.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt performance and shareholders, each Fund
reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of a Fund
in any calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification number, will be
counted together for purposes of the four exchange limit.
* Each Fund reserves the right to refuse exchange purchases by any person or
group if, in TMC's judgment, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
* Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the
Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund.

Although a Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time. The Funds
reserve the right to terminate or modify the exchange privilege in the
future.

PERFORMANCE

YIELD COMPUTATION AND TOTAL RETURN

The Funds may quote their yields and returns in reports, sales literature and
advertisements. Yield and return information are computed separately for
Class A and Class C shares. Yield and return for Class C shares of a Fund
ordinarily will be less than t hat of Class A shares of the same Fund because
of the additional distribution fees imposed upon Class C shares.
Additionally, yield and return could differ in minor respects among classes
of the same Fund because of allocation of certain expenses to one or more
specific classes to which the expenses relate. Any return quoted should not
be considered a representation of the return in the future since return
figures are based upon historical earnings. Actual performance will vary.

Current yield quotations will include a standardized calculation which
computes yield for a 30-day or one-month period by dividing a Fund's net
investment income per share during the period by the maximum offering price
on the last day of the period and annualizing the result. Provided that any
such quotation is also accompanied by the standardized calculation referred
to above, any of the Funds also may quote non-standardized yields for a
specified period by dividing the net investment income per share of that Fund
f or that period by either the Fund's average public offering price per share
for that same period or the offering price per share on the first or last day
of the period and annualizing the result. The primary differences between the
yield calculations obtain ed using the standardized performance measure and
any non-standardized performance measure will be caused by the following
factors: (1)The non-standardized calculation may cover periods other than the
30-day or one month period required by the standardize d calculation; (2)The
non-standardized calculations may reflect amortization of premium based upon
historical cost rather than market value; (3)The non-standardized calculation
may reflect the average offering price per share for the period or the
beginning offering price per share for the period, whereas the standardized
calculation will always reflect the maximum offering price per share on the
last day of the period; (4)The non-standardized calculation may reflect an
offering price per share other than the maximum offering price, provided
that any time any Fund's return is quoted in reports, sales literature or
advertisements using a public offering price which is less than the Fund's
maximum public offering price, the return computed by using the Fund's
maximum public offering price also will be quoted in the same piece; (5)The
non-standard return quotation may include the effective return obtained by
compounding the monthly dividends.

Average annual total return quotations show the average annual percentage
change in value of $1,000 for one, five and ten-year periods unless the class
has been in existence for a shorter period. Average annual total return
includes the effect of paying the maximum sales charge (Class A shares) or
the deduction of the applicable CDSC (Class C shares) and assumes the
reinvestment of all dividends. The Funds also may furnish average annual
total return quotations for other periods, or based upon investments at
various sales charge levels or at net asset value. Total return quotations
show the total of all income and capital gain paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in the value of
the original investment, expressed as a percentage of the purchase price.

Yield and return information may be useful in reviewing the performance of
the Funds and for providing a basis for comparison with other investment
alternatives. Comparative information about the yield or distribution rate of
the shares of a Fund and a bout average rates of return on certificates of
deposit, bank money market deposit accounts, money market mutual funds and
other short-term investments may also be included in advertisements and
communications of the Fund. Any such comparison will
contain information about the differences between the Funds
and those investments.

From time to time, in advertisements and other types of literature, the
performance of the Funds may be compared to other groups of mutual funds.
This comparative performance ma y be expressed as a ranking or a rating
prepared by Lipper Analytical Services, Inc., Donoghue Organization, Inc.,
Morningstar, Inc., Value Line or other widely recognized independent services
which monitor the performance of mutual funds. Performance rankings and
ratings reported periodically in national financial publications such as
MONEY Magazine, FORBES, BARRON's, VALUE LINE, the WALL STREET JOURNAL and
MORNINGSTAR, and other such publications may also be used. The Funds may
illustrate performance or the characteristics of their respective investment
portfolios through graphs, tabular data, or other displays which describe (i)
the average portfolio maturity of a Fund's portfolio securities relative to
the maturities of other investments, (ii) the relationship of yield and
maturity of the Fund to the yield and maturity of other investments (either
as a comparison or through use of standard benchmarks or indices such as the
Treasury yield curve), (iii) changes in the Funds' share price or net asset
value relative to changes in the value of other investments, and (iv) the
relationship over time of changes in the Funds' (or other investments) net
asset values or prices and the Funds' (or other investments') investment
returns. The Funds also may illustrate or refer to their respective
investment portfolios, investment techniques and strategies, and general
market or economic trends in advertising or communications to shareholders or
prospective shareholders, including reprints of interviews or articles
written by or about, and including comments by, Fund managers. These
illustrations, references and comments ordinarily will relate to
topics addressed in the Funds' Prospectus and Statements of Additional
Information.

ORGANIZATION OF THE FUNDS

Each of the Funds is a diversified 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" ). The Funds are managed by their investment adviser, Thornburg
Management Company, Inc. (TMC) under the supervision of the Trust's Trustees.
The Trust currently has 12 authorized Funds, two of which are described in
this Prospectus. The Trustees are authorized to divide the Trust's 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 Trustees, change fundamental
investment policies, or for other purposes. Shareholders not attending these
meetings are encouraged to vote by proxy. Each Fund will mail proxy materials
in advance, including a voting card and information about the proposals to be
voted on. The number of votes you are entitled to is based upon the number of
shares you own. Shares do not have cumulative voting rights or preemptive
rights.

TMC and TSC

The Funds are managed by Thornburg Management Company, Inc., ("TMC") which
chooses each Fund's investments and handles its business affairs. TMC was
established in 1982. Today, the Thornburg Funds include Thornburg Value Fund,
Thornburg Limited Term Municipal Fund National Portfolio and Thornburg
Limited Term Municipal Fund California Portfolio, Thornburg Intermediate
Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund, and
Thornburg Florida Intermediate Municipal Fund in addition to the Funds
covered by this Prospectus. The Thornburg Funds total over $1.6 billion in
assets. Thornburg Management Company Inc. is known as a provider of
conservative investment products. For more than a decade the Thornburg Funds
have been committed to preserving and increasing the real wealth of their
shareholders. The key to growing real wealth is increasing buying power after
taxes, inflation, and investment related expenses.

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

<TABLE>
U.S. Government Fund Income Fund
Net Assets Annual Rate Annual Rate
<S> <C> <C>
0 to $500 million .50% .625%
$500 million to $1 billion .50% .575%
$1 billion to $1.5 billion .45% .525%
$1.5 billion to $2 billion .45% .475%
Over $2 billion .40% .400%
</TABLE>

Steven J. Bohlin, a Managing Director of TMC, has primary responsibility for
the day-to-day management of each of the Fund portfolios. He has held this
responsibility since 1988 for the Government Fund and since the inception of
the Income Fund in 1992. Mr. Bohlin is assisted by other employees of TMC in
managing the Funds.

TMC may, from time to time, agree to waive its fees or to reimburse any Fund
for expenses above a specified percentage of average daily net assets. TMC
retains the ability to be repaid by the Fund receiving these reimbursements
for these expense reimbursements if expenses fall below the limit prior to
the end of the fiscal year. Fee waivers or expenses by the Fund will lower
its yield.

In addition to TMC's fees, each Fund will pay all other costs and expenses of
its operations. Funds will not bear any costs of sales or promotion incurred
in connection with the distribution of their shares, except as provided for
under the service and distribution plans applicable to each Fund class, as
described above under "Service and Distribution Plans."

Thornburg Securities Corporation (TSC) distributes and markets the Thornburg
Funds.

H. Garrett Thornburg, Jr., a Trustee and President of the Trust, is the
controlling stockholder of both TMC and TSC.
Thornburg Funds provides shareholders account inquiry service 24 hours a day,
365 days a year, through its Audio Response telephone service. To reach
Thornburg Funds for general information, please call 1-800-847-0200. If you
would prefer to speak with a Thornburg Funds representative, please call
during business hours and follow the simple instructions you will receive.

ADDITIONAL INFORMATION

Reports to Shareholders
Shareholders will receive annual reports of their Fund containing financial
statements audited by the Funds' independent auditors, and also will receive
unaudited semi-annual reports. In addition, each shareholder will receive an
account statement no less often than quarterly.

Custodian and Transfer Agent
The custodian of each Fund's assets is State Street Bank & Trust Co. National
Financial Data Services is the transfer agent for the Funds and
performs bookkeeping, data processing and administrative services incident to
the maintenance of shareholder accounts.

General Counsel
Legal matters in connection with the issuance of shares of the Funds are
passed upon by White, Koch, Kelly & McCarthy, Professional Association, Post
Office Box 787, Santa Fe, New Mexico 87504-0787.

Investment Adviser
Thornburg Management Company, Inc.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501

Distributor
Thornburg Securities Corporation
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501

Auditor
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017

Custodian
State Street Bank & Trust Co.
Boston, Massachusetts

Transfer Agent
State Street Bank & Trust Co.
c/o NFDS Servicing Agent
Post Office Box 419017
Kansas City, Missouri 64141-6017

No dealer, sales representative or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, the information or representation must not
be relied upon as having been authorized by any Fund or Thornburg Securities
Corporation. This Prospectus constitutes an offer to sell securities of a
Fund only in those states where the Fund's shares have been registered or
otherwise qualified for sale. A Fund will not accept applications from
persons residing in states where the Fund's shares are not registered.

<logo>
Thornburg Funds
Investing With Integrity
Thornburg Securities Corporation, Distributor
119 East Marcy Street, Santa Fe, New Mexico 87501
(800) 847-0200

THORNBURG
MUNICIPAL FUNDS

Thornburg Limited Term Municipal Fund National Portfolio
Thornburg Limited Term Municipal Fund California Portfolio
Thornburg Intermediate Municipal Fund
Thornburg Florida Intermediate Municipal Fund
Thornburg New Mexico Intermediate Municipal Fund

PROSPECTUS
February 1, 1996

TABLE OF CONTENTS

Expense Information
Financial Highlights
Management Discussion of Fund Performance
Investment Objectives and Policies
Your Account - Buying Fund Shares
Selling Fund Shares
Investor Services, Transaction Services,
Shareholder and Account Policies
Taxes
Service and Distribution Plans
Transaction Details
Exchange Restrictions
Performance
Organization of the Funds
TMC and TSC
Additional Information

THORNBURG MUNICIPAL FUNDS

The Thornburg Municipal Funds are separate investment portfolios ("Funds")
offered through this combined prospectus by Thornburg Limited Term Municipal
Fund, Inc. and Thornburg Investment Trust:

LIMITED TERM MUNICIPAL FUNDS
(series of Thornburg Limited Term Municipal Fund, Inc.):
Thornburg Limited Term Municipal Fund National Portfolio
("Limited Term National Fund")
Thornburg Limited Term Municipal Fund California Portfolio
("Limited Term California Fund")

INTERMEDIATE TERM MUNICIPAL FUNDS (series of Thornburg Investment Trust):
Thornburg Intermediate Municipal Fund ("Intermediate National Fund")
Thornburg Alabama Intermediate Municipal Fund
("Intermediate Alabama Fund")*
Thornburg Arizona Intermediate Municipal Fund
("Intermediate Arizona Fund")*
Thornburg Florida Intermediate Municipal Fund
("Intermediate Florida Fund")
Thornburg New Mexico Intermediate Municipal Fund
("Intermediate New Mexico Fund")
Thornburg Pennsylvania Intermediate Municipal Fund
("Intermediate Pennsylvania Fund")*
Thornburg Tennessee Intermediate Municipal Fund
("Intermediate Tennessee Fund")*
Thornburg Texas Intermediate Municipal Fund
("Intermediate Texas Fund")*
Thornburg Utah Intermediate Municipal Fund
("Intermediate Utah Fund")*

* Funds marked with an asterisk are not currently active, and propose to
commence investment operations in the future.

All of the Funds are managed by Thornburg Management Company, Inc. ("TMC").
Each active Fund offers a choice to investors of two classes of shares:
"Class A shares," sold at net asset value plus an initial sales charge
imposed at the time of sale; and "Class C shares," sold without an initial
sales charge but subject to a sales charge if redeemed within one year of
purchase and an annual distribution fee. The different classes are described
under the heading "Your Account-Buying Fund Shares," beginning on page 16.

Each Fund has the objective of providing, through investment in a
professionally managed portfolio of Municipal Obligations, as high a level of
current income exempt from federal income tax as is consistent, in the view
of the Funds' investment adviser, with preservation of capital.

Each of the Funds having a state's name will invest primarily in Municipal
Obligations of the state having the same name, with the objective of having
interest dividends paid to its state's shareholders exempt from any
individual income taxes imposed by that state. Each of the Limited Term
Funds will maintain a portfolio having a dollar-weighted average maturity of
normally not more than five years, with the objective of reducing
fluctuations in its net asset value relative to municipal bond portfolios
with longer average maturities while expecting lower yields than those
received on portfolios with longer average maturities. Each of the
Intermediate Funds will maintain a portfolio having a dollar-weighted average
maturity of normally three to ten years, with the objective of reducing
fluctuations in net asset value relative to long-term municipal bond
portfolios. The Intermediate Funds will expect lower yields than those
received on long term bond portfolios, while seeking higher yields and
expecting higher share price volatility than the Limited Term Funds. During
temporary periods the portfolio maturity of the Intermediate Funds may be
reduced for defensive purposes. There is no limitation on the maturity of any
specific security a Fund may purchase, subject to the limitation on the
average maturity of each Fund. There can be no assurance that the Funds'
respective objectives will be achieved.

This Prospectus sets forth concisely the information a prospective investor
should know about the Funds before investing. It should be read and retained
for further reference. Additional information about the Limited Term Funds
is contained in a Statement of Additional Information - Thornburg Limited
Term Municipal Funds dated November 1, 1995, and additional information about
the Intermediate Funds is contained in a Statement of Additional Information
- - Thornburg Intermediate Municipal Funds dated February 1, 1996. Each of
these Statements of Additional Information has been filed with the Securities
and Exchange Commission and may be obtained at no charge by contacting
Thornburg Securities Corporation, 119 East Marcy Street, Suite 202, Santa Fe,
New Mexico 87501, 800-847-0200. This Prospectus incorporates by reference
the entire Statements of Additional Information.

EXPENSE INFORMATION
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
<CAPTION>
Limited Term Municipal Funds Thornburg Intermediate Municipal Funds
---------------------------- --------------------------------------
Class A Class C Class A Class C
<F1>
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases 2.50% none 3.50% none
(as a percentage of offering price)

Maximum Deferred Sales Charge on Redemptions 0.50 <F2> 0.50% <F3> 0.50 <F2> 0.60% <F3>
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)

ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Examples:
Assuming each Fund's expense percentage remains the same, an investor making a $1,000
investment will pay the following cumulative expenses, assuming a 5% annual return.
<CAPTION>
Class A Class C Class A Class C Class C
<F1>
------- ------- ------- ------- -------
<S> <C> <C> <S> <C> <C> <C>
Limited Term National Fund
- --------------------------
Management Fees .70% .70% After 1 year $ 35 $ 14 $ 19
12b-1 Fees (after fee waivers for Class C) <F4> .13% .50% After 3 years $ 55 $ 42 $ 42
Other Expenses (after expense reimbursements for Class C) <F4> .14% .13% After 5 years $ 77 $ 73 $ 73
----- ----- After 10 years $140 $161 $161
Total Fund Operating Expenses .97% 1.33%

Limited Term California Fund
- ----------------------------
Management Fees (after fee waivers) <F5> .72% .72% After 1 year $ 35 $ 14 $ 19
12b-1 Fees (after fee waivers for Class C) <F5> .13% .50% After 3 years $ 56 $ 44 $ 44
Other Expenses (after expense reimbursements) <F5> .15% .15% After 5 years $ 79 $ 76 $ 76
----- ----- After 10 years $144 $167 $167
Total Fund Operating Expenses 1.00% 1.37%

Intermediate National Fund
- --------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F6> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%

Intermediate New Mexico Fund
- ----------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F7> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%

Intermediate Florida Fund
- -------------------------
Management Fees .63% .63% After 1 year $ 45 $ 14 $ 20
12b-1 Fees (after fee waivers for Class C) <F8> .25% .60% After 3 years $ 66 $ 43 $ 43
Other Expenses (after reimbursements) <F8> .12% .12% After 5 years $ 88 $ 75 $ 75
----- ----- After 10 years $153 $164 $164
Total Fund Operating Expenses 1.00% 1.35%

<FN>
<F1> Assumes redemption at end of period
<F2> Imposed only on redemptions of purchases greater than $1 million in the event of a redemption within 12 months of purchase.
<F3> Imposed only on redemptions within 12 months of purchase, for Class C shares purchased on or after October 2, 1995.
<F4> Amounts shown for Class C shares of Limited Term National Fund are based upon waiver of a portion of the Class C 12b-1 fee
and assumption of certain Class C operating expenses. Amounts shown have been restated to reflect current fees. Had TMC not
undertaken such action, the Class C 12b-1 fees and operating expenses would have been 1.00% and .14%, respectively, and the
total Fund operating expenses would have been 1.84% for the Class C shares.
<F5> Expenses reflect rounding. Amounts shown have been restated to reflect current fees. Amounts shown for Class A of the Limited
Term California Fund are based upon a management fee waiver and assumption of certain Fund operating expenses. Had TMC not
undertaken such action, the management fee and the Fund operating expenses would have been .75% and .16%, respectively, and
the total Fund operating expenses would have been 1.04%. Amounts shown for Class C of the Limited Term California Fund are
based upon a management fee waiver, a waiver of a portion of the Class C 12b-1 fees, and assumption of certain Class C
operating expenses. Had TMC not undertaken such action, the Class C management fees, 12b-1 fees, and operating expenses would
have been .75%, 1.00%, and 1.46%, respectively, and total Fund operating expenses would have been 3.21%.
<F6> Expenses reflect rounding. Amounts shown have been restated to reflect current fees. Amounts shown for Class A of the
Intermediate National Fund are based upon a reimbursement of expenses; absent the reimbursement, other expenses would be .20%
and total Fund operating expenses would be 1.08%. Amounts shown for Class C of the Intermediate National Fund are based upon
a reimbursement of expenses and a partial waiver of Rule 12b-1 fees; absent the reimbursement and waiver, the Class C other
expenses would be .625%, the Class C 12b-1 fees would be 1.00%, and the total Fund operating expenses would be 2.35%
<F7> Expenses reflect rounding. Amounts shown have been restated to reflect current fees. Amounts shown for Class A of the
Intermediate New Mexico Fund are based upon a reimbursement of expenses; absent the reimbursement, other expenses would be
.18% and total Fund operating expenses would be 1.06%. Amounts shown for Class C of the Intermediate New Mexico Fund are
based upon a reimbursement of expenses and a partial waiver of Rule 12b-1 fees; absent the reimbursement and waiver, the
Class C other expenses would be 14.23%, the Class C 12b-1 fees would be 1.00%, and the total Fund operating expenses would
be 15.86%.
<F8> Expenses reflect rounding. Amounts shown have been restated to reflect current fees. Amounts shown for Class A of the
Intermediate Florida Fund are based upon a reimbursement of expenses; absent the reimbursement, other expenses would be 1.06%
and total Fund operating expenses would be 1.44%. Amounts shown for Class C of the Fund are based upon reimbursement of
expenses and a partial waiver of the 12b-1 fees; absent the reimbursement and the waiver, other expenses would be 17.35%,
the Class C 12b-1 fees would be 1.00%, and the total Fund operating expenses for the Class C shares would be 19.08%.
</FN>
</TABLE>
EXPLANATION OF TABLES

ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The expense figures
shown in the table opposite are presented to assist the investor in
understanding the various costs that an investor in a Fund will bear,
directly or indirectly. Long-term Class C shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
regulations of the National Association of Securities Dealers, Inc. The
Funds' investment adviser may not waive its fee or assume Fund expenses in
the future.

FINANCIAL HIGHLIGHTS

The table on the following pages present, for each Fund, per share income
and capital changes for a share outstanding throughout each period indicated.
The information for the years ended June 30, 1989, 1990, 1991, 1992, 1993,
1994, and 1995 for the Limited Term National Fund and the Limited Term
California Fund, and all information for the Intermediate Funds, has been
audited by McGladrey & Pullen, LLP, independent auditors, whose reports
thereon are incorporated by reference in the registration statements for the
respective Funds. The information should be read in conjunction with the
1995 Annual Report for each Fund.

<TABLE>
Net
Ratio of Ratio of Ratio of Assets
Expenses Expenses Net at end
Net Distri- to to Investment of
Realized butions Average Average Income Period
Net Asset and Total from Distri- Net Net (Loss) ('000's
Value Unrealized from Net butions Net Asset Assets Assets to omitted)
Beginning Net Gain Investment Invest- from Value Total After Before Average Rate of
Fiscal Year of Investment (Loss) Operations ment Net End of Return Expense Expense Net Portfolio
or Period Period Income Investments Income Gains Period <F2> Reductions Reductions Assets Turnover
- ------------- ------ --------- -------- ---------- ------- ------- ------- ------ ---------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Limited Term
Municipal Fund
- --------------
Class A
Year ended:
June 30, 1986 $12.25 $ .92 $ .43 $1.35 $( .92) $12.68 10.90% 1.00% (1.47)% 6.92% 53.00% $ 60,141
June 30, 1987 12.68 .83 .02 .85 ( .83) $( .01) 12.69 6.87 (1.00) (1.10) 6.27 47.00 127,074
June 30, 1988 12.69 .84 .06 .90 ( .84) 12.75 7.37 (1.10) (1.20) 6.58 66.00 164,489
June 30, 1989 12.75 .85 .05 .90 ( .85) 12.80 7.29 (1.15) (1.15) 6.66 69.96 184,139
June 30, 1990 12.80 .86 (.06) .80 ( .86) 12.74 6.48 (1.11) (1.11) 6.73 67.51 217,325
June 30, 1991 12.74 .85 .09 .94 ( .85) 12.83 7.60 (1.07) (1.07) 6.58 32.36 312.882
June 30, 1992 12.83 .79 .26 1.05 ( .79) 13.09 8.40 (1.04) (1.04) 5.96 27.63 521,683
June 30, 1993 13.09 .68 .50 1.18 ( .68) 13.59 9.24 (1.01) (1.01) 5.03 19.30 895,500
June 30, 1994 13.59 .63 (.32) .31 ( .63) 13.27 2.25 (0.95) (0.95) 4.60 15.63 1,030,293
June 30, 1995 13.27 .64 .10 .74 ( .64) 13.37 5.76 (0.97) (0.97) 4.86 23.02 931,987
Class B <F4>
9/1/94 <F1> $13.29 $ .46 $ .09 $ .55 $( .46) $13.38 4.14% (1.57)% (2.30)% 4.24% 23.02% $2,823
to 6/30/95 <F3> <F3> <F3>
Class C
9/1/94 <F1> $13.29 $ .46 $ .11 $ .57 $( .46) $13.40 4.25% (1.60)% (1.84)% 4.21% 23.02% $6,469
to 6/30/95 <F3> <F3> <F3>

Limited Term
California Fund
- ---------------
Class A
2/20/87 <F1> $12.13 $ .26 $(.12) $ .14 $( .26) $12.01 1.10% (0.67)% (.81)% 5.73% 74.00% $ 6,041
to 6/30/87 <F3> <F3> <F3>
Year ended:
June 30, 1988 12.01 .78 .07 .85 ( .78) 12.08 7.10 (0.85) (1.73) 6.30 29.00 11,641
June 30, 1989 12.08 .77 .07 .84 ( .77) 12.15 7.17 (1.00) (1.38) 6.27 58.80 12,794
June 30, 1990 12.15 .76 (.04) .72 ( .76) 12.11 6.15 (1.00) (1.22) 6.16 49.05 26,517
June 30, 1991 12.11 .75 .13 .88 ( .75) 12.24 7.45 (1.00) (1.20) 6.08 39.66 33,487
June 30, 1992 12.24 .72 .24 .96 ( .72) 12.48 8.10 (1.00) (1.10) 5.80 30.56 53,130
June 30, 1993 12.48 .65 .37 1.02 ( .65) 12.85 8.36 (1.00) (1.06) 5.07 20.81 81,874
June 30, 1994 12.85 .58 (.28) .30 ( .58) 12.57 2.37 (1.00) (1.03) 4.51 15.26 111,723
June 30, 1995 12.57 .58 .04 .62 ( .58) 12.61 5.12 (1.00) (1.04) 4.69 18.54 98,841
Class B <F4>
9/1/94 <F1> $12.55 $ .43 $ .07 $ .50 $( .43) $12.62 3.99% (1.60)% (4.51)% 4.10% 18.54% $590
to 6/30/95 <F3> <F3> <F3>
Class C
9/1/94 <F1> $12.55 $ .42 $ .07 $ .49 $( .42) $12.62 3.98% (1.63)% (3.21)% 4.07% 18.54% $790
to 6/30/95 <F3> <F3> <F3>

Intermediate
National Fund
- -------------
Class A
7/23/91 <F1> $12.06 $ .16 $ .05 $ .21 $( .16) $12.11 1.77% (0.25)% (2.78)% 5.80% 3.40% $9,719
to 9/30/91 <F3> <F3> <F3>
Year ended:
Sept. 30, 1992 12.11 .78 .48 1.26 ( .78) 12.59 10.76 (0.48) (1.19) 6.15 46.15 81,428
Sept. 30, 1993 12.59 .71 .88 1.59 ( .71) 13.47 13.01 (0.70) (1.06) 5.37 14.29 182,319
Sept. 30, 1994 13.47 .67 (.72) (.05) ( .67) $( .02) 12.73 (.38) (0.95) (1.05) 5.23 27.3 207,718
Sept. 30, 1995 12.73 .68 .45 1.13 ( .68) 13.18 9.16 (1.00) (1.08) 5.31 32.20 227,881
Class B <F4>
9/1/94 <F1> $12.91 $ .05 $(.18) $(.13) $( .05) $12.73 (.99)% (1.70)% 1.70% 4.57% 27.37% $342
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.73 .59 .40 .99 ( .59) 13.13 8.30 (1.65) (2.86) 4.59 32.20 0
Class C
9/1/94 <F1> $12.91 $ .05 $(.18) $(.13) $( .05) $12.73 (.97)% (1.76)% 1.76% 4.51% 27.37% $ 139
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.73 .60 .47 1.07 ( .60) 13.20 8.60 (1.66) (2.35) 4.62 32.20 4,001

Intermediate
New Mexico Fund
- ---------------
Class A
6/21/91 <F1> $12.06 $ .23 $ .15 $ .38 $( .23) $12.21 3.18% (0.25)% (1.32)% 6.57% 49.67% $20,511
to 9/30/91 <F3> <F3> <F3>
Year ended:
Sept. 30, 1992 12.21 .74 .43 1.17 ( .74) 12.64 9.98 (0.42) (1.12) 5.76 32.15 71,034
Sept. 30, 1993 12.64 .65 .72 1.37 ( .65) 13.36 10.96 (0.61) (1.01) 4.95 10.33 128,590
Sept. 30, 1994 13.36 .60 (.63) (.03) ( .60) $( .01) 12.72 (.26) (0.90) (1.04) 4.58 6.87 143,910
Sept. 30, 1995 12.72 .60 .40 1.00 ( .60) 13.12 8.10 (1.00) (1.06) 4.71 17.06 136,742
Class B <F4>
9/1/94 <F1> $12.87 $ .05 $(.15) $(.10) $( .05) $12.72 (0.80)% (1.71)% 1.71% 3.47% 6.87% $ 81
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.72 .52 .37 .89 ( .52) 13.09 7.42 (1.64) (4.71) 4.06 17.06 0

Class C
9/1/94 <F1> $12.87 $ .04 $(.16) $(.12) $( .04) $12.71 (0.90)% (1.74)% 1.74% 3.49% 6.87% $ 59
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 12.71 .52 .41 .93 ( .52) 13.12 7.48 (1.66) (15.86) 4.05 17.06 141

Intermediate
Florida Fund
- ------------
Class A
2/1/94 <F1> $12.06 $ .40 $(.52) $(.12) $( .40) $11.54 (0.95)% (0.25)% (1.95)% 5.09% 19.94% $ 8,076
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 11.54 .63 .29 .92 ( .63) 11.83 8.22 (0.38) (1.68) 5.41 89.60 14,822
Class B <F4>
9/1/94 <F1> $11.72 $ .05 $(.17) $(.12) $( .05) $11.55 (1.02)% (1.05)% (1.05)% 4.80% 19.94% $ 20
to 9/30/94 <F3> <F3> <F3>
Year ended:
Sept. 30, 1995 11.55 .55 .28 .83 ( .55) 11.83 7.55 (1.08) (5.35) 4.69 89.60 0
Class C
9/1/94 <F1> $11.72 $ .05 $(.18) $(.13) $( .05) $11.54 (1.10)% (1.10)% (1.10)% 4.89% 19.94% $109
to 9/30/94 <F3> <F3> <F3>
Year ended
Sept. 30, 1995 11.54 .55 .32 .87 ( .55) 11.86 7.74 (1.08) (19.08) 4.65 89.60 259

<FN>
<F1> Commencement of operations.
<F2> Sales charges are not reflected in computing total return, which is not annualized for periods less than one year.
<F3> Annualized
<F4> Class B shares are no longer offered by the Funds, and all outstanding Class B shares were converted into Class A shares
on September 28, 1995.
</FN>
</TABLE>

MANAGEMENT DISCUSSION OF FUND PERFORMANCE

The following graphs compare how $10,000 would have appreciated if invested
in shares of the named Fund, a broad based securities market index, and the
Consumer Price Index, a general measure of inflation. The table accompanying
each graph shows average annual total return for the Fund for the designated
period. Class A total return figures assume an investment of $10,000 at the
public offering price for purchases up to $10,000; Class C total return
figures assume an investment of $10,000.

Comparison of Fund performance to widely used indices is imperfect, because
the indices do not reflect the ladder ed maturity strategy each Fund uses.
Each index shown attempts to model the total return of a constant maturity
bond portfolio, including bonds from throughout the United States. Each index
also assumes no trading costs for buying and selling bonds, no custodial or
accounting costs, and coupons are immediately reinvested at no transactional
cost. Consequently, the reader should remain aware of the inherent
limitations in comparing a theoretical index to actual results of a Fund
portfolio.

Each Fund "ladders" or arrays the maturities of its bonds. The Limited Term
Municipal Funds maintain a weighted average maturity using this technique
which is normally no more than five years, while the Intermediate Municipal
Funds' weighted average maturity is normally no more than 10 years. Interest
rates during 1994 generally increased, allowing interest dividends to
increase somewhat as Fund cash flow was reinvested at higher rates, and
causing the value of the Funds' portfolios to decrease relative to their
expected values in a flat interest rate environment. In the first half of
1995, slowing economic growth has led to falling interest rates and
increasing bond prices.

After hitting bottom in November 1994, bond prices in the U.S. have risen
dramatically over most of 1995 to date. For example, as interest rates on the
6.25% U.S. Treasury bond due in August 2023 increased from 5.99% to 8.23%,
between October 1, 1993 and November 7, 1994, the market value of the bond
decreased by approximately 25.3%. Since November 1994, the interest rate on
the bond has fallen back down to 6.65% as of September 30, 1995, and the
price has risen by 21.3%. Similarly, market values of U.S. Treasury bonds due
in 1999 and 2004 have risen by 6.7% and 12.7%, respectively since November 7,
1994. Municipal bond prices also increased across the spectrum of maturities
as market yields on municipal bonds decreased. Rising bond prices produced
total returns of 9.26% and 10.30% respectively, for the Lehman Brothers 5
year general obligation bond index and the Merrill Lynch Municipal Bond
(7-12) year Index for the 6 months ending September 30, 1995. The net asset
values of Intermediate National Fund, Intermediate New Mexico Fund and
Intermediate Florida Fund, increased by 3.35%, 3.14% and 3.51% respectively
over this same six month period. The net asset values of Limited Term
National Fund and Limited Term California Fund increased by 3.51% and 3.90%
respectively over the six month period ending June 30, 1995. If interest
rates continue to fall, the net asset values of all the Funds should continue
to increase. However, over time, dividend income would decrease.

LIMITED TERM NATIONAL FUND

Index Comparison

Compares performance of the Limited Term National Fund, the Lehman 5-Year
General Obligation Bond Index and the Consumer Price Index for the period
October 1, 1984 to June 30, 1995. On June 30, 1995, the weighted average
securities ratings of the Index an d the Fund were AA and AA, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
5.01 years and 3.9 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund ma}y not be
indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
Limited Term National Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
9/84 $ 9,746 $10,000 $10,000
12/84 9,928 10,448 10,151
3/85 10,232 10,852 10,283
6/85 10,677 11,400 10,355
9/85 10,747 11,355 10,417
12/85 11,226 11,741 10,564
3/86 11,739 12,628 10,522
6/86 11,842 12,636 10,553
9/86 12,177 13,103 10,616
12/86 12,471 13,447 10,702
3/87 12,741 13,755 10,852
6/87 12,656 13,629 10,983
9/87 12,683 13,347 11,104
12/87 12,988 13,857 11,204
3/88 13,402 14,289 11,294
6/88 13,589 14,350 11,430
9/88 13,838 14,514 11,545
12/88 14,013 14,601 11,649
3/89 14,168 14,559 11,789
6/89 14,580 15,244 11,955
9/89 14,783 15,421 12,027
12/89 15,105 15,881 12,172
3/90 15,239 15,959 12,404
6/90 15,524 16,316 12,529
9/90 15,715 16,488 12,781
12/90 16,085 17,034 12,948
3/91 16,400 17,402 13,026
6/91 16,704 17,706 13,117
9/91 17,073 18,336 13,222
12/91 17,470 18,952 13,355
3/92 17,628 18,904 13,435
6/92 18,107 19,519 13,543
9/92 18,509 20,010 13,624
12/92 18,822 20,328 13,747
3/93 19,341 20,808 13,858
6/93 19,780 21,298 13,941
9/93 20,264 21,761 14,010
12/93 20,481 22,028 14,123
3/94 20,050 21,332 14,208
6/94 20,225 21,619 14,293
9/94 30,324 21,784 14,408
12/94 20,178 21,713 14,466
3/95 20,896 22,592 14,582
6/95 21,390 23,168 14,699
9/95 23,801 14,743
</TABLE>

<TABLE> <This appears as a graph in the prospectus.>
Limited Term National Fund C Shares
<CAPTION>
FUND Lehman CPI
C Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,952 9,925 10,020
10/94 9,894 9,869 10,030
11/94 9,792 9,806 10,040
12/94 9,858 9,893 10,060
1/95 9,969 9,988 10,090
2/95 10,120 10,132 10,121
3/95 10,193 10,293 10,141
4/95 10,245 10,321 10,181
5/95 10,405 10,547 10,212
6/95 10,424 10,556 10,222
7/95 10,703 10,232
8/95 10,812 10,243
9/95 10,844 10,253
</TABLE>

Average Annual Total Return
A Shares
One Year (12 Mos. ended 6/30/95): 3.11%
Five Year: 6.08%
From Inception (9/28/84): 7.32%
C Shares
From Inception (9/1/94): 5.16% (annualized)

LIMITED TERM CALIFORNIA FUND

Index Comparison

Compares performance of the Limited Term California Fund, the Lehman 5-Year
General Obligation Bond Index and the Consumer Price Index for the period
February 28, 1987 to June 30, 1995. On June 30, 1995, the weighted average
securities ratings of the Index and the Fund were AA and AA, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
5.01 years and 4.1 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
California Fund A Shares
<CAPTION>
FUND Lehman CPI
A Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
1/87 $ 9,750 $10,000 $10,000
3/87 9,786 10,034 10,080
6/87 9,857 9,942 10,202
9/87 9,924 9,737 10,314
12/87 10,100 10,108 10,407
3/88 10,375 10,424 10,491
6/88 10,557 10,469 10,617
9/88 10,733 10,588 10,724
12/88 10,885 10,651 10,820
3/89 10,994 10,620 10,951
6/89 11,313 11,121 11,105
9/89 11,469 11,249 11,172
12/89 11,704 11,585 11,306
3/90 11,814 11,642 11,522
6/90 12,009 11,902 11,638
9/90 12,140 12,028 11,872
12/90 12,496 12,426 12,027
3/91 12,707 12,694 12,099
6/91 12,904 12,916 12,184
9/91 13,121 13,376 12,282
12/91 13,436 13,825 13,405
3/92 13,566 17,790 12,480
6/92 13,950 14,239 12,580
9/92 14,261 14,597 12,655
12/92 14,448 14,829 12,770
3/93 14,813 15,179 12,872
6/93 15,116 15,537 12,949
9/93 15,437 15,874 13,014
12/93 15,634 16,069 13,119
3/94 15,308 15,562 13,197
6/94 15,474 15,771 13,277
9/94 15,495 15,891 13,383
12/94 15,300 15,839 13,437
3/95 15,877 16,481 13,545
6/95 16,266 16,901 13,653
9/95 17,363 13,694
</TABLE>

<TABLE> <This appears as a graph in the prospectus.>
Limited Term California Fund C Shares
<CAPTION>
FUND Lehman CPI
C Shares Government
-------- ---------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,952 9,925 10,020
10/94 9,894 9,869 10,030
11/94 9,792 9,806 10,040
12/94 9,858 9,893 10,060
1/95 9,969 9,988 10,090
2/95 10,120 10,132 10,121
3/95 10,193 10,293 10,141
4/95 10,245 10,321 10,181
5/95 10,405 10,547 10,212
6/95 10,424 10,556 10,222
7/95 10,703 10,232
8/95 10,812 10,243
9/95 10,844 10,253
</TABLE>

Average Annual Total Return
A Shares
One Year (12 mos. ended 6/30/95): 2.49%
Five Years: 5.72%
From Inception (2/19/87): 5.99%
C Shares
From Inception (9/1/94): 4.82% (annualized)

INTERMEDIATE NATIONAL FUND

Index Comparison

Compares performance of the Intermediate National Fund, the Merrill Lynch
Municipal Bond (7-12 year) Index and the Consumer Price Index, July 23, 1991
to September 30, 1995. On September 30, 1995, the weighted average securities
ratings of the Index and the Fund were AA and A+, respectively, and the
weighted average portfolio maturities of the Index and the Fund were 8.5
years and 8.2 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
Intermediate National Fund A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
6/91 $ 9,648 $10,000 $10,000
7/91 9,675 10,136 10,030
9/91 9,819 10,428 10,080
11/91 9,943 10,498 10,151
1/92 10,113 10,695 10,192
3/92 10,207 10,593 10,243
5/92 10,429 10,732 10,284
7/92 10,904 11,259 10,345
9/92 10,876 11,220 10,387
11/92 10,976 11,369 10,460
1/93 11,223 11,611 10,501
3/93 11,496 11,834 10,565
5/93 11,662 12,016 10,617
7/93 11,872 12,111 10,639
9/93 12,291 12,456 10,681
11/93 12,238 12,449 10,745
1/94 12,598 12,797 10,767
3/94 12,039 12,114 10,832
5/94 12,197 12,200 10,864
7/94 12,305 12,473 10,929
9/94 12,244 12,306 10,984
11/94 11,965 12,050 11,006
1/95 12,385 12,408 11,061
3/95 12,742 12,860 11,117
5/95 13,090 13,348 11,195
7/95 13,162 13,418 11,217
9/95 13,365 13,573 11,239
</TABLE>

<TABLE> <This appears as a graph in the prospectus.>
Intermediate National Fund C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,903 9,848 10,020
10/94 9,791 9,786 10,030
11/94 9,689 9,643 10,040
12/94 9,813 9,785 10,060
1/95 10,009 9,930 10,090
2/95 10,199 10,215 10,121
3/95 10,286 10,291 10,141
4/95 10,313 10,317 10,181
5/95 10,555 10,682 10,212
6/95 10,530 10,671 10,222
7/95 10,593 10,738 10,232
8/95 10,698 10,895 10,243
9/95 10,754 10,862 10,253
</TABLE>

Average Annual Total Return

A Shares
One Year (12 Mos. ended 9/30/95): 5.34%
From Inception (7/23/91): 7.16%
C Shares
One Year (12 Mos. ended 9/30/95: 8.60%
From Inception (9/1/94): 6.96% (annualized)

INTERMEDIATE NEW MEXICO FUND

Index Comparison

Compares performance of the Intermediate New Mexico Fund shares, the
Merrill Lynch Municipal Bond (7-12 year) Index and the Consumer Price Index,
June 21, 1991 to September 30, 1995. On September 30, 1995, the weighted
average securities ratings of the Index and the Fund were AA and AA,
respectively, and the weighted average portfolio maturities of the Index and
the Fund were 8.5 years and 6.9 years, respectively. Class C shares became
available on September 1, 1994. Past performance of the Index and the Fund
may not be indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
New Mexico A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
5/91 $ 9,650 $10,000 $10,000
7/91 9,764 10,064 10,050
9/91 9,957 10,375 10,100
11/91 10,075 10,444 10,171
1/92 10,311 10,640 10,212
3/92 10,329 10,539 10,263
5/92 10,541 10,677 10,304
7/92 10,985 11,201 10,366
9/92 10,950 11,162 10,408
11/92 11,034 11,311 10,480
1/93 11,282 11,551 10,522
3/93 11,490 11,773 10,586
5/93 11,628 11,955 10,639
7/93 11,782 12,049 10,660
9/93 12,150 12,392 10,703
11/93 12,113 12,385 10,767
1/94 12,416 12,731 10,788
3/94 11,936 12,052 10,853
5/94 12,040 12,138 10,886
7/94 12,143 12,410 10,951
9/94 12,119 12,243 11,006
11/94 11,877 11,988 11,028
1/95 12,272 12,345 11,083
3/95 12,593 12,794 11,139
5/95 12,888 13,280 11,217
7/95 12,958 13,349 11,239
9/95 13,100 13,504 11,262
</TABLE>

<TABLE> <This appears as a graph in the prospectus.>
New Mexico C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,910 9,848 10,020
10/94 9,808 9,786 10,030
11/94 9,700 9,643 10,040
12/94 9,845 9,785 10,060
1/95 10,021 9,930 10,090
2/95 10,206 10,215 10,121
3/95 10,264 10,291 10,141
4/95 10,283 10,317 10,181
5/95 10,493 10,682 10,212
6/95 10,464 10,671 10,222
7/95 10,547 10,738 10,232
8/95 10,615 10,895 10,243
9/95 10,651 10,862 10,253
</TABLE>

Average Annual Total Return

A Shares
One Year (12 Mos. ended 9/30/95): 4.31%
From Inception (6/21/91): 6.50%
C Shares
One Year (12 Mos. ended 9/30/95): 7.48%
From Inception (9/1/94): 6.02% (annualized)

INTERMEDIATE FLORIDA FUND

Index Comparison

Compares performance of Intermediate Florida Fund shares, the Merrill
Lynch Municipal Bond (7-12 year) Index and the Consumer Price Index, February
1, 1994 to September 30, 1995. On September 30, 1995, the weighted average
securities ratings of the Index and the Fund were AA and AA+, respectively,
and the weighted average portfolio maturities of the Index and the Fund were
8.5 years and 7.5 years, respectively. Class C shares became available on
September 1, 1994. Past performance of the Index and the Fund may not be
indicative of future performance.

<TABLE> <This appears as a graph in the prospectus.>
Florida A Shares
<CAPTION>
FUND ML Muni CPI
A Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
1/94 $ 9,648 $10,000 $10,000
2/94 9,568 9,726 10,030
3/94 9,350 9,466 10,060
4/94 9,433 9,512 10,070
5/94 9,507 9,534 10,090
6/94 9,481 9,524 10,121
7/94 9,602 9,747 10,151
8/94 9,653 9,765 10,181
9/94 9,557 9,617 10,202
10/94 9,502 9,556 10,213
11/94 9,346 9,416 10,222
12/94 9,492 9,555 10,243
1/95 9,660 9,697 10,273
2/95 9,849 9,975 10,304
3/95 9,936 10,049 10,325
4/95 9,929 10,074 10,366
5/95 10,137 10,431 10,397
6/95 10,148 10,420 10,408
7/95 10,227 10,485 10,418
8/95 10,297 10,638 10,428
9/95 10,342 10,607 10,439
</TABLE>

<TABLE> <This appears as a graph in the prospectus.>
Florida C Shares
<CAPTION>
FUND ML Muni CPI
C Shares 7-12 Yrs.
-------- --------- ---------
<S> <C> <C> <C>
8/94 $10,000 $10,000 $10,000
9/94 9,890 9,848 10,020
10/94 9,826 9,786 10,030
11/94 9,658 9,643 10,040
12/94 9,831 9,785 10,060
1/95 9,999 9,930 10,090
2/95 10,188 10,215 10,121
3/95 10,272 10,291 10,141
4/95 10,259 10,317 10,181
5/95 10,466 10,682 10,212
6/95 10,472 10,671 10,222
7/95 10,548 10,738 10,232
8/95 10,614 10,895 10,243
9/95 10,655 10,862 10,253
</TABLE>

Total Return

A Shares
One Year (12 Mos. ended 9/30/95): 4.44%
From Inception (2/01/94): 2.05%
C Shares
One Year (12 Mos. ended 9/30/95): 7.74%
From Inception (9/1/94): 6.05% (annualized)

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of each Fund is to obtain as high a level of
current income exempt from federal income tax as is consistent, in the view
of TMC, with preservation of capital. Each single state Fund will invest
primarily in Municipal Obligations originating in its state with the object
of obtaining exemption of interest dividends from any income taxes imposed by
that state on individuals. The Intermediate Florida Fund and the Intermediate
Pennsylvania Fund have the additional objective of obtaining exemption from
ad valorem taxes imposed by those states on securities held by individuals.
The secondary objective of the Limited Term Funds is to minimize expected
fluctuations in net asset value relative to longer intermediate and long-term
bond portfolios. The secondary objective of the Intermediate Funds is to
reduce fluctuations in net asset value relative to long-term municipal bond
portfolios, while seeking higher yields than the Limited Term Municipal Funds
expect to receive. There is a risk in all investments, however, and there is
no assurance that the Funds' objectives will be achieved. Income otherwise
exempt from federal income tax may be subject to the federal alternative
minimum tax, and distributions from gains attributable to market discount are
characterized as ordinary income for federal income tax purposes. The primary
and secondary investment objectives of each Fund are fundamental policies of
that Fund, and may not be changed without a vote of the Fund's shareholders.

Each Fund will pursue its primary objective by investing in a portfolio of
investment grade or equivalent obligations which are issued by states and
state agencies, and local governments and agencies, and by United States
territories and possessions ("Municipal Obligations"). Each single state Fund
will invest primarily in Municipal Obligations originating in the state of
the same name. Municipal Obligations are discussed below under the caption
"Municipal Obligations," and investment grade ratings are discussed below
under the caption "Investment Ratings." Each of the Limited Term Funds will
seek to achieve its secondary objective of minimizing fluctuations in net
asset value by maintaining a portfolio of investments with a dollar-weighted
average maturity normally not exceeding five years. Each Intermediate Fund
will seek to achieve its secondary objective of obtaining lower share price
fluctuation than a long-term portfolio and obtaining higher yields than a
limited term portfolio by maintaining a dollar-weighted average portfolio
maturity normally between three and ten years. Any Intermediate Fund may
maintain a portfolio maturity shorter than three years as a defensive
strategy during abnormal market conditions. If your sole objective is
preservation of capital, then the Funds may not be suitable for you because
their net asset values will vary as market interest rates fluctuate.
Investors whose sole objective is preservation of capital may wish to
consider a high quality money market fund.

Except to the extent a Fund is invested in temporary investments for
defensive purposes, the objective of each Fund under normal conditions is to
invest 100% of its net assets in Municipal Obligations. As a fundamental
policy which may not be changed without a vote of the Fund's shareholders,
each Fund must normally invest at least 80% of its net assets in Municipal
Obligations. Under normal conditions each single state Fund will invest 100%,
and as a matter of fundamental policy, will invest at least 65% of its total
assets in Municipal Obligations which originate in the state having the same
name as the Fund. Any Fund may purchase obligations issued by or on behalf of
territories or possessions of the United States and their agencies and
instrumentalities.

The Funds have reserved the right to invest up to 20% of each Fund's net
assets in "temporary investments" in taxable securities (of comparable
quality to the above tax-exempt investments) that would produce interest not
exempt from federal income tax. Such temporary investments, which may include
repurchase agreements with dealers, banks or recognized financial
institutions that in the opinion of TMC represent minimal credit risk, may be
made due to market conditions, pending investment of idle funds or to afford
liquidity. Such investments are, like any investment, subject to market risks
and fluctuations in value. In addition, each Fund's temporary taxable
investments may exceed 20% of its net assets when made for defensive purposes
during periods of abnormal market conditions. The Funds do not expect to find
it necessary to make temporary investments in taxable investments.

MUNICIPAL OBLIGATIONS

Municipal Obligations are obligations bearing interest exempt from federal
income taxes, which are issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities. Municipal
Obligations include notes (including tax-exempt commercial paper), bonds,
municipal leases and participation interests in these obligations. Interest
on Municipal Obligations may be subject to the alternative minimum tax or
state income taxes. See "Federal Taxes."

The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The market value of outstanding
Municipal Obligations will vary with changes in prevailing interest rate
levels and as a result of changing evaluations of the ability of their
issuers to meet interest and principal payments. Variations in market value
of Municipal Obligations held in a Fund's portfolio arising from these or
other factors will cause changes in the net asset value of that Fund's
shares. See "How Fund Shares Are Priced." Municipal Obligations often grant
the issuer the option to pay off the obligation prior to its final maturity.
Prepayment of Municipal Obligations may reduce the expected yield on invested
funds, the net asset value of a Fund, or both if interest rates have declined
below the level prevailing when the obligation was purchased. If interest
rates have declined, reinvestment of the proceeds from the prepayment of
Municipal Obligations may result in a lower yield to a Fund. In addition, the
federal income tax treatment of gains from market discount as ordinary income
may increase the price volatility of Municipal Obligations.

Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the United States Bankruptcy Code. In addition, the
obligations of such issuers may become subject to the laws enacted in the
future by Congress, state legislatures or referenda extending the time for
payment of principal or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There
is also the possibility that, as a result of legislation or other conditions,
the power or ability of any issuer to pay, when due, the principal of and
interest on its Municipal Obligations may be materially affected.

VARIABLE RATE SECURITIES; INVERSE FLOATERS; AND DEMAND INSTRUMENTS

The Funds may purchase variable rate Municipal Obligations. These variable
rate securities bear rates of interest that are adjusted periodically
according to formulas intended to reflect market rates of interest, and these
may include "inverse floaters," whose rates vary inversely with changes in
market rates of interest. The values of inverse floaters will tend to be more
volatile than fixed rate municipal securities having similar credit quality,
redemption provisions, and maturity. No Fund will invest more than 10% of
its total assets in securities whose rates vary inversely with changes in
market rates of interest. Each Fund also may purchase variable rate demand
instruments and also may purchase fixed rate municipal demand instruments
either in the public market or privately from banks, insurance companies and
other financial institutions. These instruments provide for periodic
adjustment of the interest rate paid to the holder. The "demand" feature
permits the holder to demand payment of principal and interest prior to the
final stated maturity, either from the issuer or by drawing on a bank letter
of credit, a guarantee or insurance issued with respect to the instrument.

MUNICIPAL LEASES

Each Fund may invest in Municipal Leases. These obligations are used by state
and local governments to acquire a wide variety of equipment and facilities.
Many such obligations include "non-appropriation" clauses which provide that
the governmental issuer has no obligation to make payments unless money is
appropriated for that purpose. If an issuer stopped making payment on a
Municipal Lease held by a Fund, the Lease would lose some or all of its
value. Often, a Fund will not hold the obligation directly, but will purchase
a "participation interest" in the obligation, which gives the Fund an
undivided interest in the underlying Municipal Lease. Some Municipal Leases
may be illiquid under certain circumstances, and TMC will evaluate the
liquidity of each Municipal Lease upon its acquisition by a Fund and
periodically while it is held.

SECURITIES RATINGS AND CREDIT QUALITY

Each Fund's assets will normally consist of (1) Municipal Obligations
(including Municipal Leases) or participation interests therein that are
rated at the time of purchase within the four highest grades by Moody's
Investors Service ("Moody's"), Fitch Investors Service ("Fitch"), or Standard
& Poor's Corporation ("S&P"), (2) Municipal Obligations (including Municipal
Leases) or participation interests therein that are not rated by a rating
agency, but are issued by obligors that either have other comparable debt
obligations that are rated within the four highest grades (Baa or BBB or
better) by Moody's or S&P or Fitch or, in the case of obligors whose
obligations are unrated, are deemed by the Adviser to be comparable with
issuers having such debt ratings, and (3) cash. Securities rated in the
described categories are described as "investment grade," and are regarded as
having a capacity to pay interest and repay principal that varies from
"extremely strong" to "adequate." According to S&P, for example, BBB bonds
normally exhibit adequate protection parameters, although adverse economic
conditions or other changes are more likely to lead to a weakened capacity
compared to higher rated categories, and AAA bonds exhibit extremely strong
capacity. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. Securities rated BBB by Fitch are considered to
have adequate capacity, although adverse changes in economic conditions and
circumstances are more likely to have an adverse impact than for higher rated
categories. Please see the Statement of Additional Information for Thornburg
Investment Trust - Intermediate Municipal Funds or the Statement of
Additional Information for Thornburg Limited Term Municipal Fund, Inc. for
detailed descriptions of these ratings. Investments in Municipal Obligations
may also include (i) variable rate demand instruments that are rated within
the two highest grades of either rating agency or, if unrated, are deemed by
TMC to be of high quality and minimal credit risk, (ii) tax-exempt
commercial paper that is rated within the two highest grades of a rating
agency, and (iii) municipal notes that are rated within the two highest
grades of a rating agency or, if unrated, are deemed by TMC to be of
comparable quality to such rated municipal notes. To the extent that unrated
Municipal Obligations may be less liquid, there may be somewhat greater risk
in purchasing unrated Municipal Obligations than in purchasing comparable,
rated Municipal Obligations. If a Fund experienced unexpected net
redemptions, it could be forced to sell such unrated Municipal Obligations at
disadvantageous prices without regard to the Obligations' investment merits,
depressing the Fund's net asset value and possibly reducing the Fund's
overall investment performance.

Credit ratings do not reflect the risk that market values of Municipal
Obligations will fluctuate with changes in interest rates, and credit rating
firms may fail to change credit ratings in a timely fashion to reflect events
subsequent to initial ratings. Accordingly, in addition to using credit
rating information, TMC subjects each issue under consideration for
investment to its own credit analysis in an effort to assess the issuer's
financial soundness. This analysis is performed on a continuing basis for all
issues held by the Funds, and TMC may determine to dispose of portfolio
securities upon a change in ratings or adverse events or market conditions
not reflected in ratings. TMC evaluates the credit quality of unrated
Municipal Obligations purchased by each Fund under the general supervision of
its Directors or Trustees, and determines the equivalency of unrated
obligations to rated obligations.

WHEN-ISSUED TRANSACTIONS

Each Fund may purchase Municipal Obligations on a "when-issued" or delayed
delivery basis, which means that the securities are not delivered until a
future date that may be as many as 45 days after the Fund has agreed to the
purchase. These transactions may involve an element of risk because the
value of the securities is subject to market fluctuation, no interest accrues
to the purchaser before delivery of the securities, and at the time of
delivery the market value may be less than cost. When the Fund agrees to
purchase Municipal Obligations on a "when-issued" basis, it will maintain
high grade liquid debt assets equal in value to the purchase price of the
"when-issued" securities in a segregated account with its custodian bank.

INVESTMENT RESTRICTIONS

Each of the Funds is subject to the restriction that it will not purchase
any investment or enter into any transactions if, as a result, more than 10%
of the Fund's net assets will be illiquid investments. Each of the Funds is
subject to other investment restrictions, which are described in that Fund's
Statement of Additional Information.

SPECIAL CONSIDERATIONS AFFECTING SINGLE-STATE FUNDS

Each of the single-state Intermediate Municipal Funds is a non-diversified
series of Thornburg Investment Trust, and each therefore may invest more than
five percent of its portfolio assets in the securities of a single issuer,
provided that it may not purchase any security (other than securities issued
or guaranteed as to principal or interest by the United States or its
instrumentalities) if, as a result, more than five percent of the Trust's
total assets would be invested in securities of a single issuer. All other
Funds are diversified series. Because each of the single state Funds will
purchase primarily Municipal Obligations originating from within its state,
an investment in a single state Fund may be riskier than an investment in
either the Limited Term National Fund or the Intermediate National Fund,
which purchase Municipal Obligations from throughout the United States.

Local economic factors could have varying effects on the obligations owned by
each single state Fund. In particular, economic developments in California
could impair the ability of certain California state and municipal issuers
to pay their obligations in some situations. Taxpayer initiatives, weakness
in tax collections and reallocation of certain revenues previously
available to county and local governments could reduce the revenues
available to some California issuers. The State of New Mexico anticipates
budget shortfalls in the current year. Lower taxes available in some New
Mexico locales, and reductions in staffing at research and military
facilities at Los Alamos, White Sands and Albuquerque could adversely affect
the ability of nearby municipalities to meet their obligations. Florida has
experienced rapid economic growth. While the economy has broadened, this
growth has brought pressure for more infrastructure, educational facilities,
and other improvements. Although recent state budgets have been balanced,
over-dependence on the sensitive sales tax creates vulnerability to recession
and to slower growth in the tax base in the future. Also, health care cost
increases or increased burdens for funding current programs at the state
level could affect revenues available to all levels of government.

YOUR ACCOUNT

BUYING FUND SHARES IN GENERAL

NET ASSET VALUE

BUYING CLASS A SHARES

When you buy Class A shares the sales charge applicable to your investment is
deducted from the price you pay and the balance is invested at NAV. The sales
charge is shown in the table below.

<TABLE>
Class A Shares Dealer Concession
Total Sales Charge or Agency Commission
As Percentage As Percentage As Percentage
of Offering Price of Net Asset Value of Offering Price
<S> <C> <C> <C>
Limited Term Municipal Funds
- ----------------------------
Less than $50,000.00 2.50% 2.56% 2.10%
$50,000 to 99,999.99 2.25% 2.30% 1.85%
$100,000 to 249,999.99 1.75% 1.78% 1.50%
$250,000 to 499,999.99 1.50% 1.52% 1.25%
$500,000 to 999,999.99 1.00% 1.01% .85%
$1,000,000 and up 0.00% 0.00% <F1>

Intermediate Municipal Funds
- ----------------------------
Less than $50,000.00 3.50% 3.63% 3.00%
$50,000 to 99,999.99 3.00% 3.09% 2.75%
$100,000 to 249,999.99 2.50% 2.56% 2.25%
$250,000 to 499,999.99 2.00% 2.04% 1.75%
$500,000 to 999,999.99 1.50% 1.52% 1.25%
$1,000,000 and up 0.00% 0.00% <F1>

<FN>
<F1> No sales charge will be payable at the time of purchase on investments of $1 million of more made by a purchaser. A
contingent deferred sales charge will be imposed on these investments in the event of a share redemption within 1 year
following the share purchase at the rate of 1/2 of 1% of the value of the shares redeemed. In determining whether such a
sales charge is payable and the amount of any charge, it is assumed that shares not subject to the charge are the first
redeemed followed by other shares held for the longest period of time. The applicability of these charges will be unaffected
by transfers of registration. TSC or TMC intend to pay a commission of up to 1/2 of 1% to dealers who place orders of $1
million or more for a single purchaser.

At certain times, for specific periods, TSC may reallow up to the full sales charge to all dealers who sell Fund shares.
These "full reallowances" may be based upon the dealer reaching specified minimum sales goals. TSC will reallow the full
sales charge only after notifying all dealers who sell Fund shares. During such periods, dealers amy be considered
underwriters under securities laws. TMC or TSC also may pay additional cash or non-cash compensation to dealer firms which
have selling agreements with TSC. Those firms may pay additional compensation to financial advisors who sell Fund shares.
Non-cash compensation may include travel and lodging in connection with seminars or other educational programs.
</FN>
</TABLE>

RIGHTS OF ACCUMULATION. Each time the value of your account plus the amount
of any new investment passes one of the breakpoints illustrated in the table
on page 16, the amount of your new investment in excess of the breakpoint
will be charged the reduced sales charge applicable to that range.

EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the
National Association of Securities Dealers, Inc. (NASD); employees of
financial planning firms who p lace orders for the Fund through a member in
good standing with NASD; the families of both types of employees. Orders must
be placed through an NASD member firm who has signed an agreement with TSC to
sell Fund shares.

CUSTOMERS of bank trust departments, companies with trust powers and
investment advisors who charge a fee for service, including investment
dealers who utilize wrap fee arrangements.

INVESTORS PURCHASING $1 MILLION OR MORE. However, a contingent deferred sales
charge of 1/2 of 1% applies to shares redeemed within one year of purchase.

THOSE PERSONS WHO ARE DETERMINED BY THE DIRECTORS OR TRUSTEES OF THE FUND to
have acquired their shares under special circumstances not involving any
sales expenses to the Funds or Distributor.

PURCHASES PLACED THROUGH A BROKER THAT MAINTAINS ONE OR MORE OMNIBUS ACCOUNTS
WITH THE FUNd provided that such purchases are made by: (i) investment
advisers or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other
fee for their services; (ii) clients of such investment advisers or financial
planners who place trades for their own accounts if the accounts are linked
to the master account of such investment adviser or financial planner on the
books and records of the broker or agent; and (iii) retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Sections 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts." Investors may be charged a fee if they
effect transactions in Fund shares through a broker or agent.

PROCEEDS FROM A LOAD FUND REDEMPTION. You may purchase shares of any Fund at
net asset value without a sales charge to the extent that the purchase
represents proceeds from a redemption (within the previous 60 days) of shares
of another mutual fund which has a sales charge. When making a direct
purchase at net asset value under this provision, the Fund must receive one
of the following with your direct purchase order: (i) the redemption check
representing the proceeds of the shares redeemed, endorsed to the order of
the Fund, or (ii) a copy of the confirmation from the other fund, showing the
redemption transaction. Standard back office procedures should be followed
for wire order purchases made through broker dealers. Purchases with
redemptions from money market funds are not eligible for this privilege. This
provision may be terminated anytime by TSC or the Fund
without notice.

BUYING CLASS C SHARES

You can buy Class C shares at NAV but you will pay a contingent deferred
sales charge (CDSC) of 1/2 of 1% on Limited Term Funds and 6/10 of 1% on
Intermediate Term Funds if you redeem your shares within one year of
purchase. The CDSC applies only to Class C shares purchased on or after
October 2, 1995. The CDSC will be imposed upon the lower of the purchase
price or net asset value at redemption of each share redeemed. The CDSC is
not imposed upon shares you buy by reinvesting dividends or capital gain
distributions. Maximum purchase amount for Class C shares is less than $1
million. Class C shares are charged higher annual expenses than Class A
shares.

If your investment horizon is relatively short and you do not qualify to
purchase Class A shares at a reduced sales charge, you should consider
purchasing Class C shares.

Through Your Financial Consult with your Consult with your
Advisor financial advisor. financial advisor

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

SELLING FUND SHARES

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.

NFDS
c/o Thornburg Funds
P.O. Box 419017
Kansas City, MO 64141-6017

Executor, Call 1-800-847-0200 for
Administrator, instructions.
Conservator, Guardian

By Telephone All account types You must sign up for the
1-800-847-0200 except Street-Name telephone redemption feature
before using it.
Minimum Wire $1,000
Minimum Check $50.00

By Systematic Withdrawal All account types You must sign up for this
Plan feature to use it.
Minimum Account Balance
$10,000
Minimum Check $50.00

INVESTOR SERVICES

Thornburg Funds provides a variety of services to help you manage your
account.

Information Services

TRANSACTION SERVICES

Exchange Privilege. You may exchange Class A shares of any other Thornburg
Fund for Class A shares of one of the Thornburg Municipal Funds.

SHAREHOLDER AND ACCOUNT POLICIES

Dividends, Capital Gains, and Taxes

Distribution Options

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

2. Cash Option. You will be sent a check for your dividend distributions.
Cash distribution checks are normally mailed on the third business day
after the month-end.

Capital Gain

2. Cash Option. You will be sent a check for any capital gain distributions.

Shares of any Thornburg Fund purchased through reinvestment of dividend and
capital gain distributions are not subject to sales charges or contingent
deferred sales charges.

Turnover and Capital Gains

TAXES

Federal Taxes
The Limited Term National Fund, Limited Term California Fund, Intermediate
National Fund, Intermediate New Mexico Fund and Intermediate Florida Fund
each have qualified under Subchapter M of the Internal Revenue Code (the
"Code ") for tax treatment as a regulated investment company, and each of
these Funds intends to continue its qualification so long as qualification is
in the best interests of the shareholders. The other Funds also intend to
qualify for this treatment under Subchapter M. This tax treatment relieves a
Fund from paying federal income tax on income which is currently distributed
to its shareholders. Each Fund also intends to satisfy conditions that will
enable it to designate distributions from the interest income generated by
its investments in Municipal Obligations, which are exempt from federal
income tax when received by the Fund, as Exempt Interest Dividends.
Shareholders receiving Exempt Interest Dividends will not be subject to
federal income tax on the amount of such dividends, except to the extent the
alternative minimum tax may be imposed.

The Fund's counsel, White, Koch, Kelly & McCarthy, Professional Association,
has not made and normally will not make any review of the proceedings
relating to the issuance of the Municipal Obligations or the basis for any
opinions issued in connection therewith. In the case of certain Municipal
Obligations, federal tax exemption is dependent upon the issuer (and other
users) complying with certain ongoing requirements. There can be no assurance
that the issuer (and other users) will comply with these requirements, in
which event the interest on such Municipal Obligations could be determined to
be taxable, in most cases retroactively from the date of issuance. Certain
matters under the Code, including certain exceptions to the foregoing, are
discussed more specifically below.

Each Fund will receive the opinion of its counsel or other assurances before
commencing investment operations that such distributions will constitute
Exempt Interest Dividends under the Code if certain conditions are satisfied.
Distributions by each Fund of net interest income received from certain
temporary investments (such as certificates of deposit, corporate commercial
paper and obligations of the United States government, its agencies and
instrumentalities) and net short-term capital gains realized by each Fund, if
any, will be taxable to shareholders as ordinary income whether received in
cash or additional shares. Distributions to shareholders will not qualify for
the dividends received deduction for corporations. Any net long-term capital
gains realized by a Fund, whether or not distributed, will be taxable to
shareholders as long-term capital gains regardless of the length of time
investors have held their shares, although gains attributable to market
discount on portfolio securities will be characterized as ordinary income.
Each year each Fund will, where applicable, mail to shareholders information
on the tax status of dividends and distributions, including the respective
percentages of tax-exempt and taxable income and an allocation of tax-exempt
income on a state-by-state basis. The exemption of interest income for
federal income tax purposes does not necessarily result in an exemption under
the income or other tax laws of any state or local taxing authorities. (See
"State Taxes," below). Shareholders are advised to consult their own tax
advisers for more detailed information concerning the federal, state and
local taxation of each Fund and the income tax consequences to its
shareholders.

The Code treats interest on certain Municipal Obligations which are private
activity bonds under the Code as a preference item for purposes of the
alternative minimum tax on individuals and corporations. The Funds may
purchase without limitation private activity bonds the interest on which is
subject to treatment under the Code as a preference item for purposes of the
alternative minimum tax on individuals and corporations, although the
frequency and amounts of these purchases are presently uncertain. Some
portion of Exempt Interest Dividends may, as a result of these purchases, be
treated as a preference item for purposes of the alternative minimum tax on
individuals and corporations. Shareholders are advised to consult their own
tax advisers as to the extent and effect of this treatment.

State Taxes

Distributions of interest income from Municipal Obligations will not
necessarily be exempt from taxes under the income or other tax laws of any
state or local taxing authority. Distributions to individuals attributable to
interest on Municipal Obligations originating in Alabama, California,
Arizona, New Mexico, and Tennessee will not be subject to personal income
taxes imposed by the state of the same name as the Fund. For example, an
individual resident in New Mexico, who owns shares in the New Mexico Fun d,
will not be required by New Mexico to pay income taxes on interest dividends
attributable to obligations originating in that state. Capital gain
distributions are taxable by these states, irrespective of the origins of the
obligations from which the gains arise. Individual shareholders in
Pennsylvania will not be subject to Pennsylvania income tax on distributions
attributable to interest on obligations originating in Pennsylvania, or
distributions attributable to gains on dispositions of obligations of
Pennsylvania and its political subdivisions and obligations of the United
States and its territories and possessions. Additionally, individual
shareholders will be exempt from Pennsylvania personal property tax on their
Pennsylvania Fund shares to the extent the Fund's assets consist of
obligations described in the preceding sentence. Individual residents in
Pittsburgh will enjoy a similar exemption from personal property taxes
imposed by the City and School District of Pittsburgh.

Florida, Texas and Utah do not currently impose an income tax on individuals
or do not impose an income tax on distributions to individuals attributable
to Municipal Obligations, although capital gain distributions will be subject
to personal income tax in Utah. Florida imposes a personal property or
"intangibles" tax which is generally applicable to securities owned by
individual residents in Florida, but the intangibles tax will not apply to
Florida Fund shares if the Funds' assets as of the close of the preceding
taxable year consist only of obligations of Florida and its political
subdivisions and obligations of the United States, Puerto Rico, Guam or the
United States Virgin Islands.

With respect to distributions of interest income from the Limited Term
National Fund and the Intermediate National Fund, the laws of the several
states and local taxing authorities vary with respect to the taxation of such
distributions, and shareholders of these Funds are advised to consult their
own tax advisers in that regard. The Limited Term National Fund and the
Intermediate National Fund will advise shareholders approximately 60 day s
after the end of each calendar year as to the percentage of income derived
from each state as to which it has any Municipal Obligations in order to
assist shareholders in the preparation of their state and local tax returns.
Prospective investors are urged to confer with their own tax advisers for
more detailed information concerning state tax consequences. In particular,
corporations should note that the preceding outline of state taxes pertains
principally to individuals, and tax treatment of corporations may be
different.

SERVICE AND DISTRIBUTION PLANS

Service Plan - Both Classes. Each class of each Fund has adopted a Service
Plan under which TMC makes payments to securities dealers and other financial
institutions and organizations to obtain various shareholder related
services. The Service Plans applicable to the Limited Term Municipal Funds
permit each of these Funds to reimburse TMC for these payments at annual
rates up to .125% of the Fund's net assets attributable to Class A shares and
up to .25% of the Fund's net assets attributable to Class C shares; the
Service Plans applicable to each class of the Intermediate Municipal Funds
provides for reimbursement at annual rates of up to .25% of each class' net
assets. No assets of any class of any Fun d will be used to reimburse
expenses attributable to any other class of the same, or any other Fund.

Class C Distribution Plan. Each Fund has adopted a Class C Distribution Plan
applicable to Class C shares, under which the Fund will pay to TSC on a
monthly basis an annual distribution fee of up to .75% of the average daily
net assets attributable to Class C shares of the Fund. This distribution fee
is an addition to the service fee described above under "Service Plan - All
Classes" and is charged to and reduces the income allocated to Class C
shares. TSC intends to use these amounts principally to compensate
dealers (including banks) who sell Class C shares. TSC also will engage in
other distribution related activities, including advertising and other
promotional activities. However, the distribution fee paid to TSC is not
computed with respect to TSC's actual expenses, and the fees received by TSC
may be more or less than its actual distribution expenses. TSC may, but is
not obligated to, waive any part or all of its compensation provided for
under the Class C Distribution Plan.

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.

Certain financial institutions that have entered sales agreements with TSC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the Fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.

When you place an order to sell shares, your shares will be sold at the next
NAV calculated after your request is received and accepted. (Except that a
CDSC will be deducted from Class C shares within one year of purchase and a
CDSC of 1/2 of 1% will be deducted from redemptions of Class A shares within
one year of purchase where no sales charge was imposed on the purchase
because it exceeded $1,000,000). Note the following:

EXCHANGE RESTRICTIONS

* The Fund you are exchanging into must be registered for sale in your
state.
* You may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.
* Before exchanging into a Fund, read its prospectus.
* If you exchange Class A shares into a Fund with a higher sales charge, you
may have to pay the percentage-point difference between that Fund's sales
charge and any sales charge you h ave previously paid in connection with
the shares you are exchanging. For example, if you had already paid a
sales charge of 2.5% on your shares and you exchange them into a Fund with
a 4.5% sales charge, you would pay an additional 2% sales charge.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt performance and shareholders, each Fund
reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of a Fund
in any calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification number, will be
counted together for purposes of the four exchange limit.
* Each Fund reserves the right to refuse exchange purchases by any person or
group if, in TMC's judgement, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
* Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the
Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund.

PERFORMANCE

YIELD COMPUTATION AND TOTAL RETURN

Yields and returns described in this section may also be quoted on a
"taxable equivalent yield" basis by computing the taxable yield or return
which a hypothetical investor subject to a specified income tax rate must
realize to receive the same yield or return after taxes. When a taxable
equivalent yield is quoted, the following additional information will be
furnished: (1) a standardized current yield; (2) the length of and the last
day of the base period used in computing the quotation; and (3) a description
of the method by which the quotation is computed.

Yield and return information may be useful in reviewing the
performance of the Funds and for providing a basis for comparison with other
investment alternatives. Comparative information about the yield or
distribution rate of the shares of a Fund and a bout average rates of return
on certificates of deposit, bank money market deposit accounts, money market
mutual funds and other short-term investments may also be included in
advertisements and communications of the Fund. Any such comparison will
contain information about the differences between the Funds
and those investments.

From time to time, in advertisements and other types of literature, the
performance of the Funds may be compared to other groups of mutual funds.
This comparative performance ma y be expressed as a ranking or a rating
prepared by Lipper Analytical Services, Inc., Donoghue Organization, Inc.,
Morningstar, Inc., Value Line or other widely recognized independent services
which monitor the performance of mutual funds. Performance rankings and
ratings reported periodically in national financial publications such as
MONEY Magazine, FORBES, BARRON's, VALUE LINE, the WALL STREET JOURNAL and
MORNINGSTAR, and other such publications may also be used. The Funds may
illustrate performance or the characteristics of their respective investment
portfolios through graphs, tabular data, or other displays which describe (i)
the average portfolio maturity of a Fund's portfolio securities relative to
the maturities of other investments, (ii) the relationship of yield and
maturity of the Fund to the yield and maturity of other investments (either
as a comparison or through use of standard benchmarks or indices such as the
Treasury yield curve), (iii) changes in the Funds' share price or net asset
value relative to changes in the value of other investments, and
(iv) the relationship over time of changes in the Funds' (or other
investments) net asset values or prices and the Funds' (or other
investments') investment returns. The Funds also may illustrate or refer to
their respective investment portfolios, investment techniques and strategies,
and general market or economic trends in advertising or communications to
shareholders or prospective shareholders, including reprints of interviews or
articles written by or about, and including comments by, Fund managers. These
illustrations, references and comments ordinarily will relate to
topics addressed in the Funds' Prospectus and Statements of Additional
Information.

ORGANIZATION OF THE FUNDS

Each of the Limited Term Municipal Funds are diversified series of Thornburg
Limited Term Municipal Fund, Inc., a Maryland corporation organized as a
diversified, open-end management investment company. The Limited Term
Municipal Funds are managed by their investment adviser, Thornburg Management
Company, Inc., under the supervision of the Board of Directors of Thornburg
Limited Term Municipal Fund, Inc. (the "Company" ). The Company currently
offers two series of stock, referred to in this Prospectus as Limited Term
National Fund and Limited Term California Fund, each in multiple classes, and
the Board of Directors is authorized to divide authorized but unissued shares
into additional series and classes.

Each of the Intermediate Municipal Funds are series of Thornburg Investment
Trust, a Massachusetts business trust (the "Trust") organized as a
diversified, open-end management investment company under a Declaration of
Trust (the "Declaration" ). Each of the single-state Intermediate Funds is a
non-diversified series of the Trust, and the Intermediate Municipal Funds are
managed by their investment adviser, Thornburg Management Company, Inc. under
the supervision of the Trust's Trustees. The Trust currently has 12
authorized Funds, nine of which are described in this Prospectus. The
Trustees are authorized to divide the Trust's shares into additional series
and classes.

No Fund is liable for the liabilities of any other Fund. However, because the
Company and the Trust share this Prospectus with respect to the Funds, there
is a possibility that one of these companies could be liable for any
misstatements, inaccuracies or incomplete disclosure in the Prospectus
respecting Funds offered by the other company. The Company and the Trust do
not concede, and specifically disclaim, any such liability.

Each Fund may hold special shareholder meetings and mail proxy materials.
These meetings may be called to elect or remove Directors or Trustees, change
fundamental investment policies, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Each Fund will mail
proxy materials in advance, including a voting card and information about the
proposals to be voted on. The number of votes you are entitled to is based
upon the number of shares you own. Shares do not have cumulative voting
rights or preemptive rights.

TMC and TSC

The Funds are managed by Thornburg Management Company, Inc., ("TMC") which
chooses each Fund's investments and handles its business affairs. TMC was
established in 1982. Today, the Thornburg Funds include Thornburg Value Fund,
Thornburg Limited Term U.S. Government Fund and Thornburg Limited Term Income
Fund in addition to the Funds covered by this Prospectus. The Thornburg
Funds total over $1.6 billion in assets. Thornburg Management Company Inc. is
known as a provider of conservative investment products. For more than a
decade the Thornburg Funds have been committed to preserving and increasing
the real wealth of their shareholders. The key to growing real wealth is
increasing buying power after taxes, inflation, and investment related
expenses.

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

<TABLE>
Limited Term Intermediate
Municipal Funds Municipal Funds
Net Assets Annual Rate Annual Rate
<S> <C> <C>
0 to $500 million .75% .625%
$500 million to $1 billion .65% .575%
$1 billion to $1.5 billion .55% .525%
$1.5 billion to $2 billion .50% .475%
Over $2 billion .40% .400%
</TABLE>

The management fee on the portion of each Limited Term Municipal Fund's net
assets up to $500 million is higher than the fee paid to the adviser of most
other mutual funds; however, the overall expense rate of each of the Limited
Term Municipal Funds is comparable to many funds sold through securities
dealers.

Brian J. McMahon, a Managing Director of TMC, has primary responsibility for
the day-to-day management of each of the Fund portfolios. He has held this
responsibility for each of the Limited Term National Fund and the Limited
Term California Fund since their respective inceptions in 1984 and 1987. He
has held the same responsibility for the Intermediate National Fund and the
Intermediate New Mexico Municipal Fund, which commenced operations in 1991,
and for the Intermediate Florida Fund, which commenced operations in February
1994. Mr. McMahon is assisted by other employees of TMC in managing the
Funds.

Thornburg Securities Corporation (TSC) distributes and markets the Thornburg
Funds.

H. Garrett Thornburg, Jr. a Trustee and President of the Trust and a Director
and Chairman of the Fund, is the controlling stockholder of both TMC and TSC.

Thornburg Funds provides shareholders account inquiry service 24 hours a day,
365 days a year, through its Audio Response telephone service. To reach
Thornburg Funds for general information, please call 1-800-847-0200. If you
would prefer to speak with a Thornburg Funds representative, please call
during business hours and follow the simple instructions you will receive.

ADDITIONAL INFORMATION

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

<logo>
Thornburg Funds
Investing With Integrity
Thornburg Securities Corporation, Distributor
119 East Marcy Street, Santa Fe, New Mexico 87501
(800) 847-0200

INCOME FUNDS STATEMENT OF ADDITIONAL INFORMATION

THORNBURG INVESTMENT TRUST
(formerly Thornburg Income Trust)

STATEMENT OF ADDITIONAL INFORMATION
for
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND ("Government Fund")
and
THORNBURG LIMITED TERM INCOME FUND ("Income Fund")
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501

Thornburg Limited Term U.S. Government Fund ("Government Fund") and
Thornburg Limited Term Income Fund ("Income Fund") are investment portfolios
established by Thornburg Investment Trust (the "Trust"). This Statement of
Additional Information relates to the investments proposed to be made by the
Funds, investment policies governing the Funds, the Funds' management, and
other issues of interest to a prospective purchaser of shares in the Funds.

This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Funds' Prospectus. A copy of the Prospectus
may be obtained at no charge by writing to the distributor of the Funds'
shares, Thornburg Securities Corporation, at 119 East Marcy Street, Suite
202, Santa Fe, New Mexico 87501.

The Trust's name was "Thornburg Income Trust" until October 1, 1995.

The date of this Statement of Additional Information is February 1,
1996.

Table of Contents

Page

INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .20
Government Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Income Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

YIELD COMPUTATION AND TOTAL RETURN:
Performance and Portfolio Information. . . . . . . . . . . . . . . . .26

REPRESENTATIVE PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . .27
Government Fund (Classes A and C). . . . . . . . . . . . . . . . . . .27
Income Fund (Classes A and C) . . . . . . . . . . . . . . . . . . . .28

DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Federal Income Tax Considerations. . . . . . . . . . . . . . . . . . .30
State and Local Income Tax Considerations. . . . . . . . . . . . . . .32
Accounts of Shareholders . . . . . . . . . . . . . . . . . . . . . . .32

INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

SERVICE AND DISTRIBUTION PLANS. . . . . . . . . . . . . . . . . . . . . . .35
Service Plans - All Cases. . . . . . . . . . . . . . . . . . . . . . .35

Class C Distribution Plan. . . . . . . . . . . . . . . . . . . . . . .36

PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .37

MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

PURCHASE OF FUND SHARES
Discussion of Reduced Sales Charges - Class A
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . .45

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . .45

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 45

INVESTMENT OBJECTIVES AND POLICIES

Introduction

This portion of the Statement of Additional Information includes
additional information which the prospective investor may wish to know
respecting types of investments each of the Funds may acquire or specific
techniques each of the Funds may utilize in pursuing its investment
objectives. Although certain investments are subject to purchase by both
Funds, there are certain investments or techniques which are available only
to one Fund or the other.

Determining Portfolio Average Maturity - Government Fund and Income Fund

For purposes of each Fund's investment policy, an instrument will be
treated as having a maturity earlier than its stated maturity date if the
instrument has technical features (such as put or demand features) or a
variable rate of interest which, in the judgment of the Fund's investment
adviser, will result in the instrument being valued in the market as though
it has an earlier maturity.

In addition, each Fund may estimate the expected maturities of certain
securities it purchases in connection with achieving its investment
objectives. Certain obligations such as Treasury Bills and Notes have stated
maturities. However, certain obligations a Fund may acquire, such as GNMA
certificates, are interests in pools of mortgages or other loans having
varying maturities.

Due to prepayments of the underlying mortgage instruments or other
loans, such asset-backed securities do not have a known actual maturity (the
stated maturity date of collateralized mortgage obligations is, in effect,
the maximum maturity date). In order to determine whether such a security is
a permissible investment for a Fund (and assuming the security otherwise
qualifies for purchase by the Fund), the security's remaining term will be
deemed equivalent to the estimated average life of the underlying mortgages
at the time of purchase of the security by the Fund. Average life will be
estimated by the Fund based on its Adviser's evaluation of likely prepayment
rates after taking into account current interest rates, current conditions in
the relevant housing markets and such other factors as it deems appropriate.
There can be no assurance that the average life as estimated will be the
actual average life.

For example, the mortgage instruments in the pools underlying
mortgage-backed securities have original maturities ranging from 8 to 40
years. The maximum original maturity of the mortgage instruments underlying
such a security may, in some cases, be as short as 12 years. The average
life of such a security at the time of purchase by a Fund is likely to be
substantially less than the maximum original maturity of the mortgage
instruments underlying the security because of prepayments of the mortgage
instruments, the passage of time from the issuance of the security until its
purchase by a Fund and, in some cases, the wide dispersion of the original
maturity dates of the underlying mortgage instruments.

Certain securities which have variable or floating interest rates or
demand or put features may nonetheless be deemed to have remaining actual
lives which are less than their stated nominal lives. In addition, certain
asset-backed securities which have variable or floating interest rates may be
deemed to have remaining lives which are less than the stated maturity dates
of the underlying mortgages.

Purchase of Certificates of Deposit - Government Fund and Income Fund

In addition to the other securities each Fund may purchase, each Fund is
authorized to purchase bank certificates of deposit under certain
circumstances. The Government Fund may under certain market conditions
invest up to 20% of its assets in (i) time certificates of deposit maturing
in one year or less after the date of acquisition which are issued by United
States banks having assets of $1,000,000,000 or more, and (ii) time
certificates of deposit insured as to principal by the Federal Deposit
Insurance Corporation. If any certificate of deposit (whether or not insured
in whole or in part) is nonnegotiable, and it matures in more than 7 days, it
will be considered illiquid, and subject to the Government Fund's fundamental
investment restriction that no more than 10% of the Fund's net assets will be
placed in illiquid investments.

The Income Fund may invest in certificates of deposit of large domestic
and foreign banks (i.e., banks which at the time of their most recent annual
financial statements show total assets in excess of one billion U.S.
dollars), including foreign branches of domestic banks, and certificates of
deposit of smaller banks as described below. Although the Income Fund
recognizes that the size of a bank is important, this fact alone is no
necessarily indicative of its creditworthiness. Investment in certificates
of deposit issued by foreign banks or foreign branches of domestic banks
involves investment risks that are different in some respects from those
associated with investment in certificates of deposit issued by domestic
banks. (See "Foreign Securities" below). The Income Fund may also invest in
certificates of deposit issued by banks and savings and loan institutions
which had at the time of their most recent annual financial statements total
assets of less than one billion dollars, provided that (i) the principal
amounts of such certificates of deposit are insured by an agency of the U.S.
Government, (ii) at no time will the Fund hold more that $100,000 principal
amount of certificates of deposit of any one such bank, and (iii) at the time
of acquisition, no more than 10% of the Fund's assets (taken at current
value) are invested in certificates of deposit of such banks having total
assets not in excess of one billion dollars.

Asset-Backed Securities - Government Fund and Income Fund

Each of the Funds may invest in asset-backed securities, which are
interests in pools in loans, described in the Prospectus. The Government
Fund only may purchase such securities or participations therein if they are
U.S. Government obligations described in the Prospectus.

Mortgage-Backed Securities and Mortgage Pass-Through Securities

If otherwise consistent with its investment restrictions and the
Prospectus, each Fund may invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by
savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations as further
described below. A Fund also may invest in debt securities which are secured
with collateral consisting of mortgage -backed securities (see
"Collateralized Mortgage Obligations"), and in other types of
mortgage-related securities.

A decline in interest rates may lead to a faster rate of repayment of
the underlying mortgages, and expose the Fund to a lower rate or return upon
reinvestment of the prepayments. Additionally, the potential for prepayments
in a declining interest rate environment will tend to limit to some degree
the increase in net asset value of the Fund because the value of the
mortgage-backed securities held by the Fund may not appreciate as rapidly as
the price of non-callable debt securities. During periods of increasing
interest rates, prepayments likely will be reduced, and the value of the
mortgage-backed securities will decline.

Interests in pools of mortgage-backed securities differ from other forms
of debt securities, which normally provide for periodic payment of interest
in fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or insurer of such
securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying property, or upon refinancing or
foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government
National Mortgage Association) are described as "modified pass-through."
These securities entitle the holder to receive all interest and principal
payments owed on the mortgage pool, net of certain fees, at the scheduled
payment dates regardless of whether or not the mortgagor actually makes the
payment.

The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a
wholly-owned United States Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the
full faith and credit of the United States government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages.
These guarantees, however, do not apply to the market value or yield of
mortgage-backed securities or to the value of Fund shares. Also, GNMA
securities often are purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.

Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by
private stockholders. It is subject to general regulation by the Secretary
of Housing and Urban Development. FNMA purchases conventional (i.e., not
insured or guaranteed by any government agency) mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed
as to timely payment of principal and interest by FNMA but are not backed by
the full faith and credit of the United States Government. FHLMC is a
corporate instrumentality of the United States Government and was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal
Home Loan Banks. FHLMC issues Participation Certificates ("PC's") which
represent interests in conventional mortgages from FHLMC's national
portfolio. FHLMC guarantees the timely payment of interest and ultimate
collection of principal, but PC's are not backed by the full faith and credit
of the United States Government.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments. Such pools
may be purchased by the Income Fund, but will not be purchased by the
Government Fund. Timely payment of interest and principal of these pools may
be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit. The
insurance and guarantees are issued by governmental entities, private
insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets the Income Fund's investment
quality standards. There can be no assurance that the private insurer or
guarantors can meet their obligations under the insurance policies or
guarantee arrangements. The Income Fund may buy mortgage-related securities
without insurance or guarantees, if through an examination of the loan
experience and practices of the originators/servicers and poolers, the
Advisor determines that the securities meet the Fund's quality standards.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable.

Collateralized Mortgage Obligations ("CMO's")

A CMO is a hybrid between a mortgage-backed bond and a mortgage
pass-through security. Similar to a bond, interest and prepaid principal are
paid, in most cases, semiannually. CMO's may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and
their income streams.

CMO's are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMO's provide for a modified form
of call protection through a de facto breakdown of the underlying pool of
mortgages according to how quickly the loans are repaid. Monthly payment of
principal received from the pool of underlying mortgages, including
prepayments, is first returned to investors holding the shortest maturity
class. Investors holding the longer maturity classes receive principal only
after the first class has been retired. An investor is partially guarded
against unanticipated early return of principal because of the sequential
payments.

In a typical CMO transaction, a corporation issues multiple series,
(e.g., A, B, C, Z) of CMO bonds ("Bonds). Proceeds of the Bond offering are
used to purchase mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal
on the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear
current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C
Bond currently being paid off. When the Series A, B, and C Bonds are paid
in full, interest and principal on the Series Z Bond begins to be paid
currently. With some CMO's, the issuer serves as a conduit to allow loan
originators (primarily builders or savings and loan associations) to borrow
against their loan portfolios.

FHLMC Collateralized Mortgage Obligations

FHLMC CMO's are debt obligations of FHLMC issued in multiple classes
having different maturity dates which are secured by the pledge of a pool of
conventional mortgage loans purchased by FHLMC. Unlike FHLMC PC's, payments
of principal and interest on the CMO's are made semiannually, as opposed to
monthly. The amount of principal payable on each semiannual payment date is
determined in accordance with FHLMC's mandatory sinking fund schedule, which,
in turn, is equal to approximately 100% of FHA prepayment experience applied
to the mortgage collateral pool. All sinking fund payments in the CMO's are
allocated to the retirement of the individual classes of bonds in the order
of their stated maturities. Payment of principal on the mortgage loans in
the collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMO's as
additional sinking fund payments. Because of the "pass-through" nature of
all principal payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of the CMO's is
actually repaid is likely to be such that each class of bonds will be retired
in advance of its scheduled date.

If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the CMO's are
identical to those of FHLMC PC's. FHLMC has the right to substitute
collateral in the event of delinquencies and/or defaults.

Other Mortgage-Backed Securities

The Adviser expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed rate mortgages. Neither Fund will
purchase mortgage-backed securities or any other assets which, in the opinion
of the Adviser, are illiquid and exceed, as a percentage of the Fund's
assets, the percentage limitations on the Fund's investment in securities
which are not readily marketable, as discussed below. The Adviser will,
consistent with the Funds' respective investment objectives, policies and
quality standards, consider making investments in such new types of
mortgage-related securities.

Other Asset-Backed Securities

The securitization techniques used to develop mortgage-backed securities
are now being applied to a broad range of assets. Through the use of trusts
and special purpose corporations, various types of assets, including
automobile loans, computer leases and credit card receivables, are being
securitized in pass-through structures similar to the mortgage pass-through
structures described above or in structures similar to the CMO pattern.
Consistent with the Funds' respective investment objectives and policies,
each Fund may invest in these and other types of asset-backed securities that
may be developed in the future. In general, the collateral supporting these
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments with interest rate fluctuations.

Several types of asset-backed securities have already been offered to
investors, including Certificates of Automobile Receivables ("CARS"). CARS
represent undivided fractional interests in a trust whose assets consist of
a pool of motor vehicle retail installment sales contracts and security
interests in the vehicles securing the contracts. Payments of principal and
interests on CARS are passed through monthly to certificate holders, and are
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution unaffiliated with the trustee or
originator of the trust. An investor's return on CARS may be affected by
early prepayment of principal on the underlying vehicle sales contracts. If
the letter of credit is exhausted, the trust may be prevented from realizing
the full amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation, damage
or loss of a vehicle, the application of federal and state bankruptcy and
insolvency laws, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of bankruptcy laws and of a number of state and federal consumer
credit laws, many of which give such debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due. There is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool assets, to ensure that the receipt of payment
on the underlying pool occurs in a timely fashion. Protection against losses
results from payment of the insurance obligations on at least a portion of
the assets in the pool by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Income Fund, as a possible purchaser of such securities,
will not pay any additional or separate fees for credit support. The degree
of credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or
failure of the credit support could adversely affect the return on an
investment in such a security.

The Income Fund may also invest in residual interests in asset-backed
securities. In the case of asset-backed securities issued in a pass-through
structure, the cash flow generated by the underlying assets is applied to
make required payments on the securities and to pay related administrative
expenses. The residual in an asset-backed security pass-through structure
represents the interest in any excess cash flow remaining after making the
foregoing payments. The amount of the residual will depend on, among other
things, the characteristics of the underlying assets, the coupon rates on the
securities, prevailing interest rates, the amount of administrative expenses
and the actual prepayment experience on the underlying assets. Asset-backed
security residuals not registered under the Securities Act of 1933 may be
subject to certain restrictions on transferability. In addition, there may
be no liquid market for such securities.

The availability of asset-backed securities may be affected by
legislative or regulatory developments. It is possible that such
developments may require the Fund to dispose of any then existing holdings of
such securities.

Repurchase Agreements - Government Fund and Income Fund

Either Fund may enter into repurchase agreements with member banks of
the Federal Reserve System or any domestic broker-dealer which is recognized
as a reporting government securities dealer if the creditworthiness of the
bank or broker-dealer has been determined by the Adviser to be at least as
high as that of other obligations the Fund may purchase or at least equal to
that of issuers of commercial paper rated within the two highest grades
assigned by Moody's or S&P. These transactions may not provide a Fund with
collateral marked-to-market during the term of the commitment.

A repurchase agreement, which provides a means for the Fund to earn
income on funds for periods as short as overnight, is an arrangement under
which the Fund purchases a security ("Obligation") and the seller agrees, at
the time of sale, to repurchase the Obligation at a specified time and price.
The repurchase price may be higher than the purchase price, the difference
being interest at a stated rate due to the Fund together with the repurchase
price on repurchase. In either case, the income to the Fund is unrelated to
the interest rate on the Obligation. Obligations will be held by the Fund's
custodian or in the Federal Reserve Book Entry System.

For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from the Fund to the seller of the Obligations subject to the repurchase
agreement and is therefore subject to the Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by a Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency
proceedings with respect to the seller of the Obligation before repurchase of
the Obligation under a repurchase agreement, the Fund may encounter delay and
incur costs before being able to sell the security. Delays may involve loss
of interest or decline in the price of the Obligation. If the court
characterized the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of
the seller. As an unsecured creditor, the Fund would be at risk of losing
some or all of the principal and income involved in the transaction. As with
any unsecured debt obligation purchased for the Fund, the Adviser seeks to
minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the Obligation.
Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the Obligation, in which case
the Fund may incur a loss if the proceeds to the Fund of the sale to a third
party are less than the repurchase price. However, if the market value
(including interest) of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the Obligation to deliver additional securities so that
the market value (including interest) of all securities subject to the
repurchase agreement will equal or exceed the repurchase price. It is
possible that the Fund will be unsuccessful in seeking to impose on the
seller a contractual obligation to deliver additional securities.

When Issued Securities - Government Fund and Income Fund

Either Fund may purchase securities offered on a "when-issued" or
"forward delivery" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued or forward delivery
securities take place at a later date. During the period between purchase
and settlement, no payment is made by the purchaser to the issuer and no
interest on the when-issued or forward delivery security accrues to the
purchaser. To the extent that assets of the Fund are not invested prior to
the settlement of a purchase of securities, the Fund will earn no income;
however, it is intended that the Fund will be fully invested to the extent
practicable and subject to the Fund's investment policies. While when-issued
or forward delivery securities may be sold prior to the settlement date, it
is intended that the Fund will purchase such securities with the purpose of
actually acquiring them unless sale appears desirable for investment reasons.
At the time the Fund makes the commitment to purchase a security on a
when-issued or forward delivery basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The
market value of when-issued or forward delivery securities may be more or
less than the purchase price. The Fund does not believe that its net asset
value or income will be adversely affected by its purchase of securities on
a when-issued or forward delivery basis. The Fund will establish a
segregated account for commitments for when-issued or forward delivery
securities as described above.

Reverse Repurchase Agreements - Government Fund and Income Fund

Either Fund may enter into reverse repurchase agreements by transferring
securities to another person in return for proceeds equal to a percentage of
the value of the securities, subject to its agreement to repurchase the
securities from the other person for an amount equal to the proceeds plus an
interest amount. Neither Fund will enter into any such transaction if, as a
result, more than 5% of the Fund's total assets would then be subject to
reverse repurchase agreements. See the "Investment Restrictions" applicable
to each Fund, below.

Dollar Roll Transactions - Government Fund and Income Fund

Either Fund may enter into "dollar roll" transactions, which consist of
the sale by the Fund to a bank or broker-dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment
to purchase from the counterparty similar, but not identical, securities at
a future date at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is
the holder. The Fund receives a fee from the counterparty as consideration
for entering into the commitment to purchase. Dollar rolls may be renewed
over a period of several months with a new purchase and repurchase price
fixed and a cash settlement made at each renewal without physical delivery of
securities. Moreover, the transaction may be preceded by a firm commitment
agreement pursuant to which the Fund agrees to buy a security on a future
date.

Dollar rolls are treated for purposes of the Investment Company Act of
1940 (the "1940 Act") as borrowings of the Fund entering into the transaction
because they involve the sale of a security coupled with an agreement to
repurchase, and are subject to the investment restrictions applicable to any
borrowings made by the Fund. Like all borrowings, a dollar roll involves
costs to the borrowing Fund. For example, while the Fund receives a fee as
consideration for agreeing to repurchase the security, the Fund forgoes the
right to receive all principal and interest payments while the counterparty
holds the security. These payments to the counterparty may exceed the fee
received by the Fund, thereby effectively charging the Fund interest on its
borrowing. Further, although the Fund can estimate the amount of expected
principal prepayment over the term of the dollar roll, a variation in the
actual amount of prepayment could increase or decrease the cost of the Fund's
borrowing.

Dollar rolls involve potential risks of loss which are different from
those related to the securities underlying the transactions. For example, if
the counterparty becomes insolvent, the Fund's right to purchase from the
counterparty may be restricted. Additionally, the value of such securities
may change adversely before the Fund is able to purchase them. Similarly,
the Fund may be required to purchase securities in connection with a dollar
roll at a higher price than may otherwise be available on the open market.
Since, as noted above, the counterparty is required to deliver a similar, but
not identical security to the Fund, the security which the Fund is required
to buy under the dollar roll may be worth less than an identical security.
Finally, there can be no assurance that the Fund's use of the cash that it
receives from a dollar roll will provide a return that exceeds borrowing
costs.

The Trustees of the Funds have adopted guidelines to ensure that those
securities received are substantially identical to those sold. To reduce the
risk of default, the Funds will engage in such transactions only with banks
and broker-dealers selected pursuant to such guidelines.

Lending of Portfolio Securities - Government Fund and Income Fund

The Fund may seek to increase its income by lending portfolio
securities. Under present regulatory policies, including those of the Board
of Governors of the Federal Reserve System and the Securities and Exchange
Commission, such loans may be made to member firms of the New York Stock
Exchange, and would be required to be secured continuously by collateral in
cash, cash equivalents or U.S. Treasury bills maintained on a current basis
at an amount at least equal to the market value and accrued interest of the
securities loaned. The Fund would have the right to call a loan and obtain
the securities loaned on no more than five days' notice. During the
existence of a loan, the Fund would continue to receive the equivalent of the
interest paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. As with other extensions
of credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
the loans would be made only to firms deemed by the Adviser to be of good
standing, and when, in the judgment of the Adviser, the consideration which
can be earned currently from securities loans of this type justifies the
attendant risk.

Other Investment Strategies - Income Fund

The Income Fund may, but is not required to, utilize various other
investment strategies as described below to hedge various market risks (such
as interest rates, currency exchange rates, and broad or specific equity
market movements), to manage the effective maturity or duration of
fixed-income securities or portfolios, or to enhance potential gain. Such
strategies are used by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new investments and
strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, the Income Fund
may purchase and sell exchange-listed and over-the-counter put and call
options on securities, financial futures, equity and fixed-income indices and
other financial instruments, purchase and sell financial futures contracts,
enter into various interest rate transactions such as swaps, caps, floors or
collars, and enter into various currency transactions such as currency
forward contracts, currency futures contracts, currency swaps or options on
currency or currency futures (collectively, all the above are called
"Strategic Transactions"). Strategic Transactions may be used to attempt to
protect against possible changes in the market value of securities held in or
to be purchased for the Income Fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate the
sale of such securities for investment purposes, to manage the effective
maturity or duration of the Fund's portfolio, or to establish a position in
the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to
enhance potential gain although no more than 5% of the Fund's assets will be
committed to Strategic Transactions entered into for purposes not related to
bona fide hedging or risk management. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any
Strategic Transaction is a function of numerous variables including market
conditions. The ability of the Fund to utilize these Strategic Transactions
successfully will depend on the Adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments.

Strategic Transactions have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to
the extent the Adviser's view as to certain market movements is incorrect,
the risk that the use of such Strategic Transactions could result in losses
greater than if they had not been used. Use of put and call options may
result in losses to the Income Fund, force the sales of portfolio securities
at inopportune times or for prices higher than (in the case of put options)
or lower than (in the case of call options) current market values, limit the
amount of appreciation the Fund can realize on its investments or cause the
Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Fund incurring losses as a result of a number
of factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency.
The use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of
the Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures
and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without
incurring substantial losses, if at all. Although the contemplated use of
these futures contracts and options thereon should tend to minimize the risk
of loss due to a decline in the value of the hedged position, at the same
time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited
to the cost of the initial premium. Losses resulting from the use of
Strategic Transactions would reduce net asset value, and possible income, and
such losses can be greater than if the Strategic Transactions had not been
utilized.

General Characteristics of Options - Income Fund

Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument as to which the options relate. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Strategic Transactions involving
options require segregation of Income Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the
underlying security, commodity, index, currency or other instrument at the
exercise price. For instance, the Income Fund's purchase of a put option on
a security might be designed to protect its holdings in the underlying
instrument (or, in some cases, a similar instrument) against a substantial
decline in the market value by giving the Fund the right to sell the
instrument at the option exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the seller
the obligation to sell, the underlying instrument at the exercise price. The
Fund's purchase of a call option on a security, financial future, index,
currency or other instrument might be intended to protect the Fund against an
increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase the
instrument. An American-style put or call option may be exercised at any
time during the option period while a European-style put or call options may
be exercised only upon expiration or during a fixed period prior thereto.
The Income Fund is authorized to purchase and sell exchange listed options
and over-the-counter options ("OTC options"). Exchange listed options are
issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties
to such options. The discussion below uses the OCC as a paradigm, but is
also applicable to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options
and Eurodollar instruments are cash settled for the net amount, if any, to
the extent the option is "in-the-money" (i.e., where the value of the
underlying instrument exceeds, in the case of a call option, or is less than,
in the case of a put option, the exercise price of the option) at the time
the option is exercised. Frequently, rather than taking or making delivery
of the underlying instrument through the process of exercising the option,
listed options are closed by entering into offsetting purchase or sale
transactions that do not result in ownership of the new option.

The Income Fund's ability to close out its position as a purchaser or
seller of an OCC or exchange listed put or call option is dependent, in part,
upon the liquidity of the option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of options
or underlying securities including reaching daily price limits; (iv)
interruption of the normal operations of the OCC or an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the
trading of options (or a particular class or series of options), in which
event the relevant market for that option on that exchange would cease to
exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent
that the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options,
which generally have standardized terms and performance mechanics, all the
terms of an OTC option, including such terms as method of settlement, term,
exercise price, premium, guaranties and security, are set by negotiation of
the parties. The Income Fund will only enter into OTC options that have a
buy-back provision permitting the Fund to require the Counterparty to buy
back the option at a formula price within seven days. The Fund expects
generally to enter into OTC options that have cash settlement provisions,
although it is not required to do so.

Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails
to make or take delivery of the security, currency or other instrument
underlying an OTC option it has entered into with the Income Fund or fails to
make a cash settlement payment due in accordance with the terms of that
option, the Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the Adviser must assess
the creditworthiness of each Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied. The Fund will engage in OTC
option transactions only with United States government securities dealers
recognized by the Federal Reserve Bank in New York as "primary dealers,"
broker dealers, domestic or foreign banks or other financial institutions
which have received a short-term credit rating of "A-1" from Standard &
Poor's Corporation or "P-1" from Moody's Investor Services or have been
determined by the Adviser to have an equivalent credit rating. The staff of
the SEC currently takes the position that the amount of the Fund's
obligation pursuant to an OTC option is illiquid, and is subject to the
Income Fund's limitation on investing no more than 15% its assets in illiquid
instruments.

If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease
in the value of the underlying securities or instruments in its portfolio or
will increase the Fund's income. The sale of put options can also provide
income.

The Income Fund may purchase and sell call options on U.S. Treasury and
agency securities, foreign sovereign debt, mortgage-backed securities,
corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets and related futures
on such securities other than futures on individual corporate debt and
individual equity securities. All calls sold by the Fund must be "covered"
or must meet the asset segregation requirements described below as long as
the call is outstanding (i.e., the Fund must own the securities or futures
contract subject to the call). Even though the Fund will receive the option
premium to help protect it against loss, a call sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security and may require
the Fund to hold a security which it might otherwise have sold.

The Income Fund may purchase and sell put options that relate to U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio) or futures on such securities other than futures
on individual corporate debt and individual equity securities. The Fund will
not sell put options if, as a result, more than 50% of the Fund's assets
would be required to be segregated to cover its potential obligations under
its hedging, duration management, risk management, and other Strategic
Transactions other than those with respect to futures and options thereon.
In selling put options, there is a risk that the Fund may be required to buy
the underlying security at a disadvantageous price above the market price.

General Characteristics of Futures - Income Fund

The Income Fund may purchase and sell financial futures contracts or
purchase put and call options on such futures as a hedge against anticipated
interest rate, currency or equity market changes, for duration management and
for risk management purposes. Futures are generally bought and sold on the
commodities exchanges where they are listed with payment of initial and
variation margin as described below. The sale of a futures contract creates
a firm obligation by the Fund, as seller, to deliver the specific type of
financial instrument called for in the contract at a specific future time for
a specified price (or, with respect to index futures and Eurodollar
instruments, the net cash amount). Options on futures contracts are similar
to options on securities except that an option on a futures contract gives
the purchaser the right in return for the premium paid to assume a position
in a futures contract.

The Income Fund's use of financial futures and options thereon will in
all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the Commodity Futures Trading
Commission and will be entered into only for bona fide hedging, risk
management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option
thereon requires the Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 5% of the face amount of
the contract, but may be higher in some circumstances. Additional cash or
assets (variation margin) may be required to be deposited thereafter on a
daily basis as the mark to market value of the contract fluctuates. The
purchase of options on financial futures involves payment of a premium for
the option without any further obligation on the part of the Fund. If the
Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position will be offset
prior to settlement and that delivery will not occur.

The Income Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and
options thereon would exceed 5% of the Fund's total assets (taken at current
value); however, in the case of an option that is in-the-money at the time of
the purchase, the segregation requirements with respect to futures and
options thereon are described below.

Options on Securities Indices and Other Financial Indices - Income Fund

The Income Fund also may purchase and sell call and put options on
securities indices and other financial indices and, in so doing can achieve
many of the same objectives it would achieve through the sale or purchase of
options on individual securities or other instruments. Options on securities
indices and other financial indices are similar to options on a security or
other instrument except that, rather than settling by physical delivery of
the underlying instrument, they settle by cash settlement (i.e., an option on
an index gives the holder the right to receive, upon exercise of the option,
an amount of cash if the closing level of the index upon which the option is
based exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option except if, in the case of an OTC option,
physical delivery is specified). This amount of cash is equal to the excess
of the closing price of the index over the exercise price of the option,
which also may be multiplied by a formula value. The seller of the option is
obligated, in return for the premium received, to make delivery of this
amount. The gain or loss on an option on an index depends on price movements
in the instruments making up the market, market segment, industry or other
composite on which the underlying index is based rather than price movements
in individual securities, as is the case with respect to options on
securities.

Currency Transactions - Income Fund

The Income Fund may engage in currency transactions with Counterparties
in order to hedge the value of currencies against fluctuations in relative
value. Currency transactions include forward currency contracts, exchange
listed currency futures, exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell ( with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. A currency swap is an agreement to exchange cash flows
based on the notional difference among two or more currencies and operates
similarly to an interest rate swap, which is described below.

The Income Fund's dealings in forward currency contracts and other
currency transactions such as futures, options, options on futures and swaps
will be limited to hedging involving either specific transactions or
portfolio positions. Transactions hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Fund, which
will generally arise in connection with the purchase or sale of its portfolio
securities. Position hedging is entering into a currency transaction with
respect to portfolio security positions denominated or generally quoted in
that currency.

The Income Fund will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended to
wholly or partially offset other transactions, than the aggregate market
value (at the time of entering into the transaction) of the securities held
in its portfolio that are denominated or generally quoted in or currently
convertible into such currency other than with respect to proxy hedging as
described below.

The Income Fund may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected to
decline in value relative to other currencies to which the Fund has or in
which the Fund expects to have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Income Fund may also
engage in proxy hedging. Proxy hedging is often used when the currency to
which the Fund's portfolio is exposed is difficult to hedge or to hedge
against the dollar. Proxy hedging entails entering into a forward contract
to sell a currency whose changes in value are generally considered to be
linked to a currency or currencies in which some or all of the Fund's
portfolio securities are or are expected to be denominated, and to buy U.S.
dollars. The amount of the contract would not exceed the value of the Fund's
securities denominated in linked currencies. For example, if the Adviser
considers the Austrian schilling is linked to the German deutschemark (the
"D-mark"), the Fund holds securities denominated in Austrian schillings and
the Adviser believes that the value of schillings will decline against the
U.S. dollar, the Adviser may enter into a contract to sell D-marks and buy
dollars. Hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, there is the risk
that the perceived linkage between various currencies may not be present or
may not be present during the particular time that the Fund is engaging in
proxy hedging. If the Fund enters into a currency hedging transaction, the
Fund will comply with the asset segregation requirements described below.

Risks of Currency Transactions - Income Fund

Currency transactions are subject to risks different from other
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales
of currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions
imposed by governments. These can result in losses to the Income Fund if it
is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
ineffective, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement
of a currency futures contract for the purchase of most currencies must occur
at a bank based in the issuing nation. Trading options on currency futures
is relatively new, and the ability to establish and close out positions on
such options is subject to the maintenance of a liquid market which may not
always be available. Currency exchange rates may fluctuate based on factors
extrinsic to that country's economy.

Combined Transactions - Income Fund

The Income Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and any combination of
futures, options and currency transactions ("component" transactions),
instead of a single Strategic Transaction, as part of a single or combined
strategy when, in the opinion of the Adviser, it is in the best interests of
the Fund to do so. A combined transaction will usually contain elements of
risk that are present in each of its component transactions. Although
combined transactions are normally entered into based on the Adviser's
judgment that the combined strategies will reduce risk or otherwise more
effectively achieve the desired portfolio management goal, it is possible
that the combination will instead increase such risks or hinder achievement
of the portfolio management objective.

Swaps, Caps, Floors and Collars - Income Fund

Among the Strategic Transactions into which the Income Fund may enter
are interest rate, currency and index swaps and the purchase or sale or
related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a
later date. The Income Fund intends to use these transactions as hedges and
not as speculative investments and will not sell interest rate caps or floors
where it does not own securities or other instruments providing the income
stream the Fund may be obligated to pay. An interest rate swap is an
agreement between two parties to exchange payments that are based on
specified interest rates and a notional amount. The exchange takes place
over a specified period of time. A currency swap is an agreement to exchange
cash flows on a notional amount of two or more currencies based on the
relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. Although swaps can take a variety of forms, typically one
party pays fixed and receives floating rate payments and the other party
receives fixed and pays floating rate payments. An interest rate cap is an
agreement between two parties over a specified period of time where one party
makes payments to the other party equal to the difference between the current
level of an interest rate index and the level of the cap, if the specified
interest rate index increases above the level of the cap. An interest rate
floor is similar except the payments are the difference between the current
level of an interest rate index and the level of the floor if the specified
interest rate index decreases below the level of the floor. An interest rate
collar is the simultaneous execution of a cap and floor agreement on a
particular interest rate index. The purchase of a cap entitles the purchaser
to receive payments on a notional principal amount from the party selling
such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. Purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined
interest rate or amount. A collar is a combination of a cap and a floor that
preserves a certain return within a predetermined range of interest rates or
values.

The Income Fund may enter into swaps, caps, floors or collars on either
an asset-based or liability-based basis, depending on whether it is hedging
its assets or its liabilities, and will usually enter into swaps on a net
basis, i.e., the two payment streams are netted out in a cash settlement on
the payment date or dates specified in the instrument, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these swaps, caps, floors and collars are entered into
for good faith hedging purposes, the Adviser and the Fund believes such
obligations do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to its borrowing
restrictions. The Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction, the
unsecured long term debt rating of the Counterparty combined with any credit
enhancements, satisfies the credit criteria established by the Trustees. If
there is a default by the Counterparty, the Fund will have contractual
remedies pursuant to the agreements related to the transaction. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Eurodollar Instruments - Income Fund

The Income Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank Offered Rate
("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain
a fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Fund might use Eurodollar futures contracts and options
thereon to hedge against changes in the LIBOR, to which many interest rate
swaps and fixed income instruments are linked.

Risks of Strategic Transactions Outside the United States - Income Fund

When constructed outside the United States, Strategic Transactions may
not be regulated as rigorously as in the United States, may not involve a
clearing mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions
also could be adversely affected by: (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in
the United States, and (v) lower trading volume and liquidity.

Use of Segregated and Other Special Accounts - Income Fund

Some transactions which the Income Fund may enter into, including many
Strategic Transactions, require that the Income Fund segregate liquid high
grade debt assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. Transactions which require segregation include
reverse repurchase agreements, dollar rolls, undertakings by the Fund to
purchase when-issued securities, the Fund's sales of put or call options, the
Fund's sales of futures contracts, currency hedging transactions (including
forward currency contracts, currency futures and currency swaps) and swaps,
floors and collars to the extent of the Fund's uncovered obligation under the
transaction. In general, either the full amount of any obligation by the
Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or an
amount of cash or liquid high grade debt securities at least equal to the
current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them.
For example, a call option written by the Fund will require the Fund to hold
the securities without additional consideration or to segregate liquid
high-grade assets sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by the Fund on an index will require
the Fund to own portfolio securities which correlate with the index or to
segregate liquid high grade debt assets equal to the excess of the index
value over the exercise price on a current basis. A put option written by
the Fund requires the Fund to segregate liquid, high grade assets equal to
the exercise price.

Except when the Income Fund enters into a forward contract for the
purchase or sale of a security denominated in a particular currency, which
requires no segregation, a currency contract which obligates the Fund to buy
or sell currency will generally require the Fund to hold an amount of that
currency or liquid securities denominated in that currency equal to the
Fund's obligations, or to segregate liquid high grade debt assets equal to
the amount of the Fund's obligation.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices, OCC issued and exchange listed
index options, swaps, caps, floors and collars will generally provide for
cash settlement. As a result, with respect to these instruments the Fund
will only segregate an amount of assets equal to its accrued net obligations,
as there is no requirement for payment or delivery of amounts in excess of
the net amount. These amounts will equal 100% of the exercise price in the
case of a put, or the in-the-money amount in the case of a call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate,
until the option expires or is closed out, cash or cash equivalents equal in
value to such excess. Other OCC issued and exchange listed options sold by
the Fund, other than those above, generally settle with physical delivery,
and the Fund will segregate an amount of assets equal to the full value of
the option. OTC options settling with physical delivery, if any, will be
treated the same as other options settling with physical delivery.

In the case of a futures contract or an option thereon, the Income Fund
must deposit initial margin and possible daily variation margin in addition
to segregating assets sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Such assets may consist of cash, cash
equivalents, or high grade liquid debt instruments.

With respect to swaps, the Income Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high
grade securities having a value equal to the accrued excess. Caps, floors
and collars require segregation of assets with a value equal to the Fund's
net obligation, if any.

Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated
assets, equals its net outstanding obligation in related options and
Strategic Transactions. For example, the Fund could purchase a put option if
the strike price of that option is the same or higher than the strike price
of a put option sold by the Fund. Moreover, instead of segregating assets if
the Fund held a futures or forward contract, it could purchase a put option
on the same futures or forward contract with a strike price as high or higher
than the price of the contract held. Other Strategic Transactions may also
be offset in combinations. If the offsetting transaction terminates at the
time of or after the primary transaction, no segregation is required. If it
terminates prior to such time, assets equal to any remaining obligation would
need to be segregated.

The Income Fund's activities involving Strategic Transactions may be
limited by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. See "Taxes."

Foreign Securities - Income Fund

The Income Fund may invest in securities of foreign issuers. Investing
in foreign issuers involves certain special considerations, including those
set forth below, which are not typically associated with investing in United
States issuers. As foreign companies are not generally subject to uniform
accounting and auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies, there may
be less publicly available information about a foreign company than a
domestic company. Volume and liquidity in most foreign bond markets is less
than in the United States and, at times, volatility of price can be greater
than in the United States. There is generally less government supervision
and regulation of brokers and listed companies than in the United States.
Mail service between the United States and foreign countries may be slower or
less reliable than within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. Securities issued or guaranteed by foreign national
governments, their agencies, instrumentalities, or political subdivisions,
may or may not be supported by the full faith and credit and taxing power of
the foreign government. The Fund's ability and decisions to purchase and
sell portfolio securities may be affected by laws or regulations relating to
the convertability and repatriation of assets. Further, it may be more
difficult for the Fund's agents to keep currently informed about corporate
actions which may affect the prices of portfolio securities. In addition,
with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect United States investments in those
countries. In addition, it may be more difficult to obtain and enforce a
judgment against a foreign issuer. Foreign securities may be subject to
foreign government taxes which will reduce the yield on such securities. A
shareholder of the Income Fund will not be entitled to claim a credit or
deduction for U.S. federal income tax purposes for his or her proportionate
share of such foreign taxes paid by the Fund.

Trustees' Power to Change Objectives and Policies

Any objective and policies stated above may be changed by the Trustees
of the Trust without a vote of the shareholders, unless identified as a
fundamental objective or policy.

INVESTMENT LIMITATIONS

The following restrictions, if identified as "fundamental" with respect
to a Fund, may not be changed without approval of a majority of the
outstanding voting securities of the Fund which, under the 1940 Act and the
rules thereunder and as used in this Statement of Additional Information,
means the lesser of (1) 67% of the shares of the Fund present at a meeting if
the holders of more than 50% of the outstanding shares of the Fund are
present in person or by proxy, or (2) more than 50% of the outstanding shares
of the Fund. Any restriction, limitation or policy which is not identified
as fundamental may be changed by the Trustees.

Government Fund Investment Limitations

As a matter of fundamental investment policy, the Government Fund will
not:

(1) Invest more than 20% of the Fund's total assets in securities
other than obligations issued or guaranteed by the United States Government
or its agencies, instrumentalities and authorities, generally described (but
not limited) under the heading "Types of Obligations the Fund May Acquire",
and then only in the nongovernmental obligations described in the Prospectus;

(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 (a) as a temporary measure, and then only
in amounts not exceeding 5% of the value of the Fund's total assets or (b)
from banks, provided that immediately after any such borrowing all borrowings
of the Fund do not exceed 10% of the Fund's total assets. The exceptions to
this restriction are not for investment leverage purposes but are solely for
extraordinary or emergency purchases or to facilitate management of the
Fund's portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments is deemed to be disadvantageous. The
Fund will not purchase securities while borrowings are outstanding. For
purposes of this restriction (i) the security arrangements described in
restriction (4) below will not be considered as borrowing money, and (ii)
reverse repurchase agreements will be considered as borrowing money;

(4) Mortgage, pledge or hypothecate any assets except to secure
permitted borrowings. Arrangements to segregate assets with the Fund's
custodian with respect to when-issued and delayed delivery transactions, and
reverse repurchase agreements, and deposits made in connection with futures
contracts, will not be considered a mortgage, pledge or hypothecation of
assets;

(5) 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 federal securities laws;

(6) Purchase or sell real estate and real estate mortgage loans, but
this shall not prevent the Fund from investing in obligations of the U.S.
Government or its agencies, relating to real estate mortgages as described
generally under the heading "Types of Obligations the Fund May Acquire";

(7) Purchase or sell commodities or commodity futures contracts or
oil, gas or other mineral exploration or development programs. Investment in
futures contracts respecting securities and in options on these futures
contracts will not be considered investment in commodity futures contracts;

(8) Make loans, except through (a) the purchase of debt obligations
in accordance with the Fund's investment objectives and policies; (b)
repurchase agreements with banks, brokers, dealers and other financial
institutions; and (c) loans of securities;

(9) Purchase any security on margin, except for such short-term
credits as are necessary for the clearance of transactions. For purposes of
this restriction, the Fund's entry into futures contracts will not be
considered the purchase of securities on margin;

(10) Make short sales of securities;

(11) 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 obligations of, or guaranteed
by, the United States government, its agencies, instrumentalities and
authorities;

(12) 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. The Fund has no present intention to purchase any
such restricted securities;

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

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

(15) 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;

(16) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those officers and
Trustees of the Fund, or those officers and directors of the Adviser, 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;

(17) Enter into any reverse repurchase agreement if, as a result
thereof, more than 5% of its total assets would be subject to its obligations
under reverse purchase agreements at any time;

(18) Purchase or sell any futures contract if, as a result thereof,
the sum of the amount of margin deposits on the Fund's existing futures
positions and the amount of premiums paid for related options would exceed 5%
of the Fund's total assets;

(19) Purchase any put or call option not related to a futures
contract;

(20) Purchase the securities of any issuer if as a result more than
10% of the value of the Fund's net assets would be invested in securities
which are considered illiquid because they are subject to legal or
contractual restrictions on resale ("restricted securities") or because no
market quotations are readily available; or enter into a repurchase agreement
maturing in more than seven days, if as a result such repurchase agreements
together with restricted securities and securities for which there are no
readily available market quotations would constitute more than 10% of the
Fund's net assets; or

(21) Issue senior securities, as defined under the Investment
Company Act of 1940, except that the Fund may enter into repurchase
agreements and reverse repurchase agreements, lend its portfolio securities,
borrow, and enter into when-issued and delayed delivery transactions as
described above under "INVESTMENT OBJECTIVES AND POLICIES" and as limited by
the foregoing investment limitations.

Whenever an investment policy or restriction states a minimum or maximum
percentage of the Government Fund's assets which may be invested in any
security or other assets, it is intended that the minimum or maximum
percentage limitations will be determined immediately after and as a result
of the Fund's acquisition of the security or asset. Accordingly, any later
increase or decrease in the relative percentage of value represented by the
asset or security resulting from changes in asset values will not be
considered a violation of these restrictions.

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

Income Fund Investment Limitations

As a matter of fundamental policy, the Income Fund may not:

(1) with respect to 75% of its total assets taken at market value,
purchase more than 10% of the voting securities of any one issuer or invest
more than 5% of the value of its total assets in the securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies;

(2) borrow money, except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements; provided that the Fund maintains asset coverage of 300% for all
borrowings;

(3) purchase or sell real estate (except that the Fund may invest in
(i) securities of companies which deal in real estate or mortgages, and (ii)
securities secured by real estate or interests therein and that the Fund
reserves freedom of action to hold and sell real estate acquired as a result
of the Fund's ownership of securities) or purchase or sell physical
commodities or contracts relating to physical commodities;

(4) act as underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;

(5) make loans to any other person, except (a) loans of portfolio
securities, and (b) to the extent that the entry into repurchase agreements
and the purchase of debt securities in accordance with its investment
objectives and investment policies may be deemed to be loans;

(6) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for shares of the
separate classes of a fund or series of the Trust provided that collateral
arrangements with respect to currency-related contracts, futures contracts,
options, or other permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of senior securities
for purposes of this restriction;

(7) purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers having their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (for the purposes of this
restriction, telephone companies are considered to be in a separate industry
from gas and electric public utilities, and wholly-owned finance companies
are considered to be in the industry of their parents if their activities are
primarily related to financing the activities of the parents).

As a matter of nonfundamental policy the Income Fund may not:

(a) purchase or retain securities of any open-end investment
company, or securities of any closed-end investment company except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets. The Fund will not acquire any
security issued by another investment company ( the "acquired company") if
the Fund thereby would own (i) more than 3% of the total outstanding voting
securities of the acquired company, or (ii) securities issued by the acquired
company having an aggregate value exceeding 5% of the Fund's total assets, or
(iii) securities issued by investment companies having an aggregate value
exceeding 10% of the Fund's total assets;

(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;

(c) purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Fund or a member, officer, director or trustee of the investment adviser
of the Fund if one or more of such individuals owns beneficially more than
one-half of one percent (1/2%) of the outstanding shares or securities or
both (taken at market value) of such issuer and such shares or securities
together own beneficially more than 5% of such shares or securities or both;

(d) purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and, if the
right is conditional, the sale is made upon the same conditions, except in
connection with arbitrage transactions, and except that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities;

(e) invest more than 15% of its net assets in the aggregate in
securities which are not readily marketable, the disposition of which is
restricted under Federal securities laws, and in repurchase agreements not
terminable within 7 days provided the Fund will not invest more than 5% of
its total assets in restricted securities;

(f) purchase securities of any issuers with a record of less than
three years of continuous operations, including predecessors, except U.S.
Government securities, securities of such issuers which are rated by at least
one nationally recognized statistical rating organization, municipal
obligations and obligations issued or guaranteed by any foreign government or
its agencies or instrumentalities, if such purchase would cause the
investments of the Fund in all such issuers to exceed 5% of the total assets
of the Fund taken at market value;

(g) purchase more than 10% of the voting securities of any one
issuer, except securities issued by the U.S. Government, its agencies or
instrumentalities;

(h) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the fund at any time do
not exceed 20% of its net assets; or sell put options in securities if, as a
result, the aggregate value of the obligations underlying such put options
would exceed 50% of the Fund's net assets;

(i) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial margin
with respect to all futures contracts entered into on behalf of the Fund and
the premiums paid for options on futures contracts does not exceed 5% of the
fair market value of the Fund's total assets; provided that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in computing the 5% limit;

(j) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which own or invest
in such interests);

(k) borrow money except as a temporary measure, and then not in
excess of 5% of its total assets (taken at market value) unless the borrowing
is from banks, in which case the percentage limitation is 10%; reverse
repurchase agreements and dollar rolls will be considered borrowings for this
purpose, and will be further subject to total asset coverage of 300% for such
agreements;

(l) purchase warrants if as a result warrants taken at the lower of
cost or market value would represent more than 5% of the value of the Fund's
total net assets or more than 2% of its net assets in warrants that are not
listed on the New York or American Stock Exchanges or on an exchange with
comparable listing requirements (for this purpose, warrants attached to
securities will be deemed to have no value); or

(m) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the time any loan is
made; all loans of portfolio securities will be fully collateralized and
marked to market daily. The Fund has no current intention of making loans of
portfolio securities that would amount to greater than 5% of the Fund's total
assets;

(n) purchase or sell real estate limited partnership interests.

Restrictions with respect to repurchase agreements shall be construed to be
for repurchase agreements entered into for the investment of available cash
consistent with the Income Fund's repurchase agreement procedures, not
repurchase commitments entered into for general investment purposes.

YIELD AND RETURN COMPUTATION

Performance and Portfolio Information

The yield and return of a Fund or any Fund class may, from time to time,
be quoted in reports, sales literature and advertisements published by the
Fund, the Distributor, or investment dealers offering the Fund. Any such
quotation must include a standardized calculation which computes yield for a
30-day or one month period by dividing net investment income per share
during the period by the maximum offering price on the last day of the
period. The standardized calculation will include the effect of semiannual
compounding and will reflect amortization of premiums for those bonds which
have a market value in excess of par. New schedules based on market value
will be computed each month for amortizing premiums. With respect to
mortgage-backed securities or other receivables-backed obligations, the Fund
will amortize the discount on premium on the outstanding principal balance,
based upon the cost of the security, over the remaining term of the security.
Gains or losses attributable to actual monthly paydowns on mortgage-backed
obligations will be reflected as increases or decreases to interest income
during the period when such gains or losses are realized. Provided that any
such quotation is also accompanied by the standardized calculation referred
to above, a Fund may also quote non-standardized performance data for a
specified period by dividing the net investment income per share 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 multiplying the result by 365 divided by the number of days in
the specified period. For purposes of this non-standardized calculation, net
investment income will include accrued interest income plus or minus any
amortized purchase discount or premium less all accrued expenses. The
primary differences between the results 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
standardized calculation; (2) The non-standardized calculation may reflect
amortization of premium based upon historical cost rather than market value;
(3) The non-standardized calculation may reflect the average offering price
per share for the period or the beginning offering price per share for the
period, whereas the standardized calculation always will reflect the maximum
offering price per share on the last day of the period; (4) The
non-standardized calculation may reflect an offering price per share other
than the maximum offering price, provided that any time the 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 price; (5) The non-standardized return quotation may
include the effective return obtained by compounding the monthly dividends.

Any performance quotation also must include average annual total return
quotation for the one, 5 and 10 year period ended on the date of the most
recent balance sheet included in the registration statement, computed by
finding the average annual compounded rates of return over such periods that
would equate the initial amount invested at the maximum public offering price
to the ending redeemable value. To the extent that a Fund has been in
operation less than one, 5 or 10 years, the time period during which the fund
has been in operation will be substituted for any one, 5 or 10 year period
for which a total return quotation is not obtainable.

Any quoted performance should not be considered a representation of the
performance in the future since the performance is not fixed. Actual
performance will depend not only the type, quality and maturities of the
investments held by the Fund and changes in interest rates on such
investments, but also on changes in the Fund's expenses during the period.
In addition, a change in the Fund's net asset value will affect its
performance.

From time to time, in advertisements and other types of literature, the
performance of a Fund may be compared to other groups of mutual funds. This
comparative performance may be expressed as a ranking prepared by Lipper
Analytical Services, Inc. or other widely recognized independent services
which monitor the performance of mutual funds. These performance analyses
ordinarily will include the reinvestment of dividends and capital gains
distributions, but do not take sales charges into consideration and are
prepared without regard to tax consequences. Performance rankings and
ratings reported periodically in national financial publications such as
MONEY magazine, FORBES and BARRON's also may be used.

A Fund also may illustrate performance or the characteristics of its
investment portfolio through graphs, tabular data or other displays which
describe (i) the average portfolio maturity of the 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 bench
marks or indices such as the Treasury yield curve), (iii) changes in the
Fund's share price or net asset value in some cases relative to changes in
the value of other investments, and (iv) the relationship over time of
changes in the Fund's (or other investments') net asset value or price and
the Fund's (or other investments') investment return.

Yield and return information may be used in reviewing the performance of
the Fund's investments and for providing a basis for comparison with other
investment alternatives. However, each Fund's return fluctuates, unlike
certain bank deposits or other investments which pay a fixed return for a
stated period of time.

REPRESENTATIVE PERFORMANCE INFORMATION

GOVERNMENT FUND (Classes A and C)

THE FOLLOWING DATA FOR THE GOVERNMENT FUND REPRESENT PAST PERFORMANCE,
AND THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN A FUND WILL
FLUCTUATE. AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.

Yield Computations

Standardized Method of Computing Yield. The Government Fund's yields
for Class A shares and Class C shares, computed for the one-month period
ended September 30, 1995 in accordance with the standardized calculation
described above, were 5.38% and 5.60% for Class A shares and Class C shares,
respectively. This method of computing performance does not take into
account changes in net asset value.

Non-standardized Method of Computing Yield. The Government Fund's
yields for Class A shares and Class C shares, computed for the 7-day period
ended September 30, 1995 in accordance with a non-standardized method, were
5.98% and 5.64% for Class A shares and Class C shares, respectively. This
non-standardized method of computation differs from the standardized method
of computing yield in that the non-standardized yield is computed for a 7-day
period rather than a 30-day or one-month period, the yield reflects
amortization of premium based upon historical cost rather than market value,
and the non-standardized yield is computed by compounding dividends monthly
rather than semiannually. This method of computing performance does not take
into account changes in net asset value.

AVERAGE ANNUAL TOTAL RETURN

The Government Fund's total returns for Class A shares and Class C
shares, computed in accordance with the total return calculation described
above are displayed in the table below for the periods shown ending
September 30, 1995. The Government Fund commenced sales of its Class A
shares on November 6, 1987, and commenced sales of Class C shares on
September 1, 1994. "Total return," unlike the standardized yield and
non-standardized yield figures shown above, takes into account changes in net
asset value over the described periods. The Class A total return figures
assume the deduction of the maximum sales commission of 2.50% on Class A
shares. The Class C data relate to Class C shares sold before October 2,
1995. Class C shares sold on or after October 2, 1995 are subject to a
contingent deferred sales charge of .50% if redeemed within one year of
purchase. These data also assume and reinvestment of all dividends at net
asset value.

1 Year 5 Years 10 Years Since Inception
Class A 6.92% ____% N/A 7.25% (11/6/87)
Class C 9.07% N/A N/A 7.87% (09/1/94)

Total return figures are average annual total returns for the periods shown.

INCOME FUND (Classes A and C)

THE FOLLOWING DATA FOR THE INCOME FUND REPRESENT PAST PERFORMANCE, AND
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN A FUND WILL
FLUCTUATE. AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.

Yield Computations

Standardized Method of Computing Yield. The Income Fund's yields for
Class A shares and Class C shares, computed for the one-month period ended
September 30, 1995 in accordance with the standardized calculation described
above, were 6.32% and 6.00% for Class A shares and Class C shares,
respectively. This method of computing performance does not take into
account changes in net asset value.

Non-standardized Method of Computing Yield. The Income Fund's yields
for Class A shares and Class C shares, computed for the 7-day period ended
September 30, 1995 in accordance with its non-standardized method, were 6.29%
and 5.95% for Class A shares and Class C shares, respectively. This
non-standardized method of computation differs from the standardized method
of computing yield in that the non-standardized yield is computed for a 7-day
period rather than a 30-day or one-month period, the yield reflects
amortization of premium based upon historical cost rather than market value,
and the non-standardized yield is computed by compounding dividends monthly
rather than semiannually. This method of computing performance does not take
into account changes in net asset value.

AVERAGE ANNUAL TOTAL RETURN

The Income Fund's total returns for Class A shares and Class C shares,
computed in accordance with the total return calculation described above are
displayed in the table below for the periods shown ending September 30, 1995.
The Income Fund commenced sales of its Class A shares on October 1, 1992, and
commenced sales of Class C shares on September 1, 1994. "Total return,"
unlike the standardized yield and non-standardized yield figures shown above,
takes into account changes in net asset value over the described periods.
The Class A total return figures assume the deduction of the maximum sales
commission of 2.50% on Class A shares. The Class C data relate to Class C
shares sold before October 2, 1995. Class C shares sold on or after October
2, 1995 are subject to a contingent deferred sales charge of .50% if redeemed
within one year of purchase. These data also assume reinvestment of all
dividends at net asset value.

1 Year 5 Years 10 Years Since Inception
Class A 6.49% N/A N/A 5.16% (10/1/92)
Class C 8.87 N/A N/A 7.47% (09/1/94)

Total return figures are average annual total returns for the periods shown.

DISTRIBUTIONS, TAXES AND SHAREHOLDER ACCOUNTS

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 each Fund
consists of all interest income accrued on that Fund's portfolio assets less
all expenses of the Fund. Expenses of each 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 each Fund at the net asset value per share at the
close of business on the distribution date, or at the shareholder's option,
paid in cash.

Federal Income Tax Considerations

Each Fund has elected and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986 (the "Code"). Distributions representing net interest and net
short-term capital gains will be taxable as ordinary income to the recipient
shareholders, whether the distributions are actually taken in cash or are
reinvested by the recipient shareholders in additional shares. Fund
distributions will not be eligible for the dividends received deduction for
corporations. Distributions of net long-term capital gains, if any, will be
treated as long-term capital gains to the distributee shareholders, whether
the distributions are actually taken as cash or are reinvested by the
recipient shareholders in additional shares.

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.
Assuming that the shareholder holds the shares as a capital asset, the gain
or loss will be a capital gain or loss and will be long-term if the shares
were held for more than six months. Effective for sales charges incurred
after October 3, 1989 if the shareholder disposes of shares within 90 days
after purchasing them, and later acquires shares for which the sales charge
is eliminated or reduced pursuant to a reinvestment right, then the original
sales charge to the extent of the reduction is not included in the basis of
the shares sold for determining gain or loss. Instead, the reduction is
included in determining the basis of the reinvested shares.

Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should distributions reduce the net asset value below
a shareholder's cost basis, such distribution would nevertheless be taxable
to the shareholder as ordinary income or capital gain as described above,
even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should consider the tax
implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then
receive a partial return of capital upon the distribution, which will
nevertheless be taxable to them.

If a Fund holds zero coupon securities or other securities which are
issued at discount, a portion of the difference between the issue price and
the face amount of zero coupon securities ("original issue discount") will be
treated as ordinary income if the Fund holds securities with original issue
discount each year, although no current payments will be received by the Fund
with respect to that income. This original issue discount will comprise a
part of that investment company taxable income of the Fund which must be
distributed to shareholders in order to maintain its qualification as a
regulated investment company and to avoid federal income tax on the Fund.
Taxable shareholders of the Fund will be subject to income tax on original
issue discount, whether or not they elect to receive their distributions in
cash.

Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a mutual fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays
such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on a disposition of debt securities denominated in a foreign
currency and on disposition of certain futures contracts, forward contracts
and options, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of the Income Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.

The Code imposes a nondeductible 4% excise tax on regulated investment
companies which do not distribute to shareholders by the end of each calendar
year the sum of (i) 98% of the company's net ordinary income realized in the
year, (ii) 98% of the company's net capital gain income for the 12-month
period ending on October 31 of that year, and (iii) the excess of (A) the sum
of the amounts in (i) and (ii) for the prior calendar year plus all amounts
from earlier years which are not treated as having been distributed under
this provision, over (B) actual distributions for the preceding calendar
years. The effect of this excise tax will be to cause each Fund to
distribute substantially all of its income during the calendar year in which
the income is earned. Shareholders will be taxed on the full amount of the
distribution declared by their Fund for each such year, including declared
distributions not actually paid until January 31 of the next calendar year.

Each shareholder will be notified annually by their Fund as to the
amount and characterization of distributions paid to or reinvested by the
shareholder for the preceding taxable year. The Fund may be required to
withhold federal income tax at a rate of 31% from distributions otherwise
payable to a shareholder if (i) the shareholder has failed to furnish the
Fund with his taxpayer identification number, (ii) the Fund is notified that
the shareholder's number is incorrect, (iii) the Internal Revenue Service
notifies the Fund that the shareholder has failed properly to report certain
income, or (iv) when required to do so, the shareholder fails to certify
under penalty of perjury that he is not subject to this withholding.

If in any year the Fund fails to qualify for the treatment conferred by
Subchapter M of the Code, the Fund would be taxed as a corporation on its
income. Distributions to the shareholders would be treated as ordinary
income to the extent of the Fund's earnings and profits, and would be treated
as nontaxable returns of capital to the extent of the shareholders'
respective bases in their shares. Further distributions would be treated as
amounts received on a sale or exchange or property. 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 the 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.

The foregoing is a general and abbreviated summary of the provisions of
the Internal Revenue Code and Treasury Regulations presently in effect as
they directly govern the taxation of the Fund and its 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 and state taxation of the Fund and the income tax consequences to its
shareholders.

State and Local Income Tax Considerations

Each Fund is a series of Thornburg Investment Trust, which is organized
as a Massachusetts business trust. Under current Massachusetts law, the
Trust is not subject to Massachusetts income taxation during any fiscal year
in which the Fund qualifies as a regulated investment company. The income
tax treatment of the shareholders in the respective states will depend upon
the specific laws applicable in those states, and prospective investors are
urged to confer with their own tax advisers concerning their particular
situations.

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 also will 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
information for income tax purposes.

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 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. Such an 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 not required,
and shareholders may be 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, unless the
shareholder has elected the Fund's telephone redemption or systematic
withdrawal features, which are described in the Prospectus. 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 ADVISER AND INVESTMENT ADVISORY AGREEMENT

General

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' respective investment objectives and policies, subject to the
general supervision and control of the Fund's Trustees.

TMC is investment adviser for Thornburg Limited Term Municipal Fund
National Portfolio and Thornburg Limited Term Municipal Fund California
Portfolio, which are fund series issued by Thornburg Limited Term Municipal
Fund, Inc. TMC also is investment adviser for Thornburg Intermediate
Municipal Fund, Thornburg New Mexico Intermediate Municipal Fund and
Thornburg Florida Intermediate Municipal Fund, series of Thornburg Investment
Trust which have aggregate net assets of approximately $383,336,000 as of
September 30, 1995. TMC is a sub-adviser for Daily Tax-Free Income Fund,
Inc., a registered investment company.

TMC will provide continuous professional investment supervision. In
addition to managing each Fund's investments, TMC will administer the Funds'
business affairs, provide office facilities and certain clerical, bookkeeping
and administrative services. Pursuant to the Investment Advisory Agreements,
the Funds will pay to TMC a monthly management fee at the annual rates
described in the table set forth below. The Income Fund also will pay
applicable sales tax, gross receipts tax or similar impositions thereon. All
fees and expenses are accrued daily and deducted before payment of dividends
to investors.

Net Assets Annual Rate
Government Fund 0 to $1 billion 0.50%
$1 billion to $2 billion 0.45%
over $2 billion 0.40%

Income Fund 0 to $500 million 0.625%
$500 million to $1 billion 0.575%
$1 billion to $1.5 billion 0.525%
$1.5 billion to $2 billion 0.475%
over $2 billion 0.400%

In addition to the fees of TMC, each Fund will pay all other costs and
expenses of its operations, as described in the Prospectus under the caption
"MANAGEMENT OF THE FUND-Expenses". Each Fund also will bear the expenses of
registering and qualifying the Fund and the shares for distribution under
federal and state securities laws, including legal fees. The management fee
will be reduced, or TMC will assume certain Fund expenses, in an amount
necessary to prevent each Fund's total expenses (including TMC's fee, but
excluding interest, taxes, brokerage and other amounts to the extent
permitted by applicable rules) from exceeding applicable State limitations on
expenses. Currently, the Trust believes the most restrictive expense ratio
limitation is 2% of the first $10 million in assets, 1.5% of the next $20
million, and 1% of assets in excess of $30 million.

Each Fund may pay up to 1/4 of 1% of its assets to TMC to reimburse it
for particular expenditures incurred by it in connection with certain
shareholder services and the distribution of the Fund's shares to investors.
The terms and conditions relating to these payments are described in detail
below under the heading "SERVICE AND DISTRIBUTION PLANS".

The Investment Advisory Agreement for each Fund has been approved by the
Trustees of the Funds, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Fund or TMC. Each
Agreement may be extended for successive 12-month periods, provided that the
continuation is approved at least annually by the Trustees, and by a majority
of the Trustees who are not "interested" within the meaning of the Investment
Company Act of 1940 or by a vote of the majority of the Fund's shares then
outstanding. The Agreement may be terminated by either party, at any time
without penalty, upon 60 days' written notice, and will terminate
automatically 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 Agreement further 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 under
the Agreement, TMC will not be liable for any action or failure to act in
accordance with its duties thereunder.

For the three most recent fiscal periods ended September 30, 1993,
1994 and 1995 with respect to each Fund, the amounts paid to TMC by each Fund
were as follows:

1993 1994 1995
---- ---- ----

Government Fund $808,403 $977,258 $735,085
Income Fund N/A -0- $ 0

TMC has waived its rights to fees in the foregoing periods as follows:

1993 1994 1995
---- ---- ----

Government Fund -0- -0- $ 24,278
Income Fund $58,431 $135,344 $163,741

TMC may, (but is not obligated to) waive its rights to any portion of its
fees in the future, and may use any portion of its fee for purposes of
shareholder and administrative services and distribution of Fund shares.
During the fiscal year ended September 30, 1995, the Government Fund
reimbursed TMC in the amount of $15,637 for certain accounting expenses
incurred by TMC on behalf of that Fund.

H. Garrett Thornburg, Jr., President and a Trustee of the Fund, is also
Director and controlling stockholder of TMC.

SERVICE AND DISTRIBUTION PLANS

Service Plans - All Classes

Each of the Funds have adopted a plan and agreement of distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("Service
Plan") which is applicable to Class A and Class C shares of each Fund. The
Plan permits each Fund to pay to TMC (in addition to the management fee and
reimbursements described above) an annual amount not exceeding .25 of 1% of
the Fund's assets to reimburse TMC for specific expenses incurred by it in
connection with certain shareholder services and the distribution of that
Fund's shares to investors. TMC may, but is not required to, expend
additional amounts from its own resources in excess of the currently
reimbursable amount of expenses. Reimbursable expenses include the payment
of amounts, including incentive compensation , to securities dealers and
other financial institutions, including banks (to the extent permissible
under the Glass-Steagall Act and other federal banking laws), for
administration and delivery of shareholder services. The nature and scope of
services provided by dealers and other entities likely will vary from entity
to entity, but may include, among other things, processing new account
applications, preparing and transmitting to the Transfer Agent computer
processable tapes of shareholder account transactions, and serving as a
source of information to customers concerning the Funds and transactions with
the Funds. The Service Plan does not provide for accrued but unpaid
reimbursements to be carried over and reimbursed to TMC in later years.

The Funds paid to TMC the amounts shown in the table below under the
Service Plan for the fiscal year ended September 30, 1995. All amounts
received by TMC under the Plan were paid principally as compensation to
securities dealers and other persons selling the Funds' shares for
administration and shareholder services referred to in the preceding
paragraph.

Class A Class C
------- -------
Government Fund $345,423 $ 3,739

Income Fund $ 52,571 $ 1,092

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 the Fund's principal
underwriter, Thornburg Securities Corporation ("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 shares 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. Because the Class C Distribution Plan is a
compensation type plan, TSC can earn a profit on any year when Fund payments
exceed TSC's actual expenses. The Funds are not liable for any expenses
incurred by TSC in excess of the compensation it received from the Fund.

The Funds paid to TSC $7,479 (Government Fund) and $2,184 (Income
Fund) under the Class C Distribution Plan for the fiscal year ended
September 30, 1995. Amounts received by TSC under the Class C Distribution
Plan were paid principally as compensation to securities dealers and other
persons selling the Funds' shares.

The Glass-Steagall Act prohibits certain banks from underwriting
mutual fund shares, but the Funds do not believe that this prohibition will
apply to the arrangements described in the Plans. However, no assurance can
be given that the Glass-Steagall Act will not be interpreted so as to
prohibit these arrangements. In that event, the Funds' ability to market
their shares could be impaired to a small extent. The Funds do not foresee
that they will give preference to banks or other depository institutions
which receive payments from TMC or TSC when selecting investments for the
Funds.

Each Plan continues in effect for periods of 12 months each unless
terminated pursuant to its terms and may be continued from year to year
thereafter, provided that the continuance is approved at lease annually by a
vote of a majority of the Trustees, including a majority of the independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan also may be terminated at any time, without penalty,
if a majority of the independent Trustees or shareholders of a Fund class
vote to terminate the Plan for that class. So long as a Plan is in effect,
the selection and nomination of Trustees who are not "interested persons" of
a Fund shall be committed to the discretion of the Trustees who are not
"interested persons." The Plans may not be amended to increase materially
the amount of a Fund's payments thereunder without approval of the
shareholders of the affected classes. Under each Plan, the other party, or
the Funds, by a vote of a majority of the independent Trustees or of the
holders of a majority of the outstanding shares, may terminate the provisions
retaining the services of the other party under the Plan, without penalty.
The Trustees have the authority to approve continuance of the Plan without
similarly approving a continuance of the provisions retaining TMC or TSC
thereunder.

To the extent that a Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it will remain in effect as such,
so as to authorize the use of the Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment,
as defined by the 1940 Act and the rules thereunder. To the extent it
constitutes an agreement pursuant to a plan, it will terminate automatically
in the event of an "assignment." Upon termination, no further payments may
be made under the agreement except for amounts previously accrued by unpaid.
The Funds may continue to make payments pursuant to the Plan of the amounts
authorized to be paid, which may or may not be to TMC or TSC, as the case may
be, or the adoption of other similar arrangements, in each case by the Funds'
Trustees, including a majority of the independent Trustees by vote cast in
person at a meeting called for that purpose.

Information regarding the services rendered under the Plans and the
amounts paid therefor is provided to, and reviewed by, the Trustees on a
quarterly basis. In their quarterly review, the Trustees consider the
continued appropriateness of the Plans and the level of compensation provided
therein.

PORTFOLIO TRANSACTIONS

TMC, in effecting purchases and sales of portfolio securities for
the account 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. Portfolio securities normally will 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 of 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 Funds to
select dealers which, in addition, furnish research information including
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 also
may 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 Trustees of the Funds.

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 a Fund 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
Fund and such other clients, the size of investment commitments generally
held by the Fund and such other clients and opinions of the persons
responsible for recommending investments to the Fund and such other clients.
While this procedure could have a detrimental effect on the price or amount
of the securities available to the Fund from time to time, it is the opinion
of the Funds' Trustees that the benefits available from TMC's organization
will outweigh any disadvantage that may arise from exposure to simultaneous
transactions. The Funds' Trustees will review simultaneous transactions.

The Funds' portfolio turnover rates for the two most recent fiscal
years are as follows:
1994 1995
---- ----

Government Fund 78.62% 28.31%

Income Fund 83.96% 43.12%

MANAGEMENT AND HOLDERS OF SECURITIES

The management of the Funds, including general supervision of the duties
performed by TMC under the Investment Advisory Agreements, is the
responsibility of the Trustees of the Trust. There are four Trustees, one of
whom is an "interested person". The names of the Trustees and officers of
the Funds and their principal occupations and other affiliations during the
past five years are set forth below, with the Trustee who is an "interested
person" of the Fund indicated by an asterisk:

* H. GARRETT THORNBURG, JR., 49, Trustee, President: Director, Chairman
(since January of 1987) and Treasurer of Thornburg Limited Term Municipal
Fund, Inc. (a mutual fund investing in certain municipal securities) since
its inception in 1984; Chairman and Director of 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;
President and Director of TMC since its formation in 1982.

DAVID A. ATER, 49, Trustee: Principal in Ater & Ater Associates, Santa
Fe, New Mexico (developer, planner and broker of residential and commercial
real estate) since 1990; owner, developer and broker for various real estate
projects; Director of Thornburg Mortgage Asset Corporation (real estate
investment trust) since 1994.

J. BURCHENAL AULT, 69, Trustee: Independent Fund Raising Counsel, May
1986 to Present; Trustee, Woodrow Wilson International Center for Scholars;
Provost, St. John's College, Santa Fe, New Mexico, from 1986 through May
1991; Director of Thornburg Limited Term Municipal Fund, Inc. since its
formation in 1984; Director of Farrar, Strauss & Giroux, (publishers) since
1968.

FORREST S. SMITH, 64, Trustee: Attorney in private practice, Santa Fe,
New Mexico; shareholder, Catron, Catron & Sawtell (law firm), Santa Fe, New
Mexico, 1988 to present.

BRIAN J. MCMAHON, 40, Vice President, Assistant Secretary: President
(since January 1987), Thornburg Limited Term Municipal Fund, Inc., and Vice
President since its formation in 1984; Managing Director of TMC since
December 1985 and a Vice President since April 1984.

STEVEN J. BOHLIN, 36, Vice President and Treasurer: Vice President of
Thornburg Limited Term Municipal Fund, Inc. since November 1988 and Assistant
Vice President from 1985 to November 1988; Managing Director of TMC since
December 1990 and a Vice President since December 1988.

DAWN B. SHAPLAND, 48, Secretary and Assistant Treasurer: Secretary,
Thornburg Limited Term Municipal Fund, Inc. since its formation in 1984; Vice
President, Daily Tax Free Income Fund, Inc. since 1989. Managing Director of
TMC since 1985 and a Vice President since January 1984.

WILLIAM FRIES, 56, Vice President: Managing Director of TMC since May
1995 and Vice President of Thornburg Investment Trust since June 1995; Vice
President of USAA Investment Management Company from 1982 to 1995.

JOHN ARIOLA, 26, Assistant Vice President: Assistant Vice President of
Thornburg Limited Term Municipal Fund, Inc. since July 1992; Accountant,
Thornburg Investment Trust and Thornburg Limited Term Municipal Fund, Inc.
since June 1991; Associate of TMC since 1992; Staff Auditor, Inventory
Auditors, Albuquerque, New Mexico, June 1987 to June 1991.

SUSAN ROSSI, 34, Assistant Vice President: Assistant Vice President of
Thornburg Limited Term Municipal Fund, Inc. since July 1992; Associate of TMC
since June 1990.

GEORGE STRICKLAND, 32, Assistant Vice President: Assistant Vice
President of Thornburg Limited Term Municipal Fund, Inc. since July 1992;
Associate of TMC since July 1991; Investor Representative, Calvert Group,
Washington, D.C., 1989 to 1991.

JONATHAN ULLRICH, 26, Assistant Vice President: Assistant Vice
President of Thornburg Limited Term Municipal Fund, Inc. since July 1992;
Associate of TMC since September 1991; Student, Brown University, 1987 to
1991.

CHRISTINE E. THOMPSON, 29, Assistant Vice President: Assistant Vice
President of Thornburg Limited Term Municipal fund, Inc. since June 1993;
Associate of TMC since June 1992; Office Manager Town and Country Janitorial
Services, Inc., Greenland, N.H., September 1991 to February 1992; Salesperson
and later Department Manager, The Harvard Cooperative society, Cambridge,
Massachusetts, May 1990 to September 1991.

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, Executive Vice President of Daily Tax-Free Income Fund,
Inc., and a Chairman and Treasurer of Thornburg Limited Term Municipal Fund,
Inc.

The officers and Trustees affiliated with TMC serve without any
compensation from the Funds. The Trust pays each Trustee who is not an
employee of TMC or an affiliated company a fee for each meeting of the
Trustees attended by the Trustee, pays an annual stipend to Trustees who
serve on the Trust's audit committee, and reimburses all Trustees for travel
and out-of-pocket expenses incurred in connection with attending such
meetings.

The officers and Trustees affiliated with TMC will serve without any
compensation from the Funds. The Trust pays each Trustee who is not an
employee of TMC or an affiliated company a quarterly fee of $1,000 plus a fee
of $500 for each meeting of the Trustees attended by the Trustee, pays an
annual stipend of $1,000 to each Trustee who serves on the Trust's audit
committee, and reimburses all Trustees for travel and out-of-pocket expenses
incurred in connection with attending such meetings.

As of November 1, 1995, the Government Fund had 11,706,260 shares
outstanding, and the Income Fund had 2,010,655 shares outstanding.

As of November 1, 1995, the following persons owned beneficially or of
record 5% or more of the outstanding shares of the Funds:

Name Fund No. of Shares % of Fund
- ------------------ --------------- ------------- ---------
None Government Fund

Thornburg Management Company, Inc. Income Fund 115,635 5.75%
Profit Sharing Plan
119 East Marcy Street
Santa Fe, New Mexico 87501

As of the same date, officers and trustees of the Trust as a group,
together with family members, owned themselves or through affiliated persons
209,703 shares of the Income Fund, representing 10.43% of the Fund's issued
and outstanding shares on that date.

As of November 1, 1995, officers and Trustees of the Trust as a group
(together with family members) owned themselves or through affiliated persons
less than 1% of the outstanding shares of the Government Fund.

PURCHASE OF FUND SHARES

Discussion of Reduced Sales Charges - Class A Shares:

Procedures for purchases of Fund shares by investors, the pricing of
Fund shares for sale to investors, and the schedule of sale to the public are
described in the Prospectus under the caption "HOW TO PURCHASE FUND SHARES".

The Prospectus states that certain classes of investors, specified
below, may purchase Class A shares of the Funds at variations to the Public
Scale. The Trust 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 the Fund may purchase Class A shares
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. Investors also may purchase Class A shares of a Fund at no
charge in accordance with the preceding sentence, if they redeemed Class B
shares of the same Fund, paid the contingent deferred sales charge applicable
to the redeemed shares, and reinvest some or all of the proceeds within 24
months. 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
Investment Trust, or of any series of Thornburg Limited Term Municipal Fund,
Inc. and reinvest some or all of the proceeds within 24 months. The
shareholder's dealer or the shareholder must notify the Transfer Agent or TSC
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 Trust, TMC, TSC,
the Custodian and Transfer Agent, and counsel to the Trust, while in such
capacities, and members of their families, 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 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 Trust's view that their familiarity
with and loyalty to the Fund will require less selling effort by the Fund,
such as a solicitation and detailed explanation of the conceptual structure
of the Fund, 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 Fund'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 from 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, may purchase shares of the Fund for themselves with no
sales charge, provided that (i) the order must be through an NASD member firm
who has entered into a Selected Dealer 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 Fund 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
advisers who receive compensation on a fee basis may purchase shares of the
Fund 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 Fund 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.

(8) No sales charge will be payable at the time of purchase on
investments of $1 million or more made by a purchaser. A redemption fee 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 redemption fee 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 fees 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) Certain employee benefit plans and insurance company separate
accounts used to fund annuity contracts may purchase shares of the Funds at
no sales charge. TSC or TMC intend to pay a commission of up to 1/2 of 1% to
dealers who place orders for these plans.

(10) Charitable organizations or foundations, including trusts
established for the benefit of charitable organizations or foundations, may
purchase shares of the Funds at no sales charge. TSC or TMC intend to pay a
commission of up to 1/2 of 1% to dealers who place orders for these
purchasers.

These organizations may charge fees to clients for whose accounts they
purchase Shares of a Fund. 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 record must confirm that the investor's
representation is correct.

(11) State and local governments, commercial banks, thrift
institutions, savings banks, and other related financial institutions may
purchase shares as follows:
Agency Commission
or Concession to Dealers
Total Sales Charge
% of % of % of
offering price net amount invested offering price
------------------ ------------------- --------------
Size of Purchase
- ----------------
$2,500 or more .50% .50% .50%

Where the reduced sales charge applies, notification is required and the
Transfer Agent's record must confirm that the investor's representation is
correct.

The investment decisions of the persons and organizations described in
the foregoing paragraphs tend to be made by informed advisers. Typically,
these organizations are better able than the general public to evaluate
quickly the appropriateness of a Fund's investment objectives and performance
in light of their goals. In certain cases, these organizations may approach
the Fund directly with no solicitation after reading performance data in
trade publications. Consequently, costs of marketing to these persons and
organizations likely will be minimal.

(12) In any case where the Fund acquires substantially all of the
assets of a registered investment company in exchange for the Fund's shares,
no sales charge will be imposed. Such exchanges are preceded by the
distribution of materials to the shareholders at the acquired company, which
explain the transaction. The preparation and dissemination of these
materials and other information relating to such a transaction commonly are
paid for by TMC rather than the Fund or TSC.

(13) Such persons as are determined by the Trustees to have acquired
shares under special circumstances, not involving any sales expense to a 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.

(14) Shares of a Fund may be sold at a reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to or permits group solicitation of its
employees, members or participants. Information on these arrangements is
available from TSC.

REDEMPTION OF SHARES

Procedures with respect to redemption of Fund shares are set forth in
the Prospectus under the caption "HOW TO REDEEM FUND SHARES". Each 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 acts as the distributor of Fund shares. The Fund bears the
expenses of registering its shares with the Securities and Exchange
Commission and qualifying them or the Fund with state regulatory authorities.
In addition, the Fund will make payments to TMC and to TSC for certain
shareholder services and distribution of the Funds' shares, including amounts
paid to dealers for services and incentive compensation. See the discussion
under the heading "SERVICE AND DISTRIBUTION PLANS". Terms of continuation,
termination and assignment under the Distribution Agreement are similar to
those described above with regard to the Investment Advisory Agreement,
except that termination other than upon assignment requires 30 days' notice.

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

INDEPENDENT AUDITORS

McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, has
been selected as the independent auditor of the Funds for the fiscal year
ended September 30, 1995. Shareholders will receive semiannual unaudited
financial statements and annual financial statements audited by the
independent auditor. The Funds' most recent Annual Reports may be obtained
at no charge by writing or calling Thornburg Management Company, Inc., 119
East Marcy Street, Suite 202, Santa Fe, New Mexico 87501, (800) 847-0200.

FINANCIAL STATEMENTS

The Funds' Statements of Assets and Liabilities including the
Schedule of Investments, as of September 30, 1995, Statements of Operations
and Statements of Changes in Net Assets for the two years in the period ended
September 30, 1995, Notes to Financial Statements, Financial Highlights, and
Independent Auditor's Report dated October 27, 1995 are incorporated herein
by reference from the Funds' Annual Reports to Shareholders.

THORNBURG INVESTMENT TRUST

STATEMENT OF ADDITIONAL INFORMATION
for
THORNBURG INTERMEDIATE MUNICIPAL FUNDS
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501

Thornburg Intermediate Municipal Funds (the "Funds") are series of
Thornburg Investment Trust (the "Trust"), each with a separate investment
portfolio and each having one or more classes of shares:

Thornburg Alabama Intermediate Municipal Fund ("Intermediate Alabama Fund")
Thornburg Arizona Intermediate Municipal Fund ("Intermediate Arizona Fund")
Thornburg Florida Intermediate Municipal Fund ("Intermediate Florida Fund")
Thornburg Intermediate Municipal Fund ("Intermediate National Fund")
Thornburg New Mexico Intermediate Municipal Fund
("Intermediate New Mexico Fund")
Thornburg Pennsylvania Intermediate Municipal Fund
("Intermediate Pennsylvania Fund")
Thornburg Tennessee Intermediate Municipal Fund
("Intermediate Tennessee Fund")
Thornburg Texas Intermediate Municipal Fund ("Intermediate Texas Fund")
Thornburg Utah Intermediate Municipal Fund ("Intermediate Utah Fund")

The Funds' investment adviser is Thornburg Management Company, Inc. ("TMC").

This Statement of Additional Information relates to the investments
proposed to be made by the Funds, investment policies governing the Funds,
the Funds' management, and other issues of interest to a prospective
purchaser of shares in the Funds.

This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Funds' Prospectus dated February 1,
1996. A copy of the Prospectus may be obtained at no charge by writing to
the distributor of the Funds' shares, Thornburg Securities Corporation
("TSC"), at 119 East Marcy Street, Suite 202, Santa Fe, New Mexico 87501.

The Trust's name was "Thornburg Income Trust" until October 1, 1995.

The date of this Statement of Additional Information is February 1,
1996.

TABLE OF CONTENTS
Page

INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . . 1
Municipal Obligations. . . . . . . . . . . . . . . . . . . . . . . . 3
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Municipal Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax-Exempt Demand Bonds. . . . . . . . . . . . . . . . . . . . . . . 7
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Temporary Investments. . . . . . . . . . . . . . . . . . . . . . . . 8
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . 8
U.S. Government Obligations. . . . . . . . . . . . . . . . . . . . . 9

INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9

YIELD AND RETURN COMPUTATION:
Performance and Portfolio Information. . . . . . . . . . . . . . . . 12
Computation of Yield and Return - In General . . . . . . . . . . . . 12
Additional Portfolio and Performance Information . . . . . . . . . . 13

REPRESENTATIVE PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . 14
Thornburg Intermediate Municipal Fund
(Classes A and C). . . . . . . . . . . . . . . . . . . . . . . . . . 14
Standardized Method of Computing Yield . . . . . . . . . . . . . . . 14
Non-standardized Method of Computing Yield . . . . . . . . . . . . . 14
Taxable Equivalent Yield . . . . . . . . . . . . . . . . . . . . . . 14
Average Annual Total Return. . . . . . . . . . . . . . . . . . . . . 15
Thornburg New Mexico Intermediate Municipal Fund
(Classes A and C). . . . . . . . . . . . . . . . . . . . . . . . . . 15
Standardized Method of Computing Yield . . . . . . . . . . . . . . . 15
Non-standardized Method of Computing Yield . . . . . . . . . . . . . 15
Taxable Equivalent Yield . . . . . . . . . . . . . . . . . . . . . . 16
Average Annual Total Return. . . . . . . . . . . . . . . . . . . . . 16
Thornburg Florida Intermediate Municipal Fund
(Classes A and C). . . . . . . . . . . . . . . . . . . . . . . . . . 17
Standardized Method of Computing Yield . . . . . . . . . . . . . . . 17
Non-standardized Method of Computing Yield . . . . . . . . . . . . . 17
Taxable Equivalent Yield . . . . . . . . . . . . . . . . . . . . . . 17
Average Annual Total Return. . . . . . . . . . . . . . . . . . . . . 18

DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Federal Income Tax Matters . . . . . . . . . . . . . . . . . . . . . 19
State and Local Tax Aspects. . . . . . . . . . . . . . . . . . . . . 22
Accounts of Shareholders . . . . . . . . . . . . . . . . . . . . . . 23

INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT. . . . . . . . . . . 23

SERVICE AND DISTRIBUTION PLANS. . . . . . . . . . . . . . . . . . . . . . 26
Service Plans - Both Classes . . . . . . . . . . . . . . . . . . . . 26
Class C Distribution Plan. . . . . . . . . . . . . . . . . . . . . . 26

PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 28

MANAGEMENT AND HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . 29

HOW TO PURCHASE FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . 32

NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 36

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 36

FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 37

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of each of the Funds is to provide for
its shareholders as high a level of current income exempt from Federal income
tax as is consistent, in the view of the Funds' investment adviser, TMC, with
preservation of capital. The Alabama, Arizona, New Mexico, Pennsylvania and
Tennessee Funds also seek to provide as high a level of current income exempt
from state individual income taxes as is consistent, in the view of TMC, with
preservation of capital. The Florida and Pennsylvania Funds seek exemption
from those states' imposition of taxes on intangible personal property. A
secondary investment objective of the Funds is reducing fluctuations in net
asset value per share relative to long-term municipal bond portfolios, by
maintaining a portfolio with a dollar-weighted average maturity that will
normally not exceed three to ten 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 National, New Mexico and
Texas Funds were organized on June 4, 1991. The Arizona Fund was organized
on January 24, 1994. The other Funds were organized on October 4, 1993.

The New Mexico Fund commenced investment operations on June 21, 1991,
and the National Fund commenced investment operations on July 23, 1991. The
Florida Fund commenced investment operations on February 1, 1994.

The dollar-weighted average effective maturity of the Funds' portfolios
normally will not exceed three to ten years. Price changes in the Funds'
shares therefore can be expected to be more moderate than the per share
fluctuations of portfolios with longer-term bonds.

The Intermediate National Fund will seek to achieve its objectives by
investing in a diversified portfolio of obligations issued by state and local
governments. Each single state Fund will acquire Municipal Obligations
issued principally by the state having the same name as the Fund, and the
political subdivisions and the agencies thereof. Any Fund may invest in
obligations of United States possessions and territories or their agencies
and instrumentalities. Each single state Fund may invest more than 5% of its
portfolio assets in the securities of a single issuer provided that it may
not purchase any security (other than certain United States Government
securities) if, as a result, more than 5% of the Trust's total assets would
be invested in securities of a single issuer. See the discussion under the
caption "Investment Limitations."

Each Fund's assets will normally consist of (1) Municipal Obligations or
participation interests therein that are rated at the time of purchase within
the four highest grades Aaa, Aa, A, Baa by Moody's Investors Service
("Moody's"), or AAA, AA, A, BBB of Standard & Poor's Corporation ("S&P"), or
Fitch Investors Service ("Fitch"), (2) Municipal Obligations 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 by Moody's 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) a small amount of cash or
equivalents. In normal conditions, the Funds will hold cash pending
investment in portfolio securities or anticipated redemption requirements.
For an explanation of these ratings, please see "Ratings," page 9. 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.

Except to the extent that the Funds are invested in temporary
investments for defensive purposes, each Fund will, under normal conditions,
invest 100% of its net assets in Municipal Obligations and normally will not
invest less than 80% of its net assets in Municipal Obligations. This 80%
policy is a fundamental investment policy of the Funds and may be changed
only with the approval of a majority of the outstanding voting securities of
a given series of the Fund. Under normal conditions, each single state 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 which
originate in the state having the same name as the Fund.

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 obligations for the payment of interest
and principal when due. In addition to using information provided by the
rating agencies, TMC will subject each issue under consideration for
investment to its own credit analysis in an effort to assess each issuer's
financial soundness. This analysis is performed on a continuing basis for
all issues held by the Funds. TMC subjects each issue under consideration
for investment to the same or similar credit analysis that TMC applies to
rated issues.

Credit ratings are helpful in evaluating bonds, but are relevant
primarily to the safety of principal and interest payments under the bonds.
These ratings do not reflect the risk that market values of bonds will
fluctuate with changes in interest rates. Additionally, credit rating
agencies may fail to change credit ratings in a timely fashion to reflect
events subsequent to initial ratings. The Funds' investment adviser, TMC,
reviews data respecting the issuers of the Funds' portfolio assets on an
ongoing basis, and may dispose of portfolio securities upon a change in
ratings or adverse events not reflected in ratings.

The Funds have reserved the right to invest up to 20% of each Fund's net
assets in "temporary investments" in taxable securities (of comparable
quality to the above tax-exempt investments) that would produce interest not
exempt from Federal income tax. Such temporary investments, which may
include repurchase agreements with dealers, banks or recognized financial
institutions that in the opinion of TMC represent minimal credit risk, may be
made due to market conditions, pending investment of idle funds or to afford
liquidity. See "Temporary Investments," at page 8. Such investments are,
like any investment, subject to market risks and fluctuations in value. In
addition, each Fund's temporary taxable investments may exceed 20% of its net
assets when made for defensive purposes during periods of abnormal market
conditions. The Funds do not expect to find it necessary to make temporary
investments in taxable investments.

No Fund 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 purchase of (i) securities of the United States
Government and its agencies, instrumentalities and authorities, or (ii) tax
exempt securities issued by other governments or political subdivisions,
because these issuers are not considered to be members of any industry. This
restriction may not be changed as to any Fund unless approved by a majority
of the outstanding shares of the Fund.

The Funds' investment objectives and policies, unless otherwise
specified, are not fundamental policies and may be changed by the Trustees
without shareholder approval.

Municipal Obligations

Municipal Obligations include debt and lease 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 procurement of funds for general operating expenses and the
procurement 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.

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 may invest in a variety of types of Municipal Obligations,
including but not limited to bonds, notes (such as tax anticipation and
revenue anticipation notes), commercial paper and variable rate demand
instruments. Variable rate demand instruments are Municipal Obligations or
participations therein, either publicly underwritten and traded or privately
purchased, that provide for a periodic adjustment of the interest rate paid
on the instrument and permit the holder to demand payment of the unpaid
principal amount and accrued interest upon not more than seven days' notice
either from the issuer or by drawing on a bank letter of credit, a guarantee
or insurance issued with respect to such instrument. Such Letters of Credit,
guarantees or insurance will be considered in determining whether a Municipal
Obligation meets a Fund's investment criteria. See the Prospectus under the
caption "Investment Objectives and Policies - Municipal Obligations." The
issuer of a variable rate demand instrument may have the corresponding right
to prepay the principal amount prior to maturity.

The Funds also may purchase fixed rate municipal demand instruments
either in the public market or privately. Such instruments may 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 their 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 such 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
such 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, based upon an accompanying opinion of
counsel. A Fund will invest in a fixed rate municipal demand instrument only
if the instrument or the associated letter of credit, guarantee or insurance
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 such debt ratings. The credit quality of such investments will
be determined on a continuing basis by TMC under the supervision of the
Trustees.

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. That 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 Fund's
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 Funds will only make commitments to
purchase Municipal Obligations on a when-issued or delayed delivery basis
with the intention of actually acquiring the securities, but the Funds
reserve 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.

TMC will evaluate the liquidity of each Municipal Lease upon its
acquisition and periodically while it is held based upon factors established
by the Trustees, 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 for the obligation, (iii) the willingness of dealers
to make a market for the obligation, and (iv) the nature and timing of
marketplace trades. 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.

The Funds 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 Trustees have been
satisfied, including (i) 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, (ii) 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,
(iii) 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,
(iv) 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 (v) the governmental issuer's general credit is adequate.
The enforceability of the "non-substitution" provisions referred to in (iii)
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 Funds that satisfy
such criteria.

Municipal Leases usually grant the lessee the option to purchase the
leased property prior to maturity of the obligation by payment of the unpaid
principal amount of the obligation and, in some cases, a prepayment fee.
Such prepayment may be required in the case of loss or destruction of the
property. The prepayment of the obligation may reduce the expected yield on
the invested funds if interest rates have declined below the level prevailing
when the obligation was purchased.

A Fund will not invest in illiquid securities if, as a result of the
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 Funds are 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 Funds, 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.

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 Funds'
portfolios may be affected. The Funds could be compelled to reevaluate their
investment objectives and policies and submit possible changes in the
structure of the Funds for the approval of their respective 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 Municipal 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 a Fund's portfolio arising from
these or other factors will cause changes in the net asset value of the
Fund's shares.

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 "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 and Fitch 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 or
Fitch, indicates an adequate capacity to pay principal and interest.
Whereas BBB rated Municipal Obligations 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, (if) 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. 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 impaired by
changing conditions or short-term adversities.

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 a Fund's net assets. See "Repurchase Agreements." In
addition, temporary taxable investments may exceed 20% of a Fund's net assets
when made for defensive purposes during periods of abnormal market
conditions. The Funds do not expect to find it necessary to make such
temporary investments.

Repurchase Agreements

Any 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. A 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 Funds 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 a 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.
A Fund might incur a loss if the value of the collateral has declined, and
the Fund 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. The Funds' investment
adviser will monitor the value of the collateral at the time the transaction
is entered into and at all subsequent times 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
declines below the repurchase price, the investment adviser 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 and
established under the authority granted by 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 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 Funds have adopted the following fundamental investment policies
which may not be changed unless approved by a majority of the outstanding
shares of each Fund or "series" of shares that would be affected by such
change. Under the Investment Company Act of 1940 (the "Act"), a "vote of the
majority of the outstanding voting securities" of a particular series means
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of such series or (2) 67% or more of the shares of such series present
at a shareholders' meeting if more than 50% of the outstanding shares of such
series are represented at the meeting in person or by proxy.

A 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) The Intermediate National Fund may not 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. Any single
state Fund may invest more than 5% of its portfolio assets in the securities
of a single issuer provided that it may not purchase any security (other than
securities issued or guaranteed as to principal or interest by the United
States or its instrumentalities) if, as a result, more than 5% of the Trust's
total assets would be invested in securities of a single issuer;

(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 either 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 Funds 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 objectives, 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 under the captions "Investment Objectives and Policies --
Municipal Obligations";

(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 are 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 either 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 a Fund's total assets would be invested in any one industry;

(17) Purchase or retain the securities of any issuer other than the
securities issued by that Fund itself 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; or

(18) Purchase the securities of any issuer if as a result more than 10%
of the value of the Fund's net assets would be invested in restricted
securities, unmarketable securities and other illiquid securities (including
repurchase agreements of more than seven days maturity and other securities
which are not readily marketable).

(19) For the purpose of applying the limitations set forth in paragraphs
(2) and 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 the 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"
pursuant to such agreement.

With respect to temporary investments, in addition to the foregoing
limitations neither Fund will enter into a repurchase agreement if, as a
result thereof, more than 5% of its net assets would be subject to repurchase
agreements.

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

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

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 series investment
companies such as the Funds shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each series affected by such matter. Rule 18f-2 further provides
that a series shall be deemed to be affected by a such a matter unless it is
clear that the interests of each series in the matter are substantially
identical or that the matter does not affect any interest of such series
deemed not to be affected. However, the Rule exempts the selection of
independent public accountants, the approval of principal distribution
contracts and the election of directors and trustees from the separate voting
requirements of the Rule.

YIELD AND RETURN COMPUTATION:
Performance and Portfolio Information

Computation of Yield and Return - In General

The return or yield of any Fund (or class of any Fund) of the Trust may,
from time to time, be quoted in reports, sales literature and advertisements
published by a Fund, the Funds' principal underwriter, or investment dealers
offering shares issued by the Trust. Any such quotation must include a
standardized calculation which computes yield for a 30-day or one month
period by dividing a portfolio's net investment income per share during the
period by the maximum offering price on the last day of the period. The
standardized calculation may include the effect of semiannual compounding and
will reflect amortization of premiums for those bonds which have a market
value in excess of par. New schedules based on market value will be computed
each month for amortizing premiums. Provided that any such quotation also is
accompanied by the standardized calculation referred to above, any Fund of
the Trust also may quote non-standardized performance data of its classes for
a specified period by dividing the net investment income per share 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 multiplying the result by 365 divided by the number of days in
the specified period. For purposes of this non-standardized calculation net
investment income will include accrued interest income plus or minus any
amortized purchases discount or premium less accrued expenses. 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
standardized calculation; (2) The non-standardized calculation may reflect
amortization of premium based upon historical cost rather than market value.
Amortization of premium based upon historical cost is required by the
Internal Revenue Service for tax reporting purposes; (3) The non-standardized
calculation may reflect the average offering price per share for the period
of the beginning offering price per share for the period, whereas the
standardized calculation will always reflect the maximum offering price per
share on the last day of the period; (4) the non-standardized calculation may
reflect an offering price per share other than the maximum offering price;
provided that any time any Fund's performance is quoted in reports, sales
literature or advertisements using a public offering price, the performance
computed by using the Fund's maximum public offering price also will be
quoted in the same piece; (5) The non-standardized performance quotation may
include the effective return obtained by compounding the monthly dividends.

Any performance computation also must include average annual total
return quotations for the 1, 5 and 10 year periods ended on the date of the
most recent balance sheet included in the registration statement, computed by
finding the average annual compounded rates of return over such periods which
would equate the initial amount invested at the maximum public offering price
to the ending redeemable value. To the extent that a Fund or a class has
been in operation less than 1, 5 and 10 years, the time period during which
the Fund or the class has been in operation will be substituted for any 1, 5
or 10 year period for which a total return quotation is not obtainable.

Yield or total return quotations described in this section also may be
quoted on a "taxable equivalent yield" basis, provided that the following
information is furnished: (1) a standardized taxable equivalent yield based
on a 30-day or one month period ended on the date of the most recent balance
sheet included in the registration statement; (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.

Additional Portfolio and Performance Information

Any of the Funds also may illustrate performance or the characteristics
of its investment portfolio or classes of the Fund through graphs, tabular
data or other displays which describe (i) the average portfolio maturity of
the 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 through use
of standard bench marks or indices such as the Treasury yield curve), (iii)
changes in the Fund's 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 Fund's (or other investments') net asset value or price and
the Fund's (or other investments') investment return.

REPRESENTATIVE PERFORMANCE INFORMATION

Thornburg Intermediate Municipal Fund (Classes A and C)

THE FOLLOWING DATA FOR INTERMEDIATE MUNICIPAL 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 yields of the
Intermediate National Fund Class A and Class C shares for the one month
period ended September 30, 1995, computed in accordance with the standardized
calculation described above, were 4.72% and 4.23% for Class A shares and
Class C shares, respectively. This method of computing yield does not take
into account changes in net asset value.

Non-standardized Method of Computing Yield. The Intermediate National
Fund's nonstandardized yields, for Class A and Class C shares computed in
accordance with its non-standardized method for the 7-day period ended
September 30, 1995, were 5.01% and 4.54% for Class A shares and Class C
shares, respectively. This nonstandardized method differs from the
standardized method of computing yield in that the nonstandardized yield is
computed for the 7-day period rather than a 30-day or one month period, the
nonstandardized yield reflects amortization of premium based upon historical
cost rather than market value, and the nonstandardized yield is computed by
compounding dividends monthly rather than semiannually. This method of
computing performance does not take into account changes in net asset value.

Taxable Equivalent Yield. The Intermediate National Fund's taxable
equivalent yields for Class A and Class C shares, computed in accordance with
the methods described above using a maximum federal tax rate of 39.6%, were
as shown below for the indicated periods ending September 30, 1995:
<TABLE>
Taxable
Equivalent
Yield Yield
----- ----------
<S> <C> <C>
Standardized Method
30 days ended 09/30/95
Class A 4.72% 7.81%
Class C 4.23% 7.00%

Non-standardized Method
7 days ended 09/30/95
Class A 5.01% 8.29%
Class C 4.54% 7.52%
30 days ended 09/30/95
Class A 5.01% 8.29%
Class C 4.54% 7.52%
</TABLE>

The nonstandardized method of computation differs from the standardized
method in that the nonstandardized yield for the 7-day period is computed on
a basis of seven days rather than the standard 30-day or one month period,
the nonstandardized yield reflects amortization of premium based upon
historical cost rather than market value, and the nonstandardized yield is
computed by compounding dividends monthly rather than semiannually. The
standardized and nonstandardized methods of computing yield and taxable
equivalent yield do not take into account changes in net asset value.

Average Annual Total Return. The Intermediate National Fund's Class A
and Class C total return figures are set forth below for the period shown
ending September 30, 1995. Class A shares were first offered on July 23,
1991, and Class C shares were first offered on September 1, 1994. The data
for Class A shares reflect deduction of the maximum sales charge of 3.50%
upon purchase. The data for Class C shares relate to Class C shares sold
before October 2, 1995. Class C shares sold on or after October 2, 1995 are
subject to a contingent deferred sales charge of .60% if redeemed within one
year of purchase. These data also assume reinvestment of all dividends at
net asset value.

1 Year 5 Years 10 Years Since Inception
------ ------- -------- ---------------
Class A 5.34% N/A N/A 7.16%
Class C 8.60% N/A N/A 6.96%

Thornburg New Mexico Intermediate Municipal Fund (Classes A and C)

THE FOLLOWING DATA FOR INTERMEDIATE NEW MEXICO 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 yields of the
Intermediate New Mexico Fund Class A and Class C shares for the one month
period ended September 30, 1995, computed in accordance with the standardized
calculation described above, were 4.18% and 3.88% for Class A shares and
Class C shares, respectively. This method of computing yield does not take
into account changes in net asset value.

Non-standardized Method of Computing Yield. The Intermediate New Mexico
Fund's nonstandardized yields, computed in accordance with a non-standardized
method, for the 7-day period ended September 30, 1995, were 4.61% and 4.13%
for Class A shares and Class C shares, respectively. This nonstandardized
method differs from the standardized method of computing yield in that the
nonstandardized yield is computed for the 7-day period rather than a 30-day
or one month period, the nonstandardized yield reflects amortization of
premium based upon historical cost rather than market value, and the
nonstandardized yield is computed by compounding dividends monthly rather
than semiannually. This method of computing performance does not take into
account changes in net asset value.

Taxable Equivalent Yield. The Intermediate New Mexico Fund's taxable
equivalent yields for Class A shares and Class C shares, computed in
accordance with the methods described above using a maximum federal tax rate
of 39.6% and a maximum New Mexico tax rate of 8.5%, were as shown below for
the indicated periods ending on September 30, 1995:

Taxable
Equivalent
Yield Yield
----- ----------
Standardized Method
30 days ended 09/30/95
Class A 4.18% 7.57%
Class C 3.88% 7.02%

Non-standardized Method
7 days ended 09/30/95
Class A 4.61% 8.35%
Class C 4.13% 7.48%

30 days ended 03/31/95
Class A 4.62% 8.36%
Class C 4.13% 7.48%

Average Annual Total Return. The Intermediate New Mexico Fund's Class
A and Class C total return figures are set forth below for the periods shown
ending September 30, 1995. Class A shares were first offered on June 21,
1991, and Class C shares were first offered on September 1, 1994. The data
for Class A shares reflect deduction of the maximum sales charge of 3.50%
upon purchase. The data for Class C shares relate to Class C shares sold
before October 2, 1995. Class C shares sold on or after October 2, 1995 are
subject to a contingent deferred sales charge if redeemed within one year of
purchase. These data also assume reinvestment of all dividends at net asset
value.

1 Year 5 Years 10 Years Since Inception

Class A 4.31% N/A N/A 6.50%
Class C 7.48 N/A N/A 6.02%

Thornburg Florida Intermediate Municipal Fund (Classes A and C)

THE FOLLOWING DATA FOR INTERMEDIATE FLORIDA 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 yields of the
Intermediate Florida Fund Class A and Class C shares for the one month period
ended September 30, 1995, computed in accordance with the standardized
calculation described above, were 5.02% and 4.64% for Class A shares and
Class C shares, respectively. This method of computing yield does not take
into account changes in net asset value.

Non-standardized Method of Computing Yield. The Intermediate Florida
Fund's nonstandardized yields, computed in accordance with a non-standardized
method for the 7-day period ending September 30, 1995, were 5.10% and 4.64%
for Class A shares and Class C shares, respectively. The nonstandardized
method differs from the standardized method of computing yield in that the
nonstandardized yield is computed for the 7-day period rather than a 30-day
or one month period, the nonstandardized yield reflects amortization of
premium based upon historical cost rather than market value, and the
nonstandardized yield is computed by compounding dividends monthly rather
than semiannually. This method of computing performance does not take into
account changes in net asset value.

Taxable Equivalent Yield. The Intermediate Florida Fund's taxable
equivalent yields for Class A shares and Class C shares, computed in
accordance with the methods described above using a maximum federal tax rate
of 39.6%, were as shown below for the indicated periods ending on September
30, 1995:
Taxable
Equivalent
Yield Yield
----- -----------
Standardized Method
30 days ended 09/30/95
Class A 5.02% 8.52%
Class C 4.64% 7.87%

Non-standardized Method
7 days ended 09/30/95
Class A 5.10% 8.65%
Class C 4.64% 7.87%
30 days ended 09/30/95
Class A 5.12% 8.68%
Class C 4.65% 7.89%

Average Annual Total Return. The Intermediate Florida Fund's Class A
and Class C total return figures are set forth below for the periods shown
ending September 30, 1995. Class A shares were first offered on February 1,
1994, and Class C shares were first offered on September 1, 1994. The data
for Class A shares reflect deduction of the maximum sales charge of 3.50%
upon purchase. The data for Class C shares relate to Class C shares sold
before October 2, 1995. Class C shares sold on or after October 2, 1995 are
subject to a contingent deferred sales charge if redeemed within one year of
purchase. These data also assume reinvestment of all dividends at net asset
value.

1 Year 5 Years 10 Years Since Inception
------ ------- -------- ---------------
Class A 4.44% N/A N/A 2.05
Class C 7.74 N/A N/A 6.05%

Any quoted yield or return should not be considered a representation of
the yield or return in the future because neither the yield nor the return
are fixed. Actual performance will depend not only on the type, quality and
maturities of the investments held by the Funds and changes in interest rates
on those investments, but also on changes in a Fund's expenses during the
period. In addition, any change in a Fund's net asset value will affect its
yield and return.

DISTRIBUTIONS AND TAXES

Distributions

All of the net income of the Funds is declared daily as a dividend on
shares for which they have received payment. Net income of a Fund consists
of all interest income accrued on portfolio assets less all expenses of that
Fund. Expenses of the Funds are accrued each day. Dividends are paid
monthly and are reinvested in additional shares of the Funds 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, or, at the shareholder's option, paid in cash. See "Accounts of
Shareholders."

Federal Income Tax Matters

Each of the National, New Mexico and Florida Funds is qualified and
intends to continue its qualification under Subchapter M of the Internal
Revenue Code (the "Code") for tax treatment as a regulated investment
company. The other Funds intend to qualify for treatment under Subchapter M.
This tax treatment relieves the Funds from paying federal income tax on
income which is currently distributed to its shareholders. Each of the Funds
also intends to satisfy conditions (including requirements as to the
proportion of its assets invested in Municipal Obligations) which will enable
it to designate distributions from the interest income generated by its
investments in Municipal Obligations, which are exempt from federal income
tax when received by the Funds, 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 be applicable.

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 the Funds 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 Fund
shares.

Distributions by the Funds 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), amounts attributable to market discount on bonds and net
short-term capital gains realized by the Funds, 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 the Funds, whether
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 a Fund should have net undistributed
capital gains 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 either Fund should fail to qualify under Subchapter M for
tax treatment as a regulated investment company, (i) that 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 that Fund's current or accumulated earnings or
profits. That 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 fails to satisfy the
diversification of investments requirement of the Code and fails to timely
cure such failure. Furthermore, a 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 that Fund's total assets consisted of assets other
than Municipal Obligations. Additionally, if in any year a 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 the Funds intend to distribute all of their net income
currently, a Fund 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 that 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 imposed 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 Fund operations, because each Fund intends to distribute
all of its net income each year.

Although the Funds currently include nine investment portfolios and
three series of shares outstanding at the date of this Statement of
Additional Information, the Funds' Trustees are authorized to divide the
shares into other separate series, and to establish additional portfolios
pertaining thereto. Each additional series of shares would relate to a
separate investment portfolio that would be different from the portfolios
covered by this Statement of Additional Information. The Trust expects that
it may create other separate state or regional portfolios with investments
concentrated in a particular state or region. The additional separate
portfolios may be attractive for investors seeking to concentrate their
investments and to minimize their liability for state income taxes on
interest income earned by the respective portfolios or for minimizing taxes
on intangibles, depending upon the particular states. Separate series of the
Trust will be treated under the Code as separate corporations except with
respect to the definitional requirements under Section 851 (a) of the Code.
The legislative history of the Tax Reform Act of 1986, which amended the
Code, indicates that the term "fund" means a segregated portfolio of assets,
the beneficial interest of which is owned by the holders of a class or series
of stock of the regulated investment company that is preferred over all other
classes or series in respect of such portfolio of assets. The capital gains
and losses of each series will belong solely to the holders of the shares of
that series and will not be aggregated with the capital gains and losses of
other series.

As is the case with other types of income, including other tax-exempt
interest income, Exempt Interest Dividends received by a shareholder will be
included in his or her "modified adjusted gross income" for the year if he or
she received Social Security benefits during the year. Under current law, if
a person's modified adjusted gross income exceeds $44,000 for the year
($34,000 for a single individual, zero for a married individual not filing a
joint income tax return and not living apart from his or her spouse at all
times during the year), a portion of that person's Social Security benefits
may be subject to federal income taxation.

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. The Funds 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 tax advisers as to the extent and effect of
that treatment.

For taxable years beginning after 1989, the Code provides that the use
of adjusted net book income will be replaced by the use of adjusted current
earnings in computing corporate taxes. 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 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. Commercial banks, thrift institutions and other
financial institutions may not deduct their cost of carrying shares.

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 Funds and the income tax consequences to shareholders of the
Funds.

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.

Distributions attributable to interest on obligations originating in
Alabama, Arizona, New Mexico and Tennessee will not be subject to personal
income taxes imposed by the state of the same name as the Fund. For example,
an individual resident in New Mexico, who owns shares in the New Mexico Fund,
will not be required by New Mexico to pay income taxes on interest
attributable to obligations originating in that state. Capital gains
distributions are taxable by these states, irrespective of the origins of the
obligations from which the gains arise.

Individual shareholders in Pennsylvania will not be subject to
Pennsylvania income tax on distributions attributable to interest on
obligations originating in Pennsylvania, or distributions attributable to
gains on dispositions of obligations of Pennsylvania and its political
subdivisions and obligations of the United States and its territories and
possessions. Additionally, individual shareholders will be exempt from
Pennsylvania personal property tax on their Pennsylvania Fund shares to the
extent the Fund's assets consist of obligations described in the preceding
sentence. Individual residents in Pittsburgh will enjoy a similar exemption
from personal property taxes imposed by the City and School District of
Pittsburgh.

Florida, Texas and Utah do not currently impose an individual income tax
or do not impose an individual income tax on distributions attributable to
Municipal Obligations, although capital gains distributions will be subject
to personal income tax in Utah. Florida and Texas do not currently impose a
state individual income tax, although such a tax has been proposed in Texas.
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 Intermediate Florida Fund shares if the
Fund's assets as of the close of the preceding taxable year consist only of
cash, 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 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
the Fund are advised to consult their own tax advisers in that regard. The
Intermediate National Fund will advise shareholders within 60 days of 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.

Accounts of Shareholders

When an investor makes an initial investment in shares of any Fund, the
Transfer Agent will open an account on the books of that 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 purposes described in the Prospectus under the caption
"Distributions and Taxes."

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 ADVISER AND INVESTMENT ADVISORY AGREEMENT

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 each Fund's
investment objectives and policies, subject to the general supervision and
control of the Funds' Trustees.

TMC is investment adviser for Thornburg Limited Term Municipal Fund,
Inc., a series investment company with two fund series having aggregate
assets of approximately $1,016,000,000 as of September 30, 1995. TMC also
acts as investment adviser for Thornburg Limited Term U.S. Government Fund
and Thornburg Limited Term Income Fund, separate series of the Trust which
had assets of $144,500,000 and $24,100,000, respectively, as of September 30,
1995. TMC is also a sub-adviser for Daily Tax-Free Income Fund, Inc., a
registered investment company.

TMC will provide continuous professional investment supervision. In
addition to managing each Fund's investments, TMC will administer the Fund's
business affairs, provide office facilities and certain clerical, bookkeeping
and administrative services. Pursuant to the Investment Advisory Agreement,
each of the Funds will pay to TMC a monthly management fee at an annual
percentage rate of the daily average net assets of the Fund, applied in
accordance with the following table, 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.

Net Assets Annual Rate
--------------------------- -----------
0 to $500 million .625%
$500 million to $1 billion .575%
$1 billion to $1.5 billion .525%
$1.5 billion to 2.0 billion .475%
More than $2.0 billion .400%

In addition to the fee of TMC, the Funds will pay all other costs and
expenses of their operations. The Funds also will bear the expenses of
registering and qualifying the Funds and the shares for distribution under
federal and state securities laws, including legal fees. The management fee
will be reduced, or TMC will assume certain expenses, in an amount necessary
to prevent any Fund's total expenses (including TMC's fee, but excluding
interest, taxes, brokerage and, to the extent permitted by applicable state
securities laws, extraordinary expenses) in any fiscal year from exceeding
the limits prescribed by any state in which the Funds' shares are qualified
for sale. The Funds currently believe that the most restrictive limitation
applicable to them is 2% of the first $10 million in assets, 1.5% of the next
$20 million, and 1% of assets in excess of $30 million.

For the three most recent fiscal periods ended September 30, 1993,
1994 and 1995, and for the six months ended March 31, 1995, with respect to
each Fund, the amounts paid to TMC by each Fund were as follows:

1993 1994 1995
-------- ---------- ----------
Intermediate National Fund $335,046 $1,062,263 $1,161,410
Intermediate New Mexico Fund $218,713 $ 670,111 $ 763,774

Intermediate Florida Fund N/A -0- -0-

The Florida Fund commenced operations on February 1, 1994. TMC has waived
and deferred its rights to fees in the foregoing periods as follows:

1993 1994 1995
-------- -------- -------- ----------
Intermediate National Fund $268,212 $462,663 $199,442 $ 191,779
Intermediate New Mexico Fund $259,170 $393,167 $199,574 $ 101,636
Intermediate Florida Fund N/A N/A $ 21,760 $ 73,419

TMC may (but is not obligated to) waive its rights to any portion of its fees
in the future, and may use any portion of its fee for purposes of shareholder
and administrative services and distribution of Fund shares. During the
fiscal year ended September 30, 1995, the Funds reimbursed TMC in the amounts
of $21,298 (National), $14,041 (New Mexico) and $875 (Florida) for certain
accounting expenses incurred by TMC on behalf of those Funds.

The Investment Advisory Agreement was approved for the Intermediate New
Mexico Fund, the Intermediate National Fund and the Intermediate Texas Fund
on June 4, 1991 by the Trustees of the Funds, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Funds or TMC, and became effective for the New Mexico Fund and the National
Fund on June 20, 1991. The Investment Advisory Agreement was similarly
approved on October 4, 1993 by the Trustees for the Intermediate Alabama
Fund, Intermediate Florida Fund, Intermediate Pennsylvania Fund, Intermediate
Tennessee Fund and Intermediate Utah Fund. The Investment Advisory Agreement
was approved for the Intermediate Arizona Fund on January 24, 1994. The
Agreement is currently effective only for the Intermediate National Fund, the
Intermediate Florida Fund and the Intermediate New Mexico Fund, and will
become effective for any Fund upon its commencement of operations and sale of
shares. The Investment Advisory Agreement was presented to the shareholders
for approval at a special shareholder meeting called for each of the
Intermediate National Fund and Intermediate New Mexico Funds on January 24,
1992, at which the Agreement was approved by a majority of the outstanding
voting securities of each Fund. The Trustees do not intend to submit the
Agreement to shareholders of any other series for approval. The initial term
of this Agreement is two years, with extensions for successive 12-month
periods, provided that the continuation for a Fund is approved at least
annually by a majority of the Trustees who are not "interested" within the
meaning of the Investment Company Act of 1940 or by a vote of the majority of
the Fund's shares then outstanding. The Agreement may be terminated by
either party, at any time without penalty, upon 60 days' written notice, and
will terminate automatically 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 Agreement further 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 under
the Agreement, TMC will not be liable for any action or failure to act in
accordance with its duties thereunder.

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

SERVICE AND DISTRIBUTION PLANS

Service Plans - All Classes

Each of the Funds has adopted a plan and agreement of distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("Service
Plan") which is applicable to Class A and Class C shares of each Fund. The
Plan permits each Fund to pay to TMC (in addition to the management fee and
reimbursements described above) an annual amount not exceeding .25 of 1% of
the Fund's assets to reimburse TMC for specific expenses incurred by it in
connection with certain shareholder services and the distribution of that
Fund's shares to investors. TMC may, but is not required to, expend
additional amounts from its own resources in excess of the currently
reimbursable amount of expenses. Reimbursable expenses include the payment
of amounts, including incentive compensation , to securities dealers and
other financial institutions, including banks (to the extent permissible
under the Glass-Steagall Act and other federal banking laws), for
administration and shareholder services. The nature and scope of services
provided by dealers and other entities likely will vary from entity to
entity, but may include, among other things, processing new account
applications, preparing and transmitting to the Transfer Agent computer
processible tapes of shareholder account transactions, and serving as a
source of information to customers concerning the Funds and transactions with
the Funds. The Service Plan does not provide for accrued but unpaid
reimbursements to be carried over and paid to TMC in later years.

The Funds paid to TMC the amounts shown in the table below, under
the terms of the Service Plan for the fiscal year ended September 30, 1995.
Amounts reimbursed to TMC under the Plan were paid by TMC principally as
compensation to securities dealers and other persons selling the Funds'
shares, for administration and shareholder services.

Year ended 09/30/95 Class A Class C
National $500,756 $ 4,947
New Mexico $332,809 $ 220
Florida $ 20,103 $ 186

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 Funds paid to TSC $12,862 (National), $573 (New Mexico), and
$484 (Florida) under the Class C Distribution Plan for the fiscal year ended
September 30, 1995. Amounts paid to TSC under the Plan were paid by TSC
principally as compensation to securities dealers and other persons selling
the Funds' shares.

The Glass-Steagall Act prohibits certain banks from underwriting mutual
fund shares, but the Funds do not believe that this prohibition will apply to
the arrangements described in the Plans. However, no assurance can be given
that the Glass-Steagall Act will not be interpreted so as to prohibit these
arrangements. In that event, the Funds' ability to market their shares could
be impaired to a small extent. The Funds do not foresee that they will give
preference to banks or other depository institutions which receive payments
from TMC when selecting investments for the Funds.

Each Plan continues in effect for periods of 12 months each unless
terminated pursuant to its terms and may be continued from year to year
thereafter, provided that the continuance is approved at lease annually by a
vote of a majority of the Trustees, including a majority of the independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance. Each Plan also may be terminated at any time, without penalty,
if a majority of the independent Trustees or shareholders of a Fund class
vote to terminate the Plan for that class. So long as a Plan is in effect,
the selection and nomination of Trustees who are not "interested persons" of
a Fund shall be committed to the discretion of the Trustees who are not
"interested persons." The Plans may not be amended to increase materially
the amount of a Fund's payments thereunder without approval of the
shareholders of the affected classes. Under each Plan, the investment
adviser or the principal underwriter (as the case may be), or the Funds, by
a vote of a majority of the independent Trustees or of the holders of a
majority of the outstanding shares, may terminate the provisions retaining
the services of TMC or TSC under the Plan, without penalty. The Trustees
have the authority to approve continuance of a Plan without similarly
approving a continuance of the provisions retaining TMC or TSC thereunder.

Information regarding the services rendered under the Plan and the
amounts paid therefor is provided to, and reviewed by, the Trustees on a
quarterly basis. In their quarterly review, the Trustees consider the
continued appropriateness of the Plan and the level of compensation provided
therein.

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. Securities normally will 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 Funds 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 Trustees of the Funds.

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 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 Funds' Trustees that the benefits available from TMC's
organization will outweigh any disadvantage that may arise from exposure to
simultaneous transactions. The Trustees will review simultaneous
transactions.

The Funds' portfolio turnover rates for the two most recent fiscal
years are as follows:

1994 1995
------ ------
Intermediate National Fund 48.30% 32.20%
Intermediate New Mexico Fund 6.62% 17.06%
Intermediate Florida Fund 15.55% 89.60%

MANAGEMENT AND HOLDERS OF SECURITIES

The management of the Funds, including general supervision of the duties
performed by TMC under the Investment Advisory Agreements, is the
responsibility of its Trustees. There are four Trustees, one of whom is an
"interested person." The names of the Trustees and officers and their
principal occupations and other affiliations during the past five years are
set forth below, with the Trustee who is an "interested person" of the Funds
indicated by an asterisk:

H. GARRETT THORNBURG, JR.,* 49, Trustee, President: Director, Chairman
(since January of 1987) and Treasurer of Thornburg Limited Term Municipal
Fund, Inc. (a mutual fund investing in certain municipal securities) since
its inception in 1984; Chairman and Director of 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;
President and Director of TMC since its formation in 1982.

J. BURCHENAL AULT, 69, Trustee: Independent Fundraising Counsel, May
1986 to present; Trustee, Woodrow Wilson International Center for Scholars;
Provost, St. John's College, Santa Fe, New Mexico, from 1986 through May
1991; Director of Thornburg Limited Term Municipal Fund, Inc. since its
formation in 1984; Director of Farrer, Strauss & Giroux (publishers) since
1968.

FORREST S. SMITH, 64, Trustee: Attorney in private practice, Santa Fe,
New Mexico; shareholder Catron, Catron & Sawtell (law firm), Santa Fe, New
Mexico, 1988 to present.

BRIAN J. MCMAHON, 40, Vice President and Assistant Secretary: President
of Thornburg Limited Term Municipal Fund, Inc. since January, 1987 and Vice
President since its formation in 1984; Managing Director of TMC since
December 1985 and a Vice President since April 1984.

DAWN B. SHAPLAND, 48, Secretary and Assistant Treasurer: Secretary,
Thornburg Limited Term Municipal Fund, Inc. since its formation in 1984; Vice
President, Daily Tax Free Income Fund, Inc. since 1989; Managing Director of
TMC since 1985 and a Vice President since January 1984.

SUSAN ROSSI, 34, Assistant Vice President: Assistant Vice President of
Thornburg Limited Term Municipal Fund, Inc. since July 1992; Associate of TMC
since June 1990.

JONATHAN ULLRICH, 26, Assistant Vice President: Assistant Vice
President of Thornburg Limited Municipal Fund, Inc. since July 1992;
Associate, of TMC since September 1991; student, Brown University, 1987 to
1991.

CHRISTINE E. THOMPSON, 29, Assistant Vice President: Assistant Vice
President, Thornburg Limited Term Municipal Fund, Inc. since June 1993;
Associate of TMC since June 1992; Office Manager, Town and Country Janitorial
Services, Inc., Greenland, New Hampshire, September 1991 to February 1992;
Salesperson and later Department Manager, The Harvard Cooperative society,
Cambridge, Massachusetts, May, 1990 to September, 1991.

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.

As of November 8, 1995, National Fund had 17,591,815 shares
outstanding, New Mexico Fund had 10,382,494 shares outstanding, and Florida
Fund had 1,382,494 shares outstanding. Class B shares issued and outstanding
as of September 30, 1995 were converted to Class A shares.

As of September 30, 1995, the following persons owned, beneficially or
of record, 5% or more of a Fund's outstanding shares:

No. of % of
Shareholder Fund Shares Total Shares

Merrill Lynch, Pierce, New Mexico Fund 634,575 6.11%
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286

E. Good Florida Fund 92,805 6.75%
Naples, FL

M. Bozzelli Florida Fund 73,235 5.32%
Sarasota, FL

As of the same date, officers and trustees of the Trust, as a group (together
with family members), owned themselves or through affiliated persons 672,186
shares of the Intermediate New Mexico Fund representing 6.47% of the Fund's
outstanding shares on that date; officers and trustees of the Trust, as a
group (together with family members), owned themselves or through affiliated
persons less than 1% of the National Fund and less than 1% of the Florida
Fund.

HOW TO PURCHASE FUND SHARES

Procedures with respect to the manner in which shares of the Funds may
be purchased and how the offering price is determined are set forth in the
Prospectus under the caption "BUYING FUND SHARES IN GENERAL."

(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 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
Investment Trust, or of any series of Thornburg Limited Term Municipal Fund,
Inc., 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.

(4) Officers, Trustees, directors and employees of the Trust, TMC, TSC,
the Custodian and Transfer Agent, and counsel to the Trust, 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 Trust'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 Trust'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 the Funds 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
a Selected Dealer 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
advisers who receive compensation on a fee basis 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 fees 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.

The investment decisions of the persons and organizations described in
the foregoing paragraphs tend to be made by informed fiduciaries or other
advisers. Typically, these persons are better able than the general public
to evaluate quickly the appropriateness of a Fund's investment objectives and
performance in light of their customers' goals. In certain cases, these
organizations may approach a Fund directly with no solicitation after reading
performance data in trade publications. Consequently costs of marketing to
these persons and organizations likely will be minimal.

(11) In any case where the Fund acquires substantially all of the
assets of a registered investment company in exchange for the Fund's shares,
no sales charge will be imposed. Such exchanges are preceded by the
distribution of materials to the shareholders at the acquired company, which
explain the transaction. The preparation and dissemination of these
materials and other information relating to such a transaction commonly are
paid for by TMC rather than the Fund or TSC.

(12) Such persons as are determined by the Trustees 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.

(13) Shares of the Fund may be sold at a reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to or permits group solicitation of its
employees, members or participants. Information on these arrangements is
available from TSC.

(14) Investors 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
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.

NET ASSET VALUE

Procedures for determining the net asset value of the Funds' shares are
set forth in the Prospectus.

The Funds will calculate the net asset value at least once daily on days
when the New York Stock Exchange is open for trading, and more frequently if
deemed desirable by the Trust. Net asset value will not be calculated on New
Year's Day, Washington's Birthday (on the third Monday in February), Good
Friday, Memorial Day (on the last Monday in May), Independence Day, Labor
Day, Thanksgiving Day, Christmas Day, on the preceding Friday if any of the
foregoing holidays falls on a Saturday, and on the following Monday if any of
the foregoing holidays falls on a Sunday. Under the Investment Company Act
of 1940, net asset value must be computed at least once daily on each day
(i) in which there is a sufficient degree of trading in a Fund's portfolio
securities that the current net asset value of its shares might be materially
affected by changes in the value of such securities and (ii) on which an
order for purchase or redemption of its shares is received.

REDEMPTION OF SHARES

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

The Funds 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 Funds normally utilize is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Funds' 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 a Fund.

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Trust, Thornburg
Securities Corporation acts as the principal underwriter of Fund 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
Funds with state regulatory authorities, and (ii) expenses paid under the
Service and Distribution Plans 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 Trustee of the
Funds, is also Director and controlling stockholder of TSC.

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
September 30, 1996. Shareholders will receive semi-annual unaudited
financial statements, and annual financial statements audited by the
independent auditors.

FINANCIAL STATEMENTS

Statements of Assets and Liabilities including Schedules of
Investments as of September 30, 1995, Statements of Operations for the year
then ended and Statements of Changes in Net Assets for the two years in the
period ended September 30, 1995, Notes to Financial Statements, Financial
Highlights, and Independent Auditor's Reports dated October 27, 1995 are
incorporated herein by reference from those Funds' respective Annual Reports
to Shareholders for the year ended September 30, 1995.

PART C
OTHER INFORMATION

Items 23 and 24. Financial Statements and Exhibits.

(a) Financial Statements

(i) Thornburg Limited Term U.S. Government Fund,
(ii) Thornburg Limited Term Income Fund,
(iii) Thornburg Intermediate Municipal Fund,
(iv) Thornburg New Mexico Intermediate Municipal Fund, and
(v) Thornburg Florida Intermediate Municipal Fund:

Reports of Independent Auditors dated November ___, 1995, Statements of
Assets and Liabilities including Schedules of Investments as of September 30,
1995, Statements of Operations for the year ended September 30, 1995,
Statements of Changes in Net Assets for the years ended September 30, 1994
and September 30, 1995, Notes to Financial Statements, Financial Highlights
are incorporated by reference to Registrant's Annual Reports to Shareholders
in respect of Thornburg Limited Term U.S. Government Fund, Thornburg Limited
Term Income Fund, Thornburg Intermediate Municipal Fund, Thornburg New Mexico
Intermediate Municipal Fund, and Thornburg Florida Intermediate Municipal
Fund, previously filed with the Securities and Exchange Commission.

(b) Exhibits

The following Exhibits are incorporated herein by reference to Registrant's
Registration Statement on Form N-1A as initially filed on June 12, 1987.

(1) Limited Term Trust, Agreement and Declaration of Trust,
dated June 3, 1987.

(2) By-Laws of Limited Term Trust, dated June 3, 1987.

(3) Not applicable.

(4) Not applicable.

(5) Form of Investment Advisory Agreement between
Registrant and Thornburg Management Company, Inc.

(6) (a) Form of Distribution Agreement between Registrant
and Thornburg Securities Corporation.

(b) Form of Agency Agreement.

(7) Not applicable.

(11) Not applicable.

(12) Not applicable.

(13) Form of Subscription to Shares by Thornburg Management
Company, Inc.

(15) Form of Plan and Agreement of Distribution Pursuant to
Rule 12b-1 between Registrant and Thornburg Management
Company, Inc.

The following exhibits are incorporated herein by reference to Registrant's
pre-effective amendment No. 1 to its Registration Statement on Form N-1A as
filed on October 28, 1987:

(1) Thornburg Income Trust - First Amendment and Supplement
to Agreement and Declaration of Trust, dated August 11,
1987.

(8) Form of Custodian Agreement between Registrant and
State Street Bank and Trust Company. This exhibit
supersedes the form of Custodian Agreement filed with
the Registrant's initial Registration Statement on Form
N-1A on June 12, 1987.

(9) Form of Transfer Agency Agreement between Registrant
and State Street Bank and Trust Company. This exhibit
supersedes the form of Transfer Agency Agreement filed
with the Registrant's initial Registration Statement on
Form N-1A on June 12, 1987.

The following exhibits are incorporated herein by reference to Registrant's
post-effective amendment No. 1 to its Registration Statement on Form N-1A as
filed on March 3, 1988:

(1) Thornburg Income Trust-Second Amendment and Supplement
to Agreement and Declaration of Trust, dated October
28, 1987.

The following exhibits are incorporated herein by reference to Registrant's
post-effective amendment No. 7 to its Registration Statement on Form N-1A as
filed on April 19, 1991:

(16) Powers of Attorney from Messrs. Bemis, Smith and
Thornburg.

The following exhibits are incorporated herein by reference to Registrant's
post-effective amendment No. 9 to its Registration Statement on Form N-1A as
filed on March 3, 1992:

(16) Power of Attorney from J. Burchenal Ault

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment No. 10 to its Registration Statement on
Form N-1A as filed on July 23, 1992:

(5) Revised form of Investment Advisory Agreement between
Registrant and Thornburg Management Company, Inc.

(13) Form of Subscription to Shares

(15) Revised form of Plan and Agreement of Distribution
Pursuant to Rule 12b-1 between Registrant and Thornburg
Management Company, Inc.

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment No. 13 to its Registration Statement on
Form N-1A as filed on December 3, 1993:

(1) Thornburg Income Trust -- Third, Fourth, Fifth, Sixth
and Seventh Amendments and Supplements to Agreement and
Declaration of Trust

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment No. 14 to its Registration Statement on
Form N-1A as filed on May 13, 1994:

(18) Power of attorney (B. McMahon)

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment no. 17 to its Registration Statement on
Form N-1A as filed on July 27, 1994:

(1) Thornburg Income Trust Amended and Restated Designation
of Series.

(15.2) Form of Plan and Agreement pursuant to Rule 12b-1
(Class B Distribution Plan)

(15.3) Form of Plan and Agreement pursuant to Rule 12b-1
(Class C Distribution Plan)

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment no. 18 to its Registration Statement on
Form N-1a as filed on December 3, 1994:

(5) Amendments (5) to Investment Advisory Agreements
between Registrant and Thornburg Management Company,
Inc. in respect of Thornburg Limited Term U.S.
Government Fund, Thornburg Limited Term Income Fund,
Thornburg Intermediate Municipal Fund, Thornburg New
Mexico Intermediate Municipal Fund, and Thornburg
Florida Intermediate Municipal Fund.

(10) Consent of White, Koch, Kelly & McCarthy, P.A.

(11) Consent of independent auditors.

(15.2) Form of Plan and Agreement pursuant to Rule 12b-1
(Class B Service Plan)

(15.3) Form of Plan and Agreement pursuant to Rule 12b-1
(Class C Service Plan)

The following exhibits are incorporated by reference to the Registrant's
post-effective amendment no. 20 to its Registration Statement on Form N-1A as
filed on July 5, 1995:

(1.1) Thornburg Income Trust - Ninth Amendment and
Supplement to Agreement and Declaration of Trust

(1.2) Thornburg Income Trust - Tenth Amendment and
Supplement to Agreement and Declaration of Trust

(5) Investment Advisory Agreement - in respect of
Thornburg Value Fund

(14) Model IRA Plan (Thornburg Value Fund)

(15.1) Form of Plan and Agreement Pursuant to Rule 12b-1
(Service Plan - all classes) - Thornburg Value Fund

(15.2) Form of Plan and Agreement Pursuant to Rule 12b-1
(Class B Distribution Plan) - Thornburg Value Fund

(15.3) Form of Plan and Agreement Pursuant to Rule 12b-1
(Class C Distribution Plan) - Thornburg Value Fund

(19) Power of attorney from David A. Ater

The following exhibits are incorporated herein by reference to the
Registrant's post-effective amendment no. 21 to its Registration Statement on
Form N-1A as filed on September 1, 1995:

(11.1) Consent of counsel to be named in registration
statement

(11.2) Consent of independent auditors to be named in
registration statement

(16.1) Schedule of performance computations - Thornburg
Intermediate Municipal Fund

(16.2) Schedule of performance computations - Thornburg New
Mexico Intermediate Municipal Fund

(16.3) Schedule of performance computations - Thornburg
Florida Intermediate Municipal Fund

The following exhibit is incorporated by reference to the Registrant's post-
effective amendment no. 22 to its Registration Statement on Form N-1A as
filed on October 2, 1995:

(1) Thornburg Income Trust - Corrected Tenth Amendment
and Supplement to Agreement and Declaration of Trust

The following exhibits is incorporated by reference to the Registrant's
post-effective amendment no. 23 to its Registration Statement on Form N-1A as
filed on October 3, 1995:

(11.1) Consent of KPMG Peat Marwick LLP, to be named in
registration statement (re Thornburg Value Fund)

(11.2) Consent of counsel to be named in registration
statement (re Thornburg Value Fund)

(11.3) Consent of McGladrey & Pullen, LLP, independent
auditors, to be named in registration statement
(re Thornburg Value Fund)

(11.4) Schedule of Total Return Investment Performance -
Thornburg Management Company, Inc. Investment
Portfolio with the Report of KPMG Peat Marwick LLP
thereon

The following exhibits are filed herewith:

(11.1) Consent of counsel to be named in registration
statement (re Thornburg Limited Term Income Funds
and Thornburg Intermediate Municipal Funds)

(11.2) Consent of McGladrey & Pullen, LLP, independent
auditors to be named in registration statement
(re Thornburg Limited Term Income Funds and
Thornburg Intermediate Municipal Funds)

(16) Schedules of performance computations (Thornburg
Limited Term U.S. Government Fund, Thornburg Limited
Term Income Fund, Thornburg Intermediate Municipal
Fund, Thornburg New Mexico Intermediate Municipal
Fund, and Thornburg Florida Intermediate Municipal
Fund)

(17 Financial Data Schedules

Item 25. Persons Controlled By or Under Common Control With Registrant.

Not applicable.

Item 26. Number of Record Holders of Securities (as of September 30,
1995).

Title of Series (active series only) No. of Holders
- ------------------------------------ --------------
Thornburg Limited Term U.S. Government Fund . . . . . . . . . . . . . . 4,330

Thornburg Intermediate Municipal Fund . . . . . . . . . . . . . . . . . 5,443

Thornburg New Mexico Intermediate Municipal Fund. . . . . . . . . . . . 2,826

Thornburg Florida Intermediate Municipal Fund . . . . . . . . . . . . . . 265

Thornburg Limited Term Income Fund. . . . . . . . . . . . . . . . . . . . 903

Item 27. Indemnification.

(1) Please see Section 10.2 of the Agreement and Declaration of
Trust filed as Exhibit 1. Section 10.2 generally provides that each of the
Trust's officers and Trustees will be indemnified by the Trust against
liability and expenses in connection with his having been a Trustee or
officer unless it is determined that the individual is liable by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, or if the individual did not
act in good faith in the reasonable belief that the action was in the Trust's
best interest.

(2) Please see Section 7 of the Distribution Agreement filed as
Exhibit 6(a). Section 7 generally provides that the Trust will indemnify
TSC, its officers and directors, and its controlling persons against
liabilities and expenses incurred because of any alleged untrue statement of
material fact contained in the Registration Statement, Prospectus or annual
or interim reports to shareholders, or any alleged omission to state a
material fact required to be stated therein, or necessary to make the
statements therein, not misleading, except where (i) the untrue statement or
omission arises from information furnished by TSC, or (ii) to the extent the
prospective indemnitee is an officer, trustee or controlling person of the
Trust, the indemnification is against public policy as expressed in the 1933
Act, or (iii) the liability or expense arises from TSC's willful misfeasance,
bad faith, gross negligence, reckless performance of duties, or reckless
disregard of its obligations and duties under the Distribution Agreement.
Further, TSC agrees to indemnify the Trust, its officers and trustees, and
its controlling persons in certain circumstances.

(3) The directors and officers of TMC are insured, and it is intended
that the Trustees and officers of the Trust will become insured, under a
joint professional and directors and officers liability policy. The
described individuals are referred to as the "insureds." The policy covers
amounts which the insureds become legally obligated to pay by reason of the
act, error, omission, misstatement, misleading statement or neglect or breach
of duty in the performance of their duties as directors, trustees and
officers. In addition, the policy covers TMC, and is proposed to cover the
Registrant, to the extent that they have legally indemnified the insureds for
amounts incurred by the insureds as described in the preceding sentence. The
coverage excludes amounts that the insureds become obligated to pay by reason
of conduct which constitutes willful misfeasance, bad faith, gross negligence
or reckless disregard of the insured's duties. The application of the
foregoing provisions is limited by the following undertaking set forth in the
rules promulgated by the Securities and Exchange Commission:

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

Item 28. Business and Other Connections of the Investment Adviser. See
"MANAGEMENT" in the Statement of Additional Information.

Item 29. Principal Underwriters.

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

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

Positions and Offices Positions and Offices
Name with TSC with Registrant

H. Garrett President and Director Trustee; President
Thornburg, Jr.

Dawn B. Shapland Secretary Secretary and
Assistant Treasurer
(c) Not applicable.

Item 30. Location of Accounts and Records.

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

Item 31. Management Services.

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

Item 32. Undertakings. Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Santa Fe, and State of New Mexico on the 30th
day of November, 1995.

THORNBURG INVESTMENT TRUST
Registrant

By *
------------------------------------
H. Garrett Thornburg, Jr., President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

*
- ------------------------------------------
H. Garrett Thornburg, Jr., Trustee,
President and principal executive officer

*
- ------------------------------------------
J. Burchenal Ault, Trustee

*
- ------------------------------------------
David A. Ater, Trustee

*
- ------------------------------------------
Forrest S. Smith, Trustee

*
- ------------------------------------------
Brian J. McMahon, Vice President
and principal accounting and
financial officer

* By: /s/ Charles W. N. Thompson, Jr.
- ------------------------------------------
Charles W.N. Thompson, Jr.
Attorney-In-Fact

INDEX TO EXHIBITS

Exhibit
Number Exhibit
- ------ -----------------------------------------------------------------
(11.1) Consent of counsel to be named in registration statement (re
Thornburg Limited Term Income Funds and Thornburg Intermediate
Municipal Funds)

(11.2) Consent of McGladrey & Pullen, LLP, independent auditors to be
named in registration statement (re Thornburg Limited Term Income
Funds and Thornburg Intermediate Municipal Funds)

(16) Schedules of performance computations (Thornburg Limited Term U.S.
Government Fund,
Thornburg Limited Term Income Fund,
Thornburg Intermediate Municipal Fund,
Thornburg New Mexico Intermediate Municipal Fund,
and Thornburg Florida Intermediate Municipal Fund)

(17) Financial Data Statements

EXHIBIT 11.1

WHITE Attorneys and Counselors at Law
KOCH, KELLY William Booker Kelly Carolyn R. Glick
& John F. McCarthy, Jr. Margaret A. Foster
McCARTHY Benjamin Phillips
A Professional Association David F. Cunningham Of Counsel
Albert V. Gonzales Mary J. Walta
Janet Clow
Kevin V. Reilly Special Counsel
Charles W. N. Thompson, Jr. Paul L. Bloom
M. Karen Kilgore
Sandra J. Brinck
Aaron J. Wolf

November 30, 1995

Thornburg Investment Trust
Thornburg Management Company, Inc.
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501

Re: Thornburg Investment Trust

Ladies and Gentlemen:

We hereby consent to the references made to this firm in the post-
effective amendment no. 24 to the registration statement of Thornburg
Investment Trust and the prospectus which is a part of that registration
statement. In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933.

/s/ White, Koch, Kelly & McCarthy, P. A.

WHITE, KOCH, KELLY & McCARTHY, P. A.

433 Paseo de Peralta P.O. Box 787 Santa Fe, New Mexico 87504-0787
(505) 982-4374 Fax Nos. (505) 982-0350; 984-8631

EXHIBIT 11.2

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

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference of our reports dated
October 27, 1995 on the financial statements of Thornburg Limited Term Income
Fund, Thornburg Limited Term U.S. Government Fund, Thornburg Intermediate
Municipal Fund, Thornburg Florida Intermediate Municipal Fund and Thornburg
New Mexico Intermediate Municipal Fund, series of Thornburg Investment Trust,
and our reports dated July 28, 1995 on the financial statements of the
National Portfolio and the California Portfolio of Thornburg Limited Term
Municipal Fund, Inc., referred to therein in Post-Effective Amendment No. 24
to the Registration Statement of Thornburg Investment Trust on Form N-1A,
File No. 33-14905 and Post-Effective Amendment No. 23 to the Registration
Statement of Thornburg Limited Term Municipal Fund, Inc. on Form N-1A, File
No. 2-89526 as filed with the Securities and Exchange Commission.

We also consent to the reference to our firm in the Thornburg Municipal
Funds' Prospectus and the Thornburg Limited Term Income Funds Prospectus
under the captions "Financial Highlights" and in the Statements of Additional
Information under the caption "Independent Auditors."

/s/ McGladrey & Pullen, LLP

McGLADREY & PULLEN, LLP

New York, New York
November 29, 1995

EXHIBIT 16

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES
LIMITED TERM U.S. GOVERNMENT FUND

Current seven days' annualized yield at 9/30/95 = 5.98%
Dividends per share declared for the period: 0.014587008
Dividend by 7 days 7
Average daily dividend: 0.002083858
Days in year 365
Annualized dividend 0.760608152
Offering price per share on 9/30/95: $12.72
Current seven days' annualized yield 0.059796238
or 5.98%
Current thirty days' annualized yield at 9/30/95 = 5.99%
Dividends per share declared for the period: 0.082584343
Dividend by 30 days 30
Average daily dividend: 0.002086145
Days in year 365
Annualized dividend 0.761442840
Offering price per share on 9/30/95: $12.76
Current thirty days' annualized yield 0.059861858
or 5.99%
Current one year effective yield
assuming reinvestment of dividends = 5.92%
Dividends per share declared for the period: Annualized 0.752032446
Offering price per share on 9/30/95: $12.72
Current one year effective yield 0.059169217
or 5.92%
Standardized yield calculation - Sep-95 = 5.08%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $832,743.83 net interest income attributable to outstanding
shares
b = $116,201.07 expenses accrued for the period net of reimbursements
c = 11,448,138.53 average daily number of shares of beneficial
interest outstanding during period
d = $12.72 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the year ended 09/30/95, assuming 2.50% sales load at
inception: 6.92%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,069.20
T = 6.92% Total Return

Average annual return for the period from inception, 11/16/87 to 09/30/95,
2,875 days, assuming 2.50% sales load at inception = 7.25%
p(1 + A) to the nth power = erv
p = $1,000.00
n = 7.88 (Total days since inception / 365 days)
erv = $1,735.52
A = 7.25% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES
LIMITED TERM U.S. GOVERNMENT FUND

Current seven days' annualized yield at 9/30/95 = 5.64%
Dividends per share declared for the period: 0.043462618
Dividend by 7 days 7
Average daily dividend: 0.001923217
Days in year 365
Annualized dividend 0.701974153
Offering price per share on 9/30/95: $12.45
Current seven days' annualized yield 0.056383466
or 5.64%
Current thirty days' annualized yield at 9/30/95 = 5.64%
Dividends per share declared for the period: 0.057761572
Dividend by 30 days 30
Average daily dividend: 0.001925386
Days in year 365
Annualized dividend 0.702765793
Offering price per share on 9/30/95: $12.45
Current thirty days' annualized yield 0.056447052
or 5.64%
Current one year effective yield
assuming reinvestment of dividends = 5.57%
Dividends per share declared for the period: Annualized 0.693013196
Offering price per share on 9/30/95: $12.45
Current one year effective yield 0.055663711
or 5.57%
Standardized yield calculation - Sep-95 = 5.60%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $12,337.32 net interest income attributable to outstanding
shares
b = $2,593.67 expenses accrued for the period net of reimbursements
c = 169,608.10 average daily number of shares of beneficial interest
outstanding during period
d = $12.45 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95, since inception of 9/1/94: 9.07%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,090.70
T = 9.07% Total Return

Average annual return for the period from inception (08/31/94)to 9/30/95 -
395 days = 7.87%

p(1 + A) to the nth power = erv
p = $1,000.00
n = 1.08 (Total days since inception / 365 days)
erv = $1,085.44
A = 7.87% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES
LIMITED TERM INCOME FUND

Current seven days' annualized yield at 9/30/95 = 6.29%
Dividends per share declared for the period: 0.014971376
Dividend by 7 days 7
Average daily dividend: 0.002138768
Days in year 365
Annualized dividend 0.780650337
Offering price per share on 9/30/95: $12.42
Current seven days' annualized yield 0.062854294
or 6.29%
Current thirty days' annualized yield at 9/30/95 = 6.33%
Dividends per share declared for the period: 0.084800935
Dividend by 30 days 30
Average daily dividend: 0.002153361
Days in year 365
Annualized dividend 0.785976826
Offering price per share on 9/30/95: $12.42
Current thirty days' annualized yield 0.063283158
or 6.33%
Current one year effective yield
assuming reinvestment of dividends = 6.14%
Dividends per share declared for the period: Annualized 0.76316134
Offering price per share on 9/30/95: $12.42
Current one year effective yield 0.061445357
or 6.14%
Standardized yield calculation - Sep-95 = 6.32%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $138,483.76 net interest income attributable to outstanding
shares
b = $16,824.00 expenses accrued for the period net of reimbursements
c = 1,883,432.42 average daily number of shares of beneficial
interest outstanding during period
d = $12.42 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the year ended 09/30/95, assuming 2.50 sales load at
inception: 6.49%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,064.90
T = 6.49% Total Return

Average annual return for the period from inception (10/01/92) to 09/30/95 -
1,094 days, assuming 2.50% sales load at inception: 5.16%

p(1 + A) to the nth power = erv
p = $1,000.00
n = 3.00 (Total days since inception / 365 days)
erv = $1,162.76
A = 5.16% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES
LIMITED TERM INCOME FUND

Current seven days' annualized yield at 9/30/95 = 5.95%
Dividends per share declared for the period: 0.013773423
Dividend by 7 days 7
Average daily dividend: 0.001968346
Days in year 365
Annualized dividend 0.718446342
Offering price per share on 9/30/95: $12.08
Current seven days' annualized yield 0.059474035
or 5.95%
Current thirty days' annualized yield at 9/30/95 = 5.99%
Dividends per share declared for the period: 0.059483477
Dividend by 30 days 30
Average daily dividend: 0.001982783
Days in year 365
Annualized dividend 0.723715637
Offering price per share on 9/30/95: $12.08
Current thirty days' annualized yield 0.059910235
or 5.99%
Current one year effective yield
assuming reinvestment of dividends = 5.81%
Dividends per share declared for the period: Annualized 0.702389273
Offering price per share on 9/30/95: $12.08
Current one year effective yield 0.058144807
or 5.81%
Standardized yield calculation - Sep-95 = 6.00%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $4,752.94 net interest income attributable to outstanding shares
b = $895.85 expenses accrued for the period net of reimbursements
c = 64,641.75 average daily number of shares of beneficial interest
outstanding during period
d = $12.08 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95 since inception of 9/1/94: 8.87%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,088.70
T = 8.87% Total Return

Average annual return for the period from inception, 08/31/94 to 09/30/95,
395 days = 7.47%
p(1 + A) to the nth power = erv
p = $1,000.00
n = 1.08 (Total days since inception / 365 days)
erv = $1,081.08
A = 7.47% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES
THORNBURG INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 5.01%
Dividends per share declared for the period: 0.013129824
Dividend by 7 days 7
Average daily dividend: 0.001875518
Days in year 365
Annualized dividend 0.684563966
Offering price per share on 9/30/95: $13.66
Current seven days' annualized yield 0.050114492
or 5.01%
Current thirty days' annualized yield at 9/30/95 = 5.01%
Dividends per share declared for the period: 0.056275828
Dividend by 30 days 30
Average daily dividend: 0.001875853
Days in year 365
Annualized dividend 0.684686199
Offering price per share on 9/30/95: $13.36
Current thirty days' annualized yield 0.050123441
or 5.01%
Current one year effective yield
assuming reinvestment of dividends = 4.99%
Dividends per share declared for the period: Annualized 0.080888805
Offering price per share on 9/30/95: $13.36
Current one year effective yield 0.049852774
or 4.99%
Standardized yield calculation - Sep-95 = 4.72%

Yield = 2 [({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $1,098,841.97 net interest income attributable to outstanding
shares
b = $185,531.65 expenses accrued for the period net of reimbursements
c = 12,115,273.41 average daily number of shares of beneficial
interest outstanding during period
d = $13.36 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95, assuming 3.50% sales load at
inception: 5.34%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,053.40
T = 5.34% Total Return

Average annual return for the period from inception (07/23/91) to 09/30/95
1,530 days, assuming 3.50% sales load at inception, = 7.16%

p(1 + A) to the nth power = erv
p = $1,000.00
n = 4.19 (Total days since inception / 365 days)
erv = $1,336.26
A = 7.16% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES
THORNBURG INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 4.54%
Dividends per share declared for the period: 0.011503938
Dividend by 7 days 7
Average daily dividend: 0.00165342
Days in year 365
Annualized dividend 0.599848213
Offering price per share on 9/30/95: $13.20
Current seven days' annualized yield 0.045443046
or 4.54%
Current thirty days' annualized yield at 9/30/95 = 4.54%
Dividends per share declared for the period: 0.048293233
Dividend by 30 days 30
Average daily dividend: 0.001643108
Days in year 365
Annualized dividend 0.599734335
Offering price per share on 9/30/95: $13.20
Current thirty days' annualized yield 0.045434419
or 4.54%
Current one year effective yield
assuming reinvestment of dividends = 4.51%
Dividends per share declared for the period: Annualized 0.596582509
Offering price per share on 9/30/95: $13.20
Current one year effective yield 0.045119887
or 4.51%
Standardized yield calculation - Sep-95 = 4.23%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $13,316.62 net interest income attributable to outstanding
shares
b = $5,120.47 expenses accrued for the period net of reimbursements
c = 285,820.67 average daily number of shares of beneficial interest
outstanding during period
d = $13.20 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95, since inception of 9/1/94: 8.60%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,086.00
T = 8.60% Total Return

Average annual return for the period from inception, 08/31/94 to 09/30/95,
395 days = 6.96%

p(1 + A) to the nth power = erv
p = $1,000.00
n = 1.08 (Total days since inception / 365 days)
erv = $1,075.53
A = 6.96% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES
THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 4.61%
Dividends per share declared for the period: 0.012034739
Dividend by 7 days 7
Average daily dividend: 0.001719163
Days in year 365
Annualized dividend 0.627494391
Offering price per share on 9/30/95: $13.60
Current seven days' annualized yield 0.046139293
or 4.61%
Current thirty days' annualized yield at 9/30/95 = 4.62%
Dividends per share declared for the period: 0.051805237
Dividend by 30 days 30
Average daily dividend: 0.001720175
Days in year 365
Annualized dividend 0.627863717
Offering price per share on 9/30/95: $13.60
Current thirty days' annualized yield 0.04616645
or 4.62%
Current one year effective yield
assuming reinvestment of dividends = 4.44%
Dividends per share declared for the period: 0.504106478
Offering price per share on 9/30/95: $13.60
Current one year effective yield 0.044419572
or 4.44%
Standardized yield calculation - Sep-95 = 4.18%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $599,250.68 net interest income attributable to outstanding
shares
b = $112,108.92 expenses accrued for the period net of reimbursements
c = 10,375,032.18 average daily number of shares of beneficial
interest outstanding during period
d = $13.60 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the year ended 09/30/95, assuming 3.50% sales load at
inception: 4.31%
p (1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,043.10
T = 4.31% Total Return

Average annual return for the period from inception (06/21/91) to 09/30/95
1,562 days, assuming 3.50% sales load at inception: 6.50%
p (1 + A) to the nth power = erv
p = $1,000.00
n = 4.28 (Total days since inception / 365 days)
erv = $1,309.31
A = 6.50% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES
THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 4.13%
Dividends per share declared for the period: 0.01038417
Dividend by 7 days 7
Average daily dividend: 0.001484881
Days in year 365
Annualized dividend 0.541981704
Offering price per share on 9/30/95: $13.12
Current seven days' annualized yield 0.041309581
or 4.13%
Current thirty days' annualized yield at 9/30/95 = 4.13%
Dividends per share declared for the period: 0.044553723
Dividend by 30 days 30
Average daily dividend: 0.001485124
Days in year 365
Annualized dividend 0.542070297
Offering price per share on 9/30/95: $13.12
Current thirty days' annualized yield 0.041316334
or 4.13%
Current one year effective yield
assuming reinvestment of dividends = 3.96%
Dividends per share declared for the period: Annualized 0.519339389
Offering price per share on 9/30/95: $13.12
Current one year effective yield 0.039583793
or 3.96%
Standardized yield calculation - Sep-95 = 3.66%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $571.87 net interest income attributable to outstanding shares
b = $176.45 expenses accrued for the period net of reimbursements
c = 9,903.75 average daily number of shares of beneficial interest
outstanding during period
d = $13.12 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95 (since inception of 9/1/94): 7.48%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,074.80
T = 7.48% Total Return

Average annual return for the period from inception, 08/31/94 to 09/30/95,
395 days = 6.02%

p(1 + A) to the nth power = erv
p = $1,000.00
n = 1.08 (Total days since inception / 365 days)
erv = $1,065.31
A = 6.02% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - A SHARES
THORNBURG FLORIDA INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 5.10%
Dividends per share declared for the period: 0.01199261
Dividend by 7 days 7
Average daily dividend: 0.001713216
Days in year 365
Annualized dividend 0.625323736
Offering price per share on 9/30/95: $12.26
Current seven days' annualized yield 0.051005199
or 5.10%
Current thirty days' annualized yield at 9/30/95 = 5.12%
Dividends per share declared for the period: 0.051890501
Dividend by 30 days 30
Average daily dividend: 0.001719683
Days in year 365
Annualized dividend 0.627684429
Offering price per share on 9/30/95: $12.26
Current thirty days' annualized yield 0.051197751
or 5.12%
Current one year effective yield
assuming reinvestment of dividends = 5.14%
Dividends per share declared for the period: Annualized 0.630273200
Offering price per share on 9/30/95: $12.26
Current one year effective yield 0.051409316
or 5.14%
Standardized yield calculation - Sep-95 = 5.02%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $64,637.64 net interest income attributable to outstanding shares
b = $4,604.93 expenses accrued for the period net of reimbursements
c = 1,181,708.45 average daily number of shares of beneficial
interest outstanding during period
d = $12.26 maximum offering price per share of beneficial
interest on: 9/30/95

Total Return for the year ended 09/30/95, assuming 3.50% sales load at
inception: 4.44%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,044.40
T = 4.44% Total Return

Average annual return for the period from inception, 01/31/94 - 09/30/95, 607
days, assuming 3.50% sales load at inception = 2.05%
p ( 1 + A ) to the nth power = erv
p = $1,000.00
n = 1.66 (Total days since inception / 365 days)
erv = $1,034.32
A = 2.05% Average Annual Return

SCHEDULE OF PERFORMANCE COMPUTATION FORMULAS - C SHARES
THORNBURG FLORIDA INTERMEDIATE MUNICIPAL FUND

Current seven days' annualized yield at 9/30/95 = 4.64%
Dividends per share declared for the period: 0.010547376
Dividend by 7 days 7
Average daily dividend: 0.001506768
Days in year 365
Annualized dividend 0.549970424
Offering price per share on 9/30/95: $11.86
Current seven days' annualized yield 0.046371874
or 4.64%
Current thirty days' annualized yield at 9/30/95 = 4.65%
Dividends per share declared for the period: 0.045374751
Dividend by 30 days 30
Average daily dividend: 0.001512492
Days in year 365
Annualized dividend 0.552059471
Offering price per share on 9/30/95: $11.86
Current thirty days' annualized yield 0.046548016
or 4.65%
Current one year effective yield
assuming reinvestment of dividends = 4.63%
Dividends per share declared for the period: Annualized 0.549295131
Offering price per share on 9/30/95: $11.86
Current one year effective yield 0.046314935
or 4.63%
Standardized yield calculation - Sep-95 = 4.64%

Yield = 2[({[(a - b)/cd] + 1} to the 6th power) - 1]
Where: a = $1,040.06 net interest income attributable to outstanding shares
b = $136.03 expenses accrued for the period net of reimbursements
c = 19,014.88 average daily number of shares of beneficial interest
outstanding during period
d = $11.86 maximum offering price per share of beneficial interest
on: 9/30/95

Total Return for the period ended 09/30/95 since inception of 9/1/94: 7.74%
p(1 + T) to the nth power = erv
p = $1,000.00
n = 1
erv = $1,077.40
T = 7.74% Total Return

Average annual return for the period from inception, 8/31/94 to 09/30/95, 395
days = 6.05%
p(1 + A) to the nth power = erv
p = $1,000.00
n = 1.08 (Total days since inception / 365 days)
erv = $1,065.63
A = 6.05% Average Annual Return

EXHIBIT 17

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 1
[NAME] THORNBURG LIMITED TERM U.S. GOVERNMENT FUND CLASS (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 140,199,343
[INVESTMENTS-AT-VALUE] 143,976,335
[RECEIVABLES] 1,832,467
[ASSETS-OTHER] 545,544
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 146,354,346
[PAYABLE-FOR-SECURITIES] 724,642
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 563,900
[TOTAL-LIABILITIES] 1,288,542
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 148,842,244
[SHARES-COMMON-STOCK] 11,522,086
[SHARES-COMMON-PRIOR] 14,744,174
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (7,553,432)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,776,992
[NET-ASSETS] 145,065,804
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,958,369
[OTHER-INCOME] 0
[EXPENSES-NET] (1,519,983)
[NET-INVESTMENT-INCOME] 9,438,386
[REALIZED-GAINS-CURRENT] (2,412,220)
[APPREC-INCREASE-CURRENT] 6,368,392
[NET-CHANGE-FROM-OPS] 13,394,558
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (9,322,160)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,186,499
[NUMBER-OF-SHARES-REDEEMED] (4,932,085)
[SHARES-REINVESTED] 523,498
[NET-CHANGE-IN-ASSETS] (33,405,638)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (5,141,212)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 759,363
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,544,261
[AVERAGE-NET-ASSETS] 151,507,254
[PER-SHARE-NAV-BEGIN] 12.03
[PER-SHARE-NII] .75
[PER-SHARE-GAIN-APPREC] .37
[PER-SHARE-DIVIDEND] (.75)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.40
[EXPENSE-RATIO] .99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 1
[NAME] THORNBURG LIMITED TERM U.S. GOVERNMENT FUND CLASS (B)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 140,199,343
[INVESTMENTS-AT-VALUE] 143,976,335
[RECEIVABLES] 1,832,467
[ASSETS-OTHER] 545,544
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 146,354,346
[PAYABLE-FOR-SECURITIES] 724,642
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 563,900
[TOTAL-LIABILITIES] 1,288,542
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 148,842,244
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 2,228
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (7,553,432)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,776,992
[NET-ASSETS] 145,065,804
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,958,369
[OTHER-INCOME] 0
[EXPENSES-NET] (1,519,983)
[NET-INVESTMENT-INCOME] 9,438,386
[REALIZED-GAINS-CURRENT] (2,412,220)
[APPREC-INCREASE-CURRENT] 6,368,392
[NET-CHANGE-FROM-OPS] 13,394,558
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (31,280)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 82,523
[NUMBER-OF-SHARES-REDEEMED] (86,760)
[SHARES-REINVESTED] 2,009
[NET-CHANGE-IN-ASSETS] (33,405,638)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (5,141,212)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 759,363
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,544,261
[AVERAGE-NET-ASSETS] 151,507,254
[PER-SHARE-NAV-BEGIN] 12.07
[PER-SHARE-NII] .69
[PER-SHARE-GAIN-APPREC] .35
[PER-SHARE-DIVIDEND] (.69)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.42
[EXPENSE-RATIO] 1.51
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 1
[NAME] THORNBURG LIMITED TERM U.S. GOVERNMENT FUND CLASS (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 140,199,343
[INVESTMENTS-AT-VALUE] 143,976,335
[RECEIVABLES] 1,832,467
[ASSETS-OTHER] 545,544
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 146,354,346
[PAYABLE-FOR-SECURITIES] 724,642
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 563,900
[TOTAL-LIABILITIES] 1,288,542
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 148,842,244
[SHARES-COMMON-STOCK] 178,061
[SHARES-COMMON-PRIOR] 83,187
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (7,553,432)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,776,992
[NET-ASSETS] 145,065,804
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,958,369
[OTHER-INCOME] 0
[EXPENSES-NET] (1,519,983)
[NET-INVESTMENT-INCOME] 9,438,386
[REALIZED-GAINS-CURRENT] (2,412,220)
[APPREC-INCREASE-CURRENT] 6,368,392
[NET-CHANGE-FROM-OPS] 13,394,558
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (84,946)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 129,727
[NUMBER-OF-SHARES-REDEEMED] (41,515)
[SHARES-REINVESTED] 6,662
[NET-CHANGE-IN-ASSETS] (33,405,638)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (5,141,212)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 759,363
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,544,261
[AVERAGE-NET-ASSETS] 151,507,254
[PER-SHARE-NAV-BEGIN] 12.08
[PER-SHARE-NII] .69
[PER-SHARE-GAIN-APPREC] .37
[PER-SHARE-DIVIDEND] (.69)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.45
[EXPENSE-RATIO] 1.52
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 4
[NAME] THORNBURG LIMITED TERM INCOME FUND (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 22,776,986
[INVESTMENTS-AT-VALUE] 23,343,368
[RECEIVABLES] 531,053
[ASSETS-OTHER] 484,747
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24,359,168
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 104,207
[TOTAL-LIABILITIES] 104,207
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 24,653,077
[SHARES-COMMON-STOCK] 1,917,639
[SHARES-COMMON-PRIOR] 1,833,507
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (964,990)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 566,382
[NET-ASSETS] 24,254,961
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,578,325
[OTHER-INCOME] 0
[EXPENSES-NET] (182,072)
[NET-INVESTMENT-INCOME] 1,396,253
[REALIZED-GAINS-CURRENT] (374,893)
[APPREC-INCREASE-CURRENT] 876,248
[NET-CHANGE-FROM-OPS] 1,897,608
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,365,616)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 440,567
[NUMBER-OF-SHARES-REDEEMED] (426,704)
[SHARES-REINVESTED] 70,269
[NET-CHANGE-IN-ASSETS] (2,508,107)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (590,097)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 134,611
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 345,813
[AVERAGE-NET-ASSETS] 21,548,384
[PER-SHARE-NAV-BEGIN] 11.83
[PER-SHARE-NII] .76
[PER-SHARE-GAIN-APPREC] .28
[PER-SHARE-DIVIDEND] (.76)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.11
[EXPENSE-RATIO] .83
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 4
[NAME] THORNBURG LIMITED TERM INCOME FUND (B)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 22,776,986
[INVESTMENTS-AT-VALUE] 23,343,368
[RECEIVABLES] 531,053
[ASSETS-OTHER] 484,747
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24,359,168
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 104,207
[TOTAL-LIABILITIES] 104,207
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 24,653,077
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 855
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (964,990)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 566,382
[NET-ASSETS] 24,254,961
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,578,325
[OTHER-INCOME] 0
[EXPENSES-NET] (182,072)
[NET-INVESTMENT-INCOME] 1,396,253
[REALIZED-GAINS-CURRENT] (374,893)
[APPREC-INCREASE-CURRENT] 876,248
[NET-CHANGE-FROM-OPS] 1,897,608
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,308)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 17,217
[NUMBER-OF-SHARES-REDEEMED] (18,161)
[SHARES-REINVESTED] 89
[NET-CHANGE-IN-ASSETS] (2,508,107)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (590,097)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 134,611
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 345,813
[AVERAGE-NET-ASSETS] 21,548,384
[PER-SHARE-NAV-BEGIN] 11.82
[PER-SHARE-NII] .72
[PER-SHARE-GAIN-APPREC] .28
[PER-SHARE-DIVIDEND] (.72)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.10
[EXPENSE-RATIO] 1.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 4
[NAME] THORNBURG LIMITED TERM INCOME FUND (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 22,776,986
[INVESTMENTS-AT-VALUE] 23,343,368
[RECEIVABLES] 531,053
[ASSETS-OTHER] 484,747
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24,359,168
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 104,207
[TOTAL-LIABILITIES] 104,207
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 24,653,077
[SHARES-COMMON-STOCK] 85,477
[SHARES-COMMON-PRIOR] 4,527
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (964,990)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 566,382
[NET-ASSETS] 24,254,961
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,578,325
[OTHER-INCOME] 0
[EXPENSES-NET] (182,072)
[NET-INVESTMENT-INCOME] 1,396,253
[REALIZED-GAINS-CURRENT] (374,893)
[APPREC-INCREASE-CURRENT] 876,248
[NET-CHANGE-FROM-OPS] 1,897,608
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (26,329)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 92,716
[NUMBER-OF-SHARES-REDEEMED] (13,936)
[SHARES-REINVESTED] 2,170
[NET-CHANGE-IN-ASSETS] (2,508,107)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (590,097)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 134,611
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 345,813
[AVERAGE-NET-ASSETS] 21,548,384
[PER-SHARE-NAV-BEGIN] 11.78
[PER-SHARE-NII] .70
[PER-SHARE-GAIN-APPREC] .30
[PER-SHARE-DIVIDEND] (.70)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.08
[EXPENSE-RATIO] 1.36
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 3
[NAME] THORNBURG INTERMEDIATE MUNICIPAL FUND (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 218,265,472
[INVESTMENTS-AT-VALUE] 228,825,230
[RECEIVABLES] 4,367,700
[ASSETS-OTHER] 164,924
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 233,357,854
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,475,777
[TOTAL-LIABILITIES] 1,475,777
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 224,626,550
[SHARES-COMMON-STOCK] 17,288,644
[SHARES-COMMON-PRIOR] 16,323,587
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,304,231)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,559,758
[NET-ASSETS] 231,882,077
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,651,703
[OTHER-INCOME] 0
[EXPENSES-NET] (2,185,139)
[NET-INVESTMENT-INCOME] 11,466,564
[REALIZED-GAINS-CURRENT] (2,097,030)
[APPREC-INCREASE-CURRENT] 9,826,700
[NET-CHANGE-FROM-OPS] 19,196,234
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (11,325,918)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,708,074
[NUMBER-OF-SHARES-REDEEMED] (3,260,168)
[SHARES-REINVESTED] 517,151
[NET-CHANGE-IN-ASSETS] 23,682,482
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,207,201)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,353,189
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,376,918
[AVERAGE-NET-ASSETS] 216,750,807
[PER-SHARE-NAV-BEGIN] 12.73
[PER-SHARE-NII] .68
[PER-SHARE-GAIN-APPREC] .45
[PER-SHARE-DIVIDEND] (.68)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.18
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 3
[NAME] THORNBURG INTERMEDIATE MUNICIPAL FUND (B)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 218,265,472
[INVESTMENTS-AT-VALUE] 228,825,230
[RECEIVABLES] 4,367,700
[ASSETS-OTHER] 164,924
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 233,357,854
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,475,777
[TOTAL-LIABILITIES] 1,475,777
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 224,626,550
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 26,895
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,304,231)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,559,758
[NET-ASSETS] 231,882,077
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,651,703
[OTHER-INCOME] 0
[EXPENSES-NET] (2,185,139)
[NET-INVESTMENT-INCOME] 11,466,564
[REALIZED-GAINS-CURRENT] (2,097,030)
[APPREC-INCREASE-CURRENT] 9,826,700
[NET-CHANGE-FROM-OPS] 19,196,234
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (49,201)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 192,283
[NUMBER-OF-SHARES-REDEEMED] (221,608)
[SHARES-REINVESTED] 2,430
[NET-CHANGE-IN-ASSETS] 23,682,482
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,207,201)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,353,189
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,376,918
[AVERAGE-NET-ASSETS] 216,750,807
[PER-SHARE-NAV-BEGIN] 12.73
[PER-SHARE-NII] .59
[PER-SHARE-GAIN-APPREC] .40
[PER-SHARE-DIVIDEND] (.59)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.13
[EXPENSE-RATIO] 1.65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 3
[NAME] THORNBURG INTERMEDIATE MUNICIPAL FUND (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 218,265,472
[INVESTMENTS-AT-VALUE] 228,825,230
[RECEIVABLES] 4,367,700
[ASSETS-OTHER] 164,924
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 233,357,854
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,475,777
[TOTAL-LIABILITIES] 1,475,777
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 224,626,550
[SHARES-COMMON-STOCK] 303,171
[SHARES-COMMON-PRIOR] 10,909
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,304,231)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,559,758
[NET-ASSETS] 231,882,077
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,651,703
[OTHER-INCOME] 0
[EXPENSES-NET] (2,185,139)
[NET-INVESTMENT-INCOME] 11,466,564
[REALIZED-GAINS-CURRENT] (2,097,030)
[APPREC-INCREASE-CURRENT] 9,826,700
[NET-CHANGE-FROM-OPS] 19,196,234
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (91,445)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 309,465
[NUMBER-OF-SHARES-REDEEMED] (22,700)
[SHARES-REINVESTED] 5,497
[NET-CHANGE-IN-ASSETS] 23,682,482
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,207,201)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,353,189
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,376,918
[AVERAGE-NET-ASSETS] 216,750,807
[PER-SHARE-NAV-BEGIN] 12.73
[PER-SHARE-NII] .60
[PER-SHARE-GAIN-APPREC] .47
[PER-SHARE-DIVIDEND] (.60)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.20
[EXPENSE-RATIO] 1.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 2
[NAME] THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 128,127,669
[INVESTMENTS-AT-VALUE] 133,256,365
[RECEIVABLES] 3,891,609
[ASSETS-OTHER] 374,299
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 137,522,273
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 136,883,202
[TOTAL-LIABILITIES] 136,883,202
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 132,490,347
[SHARES-COMMON-STOCK] 10,420,504
[SHARES-COMMON-PRIOR] 11,312,926
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (735,841)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5,128,696
[NET-ASSETS] 136,883,202
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,898,965
[OTHER-INCOME] 0
[EXPENSES-NET] (1,387,898)
[NET-INVESTMENT-INCOME] 6,511,067
[REALIZED-GAINS-CURRENT] (543,396)
[APPREC-INCREASE-CURRENT] 4,633,144
[NET-CHANGE-FROM-OPS] 10,600,815
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (6,490,487)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,915,028
[NUMBER-OF-SHARES-REDEEMED] (3,134,511)
[SHARES-REINVESTED] 327,061
[NET-CHANGE-IN-ASSETS] (7,166,676)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (192,445)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 865,405
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,489,534
[AVERAGE-NET-ASSETS] 138,291,954
[PER-SHARE-NAV-BEGIN] 12.72
[PER-SHARE-NII] .60
[PER-SHARE-GAIN-APPREC] .40
[PER-SHARE-DIVIDEND] (.60)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.12
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 2
[NAME] THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND (B)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 128,127,669
[INVESTMENTS-AT-VALUE] 133,256,365
[RECEIVABLES] 3,891,609
[ASSETS-OTHER] 374,299
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 137,522,273
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 136,883,202
[TOTAL-LIABILITIES] 136,883,202
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 132,490,347
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 6,341
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (735,841)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5,128,696
[NET-ASSETS] 136,883,202
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,898,965
[OTHER-INCOME] 0
[EXPENSES-NET] (1,387,898)
[NET-INVESTMENT-INCOME] 6,511,067
[REALIZED-GAINS-CURRENT] (543,396)
[APPREC-INCREASE-CURRENT] 4,633,144
[NET-CHANGE-FROM-OPS] 10,600,815
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (17,017)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 69,495
[NUMBER-OF-SHARES-REDEEMED] (76,399)
[SHARES-REINVESTED] 563
[NET-CHANGE-IN-ASSETS] (7,166,676)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (192,445)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 865,405
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,489,534
[AVERAGE-NET-ASSETS] 138,291,954
[PER-SHARE-NAV-BEGIN] 12.72
[PER-SHARE-NII] .52
[PER-SHARE-GAIN-APPREC] .37
[PER-SHARE-DIVIDEND] (.52)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.09
[EXPENSE-RATIO] 1.64
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 2
[NAME] THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 128,127,669
[INVESTMENTS-AT-VALUE] 133,256,365
[RECEIVABLES] 3,891,609
[ASSETS-OTHER] 374,299
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 137,522,273
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 136,883,202
[TOTAL-LIABILITIES] 136,883,202
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 132,490,347
[SHARES-COMMON-STOCK] 10,757
[SHARES-COMMON-PRIOR] 4,679
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (735,841)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 5,128,696
[NET-ASSETS] 136,883,202
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7,898,965
[OTHER-INCOME] 0
[EXPENSES-NET] (1,387,898)
[NET-INVESTMENT-INCOME] 6,511,067
[REALIZED-GAINS-CURRENT] (543,396)
[APPREC-INCREASE-CURRENT] 4,633,144
[NET-CHANGE-FROM-OPS] 10,600,815
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3,563)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5,853
[NUMBER-OF-SHARES-REDEEMED] (31)
[SHARES-REINVESTED] 256
[NET-CHANGE-IN-ASSETS] (7,166,676)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (192,445)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 865,405
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,489,534
[AVERAGE-NET-ASSETS] 138,291,954
[PER-SHARE-NAV-BEGIN] 12.71
[PER-SHARE-NII] .52
[PER-SHARE-GAIN-APPREC] .41
[PER-SHARE-DIVIDEND] (.52)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.12
[EXPENSE-RATIO] 1.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 5
[NAME] THORNBURG FLORIDA INTERMEDIATE MUNICIPAL FUND (A)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 14,515,387
[INVESTMENTS-AT-VALUE] 14,820,460
[RECEIVABLES] 293,981
[ASSETS-OTHER] 41,224
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 15,155,665
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 74,046
[TOTAL-LIABILITIES] 74,046
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14,884,531
[SHARES-COMMON-STOCK] 1,252,774
[SHARES-COMMON-PRIOR] 699,738
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (107,985)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 305,073
[NET-ASSETS] 15,081,619
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 679,541
[OTHER-INCOME] 0
[EXPENSES-NET] (48,128)
[NET-INVESTMENT-INCOME] 631,413
[REALIZED-GAINS-CURRENT] (77,300)
[APPREC-INCREASE-CURRENT] 434,101
[NET-CHANGE-FROM-OPS] 988,214
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (609,538)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,280,027
[NUMBER-OF-SHARES-REDEEMED] (1,748,521)
[SHARES-REINVESTED] 21,530
[NET-CHANGE-IN-ASSETS] 6,876,500
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (30,685)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 73,419
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 197,152
[AVERAGE-NET-ASSETS] 11,818,372
[PER-SHARE-NAV-BEGIN] 11.54
[PER-SHARE-NII] .63
[PER-SHARE-GAIN-APPREC] .29
[PER-SHARE-DIVIDEND] (.63)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.83
[EXPENSE-RATIO] .38
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 5
[NAME] THORNBURG FLORIDA INTERMEDIATE MUNICIPAL FUND (B)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 14,515,387
[INVESTMENTS-AT-VALUE] 14,820,460
[RECEIVABLES] 293,981
[ASSETS-OTHER] 41,224
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 15,155,665
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 74,046
[TOTAL-LIABILITIES] 74,046
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14,884,531
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 1,731
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (107,985)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 305,073
[NET-ASSETS] 15,081,619
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 679,541
[OTHER-INCOME] 0
[EXPENSES-NET] (48,128)
[NET-INVESTMENT-INCOME] 631,413
[REALIZED-GAINS-CURRENT] (77,300)
[APPREC-INCREASE-CURRENT] 434,101
[NET-CHANGE-FROM-OPS] 988,214
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (18,433)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 53,482
[NUMBER-OF-SHARES-REDEEMED] (55,915)
[SHARES-REINVESTED] 702
[NET-CHANGE-IN-ASSETS] 6,876,500
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (30,685)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 73,419
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 197,152
[AVERAGE-NET-ASSETS] 11,818,372
[PER-SHARE-NAV-BEGIN] 11.55
[PER-SHARE-NII] .55
[PER-SHARE-GAIN-APPREC] .28
[PER-SHARE-DIVIDEND] (.55)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.83
[EXPENSE-RATIO] 1.08
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

[ARTICLE] 6
[CIK] 0000816153
[NAME] THORNBURG INVESTMENT TRUST
[SERIES]
[NUMBER] 5
[NAME] THORNBURG FLORIDA INTERMEDIATE MUNICIPAL FUND (C)
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-END] SEP-30-1995
[INVESTMENTS-AT-COST] 14,515,387
[INVESTMENTS-AT-VALUE] 14,820,460
[RECEIVABLES] 293,981
[ASSETS-OTHER] 41,224
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 15,155,665
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 74,046
[TOTAL-LIABILITIES] 74,046
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 14,884,531
[SHARES-COMMON-STOCK] 21,869
[SHARES-COMMON-PRIOR] 9,422
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (107,985)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 305,073
[NET-ASSETS] 15,081,619
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 679,541
[OTHER-INCOME] 0
[EXPENSES-NET] (48,128)
[NET-INVESTMENT-INCOME] 631,413
[REALIZED-GAINS-CURRENT] (77,300)
[APPREC-INCREASE-CURRENT] 434,101
[NET-CHANGE-FROM-OPS] 988,214
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3,442)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 23,893
[NUMBER-OF-SHARES-REDEEMED] (11,696)
[SHARES-REINVESTED] 250
[NET-CHANGE-IN-ASSETS] 6,876,500
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (30,685)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 73,419
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 197,152
[AVERAGE-NET-ASSETS] 11,818,372
[PER-SHARE-NAV-BEGIN] 11.54
[PER-SHARE-NII] .55
[PER-SHARE-GAIN-APPREC] .32
[PER-SHARE-DIVIDEND] (.55)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.86
[EXPENSE-RATIO] 1.08
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>