<PAGE>
OUTSIDE FRONT COVER
THORNBURG CORE GROWTH FUND
Prospectus THORNBURG INVESTMENT MANAGEMENT
December 27, 2000 LOGO
Thornburg Core Growth Fund
("Growth Fund")
Thornburg Core Growth Fund is a separate investment portfolio of Thornburg
Investment Trust.
These securities have not been approved or disapproved by the Securities
and Exchange Commission or any state securities commission nor has the
Securities and Exchange Commission or any state securities commission
passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Fund shares involve investment risks (including possible loss of
principal), and are not deposits or obligations of, or guaranteed or
endorsed by, and are not insured by, any bank, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any government agency.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
TABLE OF CONTENTS
__ Thornburg Core Growth Fund
Investment Goals
Principal Investment Strategies
Principal Investment Risks
Past Performance of the Fund
Fees and Expenses
__ Additional Information About Fund Investments,
Investment Practices and Risks
__ Potential Advantages of Investing in the Fund
__ Opening Your Account
__ Buying Class A Shares
Buying Class C Shares
__ Selling Fund Shares
__ Investor Services
__ Transaction Details
__ Dividends and Distributions
__ Taxes
__ Organization of the Fund
__ Investment Adviser
<PAGE>
Thornburg Growth Fund
Investment Goals
----------------
The Fund seeks long-term growth of capital by investing in equity
securities selected for their growth potential. This goal is a fundamental
policy of the Fund and may be changed only with shareholder approval.
Principal Investment Strategies
------------------------------
Growth Fund expects to invest primarily in domestic equity securities
(primarily common stocks) selected for their growth potential. However,
the Fund may own a variety of securities, including foreign equity
securities and debt securities.
The Fund's investment adviser, Thornburg Investment Management, Inc.
(Thornburg) intends to invest in companies that it believes will have
growing revenues, earnings and profits. The Fund can invest in companies of
any size, from larger, well-established companies to smaller, emerging
growth companies.
Thornburg primarily uses individual company and industry analysis to make
investment decisions. Among the specific factors considered by Thornburg
in identifying securities for inclusion in the Fund are:
. earnings growth potential . price/revenue ratio
. business model . PE/growth rate ratio
. industry growth potential . price/cash flow ratio
. industry leadership . enterprise value/EBITDA
. asset appreciation potential (earnings before interest,
. potential size of business taxes, depreciation and
. value based on earnings amortization)
growth discount model . management strength
. price/earnings ratio . debt/capital ratio
The Fund typically makes equity investments in the following three types of
companies:
. Growth Industry Leaders are fast growing companies that appear to have
proprietary advantages in industry segments that are experiencing rapid
growth. Stocks of these companies generally sell at premium valuations.
. Consistent Growth Companies. Stocks in this category generally sell at
premium valuations and tend to show steady revenue and earnings growth.
. Emerging Franchises are typically growing companies that in Thornburg's
opinion are in the process of establishing a leading position in a
significant product, service or market and which Thornburg expects will
grow, or continue to grow, at an above average rate. These companies may
not be profitable at the time of purchase.
In conjunction with individual company analysis, Thornburg may identify
economic sectors it expects to experience growth. At times this approach
may produce a focus on certain industries, such as financial services,
healthcare or biotechnology. The exposure to particular economic sectors
or industries likely will vary over time.
Debt securities, usually with associated equity features, occasionally will
be considered for investment when Thornburg believes them to be more
attractive than equity alternatives. The Fund may purchase debt securities
of any maturity and of any quality.
The Fund may engage in active and frequent trading of portfolio securities
to pursue its principal investment strategies. This could result in
taxable capital gains distributions to shareholders, and increased
transaction costs which may affect Fund performance.
Principal Investment Risks
-------------------------
It is possible to lose money on an investment in the Fund. The value of
the Fund's investments varies from day to day, generally reflecting changes
in market conditions, political and economic news, interest rates,
dividends, industry and technological developments, and specific corporate
developments. The value of the Fund's investments can be reduced sharply
by unsuccessful investment strategies, changes in industry leadership, poor
economic growth, high interest rates, and market volatility which may lead
to extended periods of lower valuations of future expected earnings.
Investments in smaller companies involve additional risks, because of
limited product lines, limited access to markets and financial resources,
greater vulnerability to competition and changes in markets, increased
volatility in share price, and possible difficulties in selling shares.
Principal foreign investment risks are changes in currency exchange rates
which may adversely affect the Fund's investments, economic and political
instability, confiscation, inability to sell foreign investments, and
reduced legal protections for investments. Debt securities owned by the
Fund may decrease in value because of interest rate increases, defaults, or
downgrades by rating agencies. The loss of money is a risk of investing in
the Fund, and when you sell your shares they may be worth less than what
you paid for them.
An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
Additional information about Fund investments, investment strategies, and
risks of investing in the Fund appears below beginning on page __.
Past Performance of the Fund
----------------------------
Growth Fund commenced investment operations on December 27, 2000. Fund
performance results have not been provided because the Fund has not been in
existence for a full calendar year.
Fees and Expenses of the Fund
-----------------------------
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
----------------
Class A Class C
------- -------
Maximum Sales Charge (Load) on Purchases 4.50% none
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) on
Redemptions 1.00* 1.00%**
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
* Imposed only on redemptions of purchases greater than $1 million or
greater in the event of a redemption within 12 months of purchase.
** Imposed only on redemptions of Class C shares within 12 months
of purchase.
Annual Fund Operating Expenses (expenses that are deducted
------------------------------ from Fund assets)
Class A Class C
Management Fee .88% .88%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses 1.94% 4.17%
----- ------
Total Annual Operating Expenses 3.07%* 6.05%*
*Other expenses in the table are estimated for the current fiscal year,
before expense reimbursements. Thornburg Investment Management, Inc.
intends to reimburse expenses so that actual Class A expenses are 1.63% and
actual Class C expenses are 2.38%. Reimbursement of expenses may be
terminated at any time.
Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and redeem all of your shares at the end of these
periods. The Example also assumes that your investment has a 5% return
each year, dividends and distributions are reinvested, and that the Fund's
operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years
------ -------
Class A Shares $746 $1,355
Class C Shares 702 1,787
You would pay the following expenses if you did not redeem your Class C
shares:
1 Year 3 Years
------ -------
Class C Shares $602 $1,787
<PAGE>
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS, INVESTMENT PRACTICES, AND
RISKS
We describe below in greater detail the equity securities which the Fund
invests in as a principal investment strategy. We also describe below
securities and investment practices which the Fund may sometimes use as
secondary investment strategies, but which are not of principal importance
to the Fund. The investment profile of the Fund will vary over time,
depending on various factors, and the Fund may not invest in all of the
securities it is permitted to purchase. You will find more information on
these subjects in the Fund's Statement of Additional Information.
Principal Investment Strategy: Domestic
-----------------------------
Equity Securities.
-----------------
The Fund invests in equity securities as a principal investment strategy.
Equity securities include common stocks, preferred stocks, convertible
securities, warrants, partnership interests and publicly traded real estate
investment trusts. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions.
Secondary Investment Strategies.
-------------------------------
Debt Securities.
---------------
The Fund may invest in debt securities. Bonds and other debt instruments,
including convertible debt securities, are used by issuers to borrow money
from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. Debt securities have
varying degrees of quality and varying levels of sensitivity to changing
interest rates. Longer-term debt securities are generally more sensitive
to interest rate changes than short term debt securities. Lower-quality
debt securities (sometimes called "junk bonds" or "high yield securities")
are rated below investment grade by the primary rating agencies, and are
often considered to be speculative.
The Fund may invest in debt securities of any quality, including high yield
securities commonly known as "junk bonds."
Securities which are rated within the four highest ratings of a ratings
agency are considered "investment grade" securities. These securities are
regarded by rating agencies as having a capacity to pay interest and repay
principal that varies from "extremely strong" to "adequate". The lowest
ratings of the investment grade securities may have speculative
characteristics, and may be more vulnerable to adverse economic conditions
or changing circumstances. Junk bonds involve greater risk of default or
price changes due to changes in the issuer's creditworthiness, or they may
already be in default. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in
periods of general economic difficulty or in response to adverse publicity
or changes in investor perceptions.
U.S. Government Securities.
--------------------------
The Fund may invest in U.S. Government securities. 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. U.S. Government securities also include
"agency obligations." Some agency obligations are backed by the full faith
and credit of the U.S. Government, but other agency obligations are
supported by the agency's authority to borrow from the U.S. Government or
the discretionary authority of the Treasury to purchase obligations of the
issuing agency.
Foreign Securities.
------------------
The Fund may invest in foreign securities. Foreign securities and foreign
currencies may involve additional risks. Securities of foreign issuers,
even if denominated in U.S. dollars, may be affected significantly by
fluctuations in the value of foreign currencies, and the value of these
securities in U.S. dollars may decline even if the securities increase in
value in their home country. Foreign securities also are subject to
greater political risk, including nationalization of assets, confiscatory
taxation, currency exchange controls, excessive or discriminatory
regulations, and restrictions on repatriation of assets and earnings to the
United States. In some countries, there may be political instability or
insufficient governmental supervision of markets, and the legal protections
for the Fund's investments could be subject to unfavorable judicial or
administrative changes. Further, governmental issuers may be unwilling or
unable to repay principal and interest when due, and may require that the
terms for payment be renegotiated. Markets in some countries may be more
volatile, and subject to less stringent investor protection and disclosure
requirements and it may be difficult to sell securities in those markets.
Moreover, the economics in many countries may be relatively unstable
because of dependence on a few industries or economic sectors.
Temporary Investments.
---------------------
The Fund may purchase short-term, highly liquid securities such as time
certificates of deposit, short-term U.S. Government securities, and
commercial paper. The Fund typically holds these securities under normal
conditions pending investment of idle funds or to provide liquidity. The
Fund also may hold assets in these securities for temporary defensive
conditions. Investment in these securities for temporary periods could
reduce the Fund's ability to attain its investment objectives.
Investments in Other Investment Companies.
-----------------------------------------
The Fund may invest in securities of closed end investment companies,
although this is not a principal strategy of the Fund. Up to 5% of its
total assets at the time of purchase may be invested in any one investment
company, provided that after its purchase no more than 3% of that
investment company's outstanding stock is owned by the Fund, and provided
further, that no more than 10% of the Fund's total assets are invested in
investment companies. Thornburg will charge an advisory fee on the portion
of the Fund's assets that are invested in securities of other investment
companies. Thus shareholders will be paying a "double fee" on those assets
since the advisers of the investment companies also will be charging fees
on the same assets.
Adjusting Investment Exposure.
-----------------------------
The Fund may use various techniques to increase or decrease its exposure to
changing securities prices, interest rates, currency exchange rates,
commodity prices, or other factors that affect securities values. These
techniques may involve derivative transactions such as buying and selling
options and futures contracts, entering into currency exchange contracts or
swap agreements, and purchasing indexed securities. The Fund may sell
securities short. Thornburg can use these practices to adjust the risk and
return characteristics of the Fund's portfolio of investments. If
Thornburg judges market conditions incorrectly or employs a strategy that
does not correlate well with the Fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk or
increase return. These techniques may increase the price volatility of the
Fund and may involve a small investment of cash relative to the magnitude
of the risk assumed. In addition, these techniques could result in a loss
if the counter-party to the transaction does not perform as promised.
Illiquid and Restricted Securities.
----------------------------------
Some investments may be determined by Thornburg, under the supervision of
the Trustees, to be illiquid, which means that they may be difficult to
sell promptly at an acceptable price. The sale of other securities,
including illiquid securities, may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the Fund.
Borrowing.
---------
The Fund may borrow from banks or through reverse repurchase agreements.
If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If the Fund makes additional
investments while borrowings are outstanding, this may be considered a form
of leverage.
POTENTIAL ADVANTAGES OF INVESTING IN THE FUND
Investing through a mutual fund permits smaller investors to diversify an
investment among a larger number of securities. Investment in a mutual
fund also relieves the investor of many investment management and
administrative burdens usually associated with the direct purchase and sale
of securities, otherwise consistent with that fund's investment objectives
and management policies. 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.
OPENING YOUR ACCOUNT
Complete and sign an account application and give it, along with your
check, to your financial advisor. You may also open your account by mail,
by sending your application with your check payable to the Fund. You may,
if there is no application accompanying this Prospectus, call 1-800-847-
0200.
The minimum amount to open an account is $5,000, except that an individual
retirement account may be opened with $2,000. The minimum amount to add to
an account is $100. You also may exchange from one Thornburg Fund into
another Thornburg Fund. See "Investor Services," below.
You may add to an existing account by mail, wire, or through your financial
advisor. Add to your account by mailing a check payable to your Fund, and
be sure to note your account number on the check. If you wish to add to an
account by wire, telephone 1-800-847-0200 for wiring instructions. Add to
an account through your financial advisor by telephoning your advisor.
You also may add to an account through the Automatic Investment Program.
See "Investor Services," below, or telephone us at 1-800-847-0200 for
details.
THE FUND OFFERS DIFFERENT CLASS OF SHARES
The Fund currently offers Class A and Class C shares. Each of a Fund's
shares represents an equal undivided interest in the Fund's assets, and the
Fund has common investment objectives and a common investment portfolio.
Each class may have varying annual expenses and sales charge structures,
which may affect performance. If you do not specify a class of shares in
your order, your money will be invested in Class A shares of the Fund.
Financial advisors and others who sell shares of the Fund receive different
compensation for selling different classes of the Fund's 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. All orders are subject to acceptance by the Fund,
and the Fund and TSC reserve the right to refuse any order in whole or in
part.
The Fund also may issue one or more other classes of shares not offered
through this Prospectus. Different classes may have different sales
charges and other expenses which may affect performance. Investors may
telephone the Fund's distributor, TSC, at (800) 847-0200 to obtain more
information concerning the various classes of shares which may be available
to them through their sales representatives. Investors may also obtain
information respecting the different classes of shares through their sales
representative or other person who is offering or making available shares
of the Fund.
NET ASSET VALUE
When you purchase shares, the price is based on the net asset value (NAV)
next determined after receipt of your order. The net asset value is the
value of a share, and is computed for each class of the Fund by adding the
market value of investments, cash and other assets for the class,
subtracting liabilities, and then dividing by the number of shares
outstanding. Share price is normally calculated at 4:00 p.m. Eastern time
on each day the New York Stock Exchange is open for business.
BUYING CLASS A SHARES
Class A shares are sold subject to a front-end sales charge. The sales
charge is deducted from the offering price when you purchase shares, and
the balance is invested at net asset value (NAV). The sales charge is not
imposed on shares that are purchased with reinvested dividends or other
distributions. Class A shares are also subject to a Rule 12b-1 Service
Plan, which provides for the Fund's payment to Thornburg of up to 1/4 of 1%
of the class's net assets each year, to obtain various shareholder related
services. Because this service fee is paid out of the class's assets on an
ongoing basis, over time these fees will increase the cost of your
investment and may cost more than paying other types of sales charges.
Because the fees for Class A shares of the Fund are lower than the fees for
Class C shares of the Fund, Class A shares of the 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 the Fund for a given amount invested.
If you are in any of the special classes of investors who can buy Class A
shares at net asset value or at a reduced sales charge, you should consider
buying Class A shares. If you are planning a large purchase or purchases
under the Right of Accumulation or Letter of Intent you should consider if
your overall costs will be lower by buying Class A shares, particularly if
you plan to hold your shares for an extended period of time.
<TABLE>
Class A Shares
Total Sales Charge
As Percentage As Percentage
of Offering Price of Net Asset
<S> <C> <C>
Growth Fund
----------------------
Less than $50,000 4.50% 4.71%
$50,000 to 99,999.99 4.00% 4.17%
$100,000 to 249,999.99 3.50% 3.63%
$250,000 to $499,999.99 3.00% 3.09%
$500,000 to 999,999.99 2.00% 2.04%
%1,000,000 and over 0.00% 0.00%*
</TABLE>
* A 1% CDSC is imposed on any portion of such purchases which are
redeemed within one year. TSC or Thornburg intend to pay a
commission of 1% to financial advisors who place orders from $1
million to $2 million, a commission of .7% for portions of any such
trade exceeding $2 million and less than $4 million, and a commission
of .5% for portions of any such trade exceeding $4 million.
At certain times, for specific periods, TSC may reallow up to the
full sales charge to all dealers who sell Fund shares. These "full
reallowances" may be based upon the dealer reaching specified minimum
sales goals. TSC will reallow the full sales charge only after
notifying all dealers who sell Fund shares. During such periods,
dealers may be considered underwriters under securities laws.
Thornburg or TSC also may pay additional cash or non-cash
compensation to dealer firms which have selling agreements with TSC.
Those firms may pay additional compensation to financial advisors who
sell Fund shares. Non-cash compensation may include travel and
lodging in connection with seminars or other educational programs.
LETTERS OF INTENT. If you intend to invest, over the course of 13 or fewer
months, an amount of money that would qualify for a reduced sales charge if
it were made in one investment, you can qualify for the reduced sales
charge on the entire amount of your investment by signing a "Letter of
Intent" (LOI). Each investment you make during the 13 months will be
charged the reduced sales commission applicable to the amount stated in
your LOI. You do not have to reach the goal you set. If you don't, you will
have to pay the difference between the sales charge you would have paid and
the sales charge you did pay. You may pay this amount directly to TSC, or
TSC will redeem a sufficient number of your shares in the Fund to obtain
the difference.
RIGHTS OF ACCUMULATION. Each time the value of your account plus the amount
of any new investment passes one of the breakpoints illustrated in the
table below, the amount of your new investment in excess of the breakpoint
will be charged the reduced sales charge applicable to that range.
SALES CHARGE WAIVERS. You may purchase Class A shares of the Fund with no
sales charge if you notify TSC or the Fund's 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 THE FUND. For two years after
such a redemption you will pay no sales charge on amounts that you
reinvest in Class A shares of the Fund, up to the amount you previously
redeemed.
AN OFFICER, TRUSTEE, DIRECTOR, OR EMPLOYEE OF THORNBURG (or any investment
company managed by THORNBURG), TSC, any affiliated Thornburg Company, the
Fund's Custodian bank or Transfer Agent and members of their families
including trusts established for the benefit of the foregoing.
EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the
National Association of Securities Dealers, Inc. (NASD); employees of
financial planning firms who p lace orders for the Fund through a member
in good standing with NASD; the families of both types of employees.
Orders must be placed through an NASD member firm who has signed an
agreement with TSC to sell Fund shares.
CUSTOMERS of bank trust departments, companies with trust powers,
investment broker dealers and investment advisors who charge fees for
service, including investment broker dealers who utilize wrap fee or
similar arrangements. Accounts established through these persons are
subject to conditions, fees and restrictions imposed by these persons.
INVESTORS PURCHASING $1 MILLION OR MORE. However, a contingent deferred
sales charge of 1% 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 Fund 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 advisors or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; (ii) clients of such
investment advisors or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such
investment advisor or financial planner on the books and records of the
broker or agent; and iii) retirement and deferred compensation plans and
trusts used to fund those plans, including, but not limited to, those
defined in Sections 401(a), 403(b) or 457 of the Internal Revenue Code and
"rabbi trusts." Investors may be charged a fee if they effect
transactions in Fund shares through a broker or agent.
PROCEEDS FROM A LOAD FUND REDEMPTION. You may purchase shares of the 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. Class C shares are sold at the NAV next determined
after your order is received. Class C shares are subject to a 1%
contingent deferred sales charge (CDSC) if the shares are redeemed within
one year of purchase. The percentage is calculated on the amount of the
redemption proceeds for each share, or the original purchase price,
whichever is lower. Shares not subject to the CDSC are considered redeemed
first. The CDSC is not imposed on shares purchased with reinvested
dividends or other distributions. Class C shares are subject to a Rule
12b-1 Service Plan providing for payment of a service fee of up to 1/4 of
1% of the class's net assets each year, to obtain shareholder related
services. Class C shares are also subject to a Rule 12b-1 Distribution
Plan providing for payment of a distribution fee of up to 3/4 of 1% of the
class's net assets each year, to pay for the sale and distribution of the
Fund's shares and to pay for commissions and other distribution expenses.
Because these service and distribution fees are paid out of the class's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost more than paying other types of sales charges.
Purchases of $1,000,000 or more of Class C shares will not be accepted.
If your investment horizon is relatively short and you do not qualify to
purchase Class A shares at a reduced sales charge, you should consider
purchasing Class C shares.
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 redeemed by
the Fund at the next share price (NAV) calculated after your order is
received in proper form. The amount of the CDSC, if any, will be deducted
and the remaining proceeds sent to you. No CDSC is imposed on the amount by
which the value of a share may have appreciated. Similarly, no CDSC is
imposed on shares obtained through reinvestment of dividends or capital
gains. Shares not subject to a CDSC will be redeemed first. Share price is
normally calculated at 4 p.m. Eastern time.
* Your 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.
* Payment for shares redeemed normally will be made by mail the next
business day, and in most cases within seven days, after receipt by the
Transfer Agent of a properly executed request for redemption
accompanied by any outstanding certificates in proper form for
transfer. The Funds may suspend the right of redemption and may
postpone payment when the New York Stock Exchange is closed for other
than weekends or holidays, or if permitted by rules of the Securities
and Exchange Commission during an emergency which makes it impractical
for the Funds to dispose of their securities or fairly to determine net
asset value, or during any other period specified by the Securities and
Exchange Commission in a rule or order for the protection of investors.
* No interest is accrued or paid on amounts represented by uncashed
distribution or redemption checks.
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. The Fund reserves the
right to redeem the shares of any shareholder whose shares have a net asset
value of less than $1,000. The Fund will notify the shareholder before
performing the redemption.
To redeem shares in an account, you may use any of the following methods.
Written Instructions
-------------------
Mail your instructions to the transfer agent at the address shown on the
back cover page. Instructions must include the following information:
. Your name
. The Fund's name
. Fund Account number
. Dollar amount or number of shares to be redeemed
. Signature guarantee, if required (see below for instructions)
. Signature (see below for signature instructions)
Signature Requirements.
Individual, Joint Tenants, Tenants in Common, Sole Proprietor General
Partner Instructions must be signed by all persons required to sign
for transactions, exactly as their names appear on the account.
UGMA or UTMA. Instructions must be signed by the custodian exactly as
it appears on the account.
Trust. Instructions must be signed by trustee, showing trustee's
capacity. If trustee's name is not an account registration, provide a
copy of trust document certified within the last 60 days.
Corporation, Association. Instructions must be signed by person
authorized to sign on account. A signature guarantee is required.
Please include a copy of corporate resolution authorizing the signer
to act.
IRA or Retirement Account. See IRA instructions or telephone
1-800-847-0200.
Executor, Administrator, Conservator, Guardian. Telephone
1-800-847-0200.
Telephone Redemption
-------------------
If you completed the telephone redemption section of your application when
you first purchased your shares, you may redeem by telephoning your Fund
Customer Representative at 1-800-847-0200. Money may be wired to your bank
account designated on your account application or sent to you in a check.
The Funds' transfer agency may charge a wire fee, which will be deducted
from the amount wired. If you did not complete the telephone redemption
section of your account application you may add this feature to your
account. The minimum wire redemption is $1,000, and the minimum check
redemption is $50.00. See "Investor Services," below, or telephone 1-800-
847-0200.
Redeem Through Financial Adviser
-------------------------------
Consult with your financial advisor. Your financial adviser may charge a
fee.
Internet Redemption
-------------------
You may redeem shares of any Fund by contacting Thornburg at its Website,
www.thornburg.com, and following the instructions.
Systematic Withdrawal Plan
-------------------------
Systematic withdrawal plans let you set up periodic redemptions from your
account. Because of the sales charge on Class A shares of the Fund, you
may not want to set up a systematic withdrawal plan during a period when
you are buying Class A shares of the Fund on a regular basis. Minimum
account size for this feature is $10,000, and the minimum payment is
$50.00. Please telephone your Fund Customer Representative at 1-800-847-
0200.
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 $25,000 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,
* The redemption proceeds are being transferred to a Thornburg account
with a different registration, or
* The redemption proceeds are otherwise being transferred differently than
your account record authorizes.
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.
INVESTOR SERVICES
Fund Information
----------------
Thornburg's telephone representatives are available Monday through Friday
from 9:30 a.m. to 6:30 p.m. Eastern time. Whenever you call, you can speak
with someone equipped to provide the information or service you need.
Statements and reports sent to you include the following:
. Account statements after every transaction affecting your account.
. Quarterly account statements.
. Financial reports (every six months).
Thornburg's Website on the Internet provides you with helpful information
24 hours a day, at www.thornburg.com.
Automatic Investment Plan
-------------------------
One easy way to pursue your financial goals is to invest money regularly.
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. Certain restrictions apply for retirement accounts.
Call 800-847-0200 and speak to a Fund Customer Service Representative for
more information.
Exchanging Shares
-----------------
As a shareholder, you have the privilege of exchanging Class A shares of
the Fund for Class A shares of other Thornburg Funds. However, you should
note the following:
. The Fund you are exchanging into must be registered for sale in your
state.
. You may only exchange between accounts that are registered in the
same name address, and taxpayer identification number.
. Before exchanging into a Fund, obtain and read the prospectus.
. Exchanges may have tax consequences for you.
. Because excessive trading can hurt fund performance and shareholders,
the 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.
. The Fund reserves the right to refuse exchange purchases by any
person or group if, in Thornburg'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 the Fund will attempt to give prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
The Thornburg Funds reserve the right to terminate or modify the exchange
privilege in the future.
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
by telephone simply by calling a Fund Customer Service Representative.
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 the address shown in
the application.
The Fund, TSC, Thornburg and the Fund's 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 Fund's
Transfer Agent will attempt to implement reasonable procedures to prevent
unauthorized transactions and the Fund or its Transfer Agent could be
liable if these procedures are not employed. These procedures will include
recording of telephone transactions, providing written confirmation of such
transactions within 5 days, and requesting certain information to better
confirm the identity of the caller at the time of the transaction. You
should verify the accuracy of your confirmation statements immediately
after you receive them.
Street Name Accounts
--------------------
Some broker dealers and other financial services firms offer to act as
owner of record of Fund shares as a convenience to investors who are
clients of those firms. Neither the Fund nor its 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 elects to hold Fund shares in street-name through an account
with a financial firm rather than directly in the shareholder's own name.
Further, neither the Fund nor its Transfer Agent will be responsible to the
investor for any loss to the investor due to the failure of a financial
firm, its loss of property or funds, or its acts or omissions. Prospective
investors are urged to confer with their financial advisors to learn about
the different options available for owning mutual funds shares. You may
receive share certificates or hold shares in your name with the Transfer
Agent upon request.
TRANSACTION DETAILS
The Fund is open for business each day the New York Stock Exchange (NYSE)
is open. The Fund normally calculates its net asset value for each class
of shares as of the close of business of the NYSE, normally 4 p.m. Eastern
time. Bonds and other fixed income securities are valued primarily using
prices obtained from independent pricing services. Equity securities such
as common stocks are valued primarily on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded, and are translated from the local currency
into U.S. dollars using current exchange rates. If quotations are not
readily available assets are valued by a method that the Trustees believe
accurately reflects fair value. Because the Fund may own securities listed
primarily on foreign exchanges which trade on days the Fund does not price
its shares, the net asset value of the Fund's shares may change on days
when shareholders cannot purchase or redeem Fund shares.
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.
The Fund reserves the right to suspend the offering of shares for a period
of time. The Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchanging Shares"
above. Purchase orders may be refused if, in Thornburg's opinion, they
would disrupt management of the Fund.
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 Fund does 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 the 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 which have entered into sales agreements
with TSC may enter confirmed purchase orders on behalf of customers by
phone, with payments 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.
The Fund may authorize certain securities brokers to receive on its behalf
purchase and redemption orders received in good form, and some of those
brokers may be authorized to designate other intermediaries to receive
purchase and redemption orders on the Fund's behalf. Provided the order is
promptly transmitted to the Fund, the Fund will be deemed to have received
a purchase or redemption order at the time it is accepted by such an
authorized broker or its designee, and customer orders will be priced based
upon the Fund's net asset value next computed after the order is received
by the authorized broker or its designee.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net income and realized
capital gains, if any, to shareholders each year. The Fund distributes any
net investment income quarterly. The 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
The Fund may earn interest from bond, money market, and other investments.
These are passed along as dividend distributions. The 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. The 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 at the next determined net
asset value. If you do not indicate a choice on your application, you
will be assigned this option. You may also instruct the Fund to invest
your dividends in the shares of any other Thornburg Fund.
2. Cash Option. You will be sent a check for your dividend distributions.
Cash distribution checks are normally mailed on the third business day
after the month-end.
Capital Gains
1. Reinvestment Option. Your capital gain distributions, if any, will be
automatically reinvested in additional shares of the Fund at the next
determined net asset value. If you do not indicate a choice on your
application, you will be assigned this option. You may also instruct
the Fund to re invest your capital gain distributions in shares of any
other Thornburg Fund.
2. Cash Option. You will be sent a check for any capital gain
distributions.
Shares of any Thornburg Fund purchased through reinvestment of dividend and
capital gain distributions are not subject to sales charges or contingent
deferred sales charges. No interest is accrued or paid on amounts
represented by uncashed distribution checks.
Turnover and Capital Gains
The Fund does 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 the 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, the 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 - In General
Certain general aspects of federal income taxation of individual shareholders
are discussed below. Aspects of investment by shareholders who are not
individuals are addressed in a more limited manner. Prospective investors,
and in particular persons who are not individuals, should consult their own
tax advisers concerning federal, state and local tax consequences respecting
investments in the Funds.
Federal Tax Treatment of Distributions
Distributions to shareholders 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 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
by shareholders regardless of the length of time the shareholder has owned
the shares, and whether received as cash or in additional shares.
Federal Tax Treatment of Sales or Redemptions of Shares
Redemption or resale of shares by a shareholder 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 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.
State Taxes
With respect to distributions of interest income and capital gains from the
Fund, the laws of the several states and local taxing authorities vary with
respect to the taxation of such distributions, and shareholders of the Funds
are advised to consult their own tax advisers in that regard.
ORGANIZATION OF THE FUND
Thornburg Core Growth Fund 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 Trust currently has eight other active series,
each with a separate investment portfolio. The Trustees are authorized to
divide the Trust's shares into additional series and classes.
INVESTMENT ADVISER
The Fund is managed by Thornburg Investment Management, Inc. (Thornburg).
Thornburg performs investment management services for the Fund under the
terms of an Investment Advisory Agreement which specifies that Thornburg will
select investments for the Fund, monitor those investments and the markets
generally, and perform related services. Thornburg also performs
administrative services applicable to each class under an Administrative
Services Agreement which requires that Thornburg will supervise, administer
and perform certain administrative services necessary for the maintenance of
each class of shareholders. Thornburg's services to the Fund and the Fund is
supervised by the Trustees of Thornburg Investment Trust.
The annual investment advisory and administrative services fee rates for each
class of the Fund are .875% and .125%, respectively.
The advisory fee rate for the Fund decreases as assets increase, as described
in the Statement of Additional Information.
Investment decisions are made by a team of individuals employed by Thornburg.
Thornburg may, from time to time, agree to waive its fees or to reimburse the
Fund for expenses above a specified percentage of average daily net assets.
Thornburg retains the ability to be repaid by the Fund 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 boost its performance,
and repayment of waivers or reimbursements will reduce its performance.
In addition to Thornburg's fees, the Fund will pay all other costs and
expenses of its operations. The Fund will not bear any costs of sales or
promotion incurred in connection with the distribution of its shares, except
as described above under "Buying Class A Shares" and "Buying Class C Shares".
Thornburg Securities Corporation (TSC) distributes and markets the Thornburg
Funds. Thornburg or TSC may make payments from their own resources to assist
in the sales or promotion of the Fund.
H. Garrett Thornburg, Jr., a Director and Chairman of the Company, and a
Trustee and Chairman of the Trust, is the controlling stockholder of both
Thornburg and TSC.
OUTSIDE BACK COVER
ADDITIONAL INFORMATION
Reports to Shareholders
Shareholders will receive annual
reports of their Fund containing
financial statements audited by the
Fund's independent auditors, and
also will receive unaudited semi-
annual reports. In addition, each
shareholder will receive an account
statement no less often than quarterly.
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 Investment Management, 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
Custodian
State Street Bank & Trust Co.
1 Heritage Drive
North Quincy, Massachusetts 02171
Transfer Agent
State Street Bank & Trust Co.
c/o NFDS Servicing Agent
Post Office Box 419017
Kansas City, Missouri 64141-6017
Additional information about the Funds' investments is available in the
Fund's Annual and Semiannual Reports to Shareholders. In the Fund's Annual
Report you will find a discussion of the market conditions and investment
strategies which significantly affected the Fund's performance during its
last fiscal year. The Fund's Statement of Additional Information (SAI) and
the Fund's Annual and Semiannual Reports are available without charge upon
request. Shareholders may make inquiries about the Fund, and investors may
request copies of the SAI, Annual and Semiannual Reports, and obtain other
Fund information, by contacting Thornburg Securities Corporation at 119 East
Marcy Street, Suite 202, Santa Fe, New Mexico 87501 (800) 847-0200. The
Fund's current SAI is incorporated in this Prospectus by reference (legally
forms a part of this Prospectus).
Information about the Fund (including the SAI) may be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Fund are also available on the Commission's Internet
site at http://www.sec.gov and copies of information may be obtained, upon
payment of a duplicating fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-6009, or by contacting the Commission at
[email protected].
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 the Fund or Thornburg
Securities Corporation. This Prospectus constitutes an offer to sell
securities of the Fund only in those states where the Fund's shares have
been registered or otherwise qualified for sale. The Fund will not accept
applications from persons residing in states where the Fund's shares are
not registered.
Thornburg Securities Corporation, Distributor
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
www.thornburg.com email: [email protected]
Thornburg Core Growth Fund is a separate series of Thornburg Investment
Trust, which files its registration statements and certain other
information with the Commission under Investment Company Act of 1940 file
number 811-05201.
<PAGE>
Statement of Additional Information
for
Thornburg Core Growth Fund
("Growth Fund")
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
Thornburg Core Growth Fund ("Growth Fund") is an investment portfolio
established by Thornburg Investment Trust (the "Trust"). This Statement of
Additional Information relates to the investments made or proposed to be
made by the Fund, investment policies governing the Fund, the Fund's
management, and other issues of interest to a prospective purchaser of
Class A and Class C shares offered by the Fund.
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Fund's Prospectus dated December 27,
2000. A copy of the Prospectus and the most recent Annual and Semiannual
Reports for the Fund 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.
Prior to October 1, 1995, the Trust's name was "Thornburg Income
Trust."
The date of this Statement of Additional Information is December 27,
2000.
<PAGE>
TABLE OF CONTENTS
ORGANIZATION OF THE FUND. . . . . . . . . . . . . . . . . . . .__
Illiquid Investments. . . . . . . . . . . . . . . . . . . . .__
Restricted Securities . . . . . . . . . . . . . . . . . . . .__
Swap Agreements, Caps, Floors, Collars. . . . . . . . . . . .__
Indexed Securities. . . . . . . . . . . . . . . . . . . . . .__
Repurchase Agreements . . . . . . . . . . . . . . . . . . . .__
Reverse Repurchase Agreements . . . . . . . . . . . . . . . .__
Securities Lending. . . . . . . . . . . . . . . . . . . . . .__
Lower-Quality Debt Securities . . . . . . . . . . . . . . . .__
Foreign Investments . . . . . . . . . . . . . . . . . . . . .__
Foreign Currency Transactions . . . . . . . . . . . . . . . .__
Limitations on Futures and Options Transactions . . . . . . .__
Real Estate-Related Instruments . . . . . . . . . . . . . . .__
Futures Contracts . . . . . . . . . . . . . . . . . . . . . .__
Futures Margin Payments-Value Fund. . . . . . . . . . . . . .__
Purchasing Put and Call Options . . . . . . . . . . . . . . .__
Writing Put and Call Options. . . . . . . . . . . . . . . . .__
Combined Positions. . . . . . . . . . . . . . . . . . . . . .__
Correlations of Price Changes . . . . . . . . . . . . . . . .__
Liquidity of Options and Futures Contracts-OTC Options. . . .__
Option and Futures Relating to Foreign Currencies . . . . . .__
Asset Coverage for Futures and Options Positions. . . . . . .__
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . .__
YIELD AND RETURN COMPUTATION. . . . . . . . . . . . . . . . . .__
Performance and Portfolio Information . . . . . . . . . . . .__
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .__
Federal Income Taxes-In General . . . . . . . . . . . . . . .__
Federal Income Taxes. . . . . . . . . . . . . . . . . . . . .__
State and Local Income Tax Considerations . . . . . . . . . .__
DISTRIBUTIONS AND SHAREHOLDERS ACCOUNTS . . . . . . . . . . . .__
INVESTMENT ADVISER, INVESTMENT ADVISORY AGREEMENT, AND
ADMINISTRATIVE SERVICES AGREEMENT . . . . . . . . . . . . . .__
Investment Advisory Agreement . . . . . . . . . . . . . . . .__
Administrative Services Agreement . . . . . . . . . . . . . .__
SERVICE AND DISTRIBUTION PLANS. . . . . . . . . . . . . . . . .__
PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . .__
In General. . . . . . . . . . . . . . . . . . . . . . . . . .__
Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . .__
Portfolio Turnover Rates. . . . . . . . . . . . . . . . . . .__
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .__
-i-
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . .__
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . .__
ADDITIONAL INFORMATION RESPECTING
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . .__
INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . .__
-ii-
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a diversified series of Thornburg Investment Trust, a
Massachusetts business trust (the "Trust") organized on June 3, 1987 as a
diversified, open-end management investment company under a Declaration of
Trust (the "Declaration"). The Trust currently has nine active Funds, one
of which is described in this Statement of Additional Information. The
Trustees are authorized to divide the Trust's shares into additional series
and classes.
The assets received for the issue or sale of shares of the Fund and
all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, are especially allocated to the Fund, and constitute
the underlying assets of that Fund. The underlying assets of the Fund are
segregated on the books of account, and are charged with the liabilities
with respect to the Fund and with a share of the general expense of the
Trust. Expenses with respect to the Trust are allocated in proportion to
the asset value of the respective series and classes of the Trust except
where allocations of direct expense can otherwise be fairly made. The
officers of the Trust, subject to the general supervision of the Trustees,
determine which expenses are allocable to the Fund, or generally allocable
to all of the several funds of the Trust. In the event of the dissolution
or liquidation of the Trust, shareholders of the Fund are entitled to
receive the underlying assets of that Fund which are available for
distribution.
The Fund may in the future, rather than invest in securities
generally, seek to achieve its investment objectives by pooling its assets
with assets of other funds for investment in another investment company
having the same investment objective and substantially similar investment
policies and restrictions as the Fund. The purpose of such an arrangement
is to achieve greater operational efficiencies and to reduce cost. It is
expected that any such investment company would be managed by Thornburg
Investment Management, Inc. (Thornburg) in a manner substantially similar
to the corresponding Fund. Shareholders of the Fund would receive prior
written notice of any such investment, but may not be entitled to vote on
the action. Such an investment would be made only if at least a majority of
the Trustees of the Fund determined it to be in the best interest of the
Fund and its shareholders.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust
may, under certain circumstances, be held personally liable for the
obligations of the trust. The Declaration of Trust provides that the Trust
shall not have any claim against shareholders except for the payment of the
purchase price of shares. However, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. Thornburg believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The 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.
The Fund will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on. The number of votes you
are entitled to is based upon the number of shares you own. Shares do not
have cumulative rights or preemptive rights.
State Street Bank and Trust, Boston, Massachusetts, is custodian of
the assets of the Fund. The Custodian is responsible for the safekeeping of
the Fund's assets and the appointment of subcustodian banks and clearing
agencies. The Custodian takes no part in determining the investment
policies of the Fund or in deciding which securities are purchased or sold
by the Fund.
INVESTMENT POLICIES
Illiquid Investments
--------------------
Illiquid investments are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at which
they are valued. Under the supervision of the Trustees, the Fund's
investment adviser (Thornburg) determines the liquidity of investments by
the Fund. In determining the liquidity of the Fund's investments,
Thornburg may consider various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the
nature of the security (including any demand or lender features), and (5)
the nature of the market place for trades (including the ability to assign
or offset the Fund's rights and obligations relating to the investment).
Investments currently considered by the Fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, over-the-counter options, and non-government
stripped fixed-rate mortgage-backed securities. Also, Thornburg may
determine some restricted securities, government-stripped fixed-rate
mortgage-backed securities, emerging market securities, and swap agreements
to be illiquid. However, with respect to over-the-counter options the Fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the Fund any have to close out the option before
expiration.
In the absence of market quotations, illiquid investments are priced
at fair value as determined utilizing procedures and methods reviewed by
the Trustees. If through a change in values, net assets, or other
circumstances, a Fund were in a position where more than 10% of its net
assets was invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
Restricted Securities
---------------------
Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the Fund could be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time it is permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a
less favorable price than prevailed when it decided to seek registration of
the security.
Swap Agreements, Caps, Floors, Collars
--------------------------------------
Swap agreements can be individually negotiated and structured to
include exposure to a variety of different types of investments or market
factors. Depending on their structure, swap agreements may increase or
decrease the Fund's exposure to long or short-term interest rates (in the
U.S. or abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation
rates. The Fund is not limited to any particular form of swap agreement if
Thornburg determines it is consistent with the Fund's investment objective
and policies.
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 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.
Inasmuch as these swaps, floors, caps and collars are entered into for
good faith hedging purposes, Thornburg and the Fund believe these
obligations do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to borrowing
restrictions. 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 is
less highly developed and, accordingly, may be less liquid than swaps.
Swap agreements will tend to shift the Fund's investment exposure from
one type of investment to another. For example, if the Fund agreed to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease the Fund's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the Fund's investments and its share price and yield. The
most significant factor in the performance of swap agreements is the change
in the specific interest rate, currency, or other factors that determine
the amounts of payments due to and from the Fund. If a swap agreement
calls for payments by the Fund, the Fund must be prepared to make such
payments when due. In addition, if the counterparty's credit worthiness
declined, the Fund will have contractual remedies available to it, but the
value of the swap or other agreement would be likely to decline,
potentially resulting in losses. The Fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The Fund will maintain appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
If the Fund enters into a swap agreement on other than a net basis, it will
segregate assets with a value equal to the full amount of the Fund's
accrued obligations under the agreement.
Indexed Securities
------------------
The Fund may purchase securities whose prices are indexed to the
prices of other securities, securities indices, currencies, precious metals
or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity or coupon rate is determined by reference to a specific instrument
or statistic. Gold-indexed securities, for example, typically provide for a
maturity value that depends on the price of gold, resulting in a security
whose price tends to rise and fall together with gold prices. Currency
indexed securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by
reference to the values of one or more specified foreign currencies, and
may offer higher yields than U.S. dollar-denominated securities of
equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increases, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values
of a number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S.
and abroad. At the same time, indexed securities are subject to the credit
risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than their underlying instruments.
Repurchase Agreements
---------------------
In a repurchase agreement, the Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed
upon price on an agreed upon date within a number of days from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured
by the value (at least equal to the amount of the agreed upon resale price
and marked to market daily) of the underlying security. The Fund may
engage in a repurchase agreements with respect to any security in which it
is authorized to invest.
The Fund may enter into these arrangements with member banks of the
Federal Reserve System or any domestic broker-dealer if the
creditworthiness of the bank or broker-dealer has been determined by
Thornburg to be satisfactory. These transactions may not provide the Fund
with collateral marked-to-market during the term of the commitment.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from the Fund to the seller of the
security 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 security purchased by the 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
security before repurchase of the security 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 underlying security. If the court characterized the transaction as a
loan and the Fund has not perfected a security interest in the underlying
security, the Fund may be required to return the security to the seller's
estate and be treated as an unsecured creditor of principal and income
involved in the transaction. As with any unsecured debt obligation
purchased for the Fund, Thornburg seeks to minimize the risk of loss
through repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller of the security. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the
seller may fail to repurchase the security, 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 security subject to the repurchase agreement becomes less
than the repurchase price (including interest), the Fund will direct the
seller of the security 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.
Reverse Repurchase Agreements
-----------------------------
In a reverse repurchase agreement, the Fund sells a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash and agrees to repurchase the instrument at a particular price and
time. While a reverse repurchase agreement is outstanding, the Fund will
maintain appropriate liquid assets in a segregated custodial account to
cover its obligation under the agreement. The Fund will enter into reverse
repurchase agreements only with parties whose creditworthiness has been
found satisfactory by Thornburg. Such transactions may increase
fluctuations in the market value of the Fund's assets and may be viewed as
a form of leverage.
Securities Lending
------------------
The Fund may lend securities to parties such as broker-dealers or
institutional investors. Securities lending allows the Fund to retain
ownership of the securities loaned and, at the same time, to earn
additional income. Since there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to parties deemed by
Thornburg to be of good standing. Furthermore, they will only be made if,
in Thornburg's judgment, the consideration to be earned from such loans
would justify the risk.
Thornburg understands that it is the current view of the SEC Staff
that a Fund may engage in loan transactions only under the following
conditions: (1) the Fund must receive 100% collateral in the form of cash
or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower;
(2) the borrower must increase the collateral whenever the market value of
the securities loaned (determined on a daily basis) rises above the value
of the collateral; (3) after giving notice, the Fund must be able to
terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) the Fund may
pay only reasonable custodian fees in connection with the loan; and (6)
the Trustees must be able to vote proxies on the securities loaned, either
by terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any
security in which the Fund is authorized to invest. Investing this cash
subjects that investment, as well as the security loaned, to market forces
(i.e., capital appreciation or depreciation).
Lower-Quality Debt Securities
-----------------------------
The Fund may purchase lower-quality debt securities (those rated below
Baa by Moody's Investors Service, Inc. or BBB by Standard and Poor's
Corporation, and unrated securities judged by Thornburg to be of equivalent
quality) that have poor protection with respect to the payment of interest
and repayment of principal, or may be in default. These securities are
often considered to be speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The market
prices of lower-quality debt securities may fluctuate more than those of
higher-quality debt securities and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates.
While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980's brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructuring. Past experience
may not provide an accurate indication of the future performance of the
high-yield bond market, especially during periods of economic recession.
In fact, from 1989 to 1991, the percentage of lower-quality securities that
defaulted rose significantly above prior levels, although the default rate
decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less
active than that for higher-quality debt securities, which can adversely
affect the prices at which the former are sold. If market quotations are
not available, lower-quality debt securities will be valued in accordance
with procedures established by the Trustees, including the use of outside
pricing services. Judgment plays a greater role in valuing high-yield
corporate debt securities than is the case for securities for which more
external sources for quotations and last-sale information are available.
Adverse publicity and changing investor perceptions may affect the ability
of outside pricing services to value lower-quality debt securities and the
Fund's ability to sell these securities. Since the risk of default is
higher for lower-quality debt securities, Thornburg's research and credit
analysis are an especially important part of managing securities of this
type held by the Fund. In considering investments for the Fund, Thornburg
will attempt to identify those issuers of high-yielding securities whose
financial condition is adequate to meet future obligations, has improved,
or is expected to improve in the future. Thornburg's analysis focuses on
relative values based on such factors as interest or dividend coverage,
asset coverage, earnings prospects, and the experience and managerial
strength of the issuer.
The Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder
to seek to protect the interests of security holders if it determines this
to be in the best interest of the Fund's shareholders.
Foreign Investments
-------------------
Foreign investments can involve significant risks in addition to the
risks inherent in U.S. investments. The value of securities denominated in
or indexed to foreign currencies, and of dividends and interest from such
securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets generally
have less trading volume and less liquidity than U.S. markets, and prices
on some foreign markets can be highly volatile. Many foreign countries
lack uniform accounting and disclosure standards comparable to those
applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and
operations. It may be more difficult to obtain and enforce a judgment
against a foreign issuer. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions, and custodial costs,
are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject
to less government supervision. Foreign security trading practices,
including those involving the release of assets in advance of payment, may
involve increased risks in the event of a failed trade or the insolvency of
a broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises, and securities issued or
guaranteed by foreign 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. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.
There is no assurance that Thornburg will be able to anticipate these
potential events or counter their effects.
The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have
relatively unstable governments, economies based on only a few industries,
and securities markets that trade a small number of securities.
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
American Depository Receipts and European Depository Receipts (ADR's
and EDR's) are certificates evidencing ownership of shares of a foreign-
based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively,
ADR's and EDR's are alternatives to the purchase of the underlying
securities in their national markets and currencies.
Foreign Currency Transactions
-----------------------------
The Fund may conduct foreign currency transactions on a spot (i.e.,
cash) basis or by entering into forward contracts to purchase or sell
foreign currencies at a future date and price. The Fund will convert
currency on a spot basis from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers
generally do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
Forward contracts are generally traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange. The
Funds may use currency forward contracts for any purpose consistent with
their investment objectives. The following discussion summarizes the
principal currency management strategies involving forward contracts that
could be used by the Fund. The Fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes. When the Fund agrees to buy or sell a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars, of the amount of
foreign currency involved in the underlying security transaction, the Fund
will be able to protect itself against an adverse change in foreign
currency values between the date the security is purchased or sold and the
date on which payment is made or received. This technique is sometimes
referred to as a "settlement hedge" or "transaction hedge." The Fund also
may enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in
foreign currency, even if the specific investments have not yet been
selected by Thornburg.
The Fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For
example, if the Fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The Fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
The Fund may enter into forward contracts to shift investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if the Fund held investments denominated in
deutschemarks, the Fund could enter into forward contracts to sell
deutschemarks and purchase Swiss francs. This type of strategy, sometimes
known as a "cross hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the Fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the Fund to assume the risk of fluctuations in the
value of the currency it purchases. Under certain conditions, SEC
guidelines require mutual funds to set aside appropriate liquid assets in a
segregated custodial account to cover currency forward contracts. As
required by SEC guidelines, the Fund will segregate assets to cover
currency forward contracts, if any, whose purpose is essentially
speculative. The Fund will not segregate assets to cover forward contracts
entered into for hedging purposes, including settlement hedges, position
hedges, and proxy hedges.
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. Those can result in losses to a Fund
if it is unable to deliver or receive currency 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.
Currency futures are also subject to risks pertaining to futures contracts
generally. See "Futures Contracts," below. Options trading on currency
futures is subject to market liquidity, and establishing and closing
positions may be difficult. Currency exchange rates may fluctuate based on
factors extrinsic to the issuing country's own economy.
Successful use of currency management strategies will depend on
Thornburg's skill in analyzing and predicting currency values. Currency
management strategies may substantially change the Fund's investment
exposure to changes in currency exchange rates, and could result in losses
to the Fund if currencies do not perform as Thornburg anticipates. For
example, if a currency's value rose at a time when Thornburg had hedged the
Fund by selling that currency in exchange for dollars, the Fund would be
unable to participate in the currency's appreciation. If Thornburg hedges
currency exposure through proxy hedges, the Fund could realize currency
losses from the hedge and the security position at the same time if the two
currencies do not move in tandem. Similarly, if Thornburg increases the
Fund's exposure to a foreign currency, and that currency's value declines,
the Fund will realize a loss. There is no assurance that Thornburg's use of
currency management strategies will be advantageous to the Fund or that it
will hedge at an appropriate time.
Limitations on Futures and Options Transactions
-----------------------------------------------
The Fund will not: (a) sell futures contracts, purchase put options,
or write call options if, as a result, more than 25% of the Fund's total
assets would be hedged with futures and options under normal conditions;
(b) purchase futures contracts or write put options if, as a result, the
Fund's total obligations upon settlement or exercise of purchased futures
contracts and written put options would exceed 25% of its total assets; or
(c) purchase call options if, as a result, the current value of option
premiums for call options purchased by the Fund would exceed 5% of the
Fund's total assets. These limitations do not apply to options attached to
or acquired or traded together with their underlying securities, and do not
apply to securities that incorporate features similar to options.
The above limitations on the Fund's investments in futures contracts
and options, and the Fund's policies regarding futures contracts and
options discussed elsewhere in this Statement of Additional Information,
are not fundamental policies and may be changed as regulatory agencies
permit.
Real Estate-Related Instruments
-------------------------------
Real estate-related instruments include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, over building, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
Futures Contracts
-----------------
When the Fund purchases a futures contract, it agrees to purchase a
specified underlying instrument at a specified future date. When the Fund
sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take
place is fixed when the Fund enters into the contract. Some currently
available futures contracts are based on specific securities, such as U.S.
Treasury bonds or notes, and some are based on indices of securities
prices, such as the Standard & Poor's 500 Composite Stock Price Index (S&P
500). Futures can be held until their delivery dates, or can be closed out
before then if a liquid secondary market is available. The value of a
futures contract tends to increase and decrease in tandem with the value of
its underlying instrument. Therefore, purchasing futures contracts will
tend to increase the Fund's exposure to positive and negative price
fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When the Fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore will
tend to offset both positive and negative market price changes, much as if
the underlying instrument had been sold.
Futures Margin Payments
-----------------------
The purchaser or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is held
until the delivery date. However both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a
futures commission merchant (FCM), when the contract is entered into.
Initial margin deposits are typically equal to a percentage of the
contract's value. If either party's position declines, that party will be
required to make additional "variation margin" payments to settle the
change in value on a daily basis. The party that has a gain may be
entitled to receive all or a portion of this amount. Initial and variation
margin payments do not constitute purchasing securities on margin for
purposes of the Fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the Fund, the Fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the Fund.
Purchasing Put and Call Options
-------------------------------
By purchasing a put option, the Fund obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed strike
price. In return for this right, the Fund pays the current market price
for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of
securities prices, and futures contracts. The Fund may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the Fund will
lose the entire premium it paid. If the Fund exercises the option, it
completes the sale of the underlying instrument at the strike price. The
Fund may also terminate a put option position by closing it out in the
secondary market at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing
the option, a put buyer can expect to suffer a loss (limited to the amount
of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
Writing Put and Call Options
----------------------------
When a Fund writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the
premium, the Fund assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option chooses to
exercise it. When writing an option on a futures contract the Fund will be
required to make margin payments to an FCM as described above for futures
contracts. The Fund may seek to terminate its position in a put option it
writes before exercise by closing out the option in the secondary market at
its current price. If the secondary market is not liquid for a put option
the Fund has written, however, the Fund must continue to be prepared to pay
the strike price while the option is outstanding, regardless of price
changes, and must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline.
At the same time, because a call writer must be prepared to deliver
the underlying instrument in return for the strike price, even if its
current value is greater, a call writer gives up some ability to
participate in security price increases.
Combined Positions
------------------
The Fund may purchase and write options in combination with each
other, or in combination with futures or forward contracts, to adjust the
risk and return characteristics of the overall position. For example, the
Fund may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk
and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult
to open and close out. 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 upon
Thornburg's judgment that the combined strategies will reduce risk or
otherwise achieve a portfolio management goal, it is possible that the
combination will instead increase risk or hinder achievement of the goal.
Correlation of Price Changes
----------------------------
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics
from the securities in which it typically invests, which involves a risk
that the options or futures position will not track the performance of the
Fund's other investments. Options and futures prices can also diverge from
the prices of their underlying instruments, even if the underlying
instruments match the Fund's investments well. Options and futures prices
are affected by such factors as current and anticipated short-term interest
rates, changes in volatility of the underlying instrument, and the time
remaining until expiration of the contract, which may not affect security
prices the same way. Imperfect correlation may also result from differing
levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and
securities are traded, or from imposition of daily price fluctuation limits
or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to
hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although
this may not be successful in all cases. If price changes in the Fund's
options or futures positions are poorly correlated with its other
investments, the positions may fail to produce anticipated gains or result
in losses that are not offset by gains in other investments.
Liquidity of Options and Futures Contracts
------------------------------------------
There is no assurance a liquid secondary market will exist for any
particular options or futures contract at any particular time. Options may
have relatively low trading volume and liquidity if their strike prices are
not close to the underlying instrument's current price. In addition,
exchanges may establish daily price fluctuation limits for options and
futures contracts, and may halt trading if a contract's price moves upward
or downward more than the limit in a given day. On volatile trading days
when the price fluctuation limit is reached or a trading halt is imposed,
it may be impossible for the Fund to enter into new positions or close out
existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the
Fund to continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, the Fund's access to other assets
held to cover its options or futures positions could also be impaired.
OTC Options
-----------
Unlike exchange-traded options, which are standardized with respect to
the underlying instrument, expiration date, contract size, and strike
price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
Fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded. The staff of the SEC currently takes the position that OTC options
are illiquid, and investments by the Fund in those instruments are subject
to the Fund's limitation on investing no more than 10% of its assets in
illiquid instruments.
Options and Futures Relating to Foreign Currencies
-------------------------------------------------
Currency futures contracts are similar to forward currency exchange
contracts, except that they are traded on exchanges (and have margin
requirements) and are standardized as to contract size and delivery date.
Most currency futures contracts call for payment or delivery in U.S.
dollars. The underlying instrument of a currency option may be a foreign
currency, which generally is purchased or delivered in exchange for U.S.
dollars, or may be a futures contract. The purchaser of a currency call
obtains the right to purchase the underlying currency, and the purchaser of
a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above.
The Fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The Fund also may purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the Fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the Fund's foreign-
denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the Fund's investments exactly over
time. See "Foreign Currency Transactions," above.
Asset Coverage for Futures and Options Positions
------------------------------------------------
The Fund will comply with guidelines established by the SEC with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in
a segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of large percentage of the
Fund's assets could impede Fund management or the Fund's ability to meet
redemption requests or other current obligations.
Short Sales
-----------
The Fund may enter into short sales with respect to stocks underlying
its convertible security holdings. For example, if Thornburg anticipates a
decline in the price of the stock underlying a convertible security the
Fund holds, it may sell the stock short. If the stock price subsequently
declines, the proceeds of the short sale could be expected to offset all or
a portion of the effect of the stock's decline on the value of the
convertible security. The Fund currently intends to hedge no more than 15%
of its total assets with short sales on equity securities underlying its
convertible security holdings under normal circumstances. When the Fund
enters into a short sale, it will be required to set aside securities
equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The Fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining , and closing short sales.
INVESTMENT LIMITATIONS
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Fund's assets that may be
invested in any security or other asset, that percentage limitation will be
determined immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment
policies and limitations.
As a matter of fundamental policy, the Fund may not:
(1) with respect to 75% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities) if, as a
result, (a) more than 5% of the Fund's total assets would be invested in
the securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except for temporary or emergency purposes or
except in connection with reverse repurchase agreements; in an amount not
exceeding 33-1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33-1/3% limitation;
(4) underwrite any issue of securities (except to the extent that the
Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result or
ownership of securities or other instruments (but this shall not prevent
the Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
The following investment limitations are not fundamental and may be
changed without shareholder approval as to the Fund:
(i) The Fund does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
(ii) The Fund does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(iii) The Fund may borrow money only (a) from a bank or (b) by
engaging in reverse repurchase agreements with any party. The Fund will
not purchase any security while borrowings representing more than 5% of its
total assets are outstanding.
(iv) The Fund does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to legal
or contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The Fund does not currently intend to purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under the
limitation in the preceding paragraph would exceed the Fund's limitations
on investments in illiquid securities.
(vi) The Fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(vii) The Fund does not currently intend to purchase the securities
of any issuer (other than securities issue or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a result,
more than 5% of its total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
(viii) The Fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the Fund's net
assets. Included in that amount, but not to exceed 2% of the Fund's net
assets, may be warrants that are not listed on the New York Stock Exchange
or the American Stock exchange. Warrants acquired by the Fund in units or
attached to securities are not subject to these restrictions.
(ix) The Fund does not currently intend to invest in oil, gas or
other mineral exploration or development programs or leases.
(x) The Fund does not currently intend to purchase the securities of
any issuer if those officers and Trustees of the trust and those officers
and directors of Thornburg who individually own more than 1/2 of 1% of the
securities of such issuer together own more than 5% of such issuer's
securities.
For the Fund's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions -
Value Fund and Global Value Fund."
YIELD AND RETURN COMPUTATION
Performance and Portfolio Information
-------------------------------------
The Fund will from time to time display performance information,
including yield, dividend returns total return, and average annual total
return, in advertising, sales literature, and reports to shareholders.
Yield is computed by dividing the Fund's net interest and dividend income
for a given 30 days or one month period by the maximum share offering price
at the end of the period. The result is "annualized" to arrive at an
annual percentage rate. In addition, the Fund may use the same method for
90 day or quarterly periods. Total return is the change in share value
over time, assuming reinvestment of any dividends and capital gains.
"Cumulative total return" describes total return over a stated period,
while "average annual total return" is a hypothetical rate of return which,
if achieved annually, would have produced the same cumulative total return
if performance had been constant for the period shown. Average annual
return tends to reduce variations in return over the period, and investors
should recognize that the average figures are not the same as actual annual
returns. The Fund may display return information for differing periods
without annualizing the results and without taking sales charges into
effect.
All performance figures are calculated separately for Class A and
Class C shares. The figures are historical, and do not predict future
returns. Actual performance will depend upon the specific investments held
by the Fund, and upon the Fund's expenses for the period.
Yield quotations 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 or 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, the 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 piece; (5) The
non-standardized return quotation may include the effective return obtained
by compounding the monthly dividends.
For the Fund's investments denominated in foreign currencies, income
and expenses are calculated first in their respective currencies, and are
then converted to U.S. dollars, either when they are actually converted or
at the end of the 30-day or one month period, whichever is earlier.
Capital gains and losses generally are excluded from the calculation as are
gains and losses from currency exchange rate fluctuations.
Income calculated for the purposes of calculating the Fund's yields
differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding of
income assumed in yield calculations, the Fund's yield may not equal its
distribution rate, the income paid to a shareholder's account, or the
income reported in the Fund's financial statements.
Yield information may be useful in reviewing the Fund's performance
and in providing a basis for comparison with other investment alternatives.
However, the Fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Total returns quoted in advertising reflect all aspects of the Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value (NAV) over a
stated period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in
the Fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual rate of return that
would equal 100% growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the Fund's performance is not constant over
time, but changes from year to year, and the average annual returns
represent averaged figures as opposed to the actual year-to-year
performance of the Fund. In addition to average annual total returns, the
Fund may quote unaveraged or cumulative total returns reflecting the simple
change in value an investment over a stated period. Average annual and
cumulative total returns may be quoted as a percentage or as a dollar
amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total
returns may be broken down into their components of income and capital
(including capital gains and changes to share price) in order to illustrate
the relationship of these factors and their contributions to total return.
Total returns may be quoted on a before-tax or after-tax basis and may be
quoted with or without taking the Fund's maximum sales charge into account.
Excluding the Fund's sales charge from a total return calculation produces
a higher total return figure. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
Charts and graphs using the Fund's net asset values, adjusted net
asset values, and benchmark indices may be used to exhibit performance. An
adjusted NAV includes any distributions paid by the Fund and reflects all
elements of its return. Unless otherwise indicated, the Fund's adjusted
NAV's are not adjusted for sales charges, if any.
The Fund may illustrate performance using moving averages. A long-
term moving average is the average of each week's adjusted closing NAV or
total return for a specified period. A short-term moving average NAV is
the average of each day's adjusted closing NAV for a specified period.
Moving average activity indicators combine adjusted closing NAV's from the
last business day of each week with moving averages for a specified period
the produce indicators showing when an NAV has crossed, stayed above, or
stayed below its moving average.
The Fund's performance may be compared to the performance of other
mutual funds in general, or to the performance of particular types of
mutual funds. These comparisons may be expressed as mutual fund ranking
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings the Fund's
performance may be compared to stock, bond, and money market mutual fund
performance indices prepared by Lipper or other organizations. When
comparing these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock
mutual funds may offer higher potential returns, they also carry the
highest degree of share price volatility. Likewise, money market funds may
offer greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds. From time to time, the Fund's
performance may also be compared to other mutual funds tracked by financial
or business publications and periodicals. For example, the Fund may quote
Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a
mutual fund rating service that rates mutual funds on the basis of risk-
adjusted performance. Rankings that compare the performance different
Thornburg funds to one another in appropriate categories over specific
periods of time may also be quoted in advertising. Performance rankings
and ratings reported periodically in financial publications such as "MONEY"
magazine, "Forbes" and "BARRON's" also may be used. These performance
analyses ordinarily do not take sales charges into consideration and are
prepared without regard to tax consequences.
Thornburg may provide information designed to help individuals
understand their investment goals and explore various financial strategies.
Such information may include information about current economic market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs bases on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of other
Thornburg mutual funds.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides
historical returns of the capital markets in the United States, including
common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of differed indices.
The Fund may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
the capital market may or may not correspond directly to those of the Fund.
The Fund may also compare performance to that of other compilations or
indices that may be developed and made available in the future, and
advertising, sales literature and shareholder reports also may discuss
aspects of periodic investment plans, dollar cost averaging and other
techniques for investing to pay for education, retirement and other goals.
In addition, the Fund may quote or reprint financial or business
publications and periodicals, including model portfolios or allocations, as
they relate to current economic and political conditions, fund management,
portfolio composition, investment philosophy, investment techniques and the
desirability of owning a particular mutual fund. The Fund may present its
fund number, Quotron (trademark) number, and CUSIP number, and discuss or
quote its current portfolio managers.
The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the Fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data. In advertising, the Fund
may also discuss or illustrate examples of interest rate sensitivity.
Momentum Indicators show the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the
Fund's percentage change in price movements over that period. The Fund may
advertise examples of the effects of periodic investment plans, including
the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices
are low. While such a strategy does not assure a profit or guard against
loss in a declining market, the investor's average cost per share can be
lower than if fixed numbers of shares are purchased at the same intervals.
In evaluating such a plan, investors should consider their ability to
continue purchasing shares during periods of low price levels. The Fund
may be available for purchase through retirement plans or other programs
offering deferral of, or exemption from, income taxes, which may produce
superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of
$1,949 after ten years, assuming tax was deducted from the return each year
at a 31% rate. An equivalent tax-deferred investment would have an after-
tax value of $2,100 after ten years, assuming tax was deducted at a 31%
rate from the tax-deferred earnings at the end of the ten-year period.
TAXES
In General
The Fund intends to elect and qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code").
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 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
the 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 the 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 the 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.
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, the 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 the 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.
Federal Income Taxes
--------------------
Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore will increase (decrease)
dividend distributions. Net short-term capital gains are distributed as
dividend income. The Fund will send each shareholder a notice in January
describing the tax status of dividends and capital gain distributions for
the prior year.
Long-term capital gains earned by the Fund on the sale of securities
and distributed to shareholders are federally taxable as long-term capital
gains, regardless of the length of time shareholders have held their
shares. If a shareholder receives a long-term capital gain distribution on
shares of the Fund and such shares are held 12 months or less and are sold
at a loss, the portion of the loss equal to the amount of the long-term
capital gain distribution will be considered a long-term loss for tax
purposes. Net short-term capital gains distributed by the Fund are taxable
to shareholders as dividends, not as capital gains.
Redemption or resale of shares will be a taxable transaction for
federal income tax purposes and the shareholder will recognize gain or loss
in an amount equal to the difference between the shareholder's basis in the
shares and the amount realized by the shareholder on the redemption or
resale. If the shareholder held the shares as capital assets, the gain or
loss will be long-term if the shares were held for more than 12 months, and
any such long-term gain generally will be subject to a maximum federal
income tax rate of 20% to the extent that gain exceeds any net short-term
capital losses realized by the taxpayer.
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.
Foreign governments may withhold taxes on dividends and interest paid
with respect to foreign securities typically at a rate between 10% and 35%.
Foreign governments may also impose taxes on other payments or gains with
respect to foreign securities. Because the Fund does not currently
anticipate that securities of foreign issuers will constitute more than 50%
of its total assets at the end of its fiscal year, shareholders of the Fund
should not expect to claim a foreign tax credit or deduction on their
federal income tax returns with respect to foreign taxes withheld.
The foregoing is a general and abbreviated summary of the provisions
of the Code and Treasury Regulations currently in effect as they directly
govern the income taxation of Fund shareholders. This summary primarily
addresses income tax consequences to shareholders who are individuals. The
Code and Regulations are subject to change at any time, in some cases
retroactively. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal tax consequences of an
investment in the Fund.
State and Local Income Tax Considerations
-----------------------------------------
Shareholders may be subject to state and local taxes on Fund
distributions, and capital gains taxation on disposition of shares. Shares
also may be subject, in some jurisdictions, to state and local property
taxes. A portion of the Fund's dividends derived from certain U.S.
Government obligations may be exempt from state and local taxation.
Shareholders should consult their own tax advisers for information
concerning the state and local taxation of an investment in the Fund.
DISTRIBUTIONS AND SHAREHOLDERS ACCOUNTS
When an investor or the investor's financial advisor makes an initial
investment in shares of the Fund, the Transfer Agent will open an account
on the books of the Fund, and the investor or financial advisor 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 the investor or the financial advisor 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 distributions of investment 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 periodic distributions of net investment 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.
INVESTMENT ADVISER, INVESTMENT ADVISORY AGREEMENTS,
AND ADMINISTRATIVE SERVICES AGREEMENTS
Investment Advisory Agreement
Pursuant to an Investment Advisory Agreement in respect of the Fund,
Thornburg Investment Management, Inc. ("Thornburg"), 119 East Marcy Street,
Suite 202, Santa Fe, New Mexico 87501, acts as investment adviser for, and
will manage the investment and reinvestment of the assets of the Fund in
accordance with the Fund's investment objectives and policies, subject to
the general supervision and control of the trustees of Thornburg Investment
Trust.
Thornburg is paid a fee by the Fund, in the percentage amounts set
forth in the table below:
------------------
Net Assets of Fund Advisory Fee Rate
------------------ -----------------
0 to $500 million .875%
$500 million to $1 billion .825%
$1 billion to $1.5 billion .775%
$1.5 billion to $2 billion .725%
Over $2 billion .625%
The fee paid by the Fund is allocated among the different classes of
shares offered by the Fund based upon the average daily net assets of each
class of shares. All fees and expenses are accrued daily and deducted
before payment of dividends. In addition to the fees of Thornburg, the
Fund will pay all other costs and expenses of its operations. The Fund
also will bear the expenses of registering and qualifying the Fund and its
shares for distribution under federal and state securities laws, including
legal fees.
The Trust's Trustees (including a majority of the Trustees who are not
"interested persons") have approved the Investment Advisory Agreement
applicable to the Value Fund.
The Investment Advisory Agreement applicable to the Fund 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 Thornburg 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 Thornburg, or of
reckless disregard of its obligations and duties under the Agreement,
Thornburg will not be liable for any action or failure to act in accordance
with its duties thereunder. No amounts have been paid to Thornburg by the
Fund under the Agreement as of the date of this Statement of Additional
Information.
Thornburg 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.
The Trust, Thornburg and the Fund's Distributor, Thornburg Securities
Corporation ("TSC") have each adopted a code of ethics in accordance with
Rule 17j-1 under the Investment Company Act of 1940. Each of the codes of
ethics permits the personnel who are subject to the code of ethics to buy
and sell securities which may be purchased and held by the Fund, but these
personnel are generally prohibited from purchasing or selling any security
which is then being purchased or sold by the Fund or is being considered
for purchase or sale by the Fund. Each code of ethics also imposes other
prohibitions and subjects certain persons to reporting requirements
respecting personal securities ownership and trading.
H. Garrett Thornburg, Jr., Treasurer, Director and Chairman of the
Board of Thornburg Limited Term Municipal Fund, Inc., and President and
Trustee of Thornburg Investment Trust, is also Director and controlling
shareholder of Thornburg.
Administrative Services Agreement
---------------------------------
Administrative services are provided to each class of shares issued by
the Fund under an Administrative Services Agreement which requires the
delivery of administrative functions necessary for the maintenance of the
shareholders of the class, supervision and direction of shareholder
communications, assistance and review in preparation of reports and other
communications to shareholders, administration of shareholder assistance,
supervision and review of bookkeeping, clerical, shareholder and account
administration and accounting functions, supervision or conduct of
regulatory compliance and legal affairs, review and administration of
functions delivered by outside service providers to or for shareholders,
and other related or similar functions as may from time to time be agreed.
The Administrative Services Agreement specific to the Fund's Class A and
Class C shares provides that the class will pay a fee calculated at an
annual percentage of .125% of the class's average daily net assets, paid
monthly, together with any applicable sales or similar tax. Services are
currently provided under these agreements by Thornburg. No amounts have
been paid to Thornburg by the Fund under its Administrative Services
Agreements as of the date of this Statement of Additional Information.
The agreements applicable to each class may be terminated by either
party, at any time without penalty, upon 60 days' written notice, and will
terminate automatically upon assignment. Termination will not affect the
service provider's right to receive fees earned before termination. The
agreements further provide that in the absence of willful misfeasance, bad
faith or gross negligence on the part of the service provider, or reckless
disregard of its duties thereunder, the provider will not be liable for any
action or failure to act in accordance with its duties thereunder.
SERVICE AND DISTRIBUTION PLANS
Service Plans - All Classes
The Fund 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 the Fund. The Plan permits
the Fund to pay to Thornburg (in addition to the management fee and
reimbursements described above) an annual amount not exceeding .25 of 1% of
each class's assets to reimburse Thornburg for specific expenses incurred
by it in connection with certain shareholder services and the distribution
of that class's shares to investors. Thornburg 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 processable tapes of shareholder account transactions, and serving
as a source of information to customers concerning the Fund and
transactions with the Fund. The Service Plan does not provide for accrued
but unpaid reimbursements to be carried over and reimbursed to Thornburg in
later years.
The Fund has not paid reimbursements to Thornburg under the Service
Plan as of the date of this Statement of Additional Information.
Class C Distribution Plan
The 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 the Fund ("Distribution Plan"). The 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 Distribution Plan applicable to the Fund 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 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
Distribution Plan is a compensation type plan, TSC can earn a profit in 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 Fund has not paid any amounts to TSC under the Distribution Plan
as of the date of this Statement of Additional Information.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Fund by the Fund's investment adviser, Thornburg
Investment Management, Inc. (Thornburg) pursuant to its authority under the
Fund's investment advisory agreement. Thornburg also is responsible for
the placement of transaction orders for other clients for whom it acts as
investment adviser.
Thornburg places orders for transactions in portfolio securities for
the Fund in such a manner as, in the opinion of Thornburg, will offer the
best price and market for the execution of these transactions. In
selecting broker dealers, subject to applicable legal requirements,
Thornburg considers various relevant factors, including, but not limited
to: the size and type of the transaction; the nature and character of the
markets for the security to be purchases or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm;
the broker-dealer's execution services rendered on a continuing basis; and
the reasonableness of any commissions; and arrangements for payment of Fund
expenses. Generally commissions for foreign investments traded will be
higher than for U.S. investments and may not be subject to negotiation.
Thornburg may execute the Fund's portfolio transactions with broker-
dealers who provide research and execution services to the Fund. Such
services may include advice concerning the value of securities; the
availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The selection of
such broker-dealers is made by Thornburg based upon the quality of such
research and execution services provided. The receipt of research from
broker-dealers who execute transactions on behalf of the Fund may be useful
to Thornburg in rendering investment management services to the Fund. The
receipt of such research may not reduce Thornburg's normal independent
research activities; however, it may enable Thornburg to avoid the
additional expenses that could be incurred if Thornburg tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the Fund to pay such higher commissions, Thornburg must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by the executing broker-dealers,
viewed in terms of a particular transaction or Thornburg's overall
responsibilities to the Fund. In reaching this determination, Thornburg
will not attempt to place a specific dollar value on the brokerage and
research services provided, or to determine what portion of the
compensation would be related to those services.
Thornburg is authorized to use research services provided by and to
place portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the Funds to the extent
permitted by law. Thornburg may use research services provided by and place
agency transactions with Thornburg Securities Corporation (TSC) if the
commissions are fair, reasonable, and comparable to commissions charged by
non-affiliated, qualified brokerage firms for similar services. Thornburg
may allocate brokerage transactions to broker-dealers who have entered into
arrangements with Thornburg under which the broker-dealer allocates a
portion of the commissions paid by the Fund toward payment of the Fund's
expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified broker-
dealers.
Thornburg reserves the right to manage other investment companies and
investment accounts for other clients which may have investment objectives
similar to those of the Fund. Subject to applicable laws and regulations,
Thornburg will attempt to allocate equitably portfolio transactions among
the Fund and the portfolios of its other clients purchasing securities
whenever decisions are made to purchase or sell securities by the 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 the other clients, the size of
investment commitments generally held by the Fund and the 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 Fund's Trustees that the benefits
available from Thornburg's organization will outweigh any disadvantage that
may arise from exposure to simultaneous transactions.
The Trustees of the Fund periodically review Thornburg's performance
of its responsibilities in connection with the placement of portfolio
transactions for the Fund.
The Fund is a separate "series" or investment portfolio of Thornburg
Investment Trust, a Massachusetts business trust (the "Trust"). The
management of the Fund, including the general supervision of Thornburg's
performance of its duties under the Investment Advisory Agreement and
Administrative Services Agreements applicable to the Fund, is the
responsibility of the Trust's Trustees. There are five Trustees, one of
whom is an "interested person" (as the term "interested" is defined in the
Investment Company Act of 1940) and four of whom are "disinterested"
persons. The names of Trustees and officers and their principal occupations
and affiliations during the past five years are set forth below, with the
Trustee who is an "interested person" of the Trust indicated by an
asterisk.
H. Garrett Thornburg, Jr.,* 54 Trustee; Director, Chairman (since 1987)
Chairman and of Trustees Treasurer
(since its inception
in 1984) of Thornburg Limited
Term Municipal Fund, Inc.;
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; Director and
Treasurer of Thornburg since
its formation in 1982 and
President
from 1982 to August 1997.
David A. Ater, 53 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, 72 Trustee Independent Fund Raising
Counsel; Trustee, Woodrow
Wilson International Center for
Scholars; Director of Thornburg
Limited Term Municipal Fund,
Inc. since its formation in
1984; Director of Farrar,
Strauss & Giroux (publishers)
since 1968.
Forrest S. Smith, 68 Trustee Attorney in private practice
and shareholder Catron, Catron
& Sawtell (law firm), Santa Fe,
New Mexico.
James W. Weyhrauch, 40 Trustee Executive Vice President and
Director, Nambe' Mills, Inc.
(manufacturer), Santa Fe, New
Mexico.
Brian J. McMahon, 44 President President of Thornburg Limited
Assistant Secretary Term Municipal Fund,Inc.
since 1987; Managing Director
of Thornburg since December
1985, President of Thornburg
since August 1997 and a Vice
President from April 1984 to
August 1997.
Steven J. Bohlin, 40 Vice President Vice President of Thornburg
Treasurer Limited Term Municipal Fund,
Inc. since 1988; a Managing
Director and a Vice President
of Thornburg.
Dawn B. Fischer, 52 Secretary Secretary of Thornburg Limited
Assistant Treasurer Term Municipal Fund, Inc. since
its formation in 1984; Vice
President, Daily Tax Free
Income Fund, Inc. (Mutual Fund)
since 1989; Managing Director
of Thornburg since 1985 and a
Vice President since January
1984.
William Fries, 59 Vice President Managing Director of Thornburg
since 1995 and Vice President
of Thornburg Limited Term
Municipal Fund, Inc. since
1995; Vice President
of USAA Investment Management
Company from 1982 to 1995.
Ken Ziesenheim, 45 Vice President Managing Director of Thornburg
since 1995; Vice President of
Thornburg Limited Term
Municipal Fund, Inc. since
1995; President of Thornburg
Securities Corporation since
1995; Senior Vice President of
Financial Services, Raymond
James & Associates, Inc. from
1991 to 1995.
George Strickland, 36 Vice President Assistant Vice President of
Thornburg Limited Term
Municipal Fund, Inc. from
1992 to 1998, and Vice
President from 1998; Associate
of Thornburg since July 1991
and a Managing Director
commencing in 1996; Vice
President of Thornburg since
December 1995.
Leigh Moiola, 32 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. from
1997 to 1999, and Vice
President since 1999; Vice
President of Thornburg since
1995 and Managing Director
commencing in 1998.
Jack Lallement, 61 Assistant Vice Assistance Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
September 1997; Fund Accountant
for Thornburg since March 1997;
Chief Financial
Officer/Controller
for Zuni Rental, Inc.
(equipment leasing and sales),
Albuquerque, New Mexico from
February 1995 to March 1997;
Chief Financial
Officer/Controller, Montgomery
& Andrews, P.A. (law firm),
Santa Fe, New Mexico from March
1987 to August 1994.
Thomas Garcia, 29 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1997; Fund Accountant for
Thornburg from 1994 to 1998;
Portfolio Analyst from 1998 to
present; Vice President since
February 2000; since 1994; BBA,
University of New Mexico, 1993.
Van J. Billops, 33 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1997; Fund Accountant for
Thornburg since 1993.
Dale Van Scoyk, 52 Vice Vice President of Thornburg
President Limited Term Municipal Fund,
Inc. since 1999; Account
Manager for Thornburg since
1997; Vice President since
1999, and Managing Director
since 1999 National Account
Manager for the Heartland Funds
1993 - 1997.
Sophia Franco, 29 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1998; Associate of Thornburg
since 1994.
Claiborne Booker, 38 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. from
1998 to 2000 and Vice President
since June, 2000; Associate of
Thornburg since 1998; Partner,
Brinson Partners, Inc., 1994 -
1997.
Kerry Lee, 33 Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. from
1998 to 1999, and vice
President since 1999; Associate
of Thornburg since 1995.
Richard Brooks, 53 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1998; Associate of Thornburg
since 1994.
Yvette Lucero, 28 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1999; Associate of Thornburg
since 1997; Sales Associate,
Virginia Trading Post,
1992-1997.
Christopher Ihlefeld, 30 Assistant Vice Assistant Vice President of
President Thornburg Limited Term
Municipal Fund, Inc. since
1999; Associate of Thornburg
since 1996; Student, College of
Santa Fe 1996-1998; Student,
Western New Mexico University,
1995-1996; Student, Rollins
College, 1991-1994.
The business address of each person listed is 119 East Marcy Street,
Suite 202, Santa Fe, New Mexico 87501. Mr. Thornburg is a Director of TSC,
Executive Vice President of Daily Tax-Free Income Fund, Inc., and a
Chairman and Treasurer of Thornburg Limited Term Municipal Fund, Inc. Mr.
Ziesenheim and Ms. Fischer are president and secretary, respectively, of
TSC.
The officers and Trustees affiliated with Thornburg serve without any
compensation from the Trust. The Trust pays each Trustee who is not an
employee of Thornburg or an affiliated person an annual fee of $2,000 plus
$1,000 for each meeting of the Trustees attended by the Trustee. In
addition, the Trust pays a $4,000 annual stipend to each member of the
audit committee, payable in quarterly installments, and reimburses all
Trustees for travel and out-of-pocket expenses incurred in connection with
attending those meetings. The Trustees have established one committee, the
audit committee, on which Messrs. Ater, Ault, Smith and Weyhrauch currently
serve.
The Trust paid fees to the Trustees during the year ended September
30, 1999 as follows:
<TABLE>
Pension or
Retirement Estimated Total
Aggregate Benefits Annual Compensation
Compensation Accrued as Benefits from Trust and
from Part of Upon Fund Complex
Trustee Trust Fund Expenses Retirement Paid to Trustee
-------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
H. Garret
Thornburg, Jr. 0 0 0 0
David A. $7,000 0 0 $7,000
Ater
J. Burchenal $7,000 0 0 $14,000
Ault
Forrest S. $7,000 0 0 $7,000
Smith
James W. $6,000 0 0 $6,000
Weyhrauch
The Trust does not pay retirement or pension benefits.
NET ASSET VALUE
The Fund will calculate its 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 Fund. 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 the 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.
DISTRIBUTOR
Pursuant to a Distribution Agreement with Thornburg Investment Trust,
Thornburg Securities Corporation ("TSC") acts as principal underwriter for
the Fund. The Fund does not bear selling expenses except (i) those
involved in registering its shares with the Securities and Exchange
Commission and qualifying them or the Fund with state regulatory
authorities, and (ii) expenses paid under the Service and Distribution
Plans and which might be considered selling expenses. Terms of
continuation, termination and assignment under the Distribution Agreement
are identical to those described above with regard to the Investment
Advisory Agreements, except that termination other than upon assignment
requires six months' notice.
H. Garrett Thornburg, Jr., Treasurer, a Director and Chairman of the
Board of Thornburg Limited Term Municipal Fund, Inc. and Chairman and a
Trustee of Thornburg Investment Trust, is also Director and controlling
stockholder of TSC.
ADDITIONAL INFORMATION RESPECTING PURCHASE AND REDEMPTION OF SHARES
To the extent consistent with state and federal law, the Fund may make
payments of the redemption price either in cash or in kind. The Trust has
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.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036 is the independent auditor of the Fund.
</TABLE>
