As Filed with the Securities and Exchange Commission
March 11, 2004
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 2 Post-Effective Amendment No. ___
THORNBURG INVESTMENT TRUST
- ---------------------------
(Exact Name of Registrant as Specified in Charter)
119 East Marcy Street, Suite 202, Santa Fe, NM 87501
- ---------------------------------------------- ---------
(Address of Principal Executive Office) (Zip Code)
Area Code and Telephone Number: (505) 984-0200
--------------
Garrett Thornburg
119 East Marcy Street, Suite 202
Santa Fe, New Mexico 87501
- --------------------------------
(Name and Address of Agent for Service)
Charles W.N. Thompson, Jr.
White, Koch, Kelly & McCarthy, P.A.
Post Office Box 787
Santa Fe, New Mexico 87504-0787
- --------------------------------
(Copies of all Correspondence)
Approximate date of proposed public offering: As soon as possible
after this Registration Statement becomes effective.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Rule 24f under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant
filed the notice required by Rule 24f-2 with respect to its most recent
fiscal year on December 12, 2003.
- ---------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant files a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement becomes effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
EXPLANATORY NOTE
The Registrant is filing as portions of this Registration Statement four
combined Prospectus/Proxy Statements, which relate respectively to
different share classes of two of its newly formed, separate series,
THORNBURG LIMITED TERM MUNICIPAL FUND and THORNBURG CALIFORNIA LIMITED TERM
MUNICIPAL FUND. Each of these series was organized to acquire in a
reorganization all of the assets, respectively, of the two existing series
of Thornburg Limited Term Municipal Fund, Inc., THORNBURG LIMITED TERM
MUNICIPAL FUND NATIONAL PORTFOLIO and THORNBURG LIMITED TERM MUNICIPAL FUND
CALIFORNIA PORTFOLIO. Accordingly, this Registration Statement is
organized as follows:
- Letter to Shareholders of Thornburg Limited Term Municipal Fund
National Portfolio
- Letter to Shareholders of Thornburg Limited Term Municipal Fund
California Portfolio
- Supplemental Letter to Shareholders of Thornburg Limited Term
Municipal Fund National Portfolio
- Supplemental Letter to Shareholders of Thornburg Limited Term
Municipal Fund California Portfolio
- Notice of Special Meeting of Shareholders of Thornburg Limited Term
Municipal Fund National Portfolio
- Notice of Special Meeting of Shareholders of Thornburg Limited Term
Municipal Fund California Portfolio.
- Form of Proxy Card (Thornburg Limited Term Municipal Fund National
Portfolio)
- Form of Proxy Card (Thornburg Limited Term Municipal Fund
California Portfolio)
- Prospectus/Proxy Statement (Class A and Class C Shares) respecting
the proposed acquisition of substantially all of the assets of
Thornburg Limited Term Municipal Fund National Portfolio by
Thornburg Limited Term Municipal Fund
- Thornburg Limited Term Municipal Funds Prospectus, March 10, 2004
- Prospectus/Proxy Statement (Institutional Class Shares) respecting
the proposed acquisition of substantially all of the assets of
Thornburg Limited Term Municipal Fund National Portfolio by
Thornburg Limited Term Municipal Fund
- Thornburg Limited Term Municipal Fund Institutional Class Shares
Prospectus, March 10, 2004
- Prospectus/Proxy Statement (Class A and Class C Shares) respecting
the proposed acquisition of substantially all of the assets of
Thornburg Limited Term Municipal Fund California Portfolio by
Thornburg California Limited Term Municipal Fund
- Prospectus/Proxy Statement (Institutional Class Shares) respecting
the proposed acquisition of substantially all of the assets of
Thornburg Limited Term Municipal Fund California Portfolio by
Thornburg California Limited Term Municipal Fund
- Statement of Additional Information (Class A and Class C Shares)
relating to the acquisition of the assets of Thornburg Limited Term
Municipal Fund National Portfolio
- Statement of Additional Information (Institutional Class Shares)
relating to the acquisition of the assets of Thornburg Limited Term
Municipal Fund National Portfolio
- Statement of Additional Information (Class A and Class C Shares)
relating to the acquisition of the assets of Thornburg Limited Term
Municipal Fund California Portfolio
- Statement of Additional Information (Institutional Class Shares)
relating to the acquisition of the assets of Thornburg Limited Term
Municipal Fund California Portfolio
- Part C Information
- Exhibits
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
(Thornburg Limited Term Municipal Fund National Portfolio)
119 East Marcy Street
Santa Fe, New Mexico 87501
Date: March 15, 2004
Dear Shareholder:
A special meeting of shareholders of Thornburg Limited Term Municipal
Fund National Portfolio (the "Fund"), a series of Thornburg Limited Term
Municipal Fund, Inc. has been called for April 28, 2004, at which time the
shareholders of the Fund will be asked to consider a proposal for
reorganizing the Fund into Thornburg Limited Term Municipal Fund (the "New
Fund"), a newly organized Fund series of Thornburg Investment Trust which
has investment objectives and policies identical to those of the Fund. The
proposal was reviewed and unanimously approved by the Board of Directors of
Thornburg Limited Term Municipal Fund, Inc., on behalf of the Fund as being
in the best interests of the Fund and its shareholders.
As a result of the proposed transaction, the New Fund will acquire all
of the assets of the Fund, and you will become a shareholder of the New
Fund. As a shareholder of the Fund, you will receive shares of the same
class of the New Fund as the class of the Fund you own at the time of the
reorganization. The net asset value of the shares of the New Fund you
receive will be the same as the net asset value of your shares in the Fund.
No sales charge will be imposed on the transaction, and the closing of the
transaction will be conditioned upon receiving an opinion of counsel that
the reorganization will qualify as a tax-free reorganization for federal
income tax purposes. WE STRONGLY URGE YOU TO REVIEW, COMPLETE AND RETURN
YOUR PROXY AS SOON AS POSSIBLE. The Board of Directors recommends a vote
FOR the reorganization.
In considering these matters, you should note:
- The investment adviser and the individuals who currently manage
the Fund will not change as a result of the reorganization.
- The investment goals and strategies of the New Fund will be
identical to the investment goals and strategies of the Fund.
- You will receive shares in the New Fund of the same value and
class as your shares in the Fund.
- Expenses of the New Fund will not increase as a result of the
reorganization.
- The Board of Directors of the Fund believe the reorganization is
in the best interests of the Fund's shareholders.
Detailed information about the proposed transaction and the reasons
for it are contained in the enclosed materials. Please exercise your right
to vote. IT IS VERY IMPORTANT THAT YOU VOTE AND THAT YOUR VOTING
INSTRUCTIONS BE RECEIVED BY NO LATER THAN April 28, 2004.
Remember, your vote is very important. To vote, you may use any one
of the following methods:
- By Mail. Please complete, date and sign the enclosed proxy card
and mail it in the enclosed, postage-paid envelope.
- By Telephone. Have your proxy card available. Call the toll-free
number listed on the proxy card. Follow the recorded instructions
and have your control number from the proxy card available.
- By Internet. Have your proxy card available. Go to the website
listed on the proxy card. Follow the instructions on the website
and have your control number from the proxy card available.
NOTE: You may receive more than one proxy package if you hold shares
of the Fund in more than one account. You must return separate proxy cards
for separate holdings.
Sincerely,
/s/ Garrett Thornburg
__________________________________
Chairman of the Board of Directors
Thornburg Limited Term Municipal
Fund, Inc.
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
(Thornburg Limited Term Municipal Fund California Portfolio)
119 East Marcy Street
Santa Fe, New Mexico 87501
Date: March 15, 2004
Dear Shareholder:
A special meeting of shareholders of Thornburg Limited Term Municipal
Fund California Portfolio (the "Fund"), a series of Thornburg Limited Term
Municipal Fund, Inc. has been called for April 28, 2004, at which time the
shareholders of the Fund will be asked to consider a proposal for
reorganizing the Fund into Thornburg California Limited Term Municipal Fund
(the "New Fund"), a newly organized Fund series of Thornburg Investment
Trust which has investment objectives and policies identical to those of
the Fund. The proposal was reviewed and unanimously approved by the Board
of Directors of Thornburg Limited Term Municipal Fund, Inc., on behalf of
the Fund as being in the best interests of the Fund and its shareholders.
As a result of the proposed transaction, the New Fund will acquire all
of the assets of the Fund, and you will become a shareholder of the New
Fund. As a shareholder of the Fund, you will receive shares of the same
class of the New Fund as the class of the Fund you own at the time of the
reorganization. The net asset value of the shares of the New Fund you
receive will be the same as the net asset value of your shares in the Fund.
No sales charge will be imposed on the transaction, and the closing of the
transaction will be conditioned upon receiving an opinion of counsel that
the reorganization will qualify as a tax-free reorganization for federal
income tax purposes. WE STRONGLY URGE YOU TO REVIEW, COMPLETE AND RETURN
YOUR PROXY AS SOON AS POSSIBLE. The Board of Directors recommends a vote
FOR the reorganization.
In considering these matters, you should note:
- The investment adviser and the individuals who currently manage the
Fund will not change as a result of the reorganization.
- The investment goals and strategies of the New Fund will be
identical to the investment goals and strategies of the Fund.
- You will receive shares in the New Fund of the same value and class
as your shares in the Fund.
- Expenses of the New Fund will not increase as a result of the
reorganization.
- The Board of Directors of the Fund believe the reorganization is in
the best interests of the Fund's shareholders.
Detailed information about the proposed transaction and the reasons
for it are contained in the enclosed materials. Please exercise your right
to vote. IT IS VERY IMPORTANT THAT YOU VOTE AND THAT YOUR VOTING
INSTRUCTIONS BE RECEIVED BY NO LATER THAN April 28, 2004.
Remember, your vote is very important. To vote, you may use any one
of the following methods:
- By Mail. Please complete, date and sign the enclosed proxy card
and mail it in the enclosed, postage-paid envelope.
- By Telephone. Have your proxy card available. Call the toll-free
number listed on the proxy card. Follow the recorded instructions
and have your control number from the proxy card available.
- By Internet. Have your proxy card available. Go to the website
listed on the proxy card. Follow the instructions on the website
and have your control number from the proxy card available.
NOTE: You may receive more than one proxy package if you hold shares
of the Fund in more than one account. You must return separate proxy cards
for separate holdings.
Sincerely,
/s/ Garrett Thornburg
----------------------------------
Chairman of the Board of Directors
Thornburg Limited Term Municipal
Fund, Inc.
<THORNBURG LTMF LETTERHEAD>
THE FOLLOWING IS IMPORTANT INFORMATION TO HELP YOU UNDERSTAND THE
PROPOSAL ON WHICH YOU ARE ASKED TO VOTE. PLEASE READ THE ENTIRE
PROSPECTUS/PROXY STATEMENT PROVIDED TO YOU.
WHY IS A SHAREHOLDER MEETING BEING HELD?
Shareholders are being asked to vote on a reorganization in which all
of the assets of your Fund will be acquired by Thornburg Limited Term
Municipal Fund (the "New Fund"), a newly organized fund series with
identical investment goals and strategies.
HOW WILL THIS REORGANIZATION AFFECT CURRENT SHAREHOLDERS?
If the reorganization is approved by shareholders, shareholders of
your Fund will receive shares of the New Fund having the same value as
their Fund shares. You will automatically be a shareholder in the New
Fund.
WHY IS THE REORGANIZATION BEING RECOMMENDED?
The reorganization is intended to simplify legal and regulatory
compliance functions, and to reduce the costs of performing those
functions. Currently, there are 12 Thornburg mutual funds, two of which
are funds of Thornburg Limited Term Municipal Fund, Inc., and ten of which
are funds of Thornburg Investment Trust, a separate investment company.
The reorganization will add the two funds of Thornburg Limited Term
Municipal Fund, Inc. to the ten funds of Thornburg Investment Trust, so
that all 12 funds are combined within only one investment company. There
will be no change in the investment objective or polices of your Fund as a
result of the reorganization, and your investment manager and the
individuals managing your Fund's investments will not change because of the
reorganization.
WILL SHAREHOLDERS HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER
TRANSACTION FEE IN CONNECTION WITH THE REORGANIZATION?
No, there are no sales loads, commissions or other fees in connection
with the transaction.
WHO WILL PROVIDE INVESTMENT MANAGEMENT AND OTHER SERVICES TO MY FUND
AFTER THE REORGANIZATION?
Thornburg Investment Management, Inc. ("TIMI") , which currently
manages your Fund, will continue to provide those services after the
reorganization, under a contract which is substantially identical to the
current contract. Similarly, transfer agent and custodial services will
continue to be provided by the same firms.
WILL THE ADVISORY FEES AND OTHER FEES CHANGE?
No, the investment advisory fee rate, the fee rate for administrative
services provided by TIMI, and any Rule 12b-1 fees charged to your class of
shares will not change as a result of the reorganization.
WHICH CLASS OF SHARES WILL I RECEIVE?
You will receive the same class of shares you hold at the time of the
reorganization.
WHAT WILL EXISTING SHAREHOLDERS DO TO OPEN A NEW THORNBURG INVESTMENT
TRUST ACCOUNT?
At the time the reorganization is completed, a shareholder's interest
in the Fund will automatically be transferred to the New Fund and a written
confirmation will be sent to the shareholder.
WILL ALL OF MY CURRENT ACCOUNT PRIVILEGES, SUCH AS TELEPHONE
REDEMPTION, SYSTEMATIC PURCHASES, AND LETTERS OF INTENT, TRANSFER WITH MY
ACCOUNT IN THE NEW FUND?
Yes. All of the features you have selected for your current account
will be available with your new account.
WILL SHAREHOLDERS HAVE TO PAY ANY FEDERAL INCOME TAXES AS A RESULT OF
THIS REORGANIZATION?
The reorganization is intended to qualify as a tax free
"reorganization" within the meeting of the Internal Revenue Code. If the
reorganization so qualifies, in general, a shareholder will recognize no
gain or loss upon the receipt of the shares of the New Fund in connection
with the reorganization.
WHAT IF A SHAREHOLDER REDEEMS SHARES OF THE FUND BEFORE THE
REORGANIZATION TAKES PLACE?
A shareholder may choose to redeem or exchange shares of the Fund
before the reorganization takes place. If so, the redemption or exchange
will be treated as a normal redemption or exchange of shares and generally
will be a taxable transaction unless the account is not subject to taxes.
HOW DO I VOTE?
Shareholders of the Fund are asked to vote at the Fund's Special
Meeting of Shareholders which is scheduled for April 28, 2004. Your vote
is very important. You have the flexibility of voting by mailing in your
proxy card, by telephone, or by Internet.
WHERE SHOULD SHAREHOLDERS CALL FOR INFORMATION?
Shareholders who want to learn more about Thornburg Funds should call
800-847-0200 or visit Thornburg's website at www.thornburg.com.
<THORNBURG LTMF LETTERHEAD>
THE FOLLOWING IS IMPORTANT INFORMATION TO HELP YOU UNDERSTAND THE
PROPOSAL ON WHICH YOU ARE ASKED TO VOTE. PLEASE READ THE ENTIRE
PROSPECTUS/PROXY STATEMENT PROVIDED TO YOU.
WHY IS A SHAREHOLDER MEETING BEING HELD?
Shareholders are being asked to vote on a reorganization in which all
of the assets of your Fund will be acquired by Thornburg California Limited
Term Municipal Fund (the "New Fund"), a newly organized fund series with
identical investment goals and strategies.
HOW WILL THIS REORGANIZATION AFFECT CURRENT SHAREHOLDERS?
If the reorganization is approved by shareholders, shareholders of
your Fund will receive shares of the New Fund having the same value as
their Fund shares. You will automatically be a shareholder in the New
Fund.
WHY IS THE REORGANIZATION BEING RECOMMENDED?
The reorganization is intended to simplify legal and regulatory
compliance functions, and to reduce the costs of performing those
functions. Currently, there are 12 Thornburg mutual funds, two of which
are funds of Thornburg Limited Term Municipal Fund, Inc., and ten of which
are funds of Thornburg Investment Trust, a separate investment company.
The reorganization will add the two funds of Thornburg Limited Term
Municipal Fund, Inc. to the ten funds of Thornburg Investment Trust, so
that all 12 funds are combined within only one investment company. There
will be no change in the investment objective or polices of your Fund as a
result of the reorganization, and your investment manager and the
individuals managing your Fund's investments will not change because of the
reorganization.
WILL SHAREHOLDERS HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER
TRANSACTION FEE IN CONNECTION WITH THE REORGANIZATION?
No, there are no sales loads, commissions or other fees in connection
with the transaction.
WHO WILL PROVIDE INVESTMENT MANAGEMENT AND OTHER SERVICES TO MY FUND
AFTER THE REORGANIZATION?
Thornburg Investment Management, Inc. ("TIMI) , which currently manages
your Fund, will continue to provide those services after the
reorganization, under a contract which is substantially identical to the
current contract. Similarly, transfer agent and custodial services will
continue to be provided by the same firms.
WILL THE ADVISORY FEES AND OTHER FEES CHANGE?
No, the investment advisory fee rate, the fee rate for administrative
services provided by TIMI and any Rule 12b-1 fees charged to your class of
shares will not change as a result of the reorganization.
WHICH CLASS OF SHARES WILL I RECEIVE?
You will receive the same class of shares you hold at the time of the
reorganization.
WHAT WILL EXISTING SHAREHOLDERS DO TO OPEN A NEW THORNBURG INVESTMENT
TRUST ACCOUNT?
At the time the reorganization is completed, a shareholder's interest
in the Fund will automatically be transferred to the New Fund and a written
confirmation will be sent to the shareholder.
WILL ALL OF MY CURRENT ACCOUNT PRIVILEGES, SUCH AS TELEPHONE
REDEMPTION, SYSTEMATIC PURCHASES, AND LETTERS OF INTENT, TRANSFER WITH MY
ACCOUNT IN THE NEW FUND?
Yes. All of the features you have selected for your current account
will be available with your new account.
WILL SHAREHOLDERS HAVE TO PAY ANY FEDERAL INCOME TAXES AS A RESULT OF
THIS REORGANIZATION?
The reorganization is intended to qualify as a tax free
"reorganization" within the meeting of the Internal Revenue Code. If the
reorganization so qualifies, in general, a shareholder will recognize no
gain or loss upon the receipt of the shares of the New Fund in connection
with the reorganization.
WHAT IF A SHAREHOLDER REDEEMS SHARES OF THE FUND BEFORE THE
REORGANIZATION TAKES PLACE?
A shareholder may choose to redeem or exchange shares of the Fund
before the reorganization takes place. If so, the redemption or exchange
will be treated as a normal redemption or exchange of shares and generally
will be a taxable transaction unless the account is not subject to taxes.
HOW DO I VOTE?
Shareholders of the Fund are asked to vote at the Fund's Special
Meeting of Shareholders which is scheduled for April 28, 2004. Your vote
is very important. You have the flexibility of voting by mailing in your
proxy card, by telephone, or by Internet.
WHERE SHOULD SHAREHOLDERS CALL FOR INFORMATION?
Shareholders who want to learn more about Thornburg Funds should call
800-847-0200 or visit Thornburg's website at www.thornburg.com.
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
Thornburg Limited Term Municipal Fund National Portfolio
119 East Marcy Street
Santa Fe, New Mexico 87501
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2004
To the Shareholders of
Thornburg Limited Term Municipal Fund National Portfolio
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Thornburg Limited Term Municipal Fund National Portfolio (the
"Fund"), a series of Thornburg Limited Term Municipal Fund, Inc., a
Maryland corporation ("Thornburg LTMF") will be held at the offices of the
Fund, 119 East Marcy Street, Santa Fe, New Mexico 87501 on April 28, 2004,
at 10:00 a.m. Mountain Time, for the following purposes:
1. To consider and act upon an Agreement and Plan of
Reorganization providing for the transfer of all of the assets of the Fund
to Thornburg Limited Term Municipal Fund (the "New Fund"), a separate
series of Thornburg Investment Trust, in exchange solely for voting shares
of the New Fund, and for the distribution of those shares to the
shareholders of the Fund and the subsequent dissolution of the Fund; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 4,
2004 as the record date for shareholders entitled to notice of and to vote
at the meeting.
A complete list of the shareholders of the Fund entitled to vote at
the Meeting will be available and open to the examination of any
shareholder of the Fund for any purpose germane to the Meeting during
ordinary business hours at the Fund's offices, 119 East Marcy Street, Santa
Fe, New Mexico 87501.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
By Order of the Board of Directors
Dawn B. Fischer
-----------------------------------
Secretary
YOUR PROMPT ATTENTION TO THE ENCLOSED FORM OF PROXY WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in
the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the registration on
the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration.
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
Thornburg Limited Term Municipal Fund California Portfolio
119 East Marcy Street
Santa Fe, New Mexico 87501
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2004
To the Shareholders of
Thornburg Limited Term Municipal Fund California Portfolio
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Thornburg Limited Term Municipal Fund California Portfolio
(the "Fund"), a series of Thornburg Limited Term Municipal Fund, Inc., a
Maryland corporation ("Thornburg LTMF") will be held at the offices of the
Fund, 119 East Marcy Street, Santa Fe, New Mexico 87501 on April 28, 2004,
at 10:00 a.m. Mountain Time, for the following purposes:
1. To consider and act upon an Agreement and Plan of
Reorganization providing for the transfer of all of the assets of the Fund
to Thornburg California Limited Term Municipal Fund (the "New Fund"), a
separate series of Thornburg Investment Trust, in exchange solely for
voting shares of the New Fund, and for the distribution of those shares to
the shareholders of the Fund and the subsequent dissolution of the Fund;
and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 4,
2004 as the record date for shareholders entitled to notice of and to vote
at the meeting.
A complete list of the shareholders of the Fund entitled to vote at
the Meeting will be available and open to the examination of any
shareholder of the Fund for any purpose germane to the Meeting during
ordinary business hours at the Fund's offices, 119 East Marcy Street, Santa
Fe, New Mexico 87501.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
By Order of the Board of Directors
Dawn B. Fischer
-----------------------------------
Secretary
YOUR PROMPT ATTENTION TO THE ENCLOSED FORM OF PROXY WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in
the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the registration on
the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form of
registration.
Control Number: _____________
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
(Thornburg Limited Term Municipal Fund National Portfolio)
PROXY FOR
SPECIAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED
April 28, 2004 BY THE BOARD OF DIRECTORS
The undersigned shareholder of THORNBURG LIMITED TERM MUNICIPAL FUND
NATIONAL PORTFOLIO (the "Fund"), a series of Thornburg Limited Term
Municipal Fund, Inc., a Maryland corporation, hereby appoints Dawn B.
Fischer, George T. Strickland and Leigh Moiola and each of them, each with
full power of substitution, as proxies to represent the undersigned at the
Special Meeting of Shareholders of the Fund, which shall be held on April
28, 2004 at 10:00 a.m. prevailing Mountain Time at the offices of Thornburg
Investment Management, Inc., 119 East Marcy Street, Santa Fe, New Mexico
87501, and at any and all adjournments thereof, and at the meeting to vote
all shares of the Fund which the undersigned would be entitled to vote,
with all powers the undersigned would possess if personally present, in
accordance with the instructions on the reverse side of this card:
Your vote is important. Please vote today.
1. FOR ____ AGAINST _____ ABSTAIN _____ As to the proposal to approve
the Agreement and Plan of Reorganization dated December 8, 2003 between
Thornburg Limited Term Municipal Fund, Inc., on behalf of the Fund, and
Thornburg Investment Trust, on behalf of Thornburg Limited Term Municipal
Fund (the "New Fund"), and the proposed transaction whereby substantially
all of the assets of the Fund will be transferred to the New Fund, in
exchange for shares of the New Fund; immediately thereafter, the shares of
the New Fund will be distributed to the shareholders of the Fund in
complete liquidation of the Fund; which will thereafter be dissolved;
2. In their discretion, upon such other business as may properly come
before the Meeting or any adjournment thereof.
If more than one of the proxies, or their substitutes, are present at the
meeting or at any adjournment thereof, they jointly (or, if only one in
present and voting, then that one) shall have authority and may exercise
all of the powers granted hereby. This proxy, when properly executed, will
be voted in accordance with the instructions marked hereon by the
undersigned; in the absence of instructions, this proxy will be voted for
the proposal.
If you plan to attend the Meeting, please call 1-800-847-0200.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
IMPORTANT: Please insert the date of signing.
Date: ___________________ 2004
_______________________________________
Signature of Shareholder
________________________________________
Signature of Shareholder (if held jointly)
This proxy card should be signed exactly as your name(s) appear hereon. If
an attorney, executor, guardian or in some representative capacity or as an
officer of a corporation or other entity, please add title as such. By
signing this proxy card, receipt of the Notice of Special Meeting of
Shareholders and Prospectus/Proxy Statement is acknowledged.
Control Number: _____________
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
(Thornburg Limited Term Municipal Fund California Portfolio)
PROXY FOR SPECIAL
MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS
April 28, 2004
The undersigned shareholder of THORNBURG LIMITED TERM MUNICIPAL FUND
CALIFORNIA PORTFOLIO (the "Fund"), a series of Thornburg Limited Term
Municipal Fund, Inc., a Maryland corporation, hereby appoints Dawn B.
Fischer, George T. Strickland and Leigh Moiola and each of them, each with
full power of substitution, as proxies to represent the undersigned at the
Special Meeting of Shareholders of the Fund, which shall be held on April
28, 2004 at 11:00 a.m. prevailing Mountain Time at the offices of Thornburg
Investment Management, Inc., 119 East Marcy Street, Santa Fe, New Mexico
87501, and at any and all adjournments thereof, and at the meeting to vote
all shares of the Fund which the undersigned would be entitled to vote,
with all powers the undersigned would possess if personally present, in
accordance with the instructions below:
Your vote is important. Please vote today.
1. FOR ___ AGAINST ___ ABSTAIN ___ as to the proposal to approve the
Agreement and Plan of Reorganization dated December 8, 2003 between
Thornburg Limited Term Municipal Fund, Inc., on behalf of the Fund, and
Thornburg Investment Trust, on behalf of Thornburg California Limited Term
Municipal Fund (the "New Fund"), and the proposed transaction whereby
substantially all of the assets of the Fund will be transferred to the New
Fund, in exchange for shares of the New Fund; immediately thereafter, the
shares of the New Fund will be distributed to the shareholders of the Fund
in complete liquidation of the Fund; which will thereafter be dissolved;
2. In their discretion, upon such other business as may properly come
before the Meeting or any adjournment thereof.
If more than one of the proxies, or their substitutes, are present at the
meeting or at any adjournment thereof, they jointly (or, if only one is
present and voting, then that one) shall have authority and may exercise
all of the powers granted hereby. This proxy, when properly executed, will
be voted in accordance with the instructions marked hereon by the
undersigned; in the absence of instructions, this proxy will be voted for
the proposal.
If you plan to attend the meeting, please call 1-800-847-0200.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
IMPORTANT: Please insert the date of signing.
Date: ____________, 2004
__________________________________________
Signature of Shareholder
__________________________________________
Signature of Shareholder (if held jointly)
This proxy card should be signed exactly as your name(s) appear hereon. If
an attorney, executor, guardian or in some representative capacity or as an
officer of a corporation or other entity, please add title as such. By
signing this proxy card, receipt of the Notice of Special Meeting of
Shareholders and Prospectus/Proxy Statement is acknowledged.
PROSPECTUS AND PROXY STATEMENT
(for Holders of Class A and Class C Shares)
RELATING TO THE ACQUISITION OF THE ASSETS OF
THORNBURG LIMITED TERM MUNICIPAL FUND NATIONAL PORTFOLIO
a separate series of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
BY AND IN EXCHANGE FOR SHARES OF
THORNBURG LIMITED TERM MUNICIPAL FUND
a separate series of
THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Prospectus/Proxy Statement relates to the proposed transfer of
substantially all of the assets of Thornburg Limited Term Municipal Fund
National Portfolio (the "Fund") in exchange solely for shares of Thornburg
Limited Term Municipal Fund (the "New Fund"). The Fund and the New Fund
each have the same investment objective, which is to seek as high a level
of interest income which is exempt from federal income taxes as is
consistent, in the view of the Funds' investment adviser, with the
preservation of capital. As a result of the proposed transaction, each
shareholder of the Fund will receive shares of the New Fund equal in value
at the date of the exchange to the value of the shareholder's shares of the
Fund. The terms and conditions of these transactions are more fully
described in this Prospectus/Proxy Statement and in the Agreement and Plan
of Reorganization attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the New Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the New Fund's "Thornburg Limited Term
Municipal Funds" Prospectus for Class A and C shares dated March 10, 2004
(the "New Fund Prospectus"), which contains information about the New Fund
and which is incorporated by reference into this Prospectus/Proxy
Statement. A Statement of Additional Information dated March 10, 2004 (the
"Statement of Additional Information") containing additional information
about the New Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information may be
obtained without charge by writing to Thornburg at its address noted above
or by calling 1-800-847-0200. Copies of the Fund's current "Thornburg
Funds" prospectus for Class A and Class C shares dated February 1, 2004,
and its Statement of Additional Information for Class A and Class C shares
dated February 1, 2004 are incorporated by reference into this
Prospectus/Proxy statement, and may be obtained without charge by writing
to Thornburg at the address shown above or by calling 1-800-847-0200.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS AND
PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THORNBURG INVESTMENT
TRUST OR THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
INVESTMENTS IN THORNBURG LIMITED TERM MUNICIPAL FUND (THE "NEW FUND")
ARE SUBJECT TO RISK, INCLUDING POSSIBLE RISK OF PRINCIPAL, AND WILL
FLUCTUATE IN VALUE. SHARES OF THE NEW FUND ARE NOT BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE NOT INSURED BY, ANY
BANK, FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is March 15, 2004.
TABLE OF CONTENTS
Summary of the Proposed Reorganization
Investment Adviser and Distributor of the Fund and the New Fund
Investment Goals, Policies and Restrictions of the Fund and the New Fund
Principal Risk Factors
Fees and Expenses of the Fund and the New Fund
Purchase, Redemption and Exchange Procedures for the Fund and the New Fund
Dividend Policies of the Fund and the New Fund
Comparative Information on Shareholder Rights
Additional Information About Shareholder Accounts
Information About the Reorganization
Capitalization
Additional Information About the Fund and the New Fund
Voting Information
Exhibit A: Agreement and Plan of Reorganization
For detailed information about the New Fund, see the Thornburg Limited Term
Municipal Funds Prospectus dated March 10, 2004 (the "New Fund
Prospectus"), which accompanies this Prospectus/Proxy Statement, or which
may be obtained by calling Thornburg 1-800-847-0200.
SUMMARY OF THE PROPOSED REORGANIZATION
The Board of Directors of Thornburg Limited Term Municipal Fund, Inc.
("Thornburg LTMF"), including the Directors who are not "interested
persons" of Thornburg LTMF (the "Independent Directors"), as defined in the
Investment Company Act of 1940, have reviewed and unanimously approved an
agreement and plan of reorganization (the "Agreement") between Thornburg
LTMF on behalf of Thornburg Limited Term Municipal Fund National Portfolio
(the "Fund") and Thornburg Investment Trust ("Thornburg Trust") on behalf
of Thornburg Limited Term Municipal Fund (the "New Fund") providing for the
acquisition of substantially all of the assets of the Fund, a separate fund
(sometimes referred to as a "series") of Thornburg LTMF, by the New Fund, a
separate series of Thornburg Trust, in exchange solely for voting shares of
the New Fund. The aggregate net asset value of the shares of the acquiring
New Fund issued in the exchange will equal the aggregate net asset value of
the shares outstanding for the acquired Fund. In connection with the
transaction, shares of the New Fund will then be distributed to the Fund's
shareholders pro rata by class so that holders of each class of shares of
the Fund will receive shares of the corresponding class of shares of the
New Fund. The Fund thereafter will be dissolved. These transactions are
referred to as the "reorganization."
As a result of the reorganization, each owner of Class A and Class C
shares of the Fund will become an owner of the corresponding class of
shares of the New Fund, having an aggregate net asset value equal to the
net asset value of that shareholder's shares in the Fund. No sales charge
will be imposed on the transaction. As a condition to the closing,
Thornburg Trust and Thornburg LTMF will obtain a legal opinion to the
effect that, based upon certain facts, assumptions and representations, the
reorganization will qualify as a tax-free reorganization for federal income
tax purposes. See "Information About the Reorganization." Persons
receiving shares of the New Fund in the reorganization will remain free to
redeem their shares after the reorganization.
The Fund and the New Fund have identical investment objectives and
policies. The New Fund will commence operations upon the completion of the
reorganization with the same portfolio of investments owned by the Fund.
The New Fund will have the same investment manager as the Fund, Thornburg
Investment Management, Inc. ("TIMI"), which will perform investment
management services under an investment management agreement having
substantially identical terms and providing for the same fees as the Fund's
current investment advisory agreement.
Expenses of the New Fund are expected to be substantially the same as
the expenses of the Fund before the reorganization, as follows:
Fund Annual Operating Expenses
Before the Reorganization
- --------------------------------------------
Class A .93%
Class C 1.68%
Expected New Fund Annual Operating Expenses
After the Reorganization
- ---------------------------------------------
Class A .93%
Class C 1.68%
Expenses of the reorganization will be paid by the Fund and are not
expected to have a material effect on the expenses of the Fund. The
reorganization is expected to result in cost savings to the shareholders of
the New Fund after the reorganization.
For the reasons set forth below, the Board of Directors of LTMF,
including all of the Independent Directors, have unanimously concluded that
the reorganization is in the best interests of the shareholders of the
Fund. The Board of Directors of Thornburg LTMF therefore have submitted
the Agreement for approval by the shareholders of the Fund at a special
meeting of shareholders to be held on April 28, 2003 (the "Meeting").
Approval of the reorganization with respect to the Fund requires an
affirmative vote of a majority of the outstanding shares of the Fund
entitled to vote at the Meeting. This Prospectus/Proxy Statement pertains
to and is directed to holders of the Fund's Class A and Class C Shares.
At or about the same time that substantially all of the assets of the
Fund are acquired by the New Fund, Thornburg California Limited Term
Municipal Fund is expected to acquire substantially all of the assets of
Thornburg LTMF's other series, Thornburg Limited Term Municipal Fund
California Portfolio. Each of these transactions has been approved by
Thornburg LTMF's Board of Directors. The acquisition of substantially all
of the assets of the Fund and Thornburg Limited Term Municipal Fund
California Portfolio are referred to collectively herein as the "Related
Transactions." Completion of the reorganization is contingent upon proper
shareholder approval being received for each of the Related Transactions,
and the satisfaction of all other conditions to closing the Related
Transactions. There can be no assurance shareholder approval can be
obtained for each Related Transaction or that the conditions of the other
Related Transaction will be satisfied. If shareholders of the Fund approve
the reorganization and the other Related Transaction is not approved, the
Board of Directors of Thornburg LTMF will consider the alternatives
available to it with respect to the Fund, including completion of the
reorganization respecting the Fund. See "Voting Information."
The Board of Directors has approved the reorganization because they
believe it would benefit the Fund. The reorganization is intended to
simplify legal and regulatory compliance functions, and to reduce the costs
of performing these functions. The Board of Directors considered these
objectives of the reorganization, together with other factors, which are
discussed below under the caption "Information About the Reorganization."
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
INVESTMENT ADVISER AND DISTRIBUTOR
OF THE FUND AND THE NEW FUND
The investment adviser to both the Fund and the New Fund is Thornburg
Investment Management, Inc. ("TIMI"), 119 East Marcy Street, Santa Fe, New
Mexico 87501. TIMI has been the investment adviser for the Fund since its
inception in 1984. TIMI is also the investment adviser for all of the 12
funds offered by Thornburg Trust, including the New Fund and Thornburg
California Limited Term Municipal Fund (the two Funds organized to
consummate the Related Transactions), four other funds which invest
principally in municipal obligations for tax exempt current income, two
funds which invest in U.S. Government and other fixed income obligations
for current income, three funds which invest primarily for capital
appreciation, and one fund which invests for current income and capital
appreciation. TIMI also provides to each Thornburg mutual fund under its
management supervision, administration and performance of certain
administrative services. Fees charged to the Fund and the New Fund for
these services are described below under "Fees and Expenses of the Fund and
the New Fund."
The distributor of shares to both the Fund and to the New Fund is
Thornburg Securities Corporation ("TSC"), 119 East Marcy Street, Santa Fe,
New Mexico 87501. TSC has been the distributor for the Fund since its
inception in 1984. TSC is also distributor for each other Thornburg mutual
fund.
INVESTMENT GOALS, POLICIES
AND RESTRICTIONS OF THE FUND AND THE NEW FUND
Investment Goals and Strategies of the Funds
- --------------------------------------------
The investment goals and strategies of the Fund and the New Fund are
identical. The primary investment goal of each Fund is to obtain as high a
level of current income exempt from federal individual income tax as is
consistent, in the view of the investment adviser, with preservation of
capital. The secondary goal of each Fund is to reduce expected changes in
its share price compared to longer intermediate and long-term bond
portfolios. Each Fund's primary and secondary goals are fundamental
policies, and may not be changed without a majority vote of the Fund's
shareholders.
Each Fund pursues its primary goal by investing principally in a
laddered maturity portfolio of municipal obligations issued by states and
state agencies, local governments and their agencies and by certain United
States territories and possessions. The investment adviser, Thornburg
Investment Management, Inc. ("TIMI"), actively manages each Fund's
portfolio. Investment decisions are based upon outlooks for interest rates
and securities markets, the supply of municipal debt securities, and
analysis of specific securities. Each Fund invests in obligations and
participations in obligations which are rated at the time of purchase as
investment grade or, if unrated, which are issued by obligors which have
comparable investment grade obligations outstanding or which are deemed by
TIMI to be comparable to obligors with outstanding investment grade
obligations. Each Fund's portfolio is "laddered" by investing in
obligations of different maturities so that some obligations mature during
each of the coming years.
Because the magnitude of changes in value of interest bearing
obligations is greater for obligations with longer terms, each Fund seeks
to reduce changes in its share value by maintaining a portfolio of
investments with a dollar-weighed average maturity normally less than five
years. There is no limitation on the maturity of any specific security
each Fund may purchase. Each Fund may dispose of any security before it
matures. Each Fund also attempts to reduce changes in its share value
through credit analysis, selection and diversification.
Each Fund ordinarily acquires and holds securities for investment
rather than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent a Fund from
obtaining the highest yields available.
Each Fund normally invests 100% of its assets in municipal
obligations. Each Fund may invest up to 20% of its assets in taxable
securities which produce income not exempt from federal income tax because
of market conditions, pending investment of idle funds or to afford
liquidity. A Fund's temporary taxable investments may exceed 20% of its
assets when made for defensive purposes during periods of abnormal market
conditions. If a Fund found it necessary to own taxable investments, some
of its income would be subject to federal income tax.
PRINCIPAL RISK FACTORS
Because the Funds' investment goals and policies are identical, the
risks of investing in the New Fund are expected to be the same as the risks
of investing in the Fund.
The value of each Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by a Fund. During periods of declining interest rates
the Fund's dividends decline. The value of Fund shares also could be
reduced if municipal obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations.
Nonrated obligations may have, or may be perceived to have, greater risk of
default. The loss of money is a risk of investing in either Fund, and when
you sell your shares they may be worth less than what you paid for them.
An investment in either Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
For a further discussion of the investment objectives, policies and
restrictions applicable to the New Fund, please see the New Fund
Prospectus, which accompanies this Prospectus/Proxy Statement, or which may
be obtained by calling Thornburg at 1-800-847-0200.
FEES AND EXPENSES OF THE FUND AND THE NEW FUND
Advisory and Administration Fees and Fund Expenses
- --------------------------------------------------
The Fund and the New Fund each have contractual arrangements to obtain
investment management, administrative and distribution services which are
substantially identical.
The Fund and The New Fund are each contractually obligated to pay an
investment management fee to TIMI based upon the Fund's assets. The fee is
computed on average daily net assets at an annual rate as follows:
Net Assets Annual Rate
---------- -----------
0 to $500 million .50%
$500 million to $1 billion .40%
$1 billion to $1.5 billion .30%
$1.5 billion to $2.0 billion .25%
more than $2.0 billion .225%
TIMI also has entered into agreements with the Fund and the New Fund to
provide administrative services at an annual rate of .125% of average daily
net assets for Class A and Class C shares of each Fund.
Investment advisory fees, and the other expenses currently paid by the
Fund and expected to be paid by the New Fund are set out below. The
Shareholder Transaction Expense table shows the transaction fees paid by a
shareholder in each Fund upon a purchase or redemption of shares. The
Annual Fund Operating Expenses table shows the annual fund operating
expense for the Fund for its fiscal year ended June 30, 2003 and compares
those fee and expense percentages to the expected annual fund operating
expenses for the New Fund for its current fiscal year.
Shareholder Transaction Expenses
(Fees Paid Directly From Your Investment)
New New
Fund Fund Fund Fund
Class A Class A Class C Class C
------- ------- ------- -------
Maximum Sales Charge (Load) on 1.50% 1.50% none none
Purchases (as a percentage of
offering price)
Maximum Deferred Sales Charge 0.50%(1) 0.50% (1) 0.50% (2) 0.50% (2)
(Load) on Redemptions (as a
percentage of redemption
proceeds or original purchase
price, whichever is lower)
Redemption Fees (as a none none none none
percentage of amount redeemed)
Annual Fund Operating Expenses
(Expenses That Are Deducted From Fund Assets)
New New
Fund Fund Fund Fund
Class A Class A(3) Class C Class C(3)
------- ------- ------- -------
Investment Advisory Fee .43% .43% .43% .43%
Distribution and Service
(12b-1) Fees .25 .25% 1.00% 1.00%
Other Expenses .25% .25% .25% .25%
----- ----- ----- -----
Total Annual Operating
Expenses .93% .93% 1.68%(4) 1.68%(4)
(1) Imposed only on redemptions of any part or all of a purchase of
$1 million or more within 12 months of purchase.
(2) Imposed only on redemptions of Class C shares within 12 months of
purchase.
(3) The New Fund is a newly organized Fund which has not conducted any
business except incident to the reorganization. The fees and expenses
shown for the New Fund are estimated fees and expenses expected to be
incurred for the fiscal year ending June 30, 2004.
(4) For the fiscal year ending June 30, 2004, Thornburg Investment
Management, Inc. and Thornburg Securities Corporation are waiving fees
and reimbursing expenses so that actual Class C expenses do not
exceed 1.24%. Thornburg Investment Management, Inc. and Thornburg
Securities Corporation intend to waive fees and reimburse expenses for
Class C shares of the New Fund after the reorganization so that actual
Class C expenses do not exceed 1.24%. Waivers of fees and
reimbursements of expenses may be terminated at any time.
EXAMPLE:
The following Example is intended to help you compare the cost of
investing in the New Fund with the cost of investing in the Fund. The
Example assumes that you invest $10,000 in each respective Fund for the
time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5%
return each year, that dividends and distributions are reinvested, and that
each Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
New Fund New Fund
Fund Pro Forma Fund Pro Forma
Class A Class A Class C Class C
------- ------- ------- -------
1 Year $243 $243 $221 $221
3 Years $442 $442 $530 $530
5 Years $657 $657 $913 $913
10 Years $1,276 $1,276 $1,987 $1,987
You would pay the following expenses if you did not redeem your Class C
shares:
Fund New Fund Pro Forma
Class C Class C
------- -------
1 Year $171 $171
3 Years $530 $530
5 Years $913 $913
10 Years $1,987 $1,987
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
FOR THE FUND AND THE NEW FUND
Sales Charges
- -------------
Share purchase, redemption and exchange procedures for the Class A and
Class C shares of the Fund are identical with the purchase, redemption and
exchange procedures for the corresponding share classes of the New Fund.
Purchasing Class A Shares
- -------------------------
Class A shares of the Fund and the New Fund are sold at net asset
value plus a sales charge at the rates shown in the table below. Class A
shares are also subject to a Rule 12b-1 Service Plan, which provides for
the Fund's payment of up to 1/4 of 1% of the class's net assets each year
for shareholder and distribution services.
As a Percentage As a Percentage
Of Offering Price Of Net Asset Value
----------------- ------------------
Less than $250,000.00 1.50% 1.52%
$250,000 to 499,999.99 1.25% 1.27%
$500,000 to 999,999.99 1.00% 1.01%
$1,000,000 and over 0.00%* 0.00%*
* No sales charge is payable at the time of purchase on investments of $1
million of more made by a purchaser. A contingent deferred sales charge
will be imposed on any portions of such investments redeemed within one
year of purchase, at a rate of 1/2 of 1% of the amount redeemed.
Class A shares also are sold to specified classes of investors at reduced
or no sales charges. For example, a shareholder who redeems Class A shares
may reinvest with no sales charge within two years of the redemption.
Additionally, each time the value of a shareholder's account plus the
amount of a new investment passes one of the breakpoints in the table
above, the portion of new investments in excess of the breakpoint will be
subject to the reduced sales charge. These privileges, and other
opportunities for purchase at reduced or no sales charge are described in
the New Fund Prospectus, which is available without charge by calling 1-
800-847-0200.
Purchasing Class C Shares
- -------------------------
Class C shares of the Fund and the New Fund are sold at net asset
value without a sales charge at the time of purchase. Class C shares are
subject to a contingent deferred sales charge of 1/2 of 1% if the shares
are redeemed within one year of purchase. Class C shares are also subject
to Rule 12b-1 Service and Distribution Plans, which provide for the Fund's
payment of up to 1% of the class's net assets each year for shareholder and
distribution services. Other information respecting the purchase of Class
C shares is provided in the New Fund Prospectus.
Exchange Privileges
- -------------------
Class A shares of the Fund may be exchanged for Class A shares of
other Thornburg funds, subject to certain conditions described in the
Fund's prospectus. Similarly, Class A shares of the New Fund may be
exchanged for Class A shares of other Thornburg mutual funds under the same
conditions, including the requirement that if you exchange into a fund with
a higher sales charge, you must pay the difference between that fund's
sales charge and the sales charge you paid on the shares you are
exchanging. This charge remains applicable to exchanges of shares received
in the reorganization. Each of the Funds permits exchanges by telephone if
the telephone exchange privilege has been elected by the shareholder.
Shareholders of the Fund who previously elected the telephone exchange
privilege will be deemed to have elected the exchange privilege of the New
Fund if the reorganization is completed.
Redemptions
- ------------
Shares of the Fund and the New Fund properly presented for redemption
may be redeemed at the next determined net asset value per share, subject
to a contingent deferred sales charge (CDSC) in specific circumstances.
The Fund and the New Fund impose a CDSC of 1/2 of 1% on redemptions of part
or all of any purchase of $1 million or more of Class A shares in the event
of a redemption within 12 months of purchase. The Fund and the New Fund
Class C shares are subject to a CDSC of 1/2 of 1% if redeemed within one
year of purchase. Shareholders' holding periods for Class A and Class C
shares of the Fund will be added to the period they hold New Fund Class A
or Class C shares received in the reorganization to determine if the CDSC
is applicable to any redemption of those shares. Shareholders of the Fund
who previously elected the telephone redemption privilege will be deemed to
have elected the New Fund's telephone redemption privilege if the
reorganization is completed.
DIVIDEND POLICIES OF THE FUND AND THE NEW FUND
The Fund distributes substantially all of its net investment income
and realized capital gains to its shareholders. The Fund declares net
income dividends daily and distributes those dividends monthly, and any net
realized capital gains are distributed at least annually, usually in
December. Distributions are reinvested in Fund shares unless the
shareholder elects to receive them in cash. The New Fund intends to follow
the same policies.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The Fund is a diversified series of Thornburg Limited Term Municipal
Fund, Inc. ("Thornburg LTMF"), a Maryland corporation organized in 1984.
As a Maryland corporation, Thornburg LTMF is governed by applicable
Maryland and federal law, its articles of incorporation and its bylaws.
The business of Thornburg LTMF is supervised by its Board of Directors.
The New Fund is a diversified series of Thornburg Trust, a
Massachusetts business trust organized in 1987. As a Massachusetts
business trust, Thornburg Trust is governed by applicable Massachusetts and
federal law, its declaration of trust, as amended, and its bylaws. The
business of Thornburg Trust is supervised by Thornburg Trust's Trustees.
Thornburg LTMF is currently authorized under its articles of
incorporation, as amended, to issue 300,000,000 Class A shares of the Fund,
150,000,000 Class C shares of the Fund, and 250,000,000 Institutional Class
shares. Each share has a par value of $.001. The Board of Directors is
permitted to increase this authorization from time to time under Maryland
law. The Board of Directors is also permitted to create additional funds
or "series," and to divide each such series into two or more classes of
shares. Thornburg Trust is authorized to create an unlimited number of
series, and with respect to each series, to issue an unlimited number of
full and fractional shares of one or more classes and to divide or combine
the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the series. All of the
shares of Thornburg LTMF and of Thornburg Trust, respectively, have equal
voting rights with each other, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. Neither Thornburg LTMF nor Thornburg
Trust permits cumulative voting.
Neither Thornburg LTMF nor Thornburg Trust holds annual shareholder
meetings. There normally will not be any meetings of shareholders of
Thornburg LTMF, Thornburg Trust or either of the Funds to elect directors
or trustees unless fewer than a majority of the directors or trustees then
holding office have been elected by shareholders. However, the Board of
Directors of Thornburg LTMF or the Trustees of Thornburg Trust may call
special meetings from time to time to seek shareholder approval of certain
matters, and meetings of shareholders of either Thornburg LTMF or Thornburg
Trust will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of any affected
series or class having voting rights.
Under Maryland law, shareholders of Thornburg LTMF are not liable for
the obligations of Thornburg LTMF. However, under Massachusetts law, there
is a remote possibility that shareholders of Thornburg Trust could, under
certain circumstances, be held personally liable for the obligations of
such a trust. The declaration of trust for Thornburg Trust contains
provisions intended to limit any such liability and to provide
indemnification out of fund property for any shareholder charged or held
personally liable for obligations or liabilities of the shareholder's fund
solely by reason of being or having been a shareholder of that fund and not
because of the shareholder's acts or omissions or for some other reason.
Consequently, the risk of a shareholder of the New Fund incurring financial
loss on account of shareholder liability is limited to circumstances in
which the New Fund itself would be unable to meet its obligations.
ADDITIONAL INFORMATION ABOUT SHAREHOLDER ACCOUNTS
If the reorganization is approved, the New Fund will establish an
account for each Fund shareholder.
No further purchases of the shares of the Fund may be made after the
date on which the shareholders of the Fund approve the reorganization, and
the share transfer books of the Fund will be permanently closed as of the
date of Closing. Only redemption requests and transfer instructions
received in proper form by the close of business on the day before the date
of Closing will be fulfilled by the Fund. Redemption requests or transfer
instructions received by the Fund after that date will be treated as
requests for the redemption or instructions for transfer of shares of the
New Fund credited to the accounts of shareholders of the New Fund.
Accordingly, those redemption requests or transfer instructions after the
close of business on the day before Closing will be forwarded to the New
Fund. For a complete description of redemption procedures for the New
Fund, see the sections of the New Fund Prospectus under the caption
"Selling Fund Shares."
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization
- ------------------------------------
The following summary of the proposed Agreement and Plan of
Reorganization (the "Agreement") is qualified in its entirety by reference
to the Agreement attached to this Prospectus/Proxy Statement as Exhibit A.
The Agreement provides that the New Fund will acquire substantially
all of the assets of the Fund in exchange solely for shares of the New Fund
on the earliest practicable date following shareholder approval of the
reorganization (the "Closing Date"). The number of full and fractional
shares of the New Fund to be issued to shareholders of the Fund will be
determined on the basis of the relative net asset values per share and
aggregate net assets of the New Fund and the Fund computed immediately
after the closing of business on the New York Stock Exchange (currently
4:00 p.m., Eastern time) on the last business day before the Closing Date
(the "Valuation Date"). The net asset value per share for the Fund will be
determined by dividing each class's respective assets, less its respective
share of liabilities, by the total number of the class's outstanding
shares. Portfolio securities of the Fund will be valued in accordance with
the valuation practices of the New Fund as described in its prospectus,
which is incorporated by reference herein. Valuation procedures of the New
Fund are the same as the valuation procedures of the Fund.
Immediately after the transfer of the Fund's assets to the New Fund on
the Closing Date, the Fund will distribute pro rata to its shareholders of
record as of the close of business on the Valuation Date the full and
fractional shares of the New Fund received by the Fund and will be
dissolved as soon thereafter as reasonably practicable. The distribution
will be accomplished by the establishment of accounts on the share records
of the New Fund in the name of each shareholder of the Fund, each
representing the respective pro rata number of full and fractional shares
of the New Fund due each of those shareholders. Following the
reorganization, shareholders will own shares of the New Fund of the same
class as the Fund shares owned before the reorganization. No certificates
for shares of the New Fund will be issued.
The consummation of the reorganization is subject to the conditions
set forth in the Agreement. The reorganization is also subject to approval
by the Fund's shareholders. Approval requires the affirmative vote of a
majority of the outstanding shares of the Fund entitled to vote at the
meeting of shareholders. Further, completion of the reorganization is
subject to shareholder approval of the "Related Transaction", which is the
proposed transaction in which Thornburg California Limited Term Municipal
Fund will acquire substantially all of the assets of Thornburg Limited Term
Municipal Fund California Portfolio. If shareholders of the Fund approve
the reorganization, but the Related Transaction is not approved, the Board
of Directors of the Fund will consider the available alternatives. The
Agreement may be terminated and the reorganization abandoned prior to the
Closing Date, before or after approval by shareholders of the Fund, by
resolution of the Board of Directors of the Fund or the Trustees of
Thornburg Trust, under circumstances specified in the Agreement.
The Fund will pay the costs of the reorganization, which include fees
and costs associated with preparing, filing, printing and distributing
proxy materials, proxy solicitation costs, costs associated with qualifying
shares for sale in various states, and the deregistration and dissolution
of Thornburg LTMF.
The Board of Directors of Thornburg LTMF has determined that the
reorganization will not result in any dilution of the interests of the
Fund's shareholders, and that participation in the reorganization is in the
best interests of the Fund's shareholders.
Full and fractional shares of beneficial interest of the New Fund will
be issued to shareholders of the Fund in accordance with the procedures
under the Agreement described above. Each share will be fully paid and
non-assessable by the New Fund when issued, and will have no preemptive or
conversion rights. See comparative information on shareholder rights,
above, for additional information with respect to the shares of the New
Fund.
Considerations of the Fund's Board of Directors
- -----------------------------------------------
Thornburg Investment Management, Inc. ("TIMI"), the investment adviser
to both the Fund and the New Fund, proposed and recommended the
reorganization to the Board of Directors of Thornburg LTMF (the "Board") to
simplify certain compliance and administrative functions and to reduce the
costs associated with the performance of those functions. Based upon
TIMI's recommendation, and after consideration of the rationale for the
reorganization and certain additional factors described below, the Board,
including all of the directors who are not "interested persons"
("Independent Directors") as that term is used in the Investment Company
Act of 1940 (the "1940 Act"), has determined that the reorganization is in
the best interest of the shareholders of the Fund and that the terms of the
agreement and plan of reorganization (the "Agreement") are fair and
reasonable.
The Board considered the recent increases in compliance and related
functions performed for the Fund, and the likely further increase in those
functions in the future due to regulatory and rulemaking initiatives by the
Congress and the Securities and Exchange Commission. The Board noted
specifically in this connection the following factors:
. increased duties for the Board assuring compliance with
revised regulations applicable to mutual funds
generally;
. increased audit committee functions and additional time
devoted to audit committee functions by the independent
accountants;
. increased number of filings by Thornburg LTMF of
documents required under state and federal law and
increased time for review and discussion of those
filings by the Board;
and
. increased Board fees and associated travel expenses and
other expenses occasioned by these increased
activities.
The Board further noted in this regard that these functions are
generally duplicative of comparable functions performed for and by
Thornburg Investment Trust and its trustees and audit committee.
The Board concluded that the general complexity of compliance, and
administration of compliance could be reduced significantly if the two
funds currently offered by Thornburg LTMF were combined with the ten
existing funds offered by Thornburg Investment Trust. This combination
would, in the Board's view, eliminate the current duplication and reduce
complexity by substituting one investment company in the place of two.
Moreover, the Board concluded that the reorganization would result in
significant cost savings, because the two funds of Thornburg Trust which
will acquire Thornburg LTMF's two current funds will share with Thornburg
Trust's other funds a number of costs which are currently duplicated (and
thus not shared) by Thornburg LTMF and Thornburg Trust.
In this latter regard the Board considered:
. legal fees and costs associated with advice on
compliance matters, preparation of documents related
to compliance, preparation of documents for Board of
Directors and audit committee meetings;
. legal counsel preparation for and attendance at Board
of Directors and audit committee meetings;
. fees and costs associated with preparation and filing
of registration statements and other periodic filings,
and general corporate work associated with the
maintenance of an additional corporate entity;
. costs, including directors' fees and travel and other
expenses associated with the Board's and the audit
committee's fees and meetings; and
. expenses and fees of the independent accountants.
The Board also considered the likelihood of future increases in these costs
because of increased rulemaking and regulatory complexity, increasing
duties placed on investment company directors and audit committees, the
possible need to hire additional legal counsel and other persons for audit
committees, and possible increases in the frequency of shareholder meetings
to elect investment company directors. Based upon estimates by TIMI and
legal counsel, the Board determined that it was reasonable to conclude that
the costs of the reorganization could be recovered in less than two years.
The Board also considered other factors in evaluating the proposed
reorganization, including the following:
(1) There would be no change in investment objectives, investment
policies, or investment risks as a result of the reorganization;
(2) After the reorganization, investment management, administrative
services, and other functions would be performed under contracts having
substantially the same terms as the existing contracts;
(3) Fees and expenses for the New Fund are expected to be virtually
the same as fees and expenses for the Fund, except for the costs of the
reorganization (which are expected to be offset, and exceeded over time by
cost savings);
(4) The reorganization will result in no dilution of shareholders'
interests;
(5) Shareholders of the Fund will receive shares in the New Fund of
the class corresponding to the same class of shares in the Fund;
(6) The reorganization will be accomplished without recognition of
gain or loss for federal income tax purposes by shareholders of Thornburg
LTMF; and
(7) No sales charges or transaction fees will be assessed against
shareholders in connection with the reorganization.
Federal Income Tax Consequences
- -------------------------------
The reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, with no taxable gain or loss recognized
by the Fund, the New Fund, or shareholders of the Fund as a consequence of
the reorganization. As a condition to the closing of the reorganization,
the Fund and the New Fund will receive an opinion of legal counsel to that
effect based on certain assumptions and representations made by the Fund
and the New Fund.
Shareholders of the Fund should consult their tax advisers regarding
the effect, if any, of the proposed reorganization in light of their
individual circumstances. In particular, shareholders of the Fund should
also consult their tax advisers as to the state, local and other tax
consequences, if any, of the reorganization.
CAPITALIZATION
The following table sets forth the capitalization of the Fund and the
New Fund as of December 31, 2003 and the pro forma capitalization of the
combined New Fund as if the reorganization occurred on that date. These
numbers will be different at the time of closing because the Fund's net
assets for each class will increase or decrease.
CAPITALIZATION OF FUNDS AS OF DECEMBER 31, 2003
FUND NEW FUND PRO FORMA
---- -------- ---------
NET ASSETS
- -----------
Class A shares $1,044,399,875. -0- $1,044,399,875.
Class C shares $ 155,996.351. -0- $ 155,996.351.
Class I shares $ 211,440.262. -0- $ 211,440,262.
TOTAL $1,411,836.488. -0- $1,411,836,488.
NET ASSETS PER SHARE
- --------------------
Class A shares $13.93 -0- $13.93
Class C shares $13.96 -0- $13.96
Class I shares $13.93 -0- $13.93
SHARES OUTSTANDING
- ------------------
Class A shares 74,580,174.625 -0- 74,580,174.625
Class C shares 11,171,853.884 -0- 11,171,853.884
Class I shares 15,235,727.402 -0- 15,235,727.402
TOTAL 100,987,755.911 -0- (1) 100,987,755.911
SHARES AUTHORIZED
- -----------------
Class A shares 300,000,000 unlimited unlimited
Class C shares 150,000,000 unlimited unlimited
Class I shares 250,000,000 unlimited unlimited
TOTAL 700,000,000 unlimited unlimited
(1) It is anticipated that a nominal number of shares of each class
will be issued to an officer of TIMI in order to permit the consummation of
corporate actions before the reorganization.
ADDITIONAL INFORMATION ABOUT THE
FUND AND THE NEW FUND
Additional information respecting the New Fund is included in the
Thornburg Limited Term Municipal Funds Prospectus dated March 10, 2004 (the
"New Fund Prospectus"), which accompanies this Prospectus/Proxy Statement,
and in the Thornburg Limited Term Municipal Funds Statement of Additional
Information dated March 10, 2004, which has been filed with the Securities
and Exchange Commission. Additional information is also included in the
Statement of Additional Information dated March 15, 2004 related to the
reorganization which has been filed with the Securities and Exchange
Commission. The described New Fund Prospectus and statements of additional
information are incorporated by reference herein. Copies of the statements
of additional information are available upon request and without charge by
calling 1-800-847-0200.
Information about the Fund is included in the Thornburg Funds
Prospectus dated February 1, 2004, and in the Thornburg Funds Statement of
Additional Information dated February 1, 2004. The described prospectus
and statement of additional information have been filed with the Securities
and Exchange Commission and are incorporated by reference herein. Copies
of the prospectus and the statement of additional information are available
upon request and without charge by calling 1-800-847-0200.
Reports and other information filed by Thornburg LTMF and Thornburg
Trust can be inspected and copied at the Securities and Exchange
Commission's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C. 20549. Information about the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information
about the Funds are also available on the Commission's Internet site at
http://www.sec.gov and copies of information may be obtained, upon payment
of a duplicating fee, by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102, or contacting the Commission by e-mail at
publicinfo@sec.gov.
Thornburg LTMF files its registration statements and certain other
information with the Commission under Investment Company Act of 1940 file
number 811-4302. Thornburg Investment Trust files its registration
statements and certain other information with the Commission under
Investment Company Act of 1940 file number 811-05201.
VOTING INFORMATION
Proxies for the meeting are being solicited from the Fund's
shareholders by the Board of Directors of Thornburg LTMF. A proxy may be
revoked at any time at or before the meeting by oral or written notice to
the secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New
Mexico 87501, 1-800-847-0200. Unless revoked, all valid proxies will be
voted in accordance with the specifications therein or, in the absence of
specifications, for approval of the reorganization.
Additional solicitations may be made by telephone, telegraph,
facsimile or personal contact by officers or employees of TIMI and its
affiliates or by a professional proxy solicitation firm or firms. Expenses
of proxy solicitation will be borne by the Fund. Thornburg LTMF has
engaged the proxy solicitation firm of D.F. King & Co., Inc. to assist in
soliciting proxies for the meeting at an estimated cost of $75,000.
Shares of the Fund of record at the close of business on March 4, 2004
(the "Record Date") will be entitled to vote at the meeting or any
adjournment thereof. The presence in person or by proxy of one-third of
the Fund's outstanding shares of the meeting will constitute a quorum.
Shareholders are entitled to one vote for each share held, and each
fractional share will be entitled to a proportionate fractional vote.
Approval of the reorganization requires the affirmative vote of a majority
of the outstanding shares of the Fund entitled to vote at the meeting. As
of March 4, 2004, there were issued and outstanding 77,860,913.871 Class A
shares, 11,669,355.383 Class C shares and 16,736,162.371 Class I shares of
the Fund. As of the same date, the following persons were known to own of
record or beneficially 5% or more of the issued and outstanding shares of
any Class of the Funds:
No of % of
Shareholder Shares Class
- ----------- ------ -----
MLPF&S 966,175.536 8.28%
FBO Customers Class C Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
Charles Schwab & Co. 3,375,744.462 20.17%
Special Custody Acct. Class I Shares
101 Montgomery St.
San Francisco, CA 94104
NFSC FEBO 1,464,554.388 8.75%
3305 W. Spring Mountain Rd. Class I Shares
Las Vegas, NV 89102
MLPF&S 931,290.296 5.56%
FBO Customers Class I Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
On March 4, 2004, officers, directors and related persons of the Fund, as a
group, owned 215,837.925 Class I shares of the Fund, representing 1.29% of
the Fund's outstanding Class I shares.
As of the same date, there were issued and outstanding 1.782 Class A
shares, 1.779 Class C shares, and 1.889 Class I shares of beneficial
interest of the New Fund. All of these shares were held by Dawn B.
Fischer, 119 East Marcy Street, Santa Fe, New Mexico 87501. Ms. Fischer
was issued these shares in order to permit certain actions in connection
with the initial organization of the New Fund.
In the event that a quorum is not present at the meeting, or a quorum
is present at the meeting but sufficient votes to approve the
reorganization are not received, the persons named as proxies may propose
one or more adjournments of the meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares represented at the meeting in person or by proxy.
If a quorum is not present, the persons named as proxies will vote those
proxies which they are entitled to vote for the reorganization in favor of
such an adjournment and will vote those proxies required to be voted
against the reorganization against any such adjournment.
"Broker non-votes" are shares held in a broker's street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does
not have discretionary voting authority. Abstentions in broker non-votes
will be counted as shares present for purposes of determining whether a
quorum is present but will not be voted for or against any adjournment or a
proposal. Accordingly, abstentions in broker non-votes effectively will be
a vote against adjournment and against the proposal because the required
vote is a percentage of the shares outstanding.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE REORGANIZATION.
Submission of Shareholder Proposals
- -----------------------------------
The Fund does not hold regular shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to the
secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New Mexico
87501.
Other Matters to Come Before the Meeting
- ----------------------------------------
The Board of Directors of Thornburg LTMF knows of no other business to
be brought before the meeting. However, if any other matters properly come
before the meeting, proxies will be voted in accordance with the judgment
of the Board.
EXHIBIT A
to
PROSPECTUS/PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 8th day of December 2003, by and between THORNBURG INVESTMENT TRUST,
a Massachusetts business trust ("Thornburg Trust"), in respect of Thornburg
Limited Term Municipal Fund (the "New Fund"), a separate series of
Thornburg Trust, and THORNBURG LIMITED TERM MUNICIPAL FUND, INC. a Maryland
corporation ("Thornburg LTMF"), in respect of Thornburg Limited Term
Municipal Fund National Portfolio (the "Fund"), a separate series of
Thornburg LTMF.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization will consist of (i) the transfer of substantially all of
the Assets (hereinafter defined) of the Fund to the New Fund in exchange
solely for Class A, Class C and Class I voting shares of beneficial
interest of the New Fund having no par value (the "New Fund Class A
Shares," "New Fund Class C Shares," and "New Fund Class I Shares,"
respectively, and collectively the "New Fund Shares") and (ii) the
distribution on the Closing Date (hereinafter defined) of the New Fund
Shares to the shareholders of the Fund in complete liquidation of the Fund
as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement. All actions required to be taken by Thornburg Trust
pursuant to this Agreement, and all representations, warranties and
covenants of Thornburg Trust hereunder, are taken and made on behalf of the
New Fund. All actions required to be taken by Thornburg LTMF pursuant to
this Agreement, and all representations, warranties and covenants of
Thornburg LTMF hereunder, are taken and made on behalf of the Fund.
THEREFORE, in consideration of the premises and of the covenants and
agreements hereafter described, the parties hereto covenant and agree as
follows.
1. Procedure for Reorganization.
(a) Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein,
Thornburg LTMF agrees to transfer the Assets of the Fund as set forth in
paragraph (b) to the New Fund, and Thornburg Trust agrees to deliver to the
Fund in exchange therefor the number of the New Fund Shares determined by
dividing the value of the Assets computed in the manner and as of the time
and date set forth in paragraph 2(a), by the net asset value of the New
Fund Shares computed in the manner and as of the time and date set forth in
paragraph 2(b). These transactions shall take place at the closing
provided for in paragraph 3(a) (the "Closing").
(b) The Assets to be acquired by the New Fund shall consist of
all cash, portfolio securities and due bills for dividends, interest, or
other receivables or rights to receive any of the foregoing, receivables
for shares sold, and any claims or rights with respect to portfolio
securities, whether or not arising from contract, which are owned by the
Fund on the closing date provided in paragraph 3(a) (the "Closing Date").
The Fund will retain cash and cash equivalents in an amount reasonably
estimated by it to be sufficient to discharge: (i) obligations incurred in
the ordinary course of its business, which could not reasonably be paid
before Closing and are not otherwise borne by any other person; and (ii)
costs resulting from the liquidation and deregistration of the Fund and
Thornburg LTMF. The Assets will not include any rights in and to the
"Thornburg" name or any variant thereof. The Fund has provided the New
Fund with a list of the current securities holdings of the Fund as of the
date of execution of this Agreement. Thornburg LTMF and the Fund reserve
the right to sell any of these securities in the ordinary course of
business but will not, without prior notification to Thornburg Trust,
acquire any additional securities for the Fund other than securities of the
type in which the New Fund is permitted to invest.
(c) On the Closing Date, Thornburg LTMF will cause the Fund to
be liquidated and to distribute pro rata to the Fund's shareholders of
record (the "Fund Shareholders"), determined on and as of the close of
business on the Valuation Date specified in paragraph 2(a), the New Fund
Shares received by Thornburg LTMF pursuant to paragraph (a). Specifically,
Thornburg LTMF shall (i) distribute the New Fund Class A Shares received in
the exchange, pro rata, to the Fund Shareholders holding Class A shares of
the Fund, (ii) distribute the New Fund Class C shares received in the
exchange, pro rata, to the Fund Shareholders holding Class C shares of the
Fund, and (iii) distribute the New Fund Class I Shares received in the
exchange, pro rata, to the Fund Shareholders holding Class I shares of the
Fund. The liquidation and distribution will be accomplished by the
transfer of the New Fund Shares then credited to the account of the Fund on
the books of the New Fund, to open accounts on the share records of the
Fund in the names of the Fund Shareholders and representing the respective
pro rata number of New Fund Shares due the Fund Shareholders.
(d) As of the Closing Date, any physically-issued share
certificates held by former Fund Shareholders and relating to Fund shares
exchanged for New Fund Shares in accordance with the preceding paragraph
(c) will represent only the right to receive the appropriate number of New
Fund Shares. As of the Closing Date, persons holding those certificates
may be requested to surrender their certificates. No redemption or
repurchase of any New Fund Shares credited to former Fund Shareholders in
place of Fund shares represented by unsurrendered certificates will be
permitted until those certificates have been surrendered for cancellation
or the certificates are cancelled upon the delivery of lost certificate
affidavits.
(e) Any transfer taxes payable upon issuance of New Fund
Shares in a name other than that of the registered holder of the New Fund
Shares on the books of the Fund as of the Closing Date shall, as a
condition of such issuance and transfer, be paid by the person to whom the
New Fund Shares are to be issued and transferred.
(f) The Fund shall be dissolved as soon as reasonably
practicable following the Closing Date. Thornburg LTMF will deregister
with the Securities and Exchange Commission (the "Commission") in
accordance with the Investment Company Act of 1940, as amended (the "1940
Act").
(g) Thornburg Trust will not assume any liability of Thornburg
LTMF, or acquire any Asset subject to any liability, in connection with the
transactions contemplated by this Agreement, except that the New Fund will
assume the obligation to pay for any portfolio securities purchased by the
Portfolio before the Closing Date in the ordinary course of its business
and the purchase of which was disclosed to the New Fund by the Fund when
the commitment to purchase arose.
2. Valuation.
(a) The value of the Fund's Assets to be acquired by the New
Fund hereunder shall be the value of those assets computed as of the close
of business on the New York Stock Exchange and after the declaration of any
dividends on the business day next preceding the Closing Date (the time and
date being hereinafter called the "Valuation Date"). The value of the
portion of the Fund's Assets consisting of portfolio securities will be
computed by Kenny Information Systems, subject to adjustment by the amount,
if any, agreed to by the New Fund and the Fund. In determining the value
of the Assets, each portfolio security and other portfolio asset shall be
priced by Kenny Information Systems in accordance with the policies and
procedures of the New Fund (subject to the second sentence hereafter) as
set forth in the then current prospectuses and statement of additional
information applicable to the New Fund, subject to adjustments agreed to by
the Fund and the New Fund. All computations shall be made by Kenny
Information Systems. In the event of a dispute with respect to the
valuation of any portfolio security or other portfolio asset of the Fund,
the New Fund and the Fund shall, by mutual consent, select an independent
third party to resolve the matter, and the determination of the independent
party will bind the Funds.
(b) The value of the Assets of each class of the Fund shall be
divided, as of the close of business on the New York Stock Exchange and
after the declaration of any dividends on the Valuation Date, among the
Class A, Class C and Class I shares of the Fund (the "Class A Assets,"
"Class C Assets," and "Class I Assets", respectively), in accordance with
the Fund's customary method of accounting.
(c) The net asset value of each New Fund Share shall be the
net asset value per share computed as of the close of business on the New
York Stock Exchange and after the declaration of any dividends on the
Valuation Date, using the valuation procedures set forth in the New Fund's
then current prospectuses, and in accordance with the New Fund's customary
method of accounting.
(d) On the Closing Date, the New Fund shall issue to the Fund
full and fractional New Fund Class A, Class C and Class I shares in the
respective numbers determined in accordance with this paragraph 2(d). The
number of New Fund Class A shares shall be determined by dividing the value
of the Class A Assets by the net asset value of a New Fund Class A share
determined in accordance with paragraph 2(c). The number of New Fund Class
C shares shall be determined by dividing the value of the Class C Assets by
the net asset value of a New Fund Class C share determined in accordance
with paragraph 2(c). The number of New Fund Class I shares shall be
determined by dividing the value of the Class I Assets by the net asset
value of a New Fund Class I share determined in accordance with paragraph
2(c).
3. Closing and Closing Date.
(a) The Closing Date shall be as soon as practicable after
approval of the transactions contemplated in this Agreement by the Fund's
Shareholders has been obtained. The Closing will be held at 119 East Marcy
Street, Suite 202, Santa Fe, New Mexico 87501, in the offices of Thornburg
Investment Management, Inc., or at such other place as the parties may
agree. The time of Closing will be 8:00 a.m. New York time on the Closing
Date. All acts taking place at the Closing will be deemed to occur
simultaneously as of the time of the Closing on the Closing Date.
(b) The Fund's portfolio securities shall be available for
inspection by the New Fund, its custodian bank or such other agents of
Thornburg Trust as Thornburg Trust shall reasonably designate, at the
offices of the Fund's custodian, no later than five business days preceding
the Valuation Date, and the Fund will immediately notify the New Fund's
investment adviser of any portfolio security thereafter acquired or sold by
the Fund. The Fund's securities and cash shall be delivered by Thornburg
LTMF to State Street Bank & Trust Company, Boston, MA 02205-9087, as
custodian for the New Fund for the account of the New Fund on the Closing
Date, duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers.
The cash delivered shall be in the form of currency or certified or
official bank checks, or completed federal funds wire, payable to the order
of "State Street Bank & Trust Co., Custodian for Thornburg Limited Term
Municipal Fund." The Fund will cause its custodian to deliver at Closing a
certificate of an authorized officer of the Custodian stating that the
Fund's securities and cash have been delivered in proper form to the New
Fund's custodian on or before the Closing Date.
(c) In the event that on the Valuation Date (i) the New York
Stock Exchange is closed to trading, or (ii) trading or the reporting of
trading in securities generally is disrupted so that accurate appraisal of
the value of the net assets of the New Fund or the Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored.
(d) Thornburg LTMF shall deliver to Thornburg Trust
shareholder and shareholder account information as of the close of business
on the Valuation Date as reasonably requested by Thornburg Trust. The New
Fund shall issue and deliver a confirmation to the Fund at the Closing
stating the number of New Fund Shares to be credited on the Closing Date to
the Fund, and stating the number of New Fund Shares credited to the Fund's
account on the books of the New Fund. Thornburg Trust shall issue and
deliver to each former Fund Shareholder, after the Closing, a confirmation
stating the number of New Fund Shares credited to the shareholder's
account. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts or other
documents as such other party may reasonably request.
4. Representations and Warranties.
(a) Thornburg LTMF represents and warrants to Thornburg Trust
as follows:
(i) The Fund is a series of Thornburg LTMF, which is a
corporation duly formed and validly existing under
the laws of the State of Maryland;
(ii) Thornburg LTMF is a duly registered open-end
management investment company, and its
registration with the Commission as an investment
company undr the 1940 Act is in full force and
effect;
(iii) The current prospectuses and statements of
additional information of the Fund, each dated
November 1, 2003, conform in all material respects
to the applicable requirements of the Securities
Act of 1933 (the "1933 Act") and the rules and
regulations of the Commission thereunder and do
not include any untrue statement of a material
fact or omit to state any material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading;
(iv) To the knowledge of Thornburg LTMF, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, or the rules and regulations under
those Acts, all of which shall have been received
prior to the Closing Date, except for such
consents, approvals, authorizations or orders as
may be required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg LTMF's Articles of Incorporation or
By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking
to which the Fund or Thornburg LTMF is a party or
by which it is bound;
(vi) The Fund has valued, and will continue to value
its portfolio securities and other assets in
accordance with applicable legal requirements;
(vii) All material contracts or other commitments (other
than this Agreement) to which the Fund is a party
will be terminated without liability to the Fund
or the New Fund on or before the Closing Date;
(viii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the
Fund or any of its properties or assets.
Thornburg LTMF knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg LTMF nor the Fund is a party
to or subject to the provisions of any order,
decree or judgment of any court or governmental
body or self regulatory organization which
materially and adversely affects their business or
their ability to consummate the transactions
herein contemplated;
(ix) The statement of assets and liabilities, the
statement of operations, and the statement of
changes in net assets of the Fund at June 30, 2003
have been audited by PricewaterhouseCoopers, LLP,
independent certified public accountants, and
those statements, together with the statements of
assets and liabilities, the statements of
operations, and the statements of changes in net
assets at December 31, 2003, when issued, fairly
reflect, or in the case of the December 31, 2003
statements will fairly reflect, in all material
respects the assets, financial condition, results
of operations, and changes in net assets of the
Fund as of and for the periods ended on those
dates and have, or in the case of the December 31,
2003 statements, shall have been prepared, in
accordance with generally accepted accounting
principles consistently applied; and there are as
of the dates thereof no known liabilities of the
Fund other than liabilities disclosed or provided
for in the foregoing statements;
(x) Since June 30, 2003, there has been no material
adverse change in the Fund's financial condition,
assets, liabilities or business other than changes
occurring in the ordinary course of business; and
the Fund has not incurred any indebtedness
maturing more than one year from the date such
indebtedness was incurred except as disclosed in
Exhibit A. For the purposes of this subparagraph
(x), a decline in net asset value per share of the
Fund's Shares is not a material adverse change;
(xi) At the Closing Date, all material federal and
other tax returns and reports of the Fund required
by law then to be filed (including any extensions)
shall have been filed, and all federal and other
taxes shall have been paid so far as due, or
provision shall have been made for the payment
thereof, and to the best of Thornburg LTMF's
knowledge no such return of or relating to the
Fund is currently under audit, and no assessment
has been asserted with respect to the Fund;
(xii) The Fund has met the requirements of Subchapter M
of the Code and has elected to be treated as a
regulated investment company for each taxable year
of its operations since its inception, and will so
qualify for the taxable year ending on the Closing
Date;
(xiii) The Fund is authorized to issue 300,000,000,
150,000,000 and 250,000,000 Class A, Class C and
Class I shares, respectively, of the Fund, at the
date hereof. All issued and outstanding shares of
the Fund have been offered and sold in compliance
in all material respects with applicable
registration requirements of the 1933 Act and
state securities laws. All issued and outstanding
shares of the Fund are, and at the Closing Date
will be, duly and validly issued and outstanding,
fully paid and non-assessable by Thornburg LTMF.
All of the issued and outstanding Shares of the
Fund will, at the time of Closing, be held by
shareholder accounts in the amounts set forth in
the list of shareholder's accounts submitted to
Thornburg Trust pursuant to paragraph 3(d). The
Fund does not have outstanding any options,
warrants or other rights to subscribe for or
purchase any securities issuable by the Fund;
(xiv) At the Closing Date, the Fund will have good and
marketable title to the Assets to be transferred
to the New Fund pursuant to paragraph 1(b),
subject to no lien, encumbrance or competing
interest in any person, and full right, power, and
authority to sell, assign, transfer and deliver
the Assets hereunder, and upon delivery and
payment for those Assets, the New Fund will
acquire good and marketable title thereto, subject
to no restriction on the full transfer thereof,
including such restrictions as might arise under
the 1933 Act other than as disclosed in writing to
the New Fund;
(xv) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg LTMF's Board of Directors, and
this Agreement constitutes a valid and binding
obligation of Thornburg LTMF, enforceable in
accordance with its terms, subject to the approval
of the shareholders of the Fund, and further
subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights
and subject to general equity principles;
(xvi) The information furnished by Thornburg LTMF for
use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto;
(xvii) The registration statement filed by the New Fund
on Form N-14 relating to the New Fund Shares that
will be registered with the Commission pursuant to
this Agreement, which shall include the proxy
statements of Thornburg LTMF in respect of the
Fund with respect to the transactions contemplated
by this Agreement, and any supplement or amendment
thereto or to the documents contained or
incorporated therein by reference (the "N-14
Registration Statement"), and the proxy materials
of Thornburg LTMF in respect of the Fund included
in the N-14 Registration Statement and filed with
the Commission pursuant to Section 14 of the 1934
Act with respect to the transactions
contemplated by this Agreement, and any supplement
or amendment thereto or the documents appended
thereto (the "Reorganization Proxy Materials"),
from their effective dates with the Commission,
through the time of the meeting of shareholders of
the Fund contemplated therein (the "Shareholders
Meeting") and at the Closing Date: (a) shall
comply in all material respects with the
provisions of the 1933 Act, 1934 Act and the 1940
Act, the rules and regulations thereunder, and
applicable state securities laws, and (b) shall
not contain any untrue statement of a material
fact or omit to state a material fact required to
be stated therein or necessary to make the
statements therein not misleading; provided, that
the representations and warranties in this
subparagraph shall only apply to statements in or
omissions from the N-14 Registration Statement or
Reorganization Proxy Materials made by, or in
reliance upon and in conformity with information
furnished by or on behalf of Thornburg LTMF.
(b) Thornburg Trust represents and warrants to Thornburg LTMF
as follows:
(i) The New Fund is a series of Thornburg Trust, which
is a business trust duly formed and validly
existing under the laws of the Commonwealth of
Massachusetts;
(ii) Thornburg Trust is a duly registered open-end
management investment company and its registration
with the Commission as an investment company under
the 1940 Act is in full force and effect;
(iii) The prospectuses and statements of additional
information for shares of the New Fund, when
effective, shall conform in all material respects
to the applicable requirements of the 1933 Act and
the rules and regulations of the Commission
thereunder and will not include any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in light
of the circumstances under which they were made,
not misleading;
(iv) To the knowledge of Thornburg Trust, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the New Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the 1934 Act, the
1940 Act, or the rules and regulations under those
Acts, all of which shall have been received prior
to the Closing Date, except for such consents,
approvals, authorizations or orders as may be
required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg Trust's Declaration of Trust or By-
Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the
New Fund or Thornburg Trust is a party or by which
it is bound;
(vi) The New Fund has valued, and will continue to
value, its portfolio securities and other assets
in accordance with applicable legal requirements;
(vii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the New
Fund or any of its properties or assets.
Thornburg Trust knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg Trust nor the New Fund is a
party to or subject to the provisions of any
order, decree or judgment of any court or
governmental body or self regulatory organization
which materially and adversely affects their
business or their ability to consummate the
transactions herein contemplated;
(viii) At the Closing Date, all federal and other tax
returns and reports of the New Fund required by
law then to be filed shall have been filed, and
all federal and other taxes shall have been paid
for as due or provision shall have been made for
the payment thereof and, to the best of Thornburg
Trust's knowledge, no such return of or relating
to the New Fund is currently under audit, and no
assessment has been asserted with respect to the
New Fund;
(ix) The New Fund intends to meet the requirements of
Subchapter M of the Code, and intends to be
treated as a regulated investment company for the
first taxable fiscal year of its operation
including the Closing Date;
(x) Thornburg Trust is authorized to issue an
unlimited number of shares of beneficial interest
having no par value. All issued and outstanding
New Fund Shares at the Closing Date will be duly
and validly issued and outstanding, fully paid and
non-assessable. The New Fund does not have
outstanding any options, warrants or other rights
to subscribe for or purchase any securities
issuable by the New Fund, nor is there outstanding
any security convertible into New Fund Shares
(except as the trustees of Thornburg Trust may
convert classes of shares in accordance with
Thornburg Trust's Declaration of Trust, as
amended);
(xi) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg Trust's trustees, and this
Agreement constitutes a valid and binding
obligation of Thornburg Trust enforceable in
accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating
to or affecting creditors' rights and subject to
general equity principles;
(xii) New Fund Shares to be issued and delivered to the
Fund pursuant to the terms of this Agreement will
at the Closing Date have been duly authorized and,
when so issued and delivered, will be duly and
validly issued New Fund Shares, and will be fully
paid and non-assessable by Thornburg Trust, except
to the extent that shareholders of Thornburg Trust
may be held personally liable for obligations of
Thornburg Trust;
(xiii) The N-14 Registration Statement and the
Reorganization Proxy Materials, from their
effective dates with the Commission, through the
time of the Shareholders Meeting and at the
Closing Date:
(a) shall comply in all material respects with
the provisions of the 1933 Act, 1934 Act and
the 1940 Act, the rules and regulations
thereunder, and applicable state securities
laws, and
(b) shall not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements made therein
not misleading; provided, that the
representations and warranties in this
subparagraph shall only apply to statements
in or omissions from the N-14 Registration
Statement or the Reorganization Proxy
Materials made in reliance upon and in
conformity with information furnished by or
on behalf of Thornburg Trust;
(xiv) At the Closing Date, the New Fund will have good
and marketable title to its assets, subject to no
lien, encumbrance or competing interest in any
person, and full right, power and authority to
sell, assign, transfer and deliver those assets
other than as disclosed in writing to Thornburg
LTMF; and
(xv) The information furnished by Thornburg Trust for
use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto.
5. Covenants of the Parties.
(a) The New Fund and the Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that the ordinary course of business will include
customary dividends and distributions and any other distribution that may
be advisable.
(b) Thornburg LTMF will call a meeting of the shareholders of
the Fund to be held as promptly as practicable to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated herein.
(c) Thornburg LTMF covenants that the New Fund Shares to be
issued hereunder will not be sold or distributed other than in accordance
with the terms of this Agreement.
(d) Thornburg LTMF will furnish to Thornburg Trust all
information reasonably requested and that is within its control for the
preparation of the N-14 Registration Statement, the preparation and
distribution of the Reorganization Proxy Materials, and for effectuating
the transactions contemplated herein. Thornburg LTMF will furnish, or
cause its transfer agent to furnish, to Thornburg Trust all information
reasonably requested respecting the beneficial ownership of Thornburg LTMF
shares, shareholders and shareholder accounts for the mailing of the
Reorganization Proxy Materials and for the establishment of New Fund
accounts for shareholders of the Fund in accordance with paragraph 1(c).
Thornburg LTMF will furnish, or cause its custodian or other agents to
furnish, all portfolio asset information reasonably requested by Thornburg
Trust in connection with, and to facilitate, the transactions contemplated
by this Agreement.
(e) Subject to the provisions of this Agreement, Thornburg
Trust and Thornburg LTMF will each take, or cause to be taken, all actions,
and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
(f) Thornburg LTMF shall furnish to Thornburg Trust within 30
days after the Closing Date a detailed trial balance of the Fund's assets
and liabilities and computations showing amortization of premium on
portfolio securities. Thornburg LTMF shall furnish to Thornburg Trust when
available the final federal income tax return for the Fund.
(g) Thornburg LTMF will, as promptly as practicable after the
Closing, wind up the business of the Fund, deregister the Fund under
applicable federal securities laws, file final reports with the state
securities regulators requiring any such reports, prepare and distribute
final account statements and tax statements to persons who were formerly
shareholders of the Fund, and file any necessary federal and state tax
returns.
(h) Thornburg Trust will prepare and file the N-14
Registration Statement, will file the Reorganization Proxy Materials with
applicable regulatory authorities, and will use all reasonable efforts to
obtain clearance or effectiveness of the N-14 Registration Statement and
the Reorganization Proxy Materials, all in accordance with the 1933 Act,
the 1934 Act, and the 1940 Act, and applicable regulations and rulings
thereunder, and in accordance with any applicable state statutes and
regulations.
(i) Thornburg Trust agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1934
Act, the 1940 Act and such of the state securities laws as are necessary or
appropriate in order to continue its operations after the Closing Date.
6. Conditions Precedent to Obligations of Thornburg LTMF.
The obligations of Thornburg LTMF to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by Thornburg Trust of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the
following further conditions:
(a) All representations and warranties of Thornburg Trust
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date; and
(b) Thornburg Trust shall have delivered to Thornburg LTMF a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg LTMF and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg Trust made in this Agreement
are true and correct at and as of the Closing Date.
7. Conditions Precedent to Obligations of Thornburg Trust.
The obligations of Thornburg Trust to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Thornburg LTMF of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
(a) All representations and warranties of Thornburg LTMF
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date;
(b) Thornburg LTMF shall have delivered to Thornburg Trust the
following information prepared as of the Closing Date: (i) net asset value
pricing sheet of the Fund, with a portfolio listing of each portfolio
security including the principal amount, identification of issue, cost, tax
lot cost, market price per unit and market value; (ii) trial balance of the
Fund's general ledger; (iii) supporting schedules with the details for
accounts receivable and accounts payable; (iv) certification from the
Fund's custodian that it has delivered to the New Fund's custodian the
Assets acquired by the New Fund; and (v) confirmation from the New Fund's
transfer agent of the aggregate number of the Fund's shares outstanding and
a reconciliation of that number to the number of shares shown in the
pricing sheet referred to in (i) above;
(c) Thornburg LTMF shall have delivered to Thornburg Trust a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg Trust and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg LTMF made in this Agreement are
true and correct at and as of the Closing Date;
(d) This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Fund in accordance with applicable law and
evidence of the approval shall have been delivered to Thornburg Trust; and
(e) The parties shall have received a favorable opinion of
White, Koch, Kelly & McCarthy, P.A. satisfactory to Thornburg LTMF and
Thornburg Trust, substantially to the effect that, based upon certain
facts, assumptions and representations, the transactions contemplated by
this Agreement constitute a tax-free reorganization described in Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, for federal
income tax purposes. The delivery of such opinion is conditioned upon
receipt by White, Koch, Kelly & McCarthy, P.A. of representations it shall
request of Thornburg Trust and Thornburg LTMF.
8. Further Conditions Precedent to Obligations of Thornburg Trust
and Thornburg LTMF.
Each party's obligations hereunder are, at its election,
subject to the further conditions that:
(a) On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
(b) On or before the Closing Date, all consents of other
parties and all other consents, orders and permits of federal, state and
local regulatory authorities (including those of the Commission and of
state securities authorities, including "no-action" positions of such
federal or state authorities) deemed necessary by Thornburg Trust or
Thornburg LTMF to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the business assets or properties of
Thornburg Trust or Thornburg LTMF; and
(c) On or before the Closing Date, the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
9. Responsibility for Fees and Expenses.
Thornburg LTMF will pay the costs of the transactions
contemplated hereby, including the expenses of preparing and filing the N-
14 Registration Statement, the costs of distributing the prospectuses and
proxy materials, proxy solicitation costs, and other costs.
10. Massachusetts Business Trust.
Thornburg Trust is organized as a Massachusetts business trust,
and references in this Agreement to Thornburg Trust mean and refer to the
trustees of Thornburg Trust from time to time serving under its declaration
of trust on file with the Secretary of State of the Commonwealth of
Massachusetts, as the same may be amended from time to time, pursuant to
which Thornburg Trust conducts its business. It is expressly agreed that
the obligations of Thornburg Trust hereunder shall not be binding upon any
of Thornburg Trust's trustees, shareholders, nominees, officers, agents, or
employees of Thornburg Trust, or the New Fund personally, but bind only the
property of the New Fund, as provided in Thornburg Trust's declaration of
trust. Moreover, no series of Thornburg Trust other than the New Fund
shall be responsible for the obligations of Thornburg Trust hereunder, and
all persons shall look only to the respective assets of the New Fund to
satisfy the obligations of Thornburg Trust hereunder. The execution and
delivery of this Agreement have been authorized by Thornburg Trust's
trustees, on behalf of the New Fund, and this Agreement has been signed by
authorized officers of Thornburg Trust acting as such, and neither such
authorization by such trustees, nor such execution and delivery by such
officers, shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
respective property of the New Fund, as provided in Thornburg Trust's
declaration of trust.
11. Indemnification.
(a) The New Fund agrees to indemnify and hold harmless the
Fund and each of the Fund's directors and officers from and against any and
all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the New Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b) The Fund agrees to indemnify and hold harmless the New
Fund and each of the New Fund's trustees and officers from and against any
and all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the New Fund or any of its
trustees or officers may become subject insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
12. Entire Agreement; Survival of Warranties.
(a) Thornburg Trust and Thornburg LTMF agree that neither
party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
(b) The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated hereunder.
13. Termination.
(a) This Agreement may be terminated by the mutual agreement
of Thornburg Trust and Thornburg LTMF. In addition, either Thornburg Trust
or Thornburg LTMF may at its option terminate this Agreement at or before
the Closing Date because:
(i) of a material breach by the other of any
representation, warranty or agreement contained
herein to be performed at or before the Closing Date;
or
(ii) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot
be met.
(b) In the event of any such termination, there shall be no
liability for damages on the part of either Thornburg Trust or Thornburg
LTMF, or their respective trustees, directors or officers, to the other
party or its trustees, directors or officers, but each shall bear, except
as otherwise provided in section 9, the expenses incurred by them
incidental to the preparation and carrying out of this Agreement.
14. Amendments.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers
of Thornburg LTMF and Thornburg Trust; provided, however, that following
the shareholders' meeting called by the Fund pursuant to this Agreement, no
such amendment may have the effect of changing the provisions for
determining the number of New Fund Shares to be issued to the Fund's
shareholders under this Agreement to the detriment of those shareholders
without their further approval.
15. Notices.
Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be given
by prepaid telegraph, telecopy or certified mail addressed to Thornburg
Trust, 119 East Marcy Street, Santa Fe, New Mexico 87501, Attention:
Brian J. McMahon, and to Thornburg LTMF, 119 East Marcy Street, Santa Fe,
New Mexico 87501, Attention: George T. Strickland.
16. Headings; Counterparts; Governing Law; Assignment.
(a) The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act (as the same Acts shall have been or
will be amended) or rules, orders or regulations of such governmental
bodies or authorities having authority with respect to such Acts.
(d) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation, other than the parties
hereto and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(e) In the event of any litigation respecting this Agreement
or its subject matter, the prevailing party will be entitled to
reimbursement from the losing party for the prevailing party's cost of
suit, including reasonable attorneys' fees.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President.
THORNBURG INVESTMENT TRUST on behalf of
THORNBURG LIMITED TERM MUNICIPAL FUND
By: /S/ Brian J. McMahon
-------------------------------------
Brian J. McMahon, President
------------------, ----------------
THORNBURG LIMITED TERM MUNICIPAL FUND,
INC., on behalf of THORNBURG LIMITED TERM
MUNICIPAL FUND NATIONAL PORTFOLIO
By: /s/ George T. Strickland
-------------------------------------
George T. Strickland, Vice President
------------------, ----------------
EXHIBIT A
to
Agreement and Plan of Reorganization
Dated December 8, 2003
Thornburg Investment Trust
(on behalf of Thornburg Limited Term Municipal Fund)
and
Thornburg Limited Term Municipal Fund, Inc.
(on behalf of Thornburg Limited Term Municipal Fund National Portfolio)
Subparagraph 4(a)(x): None.
OUTSIDE FRONT COVER
THORNBURG LIMITED TERM MUNICIPAL FUNDS
Prospectus THORNBURG INVESTMENT MANAGEMENT
March 10, 2004
Thornburg Limited Term Municipal Fund
("Limited Term National Fund")
Thornburg California Limited Term Municipal Fund
("Limited Term California Fund")
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Securities and Exchange 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.
Limited Term National Fund and Limited Term California Fund are separate
investment portfolios of Thornburg Investment Trust.
Limited Term National Fund
Investment Goals
- -----------------
The primary investment goal of Limited Term National Fund is to obtain as
high a level of current income exempt from federal individual income tax
as is consistent, in the view of the Fund's investment adviser, with
preservation of capital. The secondary goal of the Fund is to reduce
expected changes in its share price compared to longer intermediate and
long-term bond portfolios. The Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of
the Fund's shareholders.
Principal Investment Strategies
- ---------------------------------
The Fund pursues its primary goal by investing in a laddered maturity
portfolio of municipal obligations issued by states and state agencies,
local governments and their agencies and by certain United States
territories and possessions. Thornburg Investment Management, Inc.
(Thornburg) actively manages the Fund's portfolio. Investment decisions
are based upon outlooks for interest rates and securities markets, the
supply of municipal debt securities, and analysis of specific securities.
The Fund invests in obligations and participations in obligations which
are rated at the time of purchase as investment grade or, if unrated,
which are issued by obligors which have comparable investment grade
obligations outstanding or which are deemed by Thornburg to be comparable
to obligors with outstanding investment grade obligations. Securities
ratings are discussed beginning on page ___. The Fund's portfolio is
"laddered" by investing in obligations of different maturities so that
some obligations mature during each of the coming years.
Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with
a dollar-weighed average maturity normally less than five years. There
is no limitation on the maturity of any specific security the Fund may
purchase. The Fund may dispose of any security before it matures. The
Fund also attempts to reduce changes in its share value through credit
analysis, selection and diversification.
The Fund ordinarily acquires and holds securities for investment rather
than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent the Fund
from obtaining the highest yields available.
The Fund normally invests 100% of its assets in municipal obligations.
The Fund may invest up to 20% of its assets in taxable securities which
produce income not exempt from federal income tax because of market
conditions, pending investment of idle funds or to afford liquidity. The
Fund's temporary taxable investments may exceed 20% of its assets when
made for defensive purposes during periods of abnormal market conditions.
If the Fund found it necessary to own taxable investments, some of its
income would be subject to federal income tax.
Principal Investment Risks
The value of the Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by the Fund. During periods of declining interest
rates the Fund's dividends decline. The value of Fund shares also could
be reduced if obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations.
Nonrated obligations may have, or be perceived to have, greater risk of
default. The loss of money is a risk of investing in the Fund, and when
you sell your shares they may be worth less than what you paid for them.
An investment in the Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Additional information about Fund investments, investment strategies and
risks of investing in the Fund appears below beginning on page _____.
Past Performance of the Fund
- ----------------------------
The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary
from year to year. The information relates to a predecessor investment
company which merged into the Fund. For a description of the merger, see
"Organization of the Funds" in the Statement of Additional Information.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown. The average annual total return
figures compare Class A and Class C share performance to the Lehman Five-
Year General Obligation Bond Index, a broad measure of market
performance. The Index is a model portfolio of municipal general
obligation bonds from throughout the United States, with a consistent
maturity of five years. Past performance (before and after taxes) is not
necessarily an indication of how the Fund will perform in the future.
The following are presented as bar graphs in the Prospectus
Limited Term National Fund Annual Total Returns Class A Shares
15%
10% 9.97 7.40
6.81
5% 5.47
3.97 4.80 4.82
0% 3.25
-1.48
- -3 0.34
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Highest quarterly results for time period shown: 3.56% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: -2.10% (quarter ended
3/31/94).
The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.
Limited Term National Fund Average Annual Total Returns
(periods ended 12/31/03)
One Year Five Years Ten Years
-------- ---------- ---------
Return Before Taxes 1.72% 4.17% 4.33%
Return After Taxes
on Distributions 1.72% 4.17% 4.33%
Return After Taxes on
Distributions and Sale
of Fund Shares 2.15% 4.13% 4.31%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.42%
Class C Shares
Since Inception
One Year Five Years 9/1/94
-------- ---------- -----------
Return Before Taxes 2.46% 4.13% 4.42%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.84%
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect state or local
income taxes. Actual after-tax returns depend on an investor's own tax
situation and may differ from the returns shown. After-tax returns are
not relevant to persons not subject to federal income tax. The after-tax
returns shown relate only to Class A shares, and after-tax returns will
vary for Class C returns because the returns of the classes are
different.
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.
Class A Class C
------- -------
Shareholder Fees (fees paid directly from your
Investment)
Maximum Sales Charge (Load) on 1.50% none
purchases (as a percentage of offering price)
Maximum Deferred Sales Charge (Load) on
Redemptions 0.50%(1) 0.50%(2)
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Class A Class C
------- -------
Management Fee .43 .43%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .25%(3) .25%(3)
---- -----
Total Annual Operating Expenses .93% 1.68%(4)
(1) Imposed only on redemptions of any part or all of $1 million or more
within 12 months of purchase.
(2) Imposed only on redemptions of Class C shares within 12 months of
purchase.
(3) Other expenses are estimated for the current fiscal year.
(4) Thornburg Investment Management, Inc. and Thornburg Securities
Corporation intend to waive fees and reimburse expenses so that
actual Class C expenses do not exceed 1.24%. Reimbursement of
expenses and waiver of fees may be terminated at any time.
Example. This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and redeem all of your shares at the end of these
periods. The Example also assumes that your investment has a 5% return
each year, that dividends and distributions are reinvested, and that the
Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $243 $442 $657 $1,276
Class C Shares $221 $530 $913 $1,987
You would pay the following expenses if you did not redeem your Class C
shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class C Shares $ 171 $ 530 $ 913 $ 1,987
LIMITED TERM CALIFORNIA FUND
Investment Goals
- -----------------
The primary investment goal of Limited Term California Fund is to obtain
as high a level of current income exempt from federal and California
state individual income taxes as is consistent, in the view of the Fund's
investment adviser, with preservation of capital. The secondary goal of
the Fund is to reduce expected changes in its share price compared to
longer intermediate and long-term bond portfolios. The Fund's primary
and secondary goals are fundamental policies, and may not be changed
without a majority vote of the Fund's shareholders.
Principal Investment Strategies
Principal Investment Strategies
- -------------------------------
The Fund pursues its primary goal by investing principally in a laddered
maturity portfolio of municipal obligations issued by the State of
California and its agencies, and by California local governments and
their agencies. Thornburg Investment Management, Inc. (Thornburg)
actively manages the Fund's portfolio. Investment decisions are based
upon outlooks for interest rates and securities markets, the supply of
municipal debt securities, and analysis of specific securities. The Fund
invests in obligations and participations in obligations which are rated
at the time of purchase as investment grade or, if unrated, which are
issued by obligors which have comparable investment grade obligations
outstanding or which are deemed by Thornburg to be comparable to obligors
with outstanding investment grade obligations. Securities ratings are
discussed beginning on page ___. The Fund may invest in obligations
issued by certain United States territories and possessions. The Fund's
portfolio is "laddered" by investing in obligations of different
maturities so that some obligations mature during each of the coming
years.
Because the magnitude of changes in value of interest bearing obligations
is greater for obligations with longer terms, the Fund seeks to reduce
changes in its share value by maintaining a portfolio of investments with
a dollar-weighed average maturity normally less than five years. There
is no limitation on the maturity of any specific security the Fund may
purchase. The Fund may dispose of any security before it matures. The
Fund also attempts to reduce changes in it share value through credit
analysis, selection and diversification.
The Fund ordinarily acquires and holds securities for investment rather
than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent the Fund
from obtaining the highest yields available.
Under normal conditions the Fund invests at least 80% of its assets in
municipal obligations originating in California which are exempt from
California and regular federal income taxes, and normally invests 100% of
its assets in municipal obligations originating in California or issued
by United States territories and possessions. The Fund may invest up to
20% of its assets in taxable securities which would produce income not
exempt from federal or California income tax. These investments may be
made due to market conditions, pending investment of idle funds or to
afford liquidity. The Fund's temporary taxable investments may exceed
20% of its assets when made for defensive purposes during periods of
abnormal market conditions. If the Fund found it necessary to own
taxable investments, some of its income would be subject to federal and
California income taxes.
Principal Investment Risks
- --------------------------
The value of the Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by the Fund. During periods of declining interest
rates the Fund's dividends decline. The value of Fund shares also could
be reduced if municipal obligations held by the Fund were downgraded by
rating agencies, or went into default, or if legislation or other
government action reduces the ability of issuers to pay principal and
interest when due or changes the tax treatment of interest on municipal
obligations. Nonrated obligations may have, or be perceived to have,
greater risk of default. Because the Fund invests primarily in
obligations originating in California, the Fund's share value may be more
sensitive to adverse economic or political developments in that state.
State budget deficits resulting from spending increases and a steep
decline in tax revenues could impair the ability of some governmental
issuers to meet their debt obligations. Moreover, political differences
between the governor and the state legislature over tax increases and
spending cuts may have a negative impact on outstanding and future
obligations of California state and local governments. A portion of the
Fund's dividends could be subject to the federal alternative minimum tax.
The loss of money is a risk of investing in a Fund, and when you sell
your shares they may be worth less than what you paid for them.
An investment in a Fund is not a deposit in any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Additional information about Fund investments, investment strategies and
risks of investing in the Fund appears below beginning on page _____.
Past Performance of the Fund
The following information provides some indication of the risks of
investing in the Fund by showing how the Fund's investment results vary
from year to year. The information relates to a predecessor investment
company which merged into the Fund. For a description of the merger, see
"Organization of the Funds" in the Statement of Additional Information.
The bar chart shows how the annual total returns for Class A shares have
been different in each full year shown, and the average annual total
return figures compare Class A and Class C share performance to the
Lehman Five-Year General Obligation Bond Index, a broad measure of market
performance. The index is a model portfolio of municipal general
obligation bonds from throughout the United States, with a constant
maturity of five years. Past performance (before and after taxes) is not
necessarily an indication of how the Fund will perform in the future.
The sales charge for Class A shares is not reflected in the returns shown
in the bar charts, and the returns would be less if the charge was taken
into account.
The following are presented as bar graphs in the Prospectus
Limited Term California Fund Annual Total Returns Class A Shares
15%
6.38
10% 10.27
5.84 6.26
5% 4.31 4.97
4.27
0% 2.54
-2.13 0.48
- -3 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Highest quarterly results for time period shown: 3.77% (quarter ended
3/31/95).
Lowest quarterly results for time period shown: -2.08% (quarter ended
3/31/94).
The sales charge for Class A shares is not reflected in the returns shown
in the bar chart above, and the returns would be less if the charge was
taken into account.
Limited Term California Fund Average Annual Total Returns
(periods ended 12/31/03)
One Year Five Years Ten Years
-------- ---------- ---------
Return Before Taxes 1.01% 3.65% 4.11%
Return After Taxes
on Distributions 1.01% 3.65% 4.11%
Return After Taxes on
Distributions and Sale
of Fund Shares 1.58% 3.65% 4.10%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.42%
Class C Shares
- --------------
Since Inception
One Year Five Years 9/1/94
-------- ---------- ----------------
Return Before Taxes 1.75% 3.58% 4.20%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.84%
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect state or local
income taxes. Actual after-tax returns depend on an investor's own tax
situation and may differ from the returns shown. After-tax returns are
not relevant to persons not subject to federal income tax. The after-tax
returns shown relate only to Class A shares, and after-tax returns will
vary for Class C shares because the returns of the classes are different.
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)
Limited Term Municipal Funds
Class A Class C
------- -------
Maximum Sales Charge (Load) on Purchases 1.50% none
(as a percentage of offering price)
Maximum Deferred Sales Charge on Redemptions 0.50%(1) 0.50%(2)
(as a percentage of redemption proceeds or
original purchase price, whichever is lower)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
Thornburg Limited Term Municipal Fund-California Portfolio
Class A Class C
Management Fee .50% .50%
Distribution and Service (12b-1) Fees .25% 1.00%
Other Expenses .27%(3) .30%(3)
---- -----
Total Annual Operating Expenses 1.02%(4) 1.80%(4)
(1) Imposed only on redemptions of any part or all of a purchase of $1
million or more within 12 months of the purchase.
(2) Imposed only on redemptions of Class C shares within 12 months of
purchase.
(3) Other expenses are estimated for the current fiscal year.
(4) Thornburg Investment Management, Inc. and Thornburg Securities
Corporation intend to waive fees and reimburse expenses so that
actual Class A expenses do not exceed .99% and actual Class C
expenses do not exceed 1.24%. Waiver of fees and 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, that dividends and distributions are reinvested, and that the
Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares $252 $470 $705 $1,379
Class C Shares $233 $566 $975 $2,116
You would pay the following expenses if you did not redeem your Class C
shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class C Shares $183 $566 $975 $2,116
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS, INVESTMENT PRACTICES, AND
RISKS
Information about each Fund's principal investment strategies and risks
is provided at the beginning of this Prospectus. The information below
provides more background about some of the investments described in the
beginning of this Prospectus, and the risks associated with those
investments.
Principal Investment Strategies
A "principal investment strategy" of a Fund is a strategy which is
important in pursuing the Fund's investment objectives, and is
anticipated will have a significant affect on its performance. In
general, a security or investment strategy will not be considered a
principal strategy of a Fund if it will not represent more than ten
percent of a Fund's assets. It is important to remember, however, that
the investment profile of each Fund will vary over time, depending on
various factors. Over time, a Fund will invest different proportions of
its assets in the securities it is permitted to purchase, and a Fund may
not invest at times in each of the securities it is permitted to purchase
as a principal strategy.
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. The yields on debt securities are dependent on a variety of
factors, including the general money market, the size of a particular
debt offering, the maturity of the debt security, and the rating of the
issuer. The market value of debt securities varies with changes in
prevailing interest rates and changing evaluations of the ability of
issuers to meet principal and interest payments. Some debt securities
permit the issuer to pay the debt before final maturity. Prepayment may
reduce the expected yield on invested funds, the net asset value of the
Fund holding the security, or both if interest rates have declined below
the level prevailing when the debt security was purchased. If interest
rates have declined, reinvestment of the prepayment proceeds by the Fund
may result in a lower yield to the Fund. Debt securities have varying
degrees of quality and varying levels of sensitivity to changing interest
rates. Prices of 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.
Municipal Obligations
Municipal debt securities, which are often called "municipal
obligations," are debt securities which are issued by or on behalf of
states, territories and possessions of the United States and the District
of Columbia, and their political subdivisions, agencies and
instrumentalities. Municipal obligations may be "general obligations
bonds" or "revenue bonds." General obligation bonds are backed by the
credit of the issuing government entity or agency, while revenue bonds
are repaid from the revenues of a specific project such as a stadium, a
waste treatment plant, or a hospital. Municipal obligations includes
notes (including tax exempt commercial paper), bonds, municipal leases
and participation interests in these obligations.
Many municipal obligations pay interest which is exempt from federal
income taxes. Interest which is exempt from federal income tax may,
however, be subject to the federal alternative minimum tax or state
income taxes. Some municipal obligations pay interest which is subject
to both federal and state income taxes.
Municipal obligations often grant the issuer the option to pay off the
obligation prior to its final maturity. Prepayment of municipal
obligations may reduce the expected yield on invested funds, the net
asset value of the Fund, or both if interest rates have declined below
the level prevailing when the obligation was purchased. In addition, the
federal income tax treatment of gains from market discount as ordinary
income may increase the price volatility of municipal obligations when
interest rates rise.
Municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors,
such as the United States Bankruptcy Code. In addition, municipal
obligations may become subject to laws enacted in the future by Congress,
state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of
such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the
power or ability of any issuer to pay, when due, the principal of and
interest on its municipal obligations may be materially affected.
Some municipal obligations are "municipal leases," which are municipal
debt securities used by state and local governments to acquire a wide
variety of equipment and facilities. Many such obligations include "non-
appropriation" clauses which provide that the governmental issuer has no
obligation to make payments unless money is appropriated for that
purpose. If an issuer stopped making payment on a municipal lease held
by a Fund, the lease would lose some or all of its value. Often, a Fund
will not hold the obligation directly, but will purchase a "participation
interest" in the obligation, which gives the Fund an undivided interest
in the underlying municipal lease. Some municipal leases may be illiquid
under certain circumstances, and Thornburg will evaluate the liquidity of
each municipal lease upon its acquisition by a Fund and periodically
while it is held.
Securities Ratings and Credit Quality
Securities which are rated within the four highest grades (Baa or BBB or
better) by Moody's Investors Service ("Moody's"), Fitch Investors Service
("Fitch"), or Standard & Poor's Corporation ("S&P") 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. "High-yield" debt securities (sometimes called "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.
Temporary Investments
Each of the Funds may purchase short-term, highly liquid securities such
as time certificates of deposit, short-term U.S. Government securities
and commercial paper. Funds typically hold these securities under normal
conditions pending investment of idle funds or to provide liquidity.
Funds also may hold assets in these securities for temporary defensive
purposes. Investment in these securities for temporary periods could
reduce a Fund's ability to attain its investment objectives, and could
result in current income subject to federal and state income taxes.
POTENTIAL ADVANTAGES OF INVESTING IN A FUND
Investing through a mutual fund permits smaller investors to diversify an
investment among a larger number of securities. In addition, a mutual
fund may give investors access to certain securities which investors
would not otherwise have.
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 - BUYING FUND SHARES
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.
If there is no application accompanying this Prospectus, please 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. Minimums may be modified under
certain circumstances.
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.
THE FUNDS OFFER DIFFERENT SHARE CLASSES
Each Fund offers Class A shares and Class C shares. Each of a Fund's
shares represents an equal undivided interest in the Fund's assets, and
each Fund has common investment objectives and a common investment
portfolio. Each class may have varying annual expenses and sales charge
structures, which may affect performance. If you do not specify a class
of shares in your order, your money will be invested in Class A shares of
the Fund you purchase.
Financial advisors and others who sell shares of the Fund receive
different compensation for selling different classes of the Funds'
shares. Shares of the Funds may be purchased through investment dealers,
brokers or agents "financial advisors") who have agreements with the
Funds' distributor, Thornburg Securities Corporation (TSC), or through
TSC in those states where TSC is registered. All orders are subject to
acceptance by the Funds, and the Funds and TSC reserve the right to
refuse any order in whole or in part.
Each Fund also may issue one or more other classes of shares not offered
through this Prospectus. Different classes may have different sales
charges and other expenses which may affect performance. Investors may
telephone the Funds' distributor, TSC, at (800) 847-0200 to obtain more
information concerning the various classes of shares which may be
available to them through their sales representatives. Investors may
also obtain information respecting the different classes of shares
through their sales representative or other person who is offering or
making available shares of the Funds.
NET ASSET VALUE
When you purchase shares, the price is based on the net asset value (NAV)
next determined after receipt of your order. The net asset value is the
value of a share, and is computed for each class of a Fund by adding the
market value of investments, cash and other assets for the class,
subtracting liabilities, and then dividing by the number of shares
outstanding. 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 and distribution 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 annual fees for Class A shares of each Fund are lower than
the fees for Class C shares of the same Fund, Class A shares of each Fund
pay higher dividends than Class C shares of the same Fund. The deduction
of the initial sales charge, however, means that you purchase fewer Class
A shares than Class C shares of each Fund for a given amount invested.
If you are in any of the special classes of investors who can buy Class A
shares at net asset value or at a reduced sales charge, you should
consider buying Class A shares. If you are planning a large purchase or
purchases under the Right of Accumulation or Letter of Intent you should
consider if your overall costs will be lower by buying Class A shares,
particularly if you plan to hold your shares for an extended period of
time.
At the time of purchase, each investor should provide to their financial
advisor information on any existing investment in the Fund or intention
to make further purchases in the future, so that the investor can take
full advantage of sales charge discounts, or the Right of Accumulation or
Letter of Intent described below. Investors should retain their account
information for this and other purposes because neither the Fund, the
Transfer Agent, nor the investor's financial advisor may have the
information.
Class A Shares
Total Sales Charge
As Percentage As Percentage
of Offering Price of Net Asset
Limited Term Municipal Funds
Less than $250,000.00 1.50% 1.52%
$250,000 to 499,999.99 1.25% 1.27%
$500,000 to 999,999.99 1.00% 1.01%
$1,000,000 and up 0.00% 0.00%*
* There is no sales charge on investments of $1 million or more made
by a purchaser, but a contingent deferred sales charge (CDSC) will be
imposed on any part or all of such an investment which is redeemed within
12 months of purchase. The CDSC is 1/2 of 1% for the Funds shown above,
and may be subject to waiver or reduction. The applicability of these
charges will not be affected by changes in registration. TSC intends to
pay a commission (which may be paid in installments) to financial
advisors who place an order for a single purchaser for the Funds of up to
0.5% for any portion of an order from $1 million to $2 million, up to
0.35% for any portion of the order from $2 million to $4 million, and
0.25% for any portion of the order exceeding $4 million. Payment of any
such commission is subject to certain restrictions described in the
Statements of Additional Information.
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 specific 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 above, 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 each Fund with no sales charge if you
notify TSC or the Funds' Transfer Agent, BFDS, at the time you purchase
shares that you belong to one of the categories below. If you do not
provide such notification at the time of purchase, your purchase will not
qualify for the waiver of sales charge.
A SHAREHOLDER WHO REDEEMED CLASS A SHARES OF A THORNBURG FUND. For two
years after such a redemption you will pay no sales charge on amounts
that you reinvest in Class A shares of one of the Funds covered by this
Prospectus, up to the amount you previously redeemed.
AN OFFICER, TRUSTEE, DIRECTOR, OR EMPLOYEE OF THORNBURG (or any
investment company managed by Thornburg), TSC, any affiliated Thornburg
Company, the Funds' Custodian bank or Transfer Agent and members of their
families including trusts established for the benefit of the foregoing.
EMPLOYEES OF BROKERAGE FIRMS who are members in good standing with the
National Association of Securities Dealers, Inc. (NASD); employees of
financial planning firms who place orders for the Fund through a member
in good standing with NASD; the families of both types of employees.
Orders must be placed through an NASD member firm who has signed an
agreement with TSC to sell Fund shares.
CUSTOMERS of bank trust departments, companies with trust powers,
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 1/2 of 1% applies to shares redeemed within one year of
purchase.
THOSE PERSONS WHO ARE DETERMINED BY THE TRUSTEES OF THE FUND to have
acquired their shares under special circumstances not involving any sales
expenses to the Funds or Distributor.
PURCHASES PLACED THROUGH A BROKER THAT MAINTAINS ONE OR MORE OMNIBUS
ACCOUNTS WITH THE FUNDS provided that such purchases are made by: (i)
investment advisors or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; (ii) clients of such
investment advisors or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such
investment advisor or financial planner on the books and records of the
broker or agent; and iii) retirement and deferred compensation plans and
trusts used to fund those plans, including, but not limited to, those
defined in Sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts." Investors may be charged a fee if they effect
transactions in Fund shares through a broker or agent.
PURCHASES BY CHARITIES. Charitable organizations or foundations,
including trusts established for the benefit of charitable organizations
or foundations, may purchase shares of the Funds without a sales charge.
Thornburg or TSC intend to pay a commission of up to 1/2 of 1% to
financial advisors who place orders for these purchases.
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
contingent deferred sales charge (CDSC) if the shares are redeemed within
one year of purchase. The CDSC is 1/2 of 1% for all Funds offering Class
C shares. 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. The CDSC will be waived for shares redeemed because
of (1) the death of the account holder, or (2) certain mandatory
distributions from IRAs and other qualified retirement arrangements. In
addition, the CDSC will be waived for redemptions under a systematic
withdrawal plan within one year of purchase up to 10% of the account
value as of the date when you set up the plan. See "Systematic
Withdrawal Plan" on page 35. 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 and distribution
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 your 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 redemption fee or 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, but any redemption fee will apply to any appreciation in
value. No CDSC or redemption fee is imposed on shares obtained through
reinvestment of dividends or capital gains. Shares not subject to a CDSC
or redemption fee will be redeemed first. No redemption fee will be
imposed on shares to which a CDSC applies. 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. Each Fund reserves the
right to redeem the shares of any shareholder whose shares have a net
asset value of less than $1,000. No redemption fee or contingent
deferred sales charge will be imposed on such a mandatory redemption.
The Fund will notify the shareholder before performing the redemption,
and allow the shareholder at least 30 days to make an additional
investment and increase the account to the stated minimum. A Fund will
not redeem an account which falls below the minimum solely due to market
fluctuations.
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. 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. The contingent deferred sales charge (CDSC) imposed on
redemptions of Class C shares within one year of purchase is waived for
redemptions under a systematic withdrawal plan within one year of
purchase up to 10% of the account value as of the date you set up the
plan. Because of the sales charge on Class A shares of each Fund, you
may not want to set up a systematic withdrawal plan during a period when
you are buying Class A shares of the same Fund on a regular basis.
Minimum account size for this feature is $10,000, and the minimum payment
is $50. 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 must 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 other participant in
the Securities Transfer Agent Medallion Program (STAMP). The Stamp2000
Medallion imprint is the only guarantee that will be accepted. 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.
Monthly 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
a 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, read the prospectus.
.. Exchanges may have tax consequences for you.
.. Each Fund reserves the right to refuse any exchange, or temporarily or
permanently terminate the exchange privilege of any investor 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, the Fund receives or anticipates simultaneous orders
affecting significant portions of the Fund's assets, exchanges appear
to coincide with a market timing strategy, or if Thornburg believes
the Fund otherwise may be adversely affected. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for this purpose. The
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 your
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 Funds, TSC, Thornburg and the Funds' Transfer Agent are not
responsible for, and will not be liable for, the authenticity of
withdrawal instructions received by telephone or the delivery or
transmittal of the redemption proceeds if they follow instructions
communicated by telephone that they reasonably believe to be genuine. By
electing telephone redemption you are giving up a measure of security you
otherwise may have by redeeming shares only with written instructions,
and you may bear the risk of any losses resulting from telephone
redemption. The Funds' Transfer Agent will attempt to implement
reasonable procedures to prevent unauthorized transactions and the Funds
or their Transfer Agent could be liable if these procedures are not
employed. These procedures will include recording of telephone
transactions, sending 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 Funds nor their 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 Funds nor their 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
Each Fund is open for business each day the New York Stock Exchange
(NYSE) is open. Each 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.
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 28% backup withholding for failing to report
income to the IRS. If you violate IRS regulations, the IRS can require
your Fund to withhold 28% of your taxable distributions and redemptions.
Federal law requires us to obtain, verify and record information which
identifies each person who opens an account. When you open an account,
you will be asked to supply your name, address, date of birth, and other
information identifying you. We are required to reject any new account
application if the required information is not provided.
Each Fund reserves the right to suspend the offering of shares for a
period of time. Each Fund also reserves the right to reject any specific
purchase order, including certain purchases by exchange. See "Exchanging
Shares" above and "Excessive Trading," below.
If you open or add to your account yourself rather than through your
financial advisor please note the following:
.. All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks.
.. The Funds do not accept cash.
.. If your check does not clear, your purchase will be cancelled and you
could be liable for any losses or fees the Fund or its Transfer Agent
has incurred.
When you buy shares of the Funds 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 a Fund is
priced on the following business day. If payment is not received by that
time, the financial institution could be held liable for resulting fees
or losses.
Each Fund may authorize certain securities brokers to receive on its
behalf purchase and redemption orders received in good form, and some of
those brokers may be authorized to designate other intermediaries to
receive purchase and redemption orders on the Fund's behalf. Provided
the order is promptly transmitted to the Fund, the Fund will be deemed to
have received a purchase or redemption order at the time it is 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.
0
Financial advisors, securities dealers and other persons offering shares
of the Funds are not agents or otherwise acting on behalf of the Funds,
Thornburg Securities Corporation or Thornburg Investment Management,
Inc., and the Funds, Thornburg Securities Corporation and Thornburg
Investment Management, Inc. are not responsible for errors or omissions
of any financial advisor, securities dealer or other person offering
mutual fund shares for sale. Investors should exercise care in selecting
persons from whom they purchase investments.
EXCESSIVE TRADING
Excessive trading of Fund shares in response to short-term fluctuations
in the market, also known as "market timing," may make it very difficult
to manage a Fund's investments and may hurt Fund performance and
shareholders. When market timing occurs, a Fund may have to sell
portfolio securities to have the cash necessary to redeem the market
timers' shares. This can happen at a time when it is not advantageous to
sell any securities, which may harm a Fund's performance. The Funds
reserve the right to refuse purchase orders or exchanges into a Fund by
any person. In particular, purchase orders or exchanges may be
restricted or refused if in Thornburg's judgment, the Fund would be
unable to invest the money effectively in accordance with its investment
objective and policies, the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets, the purchases
appear to coincide with a market timing strategy, or if Thornburg
believes the Fund otherwise may be adversely affected. Any Fund's
exercise of these rights is in addition to, and not in lieu of, the
imposition of any redemption fees. Accounts under common ownership or
control, including amounts with the same tax identification number, will
be counted together for this purpose. See "Exchanging Shares," above.
DIVIDENDS AND DISTRIBUTIONS
The Funds distribute substantially all of their net income and realized
capital gains, if any, to shareholders each year. Each of the Funds
declares its net investment income daily and distributes it monthly.
Each Fund will distribute net realized capital gains, if any, at least
annually. Capital gain distributions normally will be declared and
payable in December.
Distribution Options
Each Fund earns interest from bond, money market, and other investments.
These are passed along as dividend distributions. Each Fund realizes
capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital gain distributions.
When you open an account, specify on your application how you want to
receive your distributions. Each Fund offers four options, (which you can
change at any time).
Dividends
1. Reinvestment Option. Your dividend distributions will be
automatically invested in additional shares of your Fund 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 end of the month or quarter for which
the distribution is made.
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 Funds do not intend to engage in short-term trading for profits.
Nevertheless, when a Fund believes that a security will no longer
contribute towards its reaching its goal, it will normally sell that
security.
When a Fund sells a security at a profit it realizes a capital gain. When
it sells a security at a loss it realizes a capital loss. A mutual fund
must, by law, distribute capital gains, net of any losses, to its
shareholders. Whether you reinvest your capital gain distributions or
take them in cash, the distribution is taxable.
To minimize taxable capital gain distributions, each Fund will realize
capital losses, if available, when, in the judgment of the portfolio
manager, the integrity and income generating aspects of the portfolio
would be unaffected by doing so.
TAXES
Federal Taxes - 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
The Funds intend to satisfy conditions that will enable them to designate
distributions from the interest income generated by investments in
municipal obligations, which are exempt from federal income tax when
received by a Fund, as "Exempt Interest Dividends." Shareholders
receiving Exempt Interest Dividends will not be subject to federal income
tax on the amount of such dividends, except to the extent the alternative
minimum tax may be imposed.
Distributions by each of the Funds of net interest income received from
certain temporary investments (such as certificates of deposit, corporate
commercial paper and obligations of the U. S. government, its agencies and
instrumentalities) and net short-term capital gains realized by the Fund,
if any, will be taxable to shareholders as ordinary income whether
received in cash or additional shares. Distributions to shareholders will
not qualify for the dividends received deduction for corporations. Any
net long-term capital gains realized by the Fund, whether or not
distributed, will be taxable to shareholders as long-term capital gains
regardless of the length of time investors have held their shares,
although gains attributable to market discount on portfolio securities
will be characterized as ordinary income. Each year the Fund will, where
applicable, mail to shareholders information on the tax status of
dividends and distributions, including the respective percentages of tax-
exempt and taxable, if any, income and an allocation of tax-exempt income
on a state-by-state basis. The exemption of interest income for federal
income tax purposes does not necessarily result in an exemption under the
income or other tax laws of any state or local taxing authorities. (See
"State Taxes").
The Code treats interest on certain municipal obligations which are
private activity bonds under the Code as a preference item for purposes of
the alternative minimum tax on individuals and corporations. The Funds
may purchase without limitation private activity bonds the interest on
which is subject to treatment under the Code as a preference item for
purposes of the alternative minimum tax on individuals and corporations,
although the frequency and amounts of these purchases are uncertain. Some
portion of Exempt Interest Dividends could, as a result of such purchases,
be treated as a preference item for purposes of the alternative minimum
tax on individuals and corporations. Shareholders are advised to consult
their own tax advisers as to the extent and effect of this treatment.
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 Funds, 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.
Each Fund will advise its shareholders approximately 60 days after the end
of each calendar year as to the percentage of income derived from each
state as to which it has any municipal obligations in order to assist
shareholders in the preparation of their state and local tax returns.
Distributions to individual shareholders of Limited Term California Fund
attributable to interest on municipal obligations originating in
California are not subject to personal income taxes imposed by the state
of California. Capital gain distributions are taxable by most states
which impose an income tax, and gains on the sale of Fund shares may be
subject to state capital gains taxes. Prospective investors are urged to
confer with their own tax advisers for more detailed information
concerning state tax consequences.
ORGANIZATION OF THE FUNDS
Limited Term National Fund and Limited Term California Fund are
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
Trustees are authorized to divide the Trust's shares into additional
series and classes.
INVESTMENT ADVISER
The Funds are managed by Thornburg Investment Management, Inc.,
(Thornburg). Thornburg performs investment management services for each
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 the class shareholders. Thornburg's
services to Limited Term National Fund and Limited Term California Fund
are supervised by the Trustees of Thornburg Investment Trust.
For the most recent fiscal year of the predecessor to each of the Funds,
the investment advisory and administrative services fee rates for each of
the Funds were:
Advisory Fee Rate Administrative Services Rate
----------------- ----------------------------
Year Ended June 30, 2003
------------------------
Limited Term National Fund .43% .125%
Limited Term California Fund .50% .125%
George T. Strickland, who is Managing Director of Thornburg, is the
portfolio manager for the Funds. Mr. Strickland has been one of the
persons primarily responsible for management of the predecessors to the
Funds since 1998, and has performed municipal bond credit analysis and
management since joining Thornburg in 1991. Mr. Strickland is assisted by
other employees of Thornburg in managing the Funds.
Thornburg may, from time to time, agree to waive its fees or to reimburse
a 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 a Fund will boost its
performance, and repayment of waivers or reimbursements will reduce its
performance.
In addition to Thornburg's fees, each Fund will pay all other costs and
expenses of its operations. No Fund will bear any costs of sales or
promotion incurred in connection with the distribution of shares, except
as described above under "Opening Your Account - Buying Fund Shares".
Thornburg pays, from its management fee and other resources, additional
cash or non-cash compensation and expense reimbursements to dealer firms
that have selling agreements with Thornburg Securities Corporation. TSC
also may pay, out of its revenues, additional cash or non-cash
compensation and expense reimbursements to dealer firms with which it has
selling agreements. These payments may include amounts to assist in the
sale or promotion of the Funds. Dealer firms may pay additional
compensation to financial advisors who sell Fund shares. Non-cash
compensation may include travel and lodging in connection with seminars
and other educational programs.
Garrett Thornburg, a Trustee and Chairman of the Trust, is the controlling
stockholder of both Thornburg and TSC.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each
Fund's financial performance for the past five years (or if shorter, the
period of the Fund's operations). All of the information for each Fund
relates to a predecessor investment company which merged into the Fund.
Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). Information for the years ended
June 30, 2000, 2001, 2002 and 2003 for Limited Term National Fund and
Limited Term California Fund appears in the Annual Reports for each of
the predecessors to those Funds, which have been audited by
PricewaterhouseCoopers LLP, independent auditors. Information for the
year ended June 30, 1999 was audited by other independent auditors.
Independent auditors' reports, together with each predecessor fund's
financial statements, are included in each predecessor fund's Annual
Report, which are available upon request. Information for the six month
period ended December 31, 2003 is unaudited.
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Municipal Fund
- --------------------------------------
Six Months Year Ended June 30,
Ended 12/31/03 2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $14.01 $13.65 $13.44 $13.06 $13.26 $13.50
------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income 0.20 0.45 0.52 0.58 0.59 0.59
Net realized and unrealized
gain (loss) on investments (0.08) 0.36 0.21 0.38 (0.20) (0.24)
------ ------ ------ ------ ------ -------
Total from investment operations 0.12 0.81 .73 0.96 0.39 0.35
Less dividends from:
Net investment income (0.20) (0.45) (0.52) (0.58) (0.59) (0.59)
------ ------ ------ ------ ------ -------
Change in net asset value (0.08) 0.36 0.21 0.38 (0.20) (0.24)
Net asset value, end of period $13.93 $14.01 $13.65 $13.44 $13.06 $13.26
====== ====== ====== ====== ====== =====
Total return (a) 0.88% 5.99% 5.54% 7.49% 3.00% 2.58%
Ratios/Supplemental Data
Ratios to average net assets:
Net investment income 2.89%(b) 3.20% 3.83% 4.36% 4.48% 4.35%
Expenses, after expense reductions 0.90%(b) 0.93% 0.95% 0.99% 0.96% 0.96%
Expenses, after expense reductions
and net of custody credits 0.90%(b) 0.93% 0.95% - - -
Expenses, before expense reductions 0.90%(b) 0.93% 0.96% 0.99% 0.96% 0.96%
Portfolio turnover rate 8.55% 15.81% 19.59% 25.37% 33.65% 22.16%
====== ====== ====== ====== ====== ======
Net assets at end of period (000) $1,039,075 $998,878 $785,145 $654,157 $672,775 $807,232
<FN>
<Fa> Sales loads are not reflected in computing total return, which is not annualized for periods less than one year.
<Fb> Annualized.
</FN>
FINANCIAL HIGHLIGHTS - Continued
Thornburg Limited Term Municipal Fund
Six Months Year Ended June 30,
Ended 12/31/03 2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $14.04 $13.67 $13.46 $13.08 $13.28 $13.53
------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income 0.18 0.41 0.47 0.53 0.53 0.53
Net realized and unrealized
gain (loss) on investments (0.08) 0.37 0.21 0.38 (0.20) (0.25)
------ ------ ------ ------ ------ -------
Total from investment operations 0.10 0.78 0.68 0.91 0.33 0.28
Less dividends from:
Net investment income (0.18) (0.41) (0.47) (0.53) (0.53) (0.53)
------ ------ ------ ------ ------ -------
Change in net asset value (0.08) 0.37 0.21 0.38 (0.20) (0.25)
Net asset value, end of period $13.96 $14.04 $13.67 $13.46 $13.08 $13.28
====== ====== ====== ====== ====== ======
Total return (a) 0.74% 5.78% 5.13% 7.07% 2.57% 2.08%
Ratios/Supplemental Data
Ratios to average net assets:
Net investment income 2.61%(b) 2.89% 3.42% 3.96% 4.06% 3.93%
Expenses, after expense reductions 1.17%(b) 1.18% 1.33% 1.38% 1.38% 1.38%
Expenses, after expense reductions
and net of custody credits 1.17%(b) 1.18% 1.33% - - -
Expenses, before expense reductions 1.17%(b) 1.68% 1.80% 1.85% 1.82% 1.78%
Portfolio turnover rate 8.55% 15.81% 19.59% 25.37% 33.65% 22.16%
====== ====== ====== ====== ====== ======
Net assets at end of period(000) $155,934 $137,559 $57,258 $24,773 $21,322 $28,048
<FN>
<Fa> Not annualized for periods less than one year.
<Fb> Annualized.
</FN>
FINANCIAL HIGHLIGHTS
Thornburg California Limited Term Municipal Fund
Six Months Year Ended June 30,
Ended 12/31/03 2003 2002 2001 2000 1999
Class A Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $13.20 $12.96 $12.79 $12.59 $12.75 $12.90
------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income 0.17 0.38 0.46 0.54 0.54 0.53
Net realized and unrealized
gain (loss) on investments (0.06) 0.24 0.17 0.20 (0.16) (0.15)
------ ------ ------ ------ ------ -------
Total from investment operations 0.11 0.62 0.63 0.74 0.38 0.38
Less dividends from:
Net investment income (0.17) (0.38) (0.46) (0.54) (0.54) (0.53)
------ ------ ------ ------ ------ -------
Change in net asset value (0.06) 0.24 0.17 0.20 (0.16) (0.15)
Net asset value, end of period $13.14 $13.20 $12.96 $12.79 $12.59 $12.75
====== ====== ====== ====== ====== ======
Total return (a) 0.85% 4.83% 5.03% 6.00% 3.10% 2.97%
Ratios/Supplemental Data
Ratios to average net assets:
Net investment income 2.59%(b) 2.87% 3.58% 4.26% 4.28% 4.11%
Expenses, after expense reductions 1.00%(b) 0.99% 1.00% 0.99% 0.99% 0.99%
Expenses, after expense reductions
and net of custody credits 0.99%(b) 0.99% 0.99% - - -
Expenses, before expense reductions 1.02%(b) 1.02% 1.01% 1.05% 1.01% 1.02%
Portfolio turnover rate 13.34% 26.03% 25.16% 15.45% 21.34% 21.71%
===== ====== ====== ====== ====== ======
Net assets at end of period (000) $139,952 $149,269 $115,237 $89,967 $90,035 $113,835
<FN>
<Fa> Sales loads are not reflected in computing total return, which is not annualized for periods less than one year.
<Fb> Annualized.
</FN>
FINANCIAL HIGHLIGHTS - Continued
Thornburg California Limited Term Municipal Fund
Six Months Year Ended June 30,
Ended 12/31/03 2003 2002 2001 2000 1999
Class C Shares:
Per Share Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $13.21 $12.97 $12.80 $12.61 $12.76 $12.91
------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income 0.15 0.34 0.41 0.49 0.49 0.48
Net realized and unrealized
gain (loss) on investments (0.06) 0.24 0.17 0.19 (0.15) (0.15)
------ ------ ------ ------ ------ -------
Total from investment operations 0.09 0.58 0.58 0.68 0.34 0.33
Less dividends from:
Net investment income (0.15) (0.34) (0.41) (0.49) (0.49) (0.48)
------ ------ ------ ------ ------ -------
Change in net asset value (0.06) 0.24 0.17 0.19 (0.15) (0.15)
Net asset value, end of period $13.15 $13.21 $12.97 $12.80 $12.61 $12.76
====== ====== ====== ====== ====== ======
Total return (a) 0.72% 4.51% 4.60% 5.49% 2.73% 2.56%
Ratios/Supplemental Data
Ratios to average net assets:
Net investment income 2.34%(b) 2.56% 3.15% 3.86% 3.88% 3.70%
Expenses, after expense reductions 1.25%(b) 1.30% 1.38% 1.40% 1.40% 1.40%
Expenses, after expense reductions
and net of custody credits 1.24%(b) 1.30% 1.37% - - -
Expenses, before expense reductions 1.33%(b) 1.80% 1.86% 2.01% 1.94% 1.92%
Portfolio turnover rate 13.34% 26.03% 25.16% 15.45% 21.34% 21.71%
====== ====== ====== ====== ====== ======
Net assets at end of period (000) $22,802 $22,487 $16,081 $6,392 $7,411 $7,892
<FN>
<Fa> Not annualized for periods less than one year.
<Fb> Annualized.
</FN>
OUTSIDE BACK COVER
ADDITIONAL INFORMATION
Reports to Shareholders
Shareholders will receive annual reports of their Fund containing
financial statements audited by the Funds' independent auditors, and also
will receive unaudited semi-annual reports. In addition, each shareholder
will receive an account statement no less often than quarterly.
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 BFDS Servicing Agent
Post Office Box 419017
Kansas City, Missouri 64141-6017
Additional information about the Funds' investments is available in the
Funds' Annual and Semiannual Reports to Shareholders. In each 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 Funds' Statement of Additional
Information (SAI) and the Funds' Annual and Semiannual Reports are
available without charge upon request. Shareholders may make inquiries
about the Funds, 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 Funds' current SAI is
incorporated in this Prospectus by reference (legally forms a part of this
Prospectus).
Information about the Funds (including the SAI) may be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room
in Washington, D.C. Information about the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Funds are also available on the Commission's
Internet site at http://www.sec.gov and copies of information may be
obtained, upon payment of a duplicating fee, by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102, or by contacting
the Commission by e-mail at publicinfo@sec.gov.
No dealer, sales representative or any other person has been authorized
to give any information or to make any representation not contained in
this Prospectus and, if given or made, the information or representation
must not be relied upon as having been authorized by any Fund or
Thornburg Securities Corporation. This Prospectus constitutes an offer to
sell securities of a Fund only in those states where the Fund's shares
have been registered or otherwise qualified for sale. A Fund will not
accept applications from persons residing in states where the Fund's
shares are not registered.
Thornburg Securities Corporation, Distributor
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
www.thornburg.com email: postmaster@thornburg.com
Limited Term National Fund and Limited Term California Fund are 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.
PROSPECTUS AND PROXY STATEMENT
(For Holders of Institutional Class Shares)
RELATING TO THE ACQUISITION OF THE ASSETS OF
THORNBURG LIMITED TERM MUNICIPAL FUND NATIONAL PORTFOLIO
a separate series of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
BY AND IN EXCHANGE FOR SHARES OF
THORNBURG LIMITED TERM MUNICIPAL FUND
a separate series of
THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Prospectus/Proxy Statement relates to the proposed transfer of
substantially all of the assets of Thornburg Limited Term Municipal Fund
National Portfolio (the "Fund") in exchange solely for shares of Thornburg
Limited Term Municipal Fund (the "New Fund"). The Fund and the New Fund
each have the same investment objective, which is to seek as high a level
of interest income which is exempt from federal income taxes as is
consistent, in the view of the Funds' investment adviser, with the
preservation of capital. As a result of the proposed transaction, each
shareholder of the Fund will receive shares of the New Fund equal in value
at the date of the exchange to the value of the shareholder's shares of the
Fund. The terms and conditions of these transactions are more fully
described in this Prospectus/Proxy Statement and in the Agreement and Plan
of Reorganization attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the New Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the New Fund's "Thornburg Limited Term
Municipal Funds Institutional Class Shares Prospectus" dated March 10, 2004
(the "New Fund Prospectus"), which contains information about the New Fund
and which is incorporated by reference into this Prospectus/Proxy
Statement. A Statement of Additional Information dated March 10, 2004 (the
"Statement of Additional Information") containing additional information
about the New Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information may be
obtained without charge by writing to Thornburg at its address noted above
or by calling 1-800-847-0200. Copies of the Fund's current "Thornburg
Institutional Class Shares" Prospectus for Class I shares dated February 1,
2004, and its Statement of Additional Information for Institutional Class
Shares dated February 1, 2004 are incorporated by reference into this
Prospectus/Proxy Statement, and may be obtained without charge by writing
to Thornburg at the address shown above or by calling 1-800-847-0200.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS AND
PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THORNBURG INVESTMENT
TRUST OR THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
INVESTMENTS IN THORNBURG LIMITED TERM MUNICIPAL FUND (THE "NEW FUND")
ARE SUBJECT TO RISK, INCLUDING POSSIBLE RISK OF PRINCIPAL, AND WILL
FLUCTUATE IN VALUE. SHARES OF THE NEW FUND ARE NOT BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE NOT INSURED BY, ANY
BANK, FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is March 15, 2004.
TABLE OF CONTENTS
Summary of the Proposed Reorganization
Investment Adviser and Distributor of the Fund and the New Fund
Investment Goals, Policies and Restrictions of the Fund and the New Fund
Principal Risk Factors
Fees and Expenses of the Fund and the New Fund
Performance Information
Purchase, Redemption and Exchange Procedures for the Fund and the New Fund
Dividend Policies of the Fund and the New Fund
Comparative Information on Shareholder Rights
Additional Information About Shareholder Accounts
Information About the Reorganization
Capitalization
Additional Information About the Fund and the New Fund
Voting Information
Exhibit A: Agreement and Plan of Reorganization
For detailed information about the New Fund, see the Thornburg Limited Term
Municipal Funds Institutional Class Shares Prospectus dated March 10, 2004,
(the "New Fund Prospectus"), which accompanies this Prospectus/Proxy
Statement, or which may be obtained by calling 1-800-847-0200.
SUMMARY OF THE PROPOSED REORGANIZATION
The Board of Directors of Thornburg Limited Term Municipal Fund, Inc.
("Thornburg LTMF"), including the Directors who are not "interested
persons" of Thornburg LTMF (the "Independent Directors"), as defined in the
Investment Company Act of 1940, have reviewed and unanimously approved an
agreement and plan of reorganization (the "Agreement") between Thornburg
LTMF on behalf of Thornburg Limited Term Municipal Fund National Portfolio
(the "Fund") and Thornburg Investment Trust ("Thornburg Trust") on behalf
of Thornburg Limited Term Municipal Fund (the "New Fund") providing for the
acquisition of substantially all of the assets of the Fund, a separate fund
(sometimes referred to as a "series") of Thornburg LTMF, by the New Fund, a
separate series of Thornburg Trust in exchange solely for voting shares of
the New Fund. The aggregate net asset value of the shares of the acquiring
New Fund issued in the exchange will equal the aggregate net asset value of
the shares outstanding for the acquired Fund. In connection with the
transaction, shares of the New Fund will then be distributed to the Fund's
shareholders pro rata by class so that holders of each class of shares of
the Fund will receive shares of the corresponding class of shares of the
New Fund. The Fund thereafter will be dissolved. These transactions are
referred to as the "reorganization."
As a result of the reorganization, each owner of Institutional Class
(Class I) shares of the Fund will become an owner of the corresponding
class of shares of the New Fund, having an aggregate net asset value equal
to the net asset value of that shareholder's shares in the Fund. No sales
charge will be imposed on the transaction. As a condition to the closing,
Thornburg Trust and Thornburg LTMF will obtain a legal opinion to the
effect that, based upon certain facts, assumptions and representations, the
reorganization will qualify as a tax-free reorganization for federal income
tax purposes. See "Information About the Reorganization." Persons
receiving shares of the New Fund in the reorganization will remain free to
redeem their shares after the reorganization.
The Fund and the New Fund have identical investment objectives and
policies. The New Fund will commence operations upon the completion of the
reorganization with the same portfolio of investments owned by the Fund.
The New Fund will have the same investment manager as the Fund, Thornburg
Investment Management, Inc. ("TIMI") which will perform investment
management services under an investment management agreement having
substantially identical terms and providing for the same fees as the Fund's
current investment advisory agreement.
Expenses of the New Fund are expected to be substantially the same as
the expenses of the Fund before the reorganization, as follows:
Fund Annual Operating Expenses
Before the Reorganization
- --------------------------------------------
Class I .58%
Expected New Fund Annual Operating Expenses
After the Reorganization
- ---------------------------------------------
Class I .58%
Expenses of the reorganization will be paid by the Fund, and are not
expected to have a material effect on the expenses of the Fund. The
reorganization is expected to result in cost savings to the shareholders of
the New Fund after the reorganization.
For the reasons set forth below, the Board of Directors of LTMF,
including all of the Independent Directors, have unanimously concluded that
the reorganization is in the best interests of the shareholders of the
Fund. The Board of Directors of Thornburg LTMF therefore have submitted
the Agreement for approval by the shareholders of the Fund at a special
meeting of shareholders to be held on April 28, 2004 (the "Meeting").
Approval of the reorganization with respect to the Fund requires an
affirmative vote of a majority of the outstanding shares of the Fund
entitled to vote at the Meeting. This Prospectus/Proxy Statement pertains
to and is directed to holders of the Fund's Institutional Class ("Class I")
shares.
At or about the same time that substantially all of the assets of the
Fund are acquired by the New Fund, Thornburg California Limited Term
Municipal Fund is expected to acquire substantially all of the assets of
Thornburg LTMF's other series, Thornburg Limited Term Municipal Fund
California Portfolio. Each of these transactions has been approved by
Thornburg LTMF's Board of Directors. The acquisition of substantially all
of the assets of the Fund and Thornburg Limited Term Municipal Fund
California Portfolio are referred to collectively herein as the "Related
Transactions." Completion of the reorganization is contingent upon proper
shareholder approval being received for each of the Related Transactions,
and the satisfaction of all other conditions to closing the Related
Transactions. There can be no assurance shareholder approval can be
obtained for each Related Transaction or that the conditions of the other
Related Acquisition will be satisfied. If shareholders of the Fund approve
the reorganization and the other Related Transaction is not approved, the
Board of Directors of Thornburg LTMF will consider the alternatives
available to it with respect to the Fund, including completion of the
reorganization respecting the Fund. See "Voting Information."
The Board of Directors has approved the reorganization because they
believe it would benefit the Fund. The reorganization is intended to
simplify legal and regulatory compliance functions, and to reduce the costs
of performing these functions. The Board of Directors considered these
objectives of the reorganization, together with other factors, which are
discussed below under the caption "Information About the Reorganization."
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
INVESTMENT ADVISER AND DISTRIBUTOR
OF THE FUND AND THE NEW FUND
The investment adviser to both the Fund and the New Fund is Thornburg
Investment Management, Inc. ("TIMI"), 119 East Marcy Street, Santa Fe, New
Mexico 87501. TIMI has been the investment adviser for the Fund since its
inception in 1984. TIMI is also the investment adviser for all of the 12
funds offered by Thornburg Trust, including the New Fund and Thornburg
California Limited Term Municipal Fund (the two Funds organized to
consummate the Related Transactions), four other funds which invest
principally in municipal obligations for tax exempt current income, two
funds which invest in U.S. Government and other fixed income obligations
for current income, three funds which invest primarily for capital
appreciation, and one fund which invests for current income and capital
appreciation. TIMI also provides to each Thornburg mutual fund under its
management supervision, administration and performance of certain
administrative services. Fees charged to the Fund and the New Fund for
these services are described below under "Fees and Expenses of the Fund and
the New Fund."
The distributor of shares for both the Fund and the New Fund is
Thornburg Securities Corporation ("TSC"), 119 East Marcy Street, Santa Fe,
New Mexico 87501. TSC has been the distributor for the Fund since its
inception in 1984. TSC is also distributor for each other Thornburg mutual
fund.
INVESTMENT GOALS, POLICIES
AND RESTRICTIONS OF THE FUND AND THE NEW FUND
Investment Goals and Strategies of the Funds
- --------------------------------------------
The investment goals and strategies of the Fund and the New Fund are
identical. The primary investment goal of each Fund is to obtain as high a
level of current income exempt from federal individual income tax as is
consistent, in the view of the investment adviser, with preservation of
capital. The secondary goal of each Fund is to reduce expected changes in
its share price compared to longer intermediate and long-term bond
portfolios. Each Fund's primary and secondary goals are fundamental
policies, and may not be changed without a majority vote of the Fund's
shareholders.
Each Fund pursues its primary goal by investing principally in a
laddered maturity portfolio of municipal obligations issued by states and
state agencies, local governments and their agencies and by certain United
States territories and possessions. The investment adviser, Thornburg
Investment Management, Inc. ("TIMI") actively manages each Fund's
portfolio. Investment decisions are based upon outlooks for interest rates
and securities markets, the supply of municipal debt securities, and
analysis of specific securities. Each Fund invests in obligations and
participations in obligations which are rated at the time of purchase as
investment grade or, if unrated, which are issued by obligors which have
comparable investment grade obligations outstanding or which are deemed by
TIMI to be comparable to obligors with outstanding investment grade
obligations. Each Fund's portfolio is "laddered" by investing in
obligations of different maturities so that some obligations mature during
each of the coming years.
Because the magnitude of changes in value of interest bearing
obligations is greater for obligations with longer terms, each Fund seeks
to reduce changes in its share value by maintaining a portfolio of
investments with a dollar-weighted average maturity normally less than five
years. There is no limitation on the maturity of any specific security
each Fund may purchase. Each Fund may dispose of any security before it
matures. Each Fund also attempts to reduce changes in its share value
through credit analysis, selection and diversification.
Each Fund ordinarily acquires and holds securities for investment
rather than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent a Fund from
obtaining the highest yields available.
Each Fund normally invests 100% of its assets in municipal
obligations. Each Fund may invest up to 20% of its assets in taxable
securities which produce income not exempt from federal income tax because
of market conditions, pending investment of idle funds or to afford
liquidity. A Fund's temporary taxable investments may exceed 20% of its
assets when made for defensive purposes during periods of abnormal market
conditions. If a Fund found it necessary to own taxable investments, some
of its income would be subject to federal income tax.
PRINCIPAL RISK FACTORS
Because the Funds' investment goals and policies are identical, the
risks of investing in the New Fund are expected to be the same as the risks
of investing in the Fund.
The value of each Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by a Fund. During periods of declining interest rates
the Fund's dividends decline. The value of Fund shares also could be
reduced if municipal obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations.
Nonrated obligations may have, or may be perceived to have, greater risk of
default. The loss of money is a risk of investing in either Fund, and when
you sell your shares they may be worth less than what you paid for them.
An investment in either Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
For a further discussion of the investment objectives, policies and
restrictions applicable to the New Fund, please see the New Fund
Prospectus, which accompanies this Prospectus/Proxy Statement, or which may
be obtained by calling Thornburg at 1-800-847-0200.
FEES AND EXPENSES OF THE FUND AND THE NEW FUND
Advisory and Administration Fees and Fund Expenses
- --------------------------------------------------
The Fund and the New Fund each have contractual arrangements to obtain
investment management, administrative and distribution services which are
substantially identical.
The Fund and the New Fund are each contractually obligated to pay an
investment management fee to TIMI based upon the Fund's assets. The fee is
computed on average daily net assets at an annual rate as follows:
Net Assets Annual Rate
0 to $500 million .50%
$500 million to $1 billion .40%
$1 billion to $1.5 billion .30%
$1.5 billion to $2.0 billion .25%
more than $2.0 billion .225%
TIMI also has entered into agreements with the Fund and the New Fund to
provide administrative services at an annual rate of .05% of average daily
net assets for Institutional Class shares of each Fund.
Investment advisory fees, and the other expenses currently paid by the
Fund and expected to be paid by the New Fund are set out below. The
Shareholder Transaction Expense table shows the transaction fees paid by a
shareholder in each Fund upon a purchase or redemption of shares. The
Annual Fund Operating Expenses table shows the annual fund operating
expense for the Fund for its fiscal year ended June 30, 2003 and compares
those fee and expense percentages to the expected annual fund operating
expenses for the New Fund for its current fiscal year.
Shareholder Transaction Expenses
(Fees Paid Directly From Your Investment)
Fund New Fund
Class I Class I
------- --------
Maximum Sales Charge (Load) on none none
Purchases (as a percentage of
offering price)
Maximum Deferred Sales Charge none none
(Load) on Redemptions (as a
percentage of redemption
proceeds on original purchase
price, whichever is lower)
Redemption Fees (as a none none
percentage of amount redeemed)
Annual Fund Operating Expenses
(Expenses That Are Deducted From Fund Assets)
Fund New Fund (1)
Class I Class I
------- --------
Investment Advisory Fee .43% .43%
Distribution and Service
(12b-1) Fees .00% .00%
Other Expenses .15% .15%
----- -----
Total Annual Operating Expenses .58% .58%
(1) The New Fund is a newly organized Fund which has not conducted
any business except incident to the reorganization. The fees and expenses
shown for the New Fund are estimated fees and expenses expected to be
incurred for the fiscal year ending June 30, 2004.
EXAMPLE:
The following Example is intended to help you compare the cost of
investing in the New Fund with the cost of investing in the Fund. The
Example assumes that you invest $10,000 in each respective Fund for the
time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5%
return each year, that dividends and distributions are reinvested, and that
each Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
Fund New Fund Pro Forma
Class A Class I
-------- --------
1 Year $59 $59
3 Years $166 $166
5 Years $324 $324
10 Years $726 $726
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
FOR THE FUND AND THE NEW FUND
Sales Charges
- --------------
Share purchase, redemption and exchange procedures for the
Institutional class shares of the Fund are identical with the purchase,
redemption and exchange procedures for the corresponding share class of the
New Fund.
Purchasing Institutional Class Shares
- -------------------------------------
Each Fund's Institutional Class ("Class I") shares are sold with no
initial sales charge or contingent deferred sales charge at the net asset
value per share.
Qualified individual investors and qualified institutions purchasing
shares for their own account are eligible to purchase Institutional Class
shares provided they invest a minimum of $2,500,000. The minimum amount
for subsequent purchases is $5,000. Qualified institutions include
corporations, banks and insurance companies purchasing for their own
account and other institutions such as trusts, endowments and foundations.
Qualified employee benefit or retirement plans other than an
individual retirement account ("IRA") or SEP-IRA are also eligible to
purchase Institutional Class shares, provided they either invest a minimum
of $1,000,000 in the Fund or have 100 or more eligible participants
enrolled in the plan. There is no minimum amount for subsequent purchases.
Investment dealers, financial advisers or other investment
professionals, including bank trust departments and companies with trust
powers, purchasing for the accounts of others within a clearly defined
"wrap" or other fee based investment advisory program are eligible to
purchase Institutional Class shares. The Funds' distributor will establish
a minimum amount per program or per account to qualify for purchase of
Institutional Class shares. The minimum amount per program is currently
$100,000.
Exchange Privileges
- --------------------
Class I shares of the Fund may be exchanged for Class I shares of
other Thornburg funds, subject to certain conditions described in the
Fund's prospectus. Similarly, Class I shares of the New Fund may be
exchanged for Class I shares of other Thornburg mutual funds subject to the
same conditions. Each of the Funds permits exchanges by telephone if the
telephone exchange privilege has been elected by the shareholder.
Shareholders of the Fund who previously elected the telephone exchange
privilege will be deemed to have elected the exchange privilege of the New
Fund if the reorganization is completed.
Redemptions
- -----------
Shares of the Fund and the New Fund properly presented for redemption
may be redeemed at the next determined net asset value per share.
Shareholders of the Fund who previously elected the telephone redemption
privilege will be deemed to have elected the New Fund's telephone
redemption privilege if the reorganization is completed.
DIVIDEND POLICIES OF THE FUND AND THE NEW FUND
The Fund distributes substantially all of its net investment income
and realized capital gains to its shareholders. The Fund declares net
income dividends daily and distributes those dividends monthly, and any net
realized capital gains are distributed at least annually, usually in
December. Distributions are reinvested in Fund shares unless the
shareholder elects to receive them in cash. The New Fund intends to follow
the same policies.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The Fund is a diversified series of Thornburg Limited Term Municipal
Fund, Inc. ("Thornburg LTMF"), a Maryland corporation organized in 1984.
As a Maryland corporation, Thornburg LTMF is governed by applicable
Maryland and federal law, its articles of incorporation and its bylaws.
The business of Thornburg LTMF is supervised by its Board of Directors.
The New Fund is a diversified series of Thornburg Trust, a
Massachusetts business trust organized in 1987. As a Massachusetts
business trust, Thornburg Trust is governed by applicable Massachusetts and
federal law, its declaration of trust, as amended, and its bylaws. The
business of Thornburg Trust is supervised by Thornburg Trust's Trustees.
Thornburg LTMF is currently authorized under its articles of
incorporation, as amended, to issue 300,000,000 Class A shares of the Fund,
150,000,000 Class C shares of the Fund, and 250,000,000 Institutional Class
shares. Each share has a par value of $.001. The Board of Directors is
permitted to increase this authorization from time to time under Maryland
law. The Board of Directors is also permitted to create additional funds
or "series," and to divide each such series into two or more classes of
shares. Thornburg Trust is authorized to create an unlimited number of
series, and with respect to each series, to issue an unlimited number of
full and fractional shares of one or more classes and to divide or combine
the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the series. All of the
shares of Thornburg LTMF and of Thornburg Trust, respectively, have equal
voting rights with each other, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. Neither Thornburg LTMF nor Thornburg
Trust permits cumulative voting.
Neither Thornburg LTMF nor Thornburg Trust holds annual shareholder
meetings. There normally will not be any meetings of shareholders of
Thornburg LTMF, Thornburg Trust or either of the Funds to elect directors
or trustees unless fewer than a majority of the directors or trustees then
holding office have been elected by shareholders. However, the Board of
Directors of Thornburg LTMF or the trustees of Thornburg Trust may call
special meetings from time to time to seek shareholder approval of certain
matters, and meetings of shareholders of either Thornburg LTMF or Thornburg
Trust will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of any affected
series or class having voting rights.
Under Maryland law, shareholders of Thornburg LTMF are not liable for
the obligations of Thornburg LTMF. However, under Massachusetts law, there
is a remote possibility that shareholders of Thornburg Trust could, under
certain circumstances, be held personally liable for the obligations of
such a trust. The declaration of trust for Thornburg Trust contains
provisions intended to limit any such liability and to provide
indemnification out of Fund property for any shareholder charged or held
personally liable for obligations or liabilities of the shareholder's fund
solely by reason of being or having been a shareholder of that fund and not
because of the shareholder's acts or omissions or for some other reason.
Consequently, the risk of a shareholder of the New Fund incurring financial
loss on account of shareholder liability is limited to circumstances in
which the New Fund itself would be unable to meet its obligations.
ADDITIONAL INFORMATION ABOUT SHAREHOLDER ACCOUNTS
If the reorganization is approved, the New Fund will establish an
account for each Fund shareholder.
No further purchases of the shares of the Fund may be made after the
date on which the shareholders of the Fund approve the reorganization, and
the share transfer books of the Fund will be permanently closed as of the
date of Closing. Only redemption requests and transfer instructions
received in proper form by the close of business on the day before the date
of Closing will be fulfilled by the Fund. Redemption requests or transfer
instructions received by the Fund after that date will be treated as
requests for the redemption or instructions for transfer of shares of the
New Fund credited to the accounts of shareholders of the Fund.
Accordingly, those redemption requests or transfer instructions after the
close of business on the day before Closing will be forwarded to the New
Fund. For a complete description of redemption procedures for the New
Fund, see the sections of the New Fund Prospectus under the caption
"Selling Fund Shares."
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization
- ------------------------------------
The following summary of the proposed Agreement and Plan of
Reorganization (the "Agreement") is qualified in its entirety by reference
to the Agreement attached to this Prospectus/Proxy Statement as Exhibit A.
The Agreement provides that the New Fund will acquire substantially
all of the assets of the Fund in exchange solely for shares of the New Fund
on the earliest practicable date following shareholder approval of the
reorganization (the "Closing Date"). The number of full and fractional
shares of the New Fund to be issued to shareholders of the Fund will be
determined on the basis of the relative net asset values per share and
aggregate net assets of the New Fund and the Fund computed immediately
after the closing of business on the New York Stock Exchange (currently
4:00 p.m., Eastern time) on the last business day before the Closing Date
(the "Valuation Date"). The net asset value per share for the Fund will be
determined by dividing each class's respective assets, less its respective
share of liabilities, by the total number of the class's outstanding
shares. Portfolio securities of the Fund will be valued in accordance with
the valuation practices of the New Fund as described in its prospectus,
which is incorporated by reference herein. Valuation procedures of the New
Fund are the same as the valuation procedures of the Fund.
Immediately after the transfer of the Fund's assets to the New Fund on
the Closing Date, the Fund will distribute pro rata to its shareholders of
record as of the close of business on the Valuation Date the full and
fractional shares of the New Fund received by the Fund and will be
dissolved as soon thereafter as reasonably practicable. The distribution
will be accomplished by the establishment of accounts on the share records
of the New Fund in the name of each shareholder of the Fund, each
representing the respective pro rata number of full and fractional shares
of the New Fund due each of those shareholders. Following the
reorganization, shareholders will own shares of the New Fund of the same
class as the Fund shares owned before the reorganization. No certificates
for shares of the New Fund will be issued.
The consummation of the reorganization is subject to the conditions
set forth in the Agreement. The reorganization is also subject to approval
by the Fund's shareholders. Approval requires the affirmative vote of a
majority of the outstanding shares of the fund entitled to vote at the
meeting. Further, completion of the reorganization is subject to
shareholder approval of the "Related Transaction", which is the proposed
transaction in which Thornburg California Limited Term Municipal Fund will
acquire substantially all of the assets of Thornburg Limited Term Municipal
Fund California Portfolio. If shareholders of the Fund approve the
reorganization, but the Related Transaction is not approved, the Board of
Directors of the Fund will consider the available alternatives. The
Agreement may be terminated and the reorganization abandoned prior to the
Closing Date, before or after approval by shareholders of the Fund, by
resolution of the Board of Directors of the Fund or the Trustees of
Thornburg Trust, under circumstances specified in the Agreement.
The Fund will pay the costs of the reorganization, which include fees
and costs associated with preparing, filing, printing and distributing
proxy materials, proxy solicitation costs, costs associated with qualifying
shares for sale in various states, and the deregistration and dissolution
of Thornburg LTMF.
The Board of Directors of Thornburg LTMF has determined that the
reorganization will not result in any dilution to the interests of the
Fund's shareholders, and that participation in the reorganization is in the
best interests of the Fund's shareholders.
Full and fractional shares of beneficial interest of the New Fund will
be issued to shareholders of the Fund in accordance with the procedures
under the Agreement described above. Each share will be fully paid and
non-assessable by the New Fund when issued, and will have no preemptive or
conversion rights. See comparative information on shareholder rights,
above, for additional information with respect to the shares of the New
Fund.
Considerations of the Fund's Board of Directors
- -----------------------------------------------
Thornburg Investment Management, Inc. ("TIMI"), the investment adviser
to both the Fund and the New Fund, proposed and recommended the
reorganization to the Board of Directors of Thornburg LTMF (the "Board") to
simplify certain compliance and administrative functions and to reduce the
costs associated with the performance of those functions. Based upon
TIMI's recommendation, and after consideration of the rationale for the
reorganization and certain additional factors described below, the Board,
including all of the directors who are not "interested persons"
("Independent Directors") as that term is used in the Investment Company
Act of 1940 (the "1940 Act"), has determined that the reorganization is in
the best interest of the shareholders of the Fund and that the terms of the
agreement and plan of reorganization (the "Agreement") are fair and
reasonable.
The Board considered the recent increases in compliance and related
functions performed for the Fund, and the likely further increase in those
functions in the future due to regulatory and rulemaking initiatives by the
Congress and the Securities and Exchange Commission. The Board noted
specifically in this connection the following factors:
. increased duties for the Board assuring compliance with
revised regulations applicable to mutual funds
generally;
. increased audit committee functions and additional time
devoted to audit committee functions by the independent
accountants;
. increased number of filings by Thornburg LTMF of
documents required under state and federal law and
increased time for review and discussion of those
filings by the Board;
and
. increased Board fees and associated travel expenses and
other expenses occasioned by these increased
activities.
The Board further noted in this regard that these functions are
generally duplicative of comparable functions performed for and by
Thornburg Investment Trust and its Trustees and audit committee.
The Board concluded that the general complexity of compliance, and
administration of compliance could be reduced significantly if the two
funds currently offered by Thornburg LTMF were combined with the ten
existing funds offered by Thornburg Investment Trust. This combination
would, in the Board's view, eliminate the current duplication and reduce
complexity by substituting one investment company in the place of two.
Moreover, the Board concluded that the reorganization would result in
significant cost savings, because the two funds of Thornburg Trust which
will acquire Thornburg LTMF's two current funds will share with Thornburg
Trust's other funds a number of costs which are currently duplicated (and
thus not shared) by Thornburg LTMF and Thornburg Trust.
In this latter regard the Board considered:
. legal fees and costs associated with advice on
compliance matters, preparation of documents related
to compliance, preparation of documents for Board of
Directors and audit committee meetings;
. legal counsel preparation for and attendance at Board
of Directors and audit committee meetings;
. fees and costs associated with preparation and filing
of registration statements and other periodic filings,
and general corporate work associated with the
maintenance of an additional corporate entity;
. costs, including Directors' fees and travel and other
expenses associated with the Board's and the audit
committee's fees and meetings; and
. expenses and fees of the independent accountants.
The Board also considered the likelihood of future increases in these costs
because of increased rulemaking and regulatory complexity, increasing
duties placed on investment company directors and audit committees, the
possible need to hire additional legal counsel and other persons for audit
committees, and possible increases in the frequency of shareholder meetings
to elect investment company directors. Based upon estimates by TIMI and
legal counsel, the Board determined that it was reasonable to conclude that
the costs of the reorganization could be recovered in less than two years.
The Board also considered other factors in evaluating the proposed
reorganization, including the following:
(1) There would be no change in investment objectives, investment
policies, or investment risks as a result of the reorganization;
(2) After the reorganization, investment management, administrative
services, and other functions would be performed under contracts having
substantially the same terms as the existing contracts;
(3) Fees and expenses for the New Fund are expected to be virtually
the same as fees and expenses for the Fund, except for the costs of the
reorganization (which are expected to be offset, and exceeded over time by
cost savings);
(4) The reorganization will result in no dilution of shareholders'
interests;
(5) Shareholders of the Fund will receive shares in the New Fund of
the class corresponding to the same class of shares in the Fund;
(6) The reorganization will be accomplished without recognition of
gain or loss for federal income tax purposes by shareholders of Thornburg
LTMF; and
(7) No sales charges or transaction fees will be assessed against
shareholders in connection with the reorganization.
Federal Income Tax Consequences
- -------------------------------
The reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, with no taxable gain or loss recognized
by the Fund, the New Fund, or shareholders of the Fund as a consequence of
the reorganization. As a condition to the closing of the reorganization,
the Fund and the New Fund will receive an opinion of legal counsel to that
effect based on certain assumptions and representations made by the Fund
and the New Fund.
Shareholders of the Fund should consult their tax advisers regarding
the effect, if any, of the proposed reorganization in light of their
individual circumstances. In particular, shareholders of the Fund should
also consult their tax advisers as to the state, local and other tax
consequences, if any, of the reorganization.
CAPITALIZATION
The following table sets forth the capitalization of the Fund and the
New Fund as of December 31, 2003 and the pro forma capitalization of the
combined New Fund as if the reorganization occurred on that date. These
numbers will be different at the time of closing because the Fund's net
assets for each class will increase or decrease.
CAPITALIZATION OF FUNDS AS OF DECEMBER 31, 2003
FUND NEW FUND PRO FORMA
---- -------- ---------
NET ASSETS
- ----------
Class A shares $1,044,399,875. -0- $1,044,399,875.
Class C shares $ 155,996,351. -0- $ 155,996,351.
Class I shares $ 211,440,262. -0- $ 211,440,262.
TOTAL $1,411,836,488. -0- $1,411,836,488.
NET ASSETS PER SHARE
Class A shares $13.93 -0- $13.93
Class C shares $13.96 -0- $13.96
Class I shares $13.93 -0- $13.93
SHARES OUTSTANDING
Class A shares 74,580,174.625 -0- 74,580,174.625
Class C shares 11,171,853.884 -0- 11,171,853.884
Class I shares 15,235,727.402 -0- 15,235,727.402
TOTAL 100,987,755.911 -0- (1) 100,987,755.911
SHARES AUTHORIZED
Class A shares 300,000,000 unlimited unlimited
Class C shares 150,000,000 unlimited unlimited
Class I shares 250,000,000 unlimited unlimited
TOTAL 700,000,000 unlimited unlimited
(1) It is anticipated that a nominal number of shares of each class
will be issued to an officer of TIMI in order to permit the consummation of
corporate actions before the reorganization.
ADDITIONAL INFORMATION ABOUT THE FUND AND THE NEW FUND
Additional information respecting the New Fund is included in the
Thornburg Limited Term Municipal Funds Institutional Class Shares
prospectus dated March 10, 2004 (the "New Fund Prospectus"), which
accompanies this Prospectus/Proxy Statement, and in the Thornburg Limited
Term Municipal Funds Institutional Class Shares Statement of Additional
Information dated March 10, 2004, which has been filed with the Securities
and Exchange Commission. Additional information is also included in the
Statement of Additional Information dated March 15, 2004 related to the
reorganization which has been filed with the Securities and Exchange
Commission. The described New Fund Prospectus and statements of additional
information are incorporated by reference herein. Copies of the statements
of additional information are available upon request and without charge by
calling 1-800-847-0200.
Information about the Fund is included in the Thornburg Institutional
Class Shares Prospectus dated February 1, 2004, and in the Thornburg Funds
Institutional Class Shares Statement of Additional Information dated
February 1, 2004. The described prospectus and statement of additional
information have been filed with the Securities and Exchange Commission and
are incorporated by reference herein. Copies of the prospectus and the
statement of additional information are available upon request and without
charge by calling 1-800-847-0200.
Reports and other information filed by Thornburg LTMF and Thornburg
Trust can be inspected and copied at the Securities and Exchange
Commission's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C. 20549. Information about the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information
about the Funds are also available on the Commission's Internet site at
http://www.sec.gov and copies of information may be obtained, upon payment
of a duplicating fee, by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102, or contacting the Commission by e-mail at
publicinfo@sec.gov.
Thornburg LTMF files its registration statements and certain other
information with the Commission under Investment Company Act of 1940 file
number 811-4302. Thornburg Investment Trust files its registration
statements and certain other information with the Commission under
Investment Company Act of 1940 file number 811-05201.
VOTING INFORMATION
Proxies for the meeting are being solicited from the Fund's
shareholders by the Board of Directors of Thornburg LTMF. A proxy may be
revoked at any time at or before the meeting by oral or written notice to
the secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New
Mexico 87501, (800) 847-0200. Unless revoked, all valid proxies will be
voted in accordance with the specifications therein or, in the absence of
specifications, for approval of the reorganization.
Additional solicitations may be made by telephone, telegraph,
facsimile or personal contact by officers or employees of TIMI and its
affiliates or by a professional proxy solicitation firm or firms. Expenses
of proxy solicitation will be borne by the Fund. Thornburg LTMF has
engaged the proxy solicitation firm of D.F. King & Co., Inc. to assist in
soliciting proxies for the meeting at an estimated cost of $75,000.
Shares of the Fund of record at the close of business on March 4, 2004
(the "Record Date") will be entitled to vote at the meeting or any
adjournment thereof. The presence in person or by proxy of one-third of
the Fund's outstanding shares at the meeting will constitute a quorum.
Shareholders are entitled to one vote for each share held, and each
fractional share will be entitled to a proportionate fractional vote.
Approval of the reorganization requires the affirmative vote of a majority
of the outstanding shares of the Fund entitled to vote at the meeting. As
of March 4, 2004, there were issued and outstanding 77,860,913.871 Class A
shares, 11,669,355.383 Class C shares and 16,736,163.371 Class I shares of
the Fund. As of the same date, the following persons were known to own of
record or beneficially 5% or more of the issued and outstanding shares of
any Class of the Fund:
No of % of
Shareholder Shares Class
- ----------- ------ -----
MLPF&S 966,175.536 8.28%
FBO Customers Class C Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
Charles Schwab & Co. 3,375,744.462 20.17%
Special Custody Acct. Class I Shares
101 Montgomery St.
San Francisco, CA 94104
NFSC FEBO 1,464,554.388 8.75%
3305 W. Spring Mountain Rd. Class I Shares
Las Vegas, NV 89102
MLPF&S 931,290.296 5.56%
FBO Customers Class I Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
On March 4, 2004, officers, directors and related persons of the Fund, as a
group, owned 215,837.925 Class I shares of the Fund, representing 1.29% of
the Fund's outstanding Class I shares.
As of the same date, there were issued and outstanding 1.782 Class A
shares, 1.779 Class C shares, and 1.889 Class I shares of beneficial
interest of the New Fund. All of these shares were held by Dawn B.
Fischer, 119 East Marcy Street, Santa Fe, New Mexico 87501. Ms. Fischer
was issued these shares in order to permit certain actions in connection
with the initial organization of the New Fund.
In the event that a quorum is not present at the meeting, or a quorum
is present at the meeting but sufficient votes to approve the
reorganization are not received, the persons named as proxies may propose
one or more adjournments of the meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares represented at the meeting in person or by proxy.
If a quorum is not present, the persons named as proxies will vote those
proxies which they are entitled to vote for the reorganization in favor of
such an adjournment and will vote those proxies required to be voted
against the reorganization against any such adjournment.
"Broker non-votes" are shares held in a broker's street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does
not have discretionary voting authority. Abstentions in broker non-votes
will be counted as shares present for purposes of determining whether a
quorum is present but will not be voted for or against any adjournment or a
proposal. Accordingly, abstentions in broker non-votes effectively will be
a vote against adjournment and against the proposal because the required
vote is a percentage of the shares outstanding.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE REORGANIZATION.
Submission of Shareholder Proposals
- -----------------------------------
The Fund does not hold regular shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to the
secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New Mexico
87501.
Other Matters to Come Before the Meeting
- ----------------------------------------
The Board of Directors of Thornburg LTMF knows of no other business to
be brought before the meeting. However, if any other matters properly come
before the meeting, proxies will be voted in accordance with the judgment
of the Directors.
EXHIBIT A
to
PROSPECTUS/PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 8th day of December 2003, by and between THORNBURG INVESTMENT TRUST,
a Massachusetts business trust ("Thornburg Trust"), in respect of Thornburg
Limited Term Municipal Fund (the "New Fund"), a separate series of
Thornburg Trust, and THORNBURG LIMITED TERM MUNICIPAL FUND, INC. a Maryland
corporation ("Thornburg LTMF"), in respect of Thornburg Limited Term
Municipal Fund National Portfolio (the "Fund"), a separate series of
Thornburg LTMF.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization will consist of (i) the transfer of substantially all of
the Assets (hereinafter defined) of the Fund to the New Fund in exchange
solely for Class A, Class C and Class I voting shares of beneficial
interest of the New Fund having no par value (the "New Fund Class A
Shares," "New Fund Class C Shares," and "New Fund Class I Shares,"
respectively, and collectively the "New Fund Shares") and (ii) the
distribution on the Closing Date (hereinafter defined) of the New Fund
Shares to the shareholders of the Fund in complete liquidation of the Fund
as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement. All actions required to be taken by Thornburg Trust
pursuant to this Agreement, and all representations, warranties and
covenants of Thornburg Trust hereunder, are taken and made on behalf of the
New Fund. All actions required to be taken by Thornburg LTMF pursuant to
this Agreement, and all representations, warranties and covenants of
Thornburg LTMF hereunder, are taken and made on behalf of the Fund.
THEREFORE, in consideration of the premises and of the covenants and
agreements hereafter described, the parties hereto covenant and agree as
follows.
1. Procedure for Reorganization.
(a) Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein,
Thornburg LTMF agrees to transfer the Assets of the Fund as set forth in
paragraph (b) to the Fund, and Thornburg Trust agrees to deliver to the
Fund in exchange therefor the number of the New Fund Shares determined by
dividing the value of the Assets computed in the manner and as of the time
and date set forth in paragraph 2(a), by the net asset value of the New
Fund Shares computed in the manner and as of the time and date set forth in
paragraph 2(b). These transactions shall take place at the closing
provided for in paragraph 3(a) (the "Closing").
(b) The Assets to be acquired by the New Fund shall consist of
all cash, portfolio securities and due bills for dividends, interest, or
other receivables or rights to receive any of the foregoing, receivables
for shares sold, and any claims or rights with respect to portfolio
securities, whether or not arising from contract, which are owned by the
Fund on the closing date provided in paragraph 3(a) (the "Closing Date").
The Fund will retain cash and cash equivalents in an amount reasonably
estimated by it to be sufficient to discharge: (i) obligations incurred in
the ordinary course of its business, which could not reasonably be paid
before Closing and are not otherwise borne by any other person; and (ii)
costs resulting from the liquidation and deregistration of the Fund and
Thornburg LTMF. The Assets will not include any rights in and to the
"Thornburg" name or any variant thereof. The Fund has provided the New
Fund with a list of the current securities holdings of the Fund as of the
date of execution of this Agreement. Thornburg LTMF and the Fund reserve
the right to sell any of these securities in the ordinary course of
business but will not, without prior notification to Thornburg Trust,
acquire any additional securities for the Fund other than securities of the
type in which the New Fund is permitted to invest.
(c) On the Closing Date, Thornburg LTMF will cause the Fund to
be liquidated and to distribute pro rata to the Fund's shareholders of
record (the "Fund Shareholders"), determined on and as of the close of
business on the Valuation Date specified in paragraph 2(a), the New Fund
Shares received by Thornburg LTMF pursuant to paragraph (a). Specifically,
Thornburg LTMF shall (i) distribute the New Fund Class A Shares received in
the exchange, pro rata, to the Fund Shareholders holding Class A shares of
the Fund, (ii) distribute the New Fund Class C shares received in the
exchange, pro rata, to the Fund Shareholders holding Class C shares of the
Fund, and (iii) distribute the New Fund Class I Shares received in the
exchange, pro rata, to the Fund Shareholders holding Class I shares of the
Fund. The liquidation and distribution will be accomplished by the
transfer of the New Fund Shares then credited to the account of the Fund on
the books of New Fund, to open accounts on the share records of the Fund in
the names of the Fund Shareholders and representing the respective pro rata
number of New Fund due the Fund Shareholders.
(d) As of the Closing Date, any physically-issued share
certificates held by former Fund Shareholders and relating to Fund shares
exchanged for New Fund Shares in accordance with the preceding paragraph
(c) will represent only the right to receive the appropriate number of New
Fund Shares. As of the Closing Date, persons holding those certificates
will be requested to surrender their certificates. No redemption or
repurchase of any New Fund Shares credited to former Fund Shareholders in
place of Fund shares represented by unsurrendered certificates will be
permitted until those certificates have been surrendered for cancellation
or the certificates are cancelled upon the delivery of lost certificate
affidavits.
(e) Any transfer taxes payable upon issuance of New Fund
Shares in a name other than that of the registered holder of the New Fund
Shares on the books of the Fund as of the Closing Date shall, as a
condition of such issuance and transfer, be paid by the person to whom the
New Fund Shares are to be issued and transferred.
(f) The Fund shall be dissolved as soon as reasonably
practicable following the Closing Date. Thornburg LTMF will deregister
with the Securities and Exchange Commission (the "Commission") in
accordance with the Investment Company Act of 1940, as amended (the "1940
Act").
(g) Thornburg Trust will not assume any liability of Thornburg
LTMF, or acquire any Asset subject to any liability, in connection with the
transactions contemplated by this Agreement, except that the New Fund will
assume the obligation to pay for any portfolio securities purchased by the
Portfolio before the Closing Date in the ordinary course of its business
and the purchase of which was disclosed to the New Fund by the Fund when
the commitment to purchase arose.
2. Valuation.
(a) The value of the Fund's Assets to be acquired by the New
Fund hereunder shall be the value of those assets computed as of the close
of business on the New York Stock Exchange and after the declaration of any
dividends on the business day next preceding the Closing Date (the time and
date being hereinafter called the "Valuation Date"). The value of the
portion of the Fund's Assets consisting of portfolio securities will be
computed by Kenny Information Systems, subject to adjustment by the amount,
if any, agreed to by the New Fund and the Fund. In determining the value
of the Assets, each portfolio security and other portfolio asset shall be
priced by Kenny Information Systems in accordance with the policies and
procedures of the New Fund (subject to the second sentence hereafter) as
set forth in the then current prospectuses and statement of additional
information applicable to the New Fund, subject to adjustments agreed to by
the Fund and the New Fund. All computations shall be made by Kenny
Information Systems. In the event of a dispute with respect to the
valuation of any portfolio security or other portfolio asset of the Fund,
the New Fund and the Fund shall, by mutual consent, select an independent
third party to resolve the matter, and the determination of the independent
party will bind the Funds.
(b) The value of the Assets of each class of the Fund shall be
divided, as of the close of business on the New York Stock Exchange and
after the declaration of any dividends on the Valuation Date, among the
Class A, Class C and Class I shares of the Fund (the "Class A Assets,"
"Class C Assets," and "Class I Assets"), respectively, in accordance with
the Fund's customary method of accounting.
(c) The net asset value of each New Fund Share shall be the
net asset value per share computed as of the close of business on the New
York Stock Exchange and after the declaration of any dividends on the
Valuation Date, using the valuation procedures set forth in the New Fund's
then current prospectuses, and in accordance with the New Fund's customary
method of accounting.
(d) On the Closing Date, the New Fund shall issue to the Fund
full and fractional New Fund Class A, Class C and Class I shares in the
respective numbers determined in accordance with this paragraph 2(d). The
number of New Fund Class A shares shall be determined by dividing the value
of the Class A Assets by the net asset value of a New Fund Class A share
determined in accordance with paragraph 2(c). The number of New Fund Class
C shares shall be determined by dividing the value of the Class C Assets by
the net asset value of a New Fund Class C share determined in accordance
with paragraph 2(c). The number of New Fund Class I shares shall be
determined by dividing the value of the Class I Assets by the net asset
value of a New Fund Class I share determined in accordance with paragraph
2(c).
3. Closing and Closing Date.
(a) The Closing Date shall be as soon as practicable after
approval of the transactions contemplated in this Agreement by the Fund's
Shareholders has been obtained. The Closing will be held at 119 East Marcy
Street, Suite 202, Santa Fe, New Mexico 87501, in the offices of Thornburg
Investment Management, Inc., or at such other place as the parties may
agree. The time of Closing will be 8:00 a.m. New York time on the Closing
Date. All acts taking place at the Closing will be deemed to occur
simultaneously as of the time of the Closing on the Closing Date.
(b) The Fund's portfolio securities shall be available for
inspection by the New Fund, its custodian bank or such other agents of
Thornburg Trust as Thornburg Trust shall reasonably designate, at the
offices of the Fund's custodian, no later than five business days preceding
the Valuation Date, and the Fund will immediately notify the New Fund's
investment adviser of any portfolio security thereafter acquired or sold by
the Fund. The Fund's securities and cash shall be delivered by Thornburg
LTMF to State Street Bank & Trust Company, Boston, MA 02205-9087, as
custodian for the New Fund for the account of the New Fund on the Closing
Date, duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers.
The cash delivered shall be in the form of currency or certified or
official bank checks, or completed federal funds wire, payable to the order
of "State Street Bank & Trust Co., Custodian for Thornburg Limited Term
Municipal Fund." The Fund will cause its custodian to deliver at Closing a
certificate of an authorized officer of the Custodian stating that the
Fund's have been delivered in proper form to the New Fund's custodian on or
before the Closing Date.
(c) In the event that on the Valuation Date (i) the New York
Stock Exchange is closed to trading, or (ii) trading or the reporting of
trading in securities generally is disrupted so that accurate appraisal of
the value of the net assets of the New Fund or the Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored.
(d) Thornburg LTMF shall deliver to Thornburg Trust
shareholder and shareholder account information as of the close of business
on the Valuation Date as reasonably requested by Thornburg Trust. The New
Fund shall issue and deliver a confirmation to the Fund at the Closing
stating the number of New Fund Shares to be credited on the Closing Date to
the Fund, and stating the number of New Fund Shares credited to the Fund's
account on the books of the New Fund. Thornburg Trust shall issue and
deliver to each former Fund Shareholder, after the Closing, a confirmation
stating the number of New Fund Shares credited to the shareholder's
account. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts or other
documents as such other party may reasonably request.
4. Representations and Warranties.
(a) Thornburg LTMF represents and warrants to Thornburg Trust
as follows:
(i) The Fund is a series of Thornburg LTMF, which is a
corporation duly formed and validly existing under
the laws of the State of Maryland;
(ii) Thornburg LTMF is a duly registered open-end
management investment company, and its
registration with the Commission as an investment
company under the 1940 Act is in full force and
effect;
(iii) The current prospectuses and statements of
additional information of the Fund, each dated
November 1, 2003, conform in all material respects
to the applicable requirements of the Securities
Act of 1933 (the "1933 Act") and the rules and
regulations of the Commission thereunder and do
not include any untrue statement of a material
fact or omit to state any material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading;
(iv) To the knowledge of Thornburg LTMF, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, or the rules and regulations under
those Acts, all of which shall have been received
prior to the Closing Date, except for such
consents, approvals, authorizations or orders as
may be required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg LTMF's Articles of Incorporation or
By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking
to which the Fund or Thornburg LTMF is a party or
by which it is bound;
(vi) The Fund has valued, and will continue to value
its portfolio securities and other assets in
accordance with applicable legal requirements;
(vii) All material contracts or other commitments (other
than this Agreement) to which the Fund is a party
will be terminated without liability to the Fund
or the New Fund on or before the Closing Date;
(viii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the
Fund or any of its properties or assets.
Thornburg LTMF knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg LTMF nor the Fund is a party
to or subject to the provisions of any order,
decree or judgment of any court or governmental
body or self regulatory organization which
materially and adversely affects their business or
their ability to consummate the transactions
herein contemplated;
(ix) The statement of assets and liabilities, the
statement of operations, and the statement of
changes in net assets of the Fund at June 30, 2003
have been audited by PricewaterhouseCoopers, LLP,
independent certified public accountants, and
those statements, together with the statements of
assets and liabilities, the statements of
operations, and the statements of changes in net
assets at December 31, 2003, when issued, fairly
reflect, or in the case of the December 31, 2003
statements will fairly reflect, in all material
respects the assets, financial condition, results
of operations, and changes in net assets of the
Fund as of and for the periods ended on those
dates and have, or in the case of the December 31,
2003 statements, shall have been prepared, in
accordance with generally accepted accounting
principles consistently applied; and there are as
of the dates thereof no known liabilities of the
Fund other than liabilities disclosed or provided
for in the foregoing statements;
(x) Since June 30, 2003, there has been no material
adverse change in the Fund's financial condition,
assets, liabilities or business other than changes
occurring in the ordinary course of business; and
the Fund has not incurred any indebtedness
maturing more than one year from the date such
indebtedness was incurred except as disclosed in
Exhibit A. For the purposes of this subparagraph
(x), a decline in net asset value per share of the
Fund's Shares is not a material adverse change;
(xi) At the Closing Date, all material federal and
other tax returns and reports of the Fund required
by law then to be filed (including any extensions)
shall have been filed, and all federal and other
taxes shall have been paid so far as due, or
provision shall have been made for the payment
thereof, and to the best of Thornburg LTMF's
knowledge no such return of or relating to the
Fund is currently under audit, and no assessment
has been asserted with respect to the Fund;
(xii) The Fund has met the requirements of Subchapter M
of the Code and has elected to be treated as a
regulated investment company for each taxable year
of its operations since its inception, and will so
qualify for the taxable year ending on the Closing
Date;
(xiii) The Fund is authorized to issue 300,000,000,
150,000,000 and 250,000,000 Class A, Class C and
Class I shares, respectively, of the Fund, at the
date hereof. All issued and outstanding shares of
the Fund have been offered and sold in compliance
in all material respects with applicable
registration requirements of the 1933 Act and
state securities laws. All issued and outstanding
shares of the Fund are, and at the Closing Date
will be, duly and validly issued and outstanding,
fully paid and non-assessable by Thornburg LTMF.
All of the issued and outstanding Shares of the
Fund will, at the time of Closing, be held by
shareholder accounts in the amounts set forth in
the list of shareholder's accounts submitted to
Thornburg Trust pursuant to paragraph 3(d). The
Fund does not have outstanding any options,
warrants or other rights to subscribe for or
purchase any securities issuable by the Fund;
(xiv) At the Closing Date, the Fund will have good and
marketable title to the Assets to be transferred
to the New Fund pursuant to paragraph 1(b),
subject to no lien, encumbrance or competing
interest in any person, and full right, power, and
authority to sell, assign, transfer and deliver
the Assets hereunder, and upon delivery and
payment for those Assets, the New Fund will
acquire good and marketable title thereto, subject
to no restriction on the full transfer thereof,
including such restrictions as might arise under
the 1933 Act other than as disclosed in writing to
the New Fund;
(xv) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg LTMF's Board of Directors, and
this Agreement constitutes a valid and binding
obligation of Thornburg LTMF, enforceable in
accordance with its terms, subject to the approval
of the shareholders of the Fund, and further
subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights
and subject to general equity principles;
(xvi) The information furnished by Thornburg LTMF
for use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto;
(xvii) The registration statement filed by the New Fund
on Form N-14 relating to the New Fund Shares that
will be registered with the Commission pursuant to
this Agreement, which shall include the proxy
statement of Thornburg LTMF in respect of the Fund
with respect to the transactions contemplated by
this Agreement, and any supplement or amendment
thereto or to the documents contained or
incorporated therein by reference (the "N-14
Registration Statement"), and the proxy materials
of Thornburg LTMF in respect of the Fund included
in the N-14 Registration Statement and filed with
the Commission pursuant to Section 14 of the 1934
Act with respect to the transactions
contemplated by this Agreement, and any supplement
or amendment thereto or the documents appended
thereto (the "Reorganization Proxy Materials"),
from their effective dates with the Commission,
through the time of the meeting of shareholders of
the Fund contemplated therein (the "Shareholders
Meeting") and at the Closing Date: (a) shall
comply in all material respects with the
provisions of the 1933 Act, 1934 Act and the 1940
Act, the rules and regulations thereunder, and
applicable state securities laws, and (b) shall
not contain any untrue statement of a material
fact or omit to state a material fact required to
be stated therein or necessary to make the
statements therein not misleading; provided, that
the representations and warranties in this
subparagraph shall only apply to statements in or
omissions from the N-14 Registration Statement or
Reorganization Proxy Materials made by, or in
reliance upon and in conformity with information
furnished by or on behalf of Thornburg LTMF.
(b) Thornburg Trust represents and warrants to Thornburg LTMF
as follows:
(i) The New Fund is a series of Thornburg Trust, which
is a business trust duly formed and validly
existing under the laws of the Commonwealth of
Massachusetts;
(ii) Thornburg Trust is a duly registered open-end
management investment company and its registration
with the Commission as an investment company under
the 1940 Act is in full force and effect;
(iii) The prospectuses and statements of additional
information for shares of the New Fund, when
effective, shall conform in all material respects
to the applicable requirements of the 1933 Act and
the rules and regulations of the Commission
thereunder and will not include any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in light
of the circumstances under which they were made,
not misleading;
(iv) To the knowledge of Thornburg Trust, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the New Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the 1934 Act, the
1940 Act, or the rules and regulations under those
Acts, all of which shall have been received prior
to the Closing Date, except for such consents,
approvals, authorizations or orders as may be
required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg Trust's Declaration of Trust or By-
Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the
New Fund or Thornburg Trust is a party or by which
it is bound;
(vi) The New Fund has valued, and will continue to
value, its portfolio securities and other assets
in accordance with applicable legal requirements;
(vii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the New
Fund or any of its properties or assets.
Thornburg Trust knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg Trust nor the New Fund is a
party to or subject to the provisions of any
order, decree or judgment of any court or
governmental body or self regulatory organization
which materially and adversely affects their
business or their ability to consummate the
transactions herein contemplated;
(viii) At the Closing Date, all federal and other tax
returns and reports of the New Fund required by
law then to be filed shall have been filed, and
all federal and other taxes shall have been paid
for as due or provision shall have been made for
the payment thereof and, to the best of Thornburg
Trust's knowledge, no such return of or relating
to the New Fund is currently under audit, and no
assessment has been asserted with respect to the
New Fund;
(ix) The New Fund intends to meet the requirements of
Subchapter M of the Code, and intends to be
treated as a regulated investment company for the
first taxable fiscal year of its operation
including the Closing Date;
(x) Thornburg Trust is authorized to issue an
unlimited number of shares of beneficial interest
having no par value. All issued and outstanding
New Fund Shares at the Closing Date will be duly
and validly issued and outstanding, fully paid and
non-assessable. The New Fund does not have
outstanding any options, warrants or other rights
to subscribe for or purchase any securities
issuable by the New Fund, nor is there outstanding
any security convertible into New Fund Shares
(except as the trustees of Thornburg Trust may
convert classes of shares in accordance with
Thornburg Trust's Declaration of Trust, as
amended);
(xi) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg Trust's trustees, and this
Agreement constitutes a valid and binding
obligation of Thornburg Trust enforceable in
accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating
to or affecting creditors' rights and subject to
general equity principles;
(xii) New Fund Shares to be issued and delivered to the
Fund pursuant to the terms of this Agreement will
at the Closing Date have been duly authorized and,
when so issued and delivered, will be duly and
validly issued New Fund Shares, and will be fully
paid and non-assessable by Thornburg Trust, except
to the extent that shareholders of Thornburg Trust
may be held personally liable for obligations of
Thornburg Trust;
(xiii) The N-14 Registration Statement and the
Reorganization Proxy Materials, from their
effective dates with the Commission, through the
time of the Shareholders Meeting and at the
Closing Date:
(a) shall comply in all material respects with
the provisions of the 1933 Act, 1934 Act and
the 1940 Act, the rules and regulations
thereunder, and applicable state securities
laws, and
(b) shall not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements made therein
not misleading; provided, that the
representations and warranties in this
subparagraph shall only apply to statements
in or omissions from the N-14 Registration
Statement or the Reorganization Proxy
Materials made in reliance upon and in
conformity with information furnished by or
on behalf of Thornburg Trust;
(xiv) At the Closing Date, the New Fund will have good
and marketable title to its assets, subject to no
lien, encumbrance or competing interest in any
person, and full right, power and authority to
sell, assign, transfer and deliver those assets
other than as disclosed in writing to Thornburg
LTMF; and
(xv) The information furnished by Thornburg Trust for
use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto.
5. Covenants of the Parties.
(a) The New Fund and the Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that the ordinary course of business will include
customary dividends and distributions and any other distribution that may
be advisable.
(b) Thornburg LTMF will call a meeting of the shareholders of
the Fund to be held as promptly as practicable to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated herein.
(c) Thornburg LTMF covenants that the New Fund Shares to be
issued hereunder will not be sold or distributed other than in accordance
with the terms of this Agreement.
(d) Thornburg LTMF will furnish to Thornburg Trust all
information reasonably requested and that is within its control for the
preparation of the N-14 Registration Statement, the preparation and
distribution of the Reorganization Proxy Materials, and for effectuating
the transactions contemplated herein. Thornburg LTMF will furnish, or
cause its transfer agent to furnish, to Thornburg Trust all information
reasonably requested respecting the beneficial ownership of Thornburg LTMF
shares, shareholders and shareholder accounts for the mailing of the
Reorganization Proxy Materials and for the establishment of New Fund
accounts for shareholders of the Fund in accordance with paragraph 1(c).
Thornburg LTMF will furnish, or cause its custodian or other agents to
furnish, all portfolio asset information reasonably requested by Thornburg
Trust in connection with, and to facilitate, the transactions contemplated
by this Agreement.
(e) Subject to the provisions of this Agreement, Thornburg
Trust and Thornburg LTMF will each take, or cause to be taken, all actions,
and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
(f) Thornburg LTMF shall furnish to Thornburg Trust within 30
days after the Closing Date a detailed trial balance of the Fund's assets
and liabilities and computations showing amortization of premium on
portfolio securities. Thornburg Funds shall furnish to Thornburg Trust
when available the final federal income tax return for the Fund.
(g) Thornburg LTMF will, as promptly as practicable after the
Closing, wind up the business of the Fund, deregister the Fund under
applicable federal securities laws, file final reports with the state
securities regulators requiring any such reports, prepare and distribute
final account statements and tax statements to persons who were formerly
shareholders of the Fund, and file any necessary federal and state tax
returns.
(h) Thornburg Trust will prepare and file the N-14
Registration Statement, will file the Reorganization Proxy Materials with
applicable regulatory authorities, and will use all reasonable efforts to
obtain clearance or effectiveness of the N-14 Registration Statement and
the Reorganization Proxy Materials, all in accordance with the 1933 Act,
the 1934 Act, and the 1940 Act, and applicable regulations and rulings
thereunder, and in accordance with any applicable state statutes and
regulations.
(i) Thornburg Trust agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1934
Act, the 1940 Act and such of the state securities laws as are necessary or
appropriate in order to continue its operations after the Closing Date.
6. Conditions Precedent to Obligations of Thornburg LTMF.
The obligations of Thornburg LTMF to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by Thornburg Trust of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the
following further conditions:
(a) All representations and warranties of Thornburg Trust
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date; and
(b) Thornburg Trust shall have delivered to Thornburg LTMF a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg LTMF and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg Trust made in this Agreement
are true and correct at and as of the Closing Date.
7. Conditions Precedent to Obligations of Thornburg Trust.
The obligations of Thornburg Trust to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Thornburg LTMF of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
(a) All representations and warranties of Thornburg LTMF
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date;
(b) Thornburg LTMF shall have delivered to Thornburg Trust the
following information prepared as of the Closing Date: (i) net asset value
pricing sheet of the Fund, with a portfolio listing of each portfolio
security including the principal amount, identification of issue, cost, tax
lot cost, market price per unit and market value; (ii) trial balance of the
Fund's general ledger; (iii) supporting schedules with the details for
accounts receivable and accounts payable; (iv) certification from the
Fund's custodian that it has delivered to the New Fund's custodian the
Assets acquired by the New Fund; and (v) confirmation from the New Fund's
transfer agent of the aggregate number of the Fund's shares outstanding and
a reconciliation of that number to the number of shares shown in the
pricing sheet referred to in (i) above;
(c) Thornburg LTMF shall have delivered to Thornburg Trust a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg Trust and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg LTMF made in this Agreement are
true and correct at and as of the Closing Date;
(d) This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Fund in accordance with applicable law and
evidence of the approval shall have been delivered to Thornburg Trust; and
(e) The parties shall have received a favorable opinion of
White, Koch, Kelly & McCarthy, P.A. satisfactory to Thornburg LTMF and
Thornburg Trust, substantially to the effect that, based upon certain
facts, assumptions and representations, the transactions contemplated by
this Agreement constitute a tax-free reorganization described in Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, for federal
income tax purposes. The delivery of such opinion is conditioned upon
receipt by White, Koch, Kelly & McCarthy, P.A. of representations it shall
request of Thornburg Trust and Thornburg LTMF.
8. Further Conditions Precedent to Obligations of Thornburg Trust
and Thornburg LTMF.
Each party's obligations hereunder are, at its election,
subject to the further conditions that:
(a) On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
(b) On or before the Closing Date, all consents of other
parties and all other consents, orders and permits of federal, state and
local regulatory authorities (including those of the Commission and of
state securities authorities, including "no-action" positions of such
federal or state authorities) deemed necessary by Thornburg Trust or
Thornburg LTMF to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the business assets or properties of
Thornburg Trust or Thornburg LTMF; and
(c) On or before the Closing Date, the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
9. Responsibility for Fees and Expenses.
Thornburg LTMF will pay the costs of the transactions
contemplated hereby, including the expenses of preparing and filing the N-
14 Registration Statement, the costs of distributing the prospectuses and
proxy materials, proxy solicitation costs, and other costs.
10. Massachusetts Business Trust.
Thornburg Trust is organized as a Massachusetts business trust,
and references in this Agreement to Thornburg Trust mean and refer to the
trustees of Thornburg Trust from time to time serving under its Declaration
of Trust on file with the Secretary of State of the Commonwealth of
Massachusetts, as the same may be amended from time to time, pursuant to
which Thornburg Trust conducts its business. It is expressly agreed that
the obligations of Thornburg Trust hereunder shall not be binding upon any
of Thornburg Trust's trustees, shareholders, nominees, officers, agents, or
employees of Thornburg Trust, or New Fund personally, but bind only the
property of the New Fund, as provided in Thornburg Trust's Declaration of
Trust. Moreover, no series of Thornburg Trust other than the New Fund
shall be responsible for the obligations of Thornburg Trust hereunder, and
all persons shall look only to the respective assets of the New Fund to
satisfy the obligations of Thornburg Trust hereunder. The execution and
delivery of this Agreement have been authorized by Thornburg Trust's
trustees, on behalf of the New Fund, and this Agreement has been signed by
authorized officers of Thornburg Fund acting as such, and neither such
authorization by such trustees, nor such execution and delivery by such
officers, shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
respective property of the New Fund, as provided in Thornburg Trust's
Declaration of Trust.
11. Indemnification.
(a) The New Fund agrees to indemnify and hold harmless the
Fund and each of the Fund's directors and officers from and against any and
all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the New Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b) The Fund agrees to indemnify and hold harmless the New
Fund and each of the New Fund's trustees and officers from and against any
and all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the New Fund or any of its
trustees or officers may become subject insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
12. Entire Agreement; Survival of Warranties.
(a) Thornburg Trust and Thornburg LTMF agree that neither
party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
(b) The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated hereunder.
13. Termination.
(a) This Agreement may be terminated by the mutual agreement
of Thornburg Trust and Thornburg LTMF. In addition, either Thornburg Trust
or Thornburg LTMF may at its option terminate this Agreement at or before
the Closing Date because:
(i) of a material breach by the other of any
representation, warranty or agreement contained
herein to be performed at or before the Closing Date;
or
(ii) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot
be met.
(b) In the event of any such termination, there shall be no
liability for damages on the part of either Thornburg Trust or Thornburg
LTMF, or their respective trustees, directors or officers, to the other
party or its trustees, directors or officers, but each shall bear, except
as otherwise provided in section 9, the expenses incurred by them
incidental to the preparation and carrying out of this Agreement.
14. Amendments.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers
of Thornburg LTMF and Thornburg Trust; provided, however, that following
the shareholders' meeting called by the Fund pursuant to this Agreement, no
such amendment may have the effect of changing the provisions for
determining the number of New Fund Shares to be issued to the Fund's
shareholders under this Agreement to the detriment of those shareholders
without their further approval.
15. Notices.
Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be given
by prepaid telegraph, telecopy or certified mail addressed to Thornburg
Trust, 119 East Marcy Street, Santa Fe, New Mexico 87501, Attention:
Brian J. McMahon, and to Thornburg LTMF, 119 East Marcy Street, Santa Fe,
New Mexico 87501, Attention: George T. Strickland.
16. Headings; Counterparts; Governing Law; Assignment.
(a) The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act (as the same Acts shall have been or
will be amended) or rules, orders or regulations of such governmental
bodies or authorities having authority with respect to such Acts.
(d) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation, other than the parties
hereto and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(e) In the event of any litigation respecting this Agreement
or its subject matter, the prevailing party will be entitled to
reimbursement from the losing party for the prevailing party's cost of
suit, including reasonable attorneys' fees.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President and attested to
by its Secretary or Assistant Secretary.
THORNBURG INVESTMENT TRUST on behalf of
THORNBURG NATIONAL LIMITED TERM
MUNICIPAL FUND
By: /s/ Brian J. McMahon
-------------------------------------
Brian J. McMahon, President
------------------, ----------------
THORNBURG LIMITED TERM MUNICIPAL FUND,
INC., on behalf of THORNBURG LIMITED TERM
MUNICIPAL FUND CALIFORNIA PORTFOLIO
By: /s/ George T. Strickland
-------------------------------------
George T. Strickland, Vice President
------------------,
EXHIBIT A
to
Agreement and Plan of Reorganization
Dated December 8, 2003
Thornburg Investment Trust
(on behalf of Thornburg Limited Term Municipal Fund)
and
Thornburg Limited Term Municipal Fund, Inc.
(on behalf of Thornburg Limited Term Municipal Fund National Portfolio)
Subparagraph 4(a)(x): None.
OUTSIDE FRONT COVER
THORNBURG INVESTMENT MANAGEMENT
Prospectus
THORNBURG LIMITED TERM MUNICIPAL FUNDS
Institutional Class Shares
March 10, 2004
Thornburg Limited Term Municipal Fund
("Limited Term National Fund")
Thornburg California Limited Term Municipal Fund
("Limited Term California Fund")
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Securities and Exchange 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
THORNBURG INSTITUTIONAL CLASS SHARES
TABLE OF CONTENTS
4 Limited Term National Fund
Investment Goals
Principal Investment Strategies
Principal Investment Risks
Past Performance of the Fund
Fees and Expenses
6 Limited Term California Fund
Investment Goals
Principal Investment Strategies
Principal Investment Risks
Past Performance of the Fund
Fees and Expenses
18 Additional Information About Fund Investments,
Investment Practices and Risks
19 Potential Advantages of Investing in a Fund
20 Opening Your Account
20 Buying Fund Shares
21 Selling Fund Shares
22 Investor Services
24 Transaction Details
24 Dividends and Distributions
25 Taxes
26 Organization of the Funds
27 Financial Highlights
Limited Term National Fund
Investment Goals
- ----------------
The primary investment goal of Limited Term National Fund is to obtain as
high a level of current income exempt from federal income tax as is
consistent, in the view of the Fund's investment adviser, with preservation
of capital. The secondary goal of the Fund is to reduce expected changes in
its share price compared to longer intermediate and long-term bond
portfolios. The Fund's primary and secondary goals are fundamental policies,
and may not be changed without a majority vote of the Fund's shareholders.
Principal Investment Strategies
- -------------------------------
The Fund pursues its primary goal by investing in a laddered maturity
portfolio of municipal obligations issued by states and state agencies, local
governments and their agencies and by certain United States territories and
possessions. Thornburg Investment Management, Inc. (Thornburg) actively
manages the Fund's portfolio. Investment decisions are based upon outlooks
for interest rates and securities markets, the supply of municipal debt
securities, and analysis of specific securities. The Fund invests in
obligations and participations in obligations which are rated at the time of
purchase as investment grade or, if unrated, which are issued by obligors
which have comparable investment grade obligations outstanding or which are
deemed by Thornburg to be comparable to obligors with outstanding investment
grade obligations. Securities ratings are discussed on page ___. The Fund's
portfolio is "laddered" by investing in obligation of different maturities so
that some obligations mature during each of the coming years.
Because the magnitude of changes in value of interest bearing obligations is
greater for obligations with longer terms, the Fund seeks to reduce changes
in its share value by maintaining a portfolio of investments with a dollar-
weighed average maturity normally less than five years. There is no
limitation on the maturity of any specific security the Fund may purchase.
The Fund may dispose of any security before it matures. The Fund also
attempts to reduce changes in it share value through credit analysis,
selection and diversification.
The Fund ordinarily acquires and holds securities for investment rather than
for realization of gains by short term trading on market fluctuations.
However, it may dispose of any security prior to its scheduled maturity to
enhance income or reduce loss, to change the portfolio's average maturity, or
to otherwise respond to current market conditions. The objective of
preserving capital may prevent the Fund from obtaining the highest yields
available.
The Fund normally invests 100% of its assets in municipal obligations. The
Fund may invest up to 20% of its assets in taxable securities which produce
income not exempt from federal income tax because of market conditions,
pending investment of idle funds or to afford liquidity. The Fund's
temporary taxable investments may exceed 20% of its assets when made for
defensive purposes during periods of abnormal market conditions. If the Fund
found it necessary to own taxable investments, some of its income would be
subject to federal income tax.
Principal Investment Risks
- ---------------------------
The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of the
Fund's investments declines and the Fund's share value is reduced. This
effect is more pronounced for intermediate and any longer term obligations
owned by the Fund. During periods of declining interest rates the Fund's
dividends decline. The value of Fund shares also could be reduced if
municipal obligations held by the Fund were downgraded by rating agencies, or
went into default, or if legislation or other government action reduces the
ability of issuers to pay principal and interest when due or changes the tax
treatment of interest on municipal obligations. Nonrated obligations may
have, or be perceived to have, greater risk of default. 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 of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government 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
- ----------------------------
The following information provides some indication of the risks of investment
in the Fund by showing how the Fund's investment results vary from year to
year. The information relates to a predecessor investment company which
merged into the Fund. For a description of the merger, see "Organization of
the Funds" in the Statement of Additional Information. The bar chart shows
how the annual total returns for Class I shares have been different in each
full year shown. The average annual total return figures compare Class I
share performance to the Lehman Five-Year General Obligation Bond Index, a
broad measure of market performance. The Index is a model portfolio of
municipal general obligation bonds from throughout the United States, with a
constant maturity of five years. Past performance (before and after taxes)
is not necessarily an indication of how the Fund will perform in the future.
The following are presented as bar graphs in the Prospectus
Limited Term National Fund Annual Total Returns Class I Shares
- --------------------------------------------------------------
10% 7.83
7.13
5% 5.86 5.18 5.22 5.53
0% 0.77
1997 1998 1999 2000 2001 2002 2003
Highest quarterly results for time period shown: 3.28% (quarter ended
06/30/02).
Lowest quarterly results for time period shown: -0.85% (quarter ended
6/30/99).
Limited Term National Fund Average Annual Total Returns
Class I Shares (periods ending 12/31/03)
- --------------------------------------------------------
Since Inception
One Year Five Years 7/5/96
-------- ---------- ----------------
Return Before Taxes 3.53% 4.87% 5.24%
Return After Taxes
on Distributions 3.53% 4.87% 5.24%
Return After Taxes on
Distributions and Sale
of Fund Shares 3.47% 4.79% 5.15%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.84%
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect state or local income
taxes. Actual after-tax returns depend on an investor's own tax situation
and may differ from the returns shown. After-tax returns are not relevant to
persons who are not subject to federal income tax.
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)
Maximum Sales Charge (Load) On Purchases none
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) on Redemption none
(as a percentage of the lesser of redemption
proceeds or original offering price)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fee .43%
Distribution and Service (12b-1) Fees .00%
Other Expenses .15% (1)
----
Total Annual Operating Expenses .58%
(1) Other expenses are estimated for the current fiscal year.
Example. This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year,
dividends and distributions are reinvested, and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class I Shares $59 $166 $324 $726
Limited Term California Fund
Investment Goals
- -----------------
The primary investment goal of Limited Term California Fund is to obtain as
high a level of current income exempt from federal and California state
individual income taxes as is consistent, in the view of the Fund's
investment adviser, with preservation of capital. The secondary goal of the
Fund is to reduce expected changes in its share price compared to longer
intermediate and long-term bond portfolios. The Fund's primary and secondary
goals are fundamental policies, and may not be changed without a majority
vote of the Fund's shareholders.
Principal Investment Strategies
- -------------------------------
The Fund pursues its primary goal by investing principally in a laddered
maturity portfolio of municipal obligations issued by the State of California
and its state agencies, and by California local governments and their
agencies. Thornburg Investment Management, Inc. (Thornburg) actively manages
the Fund's portfolio. Investment decisions are based upon outlooks for
interest rates and securities markets, the supply of municipal debt
securities, and analysis of specific securities. The Fund invests in
obligations and participations in obligations which are rated at the time of
purchase as investment grade or, if unrated, which are issued by obligors
which have comparable investment grade obligations outstanding or which are
deemed by Thornburg to be comparable to obligors with outstanding investment
grade obligations. Securities ratings are discussed on page 10. The Fund
may invest in obligations issued by certain United States territories and
possessions. The Fund's portfolio is "laddered" by investing in obligations
of different maturities so that some obligations mature during each of the
coming years.
Because the magnitude of changes in value of interest bearing obligations is
greater for obligations with longer terms, the Fund seeks to reduce changes
in its share value by maintaining a portfolio of investments with a dollar-
weighed average maturity normally less than five years. There is no
limitation on the maturity of any specific security the Fund may purchase.
The Fund may dispose of any security before it matures. The Fund also
attempts to reduce changes in it share value through credit analysis,
selection and diversification.
The Fund ordinarily acquires and holds securities for investment rather than
for realization of gains by short term trading on market fluctuations.
However, it may dispose of any security prior to its scheduled maturity to
enhance income or reduce loss, to change the portfolio's average maturity, or
to otherwise respond to current market conditions. The objective of
preserving capital may prevent the Fund from obtaining the highest yields
available.
Under normal conditions the Fund invests at least 80% of its assets in
municipal obligations originating in California which are exempt from
California and regular federal income taxes, and normally invests 100% of its
assets in municipal obligations originating in California or issued by United
States territories and possessions. The Fund may invest up to 20% of its
assets in taxable securities which would produce income not exempt from
federal or California income tax. These investments may be made due to
market conditions, pending investment of idle funds or to afford liquidity.
The Fund's temporary taxable investments may exceed 20% of its assets when
made for defensive purposes during periods of abnormal market conditions. If
the Fund found it necessary to own taxable investments, some of its income
would be subject to federal and California income taxes.
Principal Investment Risks
- --------------------------
The value of the Fund's shares and its dividends will fluctuate in response
to changes in interest rates. When interest rates increase, the value of the
Fund's investments declines and the Fund's share value is reduced. This
effect is more pronounced for intermediate and longer term obligations owned
by the Fund. During periods of declining interest rates the Fund's dividends
decline. The value of Fund shares also could be reduced if municipal
obligations held by the Fund were downgraded by rating agencies, or went into
default, or if legislation or other government action reduces the ability of
issuers to pay principal and interest when due or changes the tax treatment
of interest on municipal obligations. Nonrated obligations may have, or be
perceived to have, greater risk of default. Because the Fund invests
primarily in obligations originating in California, the Fund's share value
may be more sensitive to adverse economic or political developments in that
state. State budget deficits resulting from spending increases and a steep
decline in tax revenues could impair the ability of some governmental issuers
to meet their debt obligations. Moreover, political differences between the
governor and the state legislature over tax increases and spending cuts may
have a negative impact on outstanding and future obligations of California
state and local governments. A portion of the Fund's dividends could be
subject to the federal alternative minimum tax. The loss of money is a risk
of investing in the Fund, and when you sell your shares they may be worth
less than what you paid for them.
An investment in the Fund is not a deposit in any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Additional information about Fund investments, investment strategies, and
risks of investing in the Fund appears below beginning on page _____.
Past Performance of the Fund
- -----------------------------
The following information provides some indication of the risks of investing
in the Fund by showing how the Fund's investment results vary from year to
year. The information relates to a predecessor investment company which
merged into the Fund. For a description of the merger, see "Organization of
the Funds" in the Statement of Additional Information. The bar chart shows
how the annual total returns for Class I shares have been different in each
full year shown. The average annual total return figures compare Class I
share performance to the Lehman Five-Year General Obligation Bond Index, a
broad measure of market performance. The Index is a model portfolio of
municipal general obligations bonds from throughout the United States, with a
constant maturity of five years. Past Performance (before and after taxes)
is not necessarily an indication of how the Fund will perform in the future.
The following is presented as a bar graph in the Profile
Limited Term California Fund Annual Total Returns Class I Shares
- ----------------------------------------------------------------
10%
6.71 6.74 2.89
5% 5.25
4.63
0% 0.82
1998 1999 2000 2001 2002 2003
Highest quarterly results for time period shown: 3.19% (quarter ended
09/30/02).
Lowest quarterly results for time period shown: -0.28% (quarter ended
12/31/99).
Average Annual Total Returns (periods ended 12/31/03)
- ----------------------------------------------------
Since Inception
One Year Five Years 4/1/97
-------- ---------- ----------------
Return Before Taxes 2.89% 4.33% 4.85%
Return After Taxes
on Distributions 2.89% 4.33% 4.85%
Return After Taxes on
Distributions and Sale
of Fund Shares 2.94% 4.29% 4.78%
Lehman Index
(reflects no deduction
for fees, expenses, or
taxes) 4.13% 5.57% 5.95%
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect state or local income
taxes. Actual after-tax returns depend on an investor's own tax situation
and may differ from the returns shown. After-tax returns are not relevant to
persons who are not subject to federal income tax.
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)
Maximum Sales Charge (Load) on Purchases none
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) on Redemptions none
(as a percentage of the lesser of redemption
proceeds or original offering price)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fee .50%
Distribution and Service (12b-1) Fees .00%
Other Expenses .25%(1)
----
Total Annual Operating Expenses .75%(2)
(1) Other expenses are estimated for the current fiscal year.
(2) Thornburg Investment Management, Inc. intends to reimburse expenses so
that actual expenses do not exceed .65%. 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, dividend
and distributions and reinvested, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class I Shares $ 77 $240 $417 $930
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS, INVESTMENT PRACTICES, AND
RISKS
Information about each Fund's principal investment strategies and risks is
provided at the beginning of this Prospectus. The information below provides
more background about some of the investments described in the beginning of
this Prospectus, and the risks associated with those investments.
Principal Investment Strategies
- --------------------------------
A "principal investment strategy" of a Fund is a strategy which is important
in pursuing the Fund's investment objectives, and is anticipated will have a
significant affect on its performance. In general, a security or investment
strategy will not be considered a principal strategy of a Fund if it will not
represent more than ten percent of a Fund's assets. It is important to
remember, however, that the investment profile of each Fund will vary over
time, depending on various factors. Over time, a Fund will invest different
proportions of its assets in the securities it is permitted to purchase, and
a Fund may not invest at times in each of the securities it is permitted to
purchase as a principal strategy.
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.
The yields on debt securities are dependent on a variety of factors,
including the general money market, the size of a particular debt offering,
the maturity of the debt security, and the rating of the issuer. The market
value of debt securities varies with changes in prevailing interest rates and
changing evaluations of the ability of issuers to meet principal and interest
payments. Some debt securities permit the issuer to pay the debt before
final maturity. Prepayment may reduce the expected yield on invested funds,
the net asset value of the Fund holding the security, or both if interest
rates have declined below the level prevailing when the debt security was
purchased. If interest rates have declined, reinvestment of the prepayment
proceeds by the Fund may result in a lower yield to the Fund. Debt
securities have varying degrees of quality and varying levels of sensitivity
to changing interest rates. Prices of 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.
Municipal Obligations
- ----------------------
Municipal debt securities, which are often called "municipal obligations,"
are debt securities which are issued by or on behalf of states, territories
and possessions of the United States and the District of Columbia, and their
political subdivisions, agencies and instrumentalities. Municipal
obligations may be "general obligations bonds" or "revenue bonds." General
obligation bonds are backed by the credit of the issuing government entity or
agency, while revenue bonds are repaid from the revenues of a specific
project such as a stadium, a waste treatment plant, or a hospital. Municipal
obligations includes notes (including tax exempt commercial paper), bonds,
municipal leases and participation interests in these obligations.
Many municipal obligations pay interest which is exempt from federal income
taxes. Interest which is exempt from federal income tax may, however, be
subject to the federal alternative minimum tax or state income taxes. Some
municipal obligations pay interest which is subject to both federal and state
income taxes.
Municipal obligations often grant the issuer the option to pay off the
obligation prior to its final maturity. Prepayment of municipal obligations
may reduce the expected yield on invested funds, the net asset value of the
Fund, or both if interest rates have declined below the level prevailing when
the obligation was purchased. In addition, the federal income tax treatment
of gains from market discount as ordinary income may increase the price
volatility of municipal obligations when interest rates rise.
Municipal obligations are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
United States Bankruptcy Code. In addition, municipal obligations may become
subject to laws enacted in the future by Congress, state legislatures or
referenda extending the time for payment of principal or interest, or
imposing other constraints upon enforcement of such obligations or upon
municipalities to levy taxes. There is also the possibility that, as a
result of legislation or other conditions, the power or ability of any issuer
to pay, when due, the principal of and interest on its municipal obligations
may be materially affected.
Some municipal obligations are "municipal leases," which are municipal debt
securities used by state and local governments to acquire a wide variety of
equipment and facilities. Many such obligations include "non-appropriation"
clauses which provide that the governmental issuer has no obligation to make
payments unless money is appropriated for that purpose. If an issuer stopped
making payment on a municipal lease held by a Fund, the lease would lose some
or all of its value. Often, a Fund will not hold the obligation directly,
but will purchase a "participation interest" in the obligation, which gives
the Fund an undivided interest in the underlying municipal lease. Some
municipal leases may be illiquid under certain circumstances, and Thornburg
will evaluate the liquidity of each municipal lease upon its acquisition by a
Fund and periodically while it is held.
Securities Ratings and Credit Quality
- --------------------------------------
Securities which are rated within the four highest grades (Baa or BBB or
better) by Moody's Investors Service ("Moody's"), Fitch Investors Service
("Fitch"), or Standard & Poor's Corporation ("S&P") 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. "High-
yield" debt securities (sometimes called "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.
Temporary Investments
- -----------------------
Each of the Funds may purchase short-term, highly liquid securities such as
time certificates of deposit, short-term U.S. Government securities and
commercial paper. Funds typically hold these securities under normal
conditions pending investment of idle funds or to provide liquidity. Funds
also may hold assets in these securities for temporary defensive purposes.
Investment in these securities for temporary periods could reduce a Fund's
ability to attain its investment objectives, and could result in current
income subject to federal and state income taxes.
POTENTIAL ADVANTAGES OF INVESTING IN A FUND
Investing through a mutual fund permits smaller investors to diversify an
investment among a larger number of securities. In addition, a mutual fund
may give investors access to certain securities which investors would not
otherwise have.
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 the Fund in which you are investing or to your financial intermediary.
You may also open your account by wire or mail. If there is no application
accompanying this prospectus, please call 1-800-847-0200. If you buy shares
by check and then redeem those shares, the payment may be delayed for up to
15 business days to ensure that your previous investment has cleared.
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.
* Checks must be drawn on U. S. banks; the Funds do not accept cash.
* If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its Transfer
Agent have incurred.
When you buy shares of a Fund or sell them through your financial advisor,
you may be charged a fee for this service. Please read your financial
advisor's program materials for any additional procedures, service features
or fees that may apply.
BUYING FUND SHARES
The Institutional Class shares of the Funds are sold on a continuous basis
with no initial sales charge or contingent deferred sales charge at the net
asset value (NAV) per share next determined after a purchase order is
received by the Funds' transfer agent. The NAV of each Fund is computed at
least once each day the Funds conduct business, by adding the value of the
Fund's assets, subtracting its liabilities and dividing the result by the
number of shares outstanding. NAV is normally calculated at four o'clock p.
m. Eastern Time on each day the New York Stock Exchange is open.
Institutional Class shares of each Fund are subject to a Rule 12b-1 Service
Plan, which permits each Fund to reimburse the investment adviser (Thornburg)
for costs to obtain various shareholder services from persons who sell
shares. The maximum annual reimbursement under the plan is 1/4 of 1% of the
class's net assets, but Thornburg has never sought a reimbursement of any
expenses under the plan for Class I shares. Thornburg has advised that it
has no current intention to do so. Because this fee is paid out of the
class's assets, payment of the fee on an ongoing basis would increase the
cost of your investment and might cost more than paying other types of sales
charges.
Each Fund reserves the right to suspend the offering of shares for a period
of time. Each Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Investor Services" and
"Transaction Details," below.
Qualified individual investors and qualified institutions purchasing shares
for their own account are eligible to purchase Institutional Class shares
provided they invest a minimum of $2,500,000. The minimum amount for
subsequent purchases is $5,000. Qualified institutions include corporations,
banks and insurance companies purchasing for their own account and other
institutions such as trusts, endowments and foundations. Thornburg or TSC
may make payments from their own resources to assist in the sales or
promotion of the Funds.
Qualified employee benefit or retirement plans other than an individual
retirement account ("IRA") or SEP-IRA are also eligible to purchase
Institutional Class shares, provided they either invest a minimum of
$1,000,000 in the Funds or have 100 or more eligible participants enrolled in
the plan. There is no minimum amount for subsequent purchases.
Investment dealers, financial advisers or other investment professionals,
including bank trust departments and companies with trust powers, purchasing
for the accounts of others within a clearly defined "wrap" or other fee based
investment advisory program are eligible to purchase Institutional Class
shares. TSC will establish a minimum amount per program or per account to
qualify for purchase of Institutional Class shares. The minimum amount per
program is currently $100,000. Consult your applicable professional for
their minimum.
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 minimum account size is $1,000 for accounts established through wrap
programs. The minimum for other accounts is $25,000. Each Fund reserves the
right to redeem the shares of any shareholder whose shares have a net asset
value of less than the stated minimum. No redemption fee will be charged on
such a mandatory redemption. The Fund will notify the shareholder before
performing such a redemption, and allow the shareholder at least 30 days to
make an additional investment and increase the account to the stated minimum.
A Fund will not redeem an account which falls below the minimum solely due to
market fluctuations.
Employees, officers, trustees, directors of any Thornburg Fund or Thornburg
company, and their families or trusts established for the benefit of any of
the foregoing, may also purchase Institutional Class shares.
SELLING FUND SHARES
Shareholders of record (the person or entity in whose name the shares are
registered) can withdraw money from their Fund at any time by redeeming some
or all of the shares in the account, either by selling them back to the Fund
or by selling the shares through their financial advisor. The shares will be
purchased by the Fund at the next share price (NAV) calculated after the
redemption order is received in proper form. Share price is normally
calculated at 4 p.m. Eastern time. Please note the following:
* Consult your financial advisor for procedures governing redemption
through the advisor's firm.
* Telephone redemptions over the wire generally will be credited to
your bank account on the business day after your phone call (see
Telephone Redemption, page ___).
* 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.
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.
To sell shares in an account, you may use any of the methods described below.
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 in the 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. 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. See "Investor
Services," below for more details, or telephone 1-800-847-0200.
Redeem Through Financial Advisor
- --------------------------------
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. Minimum account size for this feature is $10,000, and the minimum
payment is $50. Please telephone your Fund Support Representative at 1-800-
847-0200.
Certain requests must include a signature guarantee
- ---------------------------------------------------
It is designed to protect you and your Fund from fraud. If you are redeeming
directly rather than through a financial advisor and you have not signed up
for telephone redemption, 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 redemption check is being mailed to a different address than the
one on your account,
* The check is being made payable to someone other than the person in
whose name the account is registered,
* 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 must 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 other participant in the Securities
Transfer Agent Medallion Program (STAMP). The Stamp 2000 Medallion imprint
is the only signature guarantee that will be accepted. A notary public
cannot provide a signature guarantee.
INVESTOR SERVICES
Fund Information
- ----------------
Thornburg's telephone representatives are available Monday through Friday
from 8:30 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.
. Monthly 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 1-
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 I shares of a
Fund for Class I shares of other Thornburg Funds offering that class of
shares. However, you should note the following:
. The Fund you are exchanging into must be registered for sale in your
state.
. You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
. Before exchanging into a Fund, read its prospectus.
. Exchanges may have tax consequences for you.
. Each Fund reserves the right to refuse any exchange, or temporarily
or permanently terminate the exchange privilege of any investor
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, the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's
assets, exchanges appear to coincide with a market timing
strategy, or if Thornburg believes the Fund otherwise may be
adversely affected. Accounts under common ownership or control,
including accounts with the same taxpayer identification number,
will be counted together for this purpose.
The 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 Support Representative.
If you did not complete the telephone redemption section of your application,
you may add this feature to your account by calling your 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 Funds, TSC, Thornburg and the Funds' Transfer Agent are not responsible
for, and will not be liable for, the authenticity of withdrawal instructions
received by telephone or the delivery or transmittal of the redemption
proceeds if they follow instructions communicated by telephone that they
reasonably believe to be genuine. By electing telephone redemption you are
giving up a measure of security you otherwise may have by redeeming shares
only with written instructions, and you may bear the risk of any losses
resulting from telephone redemption. The Funds' Transfer Agent will attempt
to implement reasonable procedures to prevent unauthorized transactions and
the Funds or their Transfer Agent could be liable if these procedures are not
employed. These procedures will include recording of telephone transactions,
providing written confirmation of such transactions within 5 days, and
requesting certain information to better confirm the identity of the caller
at the time of the transaction. You should verify the accuracy of your
confirmation statements immediately after you receive them.
Systematic Withdrawal Plan
- --------------------------
Systematic withdrawal plans let you set up periodic redemptions from your
account. Consult your financial advisor or call a Fund Support
Representative at 800-847-0200 for information.
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 Funds nor their 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
Funds nor their 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.
TRANSACTION DETAILS
Each Fund is open for business each day the New York Stock Exchange (NYSE) is
open. Each 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.
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 28% backup withholding for failing to report income to
the IRS. If you violate IRS regulations, the IRS can require your Fund to
withhold 28% of your taxable distributions and redemptions.
Federal law requires us to obtain, verify and record information which
identifies each person who opens an account. When you open an account, you
will be asked to supply your name, address, date of birth, and other
information identifying you. We are required to reject any new account
application if the required information is not provided.
Each Fund reserves the right to suspend the offering of shares for a period
of time. Each Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchanging Shares,"0
and "Excessive Trading," below.
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 a Fund is priced on the
following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses.
Each Fund may authorize certain securities brokers to receive on its behalf
purchase and redemption orders received in good form, and some of those
brokers may be authorized to designate other intermediaries to receive
purchase and redemption orders on the Fund's behalf. Provided the order is
promptly transmitted to the Fund, the Fund will be deemed to have received a
purchase or redemption order at the time it is 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.
Financial advisors, securities dealers and other persons offering shares of
the Funds are not agents or otherwise acting on behalf of the Funds,
Thornburg Securities Corporation or Thornburg Investment Management, Inc.,
and the Funds, Thornburg Securities Corporation and Thornburg Investment
Management, Inc. are not responsible for errors or omissions of any financial
advisor, securities dealer or other person offering mutual fund shares for
sale. Investors should exercise care in selecting persons from whom they
purchase investments.
Excessive Trading
- -----------------
Excessive trading of Fund shares in response to short-term fluctuations in
the market, also known as "market timing," may make it very difficult to
manage a Fund's investments and may hurt Fund performance and shareholders.
When market timing occurs, a Fund may have to sell portfolio securities to
have the cash necessary to redeem the market timers' shares. This can happen
at a time when it is not advantageous to sell any securities, which may harm
a Fund's performance. The Funds reserve the right to refuse purchase orders
or exchanges into a Fund by any person. In particular, purchase orders or
exchanges may be restricted or refused if in Thornburg's judgment, the Fund
would be unable to invest the money effectively in accordance with its
investment objectives and policies, the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets, the
purchases appear to coincide with a market timing strategy, or if Thornburg
believes the Fund otherwise may be adversely affected. Any Fund's exercise
of these rights is in addition to, and not in lieu of, the imposition of any
redemption fees. Accounts under common ownership or control, including
accounts with the same tax identification number, will be counted together
for this purpose. See "Exchanging Shares," above.
DIVIDENDS AND DISTRIBUTIONS
The Funds distribute substantially all of their net income and realized
capital gains, if any, to shareholders each year. Each of the Funds declares
its net investment income daily and distributes it monthly. Each Fund will
distribute net realized capital gains, if any, at least annually. Capital
gain distributions, if any, normally will be declared and payable in
December. You will be notified annually by your Fund as to the amount and
characterization of distributions paid to or reinvested by you for the
preceding tax year.
Distribution Options. The Funds earn interest from bond, money market, and
other investments. These are passed along as dividend distributions. Each
Fund realizes capital gains whenever it sells securities for a higher price
than it paid for them. These are passed along as capital gain distributions.
When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers four options, which you can change at
anytime. 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 or earnings are accrued or
paid on amounts represented by uncashed distribution checks.
Dividends
1. Reinvestment Option. Your dividend distributions will be automatically
invested in additional shares of your Fund. If you do not indicate a
choice on your application, you will be assigned this option. You may
also instruct the Fund to invest your dividends in the shares of another
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 end of the month or quarter for which the distribution is
made.
Capital Gains
1. Reinvestment Option. Your capital gain distributions, if any, will be
automatically reinvested in additional shares of your Fund. If you do
not indicate a choice on your application, you will be assigned this
option. You may also instruct the Fund to reinvest your capital gain
distributions in shares of another Thornburg Fund.
2. Cash Option. You will be sent a check for any capital gain
distributions.
Turnover and Capital Gains. The Funds do not normally engage in short-term
trading for profits. However, when a Fund believes that a security will no
longer contribute towards its reaching its goal or that another security will
better contribute to its goal, it will normally sell that security.
When a Fund sells a security at a profit it realizes a capital gain. When it
sells a security at a loss it realizes a capital loss. A mutual fund must,
by law, distribute capital gains, net of any losses, to its shareholders.
Whether you reinvest your capital gain distributions or take them in cash,
the distribution is taxable.
To minimize taxable capital gain distributions, each Fund will realize
capital losses, if available, when, in the judgment of the portfolio manager,
the integrity and income generating aspects of the portfolio would be
unaffected by doing so.
TAXES
Federal Taxes - 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 -The Funds intend to satisfy
conditions that will enable them to designate distributions from the interest
income generated by investments in municipal obligations, which are exempt
from federal income tax when received by a Fund, as Exempt Interest
Dividends. Shareholders receiving Exempt Interest Dividends will not be
subject to federal income tax on the amount of such dividends, except to the
extent the alternative minimum tax may be imposed.
Distributions by the Funds of net interest income received from certain
temporary investments (such as certificates of deposit, corporate commercial
paper and obligations of the U. S. government, its agencies and
instrumentalities) and net short-term capital gains realized by a Fund, if
any, will be taxable to shareholders as ordinary income whether received in
cash or additional shares. Distributions to shareholders will not qualify
for the dividends received deduction for corporations. Any net long-term
capital gains realized by a Fund, whether or not distributed, will be taxable
to shareholders as long-term capital gains regardless of the length of time
investors have held their shares, although gains attributable to market
discount on portfolio securities will be characterized as ordinary income.
Each year the Fund will, where applicable, mail to shareholders information
on the tax status of dividends and distributions, including the respective
percentages of tax-exempt and taxable, if any, income and an allocation of
tax-exempt income on a state-by-state basis. The exemption of interest
income for federal income tax purposes does not necessarily result in an
exemption under the income or other tax laws of any state or local taxing
authorities. (See "State Taxes").
The Internal Revenue Code treats interest on certain municipal obligations
which are private activity bonds under the Code as a preference item for
purposes of the alternative minimum tax on individuals and corporations. The
Funds may purchase without limitation private activity bonds the interest on
which is subject to treatment under the Code as a preference item for
purposes of the alternative minimum tax on individuals and corporations,
although the frequency and amounts of these purchases are uncertain. Some
portion of Exempt Interest Dividends could, as a result of such purchases, be
treated as a preference item for purposes of the alternative minimum tax on
individuals and corporations. Shareholders are advised to consult their own
tax advisers as to the extent and effect of this treatment.
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.
State Taxes. With respect to distributions of interest income and capital
gains from the Funds, 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. The Funds will advise shareholders approximately 60 days after
the end of each calendar year as to the percentage of income derived from
each state as to which it has any municipal obligations in order to assist
shareholders in the preparation of their state and local tax returns.
Distributions by Limited Term California Fund to individuals attributable to
interest on municipal obligations originating in California are not subject
to personal income taxes imposed by the State of California. Capital gain
distributions are taxable by most states which impose an income tax, and
gains on the sale of Fund shares may be subject to state capital gains taxes.
Prospective investors are urged to confer with their own tax advisers for
more detailed information concerning state tax consequences.
ORGANIZATION OF THE FUNDS
Limited Term National Fund and Limited Term California Fund are 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 12
authorized Funds, two of which are described in this Prospectus. The
Trustees are authorized to divide the Trust's shares into additional series
and classes.
The Funds are managed by Thornburg Investment Management, Inc. (Thornburg).
Thornburg performs investment management services for each 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 of shares under an
Administrative Services Agreement which requires that Thornburg will
supervise, administer and perform certain administrative services necessary
for the maintenance of the class shareholders. Thornburg's services to
Limited Term National Fund and Limited Term California Fund are supervised by
the Trustees of Thornburg Investment Trust.
For the most recent fiscal year of the predecessor to each of the Funds, the
investment advisory and administrative services fee rates for each of the
Funds were:
Class I
Advisory Administrative
Fee Rate Services Rate
-------- --------------
Year Ended June 30, 2003
------------------------
Limited Term National Fund .43% .05%
Limited Term California Fund .50% .05%
The advisory fee rate for each Fund decreases as assets increase, as
described in the Statement of Additional Information.
George T. Strickland, a Managing Director of Thornburg, is the portfolio
manager for the Funds. Mr. Strickland has been one of the persons primarily
responsible for management of the predecessors to the Funds since 1998, and
has performed municipal bond credit analyses and management since joining
Thornburg in 1991. Mr. Strickland is assisted by other employees of
Thornburg in managing the Funds.
Thornburg may, from time to time, agree to waive its fees or to reimburse a
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 a Fund will boost its performance,
and repayment of waivers or reimbursements will reduce its performance.
In addition to Thornburg's fees, each Fund will pay all other costs and
expenses of its operations. No Fund will bear any costs of sales or
promotion incurred in connection with the distribution of Institutional Class
shares, except as described above under "Buying Fund Shares".
Thornburg pays, from its management fee and other resources, additional cash
or non-cash compensation and expense reimbursements to dealer firms that have
selling agreements with Thornburg Securities Corporation. TSC also may pay,
out of its revenues, additional cash or non-cash compensation and expense
reimbursements to dealer firms with which it has selling agreements. These
payments may include amounts to assist in the sale or promotion of the Funds.
Dealer firms may pay additional compensation to financial advisors who sell
Fund shares. Non-cash compensation may include travel and lodging in
connection with seminars and other education programs.
Garrett Thornburg, a Trustee and Chairman of the Trust, is the controlling
stockholder of both Thornburg and TSC.
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each
Fund's financial performance for the past five years (or if shorter, the
period of the Fund's operations). All of the information for each Fund
relates to a predecessor investment company which merged into the Fund.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). Information for the years ended June 30, 2000,
2001, 2002 and 2003 for Limited Term National Fund and Limited Term
California Fund appears in the Annual Report for each of the predecessors to
those Funds, which have been audited by PricewaterhouseCoopers LLP,
independent auditors. Information for the year ended June 30, 1999 was
audited by other independent auditors. Independent auditors' reports,
together with each predecessor fund's financial statements, are included in
each predecessor fund's Annual Report, which are available upon request.
Information for the six month period ended December 31, 2003 is unaudited.
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Municipal Fund
- -----------------------------------------------------------------
Year Ended June 30,
Six Months -------------------
Ended 12/31/03 2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $14.01 $13.65 $13.44 $13.06 $13.26 $13.51
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.23 0.49 0.57 0.63 0.63 0.64
Net realized and unrealized
gain (loss) on investments (0.08) 0.36 0.21 0.38 (0.20) (0.25)
------ ------ ------ ------ ------ ------
Total from investment operations 0.15 0.85 0.78 1.01 0.43 0.39
Less dividends from:
Net investment income (0.23) (0.49) (0.57) (0.63) (0.63) (0.64)
------ ------ ------ ------ ------ ------
Change in net asset value (0.08) 0.36 0.21 0.38 (0.20) (0.25)
Net asset value, end of year $13.93 $14.01 $13.65 $13.44 $13.06 $13.26
====== ====== ====== ====== ====== ======
Total return (a) 1.05% 6.36% 5.91% 7.91% 3.37% 2.87%
- ------------
Ratios/Supplemental Data
- ------------------------
Ratios to average net assets:
Net investment income 3.22%(b) 3.54% 4.18% 4.75% 4.84% 4.71%
Expenses, after expense reductions 0.56%(b) 0.58% 0.60% 0.60% 0.60% 0.60%
Expenses, after expense reductions
and net of custody credits 0.56%(b) 0.58% 0.60% - - -
Expenses, before expense reductions 0.56%(b) 0.58% 0.62% 0.65% 0.62% 0.61%
Portfolio turnover rate 8.55% 15.81% 19.59% 25.37% 33.65% 22.16%
====== ====== ====== ====== ====== ======
Net assets at end of year (000) 212,298 $197,367 $123,652 $86,160 $76,470 $81,326
<FN>
<Fa> Not annualized for periods less than one year.
<Fb> Annualized.
</FN>
FINANCIAL HIGHLIGHTS
Thornburg California Limited Term Municipal Fund
- ------------------------------------------------
Year Ended June 30,
Six Months -------------------
Ended 12/31/03 2003 2002 2001 2000 1999
Class I Shares:
Per Share Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $13.22 $12.97 $12.79 $12.60 $12.75 $12.90
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.19 0.42 0.51 0.59 0.58 0.58
Net realized and unrealized
gain (loss) on investments (0.07) 0.25 0.18 0.19 (0.15) (0.15)
------ ------ ------ ------ ------ ------
Total from investment operations 0.12 0.67 0.69 0.78 0.43 0.43
Less dividends from:
Net investment income (0.19) (0.42) (0.51) (0.59) (0.58) (0.58)
------ ------ ------ ------ ------ ------
Change in net asset value (0.07) 0.25 0.18 0.19 (0.15) (0.15)
Net asset value, end of year $13.15 $13.22 $12.97 $12.79 $12.60 $12.75
====== ====== ====== ====== ====== ======
Total return (a) 0.94% 5.27% 5.48% 6.28% 3.50% 3.33%
- ------------
Ratios/Supplemental Data
- ------------------------
Ratios to average net assets:
Net investment income 2.91%(b) 3.20% 3.92% 4.60% 4.60% 4.45%
Expenses, after expense reductions 0.67%(b) 0.65% 0.66% 0.65% 0.65% 0.65%
Expenses, after expense reductions
and net of custody credits 0.67%(b) 0.65% 0.65% - - -
Expenses, before expense reductions 0.76%(b) 0.75% 0.84% 0.98% 0.79% 0.78%
Portfolio turnover rate 13.34% 26.03% 25.16% 15.45% 21.34% 21.71%
====== ====== ====== ====== ====== ======
Net assets at end of year (000) $20,948 $20,592 $10,133 $5,520 $5,793 $12,724
<FN>
<Fa> Not annualized for periods less than one year.
<Fb> Annualized.
</FN>
OUTSIDE BACK COVER
ADDITIONAL INFORMATION
Reports to Shareholders
Shareholders will receive annual
reports of their Fund containing
financial statements audited by the
Funds' independent auditors, and
also will receive unaudited semi-
annual reports. In addition, each
shareholder will receive an account
statement no less often than quarterly.
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 219017
Kansas City, Missouri 64121-9017
COLUMN BREAK
Additional information about the Funds' investments is available in the
Funds' Annual and Semiannual Reports to Shareholders. In each 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 Funds' Statement of Additional
Information (SAI) and the Funds' Annual and Semiannual Reports are
available without charge upon request. Shareholders may make inquiries
about the Funds, 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 Funds' current SAI is
incorporated in this Prospectus by reference (legally forms a part of this
Prospectus).
Information about the Funds (including the SAI) may be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Funds are also available on the Commission's Internet
site at http://www.sec.gov and copies of information may be obtained, upon
payment of a duplicating fee, by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102 by contacting the Commission by e-mail
at publicinfo@sec.gov.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, the information or representation must
not be relied upon as having been authorized by any Fund or Thornburg
Securities Corporation. This Prospectus constitutes an offer to sell
securities of a Fund only in those states where the Fund's shares have been
registered or otherwise qualified for sale. A Fund will not accept
applications from persons residing in states where the Fund's shares are
not registered.
Thornburg Securities Corporation, Distributor
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
www.thornburg.com
Limited Term National Fund and Limited Term California Fund are 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.
PROSPECTUS AND PROXY STATEMENT
(For Holders of Class A and Class C Shares)
RELATING TO THE ACQUISITION OF THE ASSETS OF
THORNBURG LIMITED TERM MUNICIPAL FUND CALIFORNIA PORTFOLIO
a separate series of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
BY AND IN EXCHANGE FOR SHARES OF
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND
a separate series of
THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Prospectus/Proxy Statement relates to the proposed transfer of
substantially all of the assets of Thornburg Limited Term Municipal Fund
California Portfolio (the "Fund") in exchange solely for shares of
Thornburg California Limited Term Municipal Fund (the "New Fund"). The
Fund and the New Fund each have the same investment objective, which is to
seek as high a level of interest income which is exempt from federal and
California state individual income taxes as is consistent, in the view of
the Funds' investment adviser, with the preservation of capital. As a
result of the proposed transaction, each shareholder of the Fund will
receive shares of the New Fund equal in value at the date of the exchange
to the value of that shareholder's shares of the Fund. The terms and
conditions of these transactions are more fully described in this
Prospectus/Proxy Statement and in the Agreement and Plan of Reorganization
attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the New Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the New Fund's "Thornburg Limited Term
Municipal Funds" Prospectus for Class A and Class C shares dated March 10,
2004 (the "New Fund Prospectus"), which contains information about the New
Fund and which is incorporated by reference into this Prospectus/Proxy
Statement. A Statement of Additional Information dated March 10, 2004 (the
"Statement of Additional Information") containing additional information
about the New Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information may be
obtained without charge by writing to Thornburg at its address noted above
or by calling 1-800-847-0200. Copies of the Fund's current "Thornburg
Funds" prospectus for Class A and Class C shares dated February 1, 2004,
and its Statement of Additional Information for Class A and Class C shares
dated February 1, 2004 are incorporated by reference into the
Prospectus/Proxy Statement, and may be obtained without charge by writing
to Thornburg at the address shown above or by calling 1-800-847-0200.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS AND
PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THORNBURG INVESTMENT
TRUST OR THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
INVESTMENTS IN THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND (THE
"NEW FUND") ARE SUBJECT TO RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND
WILL FLUCTUATE IN VALUE. SHARES OF THE NEW FUND ARE NOT BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE NOT INSURED BY, ANY
BANK, FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is March 15, 2004.
TABLE OF CONTENTS
Summary of the Proposed Reorganization
Investment Adviser and Distributor of the Fund and the New Fund
Investment Goals, Policies and Restrictions of the Fund and the New Fund
Principal Risk Factors
Fees and Expenses of the Fund and the New Fund
Purchase, Redemption and Exchange Procedures for the Fund and the New Fund
Dividend Policies of the Fund and the New Fund
Comparative Information on Shareholder Rights
Additional Information About Shareholder Accounts
Information About the Reorganization
Capitalization
Additional Information About the Fund and the New Fund
Voting Information
Exhibit A: Agreement and Plan of Reorganization
For detailed information about the New Fund, see the Thornburg Limited Term
Municipal Funds Prospectus dated March 10, 2004 (the "New Fund
Prospectus"), which accompanies this Prospectus/Proxy Statement, or which
may be obtained by calling Thornburg at 1-800-847-0200.
SUMMARY OF THE PROPOSED REORGANIZATION
The Board of Directors of Thornburg Limited Term Municipal Fund, Inc.
("Thornburg LTMF"), including the Directors who are not "interested
persons" of Thornburg LTMF (the "Independent Directors"), as defined in the
Investment Company Act of 1940, have reviewed and unanimously approved an
agreement and plan of reorganization (the "Agreement") between Thornburg
LTMF on behalf of Thornburg Limited Term Municipal Fund California
Portfolio (the "Fund") and Thornburg Investment Trust ("Thornburg Trust")
on behalf of Thornburg California Limited Term Municipal Fund (the "New
Fund") providing for the acquisition of substantially all of the assets of
the Fund, a separate fund (sometimes referred to as a "series") of
Thornburg LTMF, by the New Fund, a separate series of Thornburg Trust in
exchange solely for voting shares of the New Fund. The aggregate net asset
value of the shares of the acquiring New Fund issued in the exchange will
equal the aggregate net asset value of the shares outstanding for the
acquired Fund. In connection with the transaction, shares of the New Fund
will then be distributed to the Fund's shareholders pro rata by class so
that holders of each class of shares of the Fund will receive shares of the
corresponding class of shares of the New Fund. The Fund thereafter will be
dissolved. These transactions are referred to as the "reorganization."
As a result of the reorganization, each owner of Class A and Class C
shares of the Fund will become an owner of the corresponding class of
shares of the New Fund, having an aggregate net asset value equal to the
net asset value of that shareholder's shares in the Fund. No sales charge
will be imposed on the transaction. As a condition to the closing,
Thornburg Trust and Thornburg LTMF will obtain a legal opinion to the
effect that, based upon certain facts, assumptions and representations, the
reorganization will qualify as a tax-free reorganization for federal income
tax purposes. See "Information About the Reorganization." Persons
receiving shares of the New Fund in the reorganization will remain free to
redeem their shares after the reorganization.
The Fund and the New Fund have identical investment objectives and
policies. The New Fund will commence operations upon the completion of the
reorganization with the same portfolio of investments owned by the Fund.
The New Fund will have the same investment manager as the Fund, Thornburg
Investment Management, Inc. ("TIMI") which will perform investment
management services under an investment management agreement having
substantially identical terms and providing for the same fees as the Fund's
current investment advisory agreement.
Expenses of the New Fund are expected to be substantially the same as
the expenses of the Fund before the reorganization, as follows:
Fund Annual Operating Expenses
Before the Reorganization
- --------------------------------------------
Class A 1.02%
Class C 1.80 %
Expected New Fund Annual Operating Expenses
After the Reorganization
- ---------------------------------------------
Class A 1.02%
Class C 1.80%
Expenses of the reorganization will be paid by the Fund and are not
expected to have a material effect on the expenses of the Fund. The
reorganization is expected to result in cost savings to the shareholders of
the New Fund after the reorganization.
For the reasons set forth below, the Board of Directors of LTMF,
including all of the Independent Directors, have unanimously concluded that
the reorganization is in the best interests of the shareholders of the
Fund. The Board of Directors of Thornburg LTMF therefore have submitted
the Agreement for approval by the shareholders of the Fund at a special
meeting of shareholders to be held on April 28, 2004 (the "Meeting").
Approval of the reorganization with respect to the Fund requires an
affirmative vote of a majority of the outstanding shares of the Fund
entitled to vote at the meeting. This Prospectus/Proxy Statement pertains
to and is directed to holders of the Fund's Class A and Class C shares.
At or about the same time that substantially all of the assets of the
Fund are acquired by the New Fund, Thornburg Limited Term Municipal Fund is
expected to acquire substantially all of the assets of Thornburg LTMF's
other series, Thornburg Limited Term Municipal Fund National Portfolio.
Each of these transactions has been approved by Thornburg LTMF's Board of
Directors. The acquisition of substantially all of the assets of the Fund
and Thornburg Limited Term Municipal Fund National Portfolio are referred
to collectively herein as the "Related Transactions." Completion of the
reorganization is contingent upon proper shareholder approval being
received for each of the Related Transactions, and the satisfaction of all
other conditions to closing the Related Acquisitions. There can be no
assurance shareholder approval can be obtained for each Related Transaction
or that the conditions of the other Related Transaction will be satisfied.
If shareholders of the Fund approve the reorganization and the other
Related Transaction is not approved, the Board of Directors of Thornburg
LTMF will consider the alternatives available to it with respect to the
Fund, including completion of the reorganization respecting the Fund. See
"Voting Information."
The Board of Directors has approved the reorganization because they
believe it would benefit the Fund. The reorganization is intended to
simplify legal and regulatory compliance functions, and to reduce the costs
of performing these functions. The Board of Directors considered these
objectives of the reorganization, together with other factors, which are
discussed below under the caption "Information About the Reorganization."
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
INVESTMENT ADVISER AND DISTRIBUTOR
OF THE FUND AND THE NEW FUND
The investment adviser to both the Fund and the New Fund is Thornburg
Investment Management, Inc. ("TIMI"), 119 East Marcy Street, Santa Fe, New
Mexico 87501. TIMI has been the investment adviser for the Fund since its
inception in 1987. TIMI is also the investment adviser for all of the 12
funds offered by Thornburg Trust, including the New Fund and Thornburg
Limited Term Municipal Fund (the two Funds organized to consummate the
Related Transaction), four other funds which invest principally in
municipal obligations for tax exempt current income, two funds which invest
in U.S. Government and other fixed income obligations for current income,
three funds which invest primarily for capital appreciation, and one fund
which invests for current income and capital appreciation. TIMI also
provides to each Thornburg mutual fund under its management supervision,
administration and performance of certain administrative services. Fees
charged to the Fund and the New Fund for these services are described below
under "Fees and Expenses of the Fund and the New Fund."
The distributor of shares for both the Fund and the New Fund is
Thornburg Securities Corporation ("TSC"), 119 East Marcy Street, Santa Fe,
New Mexico 87501. TSC has been the distributor for the Fund since its
inception in 1987. TSC is also distributor for each other Thornburg mutual
fund.
INVESTMENT GOALS, POLICIES
AND RESTRICTIONS OF THE FUND AND THE NEW FUND
Investment Goals and Strategies of the Funds
- --------------------------------------------
The investment goals and strategies of the Fund and the New Fund are
identical. The primary investment goal of each Fund is to obtain as high a
level of current income exempt from federal and California state individual
income tax as is consistent, in the view of the investment adviser, with
preservation of capital. The secondary goal of each Fund is to reduce
expected changes in its share price compared to longer intermediate and
long-term bond portfolios. Each Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of the
Fund's shareholders.
Each Fund pursues its primary goal by investing principally in a
laddered maturity portfolio of municipal obligations issued by the State of
California and its agencies, and by California local governments and their
agencies. The investment adviser, Thornburg Investment Management, Inc.
("TIMI") actively manages each Fund's portfolio. Investment decisions are
based upon outlooks for interest rates and securities markets, the supply
of municipal debt securities, and analysis of specific securities. Each
Fund invests in obligations and participations in obligations which are
rated at the time of purchase as investment grade or, if unrated, which are
issued by obligors which have comparable investment grade obligations
outstanding or which are deemed by TIMI to be comparable to obligors with
outstanding investment grade obligations. The Fund may invest in
obligations issued by certain United States territories and possessions.
Each Fund's portfolio is "laddered" by investing in obligations of
different maturities so that some obligations mature during each of the
coming years.
Because the magnitude of changes in value of interest bearing
obligations is greater for obligations with longer terms, each Fund seeks
to reduce changes in its share value by maintaining a portfolio of
investments with a dollar-weighted average maturity normally less than five
years. There is no limitation on the maturity of any specific security
each Fund may purchase. Each Fund may dispose of any security before it
matures. Each Fund also attempts to reduce changes in its share value
through credit analysis, selection and diversification.
Each Fund ordinarily acquires and holds securities for investment
rather than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent a Fund from
obtaining the highest yields available.
Under normal conditions each Fund invests at least 80% of its assets
in municipal obligations originating in California which are exempt from
California and regular federal income taxes, and normally invests 100% of
its assets in municipal obligations originating in California or issued by
United States territories and possessions. Each Fund may invest up to 20%
of its assets in taxable securities which would produce income not exempt
from federal or California income tax. These investments may be made due
to market conditions, pending investment of idle funds or to afford
liquidity. Each Fund's temporary taxable investments may exceed 20% of its
assets when made for defensive purposes during periods of abnormal market
conditions. If the Fund found it necessary to own taxable investments,
some of its income would be subject to federal and California income taxes.
PRINCIPAL RISK FACTORS
Because the Funds' investment goals and policies are identical, the
risks of investing in the New Fund are expected to be the same as the risks
of investing in the Fund.
The value of each Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by a Fund. During periods of declining interest rates
the Fund's dividends decline. The value of Fund shares also could be
reduced if municipal obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations.
Nonrated obligations may have, or may be perceived to have, greater risk of
default. Because each Fund invests primarily in obligations originating in
California, the Fund's share value may be more sensitive to adverse
economic or political developments in that state. State budget deficits
resulting from spending increases and a steep decline in tax revenues could
impair the ability of some governmental issuers to meet their debt
obligations. Moreover, political differences between the governor and the
state legislature over tax increases and spending cuts may have a negative
impact on outstanding and future obligations of California state and local
governments. A portion of each Fund's dividends could be subject to the
federal alternative minimum tax. The loss of money is a risk of investing
in either Fund, and when you sell your shares they may be worth less than
what you paid for them.
An investment in either Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
For a further discussion of the investment objectives, policies and
restrictions applicable to the New Fund, please see the New Fund
Prospectus, which accompanies this Prospectus/Proxy Statement, or which may
be obtained by calling Thornburg at 1-800-847-0200.
FEES AND EXPENSES OF THE FUND AND THE NEW FUND
Advisory and Administration Fees and Fund Expenses
- --------------------------------------------------
The Fund and the New Fund each have contractual arrangements to obtain
investment management, administrative and distribution services which are
substantially identical.
The Fund and The New Fund are each contractually obligated to pay an
investment management fee to TIMI based upon the Fund's assets. The fee is
computed on average daily net assets at an annual rate as follows:
Net Assets Annual Rate
---------- -----------
0 to $500 million .50%
$500 million to $1 billion .40%
$1 billion to $1.5 billion .30%
$1.5 billion to $2.0 billion .25%
more than $2.0 billion .225%
TIMI also has entered into agreements with the Fund and the New Fund to
provide administrative services at an annual rate of .125% of average daily
net assets for Class A and Class C shares of each Fund.
Investment advisory fees, and the other expenses currently paid by the
Fund and expected to be paid by the New Fund are set out below. The
Shareholder Transaction Expense table shows the transaction fees paid by a
shareholder in each Fund upon a purchase or redemption of shares. The
Annual Operating Expenses table shows the annual Fund operating expense for
the Fund for its fiscal year ended June 30, 2003 and compares those fee and
expense percentages to the expected annual fund operating expenses for the
New Fund for its current fiscal year.
Shareholder Transaction Expenses
(Fees Paid Directly From Your Investment)
New New
Fund Fund Fund Fund
Class A Class A Class C Class C
------- ------- ------- -------
Maximum Sales Charge (Load) 1.50% 1.50% none none
on Purchases (as a percentage
of offering price)
Maximum Deferred Sales Charge 0.50%(1) 0.50%(1) 0.50%(2) 0.50%(2)
(Load) on Redemptions (as a
percentage of redemption
proceeds or original purchase
price, whichever is lower)
Redemption Fees (as a none none none none
percentage of amount redeemed)
Annual Fund Operating Expenses
(Expenses That Are Deducted From Fund Assets)
New New
Fund Fund Fund Fund
Class A Class A(3) Class C Class C(3)
------- ------- ------- -------
Investment Advisory Fee .50% .50% .50% .50%
Distribution and Service
(12b-1) Fees .25% .25% 1.00% 1.00%
Other Expenses .27% .27% .30% .30%
----- ----- ----- -----
Total Annual Operating
Expenses 1.02%(4) 1.02%(4) 1.80%(4) 1.80%(4)
(1) Imposed only on redemptions of any part or all of a purchase of
$1 million or more within 12 months of purchase.
(2) Imposed only on redemptions of Class C shares within 12 months of
purchase.
(3) The New Fund is a newly organized Fund which has not conducted
any business except incident to the reorganization. The fees and expenses
shown for The New Fund are estimated fees and expenses expected to be
incurred for the fiscal year ending June 30, 2004.
(4) For the fiscal year ending June 30, 2004, Thornburg Investment
Management, Inc. and Thornburg Securities Corporation are waiving fees and
reimbursing expenses so that actual Class A expenses do not exceed .99% and
actual Class C expenses do not exceed 1.24%. Thornburg Investment
Management, Inc. and Thornburg Securities Corporation intend to waive fees
and reimburse expenses for Class A and Class C shares of the New Fund after
the reorganization so that actual Class A expenses do not exceed .99% and
actual Class C expenses do not exceed 1.24%. Waivers of fees and
reimbursements of expenses may be terminated at any time.
EXAMPLE:
The following Example is intended to help you compare the cost of
investing in the New Fund with the cost of investing in the Fund. The
Example assumes that you invest $10,000 in each respective Fund for the
time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5%
return each year, that dividends and distributions are reinvested, and that
each Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
New Fund New Fund
Fund Pro Forma Fund Pro Forma
Class A Class A Class C Class C
------- ------- ------- -------
1 Year $252 $252 $221 $221
3 Years $470 $470 $566 $566
5 Years $705 $705 $975 $975
10 Years $1,379 $1,379 $2,116 $2,116
You would pay the following expenses if you did not redeem your Class C
shares:
Fund New Fund Pro Forma
Class C Class C
------- -------
1 Year $171 $171
3 Years $566 $566
5 Years $975 $975
10 Years $2,116 $2,116
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
FOR THE FUND AND THE NEW FUND
Sales Charges
- -------------
Share purchase, redemption and exchange procedures for the Class A and
Class C shares of the Fund are identical with the purchase, redemption and
exchange procedures for the corresponding share classes of the New Fund.
Purchasing Class A Shares
- -------------------------
Class A shares of the Fund and the New Fund are sold at net asset
value plus a sales charge at the rates shown in the table below. Class A
shares are also subject to a Rule 12b-1 Service Plan, which provides for
the Fund's payment of up to 1/4 of 1% of the class's net assets each year
for shareholder and distribution services.
As a Percentage As a Percentage
Of Offering Price Of Net Asset Value
----------------- ------------------
Less than $250,000.00 1.50% 1.52%
$250,000 to 499,999.99 1.25% 1.27%
$500,000 to 999,999.99 1.00% 1.01%
$1,000,000 and over 0.00%* 0.00%*
* No sales charge is payable at the time of purchase on investments of $1
million of more made by a purchaser. A contingent deferred sales charge
will be imposed on any portions of such investments redeemed within one
year of purchase, at a rate of .50% of the amount redeemed.
Class A shares also are sold to specified classes of investors at
reduced or no sales charges. For example, a shareholder who redeems Class
A shares may reinvest with no sales charge within two years of the
redemption. Additionally, each time the value of a shareholder's account
plus the amount of a new investment passes one of the breakpoints in the
table above, the portion of new investments in excess of the breakpoint
will be subject to the reduced sales charge. These privileges, and other
opportunities for purchase at reduced or no sales charge are described in
the New Fund Prospectus, which is available without charge by calling 1-
800-847-0200.
Purchasing Class C Shares
- -------------------------
Class C shares of the Fund and the New Fund are sold at net asset
value without a sales charge at the time of purchase. Class C shares are
subject to a contingent deferred sales charge of 1/2 of 1% if the shares
are redeemed within one year of purchase. Class C shares are also subject
to Rule 12b-1 Service and Distribution Plans, which provide for the Fund's
payment of up to 1% of the class's net assets each year for shareholder and
distribution services. Other information respecting the purchase of Class
C shares is provided in the New Fund Prospectus.
Exchange Privileges
- --------------------
Class A shares of the Fund may be exchanged for Class A shares of
other Thornburg funds, subject to certain conditions described in the
Fund's prospectus. Similarly, Class A shares of the New Fund may be
exchanged for Class A shares of other Thornburg mutual funds under the same
conditions, including the requirement that if you exchange into a fund with
a higher sales charge, you must pay the difference between that fund's
sales charge and the sales charge you paid on the shares you are
exchanging. This charge remains applicable to exchanges of shares received
in the reorganization. Each of the Funds permits exchanges by telephone if
the telephone exchange privilege has been elected by the shareholder.
Shareholders of the Fund who previously elected the telephone exchange
privilege will be deemed to have elected the exchange privilege of the New
Fund if the reorganization is completed.
Redemptions
- -----------
Shares of the Fund and the New Fund properly presented for redemption
may be redeemed at the next determined net asset value per share, subject
to a contingent deferred sales charge (CDSC) in specific circumstances.
The Fund and the New Fund impose a CDSC of 1/2 of 1% on redemptions of part
or all of any purchase of $1 million or more of Class A shares in the event
of a redemption within 12 months of purchase. The Fund and the New Fund
Class C shares are subject to a CDSC is 1/2 of 1% if redeemed within one
year of purchase. Shareholders' holding periods for Class A and Class C
shares of the Fund will be added to the period they hold New Fund Class A
or Class C shares received in the reorganization to determine if the CDSC
is applicable to any redemption of those shares. Shareholders of the Fund
who previously elected the telephone redemption privilege will be deemed to
have elected the New Fund's telephone redemption privilege if the
reorganization is completed.
DIVIDEND POLICIES OF THE FUND AND THE NEW FUND
The Fund distributes substantially all of its net investment income
and realized capital gains to its shareholders. The Fund declares net
income dividends daily and distributes those dividends monthly, and any net
realized capital gains are distributed at least annually, usually in
December. Distributions are reinvested in Fund shares unless the
shareholder elects to receive them in cash. The New Fund intends to follow
the same policies.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The Fund is a diversified series of Thornburg Limited Term Municipal
Fund, Inc. ("Thornburg LTMF"), a Maryland corporation organized in 1984.
As a Maryland corporation, Thornburg LTMF is governed by applicable
Maryland and federal law, its articles of incorporation and its bylaws.
The business of Thornburg LTMF is supervised by its Board of Directors.
The New Fund is a diversified series of Thornburg Trust, a
Massachusetts business trust organized in 1987. As a Massachusetts
business trust, Thornburg Trust is governed by applicable Massachusetts and
federal law, its declaration of trust, as amended, and its bylaws. The
business of Thornburg Trust is supervised by Thornburg Trust's Trustees.
Thornburg LTMF is currently authorized under its articles of
incorporation, as amended, to issue 100,000,000 Class A shares of the Fund,
75,000,000 Class C shares of the Fund, and 125,000,000 Institutional Class
shares. Each share has a par value of $.001. The Board of Directors is
permitted to increase this authorization from time to time under Maryland
law. The Board of Directors is also permitted to create additional funds
or "series," and to divide each such series into two or more classes of
shares. Thornburg Trust is authorized to create an unlimited number of
series, and with respect to each series, to issue an unlimited number of
full and fractional shares of one or more classes and to divide or combine
the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the series. All of the
shares of Thornburg LTMF and of Thornburg Trust, respectively, have equal
voting rights with each other, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. Neither Thornburg LTMF nor Thornburg
Trust permits cumulative voting.
Neither Thornburg LTMF nor Thornburg Trust holds annual shareholder
meetings. There normally will not be any meetings of shareholders of
Thornburg LTMF, Thornburg Trust or either of the Funds to elect directors
or trustees unless fewer than a majority of the directors or trustees then
holding office have been elected by shareholders. However, the Board of
Directors of Thornburg LTMF or the trustees of Thornburg Trust may call
special meetings from time to time to seek shareholder approval of certain
matters, and meetings of shareholders of either Thornburg LTMF or Thornburg
Trust will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of any affected
series or class having voting rights.
Under Maryland law, shareholders of Thornburg LTMF are not liable for
the obligations of Thornburg LTMF. However, under Massachusetts law, there
is a remote possibility that shareholders of Thornburg Trust could, under
certain circumstances, be held personally liable for the obligations of
such a trust. The declaration of trust for Thornburg Trust contains
provisions intended to limit any such liability and to provide
indemnification out of Fund property for any shareholder charged or held
personally liable for obligations or liabilities of the shareholder's fund
solely by reason of being or having been a shareholder of that fund and not
because of the shareholder's acts or omissions or for some other reason.
Consequently, the risk of a shareholder of the New Fund incurring financial
loss on account of shareholder liability is limited to circumstances in
which the New Fund itself would be unable to meet its obligations.
ADDITIONAL INFORMATION ABOUT SHAREHOLDER ACCOUNTS
If the reorganization is approved, the New Fund will establish an
account for each Fund shareholder.
No further purchases of the shares of the Fund may be made after the
date on which the shareholders of the Fund approve the reorganization, and
the share transfer books of the Fund will be permanently closed as of the
date of Closing. Only redemption requests and transfer instructions
received in proper form by the close of business on the day before the date
of Closing will be fulfilled by the Fund. Redemption requests or transfer
instructions received by the Fund after that date will be treated as
requests for the redemption or instructions for transfer of shares of the
New Fund credited to the accounts of shareholders of the Fund.
Accordingly, those redemption requests or transfer instructions after the
close of business on the day before Closing will be forwarded to the New
Fund. For a complete description of redemption procedures for the New
Fund, see the sections of the New Fund Prospectus under the caption
"Selling Fund Shares."
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization
- ------------------------------------
The following summary of the proposed Agreement and Plan of
Reorganization (the "Agreement") is qualified in its entirety by reference
to the Agreement attached to this Prospectus/Proxy Statement as Exhibit A.
The Agreement provides that the New Fund will acquire substantially
all of the assets of the Fund in exchange solely for shares of the New Fund
on the earliest practicable date following shareholder approval of the
reorganization (the "Closing Date"). The number of full and fractional
shares of the New Fund to be issued to shareholders of the Fund will be
determined on the basis of the relative net asset values per share and
aggregate net assets of the New Fund and the Fund computed immediately
after the closing of business on the New York Stock Exchange (currently
4:00 p.m., Eastern time) on the last business day before the Closing Date
(the "Valuation Date"). The net asset value per share for the Fund will be
determined by dividing each class's respective assets, less its respective
share of liabilities, by the total number of the class's outstanding
shares. Portfolio securities of the Fund will be valued in accordance with
the valuation practices of the New Fund as described in its prospectus,
which is incorporated by reference herein. Valuation procedures of the New
Fund are the same as the valuation procedures of the Fund.
Immediately after the transfer of the Fund's assets to the New Fund on
the Closing Date, the Fund will distribute pro rata to its shareholders of
record as of the close of business on the Valuation Date the full and
fractional shares of the New Fund received by the Fund and will be
dissolved as soon thereafter as reasonably practicable. The distribution
will be accomplished by the establishment of accounts on the share records
of the New Fund in the name of each shareholder of the Fund, each
representing the respective pro rata number of full and fractional shares
of the New Fund due each of those shareholders. Following the
reorganization, shareholders will own shares of the New Fund of the same
class as the Fund shares owned before the reorganization. No certificates
for shares of the New Fund will be issued.
The consummation of the reorganization is subject to the conditions
set forth in the Agreement. The reorganization is also subject to approval
by the Fund's shareholders. Approval requires the affirmative vote of a
majority of the outstanding shares of the Fund entitled to vote at the
Meeting. Further, completion of the reorganization is subject to
shareholder approval of the "Related Transaction", which is the proposed
transaction in which Thornburg Limited Term Municipal Fund will acquire
substantially all of the assets of Thornburg Limited Term Municipal Fund
National Portfolio. If shareholders of the Fund approve the
reorganization, but the Related Transaction is not approved, the Board of
Directors of the Fund will consider the available alternatives. The
Agreement may be terminated and the reorganization abandoned prior to the
Closing Date, before or after approval by shareholders of the Fund, by
resolution of the Board of Directors of the Fund or the Trustees of
Thornburg Trust, under circumstances specified in the Agreement.
The Fund will pay the costs of the reorganization, which include fees
and costs associated with preparing, filing, printing and distributing
proxy materials, proxy solicitation costs, costs associated with qualifying
shares for sale in various states, and the deregistration and dissolution
of Thornburg LTMF.
The Board of Directors of Thornburg LTMF has determined that the
reorganization will not result in any dilution to the interests of the
Fund's shareholders, and that participation in the reorganization is in the
best interests of the Fund's shareholders.
Full and fractional shares of beneficial interest of the New Fund will
be issued to shareholders of the Fund in accordance with the procedures
under the Agreement described above. Each share will be fully paid and
non-assessable by the New Fund when issued, and will have no preemptive or
conversion rights. See comparative information on shareholder rights,
above, for additional information with respect to the shares of the New
Fund.
Considerations of the Fund's Board of Directors
- -----------------------------------------------
Thornburg Investment Management, Inc. ("TIMI"), the investment adviser
to both the Fund and the New Fund, proposed and recommended the
reorganization to the Board of Directors of Thornburg LTMF (the "Board") to
simplify certain compliance and administrative functions and to reduce the
costs associated with the performance of those functions. Based upon
TIMI's recommendation, and after consideration of the rationale for the
reorganization and certain additional factors described below, the Board,
including all of the directors who are not "interested persons"
("Independent Directors") as that term is used in the Investment Company
Act of 1940 (the "1940 Act"), has determined that the reorganization is in
the best interest of the shareholders of the Fund and that the terms of the
agreement and plan of reorganization (the "Agreement") are fair and
reasonable.
The Board considered the recent increases in compliance and related
functions performed for the Fund, and the likely further increase in those
functions in the future due to regulatory and rulemaking initiatives by the
Congress and the Securities and Exchange Commission. The Board noted
specifically in this connection the following factors:
. increased duties for the Board assuring compliance with
revised regulations applicable to mutual funds
generally;
. increased audit committee functions and additional time
devoted to audit committee functions by the independent
accountants;
. increased number of filings by Thornburg LTMF of
documents required under state and federal law and
increased time for review and discussion of those
filings by the Board;
and
. increased Board fees and associated travel expenses and
other expenses occasioned by these increased
activities.
The Board further noted in this regard that these functions are
generally duplicative of comparable functions performed for and by
Thornburg Investment Trust and its Trustees and audit committee.
The Board concluded that the general complexity of compliance, and
administration of compliance could be reduced significantly if the two
funds currently offered by Thornburg LTMF were combined with the ten
existing funds offered by Thornburg Investment Trust. This combination
would, in the Board's view, eliminate the current duplication and reduce
complexity by substituting one investment company in the place of two.
Moreover, the Board concluded that the reorganization would result in
significant cost savings, because the two funds of Thornburg Trust which
will acquire Thornburg LTMF's two current funds will share with Thornburg
Trust's other funds a number of costs which are currently duplicated (and
thus not shared) by Thornburg LTMF and Thornburg Trust.
In this latter regard the Board considered:
. legal fees and costs associated with advice on
compliance matters, preparation of documents related
to compliance, preparation of documents for Board of
Directors and audit committee meetings;
. legal counsel preparation for and attendance at Board
of Directors and audit committee meetings;
. fees and costs associated with preparation and filing
of registration statements and other periodic filings,
and general corporate work associated with the
maintenance of an additional corporate entity;
. costs, including Directors' fees and travel and other
expenses associated with the Board's and the audit
committee's fees and meetings; and
. expenses and fees of the independent accountants.
The Board also considered the likelihood of future increases in these costs
because of increased rulemaking and regulatory complexity, increasing
duties placed on investment company directors and audit committees, the
possible need to hire additional legal counsel and other persons for audit
committees, and possible increases in the frequency of shareholder meetings
to elect investment company directors. Based upon estimates by TIMI and
legal counsel, the Board determined that it was reasonable to conclude that
the costs of the reorganization could be recovered in less than two years.
The Board also considered other factors in evaluating the proposed
reorganization, including the following:
(1) There would be no change in investment objectives, investment
policies, or investment risks as a result of the reorganization;
(2) After the reorganization, investment management, administrative
services, and other functions would be performed under contracts having
substantially the same terms as the existing contracts;
(3) Fees and expenses for the New Fund are expected to be virtually
the same as fees and expenses for the Fund, except for the costs of the
reorganization (which are expected to be offset, and exceeded over time by
cost savings);
(4) The reorganization will result in no dilution of shareholders'
interests;
(5) Shareholders of the Fund will receive shares in the New Fund of
the class corresponding to the same class of shares in the Fund;
(6) The reorganization will be accomplished without recognition of
gain or loss for federal income tax purposes by shareholders of Thornburg
LTMF; and
(7) No sales charges or transaction fees will be assessed against
shareholders in connection with the reorganization.
Federal Income Tax Consequences
- -------------------------------
The reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, with no taxable gain or loss recognized
by the Fund, the New Fund, or shareholders of the Fund as a consequence of
the reorganization. As a condition to the closing of the reorganization,
the Fund and the New Fund will receive an opinion of legal counsel to that
effect based on certain assumptions and representations made by the Fund
and the New Fund.
Shareholders of the Fund should consult their tax advisers regarding
the effect, if any, of the proposed reorganization in light of their
individual circumstances. In particular, shareholders of the Fund should
also consult their tax advisers as to the state, local and other tax
consequences, if any, of the reorganization.
CAPITALIZATION
The following table sets forth the capitalization of the Fund and the
New Fund as of December 31, 2003 and the pro forma capitalization of the
combined New Fund as if the reorganization occurred on that date. These
numbers will be different at the time of closing because the Fund's net
assets for each class will increase or decrease.
CAPITALIZATION OF FUNDS AS OF DECEMBER 31, 2003
FUND NEW FUND PRO FORMA
---- -------- ---------
NET ASSETS
- ----------
Class A shares $139,962,728 -0- $139,962,728
Class C shares $ 22,801,556 -0- $ 22,801,556
Class I shares $ 20,905,203 -0- $ 20,905,203
TOTAL $183,669,487 -0- $183,669,487
NET ASSETS PER SHARE
- --------------------
Class A shares $13.14 -0- $13.14
Class C shares $13.15 -0- $13.15
Class I shares $13.15 -0- $13.15
SHARES OUTSTANDING
- -------------------
Class A shares 10,653,251.431 -0- 10,653,251.431
Class C shares 1,734,313.442 -0- 1,734,313.442
Class I shares 1,593,051.762 -0- 1,593,051.762
TOTAL 13,980,616.635 -0- (1) 13,980,616.635
SHARES AUTHORIZED
- ------------------
Class A shares 100,000,000 unlimited unlimited
Class C shares 75,000,000 unlimited unlimited
Class I shares 125,000,000 unlimited unlimited
TOTAL 300,000,000 unlimited unlimited
(1) It is anticipated that a nominal number of shares of each class
will be issued to an officer of TIMI in order to permit the consummation of
corporate actions before the reorganization.
ADDITIONAL INFORMATION ABOUT THE FUND AND THE NEW FUND
Additional information respecting the New Fund is included in the
Thornburg Limited Term Municipal Funds prospectus dated March 10, 2004 (the
"New Fund Prospectus"), which accompanies this Prospectus/Proxy Statement,
and in the Thornburg Limited Term Municipal Funds Statement of Additional
Information dated March 10, 2004, which has been filed with the Securities
and Exchange Commission. Additional information is also included in the
Statement of Additional Information dated March 15, 2004 related to the
reorganization which has been filed with the Securities and Exchange
Commission. The described New Fund Prospectus and statements of additional
information are incorporated by reference herein. Copies of the statements
of additional information are available upon request and without charge by
calling 1-800-847-0200.
Information about the Fund is included in the Thornburg Funds
Prospectus dated February 1, 2004, and in the Thornburg Funds Statement of
Additional Information dated February 1, 2004. The described prospectus
and statement of additional information have been filed with the Securities
and Exchange Commission and are incorporated by reference herein. Copies
of the prospectus and the statement of additional information are available
upon request and without charge by calling 1-800-847-0200.
Reports and other information filed by Thornburg LTMF and Thornburg
Trust can be inspected and copied at the Securities and Exchange
Commission's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C. 20549. Information about the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information
about the Funds are also available on the Commission's Internet site at
http://ww,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. 20549-0102, or contacting the Commission by e-mail at
publicinfo@sec.gov.
Thornburg LTMF files its registration statements and certain other
information with the Commission under Investment Company Act of 1940 file
number 811-4302. Thornburg Investment Trust files its registration
statements and certain other information with the Commission under
Investment Company Act of 1940 file number 811-05201.
VOTING INFORMATION
Proxies for the meeting are being solicited from the Fund's
shareholders by the Board of Directors of Thornburg LTMF. A proxy may be
revoked at any time at or before the meeting by oral or written notice to
the secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New
Mexico 87501, (800) 847-0200. Unless revoked, all valid proxies will be
voted in accordance with the specifications therein or, in the absence of
specifications, for approval of the reorganization.
Additional solicitations may be made by telephone, telegraph,
facsimile or personal contact by officers or employees of TIMI and its
affiliates or by a professional proxy solicitation firm or firms. Expenses
of proxy solicitation will be borne by the Fund. TIMI has engaged the
proxy solicitation firm of D.F. King & Co., Inc. to assist in soliciting
proxies for the meeting at an estimated cost of $9,000.
Shares of the Fund of record at the close of business on March 4, 2004
(the "Record Date") will be entitled to vote at the meeting or any
adjournment thereof. The presence in person or by proxy of one-third of
the Fund's outstanding shares at the meeting will constitute a quorum.
Shareholders are entitled to one vote for each share held, and each
fractional share will be entitled to a proportionate fractional vote.
Approval of the reorganization requires the affirmative vote of a majority
of the outstanding shares of the Fund entitled to vote at the meeting. As
of March 4, 2004, there were issued and outstanding 10,256,655.097 Class A
shares, 1,742,708.731 Class C shares and 1,747,769.864 Class I shares of
the Fund. As of the same date, persons were known to own of record or
beneficially 5% or more of the issued and outstanding shares of any Class
of the Fund:
No of % of
Shareholder Shares Class
- ----------- ------ -----
MLPF&S 538,123.773 5.25%
FBO Customers Class A Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
LPL Financial Services 521,794.053 5.09%
9785 Towne Center Dr. Class A Shares
San Diego, CA 94611
UBS Financial Services 87,506.259 5.02%
101 Duncan Class C Shares
Oakland, CA 94611
Charles Schwab & Co. 1,014,494.535 58.05%
Special Custody Class I Shares
101 Montgomery St.
San Francisco, CA 94104
MLPF&S 124,432.509 7.12%
FBO Customers Class I Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
On March 4, 2004, officers, directors and related persons of the Fund, as a
group, held less than one percent of the outstanding shares of any class of
the Fund.
As of the same date, there were issued and outstanding 1.889 Class A
shares, 1.888 Class C shares, and 1.888 Class I shares of beneficial
interest of the New Fund. All of these shares were held by Dawn B.
Fischer, 119 East Marcy Street, Santa Fe, New Mexico 87501. Ms. Fischer
was issued these shares in order to permit certain actions in connection
with the initial organization of the New Fund.
In the event that a quorum of all classes of shares is not present at
the meeting, or a quorum is present at the meeting but sufficient votes to
approve the reorganization are not received, the persons named as proxies
may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares represented at the meeting in person or
by proxy. If a quorum is not present, the persons named as proxies will
vote those proxies which they are entitled to vote for the reorganization
in favor of such an adjournment and will vote those proxies required to be
voted against the reorganization against any such adjournment.
"Broker non-votes" are shares held in a broker's street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does
not have discretionary voting authority. Abstentions in broker non-votes
will be counted as shares present for purposes of determining whether a
quorum is present but will not be voted for or against any adjournment or a
proposal. Accordingly, abstentions in broker non-votes effectively will be
a vote against adjournment and against the proposal because the required
vote is a percentage of the shares outstanding.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE REORGANIZATION.
Submission of Shareholder Proposals
- -----------------------------------
The Fund does not hold regular shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to the
secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New Mexico
87501.
Other Matters to Come Before the Meeting
- ----------------------------------------
The Board of Directors of Thornburg LTMF knows of no other business to
be brought before the meeting. However, if any other matters properly come
before the meeting, proxies will be voted in accordance with the judgment
of the Directors.
EXHIBIT A
to
PROSPECTUS/PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 8th day of December 2003, by and between THORNBURG INVESTMENT TRUST,
a Massachusetts business trust ("Thornburg Trust"), in respect of Thornburg
California Limited Term Municipal Fund (the "New Fund"), a separate series
of Thornburg Trust, and THORNBURG LIMITED TERM MUNICIPAL FUND, INC. a
Maryland corporation ("Thornburg LTMF"), in respect of Thornburg Limited
Term Municipal Fund California Portfolio (the "Fund"), a separate series of
Thornburg LTMF.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization will consist of (i) the transfer of substantially all of
the Assets (hereinafter defined) of the Fund to the New Fund in exchange
solely for Class A, Class C and Class I voting shares of beneficial
interest of the New Fund having no par value (the "New Fund Class A
Shares," "New Fund Class C Shares," and "New Fund Class I Shares,"
respectively, and collectively the "New Fund Shares") and (ii) the
distribution on the Closing Date (hereinafter defined) of the New Fund
Shares to the shareholders of the Fund in complete liquidation of the Fund
as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement. All actions required to be taken by Thornburg Trust
pursuant to this Agreement, and all representations, warranties and
covenants of Thornburg Trust hereunder, are taken and made on behalf of the
New Fund. All actions required to be taken by Thornburg LTMF pursuant to
this Agreement, and all representations, warranties and covenants of
Thornburg LTMF hereunder, are taken and made on behalf of the Fund.
THEREFORE, in consideration of the premises and of the covenants and
agreements hereafter described, the parties hereto covenant and agree as
follows.
1. Procedure for Reorganization.
(a) Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein,
Thornburg LTMF agrees to transfer the Assets of the Fund as set forth in
paragraph (b) to the New Fund, and Thornburg Trust agrees to deliver to the
Fund in exchange therefor the number of the New Fund Shares determined by
dividing the value of the Assets computed in the manner and as of the time
and date set forth in paragraph 2(a), by the net asset value of the New
Fund Shares computed in the manner and as of the time and date set forth in
paragraph 2(b). These transactions shall take place at the closing
provided for in paragraph 3(a) (the "Closing").
(b) The Assets to be acquired by the New Fund shall consist of
all cash, portfolio securities and due bills for dividends, interest, or
other receivables or rights to receive any of the foregoing, receivables
for shares sold, and any claims or rights with respect to portfolio
securities, whether or not arising from contract, which are owned by the
Fund on the closing date provided in paragraph 3(a) (the "Closing Date").
The Fund will retain cash and cash equivalents in an amount reasonably
estimated by it to be sufficient to discharge: (i) obligations incurred in
the ordinary course of its business, which could not reasonably be paid
before Closing and are not otherwise borne by any other person; and (ii)
costs resulting from the liquidation and deregistration of the Fund and
Thornburg LTMF. The Assets will not include any rights in and to the
"Thornburg" name or any variant thereof. The Fund has provided the New
Fund with a list of the current securities holdings of the Fund as of the
date of execution of this Agreement. Thornburg LTMF and the Fund reserve
the right to sell any of these securities in the ordinary course of
business but will not, without prior notification to Thornburg Trust,
acquire any additional securities for the Fund other than securities of the
type in which the New Fund is permitted to invest.
(c) On the Closing Date, Thornburg LTMF will cause the Fund to
be liquidated and to distribute pro rata to the Fund's shareholders of
record (the "Fund Shareholders"), determined on and as of the close of
business on the Valuation Date specified in paragraph 2(a), the New Fund
Shares received by Thornburg LTMF pursuant to paragraph (a). Specifically,
Thornburg LTMF shall (i) distribute the New Fund Class A Shares received in
the exchange, pro rata, to the Fund Shareholders holding Class A shares of
the Fund, (ii) distribute the New Fund Class C shares received in the
exchange, pro rata, to the Fund Shareholders holding Class C shares of the
Fund, and (iii) distribute the New Fund Class I Shares received in the
exchange, pro rata, to the Fund Shareholders holding Class I shares of the
Fund. The liquidation and distribution will be accomplished by the
transfer of the New Fund Shares then credited to the account of the Fund on
the books of the New Fund, to open accounts on the share records of the
Fund in the names of the Fund Shareholders and representing the respective
pro rata number of New Fund Shares due the Fund Shareholders.
(d) As of the Closing Date, any physically-issued share
certificates held by former Fund Shareholders and relating to Fund shares
exchanged for New Fund Shares in accordance with the preceding paragraph
(c) will represent only the right to receive the appropriate number of New
Fund Shares. As of the Closing Date, persons holding those certificates
may be requested to surrender their certificates. No redemption or
repurchase of any New Fund Shares credited to former Fund Shareholders in
place of Fund shares represented by unsurrendered certificates will be
permitted until those certificates have been surrendered for cancellation
or the certificates are cancelled upon the delivery of lost certificate
affidavits.
(e) Any transfer taxes payable upon issuance of New Fund
Shares in a name other than that of the registered holder of the New Fund
Shares on the books of the Fund as of the Closing Date shall, as a
condition of such issuance and transfer, be paid by the person to whom the
New Fund Shares are to be issued and transferred.
(f) The Fund shall be dissolved as soon as reasonably
practicable following the Closing Date. Thornburg LTMF will deregister
with the Securities and Exchange Commission (the "Commission") in
accordance with the Investment Company Act of 1940, as amended (the "1940
Act").
(g) Thornburg Trust will not assume any liability of Thornburg
LTMF, or acquire any Asset subject to any liability, in connection with the
transactions contemplated by this Agreement, except that the New Fund will
assume the obligation to pay for any portfolio securities purchased by the
Portfolio before the Closing Date in the ordinary course of its business
and the purchase of which was disclosed to the New Fund by the Fund when
the commitment to purchase arose.
2. Valuation.
(a) The value of the Fund's Assets to be acquired by the New
Fund hereunder shall be the value of those assets computed as of the close
of business on the New York Stock Exchange and after the declaration of any
dividends on the business day next preceding the Closing Date (the time and
date being hereinafter called the "Valuation Date"). The value of the
portion of the Fund's Assets consisting of portfolio securities will be
computed by Kenny Information Systems, subject to adjustment by the amount,
if any, agreed to by the New Fund and the Fund. In determining the value
of the Assets, each portfolio security and other portfolio asset shall be
priced by Kenny Information Systems in accordance with the policies and
procedures of the New Fund (subject to the second sentence hereafter) as
set forth in the then current prospectuses and statement of additional
information applicable to the New Fund, subject to adjustments agreed to by
the Fund and the New Fund. All computations shall be made by Kenny
Information Systems. In the event of a dispute with respect to the
valuation of any portfolio security or other portfolio asset of the Fund,
the New Fund and the Fund shall, by mutual consent, select an independent
third party to resolve the matter, and the determination of the independent
party will bind the Funds.
(b) The value of the Assets of each class of the Fund shall be
divided, as of the close of business on the New York Stock Exchange and
after the declaration of any dividends on the Valuation Date, among the
Class A, Class C and Class I shares of the Fund (the "Class A Assets,"
"Class C Assets," and "Class I Assets", respectively), in accordance with
the Fund's customary method of accounting.
(c) The net asset value of each New Fund Share shall be the
net asset value per share computed as of the close of business on the New
York Stock Exchange and after the declaration of any dividends on the
Valuation Date, using the valuation procedures set forth in the New Fund's
then current prospectuses, and in accordance with the New Fund's customary
method of accounting.
(d) On the Closing Date, the New Fund shall issue to the Fund
full and fractional New Fund Class A, Class C and Class I shares in the
respective numbers determined in accordance with this paragraph 2(d). The
number of New Fund Class A shares shall be determined by dividing the value
of the Class A Assets by the net asset value of a New Fund Class A share
determined in accordance with paragraph 2(c). The number of New Fund Class
C shares shall be determined by dividing the value of the Class C Assets by
the net asset value of a New Fund Class C share determined in accordance
with paragraph 2(c). The number of New Fund Class I shares shall be
determined by dividing the value of the Class I Assets by the net asset
value of a New Fund Class I share determined in accordance with paragraph
2(c).
3. Closing and Closing Date.
(a) The Closing Date shall be as soon as practicable after
approval of the transactions contemplated in this Agreement by the Fund's
Shareholders has been obtained. The Closing will be held at 119 East Marcy
Street, Suite 202, Santa Fe, New Mexico 87501, in the offices of Thornburg
Investment Management, Inc., or at such other place as the parties may
agree. The time of Closing will be 8:00 a.m. New York time on the Closing
Date. All acts taking place at the Closing will be deemed to occur
simultaneously as of the time of the Closing on the Closing Date.
(b) The Fund's portfolio securities shall be available for
inspection by the New Fund, its custodian bank or such other agents of
Thornburg Trust as Thornburg Trust shall reasonably designate, at the
offices of the Fund's custodian, no later than five business days preceding
the Valuation Date, and the Fund will immediately notify the New Fund's
investment adviser of any portfolio security thereafter acquired or sold by
the Fund. The Fund's securities and cash shall be delivered by Thornburg
LTMF to State Street Bank & Trust Company, Boston, MA 02205-9087, as
custodian for the New Fund for the account of the New Fund on the Closing
Date, duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers.
The cash delivered shall be in the form of currency or certified or
official bank checks, or completed federal funds wire, payable to the order
of "State Street Bank & Trust Co., Custodian for Thornburg California
Limited Term Municipal Fund." The Fund will cause its custodian to deliver
at Closing a certificate of an authorized officer of the Custodian stating
that the Fund's securities and cash have been delivered in proper form to
the New Fund's custodian on or before the Closing Date.
(c) In the event that on the Valuation Date (i) the New York
Stock Exchange is closed to trading, or (ii) trading or the reporting of
trading in securities generally is disrupted so that accurate appraisal of
the value of the net assets of the New Fund or the Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored.
(d) Thornburg LTMF shall deliver to Thornburg Trust
shareholder and shareholder account information as of the close of business
on the Valuation Date as reasonably requested by Thornburg Trust. The New
Fund shall issue and deliver a confirmation to the Fund at the Closing
stating the number of New Fund Shares to be credited on the Closing Date to
the Fund, and stating the number of New Fund Shares credited to the Fund's
account on the books of the New Fund. Thornburg Trust shall issue and
deliver to each former Fund Shareholder, after the Closing, a confirmation
stating the number of New Fund Shares credited to the shareholder's
account. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts or other
documents as such other party may reasonably request.
4. Representations and Warranties.
(a) Thornburg LTMF represents and warrants to Thornburg Trust
as follows:
(i) The Fund is a series of Thornburg LTMF, which is a
corporation duly formed and validly existing under
the laws of the State of Maryland;
(ii) Thornburg LTMF is a duly registered open-end
management investment company, and its
registration with the Commission as an investment
company undr the 1940 Act is in full force and
effect;
(iii) The current prospectuses and statements of
additional information of the Fund, each dated
November 1, 2003, conform in all material respects
to the applicable requirements of the Securities
Act of 1933 (the "1933 Act") and the rules and
regulations of the Commission thereunder and do
not include any untrue statement of a material
fact or omit to state any material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading;
(iv) To the knowledge of Thornburg LTMF, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, or the rules and regulations under
those Acts, all of which shall have been received
prior to the Closing Date, except for such
consents, approvals, authorizations or orders as
may be required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg LTMF's Articles of Incorporation or
By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking
to which the Fund or Thornburg LTMF is a party or
by which it is bound;
(vi) The Fund has valued, and will continue to value
its portfolio securities and other assets in
accordance with applicable legal requirements;
(vii) All material contracts or other commitments (other
than this Agreement) to which the Fund is a party
will be terminated without liability to the Fund
or the New Fund on or before the Closing Date;
(viii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the
Fund or any of its properties or assets.
Thornburg LTMF knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg LTMF nor the Fund is a party
to or subject to the provisions of any order,
decree or judgment of any court or governmental
body or self regulatory organization which
materially and adversely affects their business or
their ability to consummate the transactions
herein contemplated;
(ix) The statement of assets and liabilities, the
statement of operations, and the statement of
changes in net assets of the Fund at June 30, 2003
have been audited by PricewaterhouseCoopers, LLP,
independent certified public accountants, and
those statements, together with the statements of
assets and liabilities, the statements of
operations, and the statements of changes in net
assets at December 31, 2003, when issued, fairly
reflect, or in the case of the December 31, 2003
statements will fairly reflect, in all material
respects the assets, financial condition, results
of operations, and changes in net assets of the
Fund as of and for the periods ended on those
dates and have, or in the case of the December 31,
2003 statements, shall have been prepared, in
accordance with generally accepted accounting
principles consistently applied; and there are as
of the dates thereof no known liabilities of the
Fund other than liabilities disclosed or provided
for in the foregoing statements;
(x) Since June 30, 2003, there has been no material
adverse change in the Fund's financial condition,
assets, liabilities or business other than changes
occurring in the ordinary course of business; and
the Fund has not incurred any indebtedness
maturing more than one year from the date such
indebtedness was incurred except as disclosed in
Exhibit A. For the purposes of this subparagraph
(x), a decline in net asset value per share of the
Fund's Shares is not a material adverse change;
(xi) At the Closing Date, all material federal and
other tax returns and reports of the Fund required
by law then to be filed (including any extensions)
shall have been filed, and all federal and other
taxes shall have been paid so far as due, or
provision shall have been made for the payment
thereof, and to the best of Thornburg LTMF's
knowledge no such return of or relating to the
Fund is currently under audit, and no assessment
has been asserted with respect to the Fund;
(xii) The Fund has met the requirements of Subchapter M
of the Code and has elected to be treated as a
regulated investment company for each taxable year
of its operations since its inception, and will so
qualify for the taxable year ending on the Closing
Date;
(xiii) The Fund is authorized to issue 100,000,000,
75,000,000 and 125,000,000 Class A, Class C and
Class I shares, respectively, of the Fund, at the
date hereof. All issued and outstanding shares of
the Fund have been offered and sold in compliance
in all material respects with applicable
registration requirements of the 1933 Act and
state securities laws. All issued and outstanding
shares of the Fund are, and at the Closing Date
will be, duly and validly issued and outstanding,
fully paid and non-assessable by Thornburg LTMF.
All of the issued and outstanding Shares of the
Fund will, at the time of Closing, be held by
shareholder accounts in the amounts set forth in
the list of shareholder's accounts submitted to
Thornburg Trust pursuant to paragraph 3(d). The
Fund does not have outstanding any options,
warrants or other rights to subscribe for or
purchase any securities issuable by the Fund;
(xiv) At the Closing Date, the Fund will have good and
marketable title to the Assets to be transferred
to the New Fund pursuant to paragraph 1(b),
subject to no lien, encumbrance or competing
interest in any person, and full right, power, and
authority to sell, assign, transfer and deliver
the Assets hereunder, and upon delivery and
payment for those Assets, the New Fund will
acquire good and marketable title thereto, subject
to no restriction on the full transfer thereof,
including such restrictions as might arise under
the 1933 Act other than as disclosed in writing to
the New Fund;
(xv) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg LTMF's Board of Directors, and
this Agreement constitutes a valid and binding
obligation of Thornburg LTMF, enforceable in
accordance with its terms, subject to the approval
of the shareholders of the Fund, and further
subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights
and subject to general equity principles;
(xvi) The information furnished by the Thornburg LTMF
for use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto;
(xvii) The registration statement filed by the New Fund
on Form N-14 relating to the New Fund Shares that
will be registered with the Commission pursuant to
this Agreement, which shall include the proxy
statements of Thornburg LTMF in respect of the
Fund with respect to the transactions contemplated
by this Agreement, and any supplement or amendment
thereto or to the documents contained or
incorporated therein by reference (the "N-14
Registration Statement"), and the proxy materials
of Thornburg LTMF in respect of the Fund included
in the N-14 Registration Statement and filed with
the Commission pursuant to Section 14 of the 1934
Act with respect to the transactions
contemplated by this Agreement, and any supplement
or amendment thereto or the documents appended
thereto (the "Reorganization Proxy Materials"),
from their effective dates with the Commission,
through the time of the meeting of shareholders of
the Fund contemplated therein (the "Shareholders
Meeting") and at the Closing Date: (a) shall
comply in all material respects with the
provisions of the 1933 Act, 1934 Act and the 1940
Act, the rules and regulations thereunder, and
applicable state securities laws, and (b) shall
not contain any untrue statement of a material
fact or omit to state a material fact required to
be stated therein or necessary to make the
statements therein not misleading; provided, that
the representations and warranties in this
subparagraph shall only apply to statements in or
omissions from the N-14 Registration Statement or
Reorganization Proxy Materials made by, or in
reliance upon and in conformity with information
furnished by or on behalf of Thornburg LTMF.
(b) Thornburg Trust represents and warrants to Thornburg LTMF
as follows:
(i) The New Fund is a series of Thornburg Trust, which
is a business trust duly formed and validly
existing under the laws of the Commonwealth of
Massachusetts;
(ii) Thornburg Trust is a duly registered open-end
management investment company and its registration
with the Commission as an investment company under
the 1940 Act is in full force and effect;
(iii) The prospectuses and statements of additional
information for shares of the New Fund, when
effective, shall conform in all material respects
to the applicable requirements of the 1933 Act and
the rules and regulations of the Commission
thereunder and will not include any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in light
of the circumstances under which they were made,
not misleading;
(iv) To the knowledge of Thornburg Trust, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the New Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the 1934 Act, the
1940 Act, or the rules and regulations under those
Acts, all of which shall have been received prior
to the Closing Date, except for such consents,
approvals, authorizations or orders as may be
required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg Trust's Declaration of Trust or By-
Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the
New Fund or Thornburg Trust is a party or by which
it is bound;
(vi) The New Fund has valued, and will continue to
value, its portfolio securities and other assets
in accordance with applicable legal requirements;
(vii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the New
Fund or any of its properties or assets.
Thornburg Trust knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg Trust nor the New Fund is a
party to or subject to the provisions of any
order, decree or judgment of any court or
governmental body or self regulatory organization
which materially and adversely affects their
business or their ability to consummate the
transactions herein contemplated;
(viii) At the Closing Date, all federal and other tax
returns and reports of the New Fund required by
law then to be filed shall have been filed, and
all federal and other taxes shall have been paid
for as due or provision shall have been made for
the payment thereof and, to the best of Thornburg
Trust's knowledge, no such return of or relating
to the New Fund is currently under audit, and no
assessment has been asserted with respect to the
New Fund;
(ix) The New Fund intends to meet the requirements of
Subchapter M of the Code, and intends to be
treated as a regulated investment company for the
first taxable fiscal year of its operation
including the Closing Date;
(x) Thornburg Trust is authorized to issue an
unlimited number of shares of beneficial interest
having no par value. All issued and outstanding
New Fund Shares at the Closing Date will be duly
and validly issued and outstanding, fully paid and
non-assessable. The New Fund does not have
outstanding any options, warrants or other rights
to subscribe for or purchase any securities
issuable by the New Fund, nor is there outstanding
any security convertible into New Fund Shares
(except as the trustees of Thornburg Trust may
convert classes of shares in accordance with
Thornburg Trust's Declaration of Trust, as
amended);
(xi) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg Trust's trustees, and this
Agreement constitutes a valid and binding
obligation of Thornburg Trust enforceable in
accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating
to or affecting creditors' rights and subject to
general equity principles;
(xii) New Fund Shares to be issued and delivered to the
Fund pursuant to the terms of this Agreement will
at the Closing Date have been duly authorized and,
when so issued and delivered, will be duly and
validly issued New Fund Shares, and will be fully
paid and non-assessable by Thornburg Trust, except
to the extent that shareholders of Thornburg Trust
may be held personally liable for obligations of
Thornburg Trust;
(xiii) The N-14 Registration Statement and the
Reorganization Proxy Materials, from their
effective dates with the Commission, through the
time of the Shareholders Meeting and at the
Closing Date:
(a) shall comply in all material respects with
the provisions of the 1933 Act, 1934 Act and
the 1940 Act, the rules and regulations
thereunder, and applicable state securities
laws, and
(b) shall not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements made therein
not misleading; provided, that the
representations and warranties in this
subparagraph shall only apply to statements
in or omissions from the N-14 Registration
Statement or the Reorganization Proxy
Materials made in reliance upon and in
conformity with information furnished by or
on behalf of Thornburg Trust;
(xiv) At the Closing Date, the New Fund will have good
and marketable title to its assets, subject to no
lien, encumbrance or competing interest in any
person, and full right, power and authority to
sell, assign, transfer and deliver those assets
other than as disclosed in writing to Thornburg
LTMF; and
(xv) The information furnished by Thornburg Trust for
use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto.
5. Covenants of the Parties.
(a) The New Fund and the Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that the ordinary course of business will include
customary dividends and distributions and any other distribution that may
be advisable.
(b) Thornburg LTMF will call a meeting of the shareholders of
the Fund to be held as promptly as practicable to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated herein.
(c) Thornburg LTMF covenants that the New Fund Shares to be
issued hereunder will not be sold or distributed other than in accordance
with the terms of this Agreement.
(d) Thornburg LTMF will furnish to Thornburg Trust all
information reasonably requested and that is within its control for the
preparation of the N-14 Registration Statement, the preparation and
distribution of the Reorganization Proxy Materials, and for effectuating
the transactions contemplated herein. Thornburg LTMF will furnish, or
cause its transfer agent to furnish, to Thornburg Trust all information
reasonably requested respecting the beneficial ownership of Thornburg LTMF
shares, shareholders and shareholder accounts for the mailing of the
Reorganization Proxy Materials and for the establishment of New Fund
accounts for shareholders of the Fund in accordance with paragraph 1(c).
Thornburg LTMF will furnish, or cause its custodian or other agents to
furnish, all portfolio asset information reasonably requested by Thornburg
Trust in connection with, and to facilitate, the transactions contemplated
by this Agreement.
(e) Subject to the provisions of this Agreement, Thornburg
Trust and Thornburg LTMF will each take, or cause to be taken, all actions,
and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
(f) Thornburg LTMF shall furnish to Thornburg Trust within 30
days after the Closing Date a detailed trial balance of the Fund's assets
and liabilities and computations showing amortization of premium on
portfolio securities. Thornburg LTMF shall furnish to Thornburg Trust when
available the final federal income tax return for the Fund.
(g) Thornburg LTMF will, as promptly as practicable after the
Closing, wind up the business of the Fund, deregister the Fund under
applicable federal securities laws, file final reports with the state
securities regulators requiring any such reports, prepare and distribute
final account statements and tax statements to persons who were formerly
shareholders of the Fund, and file any necessary federal and state tax
returns.
(h) Thornburg Trust will prepare and file the N-14
Registration Statement, will file the Reorganization Proxy Materials with
applicable regulatory authorities, and will use all reasonable efforts to
obtain clearance or effectiveness of the N-14 Registration Statement and
the Reorganization Proxy Materials, all in accordance with the 1933 Act,
the 1934 Act, and the 1940 Act, and applicable regulations and rulings
thereunder, and in accordance with any applicable state statutes and
regulations.
(i) Thornburg Trust agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1934
Act, the 1940 Act and such of the state securities laws as are necessary or
appropriate in order to continue its operations after the Closing Date.
6. Conditions Precedent to Obligations of Thornburg LTMF.
The obligations of Thornburg LTMF to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by Thornburg Trust of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the
following further conditions:
(a) All representations and warranties of Thornburg Trust
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date; and
(b) Thornburg Trust shall have delivered to Thornburg LTMF a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg LTMF and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg Trust made in this Agreement
are true and correct at and as of the Closing Date.
7. Conditions Precedent to Obligations of Thornburg Trust.
The obligations of Thornburg Trust to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Thornburg LTMF of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
(a) All representations and warranties of Thornburg LTMF
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date;
(b) Thornburg LTMF shall have delivered to Thornburg Trust the
following information prepared as of the Closing Date: (i) net asset value
pricing sheet of the Fund, with a portfolio listing of each portfolio
security including the principal amount, identification of issue, cost, tax
lot cost, market price per unit and market value; (ii) trial balance of the
Fund's general ledger; (iii) supporting schedules with the details for
accounts receivable and accounts payable; (iv) certification from the
Fund's custodian that it has delivered to the New Fund's custodian the
Assets acquired by the New Fund; and (v) confirmation from the New Fund's
transfer agent of the aggregate number of the Fund's shares outstanding and
a reconciliation of that number to the number of shares shown in the
pricing sheet referred to in (i) above;
(c) Thornburg LTMF shall have delivered to Thornburg Trust a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg Trust and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg LTMF made in this Agreement are
true and correct at and as of the Closing Date;
(d) This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Fund in accordance with applicable law and
evidence of the approval shall have been delivered to Thornburg Trust; and
(e) The parties shall have received a favorable opinion of
White, Koch, Kelly & McCarthy, P.A. satisfactory to Thornburg LTMF and
Thornburg Trust, substantially to the effect that, based upon certain
facts, assumptions and representations, the transactions contemplated by
this Agreement constitute a tax-free reorganization described in Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, for federal
income tax purposes. The delivery of such opinion is conditioned upon
receipt by White, Koch, Kelly & McCarthy, P.A. of representations it shall
request of Thornburg Trust and Thornburg LTMF.
8. Further Conditions Precedent to Obligations of Thornburg Trust
and Thornburg LTMF.
Each party's obligations hereunder are, at its election,
subject to the further conditions that:
(a) On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
(b) On or before the Closing Date, all consents of other
parties and all other consents, orders and permits of federal, state and
local regulatory authorities (including those of the Commission and of
state securities authorities, including "no-action" positions of such
federal or state authorities) deemed necessary by Thornburg Trust or
Thornburg LTMF to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the business assets or properties of
Thornburg Trust or Thornburg LTMF; and
(c) On or before the Closing Date, the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
9. Responsibility for Fees and Expenses.
Thornburg LTMF will pay the costs of the transactions
contemplated hereby, including the expenses of preparing and filing the N-
14 Registration Statement, the costs of distributing the prospectuses and
proxy materials, proxy solicitation costs, and other costs.
10. Massachusetts Business Trust.
Thornburg Trust is organized as a Massachusetts business trust,
and references in this Agreement to Thornburg Trust mean and refer to the
trustees of Thornburg Trust from time to time serving under its declaration
of trust on file with the Secretary of State of the Commonwealth of
Massachusetts, as the same may be amended from time to time, pursuant to
which Thornburg Trust conducts its business. It is expressly agreed that
the obligations of Thornburg Trust hereunder shall not be binding upon any
of Thornburg Trust's trustees, shareholders, nominees, officers, agents, or
employees of Thornburg Trust, or the New Fund personally, but bind only the
property of the New Fund, as provided in Thornburg Trust's declaration of
trust. Moreover, no series of Thornburg Trust other than the New Fund
shall be responsible for the obligations of Thornburg Trust hereunder, and
all persons shall look only to the respective assets of the New Fund to
satisfy the obligations of Thornburg Trust hereunder. The execution and
delivery of this Agreement have been authorized by Thornburg Trust's
trustees, on behalf of the New Fund, and this Agreement has been signed by
authorized officers of Thornburg Trust acting as such, and neither such
authorization by such trustees, nor such execution and delivery by such
officers, shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
respective property of the New Fund, as provided in Thornburg Trust's
declaration of trust.
11. Indemnification.
(a) The New Fund agrees to indemnify and hold harmless the
Fund and each of the Fund's directors and officers from and against any and
all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the New Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b) The Fund agrees to indemnify and hold harmless the New
Fund and each of the New Fund's trustees and officers from and against any
and all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the New Fund or any of its
trustees or officers may become subject insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
12. Entire Agreement; Survival of Warranties.
(a) Thornburg Trust and Thornburg LTMF agree that neither
party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
(b) The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated hereunder.
13. Termination.
(a) This Agreement may be terminated by the mutual agreement
of Thornburg Trust and Thornburg LTMF. In addition, either Thornburg Trust
or Thornburg LTMF may at its option terminate this Agreement at or before
the Closing Date because:
(i) of a material breach by the other of any
representation, warranty or agreement contained
herein to be performed at or before the Closing Date;
or
(ii) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot
be met.
(b) In the event of any such termination, there shall be no
liability for damages on the part of either Thornburg Trust or Thornburg
LTMF, or their respective trustees, directors or officers, to the other
party or its trustees, directors or officers, but each shall bear, except
as otherwise provided in section 9, the expenses incurred by them
incidental to the preparation and carrying out of this Agreement.
14. Amendments.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers
of Thornburg LTMF and Thornburg Trust; provided, however, that following
the shareholders' meeting called by the Fund pursuant to this Agreement, no
such amendment may have the effect of changing the provisions for
determining the number of New Fund Shares to be issued to the Fund's
shareholders under this Agreement to the detriment of those shareholders
without their further approval.
15. Notices.
Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be given
by prepaid telegraph, telecopy or certified mail addressed to Thornburg
Trust, 119 East Marcy Street, Santa Fe, New Mexico 87501, Attention:
Brian J. McMahon, and to Thornburg LTMF, 119 East Marcy Street, Santa Fe,
New Mexico 87501, Attention: George T. Strickland.
16. Headings; Counterparts; Governing Law; Assignment.
(a) The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act (as the same Acts shall have been or
will be amended) or rules, orders or regulations of such governmental
bodies or authorities having authority with respect to such Acts.
(d) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation, other than the parties
hereto and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(e) In the event of any litigation respecting this Agreement
or its subject matter, the prevailing party will be entitled to
reimbursement from the losing party for the prevailing party's cost of
suit, including reasonable attorneys' fees.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President and attested to
by its Secretary or Assistant Secretary.
THORNBURG INVESTMENT TRUST on behalf of
THORNBURG CALIFORNIA LIMITED TERM
MUNICIPAL FUND
By: /s/ Brian J. McMahon
-------------------------------------
Brian J. McMahon, President
------------------, ----------------
THORNBURG LIMITED TERM MUNICIPAL FUND,
INC., on behalf of THORNBURG LIMITED TERM
MUNICIPAL FUND CALIFORNIA PORTFOLIO
By: /s/ George T. Strickland
-------------------------------------
George T. Strickland, Vice President
------------------,
EXHIBIT A
to
Agreement and Plan of Reorganization
Dated December 8, 2003
Thornburg Investment Trust
(on behalf of Thornburg California Limited Term Municipal Fund)
and
Thornburg Limited Term Municipal Fund, Inc.
(on behalf of Thornburg Limited Term Municipal Fund California Portfolio)
Subparagraph 4(a)(x): None.
PROSPECTUS AND PROXY STATEMENT
(For Holders of Institutional Class Shares)
RELATING TO THE ACQUISITION OF THE ASSETS OF
THORNBURG LIMITED TERM MUNICIPAL FUND CALIFORNIA PORTFOLIO
a separate series of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
BY AND IN EXCHANGE FOR SHARES OF
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND
a separate series of
THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Prospectus/Proxy Statement relates to the proposed transfer of
substantially all of the assets of Thornburg Limited Term Municipal Fund
California Portfolio (the "Fund") in exchange solely for shares of
Thornburg California Limited Term Municipal Fund (the "New Fund"). The
Fund and the New Fund each have the same investment objective, which is to
seek as high a level of interest income which is exempt from federal and
California state individual income taxes as is consistent, in the view of
the Funds' investment adviser, with the preservation of shareholders'
capital. As a result of the proposed transaction, each shareholder of the
Fund will receive shares of the New Fund equal in value at the date of the
exchange to the value of the shareholder's shares of the Fund. The terms
and conditions of these transactions are more fully described in this
Prospectus/Proxy Statement and in the Agreement and Plan of Reorganization
attached hereto as Exhibit A.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the New Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the New Fund's "Thornburg Limited Term
Municipal Funds Institutional Class Shares Prospectus" dated March 10, 2004
(the "New Fund Prospectus"), which contains information about the New Fund
and which is incorporated by reference into this Prospectus/Proxy
Statement. A Statement of Additional Information dated March 10, 2004 (the
"Statement of Additional Information") containing additional information
about the New Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information may be
obtained without charge by writing to Thornburg at its address noted above
or by calling 1-800-847-0200. Copies of the Fund's current "Thornburg
Funds" prospectus for Class I shares dated February 1, 2004, and its
Statement of Additional Information for Institutional Class Shares dated
February 1, 2004 are incorporated by reference into this Prospectus/Proxy
Statement, and may be obtained without charge by writing to Thornburg at
the address shown above or by calling 1-800-847-0200.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS AND
PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THORNBURG INVESTMENT
TRUST OR THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
INVESTMENTS IN THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND (THE
"NEW FUND") ARE SUBJECT TO RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND
WILL FLUCTUATE IN VALUE. SHARES OF THE NEW FUND ARE NOT BANK DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, AND ARE NOT INSURED BY, ANY
BANK, FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is March 15, 2004.
TABLE OF CONTENTS
Summary of the Proposed Reorganization
Investment Adviser and Distributor of the Fund and the New Fund
Investment Goals, Policies and Restrictions of the Fund and the New Fund
Principal Risk Factors
Fees and Expenses of the Fund and the New Fund
Purchase, Redemption and Exchange Procedures for the Fund and the New Fund
Dividend Policies of the Fund and the New Fund
Comparative Information on Shareholder Rights
Additional Information About Shareholder Accounts
Information About the Reorganization
Capitalization
Additional Information About the Fund and the New Fund
Voting Information
Exhibit A: Agreement and Plan of Reorganization
For detailed information about the New Fund, see the Thornburg Limited Term
Municipal Funds Institutional Class Shares Prospectus dated March 10, 2004,
(the "New Fund Prospectus"), which accompanies this Prospectus/Proxy
Statement, or which may be obtained by calling Thornburg at 1-800-847-0200.
SUMMARY OF THE PROPOSED REORGANIZATION
The Board of Directors of Thornburg Limited Term Municipal Fund, Inc.
("Thornburg LTMF"), including the Directors who are not "interested
persons" of Thornburg LTMF (the "Independent Directors"), as defined in the
Investment Company Act of 1940, have reviewed and unanimously approved an
agreement and plan of reorganization (the "Agreement") between Thornburg
LTMF on behalf of Thornburg Limited Term Municipal Fund California
Portfolio (the "Fund") and Thornburg Investment Trust ("Thornburg Trust")
on behalf of Thornburg California Limited Term Municipal Fund (the "New
Fund") providing for the acquisition of substantially all of the assets of
the Fund, a separate fund (sometimes referred to as a "series") of
Thornburg LTMF, by the New Fund, a separate series of Thornburg Trust in
exchange solely for voting shares of the New Fund. The aggregate net asset
value of the shares of the acquiring New Fund issued in the exchange will
equal the aggregate net asset value of the shares outstanding for the
acquired Fund. In connection with the transaction, shares of the New Fund
will then be distributed to the Fund's shareholders pro rata by class so
that holders of each class of shares of the Fund will receive shares of the
corresponding class of shares of the New Fund. The Fund thereafter will be
dissolved. These transactions are referred to as the "reorganization."
As a result of the reorganization, each owner of Institutional Class
("Class I") shares of the Fund will become an owner of the corresponding
class of shares of the New Fund, having an aggregate net asset value equal
to the net asset value of that shareholder's shares in the Fund. No sales
charge will be imposed on the transaction. As a condition to the closing,
Thornburg Trust and Thornburg LTMF will obtain a legal opinion to the
effect that, based upon certain facts, assumptions and representations, the
reorganization will qualify as a tax-free reorganization for federal income
tax purposes. See "Information About the Reorganization." Persons
receiving shares of the New Fund in the reorganization will remain free to
redeem their shares after the reorganization.
The Fund and the New Fund have identical investment objectives and
policies. The New Fund will commence operations upon the completion of the
reorganization with the same portfolio of investments owned by the Fund.
The New Fund will have the same investment manager as the Fund, Thornburg
Investment Management, Inc. ("TIMI"), which will perform investment
management services under an investment management agreement having
substantially identical terms and providing for the same fees as the Fund's
current investment advisory agreement.
Expenses of the New Fund are expected to be substantially the same as
the expenses of the Fund before the reorganization, as follows:
Fund Annual Operating Expenses
Before the Reorganization
- -------------------------
Class I .75%
Expected New Fund Annual Operating Expenses
After the Reorganization
- -------------------------
Class I .75%
Expenses of the reorganization will be paid by the Fund, and are not
expected to have a material effect on the expenses of the Fund. The
reorganization is expected to result in cost savings to the shareholders of
the New Fund after the reorganization.
For the reasons set forth below, the Board of Directors of LTMF,
including all of the Independent Directors, have unanimously concluded that
the reorganization is in the best interests of the shareholders of the
Fund. The Board of Directors of Thornburg LTMF therefore have submitted
the Agreement for approval by the shareholders of the Fund at a special
meeting of shareholders to be held on April 28, 2004 (the "Meeting").
Approval of the reorganization with respect to the Fund requires the
affirmative vote of a majority of the outstanding shares of the Fund
entitled to vote at the Meeting. This Prospectus/Proxy Statement pertains
to and is directed to holders of the Fund's Institutional Class ("Class I")
shares.
At or about the same time that substantially all of the assets of the
Fund are acquired by the New Fund, Thornburg Limited Term Municipal Fund
will is expected to substantially all of the assets of Thornburg LTMF's
other series, Thornburg Limited Term Municipal Fund National Portfolio.
Each of these transactions has been approved by Thornburg LTMF's Board of
Directors. The acquisition of substantially all of the assets of the Fund
and Thornburg Limited Term Municipal Fund National Portfolio are referred
to collectively herein as the "Related Transactions." Completion of the
reorganization is contingent upon proper shareholder approval being
received for each of the Related Transactions, and the satisfaction of all
other conditions to closing the Related Transactions. There can be no
assurance shareholder approval can be obtained for each Related
Transactions or that the conditions of the other Related Transactions will
be satisfied. If shareholders of the Fund approve the reorganization and
the other Related Transactions is not approved, the Board of Directors of
Thornburg LTMF will consider the alternatives available to it with respect
to the Fund, including completion of the reorganization respecting the
Fund. See "Voting Information."
The Board of Directors has approved the reorganization because they
believe it would benefit the Fund. The reorganization is intended to
simplify legal and regulatory compliance functions, and to reduce the costs
of performing these functions. The Board of Directors considered these
objectives of the reorganization, together with other factors, which are
discussed below under the caption "Information About the Reorganization."
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
INVESTMENT ADVISER AND DISTRIBUTOR
OF THE FUND AND THE NEW FUND
The investment adviser to both the Fund and the New Fund is Thornburg
Investment Management, Inc. ("TIMI"), 119 East Marcy Street, Santa Fe, New
Mexico 87501. TIMI has been the investment adviser for the Fund since its
inception in 1987. TIMI is also the investment adviser for all of the 12
funds offered by Thornburg Trust, including the New Fund and Thornburg
Limited Term Municipal Fund (the two funds organized to consummate the
Related Transaction), four other funds which invest principally in
municipal obligations for tax exempt current income, two funds which invest
in U.S. Government and other fixed income obligations for current income,
three funds which invest primarily for capital appreciation, and one fund
which invests for current income and capital appreciation. TIMI also
provides to each Thornburg mutual fund under its management supervision,
administration and performance of certain administrative services. Fees
charged to the Fund and the New Fund for these services are described below
under "Fees and Expenses of the Fund and the New Fund."
The distributor of shares for both the Fund and the New Fund is
Thornburg Securities Corporation ("TSC"), 119 East Marcy Street, Santa Fe,
New Mexico 87501. TSC has been the distributor for the Fund since its
inception in 1987. TSC is also distributor for each other Thornburg mutual
fund.
INVESTMENT GOALS, POLICIES
AND RESTRICTIONS OF THE FUND AND THE NEW FUND
Investment Goals and Strategies of the Funds
- --------------------------------------------
The investment goals and strategies of the Fund and the New Fund are
identical. The primary investment goal of each Fund is to obtain as high a
level of current income exempt from federal and California state individual
income tax as is consistent, in the view of the investment adviser, with
preservation of capital. The secondary goal of each Fund is to reduce
expected changes in its share price compared to longer intermediate and
long-term bond portfolios. Each Fund's primary and secondary goals are
fundamental policies, and may not be changed without a majority vote of the
Fund's shareholders.
Each Fund pursues its primary goal by investing principally in a
laddered maturity portfolio of municipal obligations issued by the State of
California and its agencies, and by California local governments and their
agencies. The investment adviser, Thornburg Investment Management, Inc.
("TIMI") actively manages each Fund's portfolio. Investment decisions are
based upon outlooks for interest rates and securities markets, the supply
of municipal debt securities, and analysis of specific securities. Each
Fund invests in obligations and participations in obligations which are
rated at the time of purchase as investment grade or, if unrated, which are
issued by obligors which have comparable investment grade obligations
outstanding or which are deemed by TIMI to be comparable to obligors with
outstanding investment grade obligations. The Fund may invest in
obligations issued by certain United States territories and possessions.
Each Fund's portfolio is "laddered" by investing in obligations of
different maturities so that some obligations mature during each of the
coming years.
Because the magnitude of changes in value of interest bearing
obligations is greater for obligations with longer terms, each Fund seeks
to reduce changes in its share value by maintaining a portfolio of
investments with a dollar-weighted average maturity normally less than five
years. There is no limitation on the maturity of any specific security
each Fund may purchase. Each Fund may dispose of any security before it
matures. Each Fund also attempts to reduce changes in its share value
through credit analysis, selection and diversification.
Each Fund ordinarily acquires and holds securities for investment
rather than for realization of gains by short term trading on market
fluctuations. However, it may dispose of any security prior to its
scheduled maturity to enhance income or reduce loss, to change the
portfolio's average maturity, or to otherwise respond to current market
conditions. The objective of preserving capital may prevent a Fund from
obtaining the highest yields available.
Under normal conditions each Fund invests at least 80% of its assets
in municipal obligations originating in California which are exempt from
California and regular federal income taxes, and normally invests 100% of
its assets in municipal obligations originating in California or issued by
United States territories and possessions. Each Fund may invest up to 20%
of its assets in taxable securities which would produce income not exempt
from federal or California income tax. These investments may be made due
to market conditions, pending investment of idle funds or to afford
liquidity. Each Fund's temporary taxable investments may exceed 20% of its
assets when made for defensive purposes during periods of abnormal market
conditions. If the Fund found it necessary to own taxable investments,
some of its income would be subject to federal and California income taxes.
PRINCIPAL RISK FACTORS
Because the Funds' investment goals and policies are identical, the
risks of investing in the New Fund are expected to be the same as the risks
of investing in the Fund.
The value of each Fund's shares and its dividends will fluctuate in
response to changes in interest rates. When interest rates increase, the
value of the Fund's investments declines and the Fund's share value is
reduced. This effect is more pronounced for intermediate and longer term
obligations owned by a Fund. During periods of declining interest rates
the Fund's dividends decline. The value of Fund shares also could be
reduced if municipal obligations held by the Fund were downgraded by rating
agencies, or went into default, or if legislation or other government
action reduces the ability of issuers to pay principal and interest when
due or changes the tax treatment of interest on municipal obligations.
Nonrated obligations may have, or may be perceived to have, greater risk of
default. Because each Fund invests primarily in obligations originating in
California, the Fund's share value may be more sensitive to adverse
economic or political developments in that state. State budget deficits
resulting from spending increases and a steep decline in tax revenues could
impair the ability of some governmental issuers to meet their debt
obligations. Moreover, political differences between the governor and the
state legislature over tax increases and spending cuts may have a negative
impact on outstanding and future obligations of California state and local
governments. A portion of each Fund's dividends could be subject to the
federal alternative minimum tax. The loss of money is a risk of investing
in either Fund, and when you sell your shares they may be worth less than
what you paid for them.
An investment in either Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
For a further discussion of the investment objectives, policies and
restrictions applicable to the New Fund, please see the New Fund
Prospectus, which accompanies this Prospectus/Proxy Statement, or which may
be obtained by calling Thornburg at 1-800-847-0200.
FEES AND EXPENSES OF THE FUND AND THE NEW FUND
Advisory and Administration Fees and Fund Expenses
- --------------------------------------------------
The Fund and the New Fund each have contractual arrangements to obtain
investment management, administrative and distribution services which are
substantially identical.
The Fund and The New Fund are each contractually obligated to pay an
investment management fee to TIMI based upon the Fund's assets. The fee is
computed on average daily net assets at an annual rate as follows:
Net Assets Annual Rate
---------- -----------
0 to $500 million .50%
$500 million to $1 billion .40%
$1 billion to $1.5 billion .30%
$1.5 billion to $2.0 billion .25%
more than $2.0 billion .225%
TIMI also has entered into agreements with the Fund and the New Fund to
provide administrative services at an annual rate of .05% of average daily
net assets for Institutional Class shares of each Fund.
Investment advisory fees, and the other expenses currently paid by the
Fund and expected to be paid by the New Fund are set out below. The
Shareholder Transaction Expense table shows the transaction fees paid by a
shareholder in each Fund upon a purchase or redemption of shares. The
Annual Fund Operating Expenses table shows the annual fund operating
expense for the Fund for its fiscal year ended June 30, 2003 and compares
those fee and expense percentages to the expected annual fund operating
expenses for the New Fund for its current fiscal year.
Shareholder Transaction Expenses
(Fees Paid Directly From Your Investment)
Fund New Fund
Class I Class I
------- --------
Maximum Sales Charge (Load) on none none
Purchases (as a percentage of
offering price)
Maximum Deferred Sales Charge none none
(Load) on Redemptions (as a
percentage of redemption
proceeds or original purchase
price, whichever is lower)
Redemption Fees (as a none none
percentage of amount redeemed)
Annual Fund Operating Expenses
(Expenses That Are Deducted From Fund Assets)
Fund New Fund (1)
Class I Class I
------- --------
Investment Advisory Fee .50% .50%
Distribution and Service
(12b-1) Fees .00% .00%
Other Expenses .25% .25%
----- -----
Total Annual Operating Expenses .75% (2) .75%(2)
(1) The New Fund is a newly organized Fund which has not conducted
any business except incident to the reorganization. The fees and expenses
shown for The New Fund are estimated fees and expenses expected to be
incurred for the fiscal year ending June 30, 2004.
(2) For the fiscal year ending June 30, 2004, Thornburg Investment
Management, Inc. is waiving fees and reimbursing expenses so that actual
Class I expenses do not exceed .65%. Thornburg Investment Management, Inc.
intends to waive fees and reimburse expenses for Class I shares of the New
Fund after the reorganization so that actual Class I expenses do not exceed
..65%. Waivers of fees and reimbursements of expenses may be terminated at
any time.
EXAMPLE:
The following Example is intended to help you compare the cost of
investing in the New Fund with the cost of investing in the Fund. The
Example assumes that you invest $10,000 in each respective Fund for the
time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5%
return each year, that dividends and distributions are reinvested, and that
each Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
Fund New Fund Pro Forma
Class I Class I
------- --------
1 Year $77 $77
3 Years $240 $240
5 Years $417 $417
10 Years $930 $930
PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
FOR THE FUND AND THE NEW FUND
Sales Charges
- --------------
Share purchase, redemption and exchange procedures for the
Institutional Class shares of the Fund are identical with the purchase,
redemption and exchange procedures for the corresponding share class of the
New Fund.
Purchasing Institutional Class Shares
- -------------------------------------
The Fund's Institutional Class ("Class I") shares are sold with no
initial sales charge or contingent deferred sales charge at the net asset
value per share.
Qualified individual investors and qualified institutions purchasing
shares for their own account are eligible to purchase Institutional Class
shares provided they invest a minimum of $2,500,000. The minimum amount
for subsequent purchases is $5,000. Qualified institutions include
corporations, banks and insurance companies purchasing for their own
account and other institutions such as trusts, endowments and foundations.
Qualified employee benefit or retirement plans other than an
individual retirement account ("IRA") or SEP-IRA are also eligible to
purchase Institutional Class shares, provided they either invest a minimum
of $1,000,000 in the Fund or have 100 or more eligible participants
enrolled in the plan. There is no minimum amount for subsequent purchases.
Investment dealers, financial advisers or other investment
professionals, including bank trust departments and companies with trust
powers, purchasing for the accounts of others within a clearly defined
"wrap" or other fee based investment advisory program are eligible to
purchase Institutional Class shares. The Fund's distributor will establish
a minimum amount per program or per account to qualify for purchase of
Institutional Class shares. The minimum amount per program is currently
$100,000.
Exchange Privileges
- -------------------
Class I shares of the Fund may be exchanged for Class I shares of
other Thornburg funds, subject to certain conditions described in the
Fund's prospectus. Similarly, Class I shares of the New Fund may be
exchanged for Class I shares of other Thornburg mutual funds subject to the
same conditions. Each of the Funds permits exchanges by telephone if the
telephone exchange privilege has been elected by the shareholder.
Shareholders of the Fund who previously elected the telephone exchange
privilege will be deemed to have elected the exchange privilege of the New
Fund if the reorganization is completed.
Redemptions
- -----------
Shares of the Fund and the New Fund properly presented for redemption
may be redeemed at the next determined net asset value per share.
Shareholders of the Fund who previously elected the telephone redemption
privilege will be deemed to have elected the New Fund's telephone
redemption privilege if the reorganization is completed.
DIVIDEND POLICIES OF FUND AND THE NEW FUND
The Fund distributes substantially all of its net investment income
and realized capital gains to its shareholders. The Fund declares net
income dividends daily and distributes those dividends monthly, and any net
realized capital gains are distributed at least annually, usually in
December. Distributions are reinvested in Fund shares unless the
shareholder elects to receive them in cash. The New Fund intends to follow
the same policies.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The Fund is a diversified series of Thornburg Limited Term Municipal
Fund, Inc. ("Thornburg LTMF"), a Maryland corporation organized in 1984.
As a Maryland corporation, Thornburg LTMF is governed by applicable
Maryland and federal law, its articles of incorporation and its bylaws.
The business of Thornburg LTMF is supervised by its Board of Directors.
The New Fund is a diversified series of Thornburg Trust, a
Massachusetts business trust organized in 1987. As a Massachusetts
business trust, Thornburg Trust is governed by applicable Massachusetts and
federal law, its declaration of trust, as amended, and its bylaws. The
business of Thornburg Trust is supervised by Thornburg Trust's Trustees.
Thornburg LTMF is currently authorized under its articles of
incorporation, as amended, to issue 100,000,000 Class A shares of the Fund,
75,000,000 Class C shares of the Fund, and 125,000,000 Institutional Class
shares. Each share has a par value of $.001. The Board of Directors is
permitted to increase this authorization from time to time under Maryland
law. The Board of Directors is also permitted to create additional funds
or "series," and to divide each such series into two or more classes of
shares. Thornburg Trust is authorized to create an unlimited number of
series, and with respect to each series, to issue an unlimited number of
full and fractional shares of one or more classes and to divide or combine
the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the series. All of the
shares of Thornburg LTMF and of Thornburg Trust, respectively, have equal
voting rights with each other, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. Neither Thornburg LTMF nor Thornburg
Trust permits cumulative voting.
Neither Thornburg LTMF nor Thornburg Trust holds annual shareholder
meetings. There normally will not be any meetings of shareholders of
Thornburg LTMF, Thornburg Trust or either of the Funds to elect directors
or trustees unless fewer than a majority of the directors or trustees then
holding office have been elected by shareholders. However, the Board of
Directors of Thornburg LTMF or the trustees of Thornburg Trust may call
special meetings from time to time to seek shareholder approval of certain
matters, and meetings of shareholders of either Thornburg LTMF or Thornburg
Trust will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of any affected
series or class having voting rights.
Under Maryland law, shareholders of Thornburg LTMF are not liable for
the obligations of Thornburg LTMF. However, under Massachusetts law, there
is a remote possibility that shareholders of Thornburg Trust could, under
certain circumstances, be held personally liable for the obligations of
such a trust. The declaration of trust for Thornburg Trust contains
provisions intended to limit any such liability and to provide
indemnification out of Fund property for any shareholder charged or held
personally liable for obligations or liabilities of the shareholder's fund
solely by reason of being or having been a shareholder of that Fund and not
because of the shareholder's acts or omissions or for some other reason.
Consequently, the risk of a shareholder of the New Fund incurring financial
loss on account of shareholder liability is limited to circumstances in
which the New Fund itself would be unable to meet its obligations.
ADDITIONAL INFORMATION ABOUT SHAREHOLDER ACCOUNTS
If the reorganization is approved, the New Fund will establish an
account for each Fund shareholder.
No further purchases of the shares of the Fund may be made after the
date on which the shareholders of the Fund approve the reorganization, and
the share transfer books of the Fund will be permanently closed as of the
date of Closing. Only redemption requests and transfer instructions
received in proper form by the close of business on the day before the date
of Closing will be fulfilled by the Fund. Redemption requests or transfer
instructions received by the Fund after that date will be treated as
requests for the redemption or instructions for transfer of shares of the
New Fund credited to the accounts of shareholders of the Fund.
Accordingly, those redemption requests or transfer instructions after the
close of business on the day before Closing will be forwarded to the New
Fund. For a complete description of redemption procedures for the New
Fund, see the sections of the New Fund Prospectus under the caption
"Selling Fund Shares."
INFORMATION ABOUT THE REORGANIZATION
Agreement and Plan of Reorganization
- ------------------------------------
The following summary of the proposed Agreement and Plan of
Reorganization (the "Agreement") is qualified in its entirety by reference
to the Agreement attached to this Prospectus/Proxy Statement as Exhibit A.
The Agreement provides that the New Fund will acquire substantially
all of the assets of the Fund in exchange solely for shares of the New Fund
on the earliest practicable date following shareholder approval of the
reorganization (the "Closing Date"). The number of full and fractional
shares of the New Fund to be issued to shareholders of the Fund will be
determined on the basis of the relative net asset values per share and
aggregate net assets of the New Fund and the Fund computed immediately
after the closing of business on the New York Stock Exchange (currently
4:00 p.m., Eastern time) on the last business day before the Closing Date
(the "Valuation Date"). The net asset value per share for the Fund will be
determined by dividing each class's respective assets, less its respective
share of liabilities, by the total number of the class's outstanding
shares. Portfolio securities of the Fund will be valued in accordance with
the valuation practices of the New Fund as described in its prospectus,
which is incorporated by reference herein. Valuation procedures of the New
Fund are the same as the valuation procedures of the Fund.
Immediately after the transfer of the Fund's assets to the New Fund on
the Closing Date, the Fund will distribute pro rata to its shareholders of
record as of the close of business on the Valuation Date the full and
fractional shares of the New Fund received by the Fund and will be
dissolved as soon thereafter as reasonably practicable. The distribution
will be accomplished by the establishment of accounts on the share records
of the New Fund in the name of each shareholder of the Fund, each
representing the respective pro rata number of full and fractional shares
of the New Fund due each of those shareholders. Following the
reorganization, shareholders will own shares of the New Fund of the same
class as the Fund shares owned before the reorganization. No certificates
for shares of the New Fund will be issued.
The consummation of the reorganization is subject to the conditions
set forth in the Agreement. The reorganization is also subject to approval
by the Fund's shareholders. Approval requires the affirmative vote of a
majority of the outstanding shares of the Fund entitled to vote at the
meeting. Further, completion of the reorganization is subject to
shareholder approval of the "Related Transaction", which is the proposed
transaction in which Thornburg Limited Term Municipal Fund will acquire
substantially all of the assets of Thornburg Limited Term Municipal Fund
National Portfolio. If shareholders of the Fund approve the
reorganization, but the Related Transaction is not approved, the Board of
Directors of the Fund will consider the available alternatives. The
Agreement may be terminated and the reorganization abandoned prior to the
Closing Date, before or after approval by shareholders of the Fund, by
resolution of the Board of Directors of the Fund or the Trustees of
Thornburg Trust, under circumstances specified in the Agreement.
The Fund will pay the costs of the reorganization, which include fees
and costs associated with preparing, filing, printing and distributing
proxy materials, proxy solicitation costs, costs associated with qualifying
shares for sale in various states, and the deregistration and dissolution
of Thornburg LTMF.
The Board of Directors of Thornburg LTMF has determined that the
reorganization will not result in any dilution to the interests of the
Fund's shareholders, and that participation in the reorganization is in the
best interests of the Fund's shareholders.
Full and fractional shares of beneficial interest of the New Fund will
be issued to shareholders of the Fund in accordance with the procedures
under the Agreement described above. Each share will be fully paid and
non-assessable by the New Fund when issued, and will have no preemptive or
conversion rights. See comparative information on shareholder rights,
above, for additional information with respect to the shares of the New
Fund.
Considerations of the Fund's Board of Directors
- -----------------------------------------------
Thornburg Investment Management, Inc. ("TIMI"), the investment adviser
to both the Fund and the New Fund, proposed and recommended the
reorganization to the Board of Directors of Thornburg LTMF (the "Board") to
simplify certain compliance and administrative functions and to reduce the
costs associated with the performance of those functions. Based upon
TIMI's recommendation, and after consideration of the rationale for the
reorganization and certain additional factors described below, the Board,
including all of the directors who are not "interested persons"
("Independent Directors") as that term is used in the Investment Company
Act of 1940 (the "1940 Act"), has determined that the reorganization is in
the best interest of the shareholders of the Fund and that the terms of the
agreement and plan of reorganization (the "Agreement") are fair and
reasonable.
The Board considered the recent increases in compliance and related
functions performed for the Fund, and the likely further increase in those
functions in the future due to regulatory and rulemaking initiatives by the
Congress and the Securities and Exchange Commission. The Board noted
specifically in this connection the following factors:
. increased duties for the Board assuring compliance with
revised regulations applicable to mutual funds
generally;
. increased audit committee functions and additional time
devoted to audit committee functions by the independent
accountants;
. increased number of filings by Thornburg LTMF of
documents required under state and federal law and
increased time for review and discussion of those
filings by the Board;
and
. increased Board fees and associated travel expenses and
other expenses occasioned by these increased
activities.
The Board further noted in this regard that these functions are
generally duplicative of comparable functions performed for and by
Thornburg Investment Trust and its Trustees and audit committee.
The Board concluded that the general complexity of compliance, and
administration of compliance could be reduced significantly if the two
funds currently offered by Thornburg LTMF were combined with the ten
existing funds offered by Thornburg Investment Trust. This combination
would, in the Board's view, eliminate the current duplication and reduce
complexity by substituting one investment company in the place of two.
Moreover, the Board concluded that the reorganization would result in
significant cost savings, because the two funds of Thornburg Trust which
will acquire Thornburg LTMF's two current funds will share with Thornburg
Trust's other funds a number of costs which are currently duplicated (and
thus not shared) by Thornburg LTMF and Thornburg Trust.
In this latter regard the Board considered:
. legal fees and costs associated with advice on
compliance matters, preparation of documents related
to compliance, preparation of documents for Board of
Directors and audit committee meetings;
. legal counsel preparation for and attendance at Board
of Directors and audit committee meetings;
. fees and costs associated with preparation and filing
of registration statements and other periodic filings,
and general corporate work associated with the
maintenance of an additional corporate entity;
. costs, including Directors' fees and travel and other
expenses associated with the Board's and the audit
committee's fees and meetings; and
. expenses and fees of the independent accountants.
The Board also considered the likelihood of future increases in these costs
because of increased rulemaking and regulatory complexity, increasing
duties placed on investment company directors and audit committees, the
possible need to hire additional legal counsel and other persons for audit
committees, and possible increases in the frequency of shareholder meetings
to elect investment company directors. Based upon estimates by TIMI and
legal counsel, the Board determined that it was reasonable to conclude that
the costs of the reorganization could be recovered in less than two years.
The Board also considered other factors in evaluating the proposed
reorganization, including the following:
(1) There would be no change in investment objectives, investment
policies, or investment risks as a result of the reorganization;
(2) After the reorganization, investment management, administrative
services, and other functions would be performed under contracts having
substantially the same terms as the existing contracts;
(3) Fees and expenses for the New Fund are expected to be virtually
the same as fees and expenses for the Fund, except for the costs of the
reorganization (which are expected to be offset, and exceeded over time by
cost savings);
(4) The reorganization will result in no dilution of shareholders'
interests;
(5) Shareholders of the Fund will receive shares in the New Fund of
the class corresponding to the same class of shares in the Fund;
(6) The reorganization will be accomplished without recognition of
gain or loss for federal income tax purposes by shareholders of Thornburg
LTMF; and
(7) No sales charges or transaction fees will be assessed against
shareholders in connection with the reorganization.
Federal Income Tax Consequences
- -------------------------------
The reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, with no taxable gain or loss recognized
by the Fund, the New Fund, or shareholders of the Fund as a consequence of
the reorganization. As a condition to the closing of the reorganization,
the Fund and the New Fund will receive an opinion of legal counsel to that
effect based on certain assumptions and representations made by the Fund
and the New Fund.
Shareholders of the Fund should consult their tax advisers regarding
the effect, if any, of the proposed reorganization in light of their
individual circumstances. In particular, shareholders of the Fund should
also consult their tax advisers as to the state, local and other tax
consequences, if any, of the reorganization.
CAPITALIZATION
The following table sets forth the capitalization of the Fund and the
New Fund as of December 31, 2003 and the pro forma capitalization of the
combined New Fund as if the reorganization occurred on that date. These
numbers will be different at the time of closing because the Fund's net
assets for each class will increase or decrease.
CAPITALIZATION OF FUNDS AS OF DECEMBER 31, 2003
FUND NEW FUND PRO FORMA
---- -------- ---------
NET ASSETS
- -----------
Class A shares $139,962,728 -0- $139,962,728
Class C shares $ 22,801,556 -0- $ 22,801,556
Class I shares $ 20,905,203 -0- $ 20,905,203
TOTAL $183,669,487 -0- $183,669,487
NET ASSETS PER SHARE
- --------------------
Class A shares $13.14 -0- $13.14
Class C shares $13.15 -0- $13.15
Class I shares $13.15 -0- $13.15
SHARES OUTSTANDING
- -------------------
Class A shares 10,653,251.431 -0- 10,653,251.431
Class C shares 1,734,313.442 -0- 1,734,313.442
Class I shares 1,593,051.762 -0- 1,593,051.762
TOTAL 13,980,616.635 -0- (1) 13,980,616.635
SHARES AUTHORIZED
- ------------------
Class A shares 100,000,000 unlimited unlimited
Class C shares 75,000,000 unlimited unlimited
Class A shares 125,000,000 unlimited unlimited
TOTAL 300,000,000 unlimited unlimited
(1) It is anticipated that a nominal number of shares of each class
will be issued to an officer of TIMI in order to permit the consummation of
corporate actions before the reorganization.
ADDITIONAL INFORMATION ABOUT THE FUNDS AND THE NEW FUND
Additional information respecting the New Fund is included in the
Thornburg Limited Term Municipal Funds Institutional Class Shares
Prospectus dated March 10, 2004 (the "New Fund Prospectus") which
accompanies this Prospectus and Proxy Statement and in the Thornburg
Limited Term Municipal Funds Institutional Class Shares Statement of
Additional Information dated March 10, 2004, which has been filed with the
Securities and Exchange Commission. Additional information is also
included in the Statement of Additional Information dated March 15, 2004
related to the reorganization which has been filed with the Securities and
Exchange Commission. The described New Fund Prospectus and statements of
additional information are incorporated by reference herein. Copies of the
statements of additional information are available upon request and without
charge by calling 1-800-847-0200.
Information about the Fund is included in the Thornburg Institutional
Class Shares Prospectus dated February 1, 2004, and in the Thornburg Funds
Institutional Class Statement of Additional Information dated February 1,
2004. The described prospectus and statement of additional information
have been filed with the Securities and Exchange Commission and are
incorporated by reference herein. Copies of the prospectus and the
statement of additional information are available upon request and without
charge by calling 1-800-847-0200.
Reports and other information filed by Thornburg LTMF and Thornburg
Trust can be inspected and copied at the Securities and Exchange
Commission's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C. 20549. Information about the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information
about the Funds are also available on the Commission's Internet site at
http://www.sec.gov and copies of information may be obtained, upon payment
of a duplicating fee, by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102, or contacting the Commission by e-mail at
publicinfo@sec.gov.
Thornburg LTMF files its registration statements and certain other
information with the Commission under Investment Company Act of 1940 file
number 811-4302. Thornburg Investment Trust files its registration
statements and certain other information with the Commission under
Investment Company Act of 1940 file number 811-05201.
VOTING INFORMATION
Proxies for the meeting are being solicited from the Fund's
shareholders by the Board of Directors of Thornburg LTMF. A proxy may be
revoked at any time at or before the meeting by oral or written notice to
the secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New
Mexico 87501, (800) 847-0200. Unless revoked, all valid proxies will be
voted in accordance with the specifications therein or, in the absence of
specifications, for approval of the reorganization.
Additional solicitations may be made by telephone, telegraph,
facsimile or personal contact by officers or employees of TIMI and its
affiliates or by a professional proxy solicitation firm or firms. Expenses
of proxy solicitation will be borne by the Fund. TIMI has engaged the
proxy solicitation firm of D.F. King & Co., Inc. to assist in soliciting
proxies for the meeting at an estimated cost of $9,000.
Shares of the Fund of record at the close of business on March 4, 2004
(the "Record Date") will be entitled to vote at the meeting or any
adjournment thereof. The presence in person or by proxy of one-third of
the Fund's outstanding shares at the meeting will constitute a quorum.
Shareholders are entitled to one vote for each share held, and each
fractional share will be entitled to a proportionate fractional vote.
Approval of the reorganization requires the affirmative vote of a majority
of the outstanding shares of the Fund entitled to vote at the meeting. As
of March 4, 2004, there were issued and outstanding 10,256,655.097 Class A
shares, 1,742,708.731 Class C shares and 1,747,769.864 Class I shares of
the Fund. As of the same date, the following persons known to own of
record or beneficially 5% or more of the issued and outstanding shares of
any Class of the Fund:
No of % of
Shareholder Shares Class
- ----------- ------ -----
MLPF&S 538,123.773 5.25%
FBO Customers Class A Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
LPL Financial Services 521,794.053 5.09%
9785 Towne Center Dr. Class A Shares
San Diego, CA 94611
UBS Financial Services 87,506.259 5.02%
101 Duncan Class C Shares
Oakland, CA 94611
Charles Schwab & Co. 1,014,494.535 58.05%
Special Custody Class I Shares
101 Montgomery St.
San Francisco, CA 94104
MLPF&S 124,432.509 7.12%
FBO Customers Class I Shares
4800 Deer Lake Drive
Jacksonville, FL 32246
On March 4, 2004, officers, directors and related persons of the Fund, as a
group, held less than one percent of the outstanding shares of any class of
the Fund.
As of the same date, there were issued and outstanding 1.889 Class A
shares, 1.888 Class C shares, and 1.888 Class I shares of beneficial
interest of the New Fund. All of these shares were held by Dawn B.
Fischer, 119 East Marcy Street, Santa Fe, New Mexico 87501. Ms. Fischer
was issued these shares in order to permit certain actions in connection
with the initial organization of the New Fund.
In the event that a quorum is not present at the meeting, or a quorum
is present at the meeting but sufficient votes to approve the
reorganization are not received, the persons named as proxies may propose
one or more adjournments of the meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares represented at the meeting in person or by proxy.
If a quorum is not present, the persons named as proxies will vote those
proxies which they are entitled to vote for the reorganization in favor of
such an adjournment and will vote those proxies required to be voted
against the reorganization against any such adjournment.
"Broker non-votes" are shares held in a broker's street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does
not have discretionary voting authority. Abstentions in broker non-votes
will be counted as shares present for purposes of determining whether a
quorum is present but will not be voted for or against any adjournment or a
proposal. Accordingly, abstentions in broker non-votes effectively will be
a vote against adjournment and against the proposal because the required
vote is a percentage of the shares outstanding.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE REORGANIZATION.
Submission of Shareholder Proposals
- -----------------------------------
The Fund does not hold regular shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to the
secretary of Thornburg LTMF, 119 East Marcy Street, Santa Fe, New Mexico
87501.
Other Matters to Come Before the Meeting
- ----------------------------------------
The Board of Directors of Thornburg LTMF knows of no other business to
be brought before the meeting. However, if any other matters properly come
before the meeting, proxies will be voted in accordance with the judgment
of the Directors.
EXHIBIT A
to
PROSPECTUS/PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 8th day of December 2003, by and between THORNBURG INVESTMENT TRUST,
a Massachusetts business trust ("Thornburg Trust"), in respect of Thornburg
California Limited Term Municipal Fund (the "New Fund"), a separate series
of Thornburg Trust, and THORNBURG LIMITED TERM MUNICIPAL FUND, INC. a
Maryland corporation ("Thornburg LTMF"), in respect of Thornburg Limited
Term Municipal Fund California Portfolio (the "Fund"), a separate series of
Thornburg LTMF.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization will consist of (i) the transfer of substantially all of
the Assets (hereinafter defined) of the Fund to the New Fund in exchange
solely for Class A, Class C and Class I voting shares of beneficial
interest of the New Fund having no par value (the "New Fund Class A
Shares," "New Fund Class C Shares," and "New Fund Class I Shares,"
respectively, and collectively the "New Fund Shares") and (ii) the
distribution on the Closing Date (hereinafter defined) of the New Fund
Shares to the shareholders of the Fund in complete liquidation of the Fund
as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement. All actions required to be taken by Thornburg Trust
pursuant to this Agreement, and all representations, warranties and
covenants of Thornburg Trust hereunder, are taken and made on behalf of the
New Fund. All actions required to be taken by Thornburg LTMF pursuant to
this Agreement, and all representations, warranties and covenants of
Thornburg LTMF hereunder, are taken and made on behalf of the Fund.
THEREFORE, in consideration of the premises and of the covenants and
agreements hereafter described, the parties hereto covenant and agree as
follows.
1. Procedure for Reorganization.
(a) Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein,
Thornburg LTMF agrees to transfer the Assets of the Fund as set forth in
paragraph (b) to the New Fund, and Thornburg Trust agrees to deliver to the
Fund in exchange therefor the number of the New Fund Shares determined by
dividing the value of the Assets computed in the manner and as of the time
and date set forth in paragraph 2(a), by the net asset value of the New
Fund Shares computed in the manner and as of the time and date set forth in
paragraph 2(b). These transactions shall take place at the closing
provided for in paragraph 3(a) (the "Closing").
(b) The Assets to be acquired by the New Fund shall consist of
all cash, portfolio securities and due bills for dividends, interest, or
other receivables or rights to receive any of the foregoing, receivables
for shares sold, and any claims or rights with respect to portfolio
securities, whether or not arising from contract, which are owned by the
Fund on the closing date provided in paragraph 3(a) (the "Closing Date").
The Fund will retain cash and cash equivalents in an amount reasonably
estimated by it to be sufficient to discharge: (i) obligations incurred in
the ordinary course of its business, which could not reasonably be paid
before Closing and are not otherwise borne by any other person; and (ii)
costs resulting from the liquidation and deregistration of the Fund and
Thornburg LTMF. The Assets will not include any rights in and to the
"Thornburg" name or any variant thereof. The Fund has provided the New
Fund with a list of the current securities holdings of the Fund as of the
date of execution of this Agreement. Thornburg LTMF and the Fund reserve
the right to sell any of these securities in the ordinary course of
business but will not, without prior notification to Thornburg Trust,
acquire any additional securities for the Fund other than securities of the
type in which the New Fund is permitted to invest.
(c) On the Closing Date, Thornburg LTMF will cause the Fund to
be liquidated and to distribute pro rata to the Fund's shareholders of
record (the "Fund Shareholders"), determined on and as of the close of
business on the Valuation Date specified in paragraph 2(a), the New Fund
Shares received by Thornburg LTMF pursuant to paragraph (a). Specifically,
Thornburg LTMF shall (i) distribute the New Fund Class A Shares received in
the exchange, pro rata, to the Fund Shareholders holding Class A shares of
the Fund, (ii) distribute the New Fund Class C shares received in the
exchange, pro rata, to the Fund Shareholders holding Class C shares of the
Fund, and (iii) distribute the New Fund Class I Shares received in the
exchange, pro rata, to the Fund Shareholders holding Class I shares of the
Fund. The liquidation and distribution will be accomplished by the
transfer of the New Fund Shares then credited to the account of the Fund on
the books of New Fund, to open accounts on the share records of the Fund in
the names of the Fund Shareholders and representing the respective pro rata
number of New Fund due the Fund Shareholders.
(d) As of the Closing Date, any physically-issued share
certificates held by former Fund Shareholders and relating to Fund shares
exchanged for New Fund Shares in accordance with the preceding paragraph
(c) will represent only the right to receive the appropriate number of New
Fund Shares. As of the Closing Date, persons holding those certificates
will be requested to surrender their certificates. No redemption or
repurchase of any New Fund Shares credited to former Fund Shareholders in
place of Fund shares represented by unsurrendered certificates will be
permitted until those certificates have been surrendered for cancellation
or the certificates are cancelled upon the delivery of lost certificate
affidavits.
(e) Any transfer taxes payable upon issuance of New Fund
Shares in a name other than that of the registered holder of the New Fund
Shares on the books of the Fund as of the Closing Date shall, as a
condition of such issuance and transfer, be paid by the person to whom the
New Fund Shares are to be issued and transferred.
(f) The Fund shall be dissolved as soon as reasonably
practicable following the Closing Date. Thornburg LTMF will deregister
with the Securities and Exchange Commission (the "Commission") in
accordance with the Investment Company Act of 1940, as amended (the "1940
Act").
(g) Thornburg Trust will not assume any liability of Thornburg
LTMF, or acquire any Asset subject to any liability, in connection with the
transactions contemplated by this Agreement, except that the New Fund will
assume the obligation to pay for any portfolio securities purchased by the
Portfolio before the Closing Date in the ordinary course of its business
and the purchase of which was disclosed to the New Fund by the Fund when
the commitment to purchase arose.
2. Valuation.
(a) The value of the Fund's Assets to be acquired by the New
Fund hereunder shall be the value of those assets computed as of the close
of business on the New York Stock Exchange and after the declaration of any
dividends on the business day next preceding the Closing Date (the time and
date being hereinafter called the "Valuation Date"). The value of the
portion of the Fund's Assets consisting of portfolio securities will be
computed by Kenny Information Systems, subject to adjustment by the amount,
if any, agreed to by the New Fund and the Fund. In determining the value
of the Assets, each portfolio security and other portfolio asset shall be
priced by Kenny Information Systems in accordance with the policies and
procedures of the New Fund (subject to the second sentence hereafter) as
set forth in the then current prospectuses and statement of additional
information applicable to the New Fund, subject to adjustments agreed to by
the Fund and the New Fund. All computations shall be made by Kenny
Information Systems. In the event of a dispute with respect to the
valuation of any portfolio security or other portfolio asset of the Fund,
the New Fund and the Fund shall, by mutual consent, select an independent
third party to resolve the matter, and the determination of the independent
party will bind the Funds.
(b) The value of the Assets of each class of the Fund shall be
divided, as of the close of business on the New York Stock Exchange and
after the declaration of any dividends on the Valuation Date, among the
Class A, Class C and Class I shares of the Fund (the "Class A Assets,"
"Class C Assets," and "Class I Assets"), respectively, in accordance with
the Fund's customary method of accounting.
(c) The net asset value of each New Fund Share shall be the
net asset value per share computed as of the close of business on the New
York Stock Exchange and after the declaration of any dividends on the
Valuation Date, using the valuation procedures set forth in the New Fund's
then current prospectuses, and in accordance with the New Fund's customary
method of accounting.
(d) On the Closing Date, the New Fund shall issue to the Fund
full and fractional New Fund Class A, Class C and Class I shares in the
respective numbers determined in accordance with this paragraph 2(d). The
number of New Fund Class A shares shall be determined by dividing the value
of the Class A Assets by the net asset value of a New Fund Class A share
determined in accordance with paragraph 2(c). The number of New Fund Class
C shares shall be determined by dividing the value of the Class C Assets by
the net asset value of a New Fund Class C share determined in accordance
with paragraph 2(c). The number of New Fund Class I shares shall be
determined by dividing the value of the Class I Assets by the net asset
value of a New Fund Class I share determined in accordance with paragraph
2(c).
3. Closing and Closing Date.
(a) The Closing Date shall be as soon as practicable after
approval of the transactions contemplated in this Agreement by the Fund's
Shareholders has been obtained. The Closing will be held at 119 East Marcy
Street, Suite 202, Santa Fe, New Mexico 87501, in the offices of Thornburg
Investment Management, Inc., or at such other place as the parties may
agree. The time of Closing will be 8:00 a.m. New York time on the Closing
Date. All acts taking place at the Closing will be deemed to occur
simultaneously as of the time of the Closing on the Closing Date.
(b) The Fund's portfolio securities shall be available for
inspection by the New Fund, its custodian bank or such other agents of
Thornburg Trust as Thornburg Trust shall reasonably designate, at the
offices of the Fund's custodian, no later than five business days preceding
the Valuation Date, and the Fund will immediately notify the New Fund's
investment adviser of any portfolio security thereafter acquired or sold by
the Fund. The Fund's securities and cash shall be delivered by Thornburg
LTMF to State Street Bank & Trust Company, Boston, MA 02205-9087, as
custodian for the New Fund for the account of the New Fund on the Closing
Date, duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers.
The cash delivered shall be in the form of currency or certified or
official bank checks, or completed federal funds wire, payable to the order
of "State Street Bank & Trust Co., Custodian for Thornburg California
Limited Term Municipal Fund." The Fund will cause its custodian to deliver
at Closing a certificate of an authorized officer of the Custodian stating
that the Fund's securities and cash have been delivered in proper form to
the New Fund's custodian on or before the Closing Date.
(c) In the event that on the Valuation Date (i) the New York
Stock Exchange is closed to trading, or (ii) trading or the reporting of
trading in securities generally is disrupted so that accurate appraisal of
the value of the net assets of the New Fund or the Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored.
(d) Thornburg LTMF shall deliver to Thornburg Trust
shareholder and shareholder account information as of the close of business
on the Valuation Date as reasonably requested by Thornburg Trust. The New
Fund shall issue and deliver a confirmation to the Fund at the Closing
stating the number of New Fund Shares to be credited on the Closing Date to
the Fund, and stating the number of New Fund Shares credited to the Fund's
account on the books of the New Fund. Thornburg Trust shall issue and
deliver to each former Fund Shareholder, after the Closing, a confirmation
stating the number of New Fund Shares credited to the shareholder's
account. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts or other
documents as such other party may reasonably request.
4. Representations and Warranties.
(a) Thornburg LTMF represents and warrants to Thornburg Trust
as follows:
(i) The Fund is a series of Thornburg LTMF, which is a
corporation duly formed and validly existing under
the laws of the State of Maryland;
(ii) Thornburg LTMF is a duly registered open-end
management investment company, and its
registration with the Commission as an investment
company undr the 1940 Act is in full force and
effect;
(iii) The current prospectuses and statements of
additional information of the Fund, each dated
November 1, 2003, conform in all material respects
to the applicable requirements of the Securities
Act of 1933 (the "1933 Act") and the rules and
regulations of the Commission thereunder and do
not include any untrue statement of a material
fact or omit to state any material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading;
(iv) To the knowledge of Thornburg LTMF, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, or the rules and regulations under
those Acts, all of which shall have been received
prior to the Closing Date, except for such
consents, approvals, authorizations or orders as
may be required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg LTMF's Articles of Incorporation or
By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking
to which the Fund or Thornburg LTMF is a party or
by which it is bound;
(vi) The Fund has valued, and will continue to value
its portfolio securities and other assets in
accordance with applicable legal requirements;
(vii) All material contracts or other commitments (other
than this Agreement) to which the Fund is a party
will be terminated without liability to the Fund
or the New Fund on or before the Closing Date;
(viii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the
Fund or any of its properties or assets.
Thornburg LTMF knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg LTMF nor the Fund is a party
to or subject to the provisions of any order,
decree or judgment of any court or governmental
body or self regulatory organization which
materially and adversely affects their business or
their ability to consummate the transactions
herein contemplated;
(ix) The statement of assets and liabilities, the
statement of operations, and the statement of
changes in net assets of the Fund at June 30, 2003
have been audited by PricewaterhouseCoopers, LLP,
independent certified public accountants, and
those statements, together with the statements of
assets and liabilities, the statements of
operations, and the statements of changes in net
assets at December 31, 2003, when issued, fairly
reflect, or in the case of the December 31, 2003
statements will fairly reflect, in all material
respects the assets, financial condition, results
of operations, and changes in net assets of the
Fund as of and for the periods ended on those
dates and have, or in the case of the December 31,
2003 statements, shall have been prepared, in
accordance with generally accepted accounting
principles consistently applied; and there are as
of the dates thereof no known liabilities of the
Fund other than liabilities disclosed or provided
for in the foregoing statements;
(x) Since June 30, 2003, there has been no material
adverse change in the Fund's financial condition,
assets, liabilities or business other than changes
occurring in the ordinary course of business; and
the Fund has not incurred any indebtedness
maturing more than one year from the date such
indebtedness was incurred except as disclosed in
Exhibit A. For the purposes of this subparagraph
(x), a decline in net asset value per share of the
Fund's Shares is not a material adverse change;
(xi) At the Closing Date, all material federal and
other tax returns and reports of the Fund required
by law then to be filed (including any extensions)
shall have been filed, and all federal and other
taxes shall have been paid so far as due, or
provision shall have been made for the payment
thereof, and to the best of Thornburg LTMF's
knowledge no such return of or relating to the
Fund is currently under audit, and no assessment
has been asserted with respect to the Fund;
(xii) The Fund has met the requirements of Subchapter M
of the Code and has elected to be treated as a
regulated investment company for each taxable year
of its operations since its inception, and will so
qualify for the taxable year ending on the Closing
Date;
(xiii) The Fund is authorized to issue 100,000,000,
75,000,000 and 125,000,000 Class A, Class C and
Class I shares, respectively, of the Fund, at the
date hereof. All issued and outstanding shares of
the Fund have been offered and sold in compliance
in all material respects with applicable
registration requirements of the 1933 Act and
state securities laws. All issued and outstanding
shares of the Fund are, and at the Closing Date
will be, duly and validly issued and outstanding,
fully paid and non-assessable by Thornburg LTMF.
All of the issued and outstanding Shares of the
Fund will, at the time of Closing, be held by
shareholder accounts in the amounts set forth in
the list of shareholder's accounts submitted to
Thornburg Trust pursuant to paragraph 3(d). The
Fund does not have outstanding any options,
warrants or other rights to subscribe for or
purchase any securities issuable by the Fund;
(xiv) At the Closing Date, the Fund will have good and
marketable title to the Assets to be transferred
to the New Fund pursuant to paragraph 1(b),
subject to no lien, encumbrance or competing
interest in any person, and full right, power, and
authority to sell, assign, transfer and deliver
the Assets hereunder, and upon delivery and
payment for those Assets, the New Fund will
acquire good and marketable title thereto, subject
to no restriction on the full transfer thereof,
including such restrictions as might arise under
the 1933 Act other than as disclosed in writing to
the New Fund;
(xv) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg LTMF's Board of Directors, and
this Agreement constitutes a valid and binding
obligation of Thornburg LTMF, enforceable in
accordance with its terms, subject to the approval
of the shareholders of the Fund, and further
subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights
and subject to general equity principles;
(xvi) The information furnished by Thornburg LTMF
for use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto;
(xvii) The registration statement filed by the New Fund
on Form N-14 relating to the New Fund Shares that
will be registered with the Commission pursuant to
this Agreement, which shall include the proxy
statement of Thornburg LTMF in respect of the Fund
with respect to the transactions contemplated by
this Agreement, and any supplement or amendment
thereto or to the documents contained or
incorporated therein by reference (the "N-14
Registration Statement"), and the proxy materials
of Thornburg LTMF in respect of the Fund included
in the N-14 Registration Statement and filed with
the Commission pursuant to Section 14 of the 1934
Act with respect to the transactions
contemplated by this Agreement, and any supplement
or amendment thereto or the documents appended
thereto (the "Reorganization Proxy Materials"),
from their effective dates with the Commission,
through the time of the meeting of shareholders of
the Fund contemplated therein (the "Shareholders
Meeting") and at the Closing Date: (a) shall
comply in all material respects with the
provisions of the 1933 Act, 1934 Act and the 1940
Act, the rules and regulations thereunder, and
applicable state securities laws, and (b) shall
not contain any untrue statement of a material
fact or omit to state a material fact required to
be stated therein or necessary to make the
statements therein not misleading; provided, that
the representations and warranties in this
subparagraph shall only apply to statements in or
omissions from the N-14 Registration Statement or
Reorganization Proxy Materials made by, or in
reliance upon and in conformity with information
furnished by or on behalf of Thornburg LTMF.
(b) Thornburg Trust represents and warrants to Thornburg LTMF
as follows:
(i) The New Fund is a series of Thornburg Trust, which
is a business trust duly formed and validly
existing under the laws of the Commonwealth of
Massachusetts;
(ii) Thornburg Trust is a duly registered open-end
management investment company and its registration
with the Commission as an investment company under
the 1940 Act is in full force and effect;
(iii) The prospectuses and statements of additional
information for shares of the New Fund, when
effective, shall conform in all material respects
to the applicable requirements of the 1933 Act and
the rules and regulations of the Commission
thereunder and will not include any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in light
of the circumstances under which they were made,
not misleading;
(iv) To the knowledge of Thornburg Trust, no consent,
approval, authorization or order of any court or
governmental authority is required for the
consummation by the New Fund of the transactions
contemplated by this Agreement, except as may be
required under the 1933 Act, the 1934 Act, the
1940 Act, or the rules and regulations under those
Acts, all of which shall have been received prior
to the Closing Date, except for such consents,
approvals, authorizations or orders as may be
required subsequent to the Closing Date;
(v) The execution, delivery and performance of this
Agreement will not result in a material violation
of Thornburg Trust's Declaration of Trust or By-
Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the
New Fund or Thornburg Trust is a party or by which
it is bound;
(vi) The New Fund has valued, and will continue to
value, its portfolio securities and other assets
in accordance with applicable legal requirements;
(vii) No litigation or administrative proceeding or
investigation of or before any court or
governmental body or self regulatory organization
is presently pending or threatened against the New
Fund or any of its properties or assets.
Thornburg Trust knows of no facts which might form
the basis for the institution of such proceedings,
and neither Thornburg Trust nor the New Fund is a
party to or subject to the provisions of any
order, decree or judgment of any court or
governmental body or self regulatory organization
which materially and adversely affects their
business or their ability to consummate the
transactions herein contemplated;
(viii) At the Closing Date, all federal and other tax
returns and reports of the New Fund required by
law then to be filed shall have been filed, and
all federal and other taxes shall have been paid
for as due or provision shall have been made for
the payment thereof and, to the best of Thornburg
Trust's knowledge, no such return of or relating
to the New Fund is currently under audit, and no
assessment has been asserted with respect to the
New Fund;
(ix) The New Fund intends to meet the requirements of
Subchapter M of the Code, and intends to be
treated as a regulated investment company for the
first taxable fiscal year of its operation
including the Closing Date;
(x) Thornburg Trust is authorized to issue an
unlimited number of shares of beneficial interest
having no par value. All issued and outstanding
New Fund Shares at the Closing Date will be duly
and validly issued and outstanding, fully paid and
non-assessable. The New Fund does not have
outstanding any options, warrants or other rights
to subscribe for or purchase any securities
issuable by the New Fund, nor is there outstanding
any security convertible into New Fund Shares
(except as the trustees of Thornburg Trust may
convert classes of shares in accordance with
Thornburg Trust's Declaration of Trust, as
amended);
(xi) The execution, delivery and performance of this
Agreement will have been duly authorized prior to
the Closing Date by all necessary actions on the
part of Thornburg Trust's trustees, and this
Agreement constitutes a valid and binding
obligation of Thornburg Trust enforceable in
accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating
to or affecting creditors' rights and subject to
general equity principles;
(xii) New Fund Shares to be issued and delivered to the
Fund pursuant to the terms of this Agreement will
at the Closing Date have been duly authorized and,
when so issued and delivered, will be duly and
validly issued New Fund Shares, and will be fully
paid and non-assessable by Thornburg Trust, except
to the extent that shareholders of Thornburg Trust
may be held personally liable for obligations of
Thornburg Trust;
(xiii) The N-14 Registration Statement and the
Reorganization Proxy Materials, from their
effective dates with the Commission, through the
time of the Shareholders Meeting and at the
Closing Date:
(a) shall comply in all material respects with
the provisions of the 1933 Act, 1934 Act and
the 1940 Act, the rules and regulations
thereunder, and applicable state securities
laws, and
(b) shall not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements made therein
not misleading; provided, that the
representations and warranties in this
subparagraph shall only apply to statements
in or omissions from the N-14 Registration
Statement or the Reorganization Proxy
Materials made in reliance upon and in
conformity with information furnished by or
on behalf of Thornburg Trust;
(xiv) At the Closing Date, the New Fund will have good
and marketable title to its assets, subject to no
lien, encumbrance or competing interest in any
person, and full right, power and authority to
sell, assign, transfer and deliver those assets
other than as disclosed in writing to Thornburg
LTMF; and
(xv) The information furnished by Thornburg Trust for
use in applications for orders, registration
statements, proxy materials and other documents
which may be necessary in connection with the
transactions contemplated hereby is and shall be
accurate and complete in all material respects and
shall comply in all material respects with federal
securities and other laws and regulations
thereunder applicable thereto.
5. Covenants of the Parties.
(a) The New Fund and the Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that the ordinary course of business will include
customary dividends and distributions and any other distribution that may
be advisable.
(b) Thornburg LTMF will call a meeting of the shareholders of
the Fund to be held as promptly as practicable to consider and act upon
this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated herein.
(c) Thornburg LTMF covenants that the New Fund Shares to be
issued hereunder will not be sold or distributed other than in accordance
with the terms of this Agreement.
(d) Thornburg LTMF will furnish to Thornburg Trust all
information reasonably requested and that is within its control for the
preparation of the N-14 Registration Statement, the preparation and
distribution of the Reorganization Proxy Materials, and for effectuating
the transactions contemplated herein. Thornburg LTMF will furnish, or
cause its transfer agent to furnish, to Thornburg Trust all information
reasonably requested respecting the beneficial ownership of Thornburg LTMF
shares, shareholders and shareholder accounts for the mailing of the
Reorganization Proxy Materials and for the establishment of New Fund
accounts for shareholders of the Fund in accordance with paragraph 1(c).
Thornburg LTMF will furnish, or cause its custodian or other agents to
furnish, all portfolio asset information reasonably requested by Thornburg
Trust in connection with, and to facilitate, the transactions contemplated
by this Agreement.
(e) Subject to the provisions of this Agreement, Thornburg
Trust and Thornburg LTMF will each take, or cause to be taken, all actions,
and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
(f) Thornburg LTMF shall furnish to Thornburg Trust within 30
days after the Closing Date a detailed trial balance of the Fund's assets
and liabilities and computations showing amortization of premium on
portfolio securities. Thornburg Funds shall furnish to Thornburg Trust
when available the final federal income tax return for the Fund.
(g) Thornburg LTMF will, as promptly as practicable after the
Closing, wind up the business of the Fund, deregister the Fund under
applicable federal securities laws, file final reports with the state
securities regulators requiring any such reports, prepare and distribute
final account statements and tax statements to persons who were formerly
shareholders of the Fund, and file any necessary federal and state tax
returns.
(h) Thornburg Trust will prepare and file the N-14
Registration Statement, will file the Reorganization Proxy Materials with
applicable regulatory authorities, and will use all reasonable efforts to
obtain clearance or effectiveness of the N-14 Registration Statement and
the Reorganization Proxy Materials, all in accordance with the 1933 Act,
the 1934 Act, and the 1940 Act, and applicable regulations and rulings
thereunder, and in accordance with any applicable state statutes and
regulations.
(i) Thornburg Trust agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1934
Act, the 1940 Act and such of the state securities laws as are necessary or
appropriate in order to continue its operations after the Closing Date.
6. Conditions Precedent to Obligations of Thornburg LTMF.
The obligations of Thornburg LTMF to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by Thornburg Trust of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the
following further conditions:
(a) All representations and warranties of Thornburg Trust
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date; and
(b) Thornburg Trust shall have delivered to Thornburg LTMF a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg LTMF and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg Trust made in this Agreement
are true and correct at and as of the Closing Date.
7. Conditions Precedent to Obligations of Thornburg Trust.
The obligations of Thornburg Trust to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Thornburg LTMF of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
(a) All representations and warranties of Thornburg LTMF
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date;
(b) Thornburg LTMF shall have delivered to Thornburg Trust the
following information prepared as of the Closing Date: (i) net asset value
pricing sheet of the Fund, with a portfolio listing of each portfolio
security including the principal amount, identification of issue, cost, tax
lot cost, market price per unit and market value; (ii) trial balance of the
Fund's general ledger; (iii) supporting schedules with the details for
accounts receivable and accounts payable; (iv) certification from the
Fund's custodian that it has delivered to the New Fund's custodian the
Assets acquired by the New Fund; and (v) confirmation from the New Fund's
transfer agent of the aggregate number of the Fund's shares outstanding and
a reconciliation of that number to the number of shares shown in the
pricing sheet referred to in (i) above;
(c) Thornburg LTMF shall have delivered to Thornburg Trust a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to
Thornburg Trust and dated as of the Closing Date, certifying that the
representations and warranties of Thornburg LTMF made in this Agreement are
true and correct at and as of the Closing Date;
(d) This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Fund in accordance with applicable law and
evidence of the approval shall have been delivered to Thornburg Trust; and
(e) The parties shall have received a favorable opinion of
White, Koch, Kelly & McCarthy, P.A. satisfactory to Thornburg LTMF and
Thornburg Trust, substantially to the effect that, based upon certain
facts, assumptions and representations, the transactions contemplated by
this Agreement constitute a tax-free reorganization described in Section
368(a)(1) of the Internal Revenue Code of 1986, as amended, for federal
income tax purposes. The delivery of such opinion is conditioned upon
receipt by White, Koch, Kelly & McCarthy, P.A. of representations it shall
request of Thornburg Trust and Thornburg LTMF.
8. Further Conditions Precedent to Obligations of Thornburg Trust
and Thornburg LTMF.
Each party's obligations hereunder are, at its election,
subject to the further conditions that:
(a) On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
(b) On or before the Closing Date, all consents of other
parties and all other consents, orders and permits of federal, state and
local regulatory authorities (including those of the Commission and of
state securities authorities, including "no-action" positions of such
federal or state authorities) deemed necessary by Thornburg Trust or
Thornburg LTMF to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the business assets or properties of
Thornburg Trust or Thornburg LTMF; and
(c) On or before the Closing Date, the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
9. Responsibility for Fees and Expenses.
Thornburg LTMF will pay the costs of the transactions
contemplated hereby, including the expenses of preparing and filing the N-
14 Registration Statement, the costs of distributing the prospectuses and
proxy materials, proxy solicitation costs, and other costs.
10. Massachusetts Business Trust.
Thornburg Trust is organized as a Massachusetts business trust,
and references in this Agreement to Thornburg Trust mean and refer to the
trustees of Thornburg Trust from time to time serving under its Declaration
of Trust on file with the Secretary of State of the Commonwealth of
Massachusetts, as the same may be amended from time to time, pursuant to
which Thornburg Trust conducts its business. It is expressly agreed that
the obligations of Thornburg Trust hereunder shall not be binding upon any
of Thornburg Trust's trustees, shareholders, nominees, officers, agents, or
employees of Thornburg Trust, or New Fund personally, but bind only the
property of the New Fund, as provided in Thornburg Trust's Declaration of
Trust. Moreover, no series of Thornburg Trust other than the New Fund
shall be responsible for the obligations of Thornburg Trust hereunder, and
all persons shall look only to the respective assets of the New Fund to
satisfy the obligations of Thornburg Trust hereunder. The execution and
delivery of this Agreement have been authorized by Thornburg Trust's
trustees, on behalf of the New Fund, and this Agreement has been signed by
authorized officers of Thornburg Fund acting as such, and neither such
authorization by such trustees, nor such execution and delivery by such
officers, shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
respective property of the New Fund, as provided in Thornburg Trust's
Declaration of Trust.
11. Indemnification.
(a) The New Fund agrees to indemnify and hold harmless the
Fund and each of the Fund's directors and officers from and against any and
all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Fund or any of its
directors or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the New Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b) The Fund agrees to indemnify and hold harmless the New
Fund and each of the New Fund's trustees and officers from and against any
and all losses, claims, damages, liabilities or expenses (including without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the New Fund or any of its
trustees or officers may become subject insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
12. Entire Agreement; Survival of Warranties.
(a) Thornburg Trust and Thornburg LTMF agree that neither
party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
(b) The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated hereunder.
13. Termination.
(a) This Agreement may be terminated by the mutual agreement
of Thornburg Trust and Thornburg LTMF. In addition, either Thornburg Trust
or Thornburg LTMF may at its option terminate this Agreement at or before
the Closing Date because:
(i) of a material breach by the other of any
representation, warranty or agreement contained
herein to be performed at or before the Closing Date;
or
(ii) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot
be met.
(b) In the event of any such termination, there shall be no
liability for damages on the part of either Thornburg Trust or Thornburg
LTMF, or their respective trustees, directors or officers, to the other
party or its trustees, directors or officers, but each shall bear, except
as otherwise provided in section 9, the expenses incurred by them
incidental to the preparation and carrying out of this Agreement.
14. Amendments.
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers
of Thornburg LTMF and Thornburg Trust; provided, however, that following
the shareholders' meeting called by the Fund pursuant to this Agreement, no
such amendment may have the effect of changing the provisions for
determining the number of New Fund Shares to be issued to the Fund's
shareholders under this Agreement to the detriment of those shareholders
without their further approval.
15. Notices.
Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be given
by prepaid telegraph, telecopy or certified mail addressed to Thornburg
Trust, 119 East Marcy Street, Santa Fe, New Mexico 87501, Attention:
Brian J. McMahon, and to Thornburg LTMF, 119 East Marcy Street, Santa Fe,
New Mexico 87501, Attention: George T. Strickland.
16. Headings; Counterparts; Governing Law; Assignment.
(a) The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act (as the same Acts shall have been or
will be amended) or rules, orders or regulations of such governmental
bodies or authorities having authority with respect to such Acts.
(d) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation, other than the parties
hereto and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(e) In the event of any litigation respecting this Agreement
or its subject matter, the prevailing party will be entitled to
reimbursement from the losing party for the prevailing party's cost of
suit, including reasonable attorneys' fees.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President and attested to
by its Secretary or Assistant Secretary.
THORNBURG INVESTMENT TRUST on behalf of
THORNBURG CALIFORNIA LIMITED TERM
MUNICIPAL FUND
By: /s/ Brian J. McMahon
-------------------------------------
Brian J. McMahon, President
------------------, ----------------
THORNBURG LIMITED TERM MUNICIPAL FUND,
INC., on behalf of THORNBURG LIMITED TERM
MUNICIPAL FUND CALIFORNIA PORTFOLIO
By: /s/ George T. Strickland
-------------------------------------
George T. Strickland, Vice President
------------------,
EXHIBIT A
to
Agreement and Plan of Reorganization
Dated December 8, 2003
Thornburg Investment Trust
(on behalf of Thornburg California Limited Term Municipal Fund)
and
Thornburg Limited Term Municipal Fund, Inc.
(on behalf of Thornburg Limited Term Municipal Fund California Portfolio)
Subparagraph 4(a)(x): None.
STATEMENT OF ADDITIONAL INFORMATION
(For Holders of Class A and Class C Shares)
Relating to the Acquisition of the Assets of
THORNBURG LIMITED TERM MUNICIPAL FUND NATIONAL PORTFOLIO
a series of THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
by and in exchange solely for shares of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC
a series of THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Statement of Additional Information, relating specifically to the
proposed acquisition of substantially all of the assets of Thornburg
Limited Term Municipal Fund National Portfolio (the "Fund"), a series of
Thornburg Limited Term Municipal Fund, Inc., by Thornburg Limited Term
Municipal Fund (the "New Fund"), a series of Thornburg Investment Trust, in
exchange solely for voting shares of the New Fund, consists of this cover
page and the following documents, each of which is incorporated by
reference herein:
1. Thornburg Limited Term Municipal Funds Statement of Additional
Information March 10, 2004, is incorporated by reference to Thornburg
Investment Trust's post-effective amendment no. 59 to its Registration
Statement on Form N-1A, filed with the Securities and Exchange Commission
on March 10, 2004 (SEC File Number 033-14905), and
2. Thornburg Funds Statement of Additional Information dated
February 1, 2004, is incorporated by reference to Thornburg Limited Term
Municipal Fund, Inc.'s filing with the Securities and Exchange Commission
on February 6, 2004 pursuant to Rule 497 (SEC File Number 002-89526); and
3. Thornburg Limited Term Municipal Fund National Portfolio
Annual Report, June 30, 2003, is incorporated by reference to Thornburg
Limited Term Municipal Fund, Inc.'s Form N-CSR filed with the Securities
and Exchange Commission on August 28, 2003 (SEC File Number 811-04302); and
4. Thornburg Limited Term Municipal Fund National Portfolio
Semiannual Report, December 31, 2003, is incorporated by reference to
Thornburg Limited Term Municipal Fund, Inc.'s Form N-CSR filed with the
Securities and Exchange Commission on February 24, 2004 (SEC File Number
811-04302).
Each of the foregoing documents incorporated by reference into this
Statement of Additional Information may be obtained, upon request and
without charge by calling Thornburg at 1-800-847-0200.
This Statement of Additional information is not a prospectus. A
Prospectus/Proxy Statement dated March 15, 2004 relating to the above
referenced acquisition may be obtained from Thornburg Investment Trust at
the number and address shown above. This Statement of Additional
Information relates to, and should be read with, the Prospectus/Proxy
Statement.
The financial statements of Thornburg Limited Term Municipal Fund
National Portfolio contained in its Annual Report to shareholders for the
fiscal year ended June 30, 2003 have been audited by
PricewaterhouseCoopers, LLP, that Fund's independent auditors.
The date of this Statement of Additional Information is March 15,
2004.
STATEMENT OF ADDITIONAL INFORMATION
(For Holders of Institutional Class Shares)
Relating to the Acquisition of the Assets of
THORNBURG LIMITED TERM MUNICIPAL FUND NATIONAL PORTFOLIO
a series of THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
by and in exchange solely for shares of
THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
a series of THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Statement of Additional Information, relating specifically to
the proposed acquisition of substantially all of the assets of Thornburg
Limited Term Municipal Fund National Portfolio (the "Fund"), a series of
Thornburg Limited Term Municipal Fund, Inc., by Thornburg Limited Term
Municipal Fund (the "New Fund"), a series of Thornburg Investment Trust, in
exchange solely for voting shares of the New Fund, consists of this cover
page and the following documents, each of which is incorporated by
reference herein:
1. Thornburg Limited Term Municipal Funds Institutional Class
Shares Statement of Additional Information, March 10, 2004 is incorporated
by reference to Thornburg Investment Trust's post-effective amendment no.
59 to its Registration Statement on Form N-1A, filed with the Securities
and Exchange Commission on March 10, 2004 (SEC File Number 033-14905); and
2. Thornburg Institutional Class Shares Statement of Additional
Information dated February 1, 2004, is incorporated by reference to
Thornburg Limited Term Municipal Fund, Inc.'s filing with the Securities
and Exchange Commission on February 6, 2004 pursuant to Rule 497 (SEC File
Number 002-89526); and
3. Thornburg Limited Term Municipal Fund National Portfolio
(Institutional Class shares) Annual Report, June 30, 2003; is incorporated
by reference to Thornburg Limited Term Municipal Fund, Inc.'s Form N-CSR
filed with the Securities and Exchange Commission on August 28, 2003 (SEC
File Number 811-04302); and
4. Thornburg Limited Term Municipal Fund National Portfolio
(Institutional Class Shares) Semiannual Report, December 31, 2003, is
incorporated by reference to Thornburg Limited Term Municipal Fund, Inc.'s
Form N-CSR filed with the Securities and Exchange Commission on February
24, 2004 (SEC File Number 811-04302).
Each of the foregoing documents incorporated by reference into this
Statement of Additional Information may be obtained, upon request and
without charge, by calling Thornburg at 1-800-847-0200.
This Statement of Additional information is not a prospectus. A
Prospectus/Proxy Statement dated March 15, 2004 relating to the above
referenced acquisition may be obtained from Thornburg Investment Trust at
the number and address shown above. This Statement of Additional
Information relates to, and should be read with, the Prospectus/Proxy
Statement.
The financial statements of Thornburg Limited Term Municipal Fund
National Portfolio contained in its Annual Report to shareholders for the
fiscal year ended June 30, 2003 have been audited by
PricewaterhouseCoopers, LLP, that Fund's independent auditors.
The date of this Statement of Additional Information is March 15,
2004.
STATEMENT OF ADDITIONAL INFORMATION
(For Holders of Class A and Class C Shares)
Relating to the Acquisition of the Assets of
THORNBURG LIMITED TERM MUNICIPAL FUND CALIFORNIA PORTFOLIO
a series of THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
by and in exchange solely for shares of
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND,
a series of THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Statement of Additional Information, relating specifically to
the proposed acquisition of substantially all of the assets of Thornburg
Limited Term Municipal Fund California Portfolio (the "Fund"), a series of
Thornburg Limited Term Municipal Fund, Inc., by Thornburg Limited Term
California Municipal Fund (the "New Fund"), a series of Thornburg
Investment Trust, in exchange solely for voting shares of the New Fund,
consists of this cover page and the following documents, each of which is
incorporated by reference herein:
1. Thornburg Limited Term Municipal Funds Statement of Additional
Information March 10, 2004, is incorporated by reference to Thornburg
Investment Trust's post-effective amendment no. 59 to its Registration
Statement on Form N-1A filed with the Securities and Exchange Commission on
March 10, 2004 (SEC File Number 033-14905);
2. Thornburg Funds Statement of Additional Information dated
February 1, 2004, is incorporated by reference to Thornburg Limited Term
Municipal Fund, Inc.'s filing with the Securities and Exchange Commission
on February 6, 2004 pursuant to Rule 497 (SEC File Number 002-89526); and
3. Thornburg Limited Term Municipal Fund California Portfolio
Annual Report, June 30, 2003, is incorporated by reference to Thornburg
Limited Term Municipal Fund, Inc.'s Form N-CSR filed with the Securities
and Exchange Commission on August 28, 2003 (SEC File Number 033-14305); and
4. Thornburg Limited Term Municipal Fund California Portfolio
Semiannual Report, December 31, 2003, is incorporated by reference to
Thornburg Limited Term Municipal Fund, Inc.'s Form N-CSR filed with the
Securities and Exchange Commission on February 24, 2004 (SEC File Number
811-04302).
Each of the foregoing documents incorporated by reference into this
Statement of Additional Information may be obtained, upon request and
without charge, by calling Thornburg at 1-800-847-0200.
This Statement of Additional information is not a prospectus. A
Prospectus/Proxy Statement dated March 15, 2004 relating to the above
referenced acquisition may be obtained from Thornburg Investment Trust at
the number and address shown above. This Statement of Additional
Information relates to, and should be read with, the Prospectus/Proxy
Statement.
The financial statements of Thornburg Limited Term Municipal Fund
California Portfolio contained in its Annual Report to shareholders for the
fiscal year ended June 30, 2003 have been audited by
PricewaterhouseCoopers, LLP, that Fund's independent auditors.
The date of this Statement of Additional Information is March 15,
2004.
STATEMENT OF ADDITIONAL INFORMATION
(For Holders of Institutional Class Shares)
Relating to the Acquisition of the Assets of
THORNBURG LIMITED TERM MUNICIPAL FUND CALIFORNIA PORTFOLIO
a series of THORNBURG LIMITED TERM MUNICIPAL FUND, INC.
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
by and in exchange solely for voting shares of
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND,
a series of THORNBURG INVESTMENT TRUST
119 East Marcy Street
Santa Fe, New Mexico 87501
(800) 847-0200
This Statement of Additional Information, relating specifically to
the proposed acquisition of substantially all of the assets of Thornburg
Limited Term Municipal Fund California Portfolio (the "Fund"), a series of
Thornburg Limited Term Municipal Fund, Inc., by Thornburg California
Limited Term Municipal Fund (the "New Fund"), a series of Thornburg
Investment Trust, in exchange solely for voting shares of the New Fund,
consists of this cover page and the following documents, each of which is
incorporated by reference herein:
1. Thornburg Limited Term Municipal Funds Institutional Class
Shares Statement of Additional Information March 10, 2004, is incorporated
by reference to Thornburg Investment Trust's post-effective amendment no.
59 to its registration statement on Form N-1A, filed with the Securities
and Exchange Commission on March 10, 2004 (SEC File Number 033-14905); and
2. Thornburg Funds Institutional Class Statement of Additional
Information dated February 1, 2004, is incorporated by reference to
Thornburg Limited Term Municipal Fund, Inc.'s filing with the Securities
and Exchange Commission on February 6, 2004 pursuant to Rule 497 (SEC File
Number 002-89526); and
3. Thornburg Limited Term Municipal Fund California Portfolio
Annual Report (Institutional Class Shares), June 30, 2003, is incorporated
by reference to Thornburg Limited Term Municipal Fund, Inc.'s Form N-CSR
filed with the Securities and Exchange Commission on August 28, 2003 (SEC
File Number 811-04302); and
4. Thornburg Limited Term Municipal Fund California Portfolio
Semiannual Report (Institutional Class Shares), December 31, 2003, is
incorporated by reference to Thornburg Limited Term Municipal Fund, Inc.'s
Form N-CSR filed with the Securities and Exchange Commission on February
24, 2004 (SEC File Number 811-04302).
Each of the foregoing documents incorporated by reference into this
Statement of Additional Information may be obtained, upon request and
without charge, by calling Thornburg at 1-800-847-0200.
This Statement of Additional information is not a prospectus. A
Prospectus/Proxy Statement dated March 15, 2004 relating to the above
referenced acquisition may be obtained from Thornburg Investment Trust at
the number and address shown above. This Statement of Additional
Information relates to, and should be read with, the Prospectus/Proxy
Statement.
The financial statements of Thornburg Limited Term Municipal Fund
California Portfolio contained in its Annual Report to shareholders for the
fiscal year ended June 30, 2003 have been audited by
PricewaterhouseCoopers, LLP, that Fund's independent auditors.
The date of this Statement of Additional Information is March 15,
2004.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
(1) Section 10.2 of Thornburg Investment Trust's Agreement and
Declaration of Trust generally provides that each of the Trust's officers
and Trustees will be indemnified by the Trust against liability and
expenses in connection with his having been a Trustee or officer unless it
is determined that the individual is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, or if the individual did not
act in good faith in the reasonable belief that the action was in the
Trust's best interest.
(2) Section 8 of the Trust's Amended Distribution Agreement generally
provides that the Trust will indemnify Thornburg Securities Corporation
(TSC), its officers and directors, and its controlling persons against
liabilities and expenses incurred because of any alleged untrue statement
of material fact contained in the Registration Statement, Prospectus or
annual or interim reports to shareholders, or any alleged omission to state
a material fact required to be stated therein, or necessary to make the
statements therein, not misleading, except where (i) the untrue statement
or omission arises from information furnished by TSC, or (ii) to the extent
the prospective, indemnitee is an officer, trustee or controlling person of
the Trust, the indemnification is against public policy as expressed in the
1933 Act, or (iii) the liability or expense arises from TSC's willful
misfeasance, bad faith, gross negligence, reckless performance of duties,
or reckless disregard of its obligations and duties under the Distribution
Agreement. Further, TSC agrees to indemnify the Trust, its officers and
trustees, and its controlling persons in certain circumstances.
(3) The directors and officers of Thornburg Investment Management,
Inc. (Thornburg) are insured, and the Trustees and officers of the Trust
are also insured, under a joint directors and officers liability policy.
The described individuals are referred to as the "insureds." The policy
covers amounts which the insureds become legally obligated to pay by reason
of the act, error, omission, misstatement, misleading statement or neglect
or breach of duty in the performance of their duties as directors, trustees
and officers. In addition, the policy covers Thornburg, and is proposed to
cover the Registrant, to the extent that they have legally indemnified the
insureds for amounts incurred by the insureds as described in the preceding
sentence. The coverage excludes amounts that the insureds become obligated
to pay by reason of conduct which constitutes willful misfeasance, bad
faith, gross negligence or reckless disregard of the insured's duties. The
application of the foregoing provisions is limited by the following
undertakings set forth in the rules promulgated by the Securities and
Exchange Commission:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to Trustees,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policies
expressed in such Act and that if a claim for indemnification
against such liabilities other than the payment by the Registrant
or expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in such Act and will be governed by the final
jurisdiction of such issue.
ITEM 16. EXHIBITS
(1) (a) Limited Term Trust, Agreement and Declaration of Trust, June
3, 1987, incorporated by reference from Registrant's
Registration Statement on Form N-1A, filed June 12, 1987.
(b) First Amendment and Supplement to Agreement and Declaration
of Trust, August 11, 1987, incorporated by reference from
Registrant's pre-effective amendment no. 1 to its
Registration Statement on Form N-1A, filed October 28, 1987.
(c) Second Amendment and Supplement to Agreement and Declaration
of Trust, October 28, 1987, incorporated by reference from
Registrant's post-effective amendment no. 1 to its
Registration Statement on Form N-1A, filed March 3, 1988.
(d) Third, Fourth, Fifth, Sixth and Seventh Amendments to
Agreement and Declaration of Trust, incorporated by
reference from Registrant's post-effective amendment no. 13
to its Registration Statement on Form N-1A, filed December
3, 1993.
(e) Amended and Restated Designation of Series, incorporated by
reference from Registrant's post-effective amendment no. 17
to its Registration Statement on Form N-1A, filed July 27,
1994.
(f) Ninth Amendment and Supplement to Agreement and Declaration
of Trust, incorporated by reference from Registrant's post-
effective amendment no. 20 to its Registration Statement on
Form N-1A, filed on July 5, 1995.
(g) Corrected Tenth Amendment and Supplement to Agreement and
Declaration of Trust, incorporated by reference from
Registrant's post-effective amendment no. 22 to its
Registration Statement on Form N-1A, filed October 2, 1995.
(h) First Supplement to Amended and Restated Designation of
Series, incorporated by reference from Registrant's post-
effective amendment no. 26 to its Registration Statement on
Form N-1A, filed May 6, 1996.
(i) Eleventh and Twelfth Amendments and Supplements to Agreement
and Declaration of Trust, incorporated by reference from
Registrant's post-effective amendment no. 29 to its
Registration Statement on Form N-1A, filed March 14, 1997.
(j) Thirteenth Amendment and Supplement to Agreement and
Declaration of Trust, incorporated by reference from
Registrant's post-effective amendment no. 33 to its
Registration Statement on Form N-1A, filed March 10, 1998.
(k) Fourteenth Amendment and Supplement to Agreement and
Declaration of Trust, incorporated by reference from
Registrant's post-effective amendment no. 43 to its
Registration Statement on Form N-1A, filed October 13, 2000.
(l) Fifteenth Amendment and Supplement to Agreement and
Declaration of Trust, incorporated by reference from
Registrant's post-effective amendment no. 44 to its
Registration Statement on Form N-1A, filed January 29, 2001.
(m) Sixteenth and Seventeenth Amendments and Supplements to
Agreement and Declaration of Trust, incorporated by
reference from Registrant's post-effective amendment no. 51
to its Registration Statement in Form N-1A, filed October
17, 2002.
(n) Second Supplement to Amended and Restated Designation of
Series, incorporated by reference from Registrant's post-
effective amendment no. 54 to its Registration Statement on
Form N-1A, filed on June 27, 2003.
(o) Eighteenth Amendment to Supplement to Agreement and
Declaration of Trust, incorporated by reference from
Registrant's Statement on Form N-14, filed on January 30,
2004.
(2) Amended By-laws (May 20, 2003), incorporated by reference from
Registrant's post-effective amendment no. 54 to its Registration
Statement on Form N-1A, filed June 27, 2003.
(4) Copies of Agreements and Plans of Reorganization are attached as
Exhibit A to each Prospectus/Proxy Statement included in this
Registration Statement.
(6) Amended and Restated Investment Advisory Agreement, incorporated
by reference from Registrant's post-effective amendment no. 32 to
its Registration Statement on Form N-1A, filed February 17, 1998.
(7) Amended Distribution Agreement, incorporated by reference from
Registrant's post-effective amendment no. 42 to its Registration
Statement on Form N-1A, filed August 31, 2000.
(9) Form of Custodian Agreement, incorporated by reference from
Registrant's post-effective amendment no. 1 to its Registration
Statement on Form N-1A, filed October 28, 1987.
(10) (a) Plan and Agreement of Distribution Pursuant to Rule 12b-1
(Service Plan - Classes A, C and I); incorporated by
reference from Registrant's post-effective amendment no. 32
to its Registration Statement on Form N-1A, filed February
17, 1998.
(b) Plan and Agreement of Distribution Pursuant to Rule 12b-1
(Distribution Plan - Class C), incorporated by reference
from Registrant's post-effective amendment no. 32 to its
Registration Statement on Form N-1A, filed February 17,
1998.
(c) Plan for Multiple Class Distribution (as revised to May 20,
2003), incorporated by reference from Registrant's post-
effective amendment no. 55 to its Registration Statement on
Form N-1A, filed July 20, 2003.
(11) Opinion of counsel filed herewith.
(12) Form of Opinion of counsel (tax) filed herewith.
(14) Consent of independent auditors, filed herewith.
(16) (a) Power of Attorney of David A. Ater, incorporated by
reference from Registrant's post-effective amendment no. 20
to its Registration Statement on Form N-1A, filed July 5,
1995.
(b) Powers of Attorney of James W. Weyhrauch and Brian J.
McMahon, incorporated by reference from the Registrant's
post-effective amendment no. 29 to its Registration
Statement on Form N-1A, filed on March 14, 1997.
(c) Powers of Attorney of Forrest S. Smith and Garrett
Thornburg, incorporated by reference from the Registrant's
post-effective amendment no. 7 to its Registration Statement
on Form N-1A, filed April 19, 1991.
(d) Power of Attorney of David D. Chase, incorporated by
reference from the Registrant's post-effective amendment no.
44 to its Registration Statement on Form N-1A, filed January
29, 2001.
(e) Power of Attorney of Steven J. Bohlin, incorporated by
reference from the Registrant's post-effective amendment no.
53 to its Registration Statement on Form N-1A, filed May 1,
2003.
ITEM 17. UNDERTAKINGS
(1) The registrant shall obtain opinions of counsel that (i) the
securities registered hereby, when sold, shall be legally issued,
fully paid and non-assessable, and (ii) the reorganization
described in each Agreement and Plan of Reorganization shall
constitute a tax-free "reorganization" described in Section 368
of the Internal Revenue Code of 1986 as amended.
(2) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(3) The undersigned Registrant agrees that every prospectus that is
filed as a part of an amendment to the registration statement and
will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the
securities all that time shall be deemed to be the initial bon
fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant in Santa Fe, New Mexico on March
11, 2004.
THORNBURG INVESTMENT TRUST
By: *
---------------------------------
Brian J. McMahon, President
and principal executive officer
As required by the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities and on the
date indicated.
*
- ---------------------------------
Brian J. McMahon, Trustee, President
and principal executive officer
*
- ---------------------------------
Steven J. Bohlin, Vice President,
Treasurer and principal financial
and accounting officer
*
- ---------------------------------
Garrett Thornburg, Trustee
*
- ---------------------------------
David D. Chase, Trustee
*
- ---------------------------------
David A. Ater, Trustee
*
- ---------------------------------
Forrest S. Smith, Trustee
*
- ---------------------------------
James W. Weyhrauch, Trustee
* By: /s/ Charles W.N. Thompson, Jr.
-------------------------------
Charles W.N. Thompson, Jr.
Dated: March 11, 2004
E X H I B I T S
(11) Opinion and consent of counsel
(12) Form of opinion of counsel (tax)
(14) Consent of independent auditors
WHITE Attorneys and Counselors at Law
KOCH, KELLY John F. McCarthy, Jr.
& Benjamin Phillips
McCARTHY Albert V. Gonzales
A Professional Association C.W.N. Thompson, Jr.
M. Karen Kilgore Suzanne Odom
Sandra J. Brinck
Aaron J. Wolf
Mary E. Walta
Rebecca Dempsey Special Counsel
John M. Hickey Paul L. Bloom
Julia Wittenberger-Wagner
Julia B. Rose
March 11, 2004
Trustees of Thornburg Investment Trust
119 East Marcy Street
Santa Fe, New Mexico 87501
Re: Thornburg Investment Trust Registration Statement on
Form N-14, pre-effective amendment no. 2 as filed on
March 11, 2004
Gentlemen:
The Class A, Class C and Class I shares proposed to be issued by each of
Thornburg Limited Term Municipal Fund and Thornburg California Limited Term
Municipal Fund, when issued in accordance with (i) the Trustees' resolutions
adopted December 8, 2003, (ii) the prospectuses of the described Funds
included as components of the Trust's post-effective amendment no. 59 to its
Registration Statement on Form N-1A as filed with the Securities and Exchange
Commission on March 10, 2004, and (iii) the above-referenced Registration
Statement on Form N-14, will be legally issued, fully paid and non-
assessable.
We hereby consent to the reference made to this firm in the described
Registration Statement of Thornburg Investment Trust and the prospectuses
which are part of that Registration Statement. In giving this consent, we do
not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
/s/ White, Koch, Kelly & McCarthy, P.A.
WHITE, KOCH, KELLY & McCARTHY, P.A.
433 Paseo de Peralta Post Office Box 787 Telephone (505) 982-4374
Santa Fe, NM 87501 Santa Fe, NM 87504-0787 Fax (505) 984-8631
e-mail cwnt@wkkm.com
Exhibit (12)
WHITE Attorneys and Counselors at Law
KOCH, KELLY John F. McCarthy, Jr.
& Benjamin Phillips
McCARTHY Albert V. Gonzales
A Professional Association C.W.N. Thompson, Jr.
M. Karen Kilgore Suzanne Odom
Sandra J. Brinck
Aaron J. Wolf
Mary E. Walta
Rebecca Dempsey Special Counsel
John M. Hickey Paul L. Bloom
Julia Wittenberger-Wagner
Julia B. Rose
March __, 2004
Board of Directors FORM OF OPINION
Thornburg Limited Term Municipal Fund, Inc.
119 East Marcy Street
Santa Fe, New Mexico 87501
Trustees
Thornburg Investment Trust
119 East Marcy Street
Santa Fe, New Mexico 87501
Re: Agreement and Plan of Reorganization made as of
the 8th day of December 2003, by and between
Thornburg Investment Trust in respect of Thornburg
Limited Term Municipal Fund and Thornburg Limited
Term Municipal Fund, Inc. in respect of Thornburg
Limited Term Municipal Fund National Portfolio; and
Agreement and) Plan of Reorganization made as of
the 8th day of December 2003, by and between
Thornburg Investment Trust in respect of Thornburg
California Limited Term Municipal Fund and Thornburg
Limited Term Municipal Fund, Inc. in respect of
Thornburg Limited Term Municipal Fund California
Portfolio
Gentlemen:
You have requested our opinion as to certain United States federal
income tax consequences of the reorganization (together, the
"Reorganizations," or singly, a "Reorganization") of each of the Funds and
the New Funds described in the above-referenced Agreements and Plans of
Reorganization (together the "Agreements," or singly, an "Agreement").
Capitalized terms in this letter not otherwise defined herein have the
meaning assigned in the Agreements.
In rendering our opinion, we have reviewed and relied upon (a) the
Agreements, (b) the proxy materials provided to shareholders of each Fund in
connection with the Special Meeting of Shareholders [to be] held on April 28,
2004, (c) certain representations concerning the Reorganizations made to us
by the parties in letters dated [--------- ---, ----](the "Representation
Letters"), (d) all other documents, financial and other reports and corporate
minutes which we deemed relevant or appropriate, and (e) such statutes,
regulations, rulings and decisions as we deemed material to the rendition of
this opinion. All terms used herein, unless otherwise defined, are used as
defined in the Agreement.
For purposes of this opinion, we have assumed that each Fund at the
effective time of the Reorganization satisfy, and following the
Reorganization, the New Funds will continue to satisfy, the requirements of
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
for qualification as a regulated investment company.
Based on the foregoing and provided that each Reorganization is carried
out in accordance with the respective Agreement and the Representation
Letters, it is our opinion that:
1. Each Reorganization will constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(F) of the Code, and the Fund and New
Fund will each be a party to a reorganization within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by either Fund upon the
transfer of all of its assets to the corresponding New Fund in exchange
solely for New Fund Shares (except to the extent that such assets consist of
contracts described in Section 1256 of the Code) or upon the distribution of
New Fund Shares to the corresponding Fund's shareholders in exchange for
their shares of the Fund.
3. No gain or loss will be recognized by either Fund upon the
receipt by it of all of the assets of the corresponding Fund in exchange
solely for New Fund Shares.
4. The tax basis of the assets of either Fund received by the
corresponding New Fund will be the same as the tax basis of such assets to
the Fund immediately prior to the Reorganization.
5. The holding period of the assets of each Fund received by the
corresponding New Fund will include the holding period of those assets in the
hands of the Fund immediately prior to the Reorganization.
6. No gain or loss will be recognized by the shareholders of either
Fund upon the exchange of their shares in the Fund for New Fund Shares
(including fractional shares to which they may be entitled).
7. The aggregate tax basis of the New Fund Shares received by the
shareholders of each Fund (including fractional shares to which they may be
entitled) pursuant to the Reorganization will be the same as the aggregate
tax basis of the shares of the Fund held by the Fund's shareholders
immediately prior to the Reorganization.
8. The holding period of the New Fund Shares received by the
shareholders of each Fund (including fractional shares to which they may be
entitled) will include the holding period of the shares in the Fund
surrendered in exchange therefor, provided that the shares surrendered were
held as a capital asset as of the effective date of the Reorganization.
9. For purposes of Section 381 of the Code, each New Fund will be
treated as the same corporation as the corresponding Fund and the tax
attributes of the Fund enumerated in Section 381(c) will be taken into
account by the New Fund as if there had been no reorganization Section
1.381(b)-1(a)(2) of the Regulations).
This opinion letter expresses our views only as to United States federal
income tax laws in effect as of the date hereof. It represents our best
legal judgment as to the matters addressed herein, but is not binding on the
Internal Revenue Service or the courts. Accordingly, no assurance can be
given that the opinions and analysis expressed herein, if contested, would be
sustained by a court. Our opinion is based upon the Code, the applicable
Treasury Regulations promulgated thereunder, the present position of the
Internal Revenue Service as set forth in published revenue rulings and
revenue procedures, present administrative positions of the Internal Revenue
Service, and existing judicial decisions, all of which are subject to change
either prospectively or retroactively. We do not undertake to make any
continuing analysis of the facts or relevant law following the date of this
letter.
Our opinion is conditioned upon the performance by Thornburg Investment
Trust and the Thornburg Limited Term Municipal Fund, Inc. of their
undertakings in the Agreement and the Representation Letters.
This opinion is being rendered to Thornburg Investment Trust, on behalf
of each New Fund, and Thornburg Limited Term Municipal Fund, Inc. on behalf
of each Fund, and may be relied upon only by such funds and the shareholders
of each such fund.
Very truly yours,
Charles W.N. Thompson, Jr.
Exhibit (14)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form N-14 of
our reports dated July 30, 2003, relating to the financial statements and
financial highlights of Thornburg Limited Term Municipal Fund National
Portfolio and Thornburg Limited Term Municipal Fund California Portfolio,
constituting Thornburg Limited Term Municipal Fund (the "Fund"), which appear
in this Registration Statement on Form N-14. We also consent to the
reference to us in the Statements of additional information in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 10, 2004